Self-Regulatory Organizations; International Securities Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Relating to Cancellation Fee Changes, 31244-31246 [E6-8434]
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31244
Federal Register / Vol. 71, No. 105 / Thursday, June 1, 2006 / Notices
06 and should be submitted on or before
June 22, 2006.
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. FICC has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.4
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.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
The purpose of the proposed rule
change is to modify Rules 1 and 4(b)(ii)
of FICC’s Government Securities
Division’s (‘‘GSD’’) rulebook to clarify
that an entity that is neither a bank nor
a trust company but does have direct
access to a Federal Reserve Bank and
the National Settlement System of the
Federal Reserve is eligible to become a
GSD funds-only settling bank member.5
FICC believes that the proposed rule
change is consistent with the
requirements of Section 17A of the Act 6
and the rules thereunder because it
makes a necessary technical change to
the membership provisions for fundsonly settling banks.
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:
BILLING CODE 8010–01–P
Electronic Comments
Self-Regulatory Organizations;
International Securities Exchange, Inc.;
Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change and Amendment No. 1 Thereto
Relating to Cancellation Fee Changes
B. Self-Regulatory Organization’s
Statement on Burden on Competition
FICC does not believe that the
proposed rule change will have any
impact or impose any burden on
competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments relating to the
proposed rule change have not yet been
solicited or received. FICC will notify
the Commission of any written
comments it receives.
wwhite on PROD1PC61 with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to section
19(b)(3)(A)(i) 7 of the Act and Rule 19b–
4(f)(1) 8 thereunder because it
constitutes a stated policy, practice, or
interpretation with respect to the
meaning, administration, or
enforcement of an existing rule. At any
time within 60 days of the filing of the
proposed rule change, the Commission
4 The Commission has modified the text of the
summaries prepared by FICC.
5 As of the date of this rule filing, this situation
applies to one GSD member that plans to act as a
settling bank for itself.
6 15 U.S.C. 78q–1.
7 15 U.S.C. 78s(b)(3)(A)(i).
8 17 CFR 240.19b–4(f)(1).
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19:10 May 31, 2006
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IV. Solicitation of 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
No. SR–FICC–2006–06 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.
All submissions should refer to File
No. SR–FICC–2006–06. 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
Section, 100 F Street, NE., Washington,
DC 20549. Copies of such filing also will
be available for inspection and copying
at FICC’s principal office and on FICC’s
Web site at https://www.ficc.com/gov/
gov.docs.jsp?NS-query=. 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 submission
should refer to File No. SR–FICC–2006–
PO 00000
Frm 00103
Fmt 4703
Sfmt 4703
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.9
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E6–8439 Filed 5–31–06; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53862; File No. SR–ISE–
2006–23]
May 24, 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 May 1,
2006, the International Securities
Exchange, Inc. (‘‘ISE’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change concerning the
Exchange’s cancellation fee as described
in Items I, II, and II below, which Items
have been prepared by the ISE. On May
18, 2006, the ISE submitted an
amendment to the proposed rule change
(‘‘Amendment No. 1’’).3 The ISE has
filed the proposed rule change as one
establishing or changing a due, fee, or
other charge imposed by the ISE under
Section 19(b)(3)(A)(ii) of the Act 4 and
Rule 19b–4(f)(2) thereunder,5 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The ISE proposes to amend its
Schedule of Fees regarding its
9 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The purpose of Amendment No. 1 was to clarify
the application of the proposed cancellation fee in
the Notes section of the Exchange’s Schedule of
Fees and to include in that section an exception for
the cancellation of orders that improved the
Exchange’s disseminated quotes at the time the
orders were entered. This exception, described
below, was discussed in the purpose section of the
filing, but was not set forth in the text of the
Schedule of Fees.
4 15 U.S.C. 78s(b)(3)(A)(ii).
5 17 CFR 240.19b–4(f)(2).
1 15
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Federal Register / Vol. 71, No. 105 / Thursday, June 1, 2006 / Notices
cancellation fee. The text of the
proposed rule change is available on the
Exchange’s Internet Web site (https://
www.iseoptions.com/legal/
proposed_rule_changes.asp), at the
principal office of the 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
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.
wwhite on PROD1PC61 with NOTICES
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 the ISE’s
cancellation fee. Through June 2005, the
Exchange charged Electronic Access
Members (‘‘EAMs’’) $1 per order
canceled in excess of the number of
orders executed. In File No. SR–ISE–
2005–31 (‘‘Fee Amendment’’), the
Exchange amended that fee in a rule
change effective on filing pursuant to
Section 19(b)(3)(A) of the Act.6 To
address problems the Exchange
encountered in applying the
cancellation fee, the Fee Amendment
applied the fee: (1) On the cancellation
activity of each of an EAM’s customers
(including itself when it self-clears),
rather than the aggregate activity of all
of an EAM’s customers; and (2) on a percontract, rather than a per-order basis.
Upon the Exchange’s filing of the Fee
Amendment, the Commission received a
number of comment letters raising
objections to the proposal. According to
the Exchange, based on those comment
letters, the Commission staff informed
the ISE that it believed that the
proposed fee should be subject to formal
comment pursuant to Section 19(b)(2) of
the Act. Accordingly, the Exchange
submitted File No. SR–ISE–2005–36,
which reinstated the cancellation fee as
it was in effect prior to the submission
of the Fee Amendment. The Exchange
thereafter submitted File No. SR–ISE–
2005–37 (the ‘‘19(b)(2) Fee
6 See Securities Exchange Act Release No. 52177
(July 29, 2005), 70 FR 45457 (August 5, 2005) (File
No. SR–ISE–2005–31).
VerDate Aug<31>2005
19:10 May 31, 2006
Jkt 208001
Amendment’’), a proposed rule change
pursuant to Section 19(b)(2) of the Act
to implement the same change that had
previously been adopted in the Fee
Amendment. The Exchange is
withdrawing the 19(b)(2) Fee
Amendment filing and submitting the
instant filing.
Since the inception of the
cancellation fee (except during the
month of July 2005), the Exchange has
charged EAMs $1 per order canceled in
excess of the number of orders
executed.7 Recognizing that order
cancellations often happen in large
numbers, the purpose of the fee was to
ease congestion in the ISE Order
Routing System (‘‘IORS’’) and to fairly
allocate costs among members according
to system use. According to the
Exchange, experience shows that two
limitations are preventing the fee from
fully achieving its intended effect. First,
the ISE applies the fee to the aggregate
number of orders a clearing EAM
cancels on behalf of itself and its
customers, which tends to mask the
activity of the EAM’s particular
customers who are responsible for the
cancellations. Second, because the
Exchange applies the fee on a per order
basis, firms have adjusted trading
activity solely to avoid this fee by
executing small orders to offset the
cancellation of larger orders. ISE states
that, if anything, this increases message
traffic as firms enter more small orders
to mask their order cancellations.
To address these concerns, the ISE
first proposes to charge a clearing EAM
based on the cancellation activity of
each of its customers (including itself
when it self-clears). The Exchange has
enhanced its systems so that it now can
identify the specific broker-dealer
customers of a clearing EAM who enters
and cancels orders. This will allow the
Exchange to identify and charge for
cancellation activity beyond aggregate
numbers. The ISE similarly will be able
to provide clearing EAMs with the
information necessary for them to pass
through resulting cancellation charges
to their customers.8
Further, for purposes of calculating
the number of trades that may offset
cancellations, the Exchange proposes to
consider all orders executed by the same
firm in the same series on the same side
of the market at the same price within
30 seconds as only one execution. The
7 See Securities Exchange Act Release No. 46189
(July 11, 2002), 67 FR 47587 (July 19, 2002) (File
No. SR–ISE–2002–16).
8 The Exchange notes that this is similar to how
the NYSE Arca, Inc. now imposes its cancellation
fee. See Securities Exchange Act Release No. 49802
(June 3, 2004), 69 FR 32391 (June 9, 2004) (File No.
SR–PCX–2004–31).
PO 00000
Frm 00104
Fmt 4703
Sfmt 4703
31245
Exchange believes that this will remove
the incentive for an EAM to enter
multiple orders in rapid succession. To
ensure that the Exchange covers only
activity that is truly excessive and
inappropriately uses bandwidth and
system capacity, the Exchange proposes
to exclude from the cancellation fee
orders that improve ISE’s disseminated
quotation at the time the orders were
entered.
2. Statutory Basis
The basis for the proposed rule
change is the requirement under Section
6(b)(4) of the Act 9 that an exchange
have an equitable allocation of
reasonable dues, fees, and other charges
among its members and other persons
using its facilities. The ISE states that,
in particular, these fees would permit
the Exchange to recover capacity costs
more equitably from among its
members.
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 proposed rule
change, as amended, 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 10 and Rule 19b–4(f)(2) 11
thereunder. At any time within 60 days
of the filing of the proposed rule change
the Commission may summarily
abrogate such proposed 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.12
9 15
U.S.C. 78f(b)(4).
U.S.C. 78s(b)(3)(A).
11 17 CFR 19b–4(f)(2).
12 For purposes of calculating the 60-day period
within which the Commission may summarily
abrogate the proposed rule change under Section
19(b)(3)(C) of Act, the Commission considers the
10 15
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01JNN1
31246
Federal Register / Vol. 71, No. 105 / Thursday, June 1, 2006 / Notices
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
No. SR–ISE–2006–23 on the subject
line.
wwhite on PROD1PC61 with NOTICES
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
No. SR–ISE–2006–23. 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 the 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 available publicly. All
submissions should refer to File No.
SR–ISE–2006–23 and should be
submitted on or before June 22, 2006.
period to commence on May 18, 2006, the date on
which the ISE submitted Amendment No. 1. See 15
U.S.C. 78s(b)(3)(C).
13 17 CFR 200.30–3(a)(12).
VerDate Aug<31>2005
19:10 May 31, 2006
Jkt 208001
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.13
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E6–8434 Filed 5–31–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53857; File No. SR–ISE–
2006–24]
Self-Regulatory Organizations;
International Securities Exchange, Inc.;
Notice of Filing of a Proposed Rule
Change and Amendment No. 1 Thereto
To Permit the Listing and Trading of
Quarterly Options Series
May 24, 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 May 2,
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, II and III below, which Items
have been substantially prepared by the
Exchange. The Exchange filed
Amendment No. 1 to the proposed rule
change on May 17, 2006.3 The
Commission is publishing this notice to
solicit comments on the proposed rule
change, as amended, from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The ISE proposes to amend its rules
in order to list option series that expire
at the close of business on the last
business day of a calendar quarter. This
rule change is being proposed on a pilot
basis for one year. The text of the
proposed rule change, as amended, is
set forth below. Proposed new language
is in italics; deletions are in [brackets].
*
*
*
*
*
Rule 100. Definitions
(a) The following terms, when used in
these Rules, shall have the meanings
specified in this Chapter 1, unless the
context indicates otherwise. Any term
defined in Article I of the Constitution
and not otherwise defined in this
Chapter shall have the meaning
assigned in Article I of the Constitution.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 In Amendment No. 1, a partial amendment, the
Exchange made minor modifications to the
proposed rule text.
2 17
PO 00000
Frm 00105
Fmt 4703
Sfmt 4703
(1) through (34) No change.
(35) The term ‘‘Quarterly Options
Series’’ means a series in an options
class that is approved for listing and
trading on the Exchange in which the
series is opened for trading on any
business day and that expires at the
close of business on the last business
day of a calendar quarter.
(35) through (44) Renumbered as (36)
through (45).
*
*
*
*
*
Rule 504. Series of Options Contracts
Open for Trading
(a) After a particular class of options
has been approved for listing and
trading on the Exchange, the Exchange
from time to time may open for trading
series of options in that class. Only
options contracts in series of options
currently open for trading may be
purchased or written on the Exchange.
Prior to the opening of trading in a given
series, the Exchange will fix the
expiration month, year and exercise
price of that series. For Short Term
Option Series, the Exchange will fix a
specific expiration date and exercise
price, as provided in Supplementary
Material .02. For Quarterly Options
Series, the Exchange will fix a specific
expiration date and exercise price, as
provided in Supplementary Material
.03.
(b) through (h) No change.
Supplementary Material to Rule 504
.01 No change.
.02 No change.
.03 Quarterly Options Series Pilot
Program: For a one-year pilot period,
the Exchange may list and trade options
series that expire at the close of business
on the last business day of a calendar
quarter (‘‘Quarterly Options Series’’).
The Exchange may list Quarterly
Options Series for up to five (5)
currently listed options classes that are
either index options or options on
exchange traded funds. In addition, the
Exchange may also list Quarterly
Options Series on any options classes
that are selected by other securities
exchanges that employ a similar pilot
program under their respective rules.
The one-year pilot will commence the
day the Exchange first initiates trading
in a Quarterly Options Series, which
shall be no later than July 24, 2006.
(a) The Exchange will list series that
expire at the end of the next consecutive
four (4) calendar quarters, as well as the
fourth quarter of the next calendar year.
For example, if the Exchange is trading
Quarterly Options Series in the month
of May 2006, it will list series that expire
at the end of the second, third and
fourth quarters of 2006, as well as the
E:\FR\FM\01JNN1.SGM
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]]>Agencies
[Federal Register Volume 71, Number 105 (Thursday, June 1, 2006)]
[Notices]
[Pages 31244-31246]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-8434]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53862; File No. SR-ISE-2006-23]
Self-Regulatory Organizations; International Securities Exchange,
Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change and Amendment No. 1 Thereto Relating to Cancellation Fee Changes
May 24, 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 May 1, 2006, the International Securities Exchange, Inc. (``ISE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change concerning the Exchange's
cancellation fee as described in Items I, II, and II below, which Items
have been prepared by the ISE. On May 18, 2006, the ISE submitted an
amendment to the proposed rule change (``Amendment No. 1'').\3\ The ISE
has filed the proposed rule change as one establishing or changing a
due, fee, or other charge imposed by the ISE under Section
19(b)(3)(A)(ii) of the Act \4\ and Rule 19b-4(f)(2) thereunder,\5\
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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ The purpose of Amendment No. 1 was to clarify the
application of the proposed cancellation fee in the Notes section of
the Exchange's Schedule of Fees and to include in that section an
exception for the cancellation of orders that improved the
Exchange's disseminated quotes at the time the orders were entered.
This exception, described below, was discussed in the purpose
section of the filing, but was not set forth in the text of the
Schedule of Fees.
\4\ 15 U.S.C. 78s(b)(3)(A)(ii).
\5\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The ISE proposes to amend its Schedule of Fees regarding its
[[Page 31245]]
cancellation fee. The text of the proposed rule change is available on
the Exchange's Internet Web site (https://www.iseoptions.com/legal/
proposed_rule_changes.asp), at the principal office of the 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 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
The purpose of this proposed rule change is to amend the ISE's
cancellation fee. Through June 2005, the Exchange charged Electronic
Access Members (``EAMs'') $1 per order canceled in excess of the number
of orders executed. In File No. SR-ISE-2005-31 (``Fee Amendment''), the
Exchange amended that fee in a rule change effective on filing pursuant
to Section 19(b)(3)(A) of the Act.\6\ To address problems the Exchange
encountered in applying the cancellation fee, the Fee Amendment applied
the fee: (1) On the cancellation activity of each of an EAM's customers
(including itself when it self-clears), rather than the aggregate
activity of all of an EAM's customers; and (2) on a per-contract,
rather than a per-order basis.
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 52177 (July 29,
2005), 70 FR 45457 (August 5, 2005) (File No. SR-ISE-2005-31).
---------------------------------------------------------------------------
Upon the Exchange's filing of the Fee Amendment, the Commission
received a number of comment letters raising objections to the
proposal. According to the Exchange, based on those comment letters,
the Commission staff informed the ISE that it believed that the
proposed fee should be subject to formal comment pursuant to Section
19(b)(2) of the Act. Accordingly, the Exchange submitted File No. SR-
ISE-2005-36, which reinstated the cancellation fee as it was in effect
prior to the submission of the Fee Amendment. The Exchange thereafter
submitted File No. SR-ISE-2005-37 (the ``19(b)(2) Fee Amendment''), a
proposed rule change pursuant to Section 19(b)(2) of the Act to
implement the same change that had previously been adopted in the Fee
Amendment. The Exchange is withdrawing the 19(b)(2) Fee Amendment
filing and submitting the instant filing.
Since the inception of the cancellation fee (except during the
month of July 2005), the Exchange has charged EAMs $1 per order
canceled in excess of the number of orders executed.\7\ Recognizing
that order cancellations often happen in large numbers, the purpose of
the fee was to ease congestion in the ISE Order Routing System
(``IORS'') and to fairly allocate costs among members according to
system use. According to the Exchange, experience shows that two
limitations are preventing the fee from fully achieving its intended
effect. First, the ISE applies the fee to the aggregate number of
orders a clearing EAM cancels on behalf of itself and its customers,
which tends to mask the activity of the EAM's particular customers who
are responsible for the cancellations. Second, because the Exchange
applies the fee on a per order basis, firms have adjusted trading
activity solely to avoid this fee by executing small orders to offset
the cancellation of larger orders. ISE states that, if anything, this
increases message traffic as firms enter more small orders to mask
their order cancellations.
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 46189 (July 11,
2002), 67 FR 47587 (July 19, 2002) (File No. SR-ISE-2002-16).
---------------------------------------------------------------------------
To address these concerns, the ISE first proposes to charge a
clearing EAM based on the cancellation activity of each of its
customers (including itself when it self-clears). The Exchange has
enhanced its systems so that it now can identify the specific broker-
dealer customers of a clearing EAM who enters and cancels orders. This
will allow the Exchange to identify and charge for cancellation
activity beyond aggregate numbers. The ISE similarly will be able to
provide clearing EAMs with the information necessary for them to pass
through resulting cancellation charges to their customers.\8\
---------------------------------------------------------------------------
\8\ The Exchange notes that this is similar to how the NYSE
Arca, Inc. now imposes its cancellation fee. See Securities Exchange
Act Release No. 49802 (June 3, 2004), 69 FR 32391 (June 9, 2004)
(File No. SR-PCX-2004-31).
---------------------------------------------------------------------------
Further, for purposes of calculating the number of trades that may
offset cancellations, the Exchange proposes to consider all orders
executed by the same firm in the same series on the same side of the
market at the same price within 30 seconds as only one execution. The
Exchange believes that this will remove the incentive for an EAM to
enter multiple orders in rapid succession. To ensure that the Exchange
covers only activity that is truly excessive and inappropriately uses
bandwidth and system capacity, the Exchange proposes to exclude from
the cancellation fee orders that improve ISE's disseminated quotation
at the time the orders were entered.
2. Statutory Basis
The basis for the proposed rule change is the requirement under
Section 6(b)(4) of the Act \9\ that an exchange have an equitable
allocation of reasonable dues, fees, and other charges among its
members and other persons using its facilities. The ISE states that, in
particular, these fees would permit the Exchange to recover capacity
costs more equitably from among its members.
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\9\ 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 proposed rule change, as amended, 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 \10\ and
Rule 19b-4(f)(2) \11\ thereunder. At any time within 60 days of the
filing of the proposed rule change the Commission may summarily
abrogate such proposed 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.\12\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 19b-4(f)(2).
\12\ For purposes of calculating the 60-day period within which
the Commission may summarily abrogate the proposed rule change under
Section 19(b)(3)(C) of Act, the Commission considers the period to
commence on May 18, 2006, the date on which the ISE submitted
Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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[[Page 31246]]
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 No. SR-ISE-2006-23 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.
All submissions should refer to File No. SR-ISE-2006-23. 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 the 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 available publicly. All submissions should refer to File No. SR-
ISE-2006-23 and should be submitted on or before June 22, 2006.
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\13\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E6-8434 Filed 5-31-06; 8:45 am]
BILLING CODE 8010-01-P
