Document ID: SEC-2008-0401-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2008-03-17T04:00Z

[Federal Register: March 17, 2008 (Volume 73, Number 52)]
[Notices]               
[Page 14290-14291]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17mr08-110]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57450; File No. SR-ISE-2008-15]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing of Proposed Rule Change Relating to the 
Exchange's Limitation of Liability

March 7, 2008.
    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 March 5, 2008, 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, II, and III below, which Items have been prepared 
substantially by the ISE. 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.
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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 ISE Rule 705, Limitation of Liability, to 
codify that it may provide compensation for losses sustained by Members 
as a result of a malfunction of the Exchange's physical equipment, 
devices and/or programming. The text of the proposed rule change is 
available at the ISE, the Commission's Public Reference Room, and 
http://www.ise.com.

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 ISE proposes to amend ISE Rule 705 to codify that it may 
provide compensation for losses sustained by Members as a result of a 
malfunction of the Exchange's physical equipment, devices, and/or 
programming. Currently, ISE Rule 705 generally states that the Exchange 
is not liable for any losses due to the Exchange's negligence or 
unintentional actions. Notwithstanding the Exchange's current 
limitation on liability, from a customer service perspective, the 
Exchange may compensate a Member for certain identified losses.\3\ As 
such, the Exchange proposes to amend ISE Rule 705 in order to establish 
limits with respect to compensating Members, both in the ISE's stock 
and options markets, as a result of a malfunction of the Exchange's 
physical equipment, devices, and/or programming.
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    \3\ The ISE represents that the determination as to whether a 
Member is compensated or not will be made on an equitable and non-
discriminatory basis without regard to the status of that Member, 
i.e., whether that Member is a Primary Market Maker, a Competitive 
Market Maker, or an Electronic Access Member of the Exchange.
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    Under the proposed rule change, payments for any and all system 
failures on any given day would be capped at $250,000. That is, for the 
aggregate of all claims made by all market participants related to the 
use of the Exchange on a single trading day, the Exchange's payment 
shall not exceed $250,000. In the event that all of the claims arising 
out of the use of the Exchange's systems cannot be fully satisfied 
because in the aggregate they exceed the limitations provided for in 
the Rule, then the maximum permitted amount will be proportionally 
allocated among all such claims arising on a single trading day. A 
system failure will be deemed to have occurred when there is a 
malfunction of the Exchange's physical systems, devices, or software.
    In order for a Member to be eligible to receive payment, claims 
must be made in writing and must be submitted no later than the opening 
of trading on the next business day following the day on which the 
incident giving rise to a claim occurred. Once in receipt of a claim, 
the Exchange will verify that: (i) a valid order was accepted into the 
Exchange's systems; and (ii) an Exchange system failure occurred during 
the execution or handling of that order. If all of the criteria for 
submitting a claim have been met, the claim will be qualified for 
processing with all other eligible claims at the end of the calendar 
month in which the incident occurred.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\4\

[[Page 14291]]

in general and Section 6(b)(5) of the Act,\5\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism for a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest. In particular, the ISE believes that the proposed rule 
change will protect investors and the public interest by providing more 
certainty as to the Exchange's potential liability resulting from 
system problems.
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    \4\ 15 U.S.C. 78f.
    \5\ 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 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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) As the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve such proposed rule change; or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 No. SR-ISE-2008-15 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-2008-15. 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 also 
will be available for inspection and copying at the principal office of 
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-
2008-15 and should be submitted on or before April 7, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-5237 Filed 3-14-08; 8:45 am]

BILLING CODE 8011-01-P