[Federal Register Volume 71, Number 244 (Wednesday, December 20, 2006)]
[Notices]
[Pages 76399-76400]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-21653]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54923; File No. SR-ISE-2006-73]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing of a Proposed Rule Change Relating to the 
Definition of Complex Trade as Applied to Trades Through the 
Intermarket Linkage

 December 12, 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 December 4, 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 
Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE proposes to amend ISE Rule 1900 to revise the definition of 
``Complex Trade'' as such definition applies to trades through the 
Intermarket Linkage (``Linkage''). The text of the proposed rule change 
appears below, with additions italicized and deletions in [brackets]:

Rule 1900. Definitions

* * * * *
    (3) ``Complex Trade'' means the execution of an order in an option 
series in conjunction with the execution of one or more related 
order(s) in different options series in the same underlying security 
occurring at or near the same time for the purpose of executing a 
particular investment strategy and for an equivalent number of 
contracts, provided that the number of contracts of the legs of a 
spread, straddle, or combination order may differ by a permissible 
ratio [for the equivalent number of contracts and for the purpose of 
executing a particular investment strategy]. The permissible ratio for 
this purpose is any ratio that is equal to or greater than one-to-three 
(.333) and less than or equal to three-to-one (3.00).
* * * * *

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 proposed rule change will amend the definition of ``Complex 
Trade'' in the ISE's Linkage rules. For Linkage purposes, the ISE 
defines a ``Complex Trade'' as a trade reflecting the execution of an 
order in an options series in conjunction with one or more other orders 
in different series in the same underlying security ``for the 
equivalent number of contracts.'' A

[[Page 76400]]

Complex Trade is exempt from the trade-through rule.\3\
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    \3\ See ISE Rule 1902(b)(7).
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    In contrast to the Linkage definition of ``Complex Trade,'' ISE 
Rule 722(a)(6) defines ``complex orders'' for other purposes on the 
ISE. This definition includes ``ratio orders,'' which do not require 
that there be an equivalent number of contracts in the orders. 
Specifically, ISE Rule 722(a)(6) permits ratios that are equal to or 
greater than one-to-three, and less than or equal to three-to-one. The 
ISE applies modified priority rules to complex orders.
    The proposal will conform the Linkage definition of Complex Trade 
to the ISE's general definition of the concept. According to the ISE, 
the other five options exchanges are adopting a similar definition, 
which will result in uniform application of the term across all options 
exchanges. The ISE believes that such uniformity will facilitate the 
speedy execution of complex trades on all markets.
2. Statutory Basis
    According to the ISE, the basis under the Act for the proposed rule 
change is the requirement under Section 6(b)(5) of the Act \4\ that the 
rules of a national securities exchange be designed to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transaction in securities, to remove impediments to and 
perfect the mechanism for a free and open market and a national market 
system, and, in general, to protect investors and the public interest.
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    \4\ 15 U.S.C. 78f(b)(5).
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 B. Self-Regulatory Organization's Statement on Burden on Competition

    The ISE 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 ISE has not solicited, and does not intend to solicit, comments 
on this proposed rule change. The ISE has not received any written 
comments from members or other interested parties.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve such proposed rule change; or
    B. institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-2006-73 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-2006-73. 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. 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-
2006-73 and should be submitted on or before January 10, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E6-21653 Filed 12-19-06; 8:45 am]
BILLING CODE 8011-01-P