Document ID: SEC-2006-0503-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: International Securities Exchange, Inc.
Posted Date: 2006-04-18T04:00Z

[Federal Register: April 18, 2006 (Volume 71, Number 74)]
[Notices]               
[Page 19918-19920]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18ap06-105]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53630; File No. SR-ISE-2006-18]

 
Self-Regulatory Organizations; International Securities Exchange, 
Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Fees for Non-ISE Market Maker Orders

April 11, 2006.
    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 April 3, 2006, the International Securities Exchange, Inc. (``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. The ISE has 
designated this proposal as one changing a fee imposed by the ISE under 
section 19(b)(3)(A)(ii) of the Act,\3\ and Rule 19b-4(f)(2) 
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 parties.
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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)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE proposes to amend its Schedule of Fees to adopt a fee for 
non-ISE market maker orders. The text of the proposed rule change is 
available on the Exchange's Web site (http://www.iseoptions.com/legal/proposed_rule_changes.asp
) and at the Commission's Public Reference 

Room. Below is the text of the proposed rule change. Proposed new 
language is italicized.

--------------------------------------------------------------------------------------------------------------------------------------------------------
        Electronic market place            Amount                Billable unit                          Frequency                         Notes
--------------------------------------------------------------------------------------------------------------------------------------------------------
Execution Fees

                                                                      * * * * * * *
 ISE Market Maker.............  ...........  ....................................  ...................................  For Complex Orders, fee
                                                                                                                                 charged only for the
                                                                                                                                 leg of the trade
                                                                                                                                 consisting of the most
                                                                                                                                 contracts. For a pilot
                                                                                                                                 period ending November
                                                                                                                                 30, 2006 in
                                                                                                                                 transactions in QQQQ,
                                                                                                                                 this fee (i) is reduced
                                                                                                                                 by $.10 per Member for
                                                                                                                                 monthly A.D.V. above
                                                                                                                                 8,000 contracts/sides
                                                                                                                                 and (ii) is waived
                                                                                                                                 entirely per Member for
                                                                                                                                 monthly A.D.V. above
                                                                                                                                 10,000 contracts/sides.
    A.D.V. Less Than 300,000..........        $0.21  Contract/side.......................  Transaction........................  Based on Exchange A.D.V.
    A.D.V. From 300,001 to 500,000....        $0.17  Contract/side.......................  Transaction........................  Based on Exchange A.D.V.
    A.D.V. From 500,001 to 1,000,000..        $0.14  Contract/side.......................  Transaction........................  Based on Exchange A.D.V.
    A.D.V. Over 1,000,000.............        $0.12  Contract/side.......................  Transaction........................  Based on Exchange A.D.V.

[[Page 19919]]

 Non-ISE Market Maker.........        $0.16  Contract/side.......................  Transaction........................  The term ``Non-ISE
                                                                                                                                 Market Maker'' means a
                                                                                                                                 market maker as defined
                                                                                                                                 in Section 3(a)(38) of
                                                                                                                                 the Securities Exchange
                                                                                                                                 Act of 1934 registered
                                                                                                                                 in the same options
                                                                                                                                 class on another
                                                                                                                                 options exchange.

                                                                      * * * * * * *
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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 regarding the proposed rule change. 
The text of these statements may be examined at the places specified in 
Item IV below. The 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
    The purpose of this proposed rule change is to establish a fee for 
FARMM orders. FARMM orders are orders that are sent to the Exchange for 
execution by an Electronic Access Member, an ISE member, on behalf of a 
non-ISE market maker. FARMM orders do not include Linkage Orders. Under 
ISE's Schedule of Fees, the Exchange currently treats FARMM orders as 
Firm Proprietary orders. As such, both these order types are charged an 
execution fee and a comparison fee of $0.15 and $0.03 per contract, 
respectively. The ISE represents that non-ISE market makers that trade 
on the Exchange do not pay all of the same fees that ISE market makers 
pay, such as membership and regulatory fees. Thus, ISE market makers 
are subsidizing non-ISE market makers' trading on the Exchange. 
Accordingly, for competitive reasons, the Exchange proposes to create a 
new fee of $0.19 per contract for all FARMM orders, comprised of an 
execution fee and a comparison fee of $0.16 and $0.03 per contract, 
respectively. The Exchange notes that other options exchanges currently 
assess a per contract surcharge on non-Linkage trades executed for the 
account of a non-member market maker. For example, the Exchange 
believes that the Chicago Board Options Exchange (``CBOE''), the 
American Stock Exchange (``Amex''), and the Philadelphia Stock Exchange 
(``Phlx'') currently charge FARMM orders $0.26,\5\ $0.21,\6\ and 
$0.24,\7\ per contract, respectively. The Exchange believes that the 
proposed increase by the Exchange of $0.01 per contract from the 
current fees paid by non-ISE market makers will still leave ISE as the 
least expensive venue for executing FARMM orders.
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    \5\ See CBOE Fees Schedule, dated March 1, 2006, at http://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf
.

    \6\ See Amex Price List, dated March 15, 2006, at http://www.amex.com/atamex/constitutionRules/at_feeSched.pdf
.

    \7\ See Phlx Fee Schedule, dated February 2006, at http://www.phlx.com/exchange/memservices/feesched.pdf
.

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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b)(4) of the Act \8\ in that it provides for the 
equitable allocation of reasonable dues, fees and other charges among 
the ISE's members and other persons using its facilities.
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    \8\ 15 U.S.C. 78f(b)(4).
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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

    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 by the Exchange. Accordingly, the proposal will 
take effect 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.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(2).
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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 Number SR-ISE-2006-18 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2006-18. 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

[[Page 19920]]

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 the 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 Number SR-ISE-2006-18 and should be submitted on or before May 9, 
2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-5708 Filed 4-17-06; 8:45 am]

BILLING CODE 8010-01-P