[Federal Register Volume 71, Number 176 (Tuesday, September 12, 2006)]
[Notices]
[Pages 53727-53728]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-15051]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54398; File No. SR-ISE-2006-42]


Self-Regulatory Organizations; the International Securities 
Exchange, Inc., Notice of Filing and Order Granting Accelerated 
Approval of a Proposed Rule Change Relating to Short Sales

August 31, 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 25, 2006, the International Securities Exchange, Inc. (the 
``Exchange'' or the ``ISE'') filed with the Securities and Exchange 
Commission the proposed rule change as described in Items I and II 
below, which items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice and order to 
solicit comments on the proposed rule change from interested persons 
and to grant accelerated approval.
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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 ISE is proposing to adopt a rule with respect to short selling 
on the ISE Stock Exchange, the Exchange's entry into the trading of 
non-option equity securities. The text of the proposed rule change is 
available on the Exchange's Web site (http://www.iseoptions.com), at 
the principal office of the Exchange, and at the Commission's Public 
Reference Room.

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 self-regulatory organization 
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 self-regulatory 
organization 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

    Purpose--Currently the ISE only trades options on equity securities 
and indices. The purpose of this proposed rule change is to adopt a 
rule that will be necessary for ISE ultimately to trade non-option 
equity securities. Specifically, Commission Regulation SHO \3\ and Rule 
10a-1\4\ under the Securities Exchange Act of 1934 (``Exchange Act'') 
govern the marking of orders in equity securities as long and short, 
the short sale of securities, and securities borrowing and delivery 
requirements. In order for the ISE to trade equity securities it will 
need to adopt a rule implementing these provisions. Proposed Rule 2105 
does so by: (a) Requiring members to mark orders in compliance with 
Regulation SHO; (b) implementing the short-sale restrictions of the 
``tick rule'' contained in the Short Sale Rule; and (c) prohibiting 
members from entering orders in equity securities unless the member can 
comply with the borrowing and delivery requirements of Regulation SHO. 
Proposed Rule 2105 exempts from its requirements transactions, 
securities and persons similarly exempted under Regulation SHO.\5\
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    \3\ Rules 242.200 through 242.203 under the Exchange Act; 17 CFR 
242.200-242.203 (``Regulation SHO'').
    \4\ 17 CFR 240.10a-1 (``Short Sale Rule'').
    \5\ Rule 2105 is substantially similar to Rule 30.20 of the 
Chicago Board Options Exchange, Incorporated (``CBOE'').
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    Basis--The basis under the Exchange Act for this proposed rule 
change is found in Section 6(b)(5), in that the proposed rule filing 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. Specifically, the proposal will permit the 
Exchange to trade equity securities in a manner that complies with 
Regulation SHO and the Short Sale Rule.

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. The 
Exchange will notify the Commission of any written comments received by 
the Exchange.

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 No. SR-ISE-2006-42 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-2006-42. 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 Commissions 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, 100 F Street, NE., Washington, DC 
20549. Copies of such filing also will be available for inspection and 
copying at the principal office of the ISE and on ISE's Web site at 
http://www.iseoptions.com. 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-2006-42 and should be submitted on or before October 3, 2006.

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

    The Commission finds that the proposed rule change is consistent 
with

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the requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange. In particular, the 
Commission finds that the proposed rule change is consistent with 
Section 6(b)(5), which requires that an exchange have rules designed, 
among other things, 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, and in general to protect 
investors and the public interest.\6\ By incorporating the requirements 
of Regulation SHO and the Short Sale Rule, the proposed rule will 
contribute to a coordinated regulatory effort to prevent short sale 
fraud and manipulation and, in so doing, will protect investors.
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    \6\ In approving this rule proposal, the Commission notes that 
it has also considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
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Acceleration

    The Commission finds good cause for approving the proposed rule 
change prior to the 30th day after the date of publication of notice of 
filing thereof in the Federal Register. The proposal incorporates the 
provisions of Regulation SHO and the Short Sale Rule and will be 
necessary for the ISE to trade non-option equity securities on the ISE 
Stock Exchange. The Exchange's adoption of a rule incorporating the 
provisions of Regulation SHO and the Short Sale Rule in order to trade 
non-option equity securities benefits the investing public. The 
Commission does not believe that ISE's proposal raises any novel 
regulatory issues. Accordingly, the Commission believes good cause 
exists, consistent with Sections 6(b)(5) and 19(b) of the Exchange Act, 
15 U.S.C. 78f(b)(5) and 78s(b), to approve the proposed rule change on 
an accelerated basis.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (File No. SR-ISE-2006-42) be and 
hereby is approved on an accelerated basis.
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    \7\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-15051 Filed 9-11-06; 8:45 am]
BILLING CODE 8010-01-P