[Federal Register Volume 70, Number 181 (Tuesday, September 20, 2005)]
[Notices]
[Pages 55197-55198]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-18616]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52418; File No. SR-ISE-2005-33]


Self-Regulatory Organizations; International Securities Exchange, 
Inc.; Order Approving a Proposed Rule Change To Amend the Exchange's 
Trade-Through and Locked Markets Rules

September 13, 2005.
    On July 8, 2005, the International Securities Exchange, Inc. 
(``ISE''), filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ to implement Amendment No. 15 to the Plan for the 
Purpose of Creating and Operating an Intermarket Option Linkage \3\ by 
amending ISE Rules 1900 and 1903 to add a ``trade and ship'' exception 
to the definition of ``Trade-Through'' and add a ``book and ship'' 
exception to the provision relating to locked markets, respectively. 
The proposed rule change was published for comment in the Federal 
Register on August 5, 2005.\4\ The Commission received no comments on 
the proposal. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On July 28, 2000, the Commission approved a national market 
system plan for the purpose of creating and operating an intermarket 
option linkage proposed by the American Stock Exchange LLC, the 
Chicago Board Options Exchange, Incorporated, and the ISE. See 
Securities Exchange Act Release No. 43086 (July 28, 2000), 65 FR 
48023 (August 4, 2000) (``Linkage Plan''). Subsequently, upon 
separate requests by the Philadelphia Stock Exchange, Inc., the 
Pacific Exchange, Inc., and the Boston Stock Exchange, Inc., the 
Commission issued orders to permit these exchanges to participate in 
the Linkage Plan. See Securities Exchange Act Release Nos. 43573 
(November 16, 2000), 65 FR 70851 (November 28, 2000); 43574 
(November 16, 2000), 65 FR 70850 (November 28, 2000); and 49198 
(February 5, 2004), 69 FR 7029 (February 12, 2004).
    \4\ See Securities Exchange Act Release No. 52174 (July 29, 
2005), 70 FR 45455.
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    Under the proposed rule change, an ISE member could trade an order 
at a price that is one minimum quoting increment inferior to the 
national best bid or offer (``NBBO'') if a Linkage Order \5\ is sent 
contemporaneously to the market(s) disseminating the NBBO to satisfy 
all interest at the NBBO price. The proposed rule change also would 
provide that an ISE member may enter an order on the ISE that would 
otherwise lock another market if a Linkage Order is sent 
contemporaneously to such other market to satisfy all interest at the 
lock price and only the remaining portion of the order is booked. The 
ISE proposes that, under trade and ship, any execution received from 
the market disseminating the NBBO must (pursuant to agency obligations) 
be reassigned to the customer order that is underlying the Linkage 
Order that was sent to trade with the market disseminating the NBBO.
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    \5\ See ISE Rule 1900(10).
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    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of Section 6 of the Act 
\6\ and the rules and regulations thereunder applicable to a national 
securities exchange.\7\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\8\ 
which requires, among other things, that the rules of an exchange be 
designed to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest. The Commission believes that the proposed rule change 
should help to implement the Linkage Plan by facilitating the ability 
of ISE's members to execute their customer

[[Page 55198]]

orders in a timely manner and potentially could decrease the incidence 
of Trade-Throughs and locked markets.
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    \6\ 15 U.S.C. 78f.
    \7\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-ISE-2005-33) is approved.
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    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 05-18616 Filed 9-19-05; 8:45 am]
BILLING CODE 8010-01-P