Document ID: SEC-2006-0573-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: International Securities Exchange, Inc.
Posted Date: 2006-05-03T04:00Z

[Federal Register: May 3, 2006 (Volume 71, Number 85)]
[Notices]               
[Page 26154-26155]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03my06-117]                         

[[Page 26154]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53729; File No. SR-ISE-2006-15]

 
Self-Regulatory Organizations; International Securities Exchange, 
Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Execution of Complex Orders

April 26, 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 13, 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 Exchange. The ISE 
has filed this proposal pursuant to Section 19(b)(3)(A)(iii) of the Act 
\3\ and Rule 19b-4(f)(6) 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 persons.
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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)(iii).
    \4\ 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 ISE is proposing to amend its rules to specify that complex 
orders may be executed using the Solicited Order Mechanism. The text of 
the rule change is as follows. Italics indicate additions; [bracketing] 
indicates deletions.
* * * * *

Rule 716. Block Trades

    (a) through (e) no change.

Supplementary Material to Rule 716

    .01 through .07 no change.
    .08 Complex Orders. Electronic Access Members may use the 
Facilitation Mechanism and the Solicited Order Mechanism according to 
paragraphs (d) and (e) of this Rule 716 to [facilitate] execute block-
size complex orders (as defined in Rule 722) at a net price. Members 
may enter Indications for complex orders at net prices, and bids and 
offers for complex orders will participate in the execution of an order 
being [facilitated] executed as provided in paragraphs (d) and (e) of 
this Rule 716. With respect to bids and offers for the individual legs 
of a complex order entered into the [Facilitation M]mechanisms, the 
priority rules for complex orders contained in Rule 722(b)(2) will 
continue to be applicable. If an improved net price for the complex 
order being [facilitated] executed can be achieved from bids and offers 
for the individual legs of the complex order in the Exchange's auction 
market, the order being [facilitated] executed will receive an 
execution at the better net price.
* * * * *

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 proposed rule change. 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.

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

1. Purpose
    The Exchange proposes to amend Supplementary Material .08 to ISE 
Rule 716, ``Block Trades,'' to specify that complex orders may be 
executed through the Solicited Order Mechanism. The Commission 
previously approved the execution of complex orders through the 
Facilitation Mechanism, and the Exchange has modified its system to 
similarly handle the execution of complex orders through the Solicited 
Order Mechanism.\5\
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    \5\ See Securities Exchange Act Release No. 52327 (Aug. 24, 
2005), 70 FR 51854 (Aug. 31, 2005) (order approving File No. SR-ISE-
2004-33) (``Facilitation Mechanism Order'').
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    The Facilitation and Solicited Order Mechanisms work in the same 
basic manner. An Electronic Access Member (``EAM'') enters an order of 
a minimum size with a counter side interest, and other market 
participants are given an opportunity to participate in the trade 
before it is automatically executed. Complex orders are entered at a 
net price and are handled in the same manner as any other order under 
ISE Rule 716(d), ``Facilitation Mechanism,'' and ISE Rule 716(e), 
``Solicited Order Mechanism.'' \6\ With respect to bids and offers for 
the individual legs of a complex order entered into either mechanism, 
the priority rules for complex orders contained in ISE Rule 722(b)(2), 
``Complex Order Priority,'' continue to be applicable. If an improved 
net price for the complex order being executed can be achieved from 
bids and offers for the individual legs of the complex order in the 
Exchange's auction market, the order being executed will receive an 
execution at the better net price.
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    \6\ Each mechanism has different execution requirements. In 
particular, the Facilitation Mechanism has a minimum order size of 
50 contracts, while the Solicited Order Mechanism has a minimum 
order size of 500 contracts. Each leg of a complex order must comply 
with these minimum order sizes. In addition, the Solicited Order 
Mechanism requires that all orders be entered as all-or-none orders, 
while the Facilitation Mechanism does not have this requirement. 
Complex orders would be subject to the all-or-none requirement when 
entered into the Solicited Order Mechanism.
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2. Statutory Basis
    The Exchange believes that the basis under the Act for this 
proposed rule change is found in section 6(b)(5),\7\ in that it will 
serve to remove impediments to, and perfect the mechanisms of, a free 
and open market and a national market system and, in general, to 
protect investors and the public interest. In particular, the proposed 
rule change will make an existing service available to an additional 
order type.
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    \7\ 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

    The Exchange has designated the proposed rule change as one that: 
(i) Does not significantly affect the protection of investors or the 
public interest; (ii) does not impose any significant burden on 
competition; and (iii) does not become operative for 30 days from the 
date of filing, or such shorter time as the Commission may

[[Page 26155]]

designate if consistent with the protection of investors and the public 
interest. In addition, as required under Rule 19b-4(f)(6)(iii),\8\ the 
ISE provided the Commission with written notice of its intention to 
file the proposed rule change, along with a brief description and the 
text of the proposed rule change, at least five business days prior to 
filing the proposal with the Commission. Therefore, the foregoing rule 
change has become effective pursuant to section 19(b)(3)(A) of the Act 
\9\ and Rule 19b-4(f)(6) thereunder.\10\
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    \8\ 17 CFR 240.19b-4(f)(6)(iii).
    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate the 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.

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-2006-15 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-ISE-2006-15. 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. Copies of the 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 No. SR-
ISE-2006-15 and should be submitted on or before May 24, 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. E6-6641 Filed 5-2-06; 8:45 am]

BILLING CODE 8010-01-P