[Federal Register Volume 71, Number 194 (Friday, October 6, 2006)]
[Notices]
[Pages 59171-59173]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-16583]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54540; File No. SR-ISE-2006-58]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to the Exercise Deadline for Quarterly Options Series

September 29, 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 September 26, 2006, the International Securities Exchange, LLC 
(``Exchange'' or ``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 Exchange. The Commission 
has designated this proposed rule change as non-controversial under 
Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) 
thereunder,\4\ which renders the proposed rule change effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE proposes to amend ISE rule 1100(c) ``Exercise of Options 
Contracts.'' The text of the proposed rule change is set forth below. 
Proposed new language is italicized.
* * * * *

Rule 1100. Exercise of Options Contracts

    (a)-(b) No Change.
    (c) Exercise cut-off time. Option holders have until 5:30 p.m. 
Eastern Time on the business day immediately prior to the expiration 
date or, in the case of Quarterly Options Series, on the expiration 
date, to make a final decision

[[Page 59172]]

to exercise or not exercise an expiring option. For customer accounts, 
Members may not accept exercise instructions after 5:30 p.m. Eastern 
Time but have until 6:30 p.m. Eastern Time to submit a Contrary 
Exercise Advice. For non-customer accounts, Members may not accept 
exercise instructions after 5:30 p.m. Eastern Time but have until 6:30 
p.m. Eastern Time to submit a Contrary Exercise Advice if such Member 
employs an electronic submission procedure with time stamp for the 
submission of exercise instructions by option holders. Consistent with 
Supplemental Material .03, Members are required to submit a Contrary 
Exercise Advice by 5:30 p.m. for non-customer accounts if such Members 
do not employ an electronic submission procedure with time stamp for 
the submission of exercise instructions by option holders.
    (d)-(j) No Change.
* * * * *

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 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 ISE proposes to amend its rule regarding exercise cut-off time 
to revise its application to Quarterly Options Series. Currently, under 
ISE Rule 1100(c), option holders have until 5:30 p.m. Eastern Time on 
the business day immediately prior to the expiration date to make a 
final decision to exercise or not exercise an expiring option. The rule 
in its current form would require the holder of a quarterly option to 
decide whether to exercise or not exercise an expiring option on the 
business day immediately prior to the expiration date. However, since 
Quarterly Options Series continue to trade on the expiration date, an 
option holder would have to make the decision whether to exercise an 
expiring option without the knowledge of what the closing price of the 
underlying security would be on expiration. Accordingly, the Exchange 
proposes to amend Rule 1100(c) so that a holder of an expiring 
quarterly option has until 5:30 p.m. on the expiration date to decide 
whether to exercise or not exercise an expiring quarterly option.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \5\ in general, and Section 6(b)(5) of the 
Act \6\ specifically, in that it is designed to promote just and 
equitable principles of trade, to prevent fraudulent and manipulative 
acts and practices, and, in general, to protect investors and the 
public interest.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \7\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\8\ Because the foregoing proposed rule change (i) does not 
significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) the Exchange provided the Commission with notice of its 
intent to file the proposed rule change at least five days prior to the 
filing date, the proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6)(iii) thereunder.\9\
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ Rule 19b-4(f)(6)(iii) requires the Exchange to give written 
notice to the Commission of its intent to file the proposed rule 
change five business days prior to filing. The Exchange provided the 
Commission with such notice on September 6, 2006.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to waive the operative 
delay if such action is consistent with the protection of investors and 
the public interest. The Exchange has asked the Commission to waive the 
operative delay to permit the proposed rule change to become effective 
prior to the 30th day after filing.
    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Waiving the operative delay will allow the Exchange to permit exercise 
of a Quarterly Options Series at any time until the close of business 
on its expiration date starting with the third quarter 2006 expirations 
on Friday, September 29, 2006, and consequently will benefit investors. 
Therefore the Commission has determined to waive the 30-day delay and 
allow the proposed rule change to become operative immediately.\10\
---------------------------------------------------------------------------

    \10\ For purposes only of waiving the operative delay of this 
proposal, the Commission notes that it has considered the proposed 
rule's impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
---------------------------------------------------------------------------

    At any time within sixty (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.

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 No. SR-ISE-2006-58 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-2006-58. 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

[[Page 59173]]

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-
2006-58 and should be submitted on or before October 27, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Nancy M. Morris,
Secretary.
 [FR Doc. E6-16583 Filed 10-5-06; 8:45 am]
BILLING CODE 8011-01-P