Document ID: SEC-2006-0169-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: International Securities Exchange, Inc.
Posted Date: 2006-02-10T05:00Z

[Federal Register: February 10, 2006 (Volume 71, Number 28)]
[Notices]               
[Page 7098-7100]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10fe06-129]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53223; File No. SR-ISE-2006-06]

 
Self-Regulatory Organizations; International Securities Exchange, 
Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change and Amendment No. 1 Thereto Relating to Competitive Market Maker 
Inactivity Fees

 February 3, 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 January 23, 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 January 31, 2006, the Exchange 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 a self-
regulatory organization pursuant to 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\ In Amendment No. 1, the ISE corrected an error in Exhibit 5 
of the original rule filing by eliminating certain inadvertent 
underlining. For purposes of calculating the 60-day period within 
which the Commission may summarily abrogate the proposed rule change 
the Commission considers the period to commence on January 31, 2006, 
the date on which the ISE filed Amendment No. 1. See 15 U.S.C. 
78s(b)(3)(C).
    \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 change its 
Competitive Market Maker (``CMM'') Inactivity Fee. The text of the 
proposed rule change is available at the Exchange, at the Commission's 
Public Reference Room and at the Exchange's Web site: http://www.iseoptions.com/legal/proposed_rule_changes.asp
).

[[Page 7099]]

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 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.

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

1. Purpose
    Currently, the ISE charges the owner \6\ of a CMM membership an 
Inactivity Fee of $25,000 a month if the owner does not: (i) Itself 
operate the CMM membership, (ii) lease the CMM membership to another 
member which operates the CMM membership, or (iii) avail itself to one 
of the exemptions specifically authorized in the Notes to the CMM 
Inactivity Fee on the Schedule of Fees. The CMM Inactivity Fee was 
adopted by the Exchange \7\ at a time when there was significant demand 
for CMM memberships and some owners were holding onto inactive 
memberships. The purpose of the CMM Inactivity Fee was to encourage the 
timely operation of the memberships to promote greater trading activity 
on the Exchange.
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    \6\ The Note to the CMM Inactivity Fee on the Schedule of Fees 
provides that the fee applies to the owner of the CMM membership, 
unless the inactive CMM membership is subject to a lease that was 
approved by the Exchange prior to the effective date of the fee, in 
which case the fee would apply to the lessee.
    \7\ See Securities Exchange Act Release No. 46272 (July 26, 
2002), 67 FR 50497 (August 2, 2002) (SR-ISE-2002-11).
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    The Exchange believes the circumstances that lead to the enactment 
of the CMM Inactivity Fee no longer exist to the same degree that they 
did in 2002. For one thing, the ISE has created additional CMM 
memberships to ease demand.\8\ The Exchange has also changed its 
minimum quoting requirements, allowing CMMs to quote wide markets.\9\ 
Thus, a new owner of a CMM membership can avoid the CMM Inactivity Fee 
by continuing to ``operate'' it by quoting $5-wide markets, enabling it 
to ``ramp up'' its quoting at a reasonable pace. Nevertheless, ISE 
believes that a CMM Inactivity Fee continues to serve a purpose by 
encouraging the operation of CMM memberships generally, and prefers to 
retain the fee. At the same time, the Exchange believes that the amount 
of the fee--$25,000 a month per membership--is now too high in light of 
the changed circumstances, imposing an unreasonable burden on firms 
that hold multiple memberships. Therefore, the Exchange proposes to 
reduce the amount of the fee to $5,000 a month per membership, with a 
cap of $25,000 on a per-firm basis, i.e., a firm that owns five or more 
inactive CMMs would pay a maximum CMM Inactivity Fee of $25,000 per 
month.
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    \8\ See Securities Exchange Act Release Nos. 47289 (January 30, 
2003), 68 FR 5947 (February 3, 2003) (SR-ISE-2002-28) (approving a 
proposed rule change to increase CMM memberships from 100 to 130); 
49195 (February 5, 2004), 69 FR 7061 (February 12, 2004) (SR-ISE-
2003-38) (approving a proposed rule change to increase CMM 
memberships from 130 to 160).
    \9\ See Securities Exchange Act Release No. 50015 (July 14, 
2004), 69 FR 43872 (July 22, 2004) (SR-ISE-2003-22).
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    Also, as a matter of ``housekeeping,'' the Exchange proposes to 
delete certain language in the Notes to the CMM Inactivity Fee relating 
to assessing the fee to the lessee if the CMM membership was subject to 
a lease that was approved prior to the effective date of the fee. All 
such leases have terminated, so there is no longer a need to retain 
that exception.
2. Statutory Basis
    The Exchange states that the basis under the Act for this proposed 
rule change is the requirement under Section 6(b)(4) \10\ 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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    \10\ 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 will 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 neither solicited nor received comments on the 
proposed rule change. The ISE 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 foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A)(ii) of the Act,\11\ and paragraph (f)(2) of Rule 
19b-4 thereunder \12\ because it establishes or changes a due, fee, or 
other charge. 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 furtherance of the purposes of the Act.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 17 CFR 240.19b-4(f)(2).
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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 Number SR-ISE-2006-06 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-2006-06. 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 7100]]

Room. Copies of such filing also will be available for inspection and 
copying at 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-2006-06 and should be submitted on or before March 3, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-1838 Filed 2-9-06; 8:45 am]

BILLING CODE 8010-01-P