[Federal Register Volume 70, Number 201 (Wednesday, October 19, 2005)]
[Notices]
[Pages 60867-60869]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-5742]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52596; File No. SR-ISE-2005-40]


Self-Regulatory Organizations; International Securities Exchange, 
Inc.; Notice of Filing and Order Granting Accelerated Approval of a 
Proposed Rule Change Relating to Market Maker Quotation Obligations

October 12, 2005.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 6, 2005, 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 and II below, which Items have been prepared by the Exchange. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons and is approving the 
proposal on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 2 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to clarify the implementation of changes to 
Exchange Rule 804 regarding market maker quotation obligations.

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 Exchange 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 III 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
    In file number SR-ISE-2005-18, the Exchange proposed to adopt rule 
changes on a pilot basis to allow Electronic Access Members to 
designate ``Preferred Market Makers'' on orders

[[Page 60868]]

Electronic Access Members enter into the Exchange's systems. In 
Amendment No. 1 to SR-ISE-2005-18, the Exchange proposed to increase 
the quotation obligations of Competitive Market Makers under Exchange 
Rule 804, who are eligible to be designated as Preferred Market Makers. 
Specifically, in SR-ISE-2005-18, as amended, the Exchange proposed to 
amend Exchange Rule 804 to require that Competitive Market Makers 
maintain continuous quotes in all of the series of any options class 
the Competitive Market Maker is quoting. The Exchange also proposed to 
amend Exchange Rule 804 to limit to 60 the number of options classes a 
Competitive Market Maker is required to quote when there are more than 
100 options classes in such Competitive Market Maker's appointed Group. 
The Commission approved SR-ISE-2005-18, as amended, on June 10, 2005, 
for a pilot period expiring on July 18, 2005.\3\ The pilot period 
subsequently was extended to June 10, 2006.\4\
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    \3\ See Securities Exchange Act Release No. 51818 (June 10, 
2005), 70 FR 35146 (June 16, 2005).
    \4\ See Securities Exchange Act Release No. 52066 (July 20, 
2005), 70 FR 43479 (July 27, 2005).
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    While the Exchange included the changes to Exchange Rule 804 as 
part of the Exchange's proposal to allow Competitive Market Makers to 
be designated as Preferred Market Makers, the Exchange did not intend 
that the proposed changes to Exchange Rule 804 be adopted on a pilot 
basis. The purpose of this rule filing is to clarify that the changes 
to Exchange Rule 804 were intended by the Exchange to be adopted on a 
permanent basis. The Exchange notes that SR-ISE-2005-18, as amended, 
was published for comment in the Federal Register, and no comments were 
received on the proposed changes to Exchange Rule 804.
2. Statutory Basis
    The Exchange believes that the basis under the Act for this 
proposed rule change is found in section 6(b)(5) of the Act,\5\ in that 
the proposed rule change is designed to promote just and equitable 
principles of trade, 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, because the proposal 
clarifies that the amendments to Exchange Rule 804 were intended to be 
adopted on a permanent basis.

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

    The Exchange believes that 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.
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    \5\ 15.U.S.C. 78f(b)(5).
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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 the proposed rule change. The Exchange has not received any 
written comments from members or other interested parties.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change 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-2005-40 on the subject line.

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-2005-40. 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 Exchange. 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-2005-40 and should be 
submitted on or before November 9, 2005.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    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\ and, in particular, the requirements of section 
6(b)(5) of the Act.\8\ Section 6(b)(5) requires, among other things, 
that the rules of a national securities 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.
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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. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Commission previously approved, on a pilot basis, changes to 
Exchange Rule 804 that (a) require Competitive Market Makers to 
maintain continuous quotes in all of the series of any options class 
the Competitive Market Maker is quoting and (b) limit to 60 the number 
of options classes a Competitive Market Maker is required to quote when 
there are more than 100 options classes in such Competitive Market 
Maker's appointed Group (together, the ``Exchange Rule 804 
Changes'').\9\ Although the Exchange Rule 804 Changes were part of the 
Exchange's proposals to allow, on a pilot basis, Electronic Access 
Members to designate ``Preferred Market Makers'' on orders such 
Electronic Access Members enter into the Exchange's systems, the 
Commission notes that the Exchange Rule 804 Changes apply to all 
Competitive Market Makers, even in cases in which a Competitive Market 
Maker does not receive a designated order. The Commission also notes 
that the Exchange stated that the proposed rule change clarifies the 
intent of the Exchange that the Exchange Rule 804 Changes be approved 
on a permanent basis. The Commission further notes that the Exchange 
Rule 804 Changes were published for comment in the Federal Register in 
connection with File Number SR-ISE-2005-18 and File

[[Page 60869]]

Number ISE-2005-35,\10\ and that no comments were received on such 
changes. The Commission believes that the proposed rule change would 
clarify that the obligations of Competitive Market Makers continue, 
regardless of whether the Preferred Market Maker pilot program is 
extended, and that such clarification does not raise any regulatory 
issues. For these reasons, the Commission believes that approving the 
Exchange Rule 804 Changes on a permanent basis is consistent with the 
Act.
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    \9\ See supra notes 3 and 4.
    \10\ Id.
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    The Exchange has requested that the Commission find good cause for 
approving the proposed rule change prior to the thirtieth day after 
publication of notice thereof in the Federal Register. The Commission 
notes that no comments were received in connection with the approvals 
of the Exchange Rule 804 Changes on a pilot basis. The Commission 
believes that accelerating approval of the proposed rule change should 
allow for more efficient market operation by offering clarity to 
existing ISE rules. Accordingly, the Commission finds good cause, 
consistent with section 19(b)(2) of the Act,\11\ for approving the 
proposed rule change prior to the thirtieth day after publication of 
notice thereof in the Federal Register.
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    \11\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-ISE-2005-40) is hereby 
approved on an accelerated basis.

    \12\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ CFR 200.30-3(a)(12).

J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5-5742 Filed 10-18-05; 8:45 am]
BILLING CODE 8010-01-P