[Federal Register Volume 72, Number 183 (Friday, September 21, 2007)]
[Notices]
[Pages 54089-54090]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-18686]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56444; File No. SR-ISE-2007-45]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Order Granting Approval to a Proposed Rule Change, as Modified by 
Amendment No. 1 Thereto, Relating to a Quote Mitigation Plan for 
Competitive Market Makers

September 14, 2007.
    On June 8, 2007, the International Securities Exchange, LLC 
(``ISE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to adopt, on a one-year pilot 
basis, a quote mitigation plan for the Exchange's Competitive Market 
Makers (``CMMs''). On August 1, 2007, the Exchange filed Amendment No. 
1 to the proposed rule change. The proposed rule change, as amended, 
was published for comment in the Federal Register on August 9, 2007.\3\ 
The Commission received no comments on the proposed rule change. This 
order approves the proposed rule change, as modified by Amendment No. 
1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 56201 (August 3, 2007), 
72 FR 44903.
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    After careful review of the proposal, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\4\ In particular, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the Act,\5\ which 
requires, among other things, that the rules of an exchange be 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.
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    \4\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \5\ 15 U.S.C. 78f(b)(5).
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    The Exchange is proposing a quote mitigation plan for its CMMs on a 
pilot basis for one year in no more than twenty securities (``Pilot 
Program Securities'') to be designated by the Exchange. Under ISE's 
current rules, a CMM must enter continuous quotations in all the series 
of at least 60 percent of the options classes for the group or ``bin'' 
to which it is appointed, or 60 options classes in the Group, whichever 
is less. Further, once a CMM enters a quote in an options class to 
which it is appointed, it must continuously quote in all series of that 
options class until the close of trading that day. ISE proposes to 
amend its rule so that a CMM will be required to enter continuous 
quotations in just 60 percent of the series, rather than in all series, 
of the options classes overlying the Pilot Program Securities, to which 
the CMM is appointed. Once a CMM enters a quote in a series, it must 
continue to quote in that series until the close of trading that 
day.\6\
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    \6\ The Exchange notes that ISE Rule 804(e)(2)(iii), which 
states that a CMM may be called upon to submit quotes in one or more 
series of options to which it is appointed in the interest of 
maintaining fair and orderly markets, shall continue to apply under 
the proposed pilot program.
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    The Exchange will issue a circular to CMMs identifying the initial 
Pilot Program Securities.\7\ The Exchange notes that the Pilot Program 
Securities selected by the Exchange are subject to

[[Page 54090]]

change based on the quoting activity in these securities. Each time a 
change takes place in the Pilot Program Securities, the Exchange will 
issue circulars to notify CMMs of this change and shall provide them 
with adequate notice in order for them to make any required systems 
changes.
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    \7\ The initial proposed pilot will consist of up to 20 of the 
most active classes, in terms of the number of quotes generated, 
that are in the Exchange's Penny Pilot Program. See Securities 
Exchange Act Release Nos. 55161 (January 24, 2007), 72 FR 4754 
(February 1, 2007) (SR-ISE-2006-62) and 56151 (July 26, 2007), 72 FR 
42452 (August 2, 2007) (SR-ISE-2007-68).
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    The Commission believes that the proposed rule change, which is 
intended to alleviate capacity constraints on some market participants' 
systems without adversely affecting the quality of the Exchange's 
markets or the timely receipt of quote information, is consistent with 
the Act. The Commission notes that it has already approved internal 
quote mitigation strategies on other exchanges that relieve some market 
makers of the obligation to quote every series of every class to which 
they are appointed.\8\
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    \8\ See Phlx Rule 1014(b)(ii)(D)(1); see also Amex Rule 
994(c)(iv).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-ISE-2007-45), as modified by 
Amendment No. 1, be, and hereby is, approved.
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    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-18686 Filed 9-20-07; 8:45 am]
BILLING CODE 8010-01-P