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###### Securities and Exchange Commission

          - [Release No. 34-55493; File No. SR-ISE-2006-77] 

                    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 13, 2006, 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 prepared by the ISE. On March 19, 2007, the Exchange filed Amendment No. 1 to the proposed rule change. 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 

                    The ISE is proposing to amend ISE Rule 716 to allow orders to be entered into the Block Mechanism in penny increments and to receive executions in penny increments. The text of the proposed rule change is available at ISE, the Commission's Public Reference Room, and                     *http://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 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 Exchange has                           ( print page 14316)                        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 offers a Block Mechanism for the execution of single-sided, block-sized orders. The Block Mechanism exposes orders of at least 50 contracts to all ISE members for three seconds, giving members an opportunity to respond with contra-side trading interest for their own account or on behalf of their customers.[3]                                          Currently, orders may be entered and executed using the Block Mechanism at the standard 5 and 10 cent increments and at “split prices” (2.5 cents for options trading in 5 cent standard increments and 5 cents for options trading in 10 cent standard increments). The Exchange proposes to allow these orders to be entered and executed in penny increments as a way to provide greater flexibility in the pricing of block-size orders and to allow a greater opportunity for price improvement.                 

#### 2. Statutory Basis 

                    The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,[4]                                          in general, and furthers the objectives of Section 6(b)(5) of the Act,[5]                                          in particular, in that it is 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. In particular, the proposal will provide additional pricing flexibility and opportunities for block-size orders to receive price improvement.                 

### B. Self-Regulatory Organization's Statement on Burden on Competition 

The Exchange does not believe 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 

Written comments on the proposed rule change were neither solicited nor received. 

## 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. 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 rule-comments@sec.gov . Please include File No. SR-ISE-2006-77 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 No. SR-ISE-2006-77. 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 at                     *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. 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 No. SR-ISE-2006-77 and should be submitted on or before April 17, 2007.                 

                        For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[6] 

Florence E. Harmon, 

Deputy Secretary.

# Footnotes

1.                             15 U.S.C. 78s(b)(1).                     
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2.                             17 CFR 240.19b-4.                     
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3.                             Supplementary Material .03 to ISE Rule 716 prohibits members from entering Responses for the account of an options market maker from another options exchange. This is the only limitation regarding who may enter Responses.                     
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4.                             15 U.S.C. 78f(b).                     
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5.                             15 U.S.C. 78f(b)(5).                     
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6.                                 17 CFR 200.30-3(a)(12).                         
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[FR Doc. E7-5546 Filed 3-26-07; 8:45 am] 

BILLING CODE 8010-01-P