Document ID: SEC-2007-0884-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: International Securities Exchange, LLC
Posted Date: 2007-07-02T04:00Z

[Federal Register: July 2, 2007 (Volume 72, Number 126)]
[Notices]               
[Page 36083-36084]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02jy07-102]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55959; File No. SR-ISE-2007-50]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Fee Changes

June 26, 2007.
    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 June 19, 2007, the International Securities Exchange, LLC 
(``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 substantially 
prepared by the ISE. The ISE has designated this proposal as one 
establishing or changing a due, fee, or other charge applicable only to 
a member under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-
4(f)(2) 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)(ii).
    \4\ 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 four Premium Products.\5\ The text 
of the proposed rule change is available at the ISE, at the 
Commission's Public Reference Room, and on the ISE's Web site (http://www.iseoptions.com/legal/proposed_rule_changes.asp
).

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    \5\ ``Premium Products'' is defined in the 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 stat ements 
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 four 
Premium Products: First Trust ISE--Revere Natural Gas Index Fund 
(``FCG''), First Trust ISE Water Index Fund (``FIW''), the SPDR S&P 
Metals & Mining ETF (``XME''),\6\ and the KBW Mortgage Finance Index 
(``MFX''). The Exchange represents that FCG, FIW, and XME are eligible 
for options trading because they constitute ``Fund Shares,'' as defined 
by ISE Rule 502(h). The Exchange further represents that MFX meets the 
standards of ISE Rule 2002(b), which allows the ISE to begin trading 
this product by filing Form 19b-4(e) at least five business days after 
commencement of trading this new product pursuant to Rule 19b-4(e) 
under the Act.\7\ The ISE represents that it submitted Form 19b-4(e) to 
the Commission on June 19, 2007.
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    \6\ ``Standard & Poor's[supreg],'' ``S&P[supreg],'' ``S&P 
500[supreg],'' ``Standard & Poor's 500[supreg],'' ``Standard & 
Poor's Depositary Receipts[supreg],'' ``SPDR[supreg],'' and ``the 
S&P[supreg] Metals & Mining Select Industry Index,'' 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 XME. XME 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 XME. 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 XME; 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 XME or with making 
disclosures concerning options on XME 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.
    \7\ 17 CFR 240.19b-4(e).
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    All of the applicable fees covered by this filing are identical to 
fees charged by the Exchange for all other Premium Products. 
Specifically, the Exchange is proposing to adopt an execution fee and a 
comparison fee for all transactions in options on FCG, FIW, XME and 
MFX.\8\ 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 \9\ 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.\10\ Finally, the amount of the 
execution fee and comparison fee for all non-ISE Market Maker 
transactions shall be $0.37 and $0.03 per contract, respectively.
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    \8\ These fees will be charged only to Exchange members. Under a 
pilot program that is set to expire on July 31, 2007, these fees 
will also be charged to Principal Orders and Principal Acting as 
Agent Orders. See ISE Rule 1900(10). See also Securities Exchange 
Act Release No. 54204 (July 25, 2006), 71 FR 43548 (August 1, 2006) 
(SR-ISE-2006-38) (``Linkage Orders Pilot''). Telephone conversation 
between Samir Patel, Assistant General Counsel, ISE, and Sara 
Gillis, Attorney, Division of Market Regulation, Commission, on June 
26, 2007.
    \9\ ``Public Customer Order'' is defined in ISE Rule 100(a)(39) 
as an order for the account of a Public Customer. ``Public 
Customer'' is defined in ISE Rule 100(a)(38) as a person that is not 
a broker or dealer in securities.
    \10\ The execution fee is currently between $0.21 and $0.12 per 
contract side, depending on the Exchange Average Daily Volume, and 
the comparison fee is currently $0.03 per contract side.
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    Additionally, the Exchange has entered into a license agreement 
with Keefe, Bruyette & Woods, Inc. in connection with the listing and 
trading of options on MFX. As with certain other licensed options, to 
defray the licensing costs, the Exchange is adopting a surcharge fee of 
$0.10 per contract for trading in options on MFX. The Exchange believes 
charging the participants that trade this instrument is the most 
equitable means of recovering the costs of the license. 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 & Firm Proprietary orders) and shall apply

[[Page 36084]]

to Principal Orders and Principal Acting as Agent Orders.\11\
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    \11\ See ISE Rule 1900(10). See also Linkage Orders Pilot, supra 
note 5.
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    Further, since options on XME and MFX are multiply-listed, the 
Payment for Order Flow fee shall apply to these two 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.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\12\ in general, and 
furthers the objectives of Section 6(b)(4),\13\ in particular, in that 
it is designed to provide for the equitable allocation of reasonable 
dues, fees, and other charges among its members and other persons using 
its facilities.
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    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(4).
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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

    Because the foregoing rule change 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 \14\ and Rule 19b-4(f)(2) 
\15\ thereunder. 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.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 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 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-2007-50 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-2007-50. 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 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-2007-50 and should be 
submitted on or before July 23, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-12741 Filed 6-29-07; 8:45 am]

BILLING CODE 8010-01-P