[Federal Register Volume 72, Number 91 (Friday, May 11, 2007)]
[Notices]
[Pages 26854-26856]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-9070]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55715; File No. SR-ISE-2007-26]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change To Extend a Pilot Program That Allows the Listing of Strike 
Prices at One-Point Intervals for Stocks Trading Under $20

May 7, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\

[[Page 26855]]

notice is hereby given that on April 30, 2007, 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 substantially prepared by ISE. The Exchange has filed the proposal 
as a ``non-controversial'' rule change pursuant to Section 19(b)(3)(A) 
of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders it 
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)(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 extend until June 5, 2008, its $1 strike 
pilot program that allows the listing of strike prices at one-point 
intervals (``Pilot Program''). 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, 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
    On June 16, 2003, the Commission approved ISE's Pilot Program, 
which allows ISE to list series with $1 strike price intervals on 
equity option classes that overlie up to five individual stocks, 
provided that the strike prices are $20 or less, but not less than 
$3.\5\ The Pilot Program, after being extended on four prior 
occasions,\6\ is set to expire on June 5, 2007.\7\ The Exchange may 
currently select up to five individual stocks to be included in the 
Pilot Program. The Exchange, however, is also permitted to list options 
on other individual stocks at $1 strike price intervals if other 
options exchanges listed those series pursuant to their respective 
rules. The Exchange has selected the following five options classes to 
participate in the Pilot Program: AMR Corp. (AMR), Clapine Corp. (CPN), 
EMC Corp. (EMC), El Paso Corp. (EP), and Sun Microsystems Inc. (SUNW). 
ISE believes the Pilot Program has been successful and well received by 
its members and the investing public. Thus, ISE proposes to extend the 
Pilot Program until June 5, 2008.
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    \5\ See Securities Exchange Act Release No. 48033 (June 16, 
2003), 68 FR 37036 (June 20, 2003) (SR-ISE-2003-17) (``Pilot Program 
Approval Order'').
    \6\ See Securities Exchange Act Release Nos. 49827 (June 8, 
2004), 69 FR 33966 (June 17, 2004) (SR-ISE-2004-21); 50060 (July 22, 
2004), 69 FR 45864 (July 30, 2004) (SR-ISE-2004-26); 51769 (May 31, 
2005), 70 FR 33232 (June 07, 2005) (SR-ISE-2005-22); and 53806 (May 
15, 2006), 71 FR 29694 (May 23, 2006) (SR-ISE-2006-20) 
(collectively, ``Pilot Extension Notices'').
    \7\ See Securities Exchange Act Release No. 53806, supra note 6.
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    In support of this proposed rule change, and as required by the 
Pilot Program Approval Order and the Pilot Extension Notices, the 
Exchange is submitting to the Commission a report (``Pilot Program 
Report''), attached as Exhibit 3 to the proposal, detailing the 
Exchange's experience with the Pilot Program. Specifically, the Pilot 
Program Report contains data and written analysis regarding the five 
options classes included in the Pilot Program for the period between 
March 2006 through February 2007.
    The Exchange believes there is sufficient investor interest and 
demand to extend the Pilot Program for another year. The Exchange 
continues to believe that the Pilot Program has provided investors with 
greater trading opportunities and flexibility and the ability to more 
closely tailor their investment strategies and decisions to the 
movement of the underlying security. Furthermore, the Exchange has not 
detected any material proliferation of illiquid options series 
resulting from the narrower strike price intervals.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder and, in particular, 
the requirements of Section 6(b) of the Act.\8\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
requirements under Section 6(b)(5) of the Act \9\ that the rules of a 
national securities exchange be designed to promote just and equitable 
principles of trade, to prevent fraudulent and manipulative acts, 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. The Exchange believes that extension 
of the Pilot Program will result in a continuing benefit to investors 
by allowing them to more closely tailor their investment decisions, and 
will allow the Exchange to further study investor interest in $1 strike 
price intervals.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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 the 
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 
persons.

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

    Because the foregoing rule change does not: (1) Significantly 
affect the protection of investors or the public interest; (2) impose 
any significant burden on competition; and (3) become operative for 30 
days from the date of this filing, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). Rule 19b-4(f)(6) also requires the 
self-regulatory organization to give the Commission 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. ISE 
has satisfied the five-day pre-filing requirement. As set forth in 
the Commission's initial approval of the Pilot Program, if ISE 
proposes to: (1) Extend the Pilot Program; (2) expand the number of 
options eligible for inclusion in the Pilot Program; or (3) seek 
permanent approval of the Pilot Program, it must submit a Pilot 
Program report to the Commission along with the filing of its 
proposal to extend, expand, or seek permanent approval of the Pilot 
Program. ISE must file any proposal to expand or seek permanent 
approval of the Pilot Program and the Pilot Program report with the 
Commission at least 60 days prior to the expiration of the Pilot 
Program. The Pilot Program report must cover the entire time the 
Pilot Program was in effect and must include: (1) Data and written 
analysis on the open interest and trading volume for options (at all 
strike price intervals) selected for the Pilot Program; (2) delisted 
options series (for all strike price intervals) for all options 
selected for the Pilot Program; (3) an assessment of the 
appropriateness of $1 strike price intervals for the options ISE 
selected for the Pilot Program; (4) an assessment of the impact of 
the Pilot Program on the capacity of ISE's, the Options Price 
Reporting Authority's, and vendors' automated systems; (5) any 
capacity problems or other problems that arose during the operation 
of the Pilot Program and how ISE addressed them; (6) any complaints 
that ISE received during the operation of the Pilot Program and how 
ISE addressed them; and (7) any additional information that would 
help to assess the operation of the Pilot Program. See Pilot Program 
Approval Order, supra note 5.

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[[Page 26856]]

    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

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an e-mail to <a href="/cdn-cgi/l/email-protection#c3b1b6afa6eea0acaeaea6adb7b083b0a6a0eda4acb5"><span class="__cf_email__" data-cfemail="c1b3b4ada4eca2aeacaca4afb5b281b2a4a2efa6aeb7">[email protected]</span></a>. Please include 
File No. SR-ISE-2007-26 on the subject line.

Paper Comments

    <bullet> 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-2007-26. 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. Copies of such 
filing will also 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 No. SR-
ISE-2007-26 and should be submitted on or before June 1, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-9070 Filed 5-10-07; 8:45 am]
BILLING CODE 8010-01-P


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