[Federal Register: September 11, 2006 (Volume 71, Number 175)]
[Notices]
[Page 53483-53485]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11se06-123]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54401; File No. SR-ISE-2006-53]
Self-Regulatory Organizations; International Securities Exchange,
Inc.; Notice of Filing and Order Granting Accelerated Approval of a
Proposed Rule Change Relating To Doing Business With the Public
September 1, 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 August 31, 2006, the International Securities Exchange, Inc.
(the ``Exchange'' or the ``ISE'') filed with the Securities and
Exchange Commission (the ``Commission'') the proposed rule change as
described in Items I and II below, which items have been prepared by
the ISE. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons and is
[[Page 53484]]
approving the proposal on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 240.19b-4.
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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 adopt a rule with respect to members doing
business with the public on the ISE, in anticipation of the Exchange's
entry into the trading of non-option equity securities. Below is the
text of the proposed rule change. Proposed new language is in italics.
* * * * *
Rule 2106. Doing Business With the Public
An Equity EAM that does business with the public must also be a
member of the NASD.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the ISE included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item III 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
Currently, the ISE only trades options on equity securities and
indices. The purpose of this proposed rule change is to adopt a rule
that incorporates provisions related to non-option equity securities to
reflect ISE's intention to begin trading non-option equity securities.
Specifically, the ISE will require ISE Electronic Access Members
(``EAMs'') trading equity securities on the ISE (``Equity EAMs'') who
do business with the public to also be members of the NASD. As such
those ISE members would be required to comply with NASD rules that
govern the practices of members when doing business with the public.
Among other things, these members would be obligated:
To make suitable recommendations to customers when
recommending the purchase, sale or exchange of any security; \3\
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\3\ See NASD Rules 2310, IM-2310-3 and 2315.
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To be aware of possible application of SEC Rule 15g-1
through 15g-9 when a transaction involves a non-exchange listed equity
security trading for less than five dollars per share; \4\
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\4\ See NASD Rule IM-2310-1.
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To deal fairly with customers and others; \5\
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\5\ See NASD Rule IM-2310-2.
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To use reasonable diligence to ascertain the best inter-
dealer market for the subject security and buy or sell in such market
so that the resultant price to the customer is as favorable as possible
under prevailing market conditions; \6\
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\6\ See NASD Rule 2320.
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To segregate and identify by customers both fully paid and
``excess margin'' securities; \7\
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\7\ See NASD Rule IM-2330.
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To make proper use of a customer's securities or funds;
\8\
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\8\ See NASD Rule 2330.
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To send a statement of account, no less than once every
calendar year, containing a description of any securities position,
money balances, or account activity to each customer whose account had
a security position, money balance, or account activity during the
period since the last such statement was sent to the customer; \9\
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\9\ See NASD Rule 2340.
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To provide customers with a margin disclosure statement
prior to or at the time of opening a margin account; \10\
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\10\ See NASD Rule 2341.
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To comply with the provisions of NASD Rule 2350 if the
member accepts deposits on the premises of a financial institution;
\11\
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\11\ See NASD Rule 2350.
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To provide a risk disclosure statement set forth in NASD
Rule 2361 prior to opening a day-trading account for a customer; \12\
and
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\12\ See NASD Rules 2360 and 2361.
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To not borrow from, or lend money to, a customer unless
the member complies with the provisions of NASD Rule 2370.\13\
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\13\ See NASD Rule 2370.
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2. Statutory Basis
The proposed rule change is consistent with the requirements of the
Act, and the rules and regulations thereunder applicable to a national
securities exchange, and in particular, with the requirements of
Section 6(b)(5) \14\ of the Act. Section 6(b)(5) requires, among other
things, that the rules of an exchange be 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, and
in general, to protect investors and the public interest. Specifically,
ISE believes the proposed rule change will promote just and equitable
principles of trade and protect investors and the public interest by
utilizing rules applicable to NASD members to provide safeguards for
public investors.
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\14\ 5 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
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. 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 No. SR-ISE-2006-53 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-2006-53. 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
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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-2006-53 and should be
submitted on or before October 2, 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 the requirements of the Act and the rules and regulations
thereunder, applicable to a national securities exchange.\15\ In
particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(5) of the Act \16\ in that it promotes
just and equitable principles of trade and protects investors and the
public interest by requiring Equity EAMs that do business with the
public to become NASD members. As NASD members those broker-dealers
would be subject to a set of rules designed to protect investors.\17\
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\15\ In approving this proposal, the Commission has considered
its impact on efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
\16\ 15 U.S.C. 78f(b)(5).
\17\ See, e.g., NASD Rules 2310, 2315, 2320. 2330, 2340, 2341,
2350, 2360, 2361, and 2370, as well as IM-2310 and IM-2330.
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ISE has requested accelerated effectiveness of the proposed rule
change. ISE has also indicated that it believes most EAMs that do
business with the public are already NASD members and all Equity EAMs
that do business with the public are NASD members.\18\ After careful
consideration, the Commission finds good cause, pursuant to Section
19(b)(2) of the Act,\19\ for approving the proposed rule change prior
to the thirtieth day after the date of publication of notice in the
Federal Register. The Commission notes ISE must have rules concerning
doing business with the public in place prior to ISE commencing trading
in non-option equity securities. Moreover, because most EAMs are
already NASD members, the proposal would not impose additional
requirements on the majority of ISE members. Therefore, granting
accelerated approval would facilitate ISE's ability to trade equity
securities in a timely manner. Accordingly, the Commission finds that
there is good cause, consistent with Section 6(b)(5) of the Act,\20\ to
approve the proposal on an accelerated basis.
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\18\ Telephone call between Laura Clare, Assistant General
Counsel, ISE, and Haimera Workie, Special Counsel, Office of Chief
Counsel, Division of Market Regulation, SEC, on August 31, 2006.
\19\ 15 U.S.C. 78s(b)(2).
\20\ 15 U.S.C. 78f(b)(5).
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\21\ that the proposed rule change (SR-ISE-2006-53) is hereby
approved on an accelerated basis.
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\21\ 15 U.S.C. 78s(b)(2).
\22\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\22\
Nancy M. Morris,
Secretary.
[FR Doc. E6-14947 Filed 9-8-06; 8:45 am]
BILLING CODE 8010-01-P