Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing of Proposed Rule Change Relating to the Facilitation Mechanism, 6633-6634 [E7-2253]

Download as PDF Federal Register / Vol. 72, No. 28 / Monday, February 12, 2007 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55236; File No. SR–ISE– 2006–78] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing of Proposed Rule Change Relating to the Facilitation Mechanism February 2, 2007. 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 December 13, 2006, 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 prepared substantially by the Exchange. 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 rules to allow both facilitated and solicited transactions to be executed using the Exchange’s Facilitation Mechanism. The text of the proposed rule change is as follows, with deletions in [brackets] and additions italicized: Rule 716. Block Trades (a) through (c) no change. (d) Facilitation Mechanism. The Facilitation Mechanism is a process by which an Electronic Access Member can execute a transaction wherein the Electronic Access Member seeks to facilitate a block-size order[s] it represents as agent, and/or a transaction wherein the Electronic Access Member solicited interest to execute against a block-size order it represents as agent. Electronic Access Members must be willing to [facilitate] execute the entire size of orders entered into the Facilitation Mechanism. (1) through (3) no change. (e) no change. sroberts on PROD1PC70 with NOTICES Supplementary Material to Rule 716 * .01 through .08 no change. * * * * 1 15 2 17 19:52 Feb 09, 2007 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The ISE offers three different execution facilities for the execution of two-sided orders (i.e., crosses): a Facilitation Mechanism, a Solicited Order Mechanism and a Price Improvement Mechanism. All three of these mechanisms have different execution features. For example, the Facilitation Mechanism guarantees members up to 40% of a customer order and is limited to orders of at least 50 contracts, the Solicited Order Mechanism offers an all-or-none execution of customer orders and is limited to orders of at least 500 contracts, and the Price Improvement Mechanism requires orders to be entered at a price that improves upon the national best bid or offer (‘‘NBBO’’) by at least one penny without a minimum required order size. Currently, the Facilitation Mechanism is limited to transactions where the member is trading against an agency order as principal (i.e., facilitating an order). In contrast, the Price Improvement Mechanism allows members to enter crossing-transactions where the member is trading against an order as principal (i.e., facilitating the order) and/or where the member has solicited an order to take the other side of an order it represents as agent.3 Thus, the Price Improvement Mechanism allows members the flexibility to represent a transaction where the member is facilitating only a portion of the customer order and has solicited interest from other parties for the other portion of the order. Members have expressed an interest in having the same flexibility to execute these types of 3 ISE Rule 723(b) states that the counter-side of an agency order ‘‘may represent interest for the Member’s own account, or interest the Member has solicited from one or more other parties, or a combination of both.’’ U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Aug<31>2005 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 ISE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. Jkt 211001 PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 6633 transactions through the Facilitation Mechanism. Therefore, ISE proposes to modify the Facilitation Mechanism rule to allow both facilitated and solicited transactions.4 2. Statutory Basis The Exchange believes that the proposal is consistent with the requirement under Section 6(b)(5) of the Act 5 that an exchange have rules that are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. In particular, the proposal will provide additional flexibility for members to execute transactions through the Facilitation Mechanism. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange believes that 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. 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 the Exchange 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. 4 For clarification, the ISE proposes to modify the Facilitation Mechanism to allow executions of block size orders against facilitated or solicited orders, or a combination of both. Telephone conversation between Katherine Simmons, Deputy General Counsel, ISE, and Ira Brandriss, Special Counsel, Division of Market Regulation, Commission, on January 3, 2007. 5 15 U.S.C. 78f(b)(5). E:\FR\FM\12FEN1.SGM 12FEN1 6634 Federal Register / Vol. 72, No. 28 / Monday, February 12, 2007 / 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: sroberts on PROD1PC70 with NOTICES 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–2006–78 on the subject line. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55225; File No. SR–NASD– 2007–007] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend a Pilot Program That Increases Position and Exercise Limits for Certain Equity Options February 1, 2007. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 Paper Comments (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 • Send paper comments in triplicate notice is hereby given that on January to Nancy M. Morris, Secretary, 25, 2007, the National Association of Securities and Exchange Commission, Securities Dealers, Inc. (‘‘NASD’’) filed Station Place, 100 F Street, NE., with the Securities and Exchange Washington, DC 20549–1090. Commission (‘‘Commission’’) the All submissions should refer to File proposed rule change as described in Number SR–ISE–2006–78. This file Items I, II, and III below, which Items number should be included on the have been substantially prepared by subject line if e-mail is used. To help the NASD. NASD has filed the proposal as Commission process and review your a ‘‘non-controversial’’ rule change comments more efficiently, please use pursuant to Section 19(b)(3)(A) of the only one method. The Commission will Act 3 and Rule 19b–4(f)(6) thereunder,4 post all comments on the Commission’s which renders it effective upon filing Internet Web site (https://www.sec.gov/ with the Commission. The Commission rules/sro.shtml). Copies of the is publishing this notice to solicit submission, all subsequent comments on the proposed rule change amendments, all written statements from interested persons. with respect to the proposed rule I. Self-Regulatory Organization’s change that are filed with the Statement of the Terms of Substance of Commission, and all written the Proposed Rule Change communications relating to the proposed rule change between the NASD proposes to amend Rule 2860 Commission and any person, other than to extend a pilot program increasing those that may be withheld from the certain options position and exercise public in accordance with the limits. The text of the proposed rule provisions of 5 U.S.C. 552, will be change is available at NASD, the available for inspection and copying in Commission’s Public Reference Room, the Commission’s Public Reference and https://www.nasd.com. Room. Copies of such filing also will be II. Self-Regulatory Organization’s available for inspection and copying at the principal office of the Exchange. All Statement of the Purpose of, and Statutory Basis for, the Proposed Rule comments received will be posted Change without change; the Commission does not edit personal identifying In its filing with the Commission, information from submissions. You NASD included statements concerning should submit only information that the purpose of and basis for the you wish to make available publicly. All proposed rule change and discussed any submissions should refer to File comments it received on the proposed Number SR–ISE–2006–78 and should be rule change. The text of these statements submitted on or before March 5, 2007. may be examined at the places specified For the Commission, by the Division of in Item IV below. NASD has prepared Market Regulation, pursuant to delegated summaries, set forth in Sections A, B, 6 authority. and C below, of the most significant Florence E. Harmon, aspects of such statements. Deputy Secretary. [FR Doc. E7–2253 Filed 2–9–07; 8:45 am] 1 15 BILLING CODE 8010–01–P 2 17 6 17 CFR 200.30–3(a)(12). VerDate Aug<31>2005 19:52 Feb 09, 2007 Jkt 211001 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(6). PO 00000 Frm 00118 Fmt 4703 Sfmt 4703 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose NASD proposes to amend Rule 2860 to extend a pilot program until September 1, 2007 (unless extended) increasing position and exercise limits for both standardized and conventional options (‘‘Pilot Program’’).5 Unless extended, the Pilot Program will expire on March 1, 2007.6 NASD believes that the Pilot Program should be extended so that it may continue without interruption for the same reasons that are discussed in the Pilot Program Notice. 2. Statutory Basis NASD believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,7 which requires, among other things, that NASD’s rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. The proposed rule change is being made so that the Pilot Program, which achieves these goals as discussed in the Pilot Program Notice, may continue without interruption. B. Self-Regulatory Organization’s Statement on Burden on Competition NASD does not believe that the proposed rule change will result in 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 Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing rule change does not: (1) Significantly affect the protection of investors or the public interest; (2) impose any significant burden on competition; and (3) become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate, it has 5 See Securities Exchange Act Release No. 51520 (April 11, 2005), 70 FR 19977 (April 15, 2005) (SR– NASD–2005–040) (‘‘Pilot Program Notice’’). 6 See Securities Exchange Act Release No. 54334 (August 18, 2006), 71 FR 50961 (August 28, 2006) (SR–NASD–2006–025). 7 15 U.S.C. 78o–3(b)(6). E:\FR\FM\12FEN1.SGM 12FEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 72, Number 28 (Monday, February 12, 2007)]
[Notices]
[Pages 6633-6634]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-2253]



[[Page 6633]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55236; File No. SR-ISE-2006-78]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing of Proposed Rule Change Relating to the 
Facilitation Mechanism

 February 2, 2007.
    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 December 13, 2006, 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 prepared 
substantially by the Exchange. 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 ISE is proposing to amend its rules to allow both facilitated 
and solicited transactions to be executed using the Exchange's 
Facilitation Mechanism. The text of the proposed rule change is as 
follows, with deletions in [brackets] and additions italicized:
Rule 716. Block Trades
    (a) through (c) no change.
    (d) Facilitation Mechanism. The Facilitation Mechanism is a process 
by which an Electronic Access Member can execute a transaction wherein 
the Electronic Access Member seeks to facilitate a block-size order[s] 
it represents as agent, and/or a transaction wherein the Electronic 
Access Member solicited interest to execute against a block-size order 
it represents as agent. Electronic Access Members must be willing to 
[facilitate] execute the entire size of orders entered into the 
Facilitation Mechanism.
    (1) through (3) no change.
    (e) no change.
Supplementary Material to Rule 716
    .01 through .08 no change.
* * * * *

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 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 ISE offers three different execution facilities for the 
execution of two-sided orders (i.e., crosses): a Facilitation 
Mechanism, a Solicited Order Mechanism and a Price Improvement 
Mechanism. All three of these mechanisms have different execution 
features. For example, the Facilitation Mechanism guarantees members up 
to 40% of a customer order and is limited to orders of at least 50 
contracts, the Solicited Order Mechanism offers an all-or-none 
execution of customer orders and is limited to orders of at least 500 
contracts, and the Price Improvement Mechanism requires orders to be 
entered at a price that improves upon the national best bid or offer 
(``NBBO'') by at least one penny without a minimum required order size.
    Currently, the Facilitation Mechanism is limited to transactions 
where the member is trading against an agency order as principal (i.e., 
facilitating an order). In contrast, the Price Improvement Mechanism 
allows members to enter crossing-transactions where the member is 
trading against an order as principal (i.e., facilitating the order) 
and/or where the member has solicited an order to take the other side 
of an order it represents as agent.\3\ Thus, the Price Improvement 
Mechanism allows members the flexibility to represent a transaction 
where the member is facilitating only a portion of the customer order 
and has solicited interest from other parties for the other portion of 
the order. Members have expressed an interest in having the same 
flexibility to execute these types of transactions through the 
Facilitation Mechanism. Therefore, ISE proposes to modify the 
Facilitation Mechanism rule to allow both facilitated and solicited 
transactions.\4\
---------------------------------------------------------------------------

    \3\ ISE Rule 723(b) states that the counter-side of an agency 
order ``may represent interest for the Member's own account, or 
interest the Member has solicited from one or more other parties, or 
a combination of both.''
    \4\ For clarification, the ISE proposes to modify the 
Facilitation Mechanism to allow executions of block size orders 
against facilitated or solicited orders, or a combination of both. 
Telephone conversation between Katherine Simmons, Deputy General 
Counsel, ISE, and Ira Brandriss, Special Counsel, Division of Market 
Regulation, Commission, on January 3, 2007.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirement under Section 6(b)(5) of the Act \5\ that an exchange have 
rules that are designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism for a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest. In particular, the proposal will provide additional 
flexibility for members to execute transactions through the 
Facilitation Mechanism.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that 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.

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 the Exchange 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.

[[Page 6634]]

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-2006-78 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-2006-78. 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 available publicly. All submissions should refer to 
File Number SR-ISE-2006-78 and should be submitted on or before March 
5, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
---------------------------------------------------------------------------

    \6\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-2253 Filed 2-9-07; 8:45 am]
BILLING CODE 8010-01-P

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