Document ID: SEC-2006-1192-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: International Securities Exchange, Inc.
Posted Date: 2006-09-15T04:00Z

[Federal Register: September 15, 2006 (Volume 71, Number 179)]
[Notices]               
[Page 54544-54545]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15se06-90]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54418; File No. SR-ISE-2006-51]

 
Self-Regulatory Organizations; International Securities Exchange, 
Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to the Definition of a Directed Order

September 8, 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 September 6, 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 and II below, which Items have been prepared by the ISE. ISE 
filed the proposed rule change pursuant to section 19(b)(3)(A) 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).
    \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

    ISE is proposing to expand the definition of a ``Directed Order'' 
to allow broker-dealer orders to be routed to ISE market makers under 
ISE Rule 811. Below is the text of the proposed rule change. Proposed 
new language is in italic; proposed deletions are in [brackets].
* * * * *

Rule 811. Directed Orders

    (a) Definitions.
    (1) A ``Directed Order'' is [a Public Customer Order] an order 
routed from an Electronic Access Member to an Exchange market maker 
through the Exchange's System.
    (2) through (3) no change.
    (b) through (e) no change.
* * * * *

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
    Under ISE Rule 811 (Directed Orders), Electronic Access Members may 
route orders to an ISE market maker, which is then required to either 
enter them into the Price Improvement Mechanism \5\ or release them to 
execute in the regular market. While the Price Improvement

[[Page 54545]]

Mechanism is not limited to Public Customer Orders under ISE Rule 723, 
the Exchange initially limited the directed orders program to the 
routing of Public Customer Orders only.\6\ The Exchange now believes it 
is appropriate to expand the directed orders program to give broker-
dealer orders a greater opportunity for price improvement. The Exchange 
therefore proposes to broaden the definition of a Directed Order under 
ISE Rule 811, so that broker-dealer orders may be routed to ISE market 
makers for potential entry into the Price Improvement Mechanism.
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    \5\ ISE Rule 723.
    \6\ Under ISE Rule 100(a), a Public Customer Order is defined as 
an order for the account of a Public Customer, and a Public Customer 
is defined as a person that is not a broker or dealer in securities.
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2. Statutory Basis
    The Exchange believes that the basis under the Act is found in 
section 6(b)(5),\7\ in that the proposed rule change is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system and, in general, to protect investors and the public 
interest. In particular, the Exchange believes that the proposed rule 
change will provide greater opportunity for broker-dealer orders to 
receive price improvement through the Price Improvement Mechanism.
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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 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 proposed rule change does not: (1) 
Significantly affect the protection of investors or the public 
interest; (2) impose any significant burden on competition; and (3) by 
its terms, become operative for 30 days after the date of this filing, 
or such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest, the proposed rule 
change has become effective pursuant to section 19(b)(3)(A) of the Act 
\8\ and Rule 19b-4(f)(6) \9\ thereunder.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing. 
However, Rule 19b-4(f)(6)(iii) \10\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. ISE has requested that the 
Commission waive the 30-day operative delay, which would make the rule 
change effective and operative upon filing. The Commission believes 
that waiver of the 30-day operative delay is consistent with the 
protection of investors and the public interest.\11\ Such waiver would 
allow the Exchange to implement the proposed rule change immediately. 
The Commission notes that the proposal to amend the definition of a 
Directed Order in the ISE Rules is substantially similar to the 
definition of a Directed Order currently used by the Boston Options 
Exchange (``BOX''), a facility of the Boston Stock Exchange, Inc. \12\ 
The Commission does not believe that the proposed rule change raises 
new regulatory issues. Accordingly, the Commission designates the 
proposed rule change effective and operative upon filing with the 
Commission.
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    \10\ 17 CFR 240.19b-4(f)(6)(iii).
    \11\ For purposes only of waiving the 30-day operative delay for 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. See 15 
U.S.C. 78c(f).
    \12\ See Chapter I, Section 1(a)(21) of the BOX Rules (defining 
the term ``Directed Order'' to mean any Customer Order to buy or 
sell which has been directed to a particular Market Maker by an 
Order Flow Provider) and Chapter I, Section 1(a)(20) of the BOX 
Rules (defining the term ``Customer Order'' to mean an agency order 
for the account of either a Public Customer or a broker-dealer). See 
also Securities Exchange Act Release No. 49068 (January 13, 2004), 
69 FR 2775 (January 20, 2004) (SR-BSE-2002-15) (order approving 
trading rules for the Boston Options Exchange facility).
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    At any time within 60 days of the filing of such 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.

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-2006-51 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-2006-51. 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-2006-51 and should be submitted on or before October 
6, 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. E6-15320 Filed 9-14-06; 8:45 am]

BILLING CODE 8010-01-P