Document ID: SEC-2006-1070-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: International Securities Exchange, Inc.
Posted Date: 2006-08-21T04:00Z

[Federal Register: August 21, 2006 (Volume 71, Number 161)]
[Notices]               
[Page 48567-48569]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21au06-83]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54315; File No. SR-ISE-2006-43]

 
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

August 14, 2006.
    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 July 25, 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 ISE. 
On August 10, 2006, ISE filed Amendment No. 1 to the proposed rule 
change.\3\ The ISE has designated this 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,\4\ and Rule 19b-4(f)(2) thereunder,\5\ 
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\ Amendment No. 1 revised the rule text contained in Exhibit 5 
to conform it to the discussion contained in the Purpose section, 
which explains that a ten (10) cent per contract surcharge applies 
only to IWB, IWD, XLV, XLU, and XLK and not to all of the Premium 
Products that are the subject of this filing.
    \4\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \5\ 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 establish 
fees for transactions in options on nine Premium Products.\6\ 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.
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    \6\ ``Premium Products'' is defined in the ISE's Schedule of 
Fees as the products enumerated therein.
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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 Exchange is proposing to amend its Schedule of Fees to 
establish fees for transactions in options on the following nine 
Premium Products: PowerShares Water Resources Portfolio (``PHO''),\7\ 
SPDR Homebuilders ETF (``XHB''),\8\ iShares FTSE/Xinhua China 25 Index 
Fund (``FXI''), iShares Dow Jones Select

[[Page 48568]]

Dividend Index Fund (``DVY''),\9\ iShares Russell 1000 Index Fund 
(``IWB''), iShares Russell 1000 Value Index Fund (``IWD''), Health Care 
Select Sector SPDR Fund (``XLV''), Utilities Select Sector SPDR Fund 
(``XLU''), and Technology Select Sector SPDR Fund (``XLK'').\10\ 
Specifically, the Exchange is proposing to adopt an execution fee and a 
comparison fee for all transactions in options on PHO, XHB, FXI, DVY, 
IWB, IWD, XLV, XLU, and XLK.\11\ The amount of the execution fee and 
comparison fee for products covered by this filing shall be $0.15 and 
$0.03 per contract, respectively, for all Public Customer Orders \12\ 
and Firm Proprietary orders. The amount of the execution fee and 
comparison fee for all ISE Market Maker transactions shall be equal to 
the execution fee and comparison fee currently charged by the Exchange 
for ISE Market Maker transactions in equity options.\13\ Finally, the 
amount of the execution fee and comparison fee for all non-ISE Market 
Maker transactions shall be $0.16 and $0.03 per contract, respectively. 
All of the applicable fees covered by this filing are identical to fees 
charged by the Exchange for all other Premium Products. The Exchange 
believes the proposed rule change will further the Exchange's goal of 
introducing new products to the marketplace that are competitively 
priced.
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    \7\ PowerSharesTM and PHOTM are trademarks 
of PowerShares Capital Management LLC (``PowerShares''). The 
Palisades Water Index is a trademark of Hydrogen Ventures and has 
been licensed for use for certain purposes by PowerShares. All other 
trademarks and service marks are the property of their respective 
owners. The PHO is not sponsored, endorsed, sold or promoted by 
Hydrogen Ventures, and Hydrogen Ventures makes no representation 
regarding the advisability of investing in PHO. Hydrogen Ventures 
and PowerShares have not licensed or authorized ISE to: (i) Engage 
in the creation, listing, provision of a market for trading, 
marketing, and promotion of options on PHO; or (ii) use and refer to 
any of their trademarks or service marks in connection with the 
listing, provision of a market for trading, marketing, and promotion 
of options on PHO or with making disclosures concerning options on 
PHO under any applicable Federal or state laws, rules or 
regulations. Hydrogen Ventures and PowerShares do not sponsor, 
endorse, or promote such activity by ISE and are not affiliated in 
any manner with ISE.
    \8\ ``Standard & Poor's[reg],'' ``S&P[reg],'' ``S&P 500[reg],'' 
``Standard & Poor's 500[reg]'' ``Standard & Poor's Depositary 
Receipts[reg],'' ``SPDR[reg],'' are trademarks of The McGraw-Hill 
Companies, Inc. (``McGraw-Hill''), and have been licensed for use by 
State Street Bank and Trust in connection with the listing and 
trading of XHB on the American Stock Exchange. XHB is not sponsored, 
sold or endorsed by Standard & Poor's, (``S&P''), a division of 
McGraw-Hill, and S&P makes no representation regarding the 
advisability of investing in XHB. McGraw-Hill and S&P have not 
licensed or authorized ISE to: (i) Engage in the creation, listing, 
provision of a market for trading, marketing, and promotion of 
options on XHB; or (ii) use and refer to any of their trademarks or 
service marks in connection with the listing, provision of a market 
for trading, marketing, and promotion of options on XHB or with 
making disclosures concerning options on XHB under any applicable 
Federal or state laws, rules or regulations. McGraw-Hill and S&P do 
not sponsor, endorse, or promote such activity by ISE and are not 
affiliated in any manner with ISE.
    \9\ iShares[reg] is a registered trademark of Barclays Global 
Investors, N.A. (``BGI''), a wholly owned subsidiary of Barclays 
Bank PLC. ``Dow Jones'' and ``Dow Jones U.S. Select Dividend Index 
Fund'' are trademarks and service marks of Dow Jones & Company, Inc. 
(``Dow Jones'') and have been licensed for use for certain purposes 
by BGI. ``FTSE'' is a trademark jointly owned by the London Stock 
Exchange PLC and The Financial Times Limited. ``Xinhua'' is a 
service mark and trademark of Xinhua Financial News Network Limited. 
All marks are licensed for use by FTSE/Xinhua Index Limited. All 
other trademarks and service marks are the property of their 
respective owners. Neither DVY nor FXI are sponsored, endorsed, 
issued, sold or promoted by Dow Jones or FTSE/Xinhua Index Limited. 
BGI, Dow Jones, and FTSE/Xinhua Index Limited have not licensed or 
authorized ISE to: (i) Engage in the creation, listing, provision of 
a market for trading, marketing, and promotion of options on DVY and 
FXI; or (ii) use and refer to any of their trademarks or service 
marks in connection with the listing, provision of a market for 
trading, marketing, and promotion of options on DVY and FXI or with 
making disclosures concerning options on DVY and FXI under any 
applicable Federal or state laws, rules or regulations. BGI, Dow 
Jones, and FTSE/Xinhua Index Limited do not sponsor, endorse, or 
promote such activity by ISE and are not affiliated in any manner 
with ISE.
    \10\ PHO, XHB, FXI, DVY, IWB, IWD, XLV, XLU, and XLK constitute 
``Fund Shares,'' as defined by ISE Rule 502(h).
    \11\ These fees will be charged only to Exchange members. Under 
a pilot program that is set to expire on July 31, 2006, these fees 
will also be charged to Linkage Orders (as defined in ISE Rule 
1900). See infra footnote 15 (regarding ISE's proposed rule change 
to extend its Linkage fees pilot program).
    \12\ Public Customer Order is defined in Exchange Rule 
100(a)(33) as an order for the account of a Public Customer. Public 
Customer is defined in Exchange Rule 100(a)(32) as a person that is 
not a broker or dealer in securities.
    \13\ The execution fee is currently between $.21 and $.12 per 
contract side, depending on the Exchange Average Daily Volume, and 
the comparison fee is currently $.03 per contract side.
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    Additionally, the Exchange has entered into a license agreement 
with the Frank Russell Company and Standard & Poor's in connection with 
the listing and trading of options on IWB, IWD and XLV, XLU, and XLK, 
as applicable. As with certain other licensed options, the Exchange 
proposes to adopt a fee of ten (10) cents per contract for trading in 
these options to defray the licensing costs. The Exchange believes 
charging the participants that trade these products is the most 
equitable means of recovering the costs of the licenses. However, 
because of competitive pressures in the industry, the Exchange proposes 
to exclude Public Customer Orders from this surcharge fee. Accordingly, 
this surcharge fee will only be charged to Exchange members with 
respect to non-Public Customer Orders (e.g., ISE Market Maker, non-ISE 
Market Maker, and Firm Proprietary orders) and shall apply to Linkage 
Orders \14\ under a pilot program that is set to expire on July 31, 
2006.\15\ Finally, since options on PHO, XHB, FXI, DVY, IWB, IWD, XLV, 
XLU, and XLK are multiply-listed, the Payment for Order Flow fee shall 
also apply.
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    \14\ See ISE Rule 1900.
    \15\ In File No. SR-ISE-2006-38, the Exchange proposed, and the 
Commission subsequently approved, a rule change to extend the 
Linkage fees pilot program until July 31, 2007. See Securities 
Exchange Act Release No. 54204 (July 25, 2006), 71 FR 43548 (August 
1, 2006).
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2. Statutory Basis
    The Exchanges believes that the basis under the Act for this 
proposed rule change is the requirement under Section 6(b)(4) of the 
Act \16\ that an exchange have an equitable allocation of reasonable 
dues, fees and other charges among its members and other persons using 
its facilities.
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    \16\ 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

    Because the foregoing rule change, as amended, establishes or 
changes a due, fee, or other charge imposed by the Exchange, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \17\ and 
Rule 19b-4(f)(2) \18\ thereunder. At any time within 60 days of the 
filing of such 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.\19\
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 19b-4(f)(2).
    \19\ The effective date of the original proposed rule is July 
25, 2006. The effective date of Amendment No. 1 is August 10, 2006. 
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 August 10, 2006, 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-2006-43 on the subject line.

[[Page 48569]]

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-2006-43. 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-2006-43 and should be submitted on or before 
September 11, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-13725 Filed 8-18-06; 8:45 am]

BILLING CODE 8010-01-P