[Federal Register Volume 70, Number 187 (Wednesday, September 28, 2005)]
[Notices]
[Pages 56755-56757]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-5243]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52479; File No. SR-ISE-2004-04]


Self-Regulatory Organizations; International Securities Exchange, 
Inc.; Notice of Filing of Proposed Rule Change and Amendments No. 1 and 
2 Relating to Exposure Periods in the Facilitation and Solicited Order 
Mechanisms

September 21, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on February 23, 2004, the International Securities Exchange, Inc. 
(``ISE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which items have been prepared by the 
Exchange. On September 7, 2005, the ISE filed Amendment No. 1 to the 
proposed rule change.\3\ On September 20, 2005, the ISE filed Amendment 
No. 2 to the

[[Page 56756]]

proposed rule change.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, from 
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 superseded and replaced ISE's original 
filing in its entirety.
    \4\ Amendment No. 2 corrected a non-substantive typographical 
error in the text of the proposed rule change, and two incorrect 
references in footnotes to the Form 19b-4 for Amendment No. 1 and 
Exhibit 1 thereto.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to decrease the exposure period in its 
Facilitation and Solicited Order Mechanisms from 10 seconds to three 
seconds. The text of the proposed rule change is as follows (italics 
indicates additions; [brackets] indicate deletions): \5\
---------------------------------------------------------------------------

    \5\ There were no changes to the text of the proposed rule 
change in Amendment No. 1. However, the proposal was updated in 
Amendment No. 1 to reflect changes in the text of ISE Rule 716 that 
occurred since the initial proposal was submitted. The Purpose 
section of the filing was also updated.
---------------------------------------------------------------------------

* * * * *

Rule 716. Block Trades

    (a) through (e) no change.

Supplementary Material to Rule 716

    .01 through .03 no change.
    .04 The time given to Members to enter Responses under paragraph 
(c)(1) shall be thirty (30) seconds. The time given to Members to enter 
Responses under paragraph (d)(1) and Responses under paragraph (e)(1) 
shall be [ten (10)] three (3) seconds.
    .05 through .08 no change.
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the ISE included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Electronic Access Members that seek to execute their customer 
orders as principal (facilitations) or to execute their customer orders 
against orders they solicit from other broker-dealers (solicitations) 
may use the Facilitation and Solicited Order Mechanisms contained in 
ISE Rule 716 or the Price Improvement Mechanism contained in ISE Rule 
723. All three of these mechanisms expose orders to the market to give 
other market participants an opportunity to participate in the trade. 
Currently, the exposure period for the Facilitation and Solicited Order 
Mechanisms is ten seconds under ISE Rule 716, while the exposure period 
for the Price Improvement Mechanism is only three seconds under ISE 
Rule 723. The purpose of this proposed rule change is to reduce the 
exposure period for the Facilitation and Solicited Order Mechanisms 
from ten seconds to three seconds.\6\
---------------------------------------------------------------------------

    \6\ ISE Rule 716 originally required that orders be exposed in 
the Facilitation Mechanism for 30 seconds. In September 2002, the 
Commission approved reducing this exposure period from 30 seconds to 
ten seconds. See Securities Exchange Act Release No. 46514 
(September 18, 2002), 67 FR 60627 (September 25, 2005) (approving 
File No. SR-ISE-2001-19). The Solicited Order Mechanism was approved 
in June 2004 with an exposure period of ten seconds. See Securities 
Exchange Act Release No. 49943 (June 30, 2004), 69 FR 41317 (July 8, 
2004) (approving File No. SR-ISE-2001-22). The Price Improvement 
Mechanism was approved in December 2004 with the three-second 
exposure period. See Securities Exchange Act Release No. 50819 
(December 8, 2004), 69 FR 75093 (December 15, 2004) (approving File 
No. SR-ISE-2003-06).
---------------------------------------------------------------------------

    When it approved the three-second exposure period for the Price 
Improvement Mechanism, the Commission concluded that, in light of the 
ISE's fully electronic marketplace, the three-second exposure period 
gave participants sufficient time to compete for orders. The ISE 
believes that there is no reason for the exposure periods to be 
different among the three mechanisms, since members are notified of the 
orders and enter their interest in trading with the orders in the same 
technical manner. Moreover, the Price Improvement Mechanism is an 
interactive auction where members receive and can respond to multiple 
price updates within the three second period, whereas members only 
receive one message at the start of an auction with respect to orders 
executed through the Facilitation and Solicited Order Mechanisms. 
Indeed, the ISE believes that exposing orders for ten seconds rather 
than three in its fully electronic market adds risk to the orders being 
exposed without providing any offsetting benefit to the orders.
2. Basis
    The basis under the Act for this proposed rule change is found in 
Section 6(b)(5),\7\ in that the proposed rule change is designed to 
promote just and equitable principles of trade, remove impediments to 
and perfect the mechanisms of a free and open market and a national 
market system and, in general, to protect investors and the public 
interest, in that the proposal will allow orders to be executed through 
the Facilitation and Solicited Order Mechanisms in a more timely and 
efficient manner.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any written comments from members or other interested parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve such proposed rule change; or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, is consistent with the Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-ISE-2004-04 on the subject line.

[[Page 56757]]

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-ISE-2004-04. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the ISE. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-ISE-2004-04 and should be submitted on or before October 
19, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jonathan G. Katz,
Secretary.
 [FR Doc. E5-5243 Filed 9-27-05; 8:45 am]
BILLING CODE 8010-01-P