Document ID: SEC-2006-1333-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: International Securities Exchange, LLC
Posted Date: 2006-10-13T04:00Z

[Federal Register: October 13, 2006 (Volume 71, Number 198)]
[Notices]               
[Page 60593-60594]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13oc06-114]                         

[[Page 60593]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-545771; File No. SR-ISE-2006-56]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing of a Proposed Rule Change and Amendment No. 1 
Relating to Customer Fees for Certain Complex Orders

October 4, 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 September 20, 2006, the International Securities Exchange, LLC 
(``Exchange'' or ``ISE'') 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 filed Amendment No. 1 to the proposal on October 4, 
2006.\3\ The Commission is publishing this notice to solicit comments 
on the proposed rule change, as amended, from interested persons.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Schedule of Fees to adopt a 
customer fee for certain Complex Orders. The text of the proposed rule 
change is available on ISE's Web site (http://www.iseoptions.com), at 

the principal office of ISE, and at the Commission's Public Reference 
Room.

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 purpose of this proposed rule change is to amend ISE's Schedule 
of Fees to adopt a customer fee for certain Complex Orders.\4\ The 
Exchange currently waives transaction fees for customers, except for 
customer transactions in Premium Products.\5\ The Exchange has noted an 
increase in volume in certain customer order transactions in Complex 
Orders. According to the ISE, customers that use highly developed 
trading systems are quickly able to hit the bid or lift an offer, 
thereby taking liquidity, i.e., interacting with Complex Orders 
resident on the complex order book. The Exchange thus proposes to 
charge an execution and comparison fee of $0.15 and $0.03 per contract, 
respectively, for customer orders that take liquidity to put them on a 
more equal footing with broker-dealer orders that are currently subject 
to this fee.
---------------------------------------------------------------------------

    \4\ Complex Orders are defined in ISE Rule 722(a).
    \5\ Premium Products are defined in the Schedule of Fees as the 
products enumerated therein.
---------------------------------------------------------------------------

    As with all Complex Order fees, only the largest leg of a Complex 
Order will be charged this fee if that leg is also taking liquidity 
away. The Exchange will not charge customers for Complex Orders if they 
are the liquidity provider, i.e., they are first on the complex order 
book. The Exchange will determine which side of a complex order is the 
liquidity taker and which is the liquidity provider based on the order 
time. The order that arrived first on the complex order book is the 
liquidity provider. This fee will only apply to customer Complex Orders 
that trade with other Complex Orders. If a Complex Order legs into the 
regular market, customer orders in the regular market that interact 
with the Complex Order will not be charged with fee, nor will a fee be 
charged to the Complex Order legging in.
    ISE believes that the proposed fee is objective in that it is based 
on the behavior of market participants and the type of orders 
submitted. As noted above, since the behavior of these customers is 
similar to the behavior of a broker-dealer, the ISE believes that it is 
fair for the Exchange to charge for these customer orders the same fees 
as those charged for broker-dealer orders.
2. Statutory Basis
    The Exchange believes that the basis for the proposal under the Act 
is the requirement under Section 6(b)(4) of the Act \6\ that an 
exchange have an equitable allocation of reasonable dues, fees, and 
other charges among its members and other persons using its facilities.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

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 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 it 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-2006-56 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.

[[Page 60594]]

All submissions should refer to File Number SR-ISE-2006-56. 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-2006-56 and should be submitted on or before 
November 3, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
---------------------------------------------------------------------------

    \7\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 06-8646 Filed 10-12-06; 8:45am]

BILLING CODE 8011-01-M