[Federal Register Volume 73, Number 194 (Monday, October 6, 2008)]
[Notices]
[Pages 58277-58279]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-23489]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58685; File No. SR-ISE-2008-73]


 Self-Regulatory Organizations; International Securities 
Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Expand the Trading Hours of the ISE Stock Exchange

September 30, 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 September 24, 2008, the International Securities Exchange, LLC 
(``Exchange'' or ``ISE'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
The Exchange has 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.
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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 submits this rule filing to extend its hours of 
trading for equity securities. 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 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 extend its hours of trading for equity 
securities. Currently, the Exchange has two equity trading sessions. 
The Pre-Market Session begins at 9 a.m. Eastern Time \5\ and ends when 
the opening transaction occurs, as defined in ISE Rule 2106(b). The 
Regular Market Session commences upon the opening transaction, as 
defined in ISE Rule 2106(b), and concludes simultaneously with the 
primary listing market in such security, which is either 4 p.m. or 4:15 
p.m. Eastern Time, depending on the security.\6\
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    \5\ See Securities and Exchange Commission Release No. 34-57021 
(December 20, 2007), 72 FR 74373 (December 31, 2007) (SR-ISE-2007-
116) (Notice of filing and immediate effectiveness of proposed rule 
change to open the Exchange's equity trading platform at 9:00 a.m.).
    \6\ See ISE Rule 2106.
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    The Exchange is proposing to begin ISE Stock Exchange trading at 8 
a.m. Eastern Time and close the market at 5 p.m. Eastern Time. Trading 
in the Pre-Market Session and the transition to the Regular-Market 
Session\7\ will remain unchanged, other than starting the Pre-Market 
Session one hour earlier.
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    \7\ See supra note 5.
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    Additionally, the Exchange is proposing to adopt a Post-Market 
Session, which will begin at the conclusion of the Regular-Market 
Session and close at 5 p.m. Eastern Time. To participate in the Post-
Market session, Equity Electronic Access Members (``Equity EAMs'') must 
mark orders as ``Post-Closing.'' Accordingly, the Exchange is proposing 
to amend ISE Rule 2102 (Hours of Business) to provide for a Post-Market 
Session and ISE Rule 2104 (Types of Orders) to adopt a ``Post-Closing'' 
order.
    Trading during expanded hours involves potential risks, including 
the possibility of lower liquidity, higher volatility, changing prices, 
unlinked markets with the possibility of trade-throughs, and wider 
spreads. Moreover, trades executed during these sessions may receive 
executions at inferior prices when compared to the high/low of the day. 
The Supplementary Material to ISE Rule 2102 presently requires Equity 
EAMs that submit orders during the Pre-Market Session on behalf of non-
members to disclose the risks of participating in such session to their 
customers. The Exchange proposes to expand this customer disclosure 
requirement to also apply to the Post-Market Session.
    The Exchange proposes to adopt rule text governing trading halts in 
the Pre- and Post-Market Sessions. Specifically, if a security begins 
trading on the Exchange in the Pre-Market Session and subsequently a 
temporary interruption occurs in the calculation or wide dissemination 
of the intraday indicative value (``IIV'') or the value of the 
underlying index by a major market data vendor, the Exchange may 
continue to trade the derivative securities product for the remainder 
of the Pre-Market Session.
    The Exchange will continue to halt trading during the Regular-
Market Session in accordance with the provisions set forth in existing 
ISE Rule 2101(a)(2)(iii)(A) and (B).\8\
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    \8\ The Exchange is also amending ISE Rule 2101(a)(2)(iii)(A) to 
delete language addressing the halting and subsequent resumption of 
trading when the underlying value of a securities derivative product 
continues not to be calculated or widely available as of the 
commencement of trading on the next business day. The Exchange 
believes that it is appropriate to delete this language because it 
is being added to proposed Rule 2102(e)(3).
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    The Exchange will halt trading during the Post-Market Session if 
the IIV or the value of the underlying index continues not to be 
calculated or widely available after the close of the Regular-Market 
Session. The Exchange may trade derivative securities products in the 
Post-Market Session only if the listing market traded such securities 
until the close of its regular trading session without a halt.
    If the IIV or the value of the underlying index continues not to be 
calculated or widely available as of the commencement of the Pre-Market 
Session on the next business day, the Exchange will not begin trading 
the derivative securities product in the Pre-Market Session that day. 
If an interruption in the calculation or wide

[[Page 58278]]

dissemination of the IIV or the value of the underlying index 
continues, the Exchange may resume trading in the derivative securities 
product only if calculation and wide dissemination of the IIV or the 
value of the underlying index resumes or trading in the derivative 
securities product resumes in the listing market.
    The Exchange intends to distribute to its Equity EAMs and make 
available on its Web site at http://www.ise.com a Regulatory 
Information Circular (``RIC'') that discloses, among other things: (1) 
The current underlying index value and IIV may not be updated during 
the Pre- and Post-Market Sessions; (2) lower liquidity in the Pre- and 
Post-Market Sessions may impact pricing; (3) higher volatility in the 
Pre- and Post-Market Sessions may impact pricing; (4) wider spreads may 
occur in the Pre- and Post-Market Session; (5) the circumstances that 
trigger trading halts; (6) required customer disclosures; and (7) 
suitability requirements. The RIC will also highlight that investors 
may be at a disadvantage to market professionals during the Pre- and 
Post-Market Sessions in that they may not have access to an updated 
index value or IIV that would otherwise be available during the Regular 
Market Session. The Exchange is also amending the Supplementary 
Material to Rule 2102 to require Equity EAMs to disclose additional 
risks associated with extended trading hours in Exchange Traded Funds 
to customers.
    Additionally the Exchange is proposing to amend Rule 2102(b) to 
precisely define the transition between the Pre-Market Session and the 
Regular-Market Session as is described above.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations under the Act applicable to a 
national securities exchange and, in particular, the requirements of 
Section 6(b) of the Act.\9\ Specifically, the Exchange believes the 
proposed rule change is consistent with Section 6(b)(5) of the Act's 
\10\ requirements that the rules of a national securities exchange be 
designed to promote just and equitable principles of trade, to prevent 
fraudulent and manipulative acts and, in general, to protect investors 
and the public interest. In particular, the proposed rule change will 
allow the Exchange to provide a competitive marketplace for Equity EAMs 
to trade securities during extended hours.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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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

    Because the foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) Impose any significant burden on competition; and
    (iii) Become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest, it 
has become effective pursuant to Section 19(b)(3)(A) of the Act \11\ 
and Rule 19b-4(f)(6) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). The Commission notes that ISE has 
satisfied the five-day pre-filing notice requirement.
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    ISE has asked the Commission to waive the 30-day operative delay. 
The Commission believes that such waiver is consistent with the 
protection of investors and the public interest because such waiver 
should benefit investors by allowing ISE, without undue delay, to 
expand its hours of trading, which should add competition in the 
trading of equity securities and new derivative securities products. In 
addition, proposed ISE Rule 2102 is closely modeled after similar rules 
of other national securities exchanges \13\ and does not raise any 
novel or significant regulatory issues. Therefore, the Commission 
designates the proposed rule change as operative upon filing.\14\
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    \13\ See e.g., NYSE Arca Rule 7.34 and Securities Exchange Act 
Release No. 54997 (December 21, 2006), 71 FR 78501 (December 29, 
2006) (SR-NYSEArca-2006-77) (reflecting trading halt procedures for 
securities trading in extended hours). See also Securities Exchange 
Act Release No. 56625 (October 5, 2007), 72 FR 58144 (October 12, 
2007) (SR-NYSEArca-2007-73) (discussing disclosure to be included in 
regulatory information bulletin).
    \14\ For purposes only of waiving the operative date of this 
proposal, the Commission has considered the rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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#cbb9bea7aee6a8a4a6a6aea5bfb88bb8aea8e5aca4bd"><span class="__cf_email__" data-cfemail="f183849d94dc929e9c9c949f8582b1829492df969e87">[email protected]</span></a>. Please include 
File Number SR-ISE-2008-73 on the subject line.

Paper Comments

    <bullet> 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-2008-73. 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 on official business days between 
the hours of 10 a.m. and 3 p.m. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
Exchange. All comments received will be posted without change;

[[Page 58279]]

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-
2008-73 and should be submitted on or before October 27, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-23489 Filed 10-3-08; 8:45 am]
BILLING CODE 8011-01-P


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