Federal Register / Vol. 69, No. 24 / Thursday, February 5, 2004 / Notices 5627

10When the Agency Order is executed at an 

improved price or at the proposed execution price 

against the book, Public Customer orders are given 

priority in the execution, and then all other nonprofessional interest at the same price would 

participate pro-rata based on size.

11 15 U.S.C. 78f(b)(5).

12 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b-4.

3 17 CFR 240.19b-4(f)(6).

4 17 CFR 240.19b-4(f)(6)(iii).

Agency Order would be executed 

against the book if there is sufficient 

size available at the bid or offer to 

execute the entire size of the Agency 

Order.10 If there is insufficient size to 

execute the entire Agency Order, the 

proposed cross would not be executed 

and would be cancelled. Similarly, the 

transaction would be cancelled if the 

execution price would be inferior to the 

BBO on the Exchange.

The proposed rule also would require 

members to deliver to customers a 

written document describing the terms 

and conditions of the Solicited Order 

Mechanism prior to executing Agency 

Orders using the Solicited Order 

Mechanism. Such written document 

would be required to be in a form 

approved by the Exchange. 

Finally, the proposed rule change 

specifies in new Supplemental Material 

to Rule 716 that members would be 

prohibited from using the Solicited 

Order Mechanism to circumvent Rule 

717(d) limiting principal transactions. 

The proposed rule change also adds a 

reference to the Solicited Order 

Mechanism in the Supplemental 

Material to Rule 400 (Just and Equitable 

Principles of Trade) that prohibits 

anticipatory hedging activities prior to 

the entry of an order on the Exchange. 

2. Statutory Basis 

The basis under the Act for the 

proposed rule change is the requirement 

under section 6(b)(5) of the Act 11 that 

an exchange have rules that are 

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 for a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. The 

Exchange states that the implementation 

of the Solicited Order Mechanism will 

allow the Exchange to better compete 

for solicited transactions, while 

providing an opportunity for price 

improvement for Agency Orders and 

assuring that public customers on the 

book are protected.

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. 

The proposed rule change will allow the 

Exchange to better compete for solicited 

transactions. 

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 

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. 

Persons making written submissions 

should file six copies thereof with the 

Secretary, Securities and Exchange 

Commission, 450 Fifth Street, NW., 

Washington, DC 20549–0609. 

Comments may also be submitted 

electronically at the following e-mail 

address: rule-comments@sec.gov. All 

comment letters should refer to File No. 

SR–ISE–2001–22. 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, comments 

should be sent in hardcopy or by e-mail 

but not by both methods. 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 will also be 

available for inspection and copying at 

the principal offices of the ISE. All 

submissions should refer to File No. 

SR–ISE–2001–22 and should be 

submitted by February 26, 2004.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.12

Jill M. Peterson, 

Assistant Secretary.

[FR Doc. 04–2329 Filed 2–4–04; 8:45 am] 

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–49149; File No. SR–ISE–

2004–02] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by the 

International Securities Exchange, Inc. 

Relating to the Extension of the Pilot 

Program for Quotation Spreads 

January 29, 2004. 

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 January 

22, 2004, the International Securities 

Exchange, Inc. (‘‘ISE’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘Commission’’) 

the proposed rule change as described 

in items I and II below, which items 

have been prepared by the ISE. The 

proposed rule change has been filed by 

the ISE under Rule 19b-4(f)(6) of the 

Act.3 The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons.

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The ISE proposes to extend until 

March 31, 2004, a pilot program 

permitting the allowable quotation 

spread for options on up to 50 equity 

securities to be $5, regardless of the 

price of the bid (‘‘Pilot Program’’). The 

ISE proposes no substantive changes to 

the Pilot Program other than extending 

its operation through March 31, 2004. 

Pursuant to Rule 19b-4(f)(6) under the 

Act, the ISE requests that the 

Commission waive the 30-day preoperative requirement contained in Rule 

19b-4(f)(6)(iii).4

5628 Federal Register / Vol. 69, No. 24 / Thursday, February 5, 2004 / Notices 

5See Securities Exchange Act Release No. 47532, 

68 FR 14728 (March 26, 2003) (order approving File 

No. SR–ISE–2001–15) (‘‘Pilot Program Approval 

Order’’).

6See Securities Exchange Act Release No. 48514 

(September 22, 2003), 68 FR 55685 (September 26, 

2003) (notice of filing and immediate effectiveness 

of File No. SR–ISE–2003–21).

7See File No. SR–ISE–2003–22.

8 15 U.S.C. 78f(b)(5).

9 15 U.S.C. 78s(b)(3)(A).

10 17 CFR 240.19b-4(f)(6).

11The ISE provided the Commission with written 

notice of its intent to file the proposed rule change 

at least five business days prior to the filing date.

12For purposes only of accelerating the operative 

date of this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. 15 

U.S.C. 78c(f).

13 17 CFR 200.30–3(a)(12).

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 ISE 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 ISE’s rules contain maximum 

quotation spread requirements that vary 

from $.25 to $1.00, depending on the 

price of the option. On March 19, 2003, 

the Commission approved a proposal to 

amend Supplementary Material .01 to 

ISE Rule 803, ‘‘Obligations of Market 

Makers,’’ to establish a six-month Pilot 

Program in which the allowable 

quotation spread for options on up to 50 

underlying equity securities would be 

$5, regardless of the price of the bid.5

The six-month period expired on 

September 19, 2003, and the Pilot 

Program was extended through January 

31, 2004.6 As required by the Pilot 

Program Approval Order, the ISE has 

submitted to the Commission a report 

detailing the ISE’s experience with the 

Pilot Program.

The ISE believes that the Pilot 

Program has been successful, and the 

ISE has filed a proposal with the 

Commission to make the quote spread 

Pilot Program permanent and to apply it 

to all ISE listed equity options.7 The 

purpose of the current proposal is to 

extend the Pilot Program in its present 

form until March 31, 2004, while the 

Commission reviews the ISE’s Pilot 

Program report and considers the ISE’s 

proposal to make the Pilot Program 

permanent.

2. Statutory Basis 

According to the ISE, the statutory 

basis for the proposal is the requirement 

under section 6(b)(5) of the Act 8 that a 

national securities exchange have rules 

that are designed 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.

(B) Self-Regulatory Organization’s 

Statement on Burden on Competition 

The ISE does not believe that the 

proposed rule change imposes 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 ISE has not solicited, and does 

not intend to solicit, comments on the 

proposed rule change. The ISE has not 

received any unsolicited written 

comments from members or other 

interested persons. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The ISE has filed the proposed rule 

change pursuant to section 19(b)(3)(A) 

of the Act 9 and subparagraph (f)(6) of 

Rule 19b-4 thereunder.10 Because the 

foregoing proposed rule change: (1) 

Does not significantly affect the 

protection of investors or the public 

interest; (2) does not impose any 

significant burden on competition; and 

(3) does not become operative for 30 

days from the date of filing, 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 19b4(f)(6) thereunder.11

A proposed rule change filed under 

Rule 19b-4(f)(6) normally does not 

become operative prior to 30 days after 

the date of filing. However, Rule 19b4(f)(6)(iii) permits the Commission to 

designate a shorter time if such action 

is consistent with the protection of 

investors and the public interest. The 

ISE has requested that the Commission 

waive the 30-day operative delay to 

prevent a lapse in the operation of the 

Pilot Program. 

The Commission believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest 

because it will permit the Pilot Program 

to continue without interruption 

through March 31, 2004. For this reason, 

the Commission designates the proposal 

to be operative upon filing with the 

Commission.12

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. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether it is consistent with 

the Act. Persons making written 

submissions should file six copies 

thereof with the Secretary, Securities 

and Exchange Commission, 450 Fifth 

Street, NW., Washington, DC 20549–

0609. Comments may also be submitted 

electronically at the following e-mail 

address: rule-comments@sec.gov. All 

comment letters should refer to File No. 

SR–ISE–2004–02. The file number 

should be included on the subject line 

if e-mail is used. To help the 

Commission process and review 

comments more efficiently, comments 

should be sent in hardcopy or by e-mail 

but not by both methods. 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 at 

the Commission’s Public Reference 

Room. Copies of such filing will also be 

available for inspection and copying at 

the principal office of the ISE. All 

submissions should refer to File No. 

SR–ISE–2004–02 and should be 

submitted by February 26, 2004.

Federal Register / Vol. 69, No. 24 / Thursday, February 5, 2004 / Notices 5629

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3See letter from Michael Simon, Senior Vice 

President and General Counsel, ISE, to Nancy 

Sanow, Assistant Director, Division of Market 

Regulation, Commission, dated January 2, 2004 

(‘‘Amendment No. 1’’). Amendment No. 1 replaces 

the original proposal in its entirety.

4 15 U.S.C. 78f(b).

5 15 U.S.C. 78f(b)(4).

6 15 U.S.C. 78s(b)(3)(A)(ii).

7 17 CFR 19b–4(f)(2).

8For purposes of calculating the sixty-day 

abrogation period, the Commission considers the 

abrogation period to have begun on January 2, 2004, 

the date on which the Commission received 

Amendment No. 1.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.13

Jill M. Peterson, 

Assistant Secretary.

[FR Doc. 04–2336 Filed 2–4–04; 8:45 am] 

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–49147; File No. SR–ISE–

2003–32] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change and 

Amendment No. 1 Thereto by the 

International Securities Exchange, Inc. 

Relating to a Fee Reduction and Fee 

Cap 

January 29, 2004. 

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 November 

20, 2003, the International Securities 

Exchange, Inc. (‘‘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 prepared by the ISE. On 

January 2, 2004, the ISE filed 

Amendment No. 1 to the proposed rule 

change.3 The Commission is publishing 

this notice to solicit comments on the 

proposed rule change, as amended, from 

interested persons.

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

ISE is proposing, on a pilot basis from 

December 1, 2003 through May 31, 

2004, a reduction in and a cap on 

execution fees, and a cap on comparison 

fees for options on the Nasdaq 100 

Index Tracking Stocksm (‘‘QQQ’’). 

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. ISE 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 ISE is proposing to amend its 

Schedule of Fees to impose, on a pilot 

basis through May 31, 2004, both a 

reduction in and a cap on execution 

fees, and a cap on comparison fees for 

QQQ options. Specifically, any member 

with monthly average daily trading 

volume (‘‘ADV’’) of 8,000 contracts in 

QQQ options would receive a $.10 

discount from the standard execution 

fees (excluding surcharge fees) for 

contracts traded above that amount, up 

to ADV of 10,000 contracts. For 

contracts in QQQ options traded in 

excess of 10,000 ADV for a month, the 

Exchange will waive all execution fees 

(excluding surcharge fees) and 

comparison fees. Current ISE execution 

fees (excluding surcharge fees) range 

from $.21 to $.12 a contract, depending 

on the exchange’s trading volume; the 

comparison fee is $.03 a contract. The 

proposed fee changes are intended to 

increase the Exchange’s competitiveness 

in trading the QQQ options. 

2. Basis 

The ISE believes that the proposal is 

consistent with section 6(b) of the Act,4

and in particular, with the requirements 

of section 6(b)(4) of the Act,5 in that it 

provides for the equitable allocation of 

reasonable dues, fees and other charges 

among its members and other persons 

using its facilities.

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The ISE does not believe that the 

proposed rule change will impose any 

inappropriate burden on competition. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

The ISE has neither solicited nor 

received written comments on the 

proposed rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing proposed rule change 

has become effective pursuant to section 

19(b)(3)(A)(ii) of the Act 6 and Rule 19b–

4(f)(2)7 thereunder, in that it establishes 

or changes a due, fee, or other charge 

imposed by the self-regulatory 

organization, which renders the 

proposal effective upon filing. At any 

time within 60 days of the filing of 

Amendment No. 1 to 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.8

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposal, as 

amended, is consistent with the Act. 

Persons making written submissions 

should file six copies thereof with the 

Secretary, Securities and Exchange 

Commission, 450 Fifth Street, NW., 

Washington, DC 20549–0609. 

Comments may also be submitted 

electronically at the following e-mail 

address: rule-comments@sec.gov. All 

comment letters should refer to File No. 

SR–ISE–2003–32. 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, comments 

should be sent in hard copy or by e-mail 

but not by both methods. 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 such filing will also be 

available for inspection and copying at 

the principal office of ISE. All 

submissions should refer to file number 

SR–ISE–2003–32 and should be 

submitted by February 26, 2004.