[Federal Register: November 9, 2006 (Volume 71, Number 217)]
[Notices]
[Page 65859-65860]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09no06-147]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54704; File No. SR-ISE-2006-44]
Self-Regulatory Organizations; International Securities Exchange,
Inc.; Order Approving a Proposed Rule Change To Amend the Schedule of
Fees To Expand the Broker Marketing Alliance To Include Non-Broker-
Dealers With Regard to the Enhanced Sentiment Market Data Offering
November 3, 2006.
On July 25, 2006, the International Securities Exchange, Inc.
(``ISE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') a proposed rule change, pursuant to Section
19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule
19b-4 thereunder,\2\ to amend its Schedule of Fees regarding its
enhanced sentiment market data offering to expand the Broker Marketing
Alliance by eliminating its limitation to only broker-dealers. The
proposed rule change was published for comment in the Federal Register
on October 3, 2006.\3\ The Commission received no comments on the
proposal.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 54508 (September 26,
2006), 71 FR 58459 (``Notice'').
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The Exchange offers an enhanced sentiment market data product that
allows an end user to identify investor sentiment for individual
securities or select industry sectors based on a calculation
methodology that utilizes proprietary Exchange opening long option
customer trade data.\4\ Previously, the Commission approved a fee
structure for this product.\5\ The amount that a subscriber is charged
depends upon whether the subscription is obtained directly from the
Exchange or indirectly through a U.S. broker-dealer participating with
the ISE in a Broker Marketing Alliance. A Broker Marketing Alliance is
an arrangement between ISE and a participating broker-dealer that
allows a participating U.S. broker-dealer to be compensated for
enlisting subscribers to the enhanced sentiment market data product.
There are four subscription levels of fees based on the
[[Page 65860]]
number of customer queries. Broker-dealer clients pay lower fees at the
four levels than subscribers directly to the Exchange, and broker-
dealers receive a rebate of the subscription fees collected.
Specifically, the Fee Schedule provides that participating broker-
dealers receive: (1) A rebate of 35% of the subscription fee collected
from subscribers; and (2) an additional bonus rebate based on (a) the
achievement of certain subscription levels; and (b) the size of their
firm, as measured by the number of the firm's customers.
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\4\ The enhanced sentiment market data is based on the ISE
Sentiment Index or ISEE. The ISEE, which is created by the ISE,
provides an intra-day picture of how investors view stock prices by
assessing customers' option trading activity. See Securities
Exchange Act Release Nos. 53756 (May 3, 2006), 71 FR 27529 (May 11,
2006) (SR-ISE-2005-56) (order approving the prior fee structure for
the product) (``Prior Order''); and 53532 (March 21, 2006), 71 FR
15501 (March 28, 2006) (SR-ISE-2005-56).
\5\ See Prior Order, supra at n.4.
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With the instant proposed rule change, the Exchange seeks to expand
the Broker Marketing Alliance by eliminating its limitation to only
broker-dealers.\6\ Under the proposal, the lower level subscription
fees billed to broker-dealer clients will now be expanded to apply to
subscribers of non-broker-dealers. These non-broker-dealers will also
be allowed to receive the same rebates and bonus rebates as described
above and previously approved for broker-dealers participating in the
Broker Marketing Alliance.\7\
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\6\ In the ISE's Schedule of Fees, it will now be referred to as
a ``Subscription through Marketing Alliance.''
\7\ See Prior Order, supra at n.4.
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In support of its proposal, the Exchange states that, since the
introduction of this market data offering, it has received interest
from many non-broker-dealers, including firms that provide investors
with market commentary, investment tools and educational materials,
seeking to sell subscriptions and participate in a revenue sharing
arrangement similar to the Broker Marketing Alliance. The Exchange
believes that allowing non-broker dealers to market its enhanced
sentiment market data offering will increase the number of product
subscribers.
The Commission has reviewed carefully the proposed rule change and
finds that it is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\8\ In particular, the Commission finds that the proposed rule
change is consistent with Section 6(b)(4) of the Act,\9\ which requires
that an exchange have an equitable allocation of reasonable dues, fees
and other charges among its members and other persons using its
facilities. We note that the fee structure for subscribers of non-
broker-dealers is identical to the fee structure previously approved
for subscribers of participating U.S. broker-dealers in the Broker
Marketing Alliance and, as noted above, the rebates and revenue sharing
arrangements are the same. Further, as noted in the Prior Order,
enhanced sentiment market data is a purely optional product, and it is
not necessary to subscribe to this service to trade options on the ISE.
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\8\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition and
capital formation. See 15 U.S.C. 78c(f).
\9\ 15 U.S.C. 78f(b)(4).
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It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\10\ that the proposed rule change be and hereby is approved.
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\10\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation, pursuant
to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
Nancy M. Morris,
Secretary.
[FR Doc. E6-18975 Filed 11-8-06; 8:45 am]
BILLING CODE 8011-01-P