[Federal Register Volume 72, Number 94 (Wednesday, May 16, 2007)]
[Notices]
[Pages 27604-27606]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-9365]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55734; File No. SR-ISE-2007-22]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing of Proposed Rule Change as Modified by Amendment 
No. 1 Thereto Relating to Split Prices

 May 10, 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 March 26, 2007, 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 substantially prepared by the ISE. 
On April 20, 2007, the Exchange filed Amendment No. 1 to the proposed 
rule change. 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.
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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 its rule governing ``Split Prices.'' 
Specifically, the Exchange proposes to provide for executions in its 
Block, Facilitation and Solicitation Mechanisms at half-penny prices 
for certain options classes included in the penny pilot program.\3\ The 
text of the proposed rule change is available at ISE, the Commission's 
Public Reference Room, and www.iseoptions.com.
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    \3\ See Securities Exchange Act Release No. 55161 (January 24, 
2007), 72 FR 4754 (February 1, 2007) (SR-ISE-2006-62) (``Penny Pilot 
Order'').

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[[Page 27605]]

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 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 Exchange proposes to amend its rule governing ``Split Prices.'' 
\4\ Specifically, the Exchange proposes to provide for executions in 
its Block, Facilitation and Solicitation Mechanisms at half-penny 
prices for certain options classes included in the penny pilot program. 
The Exchange's rule governing Split Prices was previously approved by 
the Commission.\5\ Pursuant to the Commission's approval, the Exchange 
currently provides for such ``Split Prices'' in options quoted in 
standard $.05 and $.10 increments.
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    \4\ See Supplementary Material .06 to ISE Rule 716.
    \5\ See Securities Exchange Act Release No. 51666 (May 9, 2005), 
70 FR 25631 (May 13, 2005) (SR-ISE-2003-07).
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    On January 26, 2007, the Exchange, along with the other options 
exchanges, commenced a six-month pilot program to quote certain options 
classes in penny increments.\6\ The penny pilot rules adopted by the 
Exchange specifically state that Split Prices do not apply to options 
trading in penny increments. At the time ISE adopted the penny pilot 
rules, the Exchange believed that being able to place orders and 
responses in the Block, Facilitation and Solicitation Mechanisms in 
penny increments would give its members sufficient pricing flexibility. 
However, based on its experience with the penny pilot thus far, the 
Exchange believes that the same competitive pressure that led to Split 
Prices in standard increments has arisen in the penny pilot options. 
Specifically, the Exchange stated that it has seen floor-based 
exchanges print large blocks at two prices, one-cent apart, effectively 
providing for a half-penny block print. For competitive reasons, and to 
allow its members the same pricing flexibility that floor-based 
exchanges appear to be providing to their members, the ISE proposes to 
extend Split Prices to options classes included in the penny pilot 
program. The Exchange also represents that the Options Clearing 
Corporation will continue to accept and clear trades at sub-penny 
prices and that orders that are on the ISE book will be protected and 
executed at the midpoint prices.
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    \6\ See Penny Pilot Order, supra note 3.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\7\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\8\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
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, to protect investors and the 
public interest. In particular, the proposal will provide additional 
pricing flexibility in penny pilot options and allow the Exchange to 
compete more effectively with floor-based exchanges.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
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

    Written comments on the proposed rule change were neither solicited 
nor received.

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 Exchange 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-2007-22 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 No. SR-ISE-2007-22. 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 at 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-2007-22 and should be submitted on or before June 6, 2007.


[[Page 27606]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-9365 Filed 5-15-07; 8:45 am]
BILLING CODE 8010-01-P