[Federal Register Volume 72, Number 249 (Monday, December 31, 2007)]
[Notices]
[Pages 74373-74375]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-25356]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57021; File No. SR-ISE-2007-116]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Open the Exchange's Equity Trading Platform at 9 a.m.

December 20 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 14, 2007, the International Securities Exchange, LLC 
(``Exchange'' or ``ISE'') 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. The Exchange has designated this proposal as 
non-controversial under Section 19(b)(3)(A)(iii) of the Act \3\ and 
Rule 19b-4(f)(6) thereunder,\4\ which renders the proposed rule change 
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)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its rules to allow the Exchange to 
open the ISE Stock Exchange at 9 a.m. without regard to whether the 
primary market in a particular security is open and to make other 
associated changes to its rules. The text of the proposed rule change 
is available at ISE's principal office, the Commission's Public 
Reference Room, and http://www.ise.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 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 establish a Pre-Market Session for the 
trading of equity securities. The proposed Pre-Market Session will 
start at 9:00 a.m. and conclude when a security is opened for trading 
according to the existing procedures contained in ISE Rule 2106. Under 
Rule 2106, the Exchange currently opens securities for trading on the 
ISE Stock Exchange following the

[[Page 74374]]

first trade on the primary market for New York Stock Exchange 
(``NYSE'') and American Stock Exchange (``Amex'') listed securities, 
and following the first reported national best bid and offer (``NBBO'') 
for Nasdaq and NYSE Arca listed securities. Generally, this means that 
the ISE Stock Exchange opens Nasdaq and NYSE Arca securities at 9:30 
a.m. and opens NYSE and Amex securities after the first trade in a 
security, which occurs at or after 9:30 a.m. The proposed Pre-Market 
Session would not change the way in which the ISE Stock Exchange 
currently opens its regular trading session.\5\
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    \5\ The Exchange will continue to accept orders for the 
regulatory trading session beginning at 7 a.m., and will continue to 
perform the current midpoint opening transaction for such orders 
received prior to the opening. When the primary market is either the 
NYSE or the Amex, the opening trade will continue to be executed at 
the midpoint of the first reported NBBO subsequent to a reported 
trade on the primary market after 9:30 a.m. When the primary market 
is Nasdaq or NYSE Arca, the opening trade will continue to be 
executed at the midpoint of the first reported NBBO after 9:30 a.m.
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    The Exchange proposes to add a Pre-Opening Order to accommodate 
trading in the Pre-Market Session. A Pre-Opening Order is an order that 
is eligible for execution during Pre-Market Session trading. Unexecuted 
Pre-Opening Orders will become Day Orders upon commencement of the 
Regular Market Session. Equity EAMs that submit orders to the Pre-
Market Session on behalf of non-members will be required to disclose 
the risks of participating in the Pre-Market Session to their 
customers, including the risk of: (1) lower liquidity; \6\ (2) higher 
volatility; \7\ (3) changing prices; \8\ (4) unlinked markets; \9\ (5) 
news announcements; \10\ (6) wider spreads,\11\ and (7) lack of 
calculation or dissemination of underlying index value or intra-day 
indicative value (``IIV'').\12\
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    \6\ There may be lower liquidity in Pre-Market hours trading as 
compared to regular market hours. As a result, an order may only be 
partially executed, or not at all.
    \7\ There may be greater volatility in Pre-Market hours trading 
than in regular market hours. As a result, an order may only be 
partially executed, or not at all, or the price received may be an 
inferior price in Pre-Market hours trading compared to what would 
have been received during regular markets hours.
    \8\ The prices of securities traded during Pre-Market hours may 
not reflect the prices either at the end of regular market hours, or 
upon the opening of the next morning. As a result, an order may 
receive an inferior price in Pre-Market hours trading compared to 
what would have been received during regular markets hours.
    \9\ The prices displayed on a particular Pre-Market hours system 
may not reflect the prices in other concurrently operating Pre-
Market hours trading systems dealing in the same securities. 
Accordingly, an order may receive an inferior price in one Pre-
Market hours trading system compared to the price the order would 
have received in another Pre-Market hours trading system.
    \10\ In Pre-Market hours trading, news announcements may occur 
during trading, and if combined with lower liquidity and higher 
volatility, may cause an exaggerated and unsustainable effect on the 
price of a security.
    \11\ Lower liquidity and higher volatility in Pre-Market hours 
trading may result in wider than normal spreads for a particular 
security.
    \12\ Since the underlying index value and/or IIV of a derivative 
security may not be calculated or widely disseminated during the 
Pre-Market hours, an investor who is unable to calculate implied 
values for such products during Pre-Market hours may be at a 
disadvantage to market professionals.
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    Under the proposal, the Pre-Market Session would operate the same 
as in the regular trading session, except that there would be no 
intermarket price protection for executions in the Pre-Market Session 
until 9:30 a.m. Because trading that occurs in the Pre-Market Session 
after 9:30 a.m. and until the security is opened in the regular market 
session will be subject to the requirements of Regulation NMS, starting 
at 9:30 a.m. the Pre-Market Session will protect incoming Pre-Opening 
Orders from trading through Protected Quotations \13\ on other markets. 
Similarly, Regulation NMS will prohibit other markets from trading 
through ISE's quotes starting at 9:30 a.m. To accommodate the needs of 
these other markets to comply with Regulation NMS, we will execute 
incoming orders marked as intermarket sweep orders and orders marked as 
immediate-or-cancel in the Pre-Market Session starting at 9:30 a.m. 
even though they may not be marked as Pre-Opening Orders.
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    \13\ See ISE Rule 2100(c)(16).
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2. Statutory Basis
    The Exchange believes that the basis under the Act for this 
proposed rule change is found in Section 6(b)(5),\14\ in that the 
proposed rule change is designed to promote just and equitable 
principles of trade, remove impediments to and perfect the mechanisms 
of a free and open market and a national market system, and, in 
general, to protect investors and the public interest. The Exchange 
believes that the proposal will provide an opportunity for investors to 
begin trading equity securities before the primary market opens with 
proper disclosure of the risks involved in doing so.
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    \14\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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 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 from members or other interested 
parties.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \15\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\16\ Because the foregoing proposed rule change: (i) Does 
not significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) does not become operative for 30 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, 
the proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act and Rule 19b-4(f)(6)(iii) thereunder.\17\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ Rule 19b-4(f)(6) also requires the Exchange to give 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 of filing of 
the proposed rule change, or such shorter time as designated by the 
Commission. The Exchange has satisfied the five-day pre-filing 
requirement.
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    At any time within 60 days of the filing of the 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

[[Page 74375]]

     Send an e-mail to [email protected]. Please include 
File No. SR-ISE-2007-116 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-2007-116. 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, 100 F Street, NE., 
Washington, DC 20549, 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 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 Number SR-ISE-2007-116 and should be 
submitted on or before January 22, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-25356 Filed 12-28-07; 8:45 am]
BILLING CODE 8011-01-P