Document ID: SEC-2005-0398-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: International Securities Exchange LLC
Posted Date: 2005-12-16T05:00Z

[Federal Register: December 16, 2005 (Volume 70, Number 241)]
[Notices]               
[Page 74859-74861]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16de05-104]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52934; File No. SR-ISE-2005-53]

 
Self-Regulatory Organizations; International Securities Exchange, 
Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change and Amendment No. 1 Thereto Relating to Fee Changes

December 9, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on November 22, 2005, 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.\3\ On November 29, 2005, ISE filed Amendment No. 1 to the proposed 
rule change.\4\ The ISE has designated this

[[Page 74860]]

proposal as one establishing or changing a due, fee, or other charge 
imposed by the ISE under Section 19(b)(3)(A)(ii) of the Act,\5\ and 
Rule 19b-4(f)(2) thereunder,\6\ which renders the proposal effective 
upon filing with the Commission. The Commission is publishing this 
notice to solicit comments on the proposed rule change, as amended, 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Commission notes that the proposed rule filing submitted 
by ISE on November 22, 2005 contained a typo in the file number 
included in Exhibit 1. This notice reflects the correct file number.
    \4\ Amendment No. 1 made a technical change to the text of 
Exhibit 5 (ISE's Schedule of Fees). The correction to Exhibit 5 does 
not affect the fees for transactions in options on the QQQQ but only 
corrects the order of the excerpted items appearing in Exhibit 5.
    \5\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \6\ 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 is proposing to amend its Schedule of Fees to extend, for 
one year, until November 30, 2006, a pilot program that (i) caps and 
waives execution and comparison fees for transactions in options on the 
Nasdaq 100 Tracking Stock (``QQQQ'') when a member transacts a certain 
number of QQQQ option contracts, and (ii) reduces and waives the 
facilitation execution and comparison fees when a member transacts a 
certain number of contracts through the Exchange's Facilitation 
Mechanism. The text of the proposed rule change, as amended, is 
available on the ISE's Web site (http://www.iseoptions.com/legal/proposed_rule_changes.asp
), at the principal office of the ISE, 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 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. 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 amend the ISE 
Schedule of Fees to extend, for one year, until November 30, 2006, a 
pilot program that (i) caps and waives execution and comparison fees 
for transactions in options on the QQQQ when a member transacts a 
certain number of QQQQ option contracts, and (ii) reduces and waives 
the facilitation execution and comparison fees when a member transacts 
a certain number of contracts through the Exchange's Facilitation 
Mechanism (when firms provide liquidity for the customers' block-sized 
orders).\7\
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    \7\ Telephone conversation between Samir Patel, Assistant 
General Counsel, ISE, Richard Holley III, Special Counsel, and Jan 
Woo, Attorney, Division of Market Regulation, Commission, on 
November 29, 2005.
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Discount on QQQQ Execution and Comparison Fees

    Under the QQQQ pilot program, when a member's monthly average daily 
volume (``A.D.V.'') in QQQQ options reaches 8,000 contracts, the 
member's execution fee for the next 2,000 QQQQ option contracts is 
reduced by $.10 per contract.\8\ Further, when a member's monthly 
A.D.V. in QQQQ options reaches 10,000 contracts, the Exchange waives 
the entire execution fee and the comparison fee for each QQQQ option 
contract traded thereafter. The Exchange instituted this pilot program 
in November 2003 for a six month period, expiring in May 2004.\9\ The 
Exchange extended the pilot program in May 2004 for an additional six 
month period, expiring in November 2004.\10\ In November 2004, the 
Exchange extended the pilot program, this time for a one year period, 
which is set to expire on November 30, 2005.\11\ The Exchange now 
proposes to further extend the pilot program for a one-year period, 
expiring on November 30, 2006. The Exchange seeks to extend this pilot 
program for competitive reasons. This pilot program was initiated and 
extended in an attempt to increase the Exchange's market share in the 
QQQQ option product.
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    \8\ Telephone conversation between Samir Patel, Assistant 
General Counsel, ISE, Richard Holley III, Special Counsel, and Jan 
Woo, Attorney, Division of Market Regulation, Commission, on 
November 29, 2005 (clarifying that the A.D.V. threshold is 
calculated on a monthly basis).
    \9\ See Securities and Exchange Commission Release No. 49147 
(January 29, 2004), 69 FR 5629 (February 5, 2004) (SR-ISE-2003-32).
    \10\ See Securities and Exchange Commission Release No. 49853 
(June 14, 2004), 69 FR 35087 (June 23, 2004) (SR-ISE-2004-15).
    \11\ See Securities and Exchange Commission Release No. 50900 
(December 21, 2004), 69 FR 78075 (December 29, 2004) (SR-ISE-2004-
36).
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Discount on Facilitation Mechanism Fees

    Under the Facilitation Mechanism pilot program, the structure of 
the reduction and waiver of the facilitation execution fee and the 
comparison fee is based on the structure of the reduction and waiver of 
the QQQQ execution fee and comparison fee noted above. That is, when a 
member's monthly A.D.V. in the Facilitation Mechanism reaches 8,000 
contracts, the member's facilitation execution fee for the next 2,000 
contracts transacted in the Facilitation Mechanism would be reduced by 
$.10 per contract. Further, when a member's monthly A.D.V. in the 
Facilitation Mechanism reaches 10,000 contracts, the Exchange would 
waive the entire facilitation execution fee and the comparison fee for 
each contract transacted in the Facilitation Mechanism thereafter. As 
with the QQQQ incentives, the Exchange is proposing to extend this 
pilot program for a one-year period to encourage members to use the 
Facilitation Mechanism.
2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with Section 6(b)(4) of the Act,\12\ which requires 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 fee changes proposed hereby will enable the Exchange 
to continue offering competitively priced products and services.
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    \12\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change, as amended, 
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 rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(2) \14\ thereunder 
because it changes a fee imposed by the Exchange. At any time within 60 
days of the filing of such

[[Page 74861]]

amended 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.\15\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 19b-4(f)(2).
    \15\ The effective date of the original proposed rule is 
November 22, 2005. The effective date of Amendment No. 1 is November 
29, 2005. For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change under 
Section 19(b)(3)(C) of the Act, the Commission considers the period 
to commence on November 29, 2005, the date on which the ISE 
submitted Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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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, as amended, 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 No. SR-ISE-2005-53 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.

All submissions should refer to File Number SR-ISE-2005-53. 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 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-2005-53 and should be submitted on or before January 
6, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
 [FR Doc. E5-7418 Filed 12-15-05; 8:45 am]

BILLING CODE 8010-01-P