[Federal Register Volume 72, Number 200 (Wednesday, October 17, 2007)]
[Notices]
[Pages 58922-58923]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-20460]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56646; File No. SR-ISE-2007-96]


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

October 11, 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 October 9, 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 
Exchange. ISE has designated this proposal as one establishing or 
changing a due, fee, or other charge imposed by 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 payment for order flow program. 
The text of the proposed rule change is available at the Exchange, the 
Commission's Public Reference Room, and 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 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 ISE has substantially 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 currently has a payment-for-order-flow (``PFOF'') 
program that helps its market makers establish PFOF arrangements with 
an EAM (``Electronic Access Member'') in exchange for that EAM 
preferencing some or all of its order flow to that market maker. This 
program is funded through a fee paid by Exchange market makers for each 
customer contract they execute, and is administered by both Primary 
Market Makers (``PMM'') \5\ and Competitive Market Makers (``CMM''),\6\ 
depending on who the order is preferenced to. Further, the maximum 
amount of PFOF fees currently collected by the exchange for PMMs and 
CMMs to administer is $450,000 and $50,000, respectively. When the pool 
balance exceeds these threshold levels, ISE rebates funds 
proportionately to those who have paid the PFOF fees. The Exchange 
states that it closely monitors the levels of the cap to ensure that 
there are adequate funds available to market makers to be competitive. 
In order to allow the Exchange's market makers to better compete in 
attracting order flow to the Exchange, it proposes to adopt a uniform 
PFOF cap of $100,000 for both its PMM- and CMM-administered pools.The 
Exchange believes that the PMM ceiling of $450,000 is a considerable 
amount of money, and thus seeks to reduce that amount to $100,000. With 
regard to the CMM ceiling, the Exchange believes that $50,000 is too 
little an amount for these market makers to better compete in 
attracting order flow and thus proposes to raise that ceiling to 
$100,000.
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    \5\ See Securities Exchange Act Release No. 43833 (January 10, 
2001), 66 FR 7822 (January 25, 2001) (SR-ISE-00-10).
    \6\ See Securities Exchange Act Release No. 53127 (January 13, 
2006), 71 FR 3582 (January 23, 2006) (SR-ISE-2005-57).
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    Additionally, the Exchange proposes to amend its fee schedule to 
reflect that PFOF funds are rebated on a monthly basis, instead of on a 
quarterly basis.
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)(4) of the Act \8\ in particular, because it 
is an equitable allocation of reasonable dues, fees, and other charges 
among exchange members and other persons using exchange facilities.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 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 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

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments with respect to the proposed rule 
change.

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 \9\ and Rule 19b-
4(f)(2) \10\ thereunder, because it establishes or changes a due,

[[Page 58923]]

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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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 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-2007-96 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-2007-96. 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 on official business 
days between the hours of 10 a.m. and 3 p.m. Copies of such filing also 
will be available for inspection and copying at the principal office of 
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-
2007-96 and should be submitted on or before November 7, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-20460 Filed 10-16-07; 8:45 am]
BILLING CODE 8011-01-P