[Federal Register Volume 73, Number 147 (Wednesday, July 30, 2008)]
[Notices]
[Pages 44302-44303]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-17411]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58216; File No. SR-ISE-2008-57]


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

July 23, 2008.
    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 July 17, 2008, International Securities Exchange, LLC (the ``ISE'' 
or the ``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. The ISE filed the proposal pursuant to Section 19(b)(3)(A) 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).
    \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 Schedule of Fees by adopting 
additional fee waivers related to the execution on ISE of public 
customer orders exposed to members before those orders are sent out for 
execution on another exchange through the intermarket linkage 
(``Linkage''). The text of the proposed rule change is available at the 
Exchange, http://www.ise.com, and the Commission's Public Reference 
Room.

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 self-regulatory organization 
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 self-regulatory organization 
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
    Before a Primary Market Maker (``PMM'') sends a customer order 
through the Linkage when ISE is not at the national best bid or offer 
(``NBBO''), the Exchange exposes these customer orders to all its 
members to give them an opportunity to match the NBBO.\5\ This exposure 
is intended to allow ISE to retain more flow by giving these customer 
orders additional opportunity to be executed at the NBBO at ISE, which 
also reduces PMM costs by reducing the number of Linkage orders they 
must send to other exchanges on behalf of customer orders.
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    \5\ See Securities Exchange Act Release No. 58038 (June 26, 
2008), 73 FR 38261 (July 3, 2008) (SR-ISE-2008-50) (Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Relating to the 
Exposure of Public Customer Orders to all ISE Members).
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    Specifically, before the PMM sends a Linkage Order on behalf of a 
public customer, the public customer order is exposed at the NBBO price 
for a period established by the Exchange not to exceed one second. 
During this exposure period, Exchange members may enter responses up to 
the size of the order being exposed in the regular trading increment 
applicable to the option. If at the end of the exposure period, the 
order is executable at the then-current NBBO and the ISE is not at the 
then-current NBBO, the order is executed against responses that equal 
or better the then-current NBBO. The exposure period is terminated if 
the exposed order becomes executable on the ISE at the prevailing NBBO 
or if the Exchange receives an unrelated order that could trade against 
the exposed order at the prevailing NBBO price. If, after an order is 
exposed, the order is not executed in full on the Exchange at the then-
current NBBO or better, and it

[[Page 44303]]

is marketable against the then-current NBBO, the PMM sends a Linkage 
Order on the customer's behalf for the balance of the order as provided 
in Rule 803(c)(2)(ii). If the balance of the order is not marketable 
against the then-current NBBO, it is placed on the ISE book.
    ISE currently charges a customer fee in options on Premium Products 
\6\ and in Second Market \7\ options; customer fees on all other 
options are currently waived by the Exchange. To encourage ISE members 
to respond to the exposure of these public customer orders, the 
Exchange proposes to waive customer fees in options on Premium Products 
and in Second Market options incurred by members who step up and match 
or improve the NBBO during the exposure period so these public customer 
orders can be executed on the Exchange.\8\ With this filing, the 
Exchange is also proposing to clarify on its Schedule of Fees that the 
fee waiver is applicable to orders exposed pursuant to Supplementary 
Material .02 to ISE Rule 803 rather than to Linkage Orders.
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    \6\ Premium Products is defined in the Schedule of Fees as the 
products enumerated therein.
    \7\ See ISE Rule 900.
    \8\ ISE recently adopted fee waivers for Firm Proprietary, ISE 
Market Maker and Payment for Order Flow fees incurred by members who 
step up and match or improve the NBBO during the exposure period. 
See Securities Exchange Act Release No. 58164 (July 15, 2008), 73 FR 
42638 (July 22, 2008) (SR-ISE-2008-56). This filing extends that 
waiver to apply to customer orders in Premium Products and in Second 
Market options. The Exchange represents that, since July 1, 2008, 
the date SR-ISE-2008-56 was filed and became operative, no customer 
orders have responded during the exposure period and thus, no 
customer orders were deprived of the proposed fee waiver.
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2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(4) that an exchange have an equitable 
allocation of reasonable dues, fees and other charges among its members 
and other persons using its facilities. In particular, the proposed 
rule change will allow ISE to retain more flow by giving these customer 
orders additional opportunity to be executed at the NBBO at ISE and 
will also reduce PMM costs by reducing the number of Linkage orders 
they must send to other exchanges.

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 unsolicited written comments from members or other interested 
parties.

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) of the Act \9\ and Rule 19b-
4(f)(2) thereunder,\10\ because it establishes or changes a due, fee, 
or other charge imposed on members by ISE. Accordingly, the proposal is 
effective upon filing with the Commission. 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.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \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-2008-57 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2008-57. 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 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 Number SR-ISE-2008-57 and should be 
submitted on or before August 20, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-17411 Filed 7-29-08; 8:45 am]
BILLING CODE 8010-01-P