[Federal Register Volume 72, Number 10 (Wednesday, January 17, 2007)]
[Notices]
[Pages 2050-2052]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-478]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55060; File No. SR-ISE-2006-72]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Special Order Fees

January 8, 2007.
    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 1, 2006, the International Securities Exchange, LLC 
(``ISE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') the proposed rule change as 
described in Items I and II below, which Items have been substantially 
prepared by ISE. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ 
which renders it effective upon filing with the Commission.\5\ 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)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ The Exchange has asked the Commission to waive the 30-day 
operative delay required by Rule 19b-4(f)(6)(iii), 17 CFR 240.19b-
4(f)(6)(iii). See discussion infra Section III.
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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 adopt a 
customer fee for special orders. The text of the proposed rule change 
is available at ISE, the Commission's Public Reference Room, and http://www.iseoptions.com.

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

[[Page 2051]]

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 purpose of this proposed rule change is to amend ISE's Schedule 
of Fees to adopt a customer fee for special orders. The Exchange 
currently waives transaction fees for customers, except for when those 
transactions occur in Premium Products.\6\ The Exchange has noted an 
increase in volume in certain customer order transactions, particularly 
in transactions that result from customer orders that are entered as 
responses to special order broadcasts. These special order broadcasts 
are sent to Exchange members when certain types of orders are entered, 
such as facilitations, solicitations, block orders, and orders entered 
in the Exchange's Price Improvement Mechanism. Customers, who have 
access to highly developed trading systems enter orders in response to 
these special order broadcasts, much like a broker or dealer would. 
Customers that possess this advanced trading technology are able to 
quickly receive and process substantial amounts of market-wide and ISE 
data, thereby allowing them to selectively respond to special order 
broadcasts.
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    \6\ Premium Products is defined in the Schedule of Fees as the 
products enumerated therein.
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    The advanced trading systems utilized by these customers provide 
them with the ability to rapidly respond to updates to the special 
order broadcasts and market-wide data (such as changes to the NBBO and 
the underlying market) by aggressively submitting orders within the 3 
second exposure period. The Exchange thus proposes to charge an 
execution and comparison fee of $0.15 and $0.03 per contract, 
respectively, for these customer orders to put theses customers on more 
equal footing with ISE members who currently pay a fee for this 
functionality. The proposed fee will only apply to responses sent by 
customers during the 3 second exposure period that all special orders 
are subject to.
    The Exchange believes that the proposed fee is necessary to 
equitably allocate the associated costs amongst ISE market participants 
that fully utilize the special order broadcasts, a functionality that 
is available only to ISE members and customers who possess highly 
developed technology. The development and ongoing maintenance 
associated with the broadcasts of, and updates to, special orders, is a 
costly expenditure of ISE resources. ISE believes that the proposed fee 
is objective in that it is based on the behavior of market participants 
and the type of orders submitted. As noted above, since the behavior of 
these public customers is similar to the behavior of an ISE member, it 
is fair for the Exchange to charge these customers the same fees as 
those charged to ISE members.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b)(5) of the Act,\7\ in that it is designed to promote just 
and equitable principles of trade, to remove impediments to and perfect 
the mechanism of a free and open market and a national market system, 
and, in general, protect investors and the public interest.\8\
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    \7\ 15 U.S.C. 78f(b)(5).
    \8\ The staff of the SEC revised this language to correct an 
error in the statutory basis proposed rule change. Telephone 
Conference between Samir Patel, Assistant General Counsel, ISE, and 
Ronesha A. Butler, Special Counsel, Division of Market Regulation, 
Commission, on January 5, 2007.
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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.

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

    Because the foregoing proposed rule change does not (1) 
significantly affect the protection of investors or the public 
interest; (2) impose any significant burden on competition; and (3) 
become operative for thirty days from the date on which it was filed, 
or such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6) \10\ thereunder.\11\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ Pursuant to Rule 19b-4(f)(6)(iii), the Exchange has given 
the Commission written notice of its intent to file the proposed 
rule change, along with a brief description and text of the proposed 
rule change, at least five business days prior to the date on which 
the Exchange filed the proposed rule change. See 17 CFR 240.19b-
4(f)(6)(iii).
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    A proposed rule change filed under Commission Rule 19b-4(f)(6) \12\ 
normally does not become operative prior to thirty days after the date 
of filing. The Exchange requests that the Commission waive the 30-day 
operative delay, as specified in Rule 19b-4(f)(6)(iii), and designate 
the proposed rule change to become operative immediately because this 
proposal is substantially similar to a Boston Options Exchange proposed 
rule change that was recently approved by the Commission.\13\ The 
Commission hereby grants the request. The Commission believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest because such waiver will allow the 
Exchange to allocate reasonable dues, fees, and other charges among its 
members and other persons using its facilities. For these reasons, the 
Commission designates the proposed rule change as effective and 
operative upon filing.\14\
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    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ See Securities Exchange Act Release No. 54328 (August 16, 
2006), 71 FR 49493 (August 23, 2006).
    \14\ For the purposes only of waiving the operative date of this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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    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.

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

[[Page 2052]]

No. SR-ISE-2006-72 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 No. SR-ISE-2006-72. 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 the filing 
also will be available for inspection and copying at the principal 
office of the Exchange.
    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 No. SR-ISE-2006-72 and should 
be submitted on or before February 7, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-478 Filed 1-16-07; 8:45 am]
BILLING CODE 8011-01-P