[Federal Register: November 9, 2006 (Volume 71, Number 217)]
[Notices]
[Page 65857-65859]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09no06-146]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54697; File No. SR-ISE-2006-61]
Self-Regulatory Organizations; International Securities
Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change and Amendment No. 1 Thereto Relating to Fee Changes
November 2, 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 October 5, 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 by the ISE.
On October 17, 2006, ISE filed Amendment No. 1 to the proposed rule
change.\3\ The ISE has designated this proposal as one establishing or
changing a due, fee, or other charge imposed by the ISE under Section
19(b)(3)(A)(ii) of the Act,\4\ and Rule 19b-4(f)(2) thereunder,\5\
which renders the proposal effective upon filing with the Commission.
The Commission is publishing this notice to solicit comments on the
proposed rule change, as amended, from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, the Exchange revised footnote 10, infra,
to clarify that six of the Premium Products that are the subject of
this filing constitute Fund Shares under ISE Rule 502(h), while the
other two Premium Products are narrow-based index options listed
pursuant to the Exchange's generic listing standards. The Exchange
also represented that Amendment No. 1 did not affect the proposed
fees covered by this filing.
\4\ 15 U.S.C. 78s(b)(3)(A)(ii).
\5\ 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 eight Premium Products.\6\ The text
of the
[[Page 65858]]
proposed rule change, as amended, is available on the ISE's Web site
(http://www.iseoptions.com/legal/proposed_rule_changes.asp), at the
principal office of the ISE, and at the Commission's Public Reference
Room.
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\6\ ``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 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 eight
Premium Products: KBW Bank Index (``BKX''), ISE Revere Natural Gas
Index (``FUM''), iShares Dow Jones U.S. Energy Sector Index Fund
(``IYE''), iShares Dow Jones Transportation Average Index Fund
(``IYT''),\7\ PowerShares WilderHill Clean Energy Portfolio
(``PBW''),\8\ Merrill Lynch Utilities HOLDRs Trust (``UTH''),\9\
Consumer Staples Select Sector SPDR Fund (``XLP''), and Consumer
Discretionary Select Sector SPDR Fund (``XLY'').\10\ Specifically, the
Exchange is proposing to adopt an execution fee and a comparison fee
for all transactions in options on BKX, FUM, IYE, IYT, PBW, UTH, XLP,
and XLY.\11\ The amount of the execution fee and comparison fee for
products covered by this filing shall be $0.15 and $0.03 per contract,
respectively, for all Public Customer Orders \12\ 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.\13\ 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. The Exchange
believes the proposed rule change will further the Exchange's goal of
introducing new products to the marketplace that are competitively
priced.
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\7\ iShares[supreg] is a registered trademark of Barclays Global
Investors, N.A. (``BGI''), a wholly owned subsidiary of Barclays
Bank PLC. ``Dow Jones,'' ``Dow Jones U.S. Energy Sector Index
Fund,'' and ``Dow Jones Transportation Average Index Fund'' are
trademarks and service marks of Dow Jones & Company, Inc. (``Dow
Jones'') and have been licensed for use for certain purposes by BGI.
All other trademarks and service marks are the property of their
respective owners. Neither IYE nor IYT are sponsored, endorsed,
issued, sold or promoted by Dow Jones. BGI and Dow Jones have not
licensed or authorized ISE to: (i) Engage in the creation, listing,
provision of a market for trading, marketing, and promotion of
options on IYE and IYT; or (ii) use and refer to any of their
trademarks or service marks in connection with the listing,
provision of a market for trading, marketing, and promotion of
options on IYE and IYT or with making disclosures concerning options
on IYE and IYT under any applicable federal or state laws, rules or
regulations. BGI and Dow Jones do not sponsor, endorse, or promote
such activity by ISE and are not affiliated in any manner with ISE.
\8\ PowerSharesTM and PBWTM are trademarks
of PowerShares Capital Management LLC (``PowerShares'' or the
``Adviser''). The WilderHill Clean Energy Index is a service mark of
WilderShares, LLC (``WilderShares''). All other trademarks and
service marks are the property of their respective owners.
WilderShares is not affiliated with the PBW or with the Adviser. PBW
is not sponsored, endorsed, sold or promoted by WilderShares, and
WilderShares makes no representation regarding the advisability of
investing in PBW. WilderShares and PowerShares have not licensed or
authorized ISE to: (i) Engage in the creation, listing, provision of
a market for trading, marketing, and promotion of options on PBW; or
(ii) use and refer to any of their trademarks or service marks in
connection with the listing, provision of a market for trading,
marketing, and promotion of options on PBW or with making
disclosures concerning options on PBW under any applicable federal
or state laws, rules or regulations. WilderShares and PowerShares do
not sponsor, endorse, or promote such activity by ISE and are not
affiliated in any manner with ISE.
\9\ UTH issues Depositary Receipts called Utilities
HOLDRSSM representing undivided beneficial ownership in
the U.S.-traded common stock of a group of specified companies that,
among other things, are involved in various segments of the
utilities industry. ``HOLDRS'' and ``HOLding Company Depositary
ReceiptS'' are service marks of Merrill Lynch & Co., Inc. (``Merrill
Lynch''). All other trademarks and service marks are the property of
their respective owners. Merrill Lynch has not licensed or
authorized ISE to: (i) Engage in the creation, listing, provision of
a market for trading, marketing, and promotion of options on UTH; or
(ii) use and refer to any of their trademarks or service marks in
connection with the listing, provision of a market for trading,
marketing, and promotion of options on UTH or with making
disclosures concerning options on UTH under any applicable federal
or state laws, rules or regulations. Merrill Lynch does not sponsor,
endorse, or promote such activity by ISE and is not affiliated in
any manner with ISE.
\10\ The Exchange represents that IYE, IYT, PBW, UTH, XLP and
XLY constitute ``Fund Shares,'' as defined by ISE Rule 502(h). The
Exchange further represents that BKX and FUM meet the standards of
ISE Rule 2002(b), which allows the ISE to begin trading these
products by filing Form 19b-4(e) at least five business days after
commencement of trading these new products pursuant to Rule 19b-4(e)
of the Act. Accordingly, the ISE has submitted Form 19b-4(e) to the
Commission.
\11\ 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).
\12\ ``Public Customer Order'' is defined in ISE Rule 100(a)(33)
as an order for the account of a Public Customer. ``Public
Customer'' is defined in ISE Rule 100(a)(32) as a person that is not
a broker or dealer in securities.
\13\ The execution fee is currently between $0.21 and $0.12 per
contract side, depending on the Exchange Average Daily Volume, and
the comparison fee is currently $0.03 per contract side.
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Additionally, the Exchange has entered into a license agreement
with Keefe, Bruyette & Woods, Inc. in connection with the listing and
trading of options on BKX; with Revere Data, LLC in connection with the
listing and trading of options on FUM; and with Standard & Poor's in
connection with the listing and trading of options on XLP and XLY. As
with certain other licensed options, to defray the licensing costs, the
Exchange is adopting a surcharge fee of $0.10 per contract for trading
in options on BKX, XLP and XLY, and $0.05 per contract for trading in
options on FUM. The Exchange believes charging the participants that
trade these products is the most equitable means of recovering the
costs of the licenses. However, because of competitive pressures in the
industry, the Exchange proposes to exclude Public Customer Orders from
this surcharge fee. Accordingly, this surcharge fee will only be
charged to Exchange members with respect to non-Public Customer Orders
(e.g., ISE Market Maker, non-ISE Market Maker, and Firm Proprietary
orders) and shall apply to Linkage Orders \14\ under a pilot program
that is set to expire on July 31, 2007. Further, since options on BKX,
IYE, IYT, PBW, UTH, XLP and XLY are multiply-listed, the Payment for
Order Flow fee shall also apply.
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\14\ See ISE Rule 1900.
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Finally, the Exchange has terminated its development agreement with
Boenning & Scattergood, Inc. for options on the ISE Water Index
(``HHO''). As a result, the Exchange proposes to no longer charge a
$0.05 per contract surcharge fee for options on HHO. Accordingly, the
Exchange proposes to delete the reference to a surcharge for HHO on its
Schedule of Fees.
2. Statutory Basis
The Exchanges believes that the basis under the Act for this
proposed rule change is the requirement under Section 6(b)(4) of the
Act \15\ that an exchange have an equitable allocation of reasonable
dues, fees and other charges
[[Page 65859]]
among its members and other persons using its facilities.
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\15\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposed rule change, as amended,
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, as amended, 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 \16\ and
Rule 19b-4(f)(2) \17\ thereunder. At any time within 60 days of the
filing of such amended 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.\18\
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 19b-4(f)(2).
\18\ For purposes of calculating the 60-day period within which
the Commission may summarily abrogate the proposed rule change under
Section 19(b)(3)(C) of the Act, the Commission considers the period
to commence on October 17, 2006, the date on which the ISE submitted
Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, 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-2006-61 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-2006-61. 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-2006-61
and should be submitted on or before November 30, 2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-18956 Filed 11-8-06; 8:45 am]
BILLING CODE 8011-01-P