Federal Register / Vol. 73, No. 147 / Wednesday, July 30, 2008 / Notices 44303 

6Premium Products is defined in the Schedule of 

Fees as the products enumerated therein. 

7See ISE Rule 900. 

8 ISE recently adopted fee waivers for Firm 

Proprietary, ISE Market Maker and Payment for 

Order Flow fees incurred by members who step up 

and match or improve the NBBO during the 

exposure period. See Securities Exchange Act 

Release No. 58164 (July 15, 2008), 73 FR 42638 

(July 22, 2008) (SR–ISE–2008–56). This filing 

extends that waiver to apply to customer orders in 

Premium Products and in Second Market options. 

The Exchange represents that, since July 1, 2008, 

the date SR–ISE–2008–56 was filed and became 

operative, no customer orders have responded 

during the exposure period and thus, no customer 

orders were deprived of the proposed fee waiver. 

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

10 17 CFR 240.19b-4(f)(2). 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

is marketable against the then-current 

NBBO, the PMM sends a Linkage Order 

on the customer’s behalf for the balance 

of the order as provided in Rule 

803(c)(2)(ii). If the balance of the order 

is not marketable against the thencurrent NBBO, it is placed on the ISE 

book. 

ISE currently charges a customer fee 

in options on Premium Products 6 and 

in Second Market 7 options; customer 

fees on all other options are currently 

waived by the Exchange. To encourage 

ISE members to respond to the exposure 

of these public customer orders, the 

Exchange proposes to waive customer 

fees in options on Premium Products 

and in Second Market options incurred 

by members who step up and match or 

improve the NBBO during the exposure 

period so these public customer orders 

can be executed on the Exchange.8 With 

this filing, the Exchange is also 

proposing to clarify on its Schedule of 

Fees that the fee waiver is applicable to 

orders exposed pursuant to 

Supplementary Material .02 to ISE Rule 

803 rather than to Linkage Orders. 

2. Statutory Basis 

The basis under the Act for this 

proposed rule change is the requirement 

under Section 6(b)(4) that an exchange 

have an equitable allocation of 

reasonable dues, fees and other charges 

among its members and other persons 

using its facilities. In particular, the 

proposed rule change will allow ISE to 

retain more flow by giving these 

customer orders additional opportunity 

to be executed at the NBBO at ISE and 

will also reduce PMM costs by reducing 

the number of Linkage orders they must 

send to other exchanges. 

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 proposed rule change 

has been designated as a fee change 

pursuant to Section 19(b)(3)(A) of the 

Act 9 and Rule 19b-4(f)(2) thereunder,10

because it establishes or changes a due, 

fee, or other charge imposed on 

members by ISE. Accordingly, the 

proposal is effective upon filing with 

the Commission. 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 

• 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–2008–57 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–ISE–2008–57. 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, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

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 

Number SR–ISE–2008–57 and should be 

submitted on or before August 20, 2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–17411 Filed 7–29–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58224; File No. SR–ISE–

2007–94] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Order Granting Accelerated 

Approval of a Proposed Rule Change 

as Modified by Amendments No. 1 and 

3 Thereto Relating to Reduction of 

Certain Order Handling and Exposure 

Periods From Three Seconds to One 

Second 

July 25, 2008. 

I. Introduction 

On October 5, 2007, the International 

Securities Exchange, LLC (‘‘ISE’’ 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 

reduce certain order exposure times 

from three seconds to one second. On 

December 4, 2007, ISE filed Amendment 

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44304 Federal Register / Vol. 73, No. 147 / Wednesday, July 30, 2008 / Notices 

3See Securities Exchange Act Release No. 58041 

(June 26, 2008), 73 FR 38263 (‘‘Notice’’). 4See letter from Lisa J. Fall, General Counsel, 

Boston Options Exchange (‘‘BOX’’), to Nancy M. 

Morris, Secretary, Commission, dated May 14, 2008 

(‘‘BOX Comment’’). 

5Rule 717(d). 

6Rule 717(e). The Exchange proposes to make a 

non-substantive clean-up of Rule 717(e) to specify 

that members can use the Facilitation Mechanism 

to execute solicited crosses. The Facilitation 

Mechanism rule was amended earlier this year to 

allow members to enter solicited crosses, and Rule 

717(e) should have been updated at that time. See 

Securities Exchange Act Release No. 55557 (March 

29, 2007), 72 FR 16838 (April 5, 2007). 

7Rule 811(c)(3). If the Directed Market Maker 

fails to do so within three seconds, the Exchange’s 

system automatically releases the order. Rule 

811(c)(3)(ii). 

8 If a Directed Market Maker is quoting at the 

NBBO at the time it releases a Directed Order, the 

Directed Market Maker is last in priority, and the 

order is exposed to all market participants before 

the Directed Order is executed against the Directed 

Market Maker’s quote. 

9 If the Directed Market Maker is quoting at the 

NBBO on the opposite side of the market from a 

Directed Order at the time the Directed Order is 

received by the Directed Market Maker, and the 

Directed Order is marketable, the Exchange’s 

system will automatically guarantee execution of 

the Directed Order against the Directed Market 

Maker at the price and the size of the Directed 

Market Maker’s quote. Rule 811(d). 

10As provided in Rule 714, when the Exchange’s 

best bid or offer is inferior to another exchange, 

incoming marketable customer orders are handled 

by the Primary Market Maker pursuant to Rule 

803(c), which requires the Primary Market Maker to 

either execute the order at a price that matches the 

NBBO or attempt to obtain the better price for the 

customer according to the Linkage rules contained 

in Chapter 19. 

11See BOX Comment, supra note 4. 

12The BOX Comment, supra note 4, was 

submitted in connection with SR–ISE–2008–29. In 

SR–ISE–2008–29, the ISE proposed to allow 

members to enter orders into the PIM at a price that 

matches the NBBO when the ISE market is inferior 

to the NBBO. The Commission approved SR–ISE–

2008–29. See Securities Exchange Act Release No. 

57847 (May 21, 2008), 73 FR 30987 (May 29, 2008). 

13See BOX Comment, supra note 4. 

14 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). 

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

16 15 U.S.C. 78f(b)(8). 

No. 1 to the proposed rule change. On 

May 22, 2008, ISE filed Amendment No. 

2 to the proposed rule change and 

withdrew this Amendment on May 29, 

2008. On June 23, 2008, ISE filed 

Amendment No. 3 to the proposed rule 

change. The proposed rule change, as 

modified by Amendments No. 1 and 3, 

was published for comment in the 

Federal Register on July 3, 2008.3 The 

Commission received one comment on 

the proposal.4 This order approves the 

proposed rule change, as modified by 

Amendments No. 1 and 3, on an 

accelerated basis. 

II. Description of the Proposal 

The Exchange proposes to reduce the 

order handling and exposure periods 

contained in Exchange Rules 716 (Block 

Trades), 717 (Limitations on Orders), 

723 (Price Improvement Mechanism for 

Crossing Transactions), and 811 

(Directed Orders) from three seconds to 

one second. 

Rule 716 contains the requirements 

applicable to the execution of orders 

using the Block Order Mechanism, 

Facilitation Mechanism, and Solicited 

Order Mechanism. The Block Order 

Mechanism allows members to obtain 

liquidity for the execution of a blocksize order, whereas the Facilitation and 

Solicited Order Mechanisms allow 

members to enter block-size cross 

transactions. Rule 723 contains the 

requirements applicable to the 

execution of orders using the Price 

Improvement Mechanism (‘‘PIM’’). The 

PIM allows members to enter cross 

transactions of any size. Orders entered 

into any of these mechanisms currently 

are exposed to all market participants 

for three seconds, giving participants an 

opportunity to enter additional trading 

interest before the orders are 

automatically executed. 

Rule 717 requires members to expose 

agency orders to the marketplace before 

executing them as principal 5 or 

executing them against orders solicited 

from other members.6 Under Rule 717, 

an order can be exposed either by 

entering it onto the Exchange and 

waiting at least three seconds before 

entering the contra-side proprietary or 

solicited order, or by utilizing the 

various mechanisms that have an 

exposure period built into the 

functionality. 

Rule 811 contains the requirements 

applicable to the handling and 

execution of Directed Orders. A 

Directed Market Maker is required to 

enter Directed Orders into the PIM or 

release the order to the Exchange’s limit 

order book within three seconds of 

receipt.7 Additionally, there are three 

instances when a Directed Order is 

exposed to all market participants for 

three seconds after being released to the 

Exchange’s limit order book: (i) Before 

a Directed Order is matched against the 

Directed Market Maker at the national 

best bid or offer (‘‘NBBO’’); 8 (ii) before 

executing a Directed Order against the 

Directed Market Maker’s Guarantee; 9

and (iii) before being given to the 

Primary Market Maker for handling 

where the Directed Market Maker is also 

the Primary Market Maker.10 Finally, if 

a Directed Order is placed on the 

Exchange’s limit order book, the 

Directed Market Maker is not permitted 

to enter a proprietary order to execute 

against the Directed Order during the 

three seconds following the release of 

the Directed Order. 

Under the proposal, all of the threesecond exposure periods referred to 

above would be reduced to one second. 

The Commission received one 

comment letter regarding the proposed 

rule change.11 The commenter expresses 

concern that the combined effect of the 

proposed rule change and another ISE 

proposal 12 would lead to greater rates of 

internalization and reduced amounts of 

price improvement being made 

available to public customers on ISE, 

especially to small orders under 50 

contracts.13

III. Discussion and Commission 

Findings 

After carefully reviewing the 

proposed rule change and the comment 

submitted, the Commission finds that 

the proposal is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.14 In 

particular, the Commission finds that 

the proposed rule change is consistent 

with Section 6(b)(5) of the Act,15 which, 

among other things, requires that the 

rules of a national securities exchange 

be designed to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in regulating 

transactions in securities, 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 Commission also 

finds that the proposed rule change is 

consistent with Section 6(b)(8) of the 

Act,16 which requires that the rules of 

an exchange not impose any burden on 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Act. 

The Commission believes that, given 

the electronic environment on ISE, 

reducing each of the exposure periods 

from three seconds to one second as 

proposed could facilitate the prompt 

execution of orders, while continuing to 

provide market participants with an 

opportunity to compete for exposed bids 

and offers. To substantiate that ISE 

members could receive, process, and 

communicate a response back to the 

Exchange within one second, the 

Exchange stated that it distributed a 

survey to ISE members that regularly 

participate in orders executed through 

the mechanisms that would be affected 

by the proposal. ISE stated that the 

survey results indicated that it typically 

takes, at most, 110 milliseconds, for 

members to receive, process, and 

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Federal Register / Vol. 73, No. 147 / Wednesday, July 30, 2008 / Notices 44305 

17The ISE stated that all of the eight members 

that responded to the specific timing questions, and 

two of the three members that did not answer the 

specific timing questions, indicated that reducing 

the crossing exposure timer to one second would 

not impair their ability to participate in ISE crossing 

orders. The ISE stated that one member responded 

that it could not measure the specific times and 

indicated that it would prefer to keep the exposure 

periods at three seconds. See Notice. 

18The BOX Letter was received prior to the 

publication of the Notice. See BOX Comment, supra 

note 4. 

19See Securities Exchange Act Release No. 58088 

(July 2, 2008), 73 FR 39747 (July 10, 2008). 

20 15 U.S.C. 78s(b)(2). 

21 15 U.S.C. 78s(b)(2). 

22 17 CFR 200.30–3(a)(12). 

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). 

respond to broadcast messages related to 

the various mechanisms. According to 

the ISE, members who responded to the 

survey also indicated that reducing the 

exposure period to one second would 

not impair their ability to participate in 

orders executed through the 

mechanisms.17 Accordingly, the 

Commission believes that it is 

consistent with the Act for ISE to reduce 

the order handling and exposure times 

discussed herein from three seconds to 

one second. 

The Commission does not agree with 

the concerns raised by the commenter. 

Based on the ISE’s statements regarding 

the survey results, the Commission 

believes that market participants should 

continue to have opportunities to 

compete for exposed bids and offers 

within a one second exposure period. 

The Commission finds good cause to 

approve the proposed rule change prior 

to the thirtieth day after publication for 

comment in the Federal Register. The 

Commission notes that the proposed 

rule change was noticed for the full 

comment period and no additional 

comments were received.18 The 

Commission also notes that the 

proposed rule change is substantially 

similar to a recently approved proposal 

submitted by the Chicago Board Options 

Exchange, Incorporated 19 and the 

Commission believes that ISE has 

provided reasonable support for ISE’s 

belief that ISE market participants 

would continue to have an opportunity 

to compete for exposed bids and offers 

if exposure periods were reduced to one 

second. Therefore, the Commission 

finds good cause, consistent with 

Section 19(b)(2) of the Act,20 to approve 

the proposed rule change on an 

accelerated basis. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,21 that the 

proposed rule change (SR–ISE–2007–

94), as modified by Amendments No. 1 

and 3, be, and hereby is, approved on 

an accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.22

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–17440 Filed 7–29–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58217; File No. SR–NSX–

2008–12] 

Self-Regulatory Organizations; 

National Stock Exchange, Inc.; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change To Provide 

for a Post Intermarket Sweep Order 

July 24, 2008. 

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 July 18, 

2008, National Stock Exchange, Inc. 

(‘‘NSX’’ 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 Exchange. 

NSX filed the proposal pursuant to 

Section 19(b)(3)(A) of the Act 3 and Rule 

19b–4(f)(6) thereunder,4 which renders 

the proposal effective upon filing with 

the Commission. 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 Exchange is proposing to amend 

NSX Rule 11.11(c)(8) to allow ETP 

Holders the option of designating an 

intermarket sweep order (‘‘ISO’’) as a 

‘‘Post Intermarket Sweep Order’’ (‘‘Post 

ISO’’). The text of the proposed rule 

change is below. Proposed new 

language is in italics, and the proposed 

deletions are enclosed in brackets: 

Rules of National Stock Exchange, Inc. 

Chapter XI. Trading Rules 

* * * * * 

Rule 11.11. Orders and Modifiers 

Users may enter into the System the 

types of orders listed in this Rule 11.11, 

subject to the limitations set forth in this 

Rule or elsewhere in these Rules. 

(a)–(b) No change. 

(c) Other Types of Orders and Order 

Modifiers. 

(1)–(7) No change. 

(8) [Incoming] Intermarket Sweep 

Order (‘‘ISO’’). 

(i) Incoming ISO. The System will 

accept incoming intermarket sweep 

orders (as such term is defined in 

Regulation NMS) from other trading 

centers. In order to be eligible for 

treatment as an intermarket sweep 

order, the order must be marked ‘‘ISO,’’

and the User entering the order must 

simultaneously route one or more 

additional limit orders marked ‘‘ISO,’’

as necessary, to away markets to execute 

against the full displayed size of any 

protected quotation for the security with 

a price that is superior to the limit price 

of the intermarket sweep order entered 

in the System. Such orders, if they meet 

the requirements of the foregoing 

sentence, will be considered immediateor-cancel (IOC) and will be executed 

without regard to protected quotations 

at away markets consistent with 

Regulation NMS. 

(ii) Post ISO. A User may designate an 

ISO as a ‘‘Post ISO.’’ In order to be 

eligible for treatment as a Post ISO, the 

order must be marked ‘‘Post ISO,’’ and 

in submitting such an order the User 

entering the order represents that such 

User has simultaneously routed one or 

more additional limit orders marked 

‘‘ISO,’’ as necessary, to away markets to 

execute against the full displayed size of 

any protected quotation for the security 

with a price that is superior or equal to 

the limit price of the Post ISO entered 

in the System. Such order, if it meets the 

requirements of the foregoing sentence 

and is not a Post Only Order pursuant 

to Rule 11.11(c)(5), will be executed 

without regard to protected quotations 

at away markets consistent with 

Regulation NMS by sweeping the NSX 

Book up to and including its limit price. 

A Post ISO which is designated by the 

User as a Post Only Order pursuant to 

Rule 11.11(c)(5) will be rejected without 

execution if, when entered, it is 

immediately marketable against 

displayed orders in the NSX Book. Any 

unfilled portion of a Post ISO that meets 

the requirements of Rule 11.22(d)(3) will 

be posted at the entered limit price. 

(9) No change. 

(d) No change. 

* * * * * 

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, 

mstockstill on PROD1PC66 with NOTICES