Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Fee Changes, 5775-5776 [E7-1997]

Download as PDF Federal Register / Vol. 72, No. 25 / Wednesday, February 7, 2007 / Notices sroberts on PROD1PC70 with NOTICES In addition, FICC will be able to include in a member’s clearing fund requirement a ‘‘special charge’’ based on such factors as FICC determines to be appropriate from time to time. Such factors may include, but are not limited to, such things as price fluctuation, volatility, or lack of liquidity. The proposed VaR methodology will necessitate a change to FICC’s risk management consequences of the late allocation of repo substitution collateral. Because offset classes and margin rates will no longer be present in the revised GSD rules, FICC will base the margining for such a generic CUSIP on the same calculation as that used for securities whose volatility is less amenable to statistical analysis.7 The VaR methodology will not include calculations that are incorporated in the GSD’s current crossmargining programs with The Clearing Corporation (‘‘TCC’’) and with the Chicago Mercantile Exchange (‘‘CME’’). In order to provide for continuity of cross-margining following the implementation of the VaR methodology and because certain key calculations required for cross-margining are unique to cross-margining, FICC will continue to perform the applicable crossmargining calculations outside of the VaR model. FICC will then adjust the cross-margining clearing fund calculation using a scaling ratio of the VaR clearing fund calculation to the cross-margining clearing fund calculation so that the clearing fund amount available for cross-margining is appropriately aligned with the VaR model. The proposed changes described herein will necessitate amendments to FICC’s cross-margining agreements with TCC and with CME as follows: 1. The definition of FICC’s ‘‘Margin Rate’’ in each of the agreements will be amended to reflect that the margin rate will no longer be based on margin factors published in the current rules (as these will no longer be applied under the VaR methodology). Instead, they will be determined based on a percentage that will be determined using the same parameters and data (e.g., confidence level and historic indices) as those used to generate margin factors in the current rules. 2. Section 5(a) of each crossmargining agreement will be amended to state that FICC’s residual margin amount will be calculated as specified in the agreement and will be adjusted, 7 Securities Exchange Act Release No. 53534 (March 21, 2006), 71 FR 15781 (March 29, 2006) (File No. SR–FICC–2005–18). This rule change created a generic CUSIP offset and applicable margin rate for determining clearing fund consequences for such late allocations. VerDate Aug<31>2005 21:36 Feb 06, 2007 Jkt 211001 if necessary, to correct for differences between the methodology of calculating the residual margin amount as described in the agreement and the VaR methodology. This change will be necessary to account for the deletion of relevant margin factors and disallowance schedules (which, like the margin factors, are incorporated into the agreements by reference) from GSD rules and to adjust for the possibility that the new VaR methodology could generate a charge that would otherwise allow for a cross-margining reduction that is greater than the margin requirement. III. Discussion Section 19(b) of the Act directs the Commission to approve a proposed rule change of a self-regulatory organization if it finds that such proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to such organization. Section 17A(b)(3)(F) of the Act requires that the rules of a clearing agency be designed to assure the safeguarding of securities and funds in FICC’s custody or control or for which it is responsible.8 Because FICC’s proposed rule change implements a VaR methodology that should better reflect market volatility and should more thoroughly distinguish the levels of risk presented by individual securities, FICC should be able to more accurately calculate the risk presented by each of its member’s activity and to collect clearing fund to protect against that risk. As a result, FICC should be in a better position to assure the safeguarding of securities and funds in its custody or control or for which it is responsible. 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. In approving the proposed rule change, the Commission considered the proposal’s impact on efficiency, competition and capital formation.9 It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that the proposed rule change (File No. SR– FICC–2006–16) be and hereby is approved. 8 15 U.S.C. 78q–1(b)(3)(F). U.S.C. 78c(f). 10 17 CFR 200.30–3(a)(12). 9 15 PO 00000 Frm 00101 Fmt 4703 Sfmt 4703 5775 For the Commission by the Division of Market Regulation, pursuant to delegated authority.10 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–1948 Filed 2–6–07; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55221; File No. SR–ISE– 2007–06] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Fee Changes February 1, 2007. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on January 22, 2007, the International Securities Exchange, LLC (‘‘ISE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by the ISE. The ISE has designated this proposal as one establishing or changing a due, fee, or other charge applicable only to a member under Section 19(b)(3)(A)(ii) of the Act,3 and Rule 19b–4(f)(2) thereunder,4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The ISE is proposing to amend its Schedule of Fees to establish fees for transactions in options on one Premium Product.5 The text of the proposed rule change is available on the ISE’s Web site (http://www.iseoptions.com/legal/ proposed_rule_changes.asp), at 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 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 5 ‘‘Premium Products’’ is defined in the Schedule of Fees as the products enumerated therein. 2 17 E:\FR\FM\07FEN1.SGM 07FEN1 5776 Federal Register / Vol. 72, No. 25 / Wednesday, February 7, 2007 / Notices 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. Exchange for all other Premium Products. Further, since options on PMP are not multiply-listed, the Payment for Order Flow fee shall not apply. The Exchange believes the proposed rule change will further the Exchange’s goal of introducing new products to the marketplace that are competitively priced. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 2. Statutory Basis 1. Purpose The Exchange is proposing to amend its Schedule of Fees to establish fees for transactions in options on the following Premium Product: The ISE Integrated Oil & Gas Index (‘‘PMP’’).6 Specifically, the Exchange is proposing to adopt an execution fee and a comparison fee for all transactions in options on PMP.7 The amount of the execution fee and comparison fee for PMP shall be $0.15 and $0.03 per contract, respectively, for all Public Customer Orders 8 and Firm Proprietary orders. The amount of the execution fee and comparison fee for all ISE Market Maker transactions shall be equal to the execution fee and comparison fee currently charged by the Exchange for ISE Market Maker transactions in equity options.9 Finally, the amount of the execution fee and comparison fee for all non-ISE Market Maker transactions shall be $0.16 and $0.03 per contract, respectively. All of the applicable fees covered by this filing are identical to fees charged by the sroberts on PROD1PC70 with NOTICES 6 The Exchange represents that PMP, a narrowbased index, meets the standards of ISE Rule 2002(b), which allows the ISE to begin trading this product by filing a Form 19b–4(e) at least five business days after commencement of trading this new products pursuant to Rule 19b–4(e) under the Act. Accordingly, the ISE represents that it has submitted the required Form 19b–4(e) to the Commission. See Telephone conversation between Samir Patel, Assistant General Counsel, ISE, and Richard Holley III, Special Counsel, Division of Market Regulation, Commission, on January 25, 2007. 7 These fees will be charged only to Exchange members. Under a pilot program that is set to expire on July 31, 2007, these fees will also be charged to Linkage Orders (as defined in ISE Rule 1900). See Securities Exchange Act Release No. 54204 (July 25, 2006), 71 FR 43548 (August 1, 2006) (SR–ISE–2006– 38). 8 ‘‘Public Customer Order’’ is defined in ISE Rule 100(a)(39) as an order for the account of a Public Customer. ‘‘Public Customer’’ is defined in ISE Rule 100(a)(38) as a person that is not a broker or dealer in securities. 9 The execution fee is currently between $.21 and $.12 per contract side, depending on the Exchange Average Daily Volume, and the comparison fee is currently $.03 per contract side. VerDate Aug<31>2005 21:36 Feb 06, 2007 Jkt 211001 The basis under the Act for this proposed rule change is the requirement under Section 6(b)(4) of the Act 10 that the rules of an exchange provide for the equitable allocation of reasonable dues, fees and other charges among its members and other persons using its facilities. B. Self-Regulatory Organization’s Statement on Burden on Competition The proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing rule change establishes or changes a due, fee, or other charge imposed by the Exchange, it has become effective pursuant to Section 19(b)(3)(A) of the Act 11 and Rule 19b–4(f)(2) 12 thereunder. At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–ISE–2007–06 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–ISE–2007–06. 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 (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the ISE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–ISE–2007–06 and should be submitted on or before February 28, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.13 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–1997 Filed 2–6–07; 8:45 am] BILLING CODE 8010–01–P 10 15 U.S.C. 78f(b)(4). U.S.C. 78s(b)(3)(A). 12 17 CFR 19b–4(f)(2). 11 15 PO 00000 Frm 00102 Fmt 4703 13 17 Sfmt 4703 E:\FR\FM\07FEN1.SGM CFR 200.30–3(a)(12). 07FEN1

Agencies

[Federal Register Volume 72, Number 25 (Wednesday, February 7, 2007)]
[Notices]
[Pages 5775-5776]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-1997]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55221; File No. SR-ISE-2007-06]


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

February 1, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on January 22, 2007, the International Securities Exchange, LLC 
(``ISE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been substantially 
prepared by the ISE. The ISE has designated this proposal as one 
establishing or changing a due, fee, or other charge applicable only to 
a member under Section 19(b)(3)(A)(ii) of the Act,\3\ and Rule 19b-
4(f)(2) thereunder,\4\ which renders the proposal effective upon filing 
with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE is proposing to amend its Schedule of Fees to establish 
fees for transactions in options on one Premium Product.\5\ The text of 
the proposed rule change is available on the ISE's Web site (http://
www.iseoptions.com/legal/proposed_rule_changes.asp), at the ISE, and 
at the Commission's Public Reference Room.
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    \5\ ``Premium Products'' is defined in the Schedule of Fees as 
the products enumerated therein.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the ISE included statements 
concerning the

[[Page 5776]]

purpose of, and basis for, the proposed rule change and discussed any 
comments it received on the proposed rule change. The text of these 
statements may be examined at the places specified in Item IV below. 
The ISE has prepared summaries, set forth in Sections A, B, and C 
below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to amend its Schedule of Fees to 
establish fees for transactions in options on the following Premium 
Product: The ISE Integrated Oil & Gas Index (``PMP'').\6\ Specifically, 
the Exchange is proposing to adopt an execution fee and a comparison 
fee for all transactions in options on PMP.\7\ The amount of the 
execution fee and comparison fee for PMP shall be $0.15 and $0.03 per 
contract, respectively, for all Public Customer Orders \8\ and Firm 
Proprietary orders. The amount of the execution fee and comparison fee 
for all ISE Market Maker transactions shall be equal to the execution 
fee and comparison fee currently charged by the Exchange for ISE Market 
Maker transactions in equity options.\9\ Finally, the amount of the 
execution fee and comparison fee for all non-ISE Market Maker 
transactions shall be $0.16 and $0.03 per contract, respectively. All 
of the applicable fees covered by this filing are identical to fees 
charged by the Exchange for all other Premium Products. Further, since 
options on PMP are not multiply-listed, the Payment for Order Flow fee 
shall not apply. The Exchange believes the proposed rule change will 
further the Exchange's goal of introducing new products to the 
marketplace that are competitively priced.
---------------------------------------------------------------------------

    \6\ The Exchange represents that PMP, a narrow-based index, 
meets the standards of ISE Rule 2002(b), which allows the ISE to 
begin trading this product by filing a Form 19b-4(e) at least five 
business days after commencement of trading this new products 
pursuant to Rule 19b-4(e) under the Act. Accordingly, the ISE 
represents that it has submitted the required Form 19b-4(e) to the 
Commission. See Telephone conversation between Samir Patel, 
Assistant General Counsel, ISE, and Richard Holley III, Special 
Counsel, Division of Market Regulation, Commission, on January 25, 
2007.
    \7\ These fees will be charged only to Exchange members. Under a 
pilot program that is set to expire on July 31, 2007, these fees 
will also be charged to Linkage Orders (as defined in ISE Rule 
1900). See Securities Exchange Act Release No. 54204 (July 25, 
2006), 71 FR 43548 (August 1, 2006) (SR-ISE-2006-38).
    \8\ ``Public Customer Order'' is defined in ISE Rule 100(a)(39) 
as an order for the account of a Public Customer. ``Public 
Customer'' is defined in ISE Rule 100(a)(38) as a person that is not 
a broker or dealer in securities.
    \9\ The execution fee is currently between $.21 and $.12 per 
contract side, depending on the Exchange Average Daily Volume, and 
the comparison fee is currently $.03 per contract side.
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2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(4) of the Act \10\ that the rules of an 
exchange provide for the equitable allocation of reasonable dues, fees 
and other charges among its members and other persons using its 
facilities.
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    \10\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from members or other interested 
parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing rule change establishes or changes a due, 
fee, or other charge imposed by the Exchange, it has become effective 
pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(2) 
\12\ thereunder. At any time within 60 days of the filing of such 
proposed rule change, the Commission may summarily abrogate such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 19b-4(f)(2).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-ISE-2007-06 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.
    All submissions should refer to File Number SR-ISE-2007-06. 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 (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the ISE. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-ISE-2007-06 and should be submitted on or before 
February 28, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-1997 Filed 2-6-07; 8:45 am]
BILLING CODE 8010-01-P