

[Federal Register: July 21, 2006 (Volume 71, Number 140)]
[Notices]               
[Page 41490]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21jy06-84]                         


[[Page 41490]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54151; File No. SR-ISE-2006-27]

 
Self-Regulatory Organizations; International Securities Exchange, 
Inc.; Order Granting Approval of Proposed Rule Change Relating to 
Automatic Execution of Non-Customer Orders

July 14, 2006.
    On May 15, 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 ISE Rule 714 to provide that incoming 
Non-Customer Orders \3\ would not be automatically executed at prices 
that are inferior to the best bid or offer disseminated by another 
national securities exchange (``NBBO'') and that Non-Customer Orders 
that are not automatically executed would be rejected. The proposed 
rule change also would clarify the handling of Public Customer Orders 
\4\ that are not automatically executed and update the rule text to 
conform with the Exchange's current handling of ``fill-or-kill'' 
orders. The proposed rule change was published for comment in the 
Federal Register on June 14, 2006.\5\ The Commission received no 
comments on the proposal. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See ISE Rule 100(a)(23).
    \4\ See ISE Rule 100(a)(33).
    \5\ See Securities Exchange Act Release No. 53946 (June 6, 
2006), 71 FR 34406 (``Notice'').
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    The Commission has reviewed carefully the proposed rule change and 
finds that it is consistent with the requirements of section 6 of the 
Act \6\ and the rules and regulations thereunder applicable to a 
national securities exchange.\7\ In particular, the Commission finds 
that the proposed rule change is consistent with section 6(b)(5) of the 
Act,\8\ which requires, among other things, that the rules of an 
exchange be designed 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.
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    \6\ 15 U.S.C. 78f.
    \7\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
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    In particular, the Commission believes that the proposed change 
should help to prevent Non-Customer Orders from automatically trading 
at prices that are inferior to the NBBO. The Commission also believes 
that the proposed rule change provides clarity with respect to the 
handling of Public Customer Orders and Non-Customer Orders when such 
orders are not automatically executed--Public Customer Orders would be 
handled by the Primary Market Maker pursuant to ISE Rule 803(c) and 
Non-Customer Orders would be automatically rejected. The Commission 
further believes that the proposed change relating to ``fill-or-kill'' 
orders clarifies for investors and market participants how such orders 
will be handled by the Exchange.
    The Commission notes that the Exchange represents that the proposed 
rule change with respect to the handling of Non-Customer Orders 
requires the Exchange to implement a systems change that will be 
implemented by early September 2006. Therefore, this part of the 
proposed rule change will not be operative until such systems change is 
implemented.\9\
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    \9\ The Exchange represents in the Notice that it would issue a 
Regulatory Information Circular notifying members at least five days 
prior to the operative date of the rule change.
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    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-ISE-2006-27) is approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    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. E6-11571 Filed 7-20-06; 8:45 am]

BILLING CODE 8010-01-P
