Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing of Proposed Rule Change Relating to the $1 Strike Pilot Program, 71986-71988 [E7-24535]

Download as PDF 71986 Federal Register / Vol. 72, No. 243 / Wednesday, December 19, 2007 / Notices indirectly controls the ISE, the books, records, premises, officers, Trustees, Delaware trustee, and employees of the Trust shall be deemed to be the books, records, premises, officers, Trustees, Delaware trustee, and employees of the ISE for purposes of and subject to oversight pursuant to the Act.103 The Trust agrees to keep confidential, to the fullest extent permitted by applicable law, all confidential information pertaining to the self-regulatory function of the ISE (including, without limitation, disciplinary matters, trading data, trading practices, and audit information) contained in the books and records of the ISE and not use such information for any commercial 104 purposes.105 The Trust Agreement requires that it may only be amended with prior written approval of the Commission, as and to the extent required under the Act.106 Further, for so long as Holdings or the Trust shall control, directly or indirectly, the ISE, any changes to the Trust must be submitted to the ISE Board. If the change must be filed with, or filed with and approved by, the Commission under section 19 of the Act 107 and the rules thereunder, then the change shall not be effective until filed with, or filed with and approved by, the Commission.108 The Commission finds that the Trust Agreement is designed to enable the ISE to operate in a manner that complies with the federal securities laws, including the objectives and requirements of sections 6(b) and 19(g) of the Act,109 facilitate the ability of the ISE and the Commission to fulfill their regulatory and oversight obligations under the Act,110 and are consistent with the provisions other entities that directly or indirectly own or control an SRO have instituted and that have been approved by the Commission.111 The mstockstill on PROD1PC66 with NOTICES 103 Id. 104 The Commission believes that any nonregulatory use of such information would be for a commercial purpose. 105 Trust Agreement, Article VI, Section 6.1(a). The Trust Agreement states that none of its provisions shall be interpreted so as to limit or impede (1) the rights of the Commission or the ISE to have access to and examine such confidential information pursuant to the U.S. federal securities laws and the rules and regulations thereunder, or (2) the ability of any Trustees, Delaware trustee, officers, directors, employees, or agents of Holdings or the Trust to disclose such confidential information to the Commission or the ISE. See Trust Agreement, Article VI, Section 6.2. 106 Trust Agreement, Article VIII, Section 8.2. 107 15 U.S.C. 78s. 108 Trust Agreement, Article VIII, Section 8.2. 109 15 U.S.C. 78f(b) and 15 U.S.C. 78s(g). 110 Trust Agreement, Articles V, VI, and VIII. 111 See, e.g., Securities Exchange Act Release Nos. 55293 (February 14, 2007), 72 FR 8033 (February VerDate Aug<31>2005 21:40 Dec 18, 2007 Jkt 214001 Commission finds that the Trust’s provisions are consistent with the Act and that they are designed to facilitate the Exchange’s ability to comply with the requirements of the Act. Under section 20(a) of the Act,112 any person with a controlling interest in the ISE shall be jointly and severally liable with and to the same extent that the ISE is liable under any provision of the Act, unless the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the violation or cause of action. In addition, section 20(e) of the Act 113 creates aiding and abetting liability for any person who knowingly provides substantial assistance to another person in violation of any provision of the Act or rule thereunder. Further, section 21C of the Act 114 authorizes the Commission to enter a cease-and-desist order against any person who has been ‘‘a cause of’’ a violation of any provision of the Act through an act or omission that the person knew or should have known would contribute to the violation. These provisions are applicable to the Trust and all other entities controlling the ISE. III. Conclusion For the foregoing reasons, the Commission finds that the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to a national securities exchange.115 It is therefore ordered, pursuant to section 19(b)(2) of the Act 116 that the proposed rule change (SR–ISE–2007– 101) is approved, and Amendment No. 1 is approved on an accelerated basis. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.117 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–24500 Filed 12–18–07; 8:45 am] BILLING CODE 8011–01–P 22, 2007) (SR–NYSE–2006–120) (merger of NYSE Group, Inc. and Euronext N.V.) and 53382 (February 27, 2006), 71 FR 11251 (March 6, 2006) (SR–NYSE–2005–77) (merger of New York Stock Exchange, Inc. and Archipelago Holdings, Inc.). 112 15 U.S.C. 78t(a). 113 15 U.S.C. 78t(e). 114 15 U.S.C. 78u–3. 115 The Commission’s approval of the proposed rule change based on the Exchange’s representation that the Resolutions will be signed by the Upstream Owners before or at the closing of the Transaction. 116 15 U.S.C. 78s(b)(2). 117 17 CFR 200.30–3(a)(12). PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–56956; File No. SR–ISE– 2007–110] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing of Proposed Rule Change Relating to the $1 Strike Pilot Program December 13, 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 November 14, 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 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 ISE proposes to expand the $1 Strike Pilot Program (‘‘Pilot Program’’) and requests permanent approval of the Pilot Program. The text of the proposed rule change is available at the Exchange, the Commission’s Public Reference Room, and http://www.ise.com. 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 Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to expand the Pilot Program and to request permanent approval of 1 15 2 17 E:\FR\FM\19DEN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 19DEN1 Federal Register / Vol. 72, No. 243 / Wednesday, December 19, 2007 / Notices mstockstill on PROD1PC66 with NOTICES the Pilot Program.3 The Pilot Program currently allows ISE to select a total of 5 individual stocks on which an option series may be listed at $1 strike price intervals. In order to be eligible for selection into the Pilot Program, the underlying stock must close below $20 in its primary market on the previous trading day. If selected for the Pilot Program, the Exchange may list strike prices at $1 intervals from $3 to $20, but no $1 strike price may be listed that is greater than $5 from the underlying stock’s closing price in its primary market on the previous day. The Exchange also may list $1 strikes on any other option class designated by other securities exchanges that employ a similar Pilot Program under their respective rules. The Exchange may not list long-term option series (LEAPS) at $1 strike price intervals for any class selected for the Pilot Program. The Exchange also is restricted from listing any series that would result in strike prices being $0.50 apart. The Exchange proposes to expand the Pilot Program to allow ISE to select a total of 10 individual stocks on which an option series may be listed at $1 strike price intervals. Additionally, ISE proposes to expand the price range on which it may list $1 strikes from $3 to $50. The existing restrictions on listing $1 strikes would continue, i.e., no $1 strike price may be listed that is greater than $5 from the underlying stock’s closing price in its primary market on the previous day, and ISE is restricted from listing any series that would result in strike prices being $0.50 apart. As stated in the Commission order approving ISE’s Pilot Program and in the subsequent extensions of the Pilot Program,4 ISE believes that $1 strike price intervals provide investors with greater flexibility in the trading of equity options that overlie lower priced stocks by allowing investors to establish equity options positions that are better tailored to meet their investment 3 The Commission approved the Pilot Program on June 16, 2003. See Securities Exchange Act Release No. 48033 (June 16, 2003), 68 FR 37036 (June 20, 2003) (SR–ISE–2003–17). The Pilot Program has subsequently been extended through June 5, 2008. See Securities Exchange Act Release Nos. 49827 (June 8, 2004), 69 FR 33966 (June 17, 2004) (SR– ISE–2004–21) (extending the Pilot Program until August 5, 2004); 50060 (July 22, 2004), 69 FR 45864 (July 30, 2004) (SR–ISE–2004–26) (extending the Pilot Program for 10 months until June 5, 2005); 51769 (May 31, 2005), 70 FR 33232 (June 7, 2005) (SR–ISE–2005–22) (extending the Pilot Program until June 5, 2006); 53806 (May 15, 2006), 71 FR 29694 (May 23, 2006) (SR–ISE–2006–20) (extending the Pilot Program until June 5, 2007); and 55715 (May 7, 2007), 72 FR 26854 (May 11, 2007) (SR– ISE–2007–26) (extending the Pilot Program until June 5, 2008). 4 See id. VerDate Aug<31>2005 21:40 Dec 18, 2007 Jkt 214001 objectives. The Exchange states that its member firms representing customers have repeatedly requested that ISE seek to expand the Pilot Program, both in terms of the number of classes on which an option series may be listed at $1 strike price intervals and the range in which $1 strikes may be listed. With regard to the impact on systems capacities, ISE’s analysis of the Pilot Program shows that the impact on the automated systems of ISE, the Options Price Reporting Authority (‘‘OPRA’’), and market data vendors has been minimal. The Exchange analyzed the quoting activity for all classes selected for the Pilot Program as a percentage of all quoting activity for all classes being quoted during the specified number of months.5 The Exchange concluded that, prior to the implementation of the Pilot Program in May 2003, the number of Best Bid/Offer (‘‘BBO’’) quotes sent to OPRA in the five classes selected for the Pilot Program represented approximately 0.47% of all BBO quotes sent by the Exchange.6 As of April 2007, the BBO quote share in the five classes selected for the Pilot Program remained below May 2003 levels in all months analyzed by the Exchange, with the exception of one month, February 2005.7 The Exchange notes that these statistics may overstate the contribution of $1 strike prices because these figures also include quotes for options series listed in intervals higher than $1 (i.e., $2.50 strikes) in the same option classes. Even with the non-$1 strike series quotes included in these figures, ISE believes that the overall impact on capacity is still minimal. ISE represents that is has sufficient capacity to handle an expansion of the Pilot Program, as proposed. The Exchange believes that the Pilot Program has provided investors with greater trading opportunities and flexibility and the ability to more closely tailor their investment strategies and decisions to the movement of the underlying security. Furthermore, the Exchange has not detected any material proliferation of illiquid option series resulting from the narrower strike price intervals. For these reasons, ISE requests that the Pilot Program be approved on a permanent basis. 5 See Securities Exchange Act Release No. 55715 (May 7, 2007), 72 FR 26854 (May 11, 2007) (SR– ISE–2007–26), Exhibit 3, Pilot Program Report (providing empirical analyses of the impact of the Pilot Program on the capacity of automated systems during years 2003 to 2007). 6 Id. 7 Id. PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 71987 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder and, in particular, the requirements of Section 6(b) of the Act.8 Specifically, the Exchange believes the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act,9 in that the rules of an exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Exchange believes that expanding the Pilot Program will result in a continuing benefit to investors by giving them more flexibility to closely tailor their investment decisions in a greater number of securities and for a more extended period of time than currently permitted. 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 comments on the proposed rule change and 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 Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which ISE consents, the Commission will: A. By order approve such proposed rule change, or B. Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, 8 15 9 15 E:\FR\FM\19DEN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(5). 19DEN1 71988 Federal Register / Vol. 72, No. 243 / Wednesday, December 19, 2007 / Notices 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–2007–110 on the subject line. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–56957; File No. SR–ISE– 2007–115] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Historical ISE Open/Close Trade Profile Fees December 13, 2007. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 • Send paper comments in triplicate (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 to Nancy M. Morris, Secretary, notice is hereby given that on December Securities and Exchange Commission, 11, 2007, the International Securities 100 F Street, NE., Washington, DC Exchange, LLC (‘‘ISE’’ or ‘‘Exchange’’) 20549–1090. filed with the Securities and Exchange All submissions should refer to File Commission (‘‘Commission’’) the Number SR–ISE–2007–110. This file proposed rule change as described in number should be included on the Items I and II below, which Items have subject line if e-mail is used. To help the been substantially prepared by ISE. The Commission process and review your Exchange filed the proposal pursuant to comments more efficiently, please use section 19(b)(3)(A) of the Act 3 and Rule only one method. The Commission will 19b–4(f)(6) thereunder,4 which renders post all comments on the Commission’s the proposal effective upon filing with Internet Web site (http://www.sec.gov/ the Commission. The Commission is rules/sro.shtml). Copies of the 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 ISE proposes to amend its Schedule of proposed rule change between the Commission and any person, other than Fees to: (1) Clarify the terms on which it offers the ISE Open/Close Trade those that may be withheld from the Profile, a market data product described public in accordance with the below; and (2) adopt a subscription fee provisions of 5 U.S.C. 552, will be for the sale of historical ISE Open/Close available for inspection and copying in Trade Profile. The text of the proposed the Commission’s Public Reference rule change is available at the Exchange, Room, 100 F Street, NE., Washington, on the Exchange’s Web site at http:// DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. www.ise.com, and at the Commission’s Copies of the filing also will be available Public Reference Room. for inspection and copying at the II. Self-Regulatory Organization’s principal office of the Exchange. All Statement of the Purpose of, and comments received will be posted Statutory Basis for, the Proposed Rule without change; the Commission does Change not edit personal identifying In its filing with the Commission, the information from submissions. You Exchange included statements should submit only information that you wish to make available publicly. All concerning the purpose of, and basis for, the proposed rule change and discussed submissions should refer to File any comments it received on the Number SR–ISE–2007–110 and should proposed rule change. The text of these be submitted on or before January 9, statements may be examined at the 2008. places specified in Item IV below. The For the Commission, by the Division of Exchange has prepared summaries, set Trading and Markets, pursuant to delegated forth in sections A, B, and C below, of authority.10 the most significant aspects of such Florence E. Harmon, statements. mstockstill on PROD1PC66 with NOTICES Paper Comments Deputy Secretary. [FR Doc. E7–24535 Filed 12–18–07; 8:45 am] 1 15 BILLING CODE 8011–01–P 2 17 10 17 CFR 200.30–3(a)(12). VerDate Aug<31>2005 21:40 Dec 18, 2007 Jkt 214001 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 ISE currently creates volume data for each ISE listed option that consists of opening buys and opening sells and closing buys and closing sells.5 ISE currently uses a subset of this data, the customer ‘‘opening only’’ trade data, for its calculation of investor sentiment, the ISE Sentiment Index, or ISEE, and for ISEE Select. The Commission recently approved a broader market data offering comprised of the entire opening and closing trade data of ISE listed options of both customers and firms, referred to by the Exchange as the ISE Open/Close Trade Profile.6 The ISE Open/Close Trade Profile offering is subdivided by origin code (i.e., customer or firm) and the customer data is then further subdivided by order size. The volume data is summarized by day and series (i.e., symbol, expiration date, strike price, call or put). ISE Open/Close Trade Profile is a subscription service, available to both members and nonmembers, and that enables subscribers to create their own proprietary put/call calculations. The data is compiled and formatted by ISE as an end of day file. The Exchange charges both members and non-members $600 per month based on an annual subscription 7 for the ISE Open/Close Trade Profile market data offering. ISE now proposes to sell historical ISE Open/Close Trade Profile, a market data offering comprised of the entire opening and closing trade data of both customers and firms that dates back to May 2005, to both members and nonmembers, on an ad-hoc basis or as a complete set that dates back to May 2005. Ad-hoc subscribers will be able to purchase this data for any number of months, beginning from May 2005 through the current month. Alternatively, subscribers will be able to purchase the entire set of this data, beginning from May 2005 through the 5 An opening buy is a transaction that creates or increases a long position and an opening sell is a transaction that creates or increases a short position. A closing buy is a transaction made to close out an existing position. A closing sell is a transaction to reduce or eliminate a long position. 6 See Securities Exchange Act Release No. 56254 (August 15, 2007), 72 FR 47104 (August 22, 2007) (SR–ISE–2007–70). 7 The Exchange notes that while historical ISE Open/Close Trade Profile is available on a month to month basis, the non-historical ISE Open/Close Trade Profile offering is available only on an annual subscription basis, which the Exchange proposes to clarify by adding the words ‘‘With an annual subscription’’ under the Notes section on its Schedule of Fees. E:\FR\FM\19DEN1.SGM 19DEN1

Agencies

[Federal Register Volume 72, Number 243 (Wednesday, December 19, 2007)]
[Notices]
[Pages 71986-71988]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-24535]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56956; File No. SR-ISE-2007-110]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing of Proposed Rule Change Relating to the $1 Strike 
Pilot Program

December 13, 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 November 14, 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 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

    ISE proposes to expand the $1 Strike Pilot Program (``Pilot 
Program'') and requests permanent approval of the Pilot Program. The 
text of the proposed rule change is available at the Exchange, the 
Commission's Public Reference Room, and http://www.ise.com.

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

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

1. Purpose
    The purpose of the proposed rule change is to expand the Pilot 
Program and to request permanent approval of

[[Page 71987]]

the Pilot Program.\3\ The Pilot Program currently allows ISE to select 
a total of 5 individual stocks on which an option series may be listed 
at $1 strike price intervals. In order to be eligible for selection 
into the Pilot Program, the underlying stock must close below $20 in 
its primary market on the previous trading day. If selected for the 
Pilot Program, the Exchange may list strike prices at $1 intervals from 
$3 to $20, but no $1 strike price may be listed that is greater than $5 
from the underlying stock's closing price in its primary market on the 
previous day. The Exchange also may list $1 strikes on any other option 
class designated by other securities exchanges that employ a similar 
Pilot Program under their respective rules. The Exchange may not list 
long-term option series (LEAPS) at $1 strike price intervals for any 
class selected for the Pilot Program. The Exchange also is restricted 
from listing any series that would result in strike prices being $0.50 
apart.
---------------------------------------------------------------------------

    \3\ The Commission approved the Pilot Program on June 16, 2003. 
See Securities Exchange Act Release No. 48033 (June 16, 2003), 68 FR 
37036 (June 20, 2003) (SR-ISE-2003-17). The Pilot Program has 
subsequently been extended through June 5, 2008. See Securities 
Exchange Act Release Nos. 49827 (June 8, 2004), 69 FR 33966 (June 
17, 2004) (SR-ISE-2004-21) (extending the Pilot Program until August 
5, 2004); 50060 (July 22, 2004), 69 FR 45864 (July 30, 2004) (SR-
ISE-2004-26) (extending the Pilot Program for 10 months until June 
5, 2005); 51769 (May 31, 2005), 70 FR 33232 (June 7, 2005) (SR-ISE-
2005-22) (extending the Pilot Program until June 5, 2006); 53806 
(May 15, 2006), 71 FR 29694 (May 23, 2006) (SR-ISE-2006-20) 
(extending the Pilot Program until June 5, 2007); and 55715 (May 7, 
2007), 72 FR 26854 (May 11, 2007) (SR-ISE-2007-26) (extending the 
Pilot Program until June 5, 2008).
---------------------------------------------------------------------------

    The Exchange proposes to expand the Pilot Program to allow ISE to 
select a total of 10 individual stocks on which an option series may be 
listed at $1 strike price intervals. Additionally, ISE proposes to 
expand the price range on which it may list $1 strikes from $3 to $50. 
The existing restrictions on listing $1 strikes would continue, i.e., 
no $1 strike price may be listed that is greater than $5 from the 
underlying stock's closing price in its primary market on the previous 
day, and ISE is restricted from listing any series that would result in 
strike prices being $0.50 apart.
    As stated in the Commission order approving ISE's Pilot Program and 
in the subsequent extensions of the Pilot Program,\4\ ISE believes that 
$1 strike price intervals provide investors with greater flexibility in 
the trading of equity options that overlie lower priced stocks by 
allowing investors to establish equity options positions that are 
better tailored to meet their investment objectives. The Exchange 
states that its member firms representing customers have repeatedly 
requested that ISE seek to expand the Pilot Program, both in terms of 
the number of classes on which an option series may be listed at $1 
strike price intervals and the range in which $1 strikes may be listed.
---------------------------------------------------------------------------

    \4\ See id.
---------------------------------------------------------------------------

    With regard to the impact on systems capacities, ISE's analysis of 
the Pilot Program shows that the impact on the automated systems of 
ISE, the Options Price Reporting Authority (``OPRA''), and market data 
vendors has been minimal. The Exchange analyzed the quoting activity 
for all classes selected for the Pilot Program as a percentage of all 
quoting activity for all classes being quoted during the specified 
number of months.\5\ The Exchange concluded that, prior to the 
implementation of the Pilot Program in May 2003, the number of Best 
Bid/Offer (``BBO'') quotes sent to OPRA in the five classes selected 
for the Pilot Program represented approximately 0.47% of all BBO quotes 
sent by the Exchange.\6\ As of April 2007, the BBO quote share in the 
five classes selected for the Pilot Program remained below May 2003 
levels in all months analyzed by the Exchange, with the exception of 
one month, February 2005.\7\ The Exchange notes that these statistics 
may overstate the contribution of $1 strike prices because these 
figures also include quotes for options series listed in intervals 
higher than $1 (i.e., $2.50 strikes) in the same option classes. Even 
with the non-$1 strike series quotes included in these figures, ISE 
believes that the overall impact on capacity is still minimal. ISE 
represents that is has sufficient capacity to handle an expansion of 
the Pilot Program, as proposed.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 55715 (May 7, 2007), 
72 FR 26854 (May 11, 2007) (SR-ISE-2007-26), Exhibit 3, Pilot 
Program Report (providing empirical analyses of the impact of the 
Pilot Program on the capacity of automated systems during years 2003 
to 2007).
    \6\ Id.
    \7\ Id.
---------------------------------------------------------------------------

    The Exchange believes that the Pilot Program has provided investors 
with greater trading opportunities and flexibility and the ability to 
more closely tailor their investment strategies and decisions to the 
movement of the underlying security. Furthermore, the Exchange has not 
detected any material proliferation of illiquid option series resulting 
from the narrower strike price intervals. For these reasons, ISE 
requests that the Pilot Program be approved on a permanent basis.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder and, in particular, 
the requirements of Section 6(b) of the Act.\8\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
requirements of Section 6(b)(5) of the Act,\9\ in that the rules of an 
exchange be designed to promote just and equitable principles of trade, 
to prevent fraudulent and manipulative acts, to remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest. The Exchange believes that expanding the Pilot Program will 
result in a continuing benefit to investors by giving them more 
flexibility to closely tailor their investment decisions in a greater 
number of securities and for a more extended period of time than 
currently permitted.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange 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 comments on the proposed rule change 
and 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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which ISE consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing,

[[Page 71988]]

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-2007-110 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-2007-110. 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, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. 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 Number SR-ISE-2007-110 and should be 
submitted on or before January 9, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-24535 Filed 12-18-07; 8:45 am]
BILLING CODE 8011-01-P