[Federal Register Volume 71, Number 147 (Tuesday, August 1, 2006)]
[Notices]
[Pages 43548-43550]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-12273]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54204; File No. SR-ISE-2006-38]


Self-Regulatory Organizations; International Securities Exchange, 
Inc.; Notice of Filing and Order Granting Accelerated Approval of 
Proposed Rule Change to Extend the Linkage Fee Pilot Program

July 25, 2006
    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 July 3, 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 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 for a pilot period through July 31, 
2007.
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    \1\ 15 U.S.C. 78s(b)(1).
    \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 extend until July 31, 2007, the current 
pilot program regarding transaction fees for trades executed through 
the intermarket options linkage (the ``Linkage''). Currently pending 
before the Commission is a filing to make such fees permanent.\3\ The 
text of the proposed rule change is available on the ISE's Web site at 
(http://www.iseoptions.com), at the Exchange's Office of the Secretary, 
and at the Commission's Public Reference Room.
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    \3\ See SR-ISE-2003-30 (the ``Permanent Fee Filing'').
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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 Exchange included statements 
concerning the purpose of, and basis for,

[[Page 43549]]

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
    The purpose of this proposed rule change is to extend for one year 
the pilot program establishing ISE fees for Principal Orders (``P 
Orders'') and Principal Acting as Agent Orders (``P/A Orders'') sent 
through Linkage and executed on the ISE. The fees currently are 
effective for a pilot period scheduled to expire on July 31, 2006,\4\ 
and this filing would extend the fees through July 31, 2007. The 
Exchange notes that in addition to the Permanent Fee Filing, the 
Exchange filed one other Linkage related fee filing that proposes to 
increase from $0.15 per contract to $0.24 per contract the fee for P 
Orders sent through Linkage and executed on the ISE.\5\
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    \4\ See Securities Exchange Act Release No. 52168 (July 29, 
2005), 70 FR 45454 (August 5, 2005) (extending the Linkage fee pilot 
program until July 31, 2006).
    \5\ See Securities Exchange Act Release No. 54074 (June 30, 
2006), 71 FR 38917 (July 10, 2006) (``P Order Fee Filing'').
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    The three fees the ISE charges for these orders are: the Firm 
Proprietary execution fee of $0.15 per contract for trading on the ISE; 
a surcharge of between $.05 and $.15 for trading certain licensed 
products; and a $.03 comparison fee (collectively ``linkage fees'').\6\ 
These are the same fees that all ISE Members pay for non-customer 
transactions executed on the Exchange.\7\ The ISE does not charge for 
the execution of Satisfaction Orders sent through Linkage and is not 
proposing to charge for such orders.
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    \6\ Pursuant to other pilot programs, certain linkage fees may 
not apply during the Linkage pilot program.
    \7\ The ISE charges these fees only to its Members, generally 
firms who clear P Orders and P/A Orders for market makers on the 
other linked exchanges.
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    In the Permanent Fee Filing, the ISE discusses in detail the 
reasons why it believes it is appropriate to charge fees for P Orders 
and P/A Orders executed through Linkage. ISE believes that market 
makers on competing exchanges always can match a better price on the 
ISE and never are obligated to send orders to the ISE through Linkage. 
However, if such market makers do seek the ISE's liquidity, whether 
through conventional orders or through the use of P Orders or P/A 
Orders, ISE believes it is appropriate to charge its Members the same 
fees levied on other non-customer orders. Because the Commission is 
continuing to study Linkage in general and the effect of fees on 
Linkage trading, the proposal would extend the current pilot program 
for Linkage fees \8\ for one year while the Commission considers the 
Permanent Fee Filing.
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    \8\ Under the current pilot program, while fees for both P 
Orders and P/A orders are currently set at $0.15 per contract, the 
ISE has proposed to increase the fee for P Orders to $0.24 per 
contract in the P Order Fee Filing.
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2. Statutory Basis
    The Exchange believes that the basis under the Act for the proposed 
rule change is the requirement under Section 6(b)(4) of the Act \9\ 
that an exchange have an equitable allocation of reasonable dues, fees 
and other charges among its members and other persons using its 
facilities.
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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 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 unsolicited 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-2006-38 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-2006-38. 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 the 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-2006-38 and should be submitted on or before August 22, 2006.

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 the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange,\10\ and, in particular, the requirements of Section 6(b) of 
the Act \11\ and the rules and regulations thereunder. The Commission 
finds that the proposed rule change is consistent with Section 6(b)(4) 
of the Act,\12\ which requires that the rules of the Exchange provide 
for the equitable allocation of reasonable dues, fees and other charges 
among its members and other persons using its facilities. The 
Commission believes that

[[Page 43550]]

the extension of the Linkage fee pilot until July 31, 2007 will give 
the Exchange and the Commission further opportunity to evaluate whether 
such fees are appropriate.
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    \10\ 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).
    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
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    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\13\ for approving the proposed rule change prior to the 
thirtieth day after publication of notice thereof in the Federal 
Register. The Commission believes that granting accelerated approval of 
the proposed rule change will preserve the Exchange's existing pilot 
program for Linkage fees without interruption as the Exchange and the 
Commission further consider the appropriateness of Linkage fees.
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    \13\ 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,\14\ that the proposed rule change (SR-ISE-2006-38) is hereby 
approved on an accelerated basis for a pilot period to expire on July 
31, 2007.
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    \14\ Id.
    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6-12273 Filed 7-31-06; 8:45 am]
BILLING CODE 8010-01-P