[Federal Register Volume 70, Number 247 (Tuesday, December 27, 2005)]
[Notices]
[Pages 76475-76477]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-7844]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52983; File No. SR-ISE-2005-047]


Self-Regulatory Organizations; International Securities Exchange, 
Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change and Amendment No. 1 Thereto To Adopt a Flat Execution Fee For 
Public Customer Orders in ``Premium Products'' and Firm Proprietary 
Orders, and To Incorporate the Current Facilitation Mechanism Fee Into 
the Flat Execution Fee For Firm Proprietary Orders

December 20, 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 December 1, 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, II and III below, which Items have been prepared by the ISE. 
On December 7, 2005, the Exchange filed Amendment No. 1 to the proposed 
rule change.\3\ The ISE filed the proposal as a ``non-controversial'' 
proposed rule change pursuant to section 19(b)(3)(A)(iii) of the Act 
\4\ and Rule 19b-4(f)(2) thereunder,\5\ which renders the proposal 
effective upon filing with the Commission. The Commission is publishing 
this notice to solicit comments on the proposed rule change, as 
amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, ISE explained further its basis for the 
proposed flat execution fee and its reason for eliminating the 
Facilitation Mechanism fee. Amendment No. 1 also corrected several 
minor errors. For purposes of calculating the 60-day period within 
which the Commission may summarily abrogate the proposed rule change 
the Commission considers the period to commence on December 7, 2005, 
the date on which the ISE filed Amendment No. 1. See 15 U.S.C. 
78s(b)(3)(C).
    \4\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \5\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE proposes to amend its Schedule of Fees to (i) adopt a flat 
execution fee for Public Customer Orders \6\ in ``Premium Products'' 
(as defined in the Schedule of Fees) and firm proprietary orders; and 
(ii)

[[Page 76476]]

incorporate the current Facilitation Mechanism fee into the flat 
execution fee for firm proprietary orders. The text of the proposed 
rule change is available at the Exchange and at the Commission's Public 
Reference Room, and at the Exchange's Web site (http://www.iseoptions.com/legal/proposed_rule_changes.asp).
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    \6\ A Public Customer Order is defined in ISE Rule 100(a)(33) as 
an order for the account of a Public Customer. A Public Customer is 
defined in ISE Rule 100(a)(32) as a person that is not a broker or 
dealer in securities.
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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 proposal. 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
    The Exchange's Schedule of Fees currently contains a formula that 
determines the amount of the execution fee to be charged to all order 
types, i.e., Public Customer (for certain index-based products), firm 
proprietary and market maker, based on the Exchange's average daily 
volume during the previous month. Under the current formula, the 
execution fee can range anywhere between $0.12 per contract to $0.21 
per contract, depending on the Exchange's average daily volume during 
the previous month. The Exchange proposes to change this structure so 
that Public Customer Orders in ``Premium Products'' \7\ and firm 
proprietary orders pay a flat execution fee of $0.15 per contract.\8\ 
Public Customer Orders in products other than Premium Products will 
continue to be subject to a flat execution fee of $0.05, although that 
fee is currently waived until June 30, 2006. ISE market makers will 
continue to be charged the variable fee under the current formula. A 
$0.03 per contract comparison fee shall continue to apply to all these 
order types, unless specifically waived in the Schedule of Fees.
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    \7\ The ISE proposes to define the term ``Premium Products'' in 
the Schedule of Fees as options on DIA, IBB, IEF, IJH, IJR, IWM, 
IWN, IWO, NYC, NY, OEF, OIH, SHY, SMH, SPY, TLT, XLB, XLE, XLF, XLI, 
XLU, BYT, HSX, HVY, IXK, IXX, IXZ, JLO, MID, MNX, MSH, NDX, OOG, 
RMN, RND, RUF, RUI, RUT, SIN, and SML.
    \8\ These fees will be charged only to Exchange members.
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    Additionally, the Exchange proposes to delete the separate 
Facilitation Mechanism fee line item. Previously, there was a separate 
line item in the Schedule of Fees for orders executed in that 
mechanism: Orders executed in the Facilitation Mechanism were charged 
the lower of the standard execution fee or $0.15 per contract. 
Historically, fees charged for trades executed in the Facilitation 
Mechanism were carved out on the Schedule of Fees as a separate line 
item because, as a matter of inducement for members to transact in the 
Facilitation Mechanism, these fees were lower than the standard 
execution fees. Over time, as the standard execution fees decreased, as 
a result of increased volume, the two fees became identical. 
Accordingly, the Exchange now proposes to eliminate the separate line 
item for orders executed in the Facilitation Mechanism because it is no 
longer necessary when there is a flat $0.15 fee for firm proprietary 
order and public customer orders in Premium Products.
    As a matter of ``housekeeping,'' in addition to using ``Premium 
Products'' as a defined word throughout the Schedule of Fees, the 
Exchange proposes to identify each product that appears on the Schedule 
of Fees by its ticker symbol alone rather than by its name and ticker 
symbol.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirements of section 6(b)(4) of the Act,\9\ which requires 
that an exchange have an equitable allocation of reasonable dues, fees 
and other charges among its members and other persons using its 
facilities. The Exchange believes the proposed fees are reasonable 
because they closely correlate to the variable execution fees charged 
to market maker and firm proprietary orders over the course of the last 
12 months. For example, for nine months during 2005, the variable 
execution fees charged to market maker and firm proprietary orders were 
$0.15 per contract, and for 3 months during 2005, these same fees were 
$0.14 per contract. The Exchange further believes that the proposed fee 
changes will enable the ISE to continue offering competitively priced 
products and services.
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    \9\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change will 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 neither solicited nor received comments on the 
proposed rule change. The ISE has not received any unsolicited written 
comments from members or other interested parties.

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

    The foregoing proposed rule change has become effective pursuant to 
section 19(b)(3)(A)(ii) of the Act,\10\ and paragraph (f)(2) of Rule 
19b-4 thereunder \11\ because it establishes or changes a due, fee, or 
other charge. At any time within 60-days of the filing of the proposed 
rule change, the Commission may summarily abrogate such rule change if 
it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.\12\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 240.19b-4(f)(2).
    \12\ See footnote 3, supra.
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IV. 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-2005-047 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-2005-047. This file 
number should be included on the subject line if e-mail is used. To 
help the

[[Page 76477]]

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 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-2005-047 and should be submitted on 
or before January 17, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. E5-7844 Filed 12-23-05; 8:45 am]
BILLING CODE 8010-01-P