

[Federal Register: July 17, 2006 (Volume 71, Number 136)]
[Notices]               
[Page 40567-40568]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17jy06-118]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54124; File No. SR-ISE-2005-49]

 
Self-Regulatory Organizations; International Securities Exchange, 
Inc.; Order Approving Proposed Rule Change and Amendment Nos. 1 and 2 
Relating to Complex Order Execution

July 11, 2006.

I. Introduction

    On October 4, 2005, the International Securities Exchange, Inc. 
(``ISE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend ISE Rule 722, ``Complex 
Orders,'' to allow the legs of an options-only complex order to be 
executed in penny increments. The ISE filed Amendment Nos. 1 and 2 to 
the proposal on February 1, 2006, and April 20, 2006, respectively.\3\ 
The proposed rule change, as amended by Amendment Nos. 1 and 2, was 
published for comment in the Federal Register on June 6, 2006.\4\ The 
Commission received no comments regarding the proposal, as amended. 
This order approves the proposed rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 2 replaced the initial filing and Amendment 
No. 1 in their entirety.
    \4\ See Securities Exchange Act Release No. 53909 (May 31, 
2006), 71 FR 32617.
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II. Description of the Proposal

    ISE Rule 722(b)(1) currently allows the options leg(s) of a stock-
option order to be executed in one-cent increments, regardless of the 
minimum increment otherwise applicable to the individual options leg(s) 
of the order.\5\ The ISE proposes to amend ISE Rule 722(b)(1) to allow 
options-only complex orders, as well as stock-option orders, to be 
executed in one-cent increments. The proposal retains the existing 
requirement under the ISE's rules that allows a complex order to take 
priority over established Public Customer interest in the marketplace 
only if at least one leg of the complex order trades at a price that is 
better than the corresponding bid or offer in the marketplace by at 
least one minimum trading increment, as provided in ISE Rule 710.\6\
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    \5\ Under ISE Rule 710, ``Minimum Trading Increments,'' the 
minimum trading increment is $.05 for an options contract trading at 
less than $3.00 per option and $.10 for an options contract trading 
at $3.00 per option or higher.
    \6\ See ISE Rule 722(b)(2).
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III. Discussion

    After careful review, 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 
and, in particular, with Section 6(b)(5) of the Act,\7\ which requires, 
among other things, that the rules of a national securities exchange be 
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 of, a free and open market and a national 
market system and, in general, to protect investors and the public 
interest.\8\ Specifically, the Commission believes that by allowing 
options-only complex orders to be executed in one-cent increments, the 
proposal may facilitate the execution of options-only complex orders by 
providing a greater number of price points at which such orders may be 
executed. As noted above, the ISE's rules will continue to require that 
at least one leg of a complex order trade at a price that is better 
than the corresponding bid or offer in the marketplace by at least one 
minimum trading increment, as provided in ISE Rule 710, when any of the 
established bids or offers in the marketplace consists of a Public 
Customer limit order.\9\
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    \7\ 15 U.S.C. 78f(b)(5).
    \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\ See ISE Rule 722(b)(2).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-ISE-2005-49), as amended, is 
approved.
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    \10\ 15 U.S.C. 78s(b)(2).


[[Page 40568]]


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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).
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Jill M. Peterson,
Assistant Secretary.
 [FR Doc. E6-11228 Filed 7-14-06; 8:45 am]

BILLING CODE 8010-01-P
