[Federal Register Volume 71, Number 235 (Thursday, December 7, 2006)]
[Notices]
[Pages 71006-71007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-20714]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54841; File No. SR-ISE-2006-69]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change Relating to Fee Changes

November 30, 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 November 27, 2006, the International Securities Exchange, LLC (the 
``Exchange'' or the ``ISE'') filed with the Securities and Exchange 
Commission the proposed rule change as described in Items I, II, and 
III below, which items have been prepared by the self-regulatory 
organization. The ISE has designated this proposal as one changing a 
fee imposed by the ISE under Section 19(b)(3)(A)(ii) of the Act \3\ and 
Rule 19b-4(f)(2) 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)(ii).
    \4\ 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 extend until 
June 30, 2007, a pilot program that (i) caps and waives execution and 
comparison fees for transactions in options on the NASDAQ-100 Index 
Tracking Stock[reg] (``QQQQ[reg]'') when a member 
transacts a certain number of QQQQ option contracts, and (ii) reduces 
and waives the facilitation execution and comparison fees when a member 
transacts a certain number of contracts through the Exchange's 
Facilitation Mechanism. The text of the proposed rule change is 
available on the Exchange's Web site at (http://www.iseoptions.com/legal/proposed-rule-changes.asp), at the ISE's principal office, 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 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 ISE proposes to amend its Schedule of Fees to extend until June 
30, 2007, a pilot program that (i) caps and waives execution and 
comparison fees for transactions in options on the QQQQ when a member 
transacts a certain number of QQQQ option contracts, and (ii) reduces 
and waives the facilitation execution and comparison fees when a member 
transacts a certain number of contracts through the Exchange's 
Facilitation Mechanism.\5\
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    \5\ Earlier this year, the Exchange amended the pilot program by 
increasing the threshold levels at which the fee waiver and 
reduction applied. See Securities Exchange Act Release No. 54016 
(June 19, 2006), 71 FR 36575 (June 27, 2006).
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    Under the QQQQ pilot program, when a member's monthly average daily 
volume (``A.D.V.'') in QQQQ options reaches 10,000 contracts, the 
member's execution fee for the next 2,000 QQQQ option contracts is 
reduced by $.10 per contract.\6\ Further, when a member's monthly 
A.D.V. in QQQQ options reaches 12,000 contracts, the Exchange waives 
the entire execution fee and the comparison fee for each QQQQ option 
contract traded thereafter. The Exchange instituted this pilot program 
in November 2003 for a six month period,

[[Page 71007]]

expiring in May 2004.\7\ The Exchange extended the pilot program in May 
2004 for an additional six month period, expiring in November 2004.\8\ 
The Exchange extended the pilot program for a one year period in 
November 2004 \9\ and again in November 2005.\10\ The current pilot 
program is set to expire on November 30, 2006. The Exchange now 
proposes to further extend the pilot program until June 30, 2007.\11\ 
The Exchange seeks to extend this pilot program for competitive 
reasons. This pilot program was initiated and extended in an attempt to 
increase the Exchange's market share in the QQQQ option product.
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    \6\ Telephone conversation between Samir Patel, Assistant 
General Counsel, ISE, and Hong-anh Tran, Special Counsel, Division 
of Market Regulation, Commission, on November 28, 2006 (clarifying 
that the A.D.V. threshold is calculated on a monthly basis).
    \7\ See Securities Exchange Act Release No. 49147 (January 29, 
2004), 69 FR 5629 (February 5, 2004).
    \8\ See Securities Exchange Act Release No. 49853 (June 14, 
2004), 69 FR 35087 (June 23, 2004).
    \9\ See Securities Exchange Act Release No. 50900 (December 21, 
2004), 69 FR 78075 (December 29, 2004).
    \10\ See Securities Exchange Act Release No. 52934 (December 9, 
2005), 70 FR 74859 (December 16, 2005).
    \11\ The Exchange intends to establish, through subsequent 
filings, June 30 as the date on which all of its fee programs 
expire. By aligning the expiration date as such, the Exchange seeks 
to manage its various fee programs more effectively.
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    The structure of the reduction and waiver of the facilitation 
execution fee and the comparison fee is based on the structure of the 
reduction and waiver of the QQQQ execution fee and comparison fee noted 
above. That is, when a member's monthly A.D.V. in the Facilitation 
Mechanism reaches 15,000 contracts, the member's facilitation execution 
fee for the next 5,000 contracts transacted in the Facilitation 
Mechanism would be reduced by $.10 per contract. Further, when a 
member's monthly A.D.V. in the Facilitation Mechanism reaches 20,000 
contracts, the Exchange would waive the entire facilitation execution 
fee and the comparison fee for each contract transacted in the 
Facilitation Mechanism thereafter. As with the QQQQ incentives, the 
Exchange is proposing to extend this pilot program to encourage members 
to use the Facilitation Mechanism.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \12\ in general, and furthers the objectives of 
Sections 6(b)(4) of the Act \13\ in particular, in that it is an 
equitable allocation of reasonable dues, fees, and other charges among 
its members and other persons using its facilities. In particular, the 
fee changes proposed hereby will enable the Exchange to continue 
offering competitively priced products and services.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 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

    No written comments were either solicited or received.

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

    The foregoing proposed rule change has been designated as a fee 
change pursuant to Section 19(b)(3)(A)(ii) of the Act \14\ and Rule 
19b-4(f)(2) \15\ thereunder, because it establishes or changes a due, 
fee, or other charge imposed by the Exchange. Accordingly, the proposal 
will take effect upon filing with the Commission. At any time within 60 
days of the filing of such 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.
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    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \15\ 17 CFR 240.19b-4(f)(2).
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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-2006-69 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-2006-69. 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-2006-69 and should be submitted on or before 
December 28, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E6-20714 Filed 12-6-06; 8:45 am]
BILLING CODE 8011-01-P