Federal Register / Vol. 72, No. 95 / Thursday, May 17, 2007 / Notices 27881 

15See, e.g., NYSE Arca Equities Rule 7.34; 

Securities Exchange Act Release No. 54997 

(December 21, 2006), 71 FR 78501 (December 29, 

2006). 

16 15 U.S.C. 78s(b)(2). 

17 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(7). 

2 17 CFR 240.19b–7. 

3 7 U.S.C. 7a–2(c). 

4 15 U.S.C. 78f. 

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

6 15 U.S.C. 78f(h)(3). 

7 15 U.S.C. 78f(h)(3). 

Shares pursuant to UTP. Under this 

rule, if the listing market halts trading 

when the IIV is not being calculated or 

widely disseminated, CBOE also would 

halt trading in the Shares. This rule is 

substantially similar to those recently 

adopted by other exchanges and found 

by the Commission to be consistent with 

the Act.15

The Commission notes that, if the 

Shares should be delisted by the listing 

market, the Exchange would no longer 

have authority to trade the Shares 

pursuant to this order. 

In support of this proposal, the 

Exchange has made the following 

representations: 

1. The Exchange’s surveillance 

procedures are adequate to properly 

monitor Exchange trading of the Shares 

and to deter and detect violations of 

Exchange rules. 

2. Prior to the commencement of 

trading, the Exchange would inform its 

members and member organizations in 

an Information Circular of the special 

characteristics and risks associated with 

trading the Shares. 

3. The Information Circular would 

include the requirement that members 

and member firms deliver a prospectus 

to investors purchasing newly issued 

Shares prior to or concurrently with the 

confirmation of a transaction. 

This approval order is conditioned on 

the Exchange’s adherence to these 

representations. 

The Commission finds good cause for 

approving this proposal before the 

thirtieth day after the publication of 

notice thereof in the Federal Register. 

As noted previously, the Commission 

previously found the listing and trading 

of the Shares on Amex and NYSE to be 

consistent with the Act. The 

Commission presently is not aware of 

any regulatory issue that should cause it 

to revisit that finding or would preclude 

the trading of the Shares on the 

Exchange pursuant to UTP. Therefore, 

accelerating approval of this proposal 

should benefit investors by creating, 

without undue delay, additional 

competition in the market for the 

Shares. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,16 that the 

proposed rule change (SR–CBOE–2007–

49) be and it hereby is, approved on an 

accelerated basis. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.17

J. Lynn Taylor, 

Deputy Secretary. 

[FR Doc. E7–9470 Filed 5–16–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55741; File No. SR–CME–

2007–01] 

Self-Regulatory Organization; Chicago 

Mercantile Exchange; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change Relating to 

Listing Standards for Security Futures 

Products 

May 10, 2007. 

Pursuant to Section 19(b)(7) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–7 under the 

Act,2 notice is hereby given that on 

April 19, 2007, Chicago Mercantile 

Exchange (‘‘CME’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change described in Items 

I, II, and III below, which Items have 

been substantially prepared by the 

Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. CME also has 

certified the proposed rule change with 

the Commodity Futures Trading 

Commission (‘‘CFTC’’) under Section 

5c(c) of the Commodity Exchange Act 

(‘‘CEA’’) 3 on April 19, 2006. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to enact a 

technical amendment with respect to 

the identification of the subject of a 

contract. Specifically, futures on 

Nasdaq-100 Tracking Stock SM

(‘‘QQQQ’’) shall henceforth be known as 

PowerShares QQQ TM (‘‘QQQQ’’). The 

name change is occasioned by the fact 

that PowerShares Capital Management 

LLC assumed sponsorship of the 

NASDAQ–100 Trust, which tracks the 

NASDAQ–100 Index commencing 

April 12, 2007. Note further that the 

CUSIP number associated with the ETF 

is amended to ‘‘73935A 104.’’

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 

Exchange 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 prepared summaries, set 

forth in Sections A, B, and C below, of 

the most significant aspects or such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to enact a 

technical amendment with respect to 

the identification of the subject of a 

contract. Specifically, futures on 

Nasdaq-100 Tracking StockSM

(‘‘QQQQ’’) shall henceforth be known as 

PowerShares QQQTM (‘‘QQQQ’’). The 

name change is occasioned by the fact 

that PowerShares Capital Management 

LLC assumed sponsorship of the 

NASDAQ–100 Trust, which tracks the 

NASDAQ–100 Index commencing 

April 12, 2007. Note further that the 

CUSIP number associated with the ETF 

is amended to ‘‘73935A 104.’’

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6 of the Act 4 and, in particular, 

furthers the objectives of Section 

6(b)(5) 5 of the Act insofar as it is 

designed to prevent fraudulent and 

manipulative acts and to promote just 

and equitable principles of trade. The 

Exchange further believe that the 

proposed rule change is consistent with 

Section 6(h)(3)6 of the Act which 

contains detailed requirements for 

listing standards and conditions for 

trading applicable to security futures 

products. The information below is 

offered in support of these statements. 

Section 6(h)(3) of the Act 7 contains 

detailed requirements for listing 

standards and conditions for trading 

applicable to security futures products. 

Set forth below is a summary of each 

such requirement or condition, followed 

by a brief explanation of how CME will 

comply with it, whether by particular 


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27882 Federal Register / Vol. 72, No. 95 / Thursday, May 17, 2007 / Notices 

8 15 U.S.C. 78f(h)(3)(A). 

9 15 U.S.C. 78l. 

10 15 U.S.C. 78f(h)(3)(B). 

11 15 U.S.C. 78f(h)(3)(C). 

12 15 U.S.C. 78o–3(a). 

13 15 U.S.C. 78f(h)(3)(D). 

14 15 U.S.C. 78f(h)(3)(E). 

15 15 U.S.C. 78f(h)(3)(F). 

16 15 U.S.C. 78o–3(a). 

17 15 U.S.C. 78o–3(a). 

18 15 U.S.C. 78f(h)(3)(G). 

19 7 U.S.C. 6j. 

20 15 U.S.C. 78k(a). 

21 17 CFR 41.27. 

22 7 U.S.C. 6j(a). 

23 15 U.S.C. 78f(h)(3)(H). 

24 15 U.S.C. 78f(h)(3)(I). 

provisions in the CME Listing Standards 

or otherwise. 

Clause (A) of Section 6(h)(3)8 requires 

that any security underlying a security 

future be registered pursuant to Section 

12 of the Act.9 This requirement is 

addressed by CME Rules 70001.2, 

70002.1.a., 70003.2.b., and 70004.2.a. 

Clause (B) of Section 6(h)(3) 10

requires that a market on which a 

physically settled security futures 

product is traded have arrangements in 

place with a registered clearing agency 

for the payment and delivery of the 

securities underlying the security 

futures product. CME has reached an 

agreement with a member of DTC, a 

registered clearing agency, to facilitate 

the delivery-versus-payment 

transactions which result from an 

agreement to make or take delivery of 

the underlying security by the market 

participant. This DTC member will 

provide CME with a dedicated DTC 

account. This account will be a subaccount of the DTC member’s main 

account and will be utilized solely for 

CME activity with respect to the 

delivery of, and payment for, securities 

delivered against CME security futures 

products. CME will act as a contra party 

to each delivery transaction. CME’s 

Clearing House will submit delivery 

instructions to DTC through the DTC 

member. Market participants will be 

required to provide proof to CME 

outlining their operational and legal 

ability to make or take delivery of the 

underlying. These agreements and 

relevant procedures will be fully 

operational prior to any possible 

delivery event associated with such 

security futures products. 

Clause (C) of Section 6(h)(3) 11

provides that listing standards for 

security futures products must be no 

less restrictive than comparable listing 

standards for options traded on a 

national securities exchange or national 

securities association registered 

pursuant to Section 15A(a) of the Act.12

For the reasons discussed above, 

notwithstanding specified differences 

between the Sample Listing Standards 

and the CME Listing Standards, CME 

believes that the latter are no less 

restrictive than comparable listing 

standards for exchange-traded options. 

Clause (D) of Section 6(h)(3) 13

requires that each security future be 

based on common stock or such other 

equity securities as the Commission and 

the CFTC jointly determine are 

appropriate. This requirement is 

addressed by Rules 70001.1, 70002.1, 

70003.2, and 70004.2. 

Clause (E) of Section 6(h)(3) 14

requires that each security futures 

product be cleared by a clearing agency 

that has in place provisions for linked 

and coordinated clearing with other 

clearing agencies that clear security 

futures products, which permits the 

security futures product to be purchased 

on one market and offset on another 

market that trades such product. CME 

intends to clear security futures 

products traded through Exchange 

facilities through the CME Clearing 

House Division. The Clearing House 

Division will have in place all 

provisions for linked and coordinated 

clearing as mandated by law and statute 

as of the effective date of such laws and 

statutes. CME will facilitate deliveries 

with a registered clearing agency to 

facilitate the payment and delivery of 

securities underlying security futures 

products, through the facilities of a third 

party agent. 

Clause (F) of Section 6(h)(3) 15

requires that only a broker or dealer 

subject to suitability rules comparable to 

those of a national securities association 

registered pursuant to Section 15A(a) of 

the Act 16 effect transactions in a 

security futures product. 

CME clearing members, and their 

correspondents, are bound by the 

applicable sales practice rules of the 

National Futures Association (‘‘NFA’’), 

which is a national securities 

association. As such, the sales practice 

rules of NFA are, perforce, comparable 

to those of a national securities 

association registered pursuant to 

Section 15A(a) of the Act.17 The 

application of NFA sales practice rules 

is extended beyond the CME clearing 

membership to the extent that NFA ByLaw 1101 provides that ‘‘[n]o member 

may carry an account, accept an order 

or handle a transaction in commodity 

futures contracts for or on behalf of any 

non-Member of NFA.’’

Clause (G) of Section 6(h)(3) 18

requires that each security futures 

product be subject to the prohibition 

against dual trading in Section 4j of the 

CEA 19 and the rules and regulations 

thereunder or the provisions of Section 

11(a) of the Act 20 and the rules and 

regulations thereunder. Exchange Rule 

123 requires Exchange members to 

comply with all applicable ‘‘provisions 

of the Commodity Exchange Act and 

regulations duly issued pursuant thereto 

by the CFTC.’’

Note that the prohibition of dual 

trading in security futures products per 

Regulation § 41.27 21 adopted pursuant 

to Section 4j(a) of the CEA,22 generally, 

applies to a contract market operating 

an electronic trading system if such 

market provides floor brokers executing 

customer orders through open outcry a 

contemporaneous placement of orders 

on behalf of specified accounts on an 

electronic trading platform and a time or 

place advantage or the ability to 

override a predetermined matching 

algorithm. The Exchange offers security 

futures products exclusively on its CME 

Globex electronic trading platform. 

Thus, the conditions cited above are 

inapplicable in this context and the 

CME Rulebook contains no specific rule 

relating to dual trading in an electronic 

forum. 

Clause (H) of Section 6(h)(3) 23

provides that trading in a security 

futures product must not be readily 

susceptible to manipulation of the price 

of such security futures product, nor to 

causing or being used in the 

manipulation of the price of any 

underlying security, option on such 

security, or option on a group or index 

including such securities. CME Listing 

Standards are designed to ensure that 

CME products and the underlying 

securities will not be readily susceptible 

to price manipulation. Exchange Rule 

432 defines activity ‘‘to manipulate 

prices or to attempt to manipulate 

prices’’ as a ‘‘major offense,’’

punishable, per Exchange Rule 430, by 

‘‘expulsion, suspension, and/or a fine of 

not more than $1,000,000 plus the 

monetary value of any benefit received 

as a result of the violative action.’’

Clause (I) of Section 6(h)(3) 24 requires 

that procedures be in place for 

coordinated surveillance amongst the 

market on which a security futures 

product is traded, any market on which 

any security underlying the security 

futures product is traded, and other 

markets on which any related security is 

traded to detect manipulation and 

insider trading. 

The Exchange has surveillance 

procedures in place to detect 

manipulation on a coordinated basis 

with other markets. In particular, CME 

is an affiliate member of the Intermarket 

Surveillance Group (‘‘ISG’’) and is party 


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Federal Register / Vol. 72, No. 95 / Thursday, May 17, 2007 / Notices 27883 

25See Securities Exchange Act Release No. 45956 

(May 17, 2002), 67 FR 36740 (May 24, 2002). 

26 15 U.S.C. 78f(h)(3)(J). 

27 15 U.S.C. 78f(h)(3)(K). 

28 17 CFR 240.19b–7. 

29See Securities Exchange Act Release No. 51957 

(June 30, 2005), 70 FR 39820 (July 11, 2005) (SR–

CME–2005–03). 

30 17 CFR 41.25(a)(2). 

31 15 U.S.C. 78f(h)(3)(L). 

32 15 U.S.C. 78g(c)(2)(B). 

33See Securities Exchange Act Release No. 46637 

(October 10, 2002), 67 FR 64672 (October 21, 2002) 

(SR–CME–2002–01). 

34 17 CFR 240.19b–4. 

35 15 U.S.C. 78f(h)(3). 

to an affiliate agreement and an 

agreement to share market surveillance 

and regulatory information with the 

other ISG members. Further, CME is 

party to a supplemental agreement with 

the other ISG members to address the 

concerns expressed by the Commission 

with respect to affiliate ISG 

membership.25

Note that CME Rule 424, as shown in 

the Appendix below, permits CME to 

enter into agreements for the exchange 

of information and other forms of 

mutual assistance with domestic or 

foreign self-regulatory organizations, 

associations, boards of trade and their 

respective regulators. 

Clause (J) of Section 6(h)(3) 26 requires 

that a market on which a security 

futures product is traded have in place 

audit trails necessary or appropriate to 

facilitate the coordinated surveillance 

referred to in the preceding paragraph. 

The Exchange relies upon its Market 

Regulation Department and its large, 

highly trained staff to actively monitor 

market participants and their trading 

practices; and to enforce compliance 

with Exchange Rules. Market Regulation 

Department staff is organized into the 

Compliance and the Market 

Surveillance Groups. In performing its 

functions the Market Regulation 

Department routinely works closely 

with the Audit Department, the Clearing 

House, the Legal Department, the 

Globex Control Center, and the 

Information Technology Department. 

The Compliance area is responsible 

for enforcing the trading practice rules 

of the Exchange through detection, 

investigation, and prosecution of those 

who may attempt to violate those rules. 

Further, the area is responsible for 

handling customer complaints, ensuring 

the integrity of the Exchange’s audit 

trail and administering an arbitration 

program for the resolution of disputes. 

The area employs investigators, 

attorneys, trading floor investigators, 

data analysts and a computer 

programming and regulatory systems 

design staff. 

The Market Regulation Department 

has created some of the most 

sophisticated tools in the world to assist 

with the detection of possible rule 

violations and monitoring of the market. 

Among the systems it uses are The 

Regulatory Trade Browser (‘‘RTB’’), the 

Virtual Detection System (‘‘VDS’’), The 

Reportable Position System (‘‘RPS’’), 

and the RegWeb Profile System 

(‘‘RegWeb’’). These systems include 

information on all Globex users, all 

transactions, large positions, and 

statistical information on trading 

entities. 

The Market Surveillance area is 

dedicated to the detection and 

prevention of market manipulation and 

other similar forms of market 

disruption. As part of these 

responsibilities, the group enforces the 

Exchange’s position limit rules, 

administers the hedge approval process 

and maintains the Exchange’s RPS 

system. 

The foundation of the Exchange’s 

Market Surveillance program is the deep 

knowledge of its staff about the major 

users, brokers, and clearing firms, along 

with its relationship with other 

regulators. Day-to-day monitoring of 

market positions is handled by a 

dedicated group of surveillance analysts 

assigned to specific market(s). Each 

analyst develops in-depth expertise of 

the factors that influence the market in 

question. The Exchange estimates that 

perhaps 90% of the market users at any 

single time are known to the Exchange. 

Daily surveillance staff activities 

include: 

• Monitoring positions for size based 

on percentage of open interest and 

historic user participation in each 

contract. 

• Aggregation of positions across 

clearing members, with the use of CME 

trade reporting systems, to account for 

all positions held by any single 

participant. This daily review permits 

the surveillance analyst promptly to 

identify unusual market activity. 

• As a contract approaches maturity, 

large positions are scrutinized to 

determine whether such activity is 

consistent with prior experience, 

allowing prompt regulatory intervention 

if necessary. 

• Analysts closely monitor market 

news through on-line and print media. 

• Staff conducts on-site visits to large 

market participants periodically. 

Market Regulation staff investigates 

possible misconduct and, when 

appropriate, initiates disciplinary 

action. Exchange Rule 430 empowers 

the Exchange’s disciplinary committees 

to discipline, limit, suspend, or 

terminate a member’s activities for 

cause, amongst other sanctions. Note 

further that the Exchange requires, per 

Rule 123, that members shall be 

responsible for ‘‘the filing of reports, 

maintenance of books and records, and 

permitting inspection and visitation’’ in 

order to facilitate such investigations by 

Exchange staff. 

CME Rule 536 requires that certain 

information be recorded with respect to 

each order which includes: time 

entered, terms of the order, order type, 

instrument and contract month, price, 

quantity, account type, account 

designation, user code, and clearing 

firm. This information may be recorded 

manually on timestamped order tickets, 

electronically in a clearing firms system, 

or by entering the orders with the 

required information into Globex 

immediately upon receipt. A complete 

Globex electronic audit trail is archived 

and maintained by CME for at least a 

five year period. Clearing firms must 

also maintain any written or electronic 

order records for a period of five years. 

Clause (K) of Section 6(h)(3) 27

requires that a market on which a 

security futures product is traded have 

in place procedures to coordinate 

trading halts between such market and 

any market on which any security 

underlying the security futures product 

is traded and other markets on which 

any related security is traded. 

The Exchange filed with the 

Commission, pursuant to Rule 19b–7 

under the Act,28 rules establishing a 

generalized framework for the trade of 

security futures products.29 Specifically, 

these rules establish a framework for the 

trade of Physically Delivered Single 

Security Futures. 

In particular, Rule 71001.F. provides, 

in accordance with Regulation 

§ 41.25(a)(2) of CEA,30 that ‘‘[t]rading of 

Physically Delivered Single Security 

Futures shall be halted at all times that 

a regulatory halt, as defined per SEC 

Rule 6h–1(a)(3) and CFTC Regulation 

§ 41.1(l), has been instituted for the 

underlying security.’’

Clause (L) of Section 6(h)(3) 31

requires that the margin requirements 

for a security futures product comply 

with the regulations prescribed 

pursuant to Section 7(c)(2)(B) of the 

Act.32 CME submitted margin 

requirement rules 33 to the Commission 

per Rule 19b–4 under the Act.34 Thus, 

CME believes that its rules regarding 

customer margin are consistent with the 

requirements of the Act. 

For the reasons described above, CME 

believes that the rules submitted 

herewith, satisfy the requirements set 

forth in Section 6(h)(3) of the Act.35


pwalker on PROD1PC71 with NOTICES
27884 Federal Register / Vol. 72, No. 95 / Thursday, May 17, 2007 / Notices 

36 15 U.S.C. 78s(b)(7). 

37 15 U.S.C. 78s(b)(1). 

38 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 17 CFR 240.17d–2. 

4See Securities Exchange Act Release No. 55367 

(February 27, 2007), 72 FR 9983 (March 6, 2007) 

(approving and declaring effective the 17d–2 

Agreement between ISE and NASD) (‘‘17d–2 

Order’’). 

5See 17d–2 Order, supra note 4. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

CME does not believe that this 

amendment will have an impact on 

competition, because it represents a 

technical change in reference to the 

security underlying the futures contract. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received from 

Members, Participants or Others 

Comments on the proposed rule 

change have not been solicited. 

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)(7) of the Act.36 Within 60 

days of the date of effectiveness of the 

proposed rule change, the Commission, 

after consultation with the CFTC, may 

summarily abrogate the proposed rule 

change and require that the proposed 

rule change be refiled in accordance 

with the provisions of Section 19(b)(1) 

of the Act.37

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 rulecomments@sec.gov. Please include File 

No. SR–CME–2007–01 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–CME–2007–01. 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 also will be 

available for inspection and copying at 

the principal office of CME. 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–CME–2007–01 and should be 

submitted on or before June 7, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.38

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. E7–9501 Filed 5–16–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55751; File No. SR–ISE–

2007–29] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change and Amendment No. 1 Thereto 

Relating to Conforming Certain Rules 

With Comparable NASD Rules 

May 11, 2007. 

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 May 1, 

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 and II below, which Items have 

been substantially prepared by the ISE. 

On May 8, 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 Exchange proposes to amend 

certain ISE rules to conform them to the 

rules of the National Association of 

Securities Dealers, Inc. (‘‘NASD’’) for 

purposes of the Plan for the Allocation 

of Regulatory Responsibilities Pursuant 

to Rule 17d–23 under the Act entered 

into between the parties (‘‘17d–2 

Agreement’’).4 The text of the proposed 

rule change is available on the 

Exchange’s Web site (http:// 

www.iseoptions.com), at 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 

Exchange 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 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 proposes to amend 

certain ISE rules to conform them to the 

rules of the NASD for purposes of the 

17d–2 Agreement between the parties 

and the related certification by the 

Exchange which states that the 

requirements contained in certain ISE 

rules are identical to, or substantially 

similar to, certain NASD rules that have 

been identified as comparable.5

Specifically, the Exchange proposes to 

amend Rules 604, 624, 626, and 1407. 

The Exchange proposes to amend ISE 

Rule 604, ‘‘Continuing Education for 

Registered Persons,’’ to remove the 

provision that exempts certain 

registered persons from the continuing 

education requirements if they have 

been continuously registered for ten (10) 

years as of July 1, 1998 and have not 

been the subject of a disciplinary action 


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