Self-Regulatory Organizations; the International Securities Exchange, Inc., Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change Relating to Short Sales, 53727-53728 [E6-15051]
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Federal Register / Vol. 71, No. 176 / Tuesday, September 12, 2006 / Notices
indices. The purpose of this proposed
rule change is to adopt a rule that will
be necessary for ISE ultimately to trade
[Release No. 34–54398; File No. SR–ISE–
non-option equity securities.
2006–42]
Specifically, Commission Regulation
SHO 3 and Rule 10a–14 under the
Self-Regulatory Organizations; the
Securities Exchange Act of 1934
International Securities Exchange, Inc.,
(‘‘Exchange Act’’) govern the marking of
Notice of Filing and Order Granting
orders in equity securities as long and
Accelerated Approval of a Proposed
short, the short sale of securities, and
Rule Change Relating to Short Sales
securities borrowing and delivery
August 31, 2006.
requirements. In order for the ISE to
Pursuant to Section 19(b)(1) of the
trade equity securities it will need to
Securities Exchange Act of 1934 (the
adopt a rule implementing these
‘‘Act’’),1 and Rule 19b–4 thereunder,2
provisions. Proposed Rule 2105 does so
notice is hereby given that on July 25,
by: (a) Requiring members to mark
2006, the International Securities
orders in compliance with Regulation
Exchange, Inc. (the ‘‘Exchange’’ or the
SHO; (b) implementing the short-sale
‘‘ISE’’) filed with the Securities and
restrictions of the ‘‘tick rule’’ contained
Exchange Commission the proposed
in the Short Sale Rule; and (c)
rule change as described in Items I and
prohibiting members from entering
II below, which items have been
orders in equity securities unless the
prepared by the self-regulatory
member can comply with the borrowing
organization. The Commission is
and delivery requirements of Regulation
publishing this notice and order to
SHO. Proposed Rule 2105 exempts from
solicit comments on the proposed rule
its requirements transactions, securities
change from interested persons and to
and persons similarly exempted under
grant accelerated approval.
Regulation SHO.5
Basis—The basis under the Exchange
I. Self-Regulatory Organization’s
Act for this proposed rule change is
Statement of the Terms of Substance of
found in Section 6(b)(5), in that the
the Proposed Rule Change
proposed rule filing is designed to
The ISE is proposing to adopt a rule
promote just and equitable principles of
with respect to short selling on the ISE
trade, remove impediments to and
Stock Exchange, the Exchange’s entry
perfect the mechanisms of a free and
into the trading of non-option equity
open market and a national market
securities. The text of the proposed rule system. Specifically, the proposal will
change is available on the Exchange’s
permit the Exchange to trade equity
Web site (https://www.iseoptions.com), at securities in a manner that complies
the principal office of the Exchange, and with Regulation SHO and the Short Sale
at the Commission’s Public Reference
Rule.
Room.
B. Self-Regulatory Organization’s
II. Self-Regulatory Organization’s
Statement on Burden on Competition
Statement of the Purpose of, and
The proposed rule change does not
Statutory Basis for, the Proposed Rule
impose any burden on competition that
Change
is not necessary or appropriate in
In its filing with the Commission, the
furtherance of the purposes of the Act.
self-regulatory organization included
SECURITIES AND EXCHANGE
COMMISSION
sroberts on PROD1PC70 with NOTICES
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 III 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
Purpose—Currently the ISE only
trades options on equity securities and
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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16:16 Sep 11, 2006
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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. The Exchange will
notify the Commission of any written
comments received by the Exchange.
3 Rules 242.200 through 242.203 under the
Exchange Act; 17 CFR 242.200–242.203
(‘‘Regulation SHO’’).
4 17 CFR 240.10a–1 (‘‘Short Sale Rule’’).
5 Rule 2105 is substantially similar to Rule 30.20
of the Chicago Board Options Exchange,
Incorporated (‘‘CBOE’’).
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53727
III. 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–2006–42 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
Number SR–ISE–2006–42. 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 Commissions
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, 100 F Street, NE., Washington,
DC 20549. Copies of such filing also will
be available for inspection and copying
at the principal office of the ISE and on
ISE’s Web site at https://
www.iseoptions.com. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–ISE–
2006–42 and should be submitted on or
before October 3, 2006.
IV. Commission’s Findings and Order
Granting Accelerated Approval of
Proposed Rule Change
The Commission finds that the
proposed rule change is consistent with
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53728
Federal Register / Vol. 71, No. 176 / Tuesday, September 12, 2006 / Notices
the requirements of the Act and the
rules and regulations thereunder
applicable to a national securities
exchange. In particular, the Commission
finds that the proposed rule change is
consistent with Section 6(b)(5), which
requires that an exchange have rules
designed, among other things, to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, and facilitating transactions
in securities, and in general to protect
investors and the public interest.6 By
incorporating the requirements of
Regulation SHO and the Short Sale
Rule, the proposed rule will contribute
to a coordinated regulatory effort to
prevent short sale fraud and
manipulation and, in so doing, will
protect investors.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.8
Nancy M. Morris,
Secretary.
[FR Doc. E6–15051 Filed 9–11–06; 8:45 am]
No. 1 thereto, and solicits comments
from interested persons on Amendment
No. 1.
BILLING CODE 8010–01–P
Acceleration
I. Introduction
On July 31, 2006, the International
Securities Exchange, Inc. (‘‘ISE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934, as amended (‘‘Act’’),1 and Rule
19b–4 thereunder,2 a proposed rule
change establishing a facility, ISE Stock
Exchange, LLC (‘‘ISE Stock’’), that
would administer a fully automated
trading system for the trading of equity
securities by Electronic Access
Members, or EAMs, of ISE under the
rules of ISE. The proposed rule change
was published for comment in the
Federal Register on August 10, 2006.3
The Commission received no comments
regarding the proposal. On August 31,
2006, ISE filed Amendment No. 1 to the
proposed rule change.4 This order
grants accelerated approval to the
proposed rule change and Amendment
The Exchange proposes to establish
ISE Stock as a facility, as that term is
defined in Section 3(a)(2) of the Act,5 of
ISE. ISE Stock would administer a fully
automated trading system for the trading
of equity securities by Electronic Access
Members, or EAMs, of ISE under the
rules of ISE. The Exchange submitted to
the Commission the Certificate of
Formation of ISE Stock and the LLC
Agreement. The Certificate of Formation
and the LLC Agreement are the source
of ISE Stock’s governance and operating
authority and, therefore, function in a
similar manner as articles of
incorporation and by-laws function for
a corporation.
ISE is a founding and controlling
member of ISE Stock. ISE owns all of
the Class A Units of ISE Stock,
representing 51% of the voting
securities of ISE Stock. In addition to its
ownership stake in ISE Stock, ISE has
entered into a management agreement
(the ‘‘Management Agreement’’) with
ISE Stock. Pursuant to the Management
Agreement, ISE Stock has appointed ISE
as ISE Stock’s manager (‘‘Manager’’) to
perform certain management,
operational, and related services. As
described in Section 8.1 of the LLC
Agreement, with limited exceptions,
ISE, as the Manager, would have the
complete and exclusive authority to
manage the operations and affairs of ISE
Stock. In addition, ISE would have
responsibility for all regulatory
functions related to the facility
(including conducting market
surveillance for trading on ISE Stock).
ISE Stock would have responsibility for
the business operations of the facility to
the extent those activities are not
inconsistent and do not interfere with
the regulatory and oversight functions of
ISE.6
The Exchange submitted to the
Commission the Certificate of Formation
and the LLC Agreement of ISE Stock
specifically relating to the control and
governance of ISE Stock that would
ensure that ISE has the authority within
ISE Stock to maintain its responsibility
for all regulatory functions related to the
ISE Stock facility.7 The LLC Agreement
The Commission finds good cause for
approving the proposed rule change
prior to the 30th day after the date of
publication of notice of filing thereof in
the Federal Register. The proposal
incorporates the provisions of
Regulation SHO and the Short Sale Rule
and will be necessary for the ISE to
trade non-option equity securities on
the ISE Stock Exchange. The Exchange’s
adoption of a rule incorporating the
provisions of Regulation SHO and the
Short Sale Rule in order to trade nonoption equity securities benefits the
investing public. The Commission does
not believe that ISE’s proposal raises
any novel regulatory issues.
Accordingly, the Commission believes
good cause exists, consistent with
Sections 6(b)(5) and 19(b) of the
Exchange Act, 15 U.S.C. 78f(b)(5) and
78s(b), to approve the proposed rule
change on an accelerated basis.
sroberts on PROD1PC70 with NOTICES
Self-Regulatory Organizations;
International Securities Exchange, Inc.;
Order Granting Accelerated Approval
of Proposed Rule Change and Notice
of Filing and Order Granting
Accelerated Approval of Amendment
No. 1 Thereto Relating To Establishing
ISE Stock Exchange, LLC as a Facility
of the International Securities
Exchange, Inc
September 1, 2006.
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 54273
(August 3, 2006), 71 FR 45868.
4 In Amendment No. 1, ISE made changes to the
proposed rule change to reflect changes made in the
Second Amendment and Restated Limited Liability
Company Agreement (‘‘LLC Agreement’’) of ISE
Stock, and made clarifying changes to the LLC
Agreement, in part, to specifically reference ISE in
various provisions, to clarify the voting rights of
Members who have transferred Units, to clarify the
details of the exception from the voting restrictions
as they relate to International Securities Exchange
Holdings, Inc. (‘‘Holdings’’), to clarify that ISE’s
Board must determine whether any change to the
LLC Agreement must be filed with the Commission
pursuant to Section 19(b) of the Act, and to apply
the call right described in Section 9.8 of the LLC
Agreement to all Units.
1 15
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,7 that the
proposed rule change (File No. SR–ISE–
2006–42) be and hereby is approved on
an accelerated basis.
6 In
approving this rule proposal, the Commission
notes that it has also considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
7 15 U.S.C. 78s(b)(2).
16:16 Sep 11, 2006
[Release No. 34–54399; File No. SR–ISE–
2006–45]
8 17
V. Conclusion
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COMMISSION
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II. Description of the Proposal
A. Overview
5 15
U.S.C. 78c(a)(2).
Amendment No. 1 supra note 4 and LLC
Agreement, Section 6.1(d).
7 The Board of Directors of ISE would be required
to determine if any changes to the LLC Agreement
are required to be filed with the Commission
pursuant to Section 19(b) of the Act and Rule 19b–
6 See
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Agencies
[Federal Register Volume 71, Number 176 (Tuesday, September 12, 2006)]
[Notices]
[Pages 53727-53728]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-15051]
[[Page 53727]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54398; File No. SR-ISE-2006-42]
Self-Regulatory Organizations; the International Securities
Exchange, Inc., Notice of Filing and Order Granting Accelerated
Approval of a Proposed Rule Change Relating to Short Sales
August 31, 2006.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on July 25, 2006, the International Securities Exchange, Inc. (the
``Exchange'' or the ``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 self-regulatory
organization. The Commission is publishing this notice and order to
solicit comments on the proposed rule change from interested persons
and to grant accelerated approval.
---------------------------------------------------------------------------
\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 ISE is proposing to adopt a rule with respect to short selling
on the ISE Stock Exchange, the Exchange's entry into the trading of
non-option equity securities. The text of the proposed rule change is
available on the Exchange's Web site (https://www.iseoptions.com), at
the principal office of the Exchange, 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 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 III 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
Purpose--Currently the ISE only trades options on equity securities
and indices. The purpose of this proposed rule change is to adopt a
rule that will be necessary for ISE ultimately to trade non-option
equity securities. Specifically, Commission Regulation SHO \3\ and Rule
10a-1\4\ under the Securities Exchange Act of 1934 (``Exchange Act'')
govern the marking of orders in equity securities as long and short,
the short sale of securities, and securities borrowing and delivery
requirements. In order for the ISE to trade equity securities it will
need to adopt a rule implementing these provisions. Proposed Rule 2105
does so by: (a) Requiring members to mark orders in compliance with
Regulation SHO; (b) implementing the short-sale restrictions of the
``tick rule'' contained in the Short Sale Rule; and (c) prohibiting
members from entering orders in equity securities unless the member can
comply with the borrowing and delivery requirements of Regulation SHO.
Proposed Rule 2105 exempts from its requirements transactions,
securities and persons similarly exempted under Regulation SHO.\5\
---------------------------------------------------------------------------
\3\ Rules 242.200 through 242.203 under the Exchange Act; 17 CFR
242.200-242.203 (``Regulation SHO'').
\4\ 17 CFR 240.10a-1 (``Short Sale Rule'').
\5\ Rule 2105 is substantially similar to Rule 30.20 of the
Chicago Board Options Exchange, Incorporated (``CBOE'').
---------------------------------------------------------------------------
Basis--The basis under the Exchange Act for this proposed rule
change is found in Section 6(b)(5), in that the proposed rule filing is
designed to promote just and equitable principles of trade, remove
impediments to and perfect the mechanisms of a free and open market and
a national market system. Specifically, the proposal will permit the
Exchange to trade equity securities in a manner that complies with
Regulation SHO and the Short Sale Rule.
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 written comments from members or other interested parties. The
Exchange will notify the Commission of any written comments received by
the Exchange.
III. 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-2006-42 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 Number SR-ISE-2006-42. 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 Commissions 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, 100 F Street, NE., Washington, DC
20549. Copies of such filing also will be available for inspection and
copying at the principal office of the ISE and on ISE's Web site at
https://www.iseoptions.com. All comments received will be posted without
change; the Commission does not edit personal identifying information
from submissions. You should submit only information that you wish to
make available publicly. All submissions should refer to File Number
SR-ISE-2006-42 and should be submitted on or before October 3, 2006.
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
The Commission finds that the proposed rule change is consistent
with
[[Page 53728]]
the requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange. In particular, the
Commission finds that the proposed rule change is consistent with
Section 6(b)(5), which requires that an exchange have rules designed,
among other things, to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, and in general to protect
investors and the public interest.\6\ By incorporating the requirements
of Regulation SHO and the Short Sale Rule, the proposed rule will
contribute to a coordinated regulatory effort to prevent short sale
fraud and manipulation and, in so doing, will protect investors.
---------------------------------------------------------------------------
\6\ In approving this rule proposal, the Commission notes that
it has also considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
---------------------------------------------------------------------------
Acceleration
The Commission finds good cause for approving the proposed rule
change prior to the 30th day after the date of publication of notice of
filing thereof in the Federal Register. The proposal incorporates the
provisions of Regulation SHO and the Short Sale Rule and will be
necessary for the ISE to trade non-option equity securities on the ISE
Stock Exchange. The Exchange's adoption of a rule incorporating the
provisions of Regulation SHO and the Short Sale Rule in order to trade
non-option equity securities benefits the investing public. The
Commission does not believe that ISE's proposal raises any novel
regulatory issues. Accordingly, the Commission believes good cause
exists, consistent with Sections 6(b)(5) and 19(b) of the Exchange Act,
15 U.S.C. 78f(b)(5) and 78s(b), to approve the proposed rule change on
an accelerated basis.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\7\ that the proposed rule change (File No. SR-ISE-2006-42) be and
hereby is approved on an accelerated basis.
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\7\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
---------------------------------------------------------------------------
\8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Nancy M. Morris,
Secretary.
[FR Doc. E6-15051 Filed 9-11-06; 8:45 am]
BILLING CODE 8010-01-P