Document ID: SEC-2008-1190-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2008-08-28T04:00Z

[Federal Register: August 28, 2008 (Volume 73, Number 168)]
[Notices]               
[Page 50847-50848]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28au08-107]                         

[[Page 50847]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58400; File No. SR-ISE-2008-66]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Retire a Pilot Program To List and Trade Options on the 
iShares Emerging Markets Index Fund

August 20, 2008.
    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 August 14, 2008, the International Securities Exchange, LLC 
(``Exchange'' or ``ISE'') filed with the Securities and Exchange 
Commission the proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. The Exchange has 
filed the proposal 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

    The Exchange submits this rule filing to retire a pilot program 
that permits the Exchange to list options on the iShares MSCI Emerging 
Markets Index Fund (``EEM Fund'').\5\ The Exchange is proposing to 
retire the pilot program because the EEM Fund now meets all of the 
Exchange's generic initial and maintenance listing standards, which 
permit the Exchange to list options on the EEM Fund without having to 
file for Commission approval. The text of the proposed rule change is 
available on the Exchange's Web site http://www.ise.com, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.
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    \5\ The EEM Fund pilot program commenced on August 27, 2007, and 
has been renewed one time. The EEM Fund pilot program is scheduled 
to expire on August 27, 2008. See Securities Exchange Act Release 
No. 56324 (August 27, 2007), 72 FR 50426 (August 31, 2007) (Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change, as 
Modified by Amendment No. 1 Thereto, To List and Trade Options on 
the iShares Emerging Markets Index Fund for a Six Month Pilot 
Program) (SR-ISE-2007-72); See Securities Exchange Act Release No. 
57399 (February 28, 2008), 73 FR 12241 (March 6, 2008) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating 
to the Extension of a Pilot Program To List and Trade Options on the 
iShares Emerging Markets Index Fund) (SR-ISE-2008-10).
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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 self-regulatory organization 
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 self-regulatory organization 
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 rule change is to retire the Pilot that permits 
the Exchange to list options on the EEM Fund.\6\ The Exchange is 
proposing to retire the Pilot because the EEM Fund now meets all of the 
Exchange's generic initial and maintenance standards. Specifically, the 
Exchange has in place initial and maintenance listing standards set 
forth in Rules 502(h) and 503(h), respectively (``Listing Standards''), 
which are designed to allow the Exchange to list funds structured as 
investment companies, such as the EEM Fund, without having to file for 
Commission approval to list for trading options on these types of 
funds.\7\
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    \6\ The EEM Fund is an open-end investment company designed to 
hold a portfolio of securities that track the MSCI Emerging Markets 
Index (the ``Index''). The Index is a capitalization-weighted index 
created and maintained by Morgan Stanley Capital International, 
Inc., and is designed to measure equity market performance in the 
global emerging markets.
    \7\ ISE Rules 502(h) and 503(h) set forth the initial listing 
and maintenance standards for registered investment companies (or 
series thereof) organized as open-end management investment 
companies, unit investment trusts, or other similar entities that 
are traded on a national securities exchange or through the 
facilities of a national securities exchange.
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    When the Exchange first sought to list options on the EEM Fund, the 
Exchange had determined that the EEM Fund met substantially all of the 
Exchange's Listing Standards requirements, but did not meet the Listing 
Standards requirement that no more than 50% of the weight of the 
securities in the EEM Fund be comprised of securities that are not 
subject to a comprehensive surveillance sharing agreement 
(``CSSA'').\8\ The Exchange had in place CSSAs with foreign exchanges 
that covered 45.97% of the securities in the EEM Fund. In order to meet 
the 50% threshold, the Exchange requested the Commission's approval to 
rely upon a memorandum of understanding that the Commission had entered 
into with the CNBV \9\ (the ``MOU'') because the securities traded on 
the Bolsa represented 6.53% of the weight of the securities in the EEM 
Fund.\10\
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    \8\ See Rule 502(h)(B)(1).
    \9\ The National Commission for Banking and Securities, or 
``CNBV,'' is Mexico's regulatory body for financial markets and 
banking. The CNBV regulates the Bolsa Mexicana de Valores 
(``Bolsa'').
    \10\ See supra note 5. The Commission permitted the Exchange to 
rely on the MOU, and the Exchange agreed to use its best efforts to 
obtain a CSSA with the Bolsa during the respective pilot periods, 
which to date has not been obtained.
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    The EEM Fund has now become compliant with ISE Rule 502(h)(B)(1) 
and more than 50% of the weight of the securities in the EEM Fund are 
now subject to a CSSA. Specifically, the Exchange represents that the 
Korean Exchange (``KRX'') \11\ recently became a member of the 
Intermarket Surveillance Group and, therefore, securities and other 
products trading on its markets are now subject to a CSSA. As a result, 
the percentage of the weight of the EEM Fund represented by South 
Korean securities now renders the EEM Fund compliant with the 
Exchange's Listing Standards requirements.
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    \11\ The KRX was created on January 27, 2005, through the 
consolidation of three domestic Korean exchanges: Korea Stock 
Exchange (KSE), KOSDAQ Market and Korea Futures Market (KOFEX). See 
http://neg.krx.co.kr/index.html.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Act of 1934 (the ``Act'') and the rules and regulations 
under the Act applicable to a national securities exchange and, in 
particular, the requirements of Section 6(b) of the Act.\12\ 
Specifically, the Exchange believes the proposed rule change is 
consistent with Section 6(b)(5) of the Act's \13\ requirements that the 
rules of a national securities exchange be designed to promote just and 
equitable principles of trade, to prevent fraudulent and manipulative 
acts and, in general, to protect investors and the public interest. In 
particular, the proposed rule change will enable the Exchange to 
continue to provide a competitive marketplace for investors to trade 
options on the EEM Fund.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).

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[[Page 50848]]

B. Self-Regulatory Organization's Statement on Burden on Competition

    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) by its terms, does not become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest. Additionally, the Exchange provided the 
Commission with written notice of its intention to file the proposed 
rule change at least five business days before its filing. Therefore, 
the foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) under the Act 
normally may not become operative prior to 30 days after the date of 
filing. However, Rule 19b-4(f)(6)(iii) under the Act \16\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive the 30-day operative delay, 
which would make the rule change effective and operative upon filing. 
The Exchange believes that waiver of the 30-day operative delay is 
consistent with the protection of investors and the public interest as 
it will allow the Exchange to continue to list options on the EEM Fund. 
For this reason, the Commission designates that the proposed rule 
change has become effective and operative immediately.\17\
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    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ For purposes only of waiving the 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).
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    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.

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-2008-66 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-ISE-2008-66. 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, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such 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 publicly available. All 
submissions should refer to File Number SR-ISE-2008-66 and should be 
submitted on or before September 18, 2008.
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    \18\ 17 CFR 200.30-3(a)(12).\

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-19943 Filed 8-27-08; 8:45 am]

BILLING CODE 8010-01-P