Self-Regulatory Organizations; International Securities Exchange, Inc.; Notice of Filing of Proposed Rule Change Relating to the Operation of Primary Market Maker Memberships, 72684-72686 [E5-6887]
Download as PDF
<![CDATA[
72684
Federal Register / Vol. 70, No. 233 / Tuesday, December 6, 2005 / Notices
Rule 303. Approval to Operate Multiple
Memberships
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act and in
particular Section 17A of the Act and
the rules and regulations thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act, that the
proposed rule change (File No. SR–
FICC–2005–14) be and hereby is
approved.
For the Commission by the Division of
Market Regulation, pursuant to delegated
authority.14
Jonathan G. Katz,
Secretary.
[FR Doc. E5–6888 Filed 12–5–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–52856; File No. SR–ISE–
2005–46]
Self-Regulatory Organizations;
International Securities Exchange, Inc.;
Notice of Filing of Proposed Rule
Change Relating to the Operation of
Primary Market Maker Memberships
November 30, 2005.
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 27, 2005, 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 ISE. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
rules to raise from two to three the
number of Primary Market Maker
(‘‘PMM’’) memberships an ISE member
may operate.
The text of the proposed rule change
is below. Proposed new language is
italicized; proposed deletions are in
[brackets].
*
*
*
*
*
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
17:44 Dec 05, 2005
Jkt 205001
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
rules to increase the number of PMM
memberships that an ISE member may
operate from two to three.3 A PMM
membership manifests itself as a share
of ISE Class B Common Stock, Series B–
1, of which there are 10 shares
authorized and outstanding. ISE’s
Certificate of Incorporation
(‘‘Certificate’’) currently prohibits a
member from owning (or voting the
shares representing) more than 20
percent of the class of any ISE stock,
thus limiting any one person from
owning more than two PMM
memberships.4 Similarly, ISE’s rules
prohibit a member from operating more
than 20 percent of a class of market
Supplementary Material to Rule 303
maker memberships.5 The result is that
.01 When making its determination
no one person can own, vote or operate
whether good cause has been shown to
more than two PMMs.
waive the limitations contained in Rule
Due to the continued concentration
303(b), the Board will consider whether and specialization in the options market
an operational, business or regulatory
making community, ISE is proposing to
need to exceed the limits has been
raise the limit on the number of PMMs
demonstrated. In those cases where
one firm can operate from two to three.
such a need is demonstrated, the Board
ISE believes this change is part of the
also will consider any operational,
natural evolution of the markets.
business or regulatory concerns that
Specifically, as competition inside and
might be raised if such a waiver were
between exchanges increases, there
granted. The Board only will waive such continues to be consolidation and
limitations when, in its judgment, such
contraction of market makers. ISE
action is in the best interest of the
believes that this evolution will result in
Exchange.
a smaller number of strong, competitive
.02 In approving any Primary Market market makers that will provide the
Maker to exercise the trading privileges
Exchange with excellent market making
associated with more than 20% of the
capabilities. ISE believes that this is
outstanding Primary Market Maker
similar to the concentration of specialist
Memberships, the Board will not
units on the major equity exchanges,
approve any arrangement in which such such as the New York Stock Exchange
Primary Market Maker would gain
(‘‘NYSE’’), where there currently are
ownership or voting rights in excess of
only seven specialist units, down from
those permitted under the Exchange’s
over three dozen.6
Certificate of Incorporation or
3 A PMM serves a function similar to that of a
Constitution.
specialist on other exchanges. Among other things,
*
*
*
*
*
a PMM must provide continuous quotations in all
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, ISE
included statements concerning the
purpose of, and basis for, the proposed
14 17
VerDate Aug<31>2005
(a) An applicant to become a Member
or an approved Member may seek
approval to exercise trading privileges
associated with more than one
Membership in the form and manner
prescribed by the Exchange.
(b) An applicant or approved Member
will be denied approval with respect to
a particular Membership if (together
with any of its affiliates) approval
would result in the applicant or
approved Member being approved to
exercise the trading privileges
associated with more than one (1)
Primary Market Maker Membership or
more than ten (10) Competitive Market
Maker Memberships. This requirement
may be waived by the Board for good
cause shown, but in no event shall the
Board waive this requirement if such
waiver would result in the applicant or
approved Member (together with any of
its affiliates) being approved to exercise
trading privileges associated with more
than 30% [20%] of the outstanding
Primary Market Maker Memberships or
more than 20% of the outstanding
Competitive Market Maker
Memberships.
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.
PO 00000
Frm 00080
Fmt 4703
Sfmt 4703
assigned options classes and must address customer
orders when another exchange is displaying a better
price. See ISE Rule 803(c).
4 See Sections III(a)(ii) and (b) of ISE’s Certificate.
5 See ISE Rule 303(b).
6 As of December 31, 1992 there were 40
specialist firms on the NYSE; as recently as
December 31, 1997 there were 37 specialist firms.
See Shawn A. Corwin, Specialist Portfolios,
E:\FR\FM\06DEN1.SGM
06DEN1
Federal Register / Vol. 70, No. 233 / Tuesday, December 6, 2005 / Notices
The Exchange is concerned that, as
the number of strong market makers
decreases, there may not be a sufficient
number of members qualified to be
PMMs if it retains the current two-PMM
limit. ISE currently has seven PMMs
operating the 10 PMM memberships,
with three PMMs operating two such
memberships and four PMMs operating
one. While there is a constant entry and
exit into options market making, ISE
believes that if there is further
contraction in the market making
community, the Exchange may find
itself with an insufficient number of
PMMs to cover all ten memberships.
In addition, the options markets are
highly competitive, and each exchange
actively seeks to attract order flow by
disseminating tight and liquid markets
and by providing a high level of
customer satisfaction. Ensuring that the
Exchange has high quality PMMs is
critical in this competitive battle. By
limiting a member to operating two
PMM memberships, the Exchange
believes it could be forced to approve
the operation of a PMM by a weaker
member while a stronger PMM
operating two such memberships also
would be willing to operate such
membership.
The Exchange recognizes that
increasing the number of PMM
memberships a member can operate
could raise issues regarding
concentration of market making
expertise. In this regard, the proposal is
only for an enabling rule. The ISE Board
would need to approve any member
application to operate three PMMs and
would need to find ‘‘good cause’’ to do
so. Thus, the Board will need to weigh
each potential application on its own
merits, balancing the potential benefits
of allowing a member to operate three
PMM memberships against any
potential concentration concerns.
This proposed rule change would not
amend the current prohibitions in the
Certificate against a member owning or
voting more than two such
memberships. Thus, the only way a
member could operate a third PMM
membership would be to lease such
membership, with the lease providing
that the lessor retains all voting rights.7
Specialist Performances, and New Listing
Allocations on the NYSE 7–8 (University of
Georgia, Working Paper, 1999).
7 ISE has confirmed that (i) it will not approve
any leasing arrangements under this proposed rule
change unless the lessor/owner retains all voting
rights and (ii) the voting limitations contained in
the Certificate supersede any of the lessor/owner’s
rights to transfer voting rights. Telephone call
between Nancy Sanow, Assistant Director,
Commission; Leah Mesfin, Special Counsel,
Commission; Rahman Harrison, Attorney,
VerDate Aug<31>2005
17:44 Dec 05, 2005
Jkt 205001
The proposed Supplementary Material
.02 to Rule 303 makes this point clear.
However, the Exchange believes it may
be appropriate to permit a member to
own and vote three PMM memberships.
Thus, upon approval of this proposed
rule change, the ISE Board would
consider an additional proposed change
to the Certificate regarding ownership
and voting limitations. If the ISE Board
approves such a change the Exchange
would need to seek stockholder
approval of that change before
submitting it to the Commission for its
consideration.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act 8 in general, and
furthers the objectives of Section 6(b)(5)
of the Act 9 in particular, in that it is
designed to promote just and equitable
principles of trade and to remove
impediments to and perfect the
mechanisms of a free and open market
and a national market system. In
particular, the proposed rule change
would provide the Exchange with
greater flexibility in ensuring that strong
PMMs operate on ISE.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change would 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 its reasons for so finding or
(ii) as to which ISE consents, the
Commission will:
(A) By order approve such proposed
rule change, or
Commission; and Michael Simon, General Counsel
and Secretary, ISE on November 18, 2005.
8 15 U.S.C. 78f(b).
9 15 U.S.C. 78f(b)(5).
PO 00000
Frm 00081
Fmt 4703
Sfmt 4703
72685
(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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–ISE–2005–46 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street, NE.,
Washington, DC 20549–9303.
All submissions should refer to File
Number SR–ISE–2005–46. 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 (https://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 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–2005–46 and should be
submitted on or before December 27,
2005.
E:\FR\FM\06DEN1.SGM
06DEN1
72686
Federal Register / Vol. 70, No. 233 / Tuesday, December 6, 2005 / Notices
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.10
Jonathan G. Katz,
Secretary.
[FR Doc. E5–6887 Filed 12–5–05; 8:45 am]
BILLING CODE 8010–01–P
OFFICE OF THE UNITED STATES
TRADE REPRESENTATIVE
[05–22749]
Notice Correction; Request for
Comments Concerning Compliance
With Telecommunications Trade
Agreements
Office of the United States
Trade Representative.
ACTION: Notice of request for public
comment and reply comment;
correction.
AGENCY:
SUMMARY: The Office of the United
States Trade Representative published a
document in the Federal Register of
November 16, 2005, concerning request
for comments and reply comments on
the operation, effectiveness, and
implementation of and compliance with
U.S. telecommunications trade
agreements. The document contained
the incorrect dates.
FOR FURTHER INFORMATION CONTACT:
Arrow Augerot, 202–395–6099
Correction
In the Federal Register of November
16, 2005, in FR Document 05–22749, on
page 69621, in the third column, correct
the ‘‘Dates’’ caption to read:
DATES: Comments are due by noon on
December 16, 2005, and Reply
Comments by noon on January 13, 2006.
Dated: November 29, 2005.
Carmen Suro-Bredie,
Chair, Trade Policy Staff Committee.
[FR Doc. E5–6908 Filed 12–5–05; 8:45 am]
BILLING CODE 3190–W6–P
OFFICE OF THE UNITED STATES
TRADE REPRESENTATIVE
[Docket No. WTO/DS–334]
WTO Dispute Settlement Proceeding
Regarding Turkey—Measures
Affecting the Importation of Rice
providing notice that on November 2,
2005, in accordance with the Marrakesh
Agreement Establishing the World
Trade Organization (‘‘WTO
Agreement’’), the United States
requested consultations regarding
Turkey’s import licensing regime and
domestic purchase requirement on
imports of rice. That request may be
found at https://www.wto.org contained
in a document designated as WT/
DS334/1. USTR invites written
comments from the public concerning
the issues raised in this dispute.
DATES: Although USTR will accept any
comments received during the course of
the consultations, comments should be
submitted on or before January 1, 2006
to be assured of timely consideration by
USTR.
ADDRESSES: Comments should be
submitted (i) electronically, to
FR0604@ustr.gov, with ‘‘Turkey Rice
(DS334)’’ in the subject line, or (ii) by
fax, to Sandy McKinzy at (202) 395–
3640, with a confirmation copy sent
electronically to the electronic mail
address above, in accordance with the
requirements for submission set out
below.
Jeff
Weiss, Assistant General Counsel, Office
of the United States Trade
Representative, 600 17th Street, NW.,
Washington, DC, (202) 395–4498.
SUPPLEMENTARY INFORMATION: Section
127(b) of the Uruguay Round
Agreements Act (URAA) (19 U.S.C.
3537(b)(1)) requires that notice and
opportunity for comment be provided
after the United States submits or
receives a request for the establishment
of a WTO dispute settlement panel. In
an effort to provide additional
opportunity for comment, USTR is
providing notice that consultations have
been requested pursuant to the WTO
Understanding on Rules and Procedures
Governing the Settlement of Disputes
(‘‘DSU’’). If such consultations should
fail to resolve the matter and a dispute
settlement panel is established pursuant
to the DSU, such panel, which would
hold its meetings in Geneva,
Switzerland, would be expected to issue
a report on its findings and
recommendations within six to nine
months after it is established.
FOR FURTHER INFORMATION CONTACT:
AGENCY:
Major Issues Raised by the United
States
SUMMARY: The Office of the United
States Trade Representative (USTR) is
On November 2, 2005, the United
States requested the establishment of a
panel regarding Turkey’s import
licensing regime and domestic purchase
requirement on imports of rice. Those
measures include:
Office of the United States
Trade Representative.
ACTION: Notice; request for comments.
10 17
CFR 200.30–3(a)(12).
VerDate Aug<31>2005
17:44 Dec 05, 2005
Jkt 205001
PO 00000
Frm 00082
Fmt 4703
Sfmt 4703
• Decree No. 96/7794 related to the
General Assessment of the Regime
Regarding Technical Regulations and
Standardization for Foreign Trade
(Official Gazette, No. 22541, February 1,
1996, Repeated)
• Decision of the board of ministers:
Decree No. 2004/7135 related to the
implementation of a tariff quota for
certain types of paddy rice and rice
types imports (Official Gazette, No.
25439, April 20, 2004);
• A notification related to
implementation of tariff quotas for
certain types of paddy and rice imports,
from the Foreign Trade Undersecretariat
(Official Gazette, No. 25445, April 27,
2004);
• Decision of the board of ministers:
Decree No. 2004/7333 related to the
management of quota and tariff
contingent on import (Official Gazette,
No. 25473, May 26, 2004);
• Decision of the board of ministers:
Decree No. 2004/7756 related to the
implementation of a tariff contingent on
the import of certain paddy rice and rice
types (Official Gazette, No. 25565,
August 27, 2004);
• A notification about the
implementation of a tariff contingent on
the import of certain paddy rice and rice
types, from the Foreign Trade
Undersecretariat (Official Gazette, No.
25577, September 8, 2004);
• A notification on Standardization in
Foreign Trade, Notification No. 2005/05
(Official Gazette, No. 25687, December
31, 2004);
• A notification about the amendment
of the notification related to the
implementation of a tariff contingent on
the import of certain paddy rice and rice
types, from the Foreign Trade
Undersecretariat (Official Gazette, No.
25767, March 26, 2005);
• A notification about the amendment
of the notification related to the
implementation of a tariff contingent
(customs duty) on the import of certain
paddy rice and rice types, from the
Foreign Trade Undersecretariat (Official
Gazette, No. 25812, May 11, 2005);
• Decision of the board of ministers:
Decree No. 2005/9315 related to the
implementation of a tariff contingent on
the import of certain types of paddy rice
and rice types (Official Gazette, No.
25935, September 13, 2005);
• A notification related to the
implementation of a tariff contingent on
the import of certain paddy rice and rice
types, from the Foreign Trade
Undersecretariat (Official Gazette, No.
25943, September 21, 2005); and
• Any amendments or extensions to
these measures, and any related or
implementing measures.
E:\FR\FM\06DEN1.SGM
06DEN1
]]>Agencies
[Federal Register Volume 70, Number 233 (Tuesday, December 6, 2005)]
[Notices]
[Pages 72684-72686]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-6887]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-52856; File No. SR-ISE-2005-46]
Self-Regulatory Organizations; International Securities Exchange,
Inc.; Notice of Filing of Proposed Rule Change Relating to the
Operation of Primary Market Maker Memberships
November 30, 2005.
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 27, 2005, 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 ISE. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its rules to raise from two to three
the number of Primary Market Maker (``PMM'') memberships an ISE member
may operate.
The text of the proposed rule change is below. Proposed new
language is italicized; proposed deletions are in [brackets].
* * * * *
Rule 303. Approval to Operate Multiple Memberships
(a) An applicant to become a Member or an approved Member may seek
approval to exercise trading privileges associated with more than one
Membership in the form and manner prescribed by the Exchange.
(b) An applicant or approved Member will be denied approval with
respect to a particular Membership if (together with any of its
affiliates) approval would result in the applicant or approved Member
being approved to exercise the trading privileges associated with more
than one (1) Primary Market Maker Membership or more than ten (10)
Competitive Market Maker Memberships. This requirement may be waived by
the Board for good cause shown, but in no event shall the Board waive
this requirement if such waiver would result in the applicant or
approved Member (together with any of its affiliates) being approved to
exercise trading privileges associated with more than 30% [20%] of the
outstanding Primary Market Maker Memberships or more than 20% of the
outstanding Competitive Market Maker Memberships.
Supplementary Material to Rule 303
.01 When making its determination whether good cause has been shown
to waive the limitations contained in Rule 303(b), the Board will
consider whether an operational, business or regulatory need to exceed
the limits has been demonstrated. In those cases where such a need is
demonstrated, the Board also will consider any operational, business or
regulatory concerns that might be raised if such a waiver were granted.
The Board only will waive such limitations when, in its judgment, such
action is in the best interest of the Exchange.
.02 In approving any Primary Market Maker to exercise the trading
privileges associated with more than 20% of the outstanding Primary
Market Maker Memberships, the Board will not approve any arrangement in
which such Primary Market Maker would gain ownership or voting rights
in excess of those permitted under the Exchange's Certificate of
Incorporation or Constitution.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, 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 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 Exchange proposes to amend its rules to increase the number of
PMM memberships that an ISE member may operate from two to three.\3\ A
PMM membership manifests itself as a share of ISE Class B Common Stock,
Series B-1, of which there are 10 shares authorized and outstanding.
ISE's Certificate of Incorporation (``Certificate'') currently
prohibits a member from owning (or voting the shares representing) more
than 20 percent of the class of any ISE stock, thus limiting any one
person from owning more than two PMM memberships.\4\ Similarly, ISE's
rules prohibit a member from operating more than 20 percent of a class
of market maker memberships.\5\ The result is that no one person can
own, vote or operate more than two PMMs.
---------------------------------------------------------------------------
\3\ A PMM serves a function similar to that of a specialist on
other exchanges. Among other things, a PMM must provide continuous
quotations in all assigned options classes and must address customer
orders when another exchange is displaying a better price. See ISE
Rule 803(c).
\4\ See Sections III(a)(ii) and (b) of ISE's Certificate.
\5\ See ISE Rule 303(b).
---------------------------------------------------------------------------
Due to the continued concentration and specialization in the
options market making community, ISE is proposing to raise the limit on
the number of PMMs one firm can operate from two to three. ISE believes
this change is part of the natural evolution of the markets.
Specifically, as competition inside and between exchanges increases,
there continues to be consolidation and contraction of market makers.
ISE believes that this evolution will result in a smaller number of
strong, competitive market makers that will provide the Exchange with
excellent market making capabilities. ISE believes that this is similar
to the concentration of specialist units on the major equity exchanges,
such as the New York Stock Exchange (``NYSE''), where there currently
are only seven specialist units, down from over three dozen.\6\
---------------------------------------------------------------------------
\6\ As of December 31, 1992 there were 40 specialist firms on
the NYSE; as recently as December 31, 1997 there were 37 specialist
firms. See Shawn A. Corwin, Specialist Portfolios, Specialist
Performances, and New Listing Allocations on the NYSE 7-8
(University of Georgia, Working Paper, 1999).
---------------------------------------------------------------------------
[[Page 72685]]
The Exchange is concerned that, as the number of strong market
makers decreases, there may not be a sufficient number of members
qualified to be PMMs if it retains the current two-PMM limit. ISE
currently has seven PMMs operating the 10 PMM memberships, with three
PMMs operating two such memberships and four PMMs operating one. While
there is a constant entry and exit into options market making, ISE
believes that if there is further contraction in the market making
community, the Exchange may find itself with an insufficient number of
PMMs to cover all ten memberships.
In addition, the options markets are highly competitive, and each
exchange actively seeks to attract order flow by disseminating tight
and liquid markets and by providing a high level of customer
satisfaction. Ensuring that the Exchange has high quality PMMs is
critical in this competitive battle. By limiting a member to operating
two PMM memberships, the Exchange believes it could be forced to
approve the operation of a PMM by a weaker member while a stronger PMM
operating two such memberships also would be willing to operate such
membership.
The Exchange recognizes that increasing the number of PMM
memberships a member can operate could raise issues regarding
concentration of market making expertise. In this regard, the proposal
is only for an enabling rule. The ISE Board would need to approve any
member application to operate three PMMs and would need to find ``good
cause'' to do so. Thus, the Board will need to weigh each potential
application on its own merits, balancing the potential benefits of
allowing a member to operate three PMM memberships against any
potential concentration concerns.
This proposed rule change would not amend the current prohibitions
in the Certificate against a member owning or voting more than two such
memberships. Thus, the only way a member could operate a third PMM
membership would be to lease such membership, with the lease providing
that the lessor retains all voting rights.\7\ The proposed
Supplementary Material .02 to Rule 303 makes this point clear. However,
the Exchange believes it may be appropriate to permit a member to own
and vote three PMM memberships. Thus, upon approval of this proposed
rule change, the ISE Board would consider an additional proposed change
to the Certificate regarding ownership and voting limitations. If the
ISE Board approves such a change the Exchange would need to seek
stockholder approval of that change before submitting it to the
Commission for its consideration.
---------------------------------------------------------------------------
\7\ ISE has confirmed that (i) it will not approve any leasing
arrangements under this proposed rule change unless the lessor/owner
retains all voting rights and (ii) the voting limitations contained
in the Certificate supersede any of the lessor/owner's rights to
transfer voting rights. Telephone call between Nancy Sanow,
Assistant Director, Commission; Leah Mesfin, Special Counsel,
Commission; Rahman Harrison, Attorney, Commission; and Michael
Simon, General Counsel and Secretary, ISE on November 18, 2005.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act \8\ in general, and furthers the
objectives of Section 6(b)(5) of the Act \9\ in particular, in that it
is designed to promote just and equitable principles of trade and to
remove impediments to and perfect the mechanisms of a free and open
market and a national market system. In particular, the proposed rule
change would provide the Exchange with greater flexibility in ensuring
that strong PMMs operate on ISE.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
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 its reasons for so finding or (ii) as to
which ISE 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 (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-ISE-2005-46 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-9303.
All submissions should refer to File Number SR-ISE-2005-46. 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 (https://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 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-2005-46 and should be submitted on or before
December 27, 2005.
[[Page 72686]]
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
---------------------------------------------------------------------------
\10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jonathan G. Katz,
Secretary.
[FR Doc. E5-6887 Filed 12-5-05; 8:45 am]
BILLING CODE 8010-01-P
