43194 Federal Register / Vol. 74, No. 164 / Wednesday, August 26, 2009 / Notices 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4The NYSE, a New York limited liability 

company, is an indirect wholly-owned subsidiary of 

NYSE Euronext. 

5See Securities Exchange Act Release No. 60261 

(July 8, 2009), 74 FR 34609 (‘‘Notice’’). 

6Section 7.3(G) of the Corporation’s Bylaws 

defines ‘‘U.S. Regulated Subsidiaries’’ as New York 

Stock Exchange LLC, NYSE Market, Inc., NYSE 

Regulation, Inc., NYSE Arca, LLC, NYSE Arca, Inc., 

NYSE Arca Equities, Inc. and NYSE Alternext US 

LLC or their successors, in each case to the extent 

that such entities continue to be controlled, directly 

or indirectly, by the Corporation. 

7See Section 3.4 of the Amended and Restated 

Bylaws of NYSE Euronext (‘‘Bylaws’’). 

8See e.g., Section 3.2 of the Bylaws (Certain 

Qualifications for the Board of Directors). 9There are currently 18 directors on the Board, 

including the Chief Executive Officer and the 

Deputy Chief Executive Officer. The Bylaws 

currently require 16 of the directors (i.e., all but the 

two aforementioned employees) to be independent. 

The proposed amendment to the Bylaws would 

require a minimum of 14 of the directors to be 

independent. 10 15 U.S.C. 78f(b)(1). 11 15 U.S.C. 78(f)(b)(5). 12 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition and capital 

formation. See 15 U.S.C. 78c(f). 

13 15 U.S.C. 78s(b)(2). 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

to Section 19(b)(1) 1 of the Securities 

Exchange Act of 1934 (the ‘‘Act’’) 2 and 

Rule 19b–4 thereunder,3 a proposed rule 

change to amend the Bylaws of its 

ultimate parent, NYSE Euronext 

(‘‘Corporation’’),4 and the Corporation’s 

Director Independence Policy to require 

that at least three-fourths of the 

members of the Corporation’s Board of 

Directors (‘‘Board’’) satisfy 

independence requirements. The 

proposed rule change was published for 

comment in the Federal Register on July 

16, 2009.5 The Commission received no 

comments regarding the proposal. This 

order approves the proposed rule 

change. 

II. Description of the Proposal 

Section 10.10(C) of the Corporation’s 

Bylaws provides, among other things, 

that for so long as the Corporation shall 

control, directly or indirectly, any U.S. 

Regulated Subsidiaries,6 before any 

amendment or repeal of any provision 

of the Bylaws shall be effective, such 

amendment or repeal shall be filed with 

or filed with and approved by the 

Commission under Section 19 of the Act 

and the rules promulgated thereunder. 

Consistent with this requirement, NYSE 

filed this proposed rule change. 

Currently, the Corporation’s Bylaws and 

Director Independence Policy require 

that all members of the Board, other 

than the Chief Executive Officer and the 

Deputy Chief Executive Officer, must 

satisfy the independence requirements 

for directors of the Corporation.7 The 

proposed rule change would permit the 

Corporation to amend its Bylaws and 

Director Independence Policy to require 

that at least three-fourths of the 

members of the Board satisfy the 

independence requirements for 

directors of the Corporation. 

The Exchange stated that the 

proposed amendment to the Bylaws and 

Director Independence Policy would not 

alter or amend the standards by which 

the Corporation determines whether an 

individual director is independent; 

would not affect the independence 

requirements of the Exchange with 

respect to its directors or the director 

independence requirements of any of 

the other self-regulatory organizations 

for which the Corporation is the 

ultimate parent or of NYSE Group, Inc., 

the intermediate holding company, 

including in each case the number of 

required independent directors; and 

would not affect other director 

qualification requirements set forth in 

the Bylaws of the Corporation.8

The Exchange further stated that the 

current board independence 

requirement eliminates from 

consideration as potential directors of 

the Corporation a substantial number of 

individuals who could contribute 

significantly to the deliberations of the 

Corporation’s Board by virtue of their 

knowledge, ability, and experience. The 

Exchange believes that the proposed 

rule change would continue to protect 

the independent judgment of the Board, 

while permitting the Corporation to 

consider a broader range of experienced 

and knowledgeable individuals as 

directors.9

III. Discussion 

After careful review, 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. Specifically, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(1) of the Act,10 which requires, 

among other things, that an exchange be 

so organized and have the capacity to be 

able to carry out the purposes of the Act. 

The Commission also finds that the 

proposed rule change is consistent with 

Section 6(b)(5) of the Act,11 which 

requires, among other things, that the 

rules of a national securities 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.12

The Bylaws currently require that 16 

of the 18 directors of the Corporation’s 

Board (all the directors except the Chief 

Executive Officer and the Deputy Chief 

Executive Officer) must satisfy the 

Corporation’s independence 

requirements. The Commission notes 

that the proposed rule change, which 

would require that at least three-fourths 

of the Board to be independent, would 

still require a minimum of 14 directors 

to satisfy the Corporation’s 

independence requirements. The 

Commission also notes that the proposal 

would not alter the Corporation’s 

standards for determining director 

independence. The Commission 

believes that the proposal strikes a 

reasonable balance between the goals of 

retaining highly qualified and 

experienced directors for Board service 

and protecting the exercise of 

independent judgment by the 

Corporation’s Board. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,13 that the 

proposed rule change (SR–NYSE–2009– 

60) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–20544 Filed 8–25–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60537; File No. SR–ISE– 

2009–63] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change Relating to Fee Changes 

August 19, 2009. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on August 7, 

2009, the International Securities 

Exchange, LLC (the ‘‘Exchange’’ or the 

‘‘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 selfregulatory organization. The 

Commission is publishing this notice to 


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Federal Register / Vol. 74, No. 164 / Wednesday, August 26, 2009 / Notices 43195 

3The Exchange represents that MVR is eligible for 

options trading because it meets the standards of 

ISE Rule 2002(d), which allows the ISE to begin 

trading this product by filing Form 19b–4(e) at least 

[sic] five business days after commencement of 

trading pursuant to Rule 19b–4(e) of the Act. 

4These fees will be charged only to Exchange 

members. Under a pilot program that is set to expire 

on July 31, 2010, these fees will also be charged to 

Linkage Principal Orders (‘‘Linkage P Orders’’) and 

Linkage Principal Acting as Agent Orders (‘‘Linkage 

P/A Orders’’). The amount of the execution fee 

charged by the Exchange for Linkage P Orders and 

Linkage P/A Orders is $0.27 per contract side and 

$0.18 per contract side, respectively. See Securities 

Exchange Act Release No. 60175 (June 25, 2009), 74 

FR 32026 (July 6, 2009) (SR–ISE–2009–36). 

5Public Customer Order is defined in Exchange 

Rule 100(a)(39) as an order for the account of a 

Public Customer. Public Customer is defined in 

Exchange Rule 100(a)(38) as a person or entity that 

is not a broker or dealer in securities. 

6The Exchange applies a sliding scale, between 

$0.01 and $0.18 per contract side, based on the 

number of contracts an ISE market maker trades in 

a month. 

7The amount of the execution fee for non-ISE 

Market Maker transactions executed in the 

Exchange’s Facilitation and Solicitation 

Mechanisms is $0.19 [sic] per contract. 

8 15 U.S.C. 78f. 

9 15 U.S.C. 78f(b)(4). 

10 15 U.S.C. 78s(b)(3)(A). [sic] 

11 17 CFR 240.19b–4(f)(2). 

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 is proposing to amend its 

Schedule of Fees to establish fees for 

transactions in options on a narrow 

based index. The text of the proposed 

rule change is available on the 

Exchange’s Web site (http:// 

www.ise.com), at the principal office of 

the Exchange, and at 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—The Exchange is 

proposing to amend its Schedule of Fees 

to establish fees for transactions in 

options on the Morgan Stanley Retail 

Index (‘‘MVR’’).3 The Exchange is 

proposing to adopt an execution fee for 

all transactions in options on MVR.4

There will be no execution fee for 

Public Customer Orders 5 in MVR. All 

Firm Proprietary orders will be charged 

$0.20 per contract. The amount of the 

execution fee for all ISE Market Maker 

transactions shall be equal to the 

execution fee currently charged by the 

Exchange for ISE Market Maker 

transactions in equity options.6 Finally, 

the amount of the execution fee for all 

non-ISE Market Maker transactions shall 

be $0.45 per contract.7

Additionally, the Exchange has 

entered into a license agreement with 

Morgan Stanley & Co., Inc. in 

connection with the listing and trading 

of options on MVR. As with certain 

other licensed options, to defray the 

licensing costs, the Exchange is 

adopting a surcharge fee of fifteen (15) 

cents per contract for trading in options 

on MVR. The Exchange believes 

charging the participants that trade this 

instrument is the most equitable means 

of recovering the costs of the license. 

However, because of competitive 

pressures in the industry, the Exchange 

proposes to exclude Public Customer 

Orders from this surcharge fee. 

Accordingly, this surcharge fee will 

only be charged to Exchange members 

with respect to non-Public Customer 

Orders (e.g., ISE Market Maker, non-ISE 

Market Maker & Firm Proprietary 

orders) and Linkage Orders. The 

Exchange believes the proposed rule 

change will further ISE’s goal of 

introducing new products to the 

marketplace at a competitive price. 

2. Basis—The Exchange believes that 

the proposed rule change is consistent 

with the objectives of Section 6 of the 

Act,8 in general, and furthers the 

objectives of Section 6(b)(4),9 in 

particular, in that it is designed to 

provide for the equitable allocation of 

reasonable dues, fees and other charges 

among its members and other persons 

using its facilities. In particular, the 

Exchange believes the proposed rule 

change will further the Exchange’s goal 

of introducing new products to the 

marketplace at a competitive priced. 

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 rule change has become 

effective pursuant to Section 19(b)(3) of 

the Act 10 and Rule 19b–4(f)(2) 11

thereunder. 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 the proposal 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 rulecomments@sec.gov. Please include File 

Number SR–ISE–2009–63 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–ISE–2009–63. 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 


jlentini on DSKJ8SOYB1PROD with NOTICES
43196 Federal Register / Vol. 74, No. 164 / Wednesday, August 26, 2009 / Notices 

12 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 60187 

(June 29, 2009), 74 FR 32664 (‘‘Notice’’). 

4The Plan is a national market system plan 

proposed by the seven existing options exchanges 

and approved by the Commission. See Securities 

Exchange Act Release No. 59647 (March 30, 2009), 

74 FR 15010 (April 2, 2009) (File No. 4–546) (‘‘Plan 

Notice’’) and 60405 (July 30, 2009), 74 FR 39362 

(August 6, 2009) (File No. 4–546) (‘‘Plan 

Approval’’). The seven options exchanges are: 

International Securities Exchange LLC (‘‘ISE’’); The 

NASDAQ Stock Market LLC (‘‘NASDAQ’’); 

NASDAQ OMX BX, Inc. (‘‘BOX’’); NASDAQ OMX 

PHLX, Inc. (‘‘Phlx’’); NYSE Amex LLC (‘‘NYSE 

Amex’’); NYSE Arca, Inc. (‘‘NYSE Arca’’); and 

CBOE (each exchange individually a ‘‘Participant’’ 

and, together, the ‘‘Participating Options 

Exchanges’’). 

5On July 28, 2000, the Commission approved the 

Old Plan as a national market system plan for the 

purpose of creating and operating an intermarket 

options market linkage proposed by the American 

Stock Exchange LLC (n/k/a NYSE Amex), CBOE, 

and ISE. See Securities Exchange Act Release No. 

43086 (July 28, 2000), 65 FR 48023 (August 4, 

2000). Subsequently, Philadelphia Stock Exchange, 

Inc. (n/k/a Phlx), Pacific Exchange, Inc. (n/k/a 

NYSE Arca), Boston Stock Exchange, Inc. (n/k/a 

BOX), and Nasdaq joined the Linkage Plan. See 

Securities Exchange Act Release Nos. 43573 

(November 16, 2000), 65 FR 70851 (November 28, 

2000); 43574 (November 16, 2000), 65 FR 70850 

(November 28, 2000); 49198 (February 5, 2004), 69 

FR 7029 (February 12, 2004); and 57545 (March 21, 

2008), 73 FR 16394 (March 27, 2008). 

6Section 8(c) of the Old Plan. 

7The Linkage Hub is a centralized data 

communications network that electronically links 

the Participating Options Exchanges to one another. 

The Options Clearing Corporation (‘‘OCC’’) operates 

the Linkage Hub. 

8Section 2(16) of the Old Plan. 

9Section 7(a)(i)(C) of the Old Plan. 

10See Securities Exchange Act Release No. 60360 

(July 21, 2009) 74 FR 37265 (July 28, 2009) (File No. 

4–429). 

11 17 CFR 242.608. 

12See Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496 (June 29, 2005) (File 

No. S7–10–04); 17 CFR 242.600 et seq. For 

discussions of the similarities between the 

provisions of Regulation NMS and the provisions in 

the Plan, see the Plan Notice and Plan Approval, 

supra note 4. 

13Under the Plan, a ‘‘Trade-Through’’ is generally 

defined as a transaction in an option series, either 

as principal or agent, at a price that is lower than 

a Protected Bid or higher than a Protected Offer.’’ 

See Section 2(21) of the Plan. A ‘‘Protected Bid’’ 

and ‘‘Protected Offer’’ generally means a bid or offer 

in an option series, respectively, that is displayed 

by a Participant, is disseminated pursuant to the 

Options Price Reporting Authority (‘‘OPRA’’) Plan, 

and is the Best Bid or Best Offer. See Section 2(17) 

of the Plan. A ‘‘Best Bid’’ or ‘‘Best Offer’’ means the 

highest bid price and the lowest offer price. Section 

(2)(1) of the Plan. ‘‘Protected Bid’’ and ‘‘Protected 

Offer,’’ together are referred to herein as ‘‘Protected 

Quotation.’’ See Section 2(18) of the Plan. 

14Section 5(a)(ii) of the Plan. 

15Section 5(b) of the Plan. 

16Subparagraphs (ii), (vii), and (viii), 

respectively, of Section 5(b) of the Plan. 

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 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–2009–63 and should be 

submitted on or before September 16, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–20543 Filed 8–25–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60551; File No. SR–CBOE– 

2009–040] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Order Granting Approval 

of a Proposed Rule Change To Adopt 

Rules Implementing the Options Order 

Protection and Locked/Crossed Market 

Plan 

August 20, 2009. 

I. Introduction 

On June 24, 2009, the Chicago Board 

Options Exchange, Incorporated 

(‘‘CBOE’’ 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 

amend and adopt rules to implement 

the Options Order Protection and 

Locked/Crossed Market Plan. The 

proposed rule change was published for 

comment in the Federal Register on July 

8, 2009.3 The Commission received no 

comments on the proposal. This order 

approves the proposed rule change. 

II. Description of the Proposal 

The Exchange proposes to amend and 

adopt new CBOE rules to implement the 

Options Order Protection and Locked/ 

Crossed Market Plan (‘‘Plan’’).4

Specifically, the Exchange proposes to 

completely replace its current 

Intermarket Linkage Rules (Rules 6.80— 

6.85) with new rules implementing the 

Plan, amend other Exchange rules to 

reflect the Plan, and delete rules 

rendered unnecessary by the Plan. 

The Old Plan 

Each of the Participating Options 

Exchanges are signatories to the Plan for 

the Purpose of Creating and Operating 

an Intermarket Option Linkage (‘‘Old 

Plan’’).5 In pertinent part, the Old Plan 

generally requires its participants to 

avoid trading at a price inferior to the 

national best bid or offer (‘‘tradethrough’’), although it provides for a 

number of exceptions to trade-through 

liability.6 The Participating Options 

Exchanges comply with this 

requirement of the Old Plan by utilizing 

a stand alone system (‘‘Linkage Hub’’) to 

send and receive specific order types,7

namely Principal Acting as Agent 

Orders (‘‘P/A Orders’’), Principal 

Orders, and Satisfaction Orders.8 The 

Old Plan also provided that 

dissemination of ‘‘locked’’ or ‘‘crossed’’ 

markets should be avoided, and 

remedial actions that should be taken to 

unlock or uncross such market.9 Each of 

the Participating Options Exchanges, 

including the Exchange, has submitted 

an amendment to the Old Plan to 

withdraw from such Plan.10 The 

withdrawals will be effective upon 

approval by the Commission of such 

amendments pursuant to Rule 608 of 

Regulation NMS under the Act 

(‘‘Regulation NMS’’).11

The Plan 

The Plan does not require a central 

linkage mechanism akin to the Old 

Plan’s Linkage Hub. Instead, the Plan 

includes the framework for routing 

orders via private linkages that exist for 

NMS stocks under Regulation NMS.12

The Plan requires the Participating 

Options Exchanges to adopt rules 

‘‘reasonably designed to prevent TradeThroughs.’’ 13 Participating Options 

Exchanges are also required to conduct 

surveillance of their respective markets 

on a regular basis to ascertain the 

effectiveness of the policies and 

procedures to prevent Trade-Throughs 

and to take prompt action to remedy 

deficiencies in such policies and 

procedures.14 As further described 

below, the Plan incorporates a number 

of exceptions to trade-through 

liability.15 Some of these exceptions are 

carried over from the Old Plan, 

including exceptions for trading 

rotations, non-firm quotes, and complex 

trades.16 Others are substantially similar 

to exceptions available for NMS stocks 


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