Document ID: SEC-2006-1506-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: International Securities Exchange, Inc.
Posted Date: 2006-11-22T05:00Z

[Federal Register: November 22, 2006 (Volume 71, Number 225)]
[Notices]               
[Page 67667-67668]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22no06-135]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54751; File No. SR-ISE-2006-56]

 
Self-Regulatory Organizations; International Securities Exchange, 
Inc.; Order Approving Proposed Rule Change and Amendment No. 1 Relating 
to Customer Fees for Certain Complex Orders

November 14, 2006.

I. Introduction

    On September 20, 2006, the International Securities Exchange, Inc. 
(``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 establish execution and 
comparison fees for customer Complex Orders that take liquidity from 
the ISE's complex order book. The ISE filed Amendment No. 1 to the 
proposal on October 4, 2006.\3\ The

[[Page 67668]]

proposed rule change, as amended, was published for comment in the 
Federal Register on October 13, 2006.\4\ The Commission received no 
comments regarding the proposal, as amended. This order approves the 
proposed rule change, as amended.
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    \1\ 1 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 revises the text of the ISE's Schedule of 
Fees to: (1) explain when an order takes liquidity from the ISE's 
complex order book; and (2) clarify that the proposed fee applies 
solely to Complex Orders that trade with other Complex Orders, and 
not to Complex Orders that trade with customer orders in the regular 
order book.
    \4\ See Securities Exchange Act Release No. 54571 (October 4, 
2006), 71 FR 60593.
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II. Description of the Proposal

    Under its current rules, the ISE generally charges execution and 
comparison fees of $.15 and $.03 per contract, respectively, for Firm 
Proprietary orders.\5\ The ISE states that it has noted increased 
volume in certain customer transactions in Complex Orders. According to 
the ISE, customers that use highly developed trading systems are able 
to take liquidity quickly from ISE's complex order book.\6\ To place 
customer orders on a more equal footing with broker-dealer orders, the 
ISE proposes to amend its Schedule of Fees to adopt execution and 
comparison fees of $.15 and $.03 per contract, respectively, for 
customer Complex Orders that take liquidity from the ISE's complex 
order book.
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    \5\ For Firm Proprietary Complex Orders, the execution fee is 
charged only for the leg of the trade with the most contracts.
    \6\ Under the ISE's proposal, an order takes liquidity when it 
interacts with a Complex Order resident on the ISE's complex order 
book. The ISE determines the liquidity provider and the liquidity 
taker based on time, i.e., the order that arrives first on the ISE's 
complex order book is the liquidity provider. The fees established 
in the proposal apply solely to customer Complex Orders that take 
liquidity from the ISE's complex order book, but not to customer 
Complex Orders that trade with orders in the regular order book. 
Similarly, the fees do not apply to customer orders in the regular 
order book that trade with Complex Orders.
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III. Discussion

    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\7\ 
Specifically, the Commission finds that the proposal is consistent with 
Section 6(b)(4) of the Act,\8\ which requires that the rules of an 
exchange provide for the equitable allocation of reasonable dues, fees, 
and other charges among its members and issuers and other persons using 
its facilities. Under its current rules, the ISE generally charges 
execution and comparison fees of $.15 and $.03 per contract, 
respectively, for Firm Proprietary orders. The proposal establishes 
execution and comparison fees of $.15 and $.03 per contract, 
respectively, for customer Complex Orders that take liquidity from the 
ISE's complex order book.\9\ Accordingly, the Commission believes that 
the proposal provides for the equitable allocation of fees among 
members and other persons using the ISE's facilities, consistent with 
Section 6(b)(4) of the Act.
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    \7\ In approving this proposed rule change the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(4).
    \9\ As with the current execution fee for Firm Proprietary 
Complex Orders, the execution fee will be charged only for the leg 
of the trade with the most contracts.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-ISE-2006-56), as amended, is 
approved.
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    \10\ 15 U.S.C. 78s(b)(2).
    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
Nancy M. Morris,
Secretary.
[FR Doc. E6-19734 Filed 11-21-06; 8:45 am]

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