[Federal Register Volume 71, Number 103 (Tuesday, May 30, 2006)]
[Notices]
[Pages 30703-30705]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-8236]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53850; File No. SR-ISE-2006-21]


Self-Regulatory Organizations; International Securities Exchange, 
Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to the Exposure Period for Crossing Orders

May 23, 2006.
    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 April 17, 2006, 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 ISE. The ISE filed the 
proposed rule change pursuant to section 19(b)(3)(A) of the Act \3\ and 
Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal effective 
upon filing with the Commission. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE proposes to decrease the exposure period for crossing 
orders under ISE Rule 717(d) and (e) to three seconds. The text of the 
proposed rule change is as follows, with deletions in [brackets] and 
additions italicized.

Rule 717. Limitations on Orders

* * * * *
    (d) Principal Transactions.
    Electronic Access Members may not execute as principal orders they 
represent as agent unless (i) agency orders are first exposed on the 
Exchange for at least three (3) [thirty (30)] seconds, (ii) the 
Electronic Access Member has been bidding or offering on the Exchange 
for at least three (3) [thirty (30)] seconds prior to receiving an 
agency order that is executable against such bid or offer, or (iii) the 
Member utilizes the Facilitation Mechanism pursuant to Rule 716(d).
    (e) Solicitation Orders.
    Electronic Access Members may not execute orders they represent as 
agent on the Exchange against orders solicited from Members and non-
member broker-dealers to transact with such orders unless (i) the 
unsolicited order is first exposed on the Exchange for at least three 
(3) [thirty (30)] seconds, or (ii) the Member utilizes the Solicited 
Order Mechanism pursuant to Rule 716(e).
* * * * *

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 ISE 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
    An Electronic Access Member (``EAM'') of the Exchange may not 
execute an order it represents as agent with a facilitation or 
solicited order (referred to herein as ``crossing orders'') unless it 
complies with the order exposure requirements contained in ISE Rule 
717(d) and (e) respectively. As set forth in these provisions, if an 
EAM seeking to cross two orders does not choose to use the Facilitation 
Mechanism or the Solicited Order Mechanism, which automatically expose 
crossing orders for 3 seconds, it is required to comply with a 30-
second exposure requirement. Specifically, when an EAM chooses not to 
use the Facilitation Mechanism, it may not execute a facilitation cross 
unless (i) the agency order is first exposed on the Exchange for at 
least 30 seconds; or (ii) the EAM has been bidding or offering on the 
Exchange for at least 30 seconds prior to receiving the agency order 
that is executable against such bid or offer. Similarly, when an EAM 
chooses not to use the Solicited Order Mechanism, it may not execute a 
solicitation cross

[[Page 30704]]

unless the agency order is first exposed on the Exchange for 30 
seconds.
    The Exchange proposes to shorten the duration of the exposure 
period contained in the rules governing such transactions from 30 
seconds to 3 seconds. This shortened exposure period is fully 
consistent with the electronic nature of the Exchange's market. Market 
participants on the ISE have implemented systems that monitor any 
updates to the ISE market, including any changes resulting from orders 
being entered into the market, and can automatically respond based on 
pre-set parameters. Thus, an exposure period of 3 seconds will permit 
exposure of orders on the ISE in a manner consistent with the 
Exchange's electronic market.
    By reducing the exposure time to 3 seconds, the ISE believes that 
EAMs will be able to provide liquidity to their customers' orders on a 
timelier basis, thus providing investors with more speedy executions. 
Timely and accurate executions are consistent with the principles under 
which the ISE's electronic market was developed.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under section 6(b)(5) \5\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, 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. 
In particular, the proposal will permit members to provide liquidity to 
customer orders on a more timely basis, thus providing investors with 
more speedy executions. At the same time, it will preserve a reasonable 
period for orders to interact in the auction market.
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    \5\ 15 U.S.C. 78f(b)(5).
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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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to section 19(b)(3)(A) of the Act \6\ and Rule 19b-
4(f)(6) thereunder.\7\
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6). When filing a proposed rule change 
pursuant to Rule 19b-4(f)(6) under the Act, an Exchange is required 
to give the Commission written notice of its intent to file the 
proposed rule change, along with a brief description and text of the 
proposed rule change, at least five business days prior to the date 
of filing of the proposed rule change, or such shorter time as 
designated by the Commission. The Exchange provided notice to the 
Commission two business days prior to filing the proposed rule 
change, and the Commission has determined to waive the five business 
day requirement.
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    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.
    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\8\ 
However, Rule 19b-4(f)(6)(iii) \9\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The ISE has requested that the 
Commission waive the 30-day operative delay. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because the proposed 
rule change is based on rules recently approved by the Commission for 
two other exchanges.\10\ For this reason, the Commission designates the 
proposal to be effective and operative upon filing with the 
Commission.\11\
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    \8\ 17 CFR 240.19b-4(f)(6)(iii).
    \9\ Id.
    \10\ See Securities Exchange Act Release Nos. 53567 (March 29, 
2006), 71 FR 17529 (April 6, 2006) (SR-CBOE-2006-09) and 53609 
(April 6, 2006), 71 FR 19224 (April 13, 2006) (SR-NYSEArca-2006-01).
    \11\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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-2006-21 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-ISE-2006-21. 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-2006-21 and should be submitted on or before June 
20, 2006.

[[Page 30705]]

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200/30-3(a)(12).

Jill M. Peterson,
Assistant Secretary.
 [FR Doc. E6-8236 Filed 5-26-06; 8:45 am]
BILLING CODE 8010-01-P