Document ID: SEC-2006-1634-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: International Securities Exchange, LLC
Posted Date: 2006-12-15T05:00Z

[Federal Register: December 15, 2006 (Volume 71, Number 241)]
[Notices]               
[Page 75594-75596]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15de06-117]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54905; File No. SR-ISE-2006-68]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Rule 2107 (Priority and Execution of Orders)

December 8, 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 November 24, 2006, 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 prepared by the Exchange. 
The Exchange filed the proposed rule change as a ``non-controversial'' 
rule change under Rule 19b-4(f)(6) under the Act,\3\ which rendered 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\ 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 proposes to amend ISE Rule 2107 (Priority and 
Execution of Orders). The text of the proposed rule change is available 
on the Exchange's Web site, http://www.iseoptions.com, at the 

Exchange's Office of the Secretary, 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 proposal. 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.

[[Page 75595]]

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On September 28, 2006, the Commission granted the ISE approval for 
its proposed adoption of trading rules related to its new electronic 
trading system for equities (``ISE Stock Exchange'').\4\ As required by 
Regulation NMS under the Act, on and after February 5, 2007, the ISE 
Stock Exchange will not Trade-Through \5\ the Protected Quotation \6\ 
of another Trading Center.\7\ Accordingly, when the ISE does not have 
interest resident in the ISE Stock Exchange at the National Best Bid or 
Offer (``NBBO''), the order will be routed to the Trading Center(s) 
displaying a Protected Quotation that is at a superior price. If the 
ISE is unable to route the order to the other Trading Center(s) for any 
reason and no valid exception to the order protection rule under 
Regulation NMS \8\ exists, the order will be canceled back to the 
Equity EAM. The purpose of this proposed rule change is to amend ISE 
Rule 2107 regarding priority and execution of orders to clarify that 
when the ISE Stock Exchange is not at the NBBO, orders will either be 
routed to Protected Quotation(s) or canceled back to the Equity EAM.
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    \4\ See Securities Exchange Act Release No. 54528, 71 FR 58650 
(October 4, 2006) (SR-ISE-2006-48).
    \5\ As defined in Rule 600(b)(77) of Regulation NMS. 17 CFR 
242.600(b)(77).
    \6\ As defined in Rule 600(b)(58) of Regulation NMS. 17 CFR 
242.600(b)(58).
    \7\ As defined in Rule 600(b)(78) of Regulation NMS. 17 CFR 
242.600(b)(78).
    \8\ See Rule 611 of Regulation NMS. 17 CFR 242.611.
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    Additionally, the ISE proposes to amend the Supplementary Material 
to ISE Rule 2107 to specify that the ISE Stock Exchange will execute 
inbound intermarket sweep orders (``ISOs'') \9\ without regard to 
prices on other markets and to define an Equity EAM's obligations 
associated with submitting ISOs to the ISE Stock Exchange, in each case 
prior to February 5, 2007 (the ``Trading Phase Date'' of Regulation 
NMS).\10\ An Equity EAM may submit an ISO only if it has simultaneously 
sent an ISO (or comparable order) for the full displayed size of all 
firm quotations that are disseminated pursuant to an effective national 
market system plan and are at a superior price to the ISE Stock 
Exchange's best bid or offer.
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    \9\ As defined in Rule 600(b)(30) of Regulation NMS. 17 CFR 
242.600(b)(30).
    \10\ Telephone conference between Nancy J. Sanow, Assistant 
Director, Division of Market Regulation, Commission, and Laura E. 
Clare, Assistant General Counsel, ISE, on December 4, 2006.
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2. Statutory Basis
     The Exchange believes that the proposed rule change is consistent 
with Section 6(b)(5) of the Act,\11\ in that it is designed to promote 
just and equitable principles of trade, 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.
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    \11\ 15 U.S.C. 78f(b)(5).
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B . Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change would impose no 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comment on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange did not solicit or receive any written comments with 
respect to the proposal.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the proposed rule change: (i) Does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and (iii) by its terms, 
does not become operative for 30 days after the date of filing, or such 
shorter time as the Commission may designate, if consistent with the 
protection of investors and the public interest, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the 
Act\12\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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    As required under Rule 19b-4(f)(6)(iii),\14\ the Exchange provided 
the Commission with written notice of its intent to file the proposed 
rule change, along with a brief description and text of the proposed 
rule change, at least five business days prior to the date of the 
filing of the proposed rule change. The Exchange has requested that the 
Commission waive the 30-day operative delay. The Commission believes 
that waiver of the 30-day operative delay is consistent with the 
protection of investors and the public interest, because this filing 
should clarify trading processes relating to the handling of orders on 
the ISE Stock Exchange. For this reason, the Commission designates the 
proposal to be effective and operative upon filing with the 
Commission.\15\
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    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ For purposes only of waiving the 30-day operative delay of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition and capital formation. 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 the furtherance of the purposes of the Act.\16 \
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    \16\ 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 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-2006-68 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-2006-68. 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

[[Page 75596]]

Room. Copies of such 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-SE-2006-68 and should be submitted on or 
before January 5, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
Florence E. Harmon,
Deputy Secretary.
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    \17\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E6-21361 Filed 12-14-06; 8:45 am]

BILLING CODE 8011-01-P