[Federal Register Volume 71, Number 217 (Thursday, November 9, 2006)]
[Notices]
[Pages 65857-65859]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-18956]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54697; File No. SR-ISE-2006-61]


 Self-Regulatory Organizations; International Securities 
Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change and Amendment No. 1 Thereto Relating to Fee Changes

November 2, 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 October 5, 2006, the International Securities Exchange, LLC 
(``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 October 17, 2006, ISE filed Amendment No. 1 to the proposed rule 
change.\3\ The ISE has designated this proposal as one establishing or 
changing a due, fee, or other charge imposed by the ISE under Section 
19(b)(3)(A)(ii) 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, the Exchange revised footnote 10, infra, 
to clarify that six of the Premium Products that are the subject of 
this filing constitute Fund Shares under ISE Rule 502(h), while the 
other two Premium Products are narrow-based index options listed 
pursuant to the Exchange's generic listing standards. The Exchange 
also represented that Amendment No. 1 did not affect the proposed 
fees covered by this filing.
    \4\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \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 is proposing to amend its Schedule of Fees to establish 
fees for transactions in options on eight Premium Products.\6\ The text 
of the

[[Page 65858]]

proposed rule change, as amended, is available on the ISE's Web site 
(http://www.iseoptions.com/legal/proposed_rule_changes.asp), at the 
principal office of the ISE, and at the Commission's Public Reference 
Room.
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    \6\ ``Premium Products'' is defined in the Schedule of Fees as 
the products enumerated therein.
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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 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
    The Exchange is proposing to amend its Schedule of Fees to 
establish fees for transactions in options on the following eight 
Premium Products: KBW Bank Index (``BKX''), ISE Revere Natural Gas 
Index (``FUM''), iShares Dow Jones U.S. Energy Sector Index Fund 
(``IYE''), iShares Dow Jones Transportation Average Index Fund 
(``IYT''),\7\ PowerShares WilderHill Clean Energy Portfolio 
(``PBW''),\8\ Merrill Lynch Utilities HOLDRs Trust (``UTH''),\9\ 
Consumer Staples Select Sector SPDR Fund (``XLP''), and Consumer 
Discretionary Select Sector SPDR Fund (``XLY'').\10\ Specifically, the 
Exchange is proposing to adopt an execution fee and a comparison fee 
for all transactions in options on BKX, FUM, IYE, IYT, PBW, UTH, XLP, 
and XLY.\11\ The amount of the execution fee and comparison fee for 
products covered by this filing shall be $0.15 and $0.03 per contract, 
respectively, for all Public Customer Orders \12\ and Firm Proprietary 
orders. The amount of the execution fee and comparison fee for all ISE 
Market Maker transactions shall be equal to the execution fee and 
comparison fee currently charged by the Exchange for ISE Market Maker 
transactions in equity options.\13\ Finally, the amount of the 
execution fee and comparison fee for all non-ISE Market Maker 
transactions shall be $0.16 and $0.03 per contract, respectively. All 
of the applicable fees covered by this filing are identical to fees 
charged by the Exchange for all other Premium Products. The Exchange 
believes the proposed rule change will further the Exchange's goal of 
introducing new products to the marketplace that are competitively 
priced.
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    \7\ iShares[supreg] is a registered trademark of Barclays Global 
Investors, N.A. (``BGI''), a wholly owned subsidiary of Barclays 
Bank PLC. ``Dow Jones,'' ``Dow Jones U.S. Energy Sector Index 
Fund,'' and ``Dow Jones Transportation Average Index Fund'' are 
trademarks and service marks of Dow Jones & Company, Inc. (``Dow 
Jones'') and have been licensed for use for certain purposes by BGI. 
All other trademarks and service marks are the property of their 
respective owners. Neither IYE nor IYT are sponsored, endorsed, 
issued, sold or promoted by Dow Jones. BGI and Dow Jones have not 
licensed or authorized ISE to: (i) Engage in the creation, listing, 
provision of a market for trading, marketing, and promotion of 
options on IYE and IYT; or (ii) use and refer to any of their 
trademarks or service marks in connection with the listing, 
provision of a market for trading, marketing, and promotion of 
options on IYE and IYT or with making disclosures concerning options 
on IYE and IYT under any applicable federal or state laws, rules or 
regulations. BGI and Dow Jones do not sponsor, endorse, or promote 
such activity by ISE and are not affiliated in any manner with ISE.
    \8\ PowerSharesTM and PBWTM are trademarks 
of PowerShares Capital Management LLC (``PowerShares'' or the 
``Adviser''). The WilderHill Clean Energy Index is a service mark of 
WilderShares, LLC (``WilderShares''). All other trademarks and 
service marks are the property of their respective owners. 
WilderShares is not affiliated with the PBW or with the Adviser. PBW 
is not sponsored, endorsed, sold or promoted by WilderShares, and 
WilderShares makes no representation regarding the advisability of 
investing in PBW. WilderShares and PowerShares have not licensed or 
authorized ISE to: (i) Engage in the creation, listing, provision of 
a market for trading, marketing, and promotion of options on PBW; or 
(ii) use and refer to any of their trademarks or service marks in 
connection with the listing, provision of a market for trading, 
marketing, and promotion of options on PBW or with making 
disclosures concerning options on PBW under any applicable federal 
or state laws, rules or regulations. WilderShares and PowerShares do 
not sponsor, endorse, or promote such activity by ISE and are not 
affiliated in any manner with ISE.
    \9\ UTH issues Depositary Receipts called Utilities 
HOLDRSSM representing undivided beneficial ownership in 
the U.S.-traded common stock of a group of specified companies that, 
among other things, are involved in various segments of the 
utilities industry. ``HOLDRS'' and ``HOLding Company Depositary 
ReceiptS'' are service marks of Merrill Lynch & Co., Inc. (``Merrill 
Lynch''). All other trademarks and service marks are the property of 
their respective owners. Merrill Lynch has not licensed or 
authorized ISE to: (i) Engage in the creation, listing, provision of 
a market for trading, marketing, and promotion of options on UTH; or 
(ii) use and refer to any of their trademarks or service marks in 
connection with the listing, provision of a market for trading, 
marketing, and promotion of options on UTH or with making 
disclosures concerning options on UTH under any applicable federal 
or state laws, rules or regulations. Merrill Lynch does not sponsor, 
endorse, or promote such activity by ISE and is not affiliated in 
any manner with ISE.
    \10\ The Exchange represents that IYE, IYT, PBW, UTH, XLP and 
XLY constitute ``Fund Shares,'' as defined by ISE Rule 502(h). The 
Exchange further represents that BKX and FUM meet the standards of 
ISE Rule 2002(b), which allows the ISE to begin trading these 
products by filing Form 19b-4(e) at least five business days after 
commencement of trading these new products pursuant to Rule 19b-4(e) 
of the Act. Accordingly, the ISE has submitted Form 19b-4(e) to the 
Commission.
    \11\ These fees will be charged only to Exchange members. Under 
a pilot program that is set to expire on July 31, 2007, these fees 
will also be charged to Linkage Orders (as defined in ISE Rule 
1900).
    \12\ ``Public Customer Order'' is defined in ISE Rule 100(a)(33) 
as an order for the account of a Public Customer. ``Public 
Customer'' is defined in ISE Rule 100(a)(32) as a person that is not 
a broker or dealer in securities.
    \13\ The execution fee is currently between $0.21 and $0.12 per 
contract side, depending on the Exchange Average Daily Volume, and 
the comparison fee is currently $0.03 per contract side.
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    Additionally, the Exchange has entered into a license agreement 
with Keefe, Bruyette & Woods, Inc. in connection with the listing and 
trading of options on BKX; with Revere Data, LLC in connection with the 
listing and trading of options on FUM; and with Standard & Poor's in 
connection with the listing and trading of options on XLP and XLY. As 
with certain other licensed options, to defray the licensing costs, the 
Exchange is adopting a surcharge fee of $0.10 per contract for trading 
in options on BKX, XLP and XLY, and $0.05 per contract for trading in 
options on FUM. The Exchange believes charging the participants that 
trade these products is the most equitable means of recovering the 
costs of the licenses. However, because of competitive pressures in the 
industry, the Exchange proposes to exclude Public Customer Orders from 
this surcharge fee. Accordingly, this surcharge fee will only be 
charged to Exchange members with respect to non-Public Customer Orders 
(e.g., ISE Market Maker, non-ISE Market Maker, and Firm Proprietary 
orders) and shall apply to Linkage Orders \14\ under a pilot program 
that is set to expire on July 31, 2007. Further, since options on BKX, 
IYE, IYT, PBW, UTH, XLP and XLY are multiply-listed, the Payment for 
Order Flow fee shall also apply.
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    \14\ See ISE Rule 1900.
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    Finally, the Exchange has terminated its development agreement with 
Boenning & Scattergood, Inc. for options on the ISE Water Index 
(``HHO''). As a result, the Exchange proposes to no longer charge a 
$0.05 per contract surcharge fee for options on HHO. Accordingly, the 
Exchange proposes to delete the reference to a surcharge for HHO on its 
Schedule of Fees.
2. Statutory Basis
    The Exchanges believes that the basis under the Act for this 
proposed rule change is the requirement under Section 6(b)(4) of the 
Act \15\ that an exchange have an equitable allocation of reasonable 
dues, fees and other charges

[[Page 65859]]

among its members and other persons using its facilities.
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    \15\ 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, as amended, 
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. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing rule change, as amended, establishes or 
changes a due, fee, or other charge imposed by the Exchange, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \16\ and 
Rule 19b-4(f)(2) \17\ thereunder. At any time within 60 days of the 
filing of such amended 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.\18\
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 19b-4(f)(2).
    \18\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change under 
Section 19(b)(3)(C) of the Act, the Commission considers the period 
to commence on October 17, 2006, the date on which the ISE submitted 
Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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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, as amended, 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-2006-61 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.
    All submissions should refer to File Number SR-ISE-2006-61. 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-2006-61 
and should be submitted on or before November 30, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-18956 Filed 11-8-06; 8:45 am]
BILLING CODE 8011-01-P