

[Federal Register: October 4, 2006 (Volume 71, Number 192)]
[Notices]               
[Page 58649-58650]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04oc06-101]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54531; File No. SR-ISE-2006-52]

 
 Self-Regulatory Organizations; International Securities 
Exchange, Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change Relating to the Block Order Mechanism

September 28, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 6, 2006, the International Securities Exchange, Inc. 
(``ISE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the ISE. The 
ISE filed the proposed rule change pursuant to Section 19(b)(3)(A) of 
the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the 
proposal effective upon filing with the Commission. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to reduce the exposure period for orders 
entered into the Block Order Mechanism under Rule 716 to three seconds. 
The text of the proposed rule change is available on the ISE's Web site 
(http://www.iseoptions.com), at the ISE's Office of the Secretary, and 

at the Commission's Public Reference Room.

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
    Under ISE Rule 716, members can seek liquidity for a single-sided 
order of at least fifty contracts (a ``block order'') by entering such 
order into the Block Order Mechanism. Currently, upon entry of an 
order, the Block Order Mechanism gives market participants thirty 
seconds to respond with contra-side trading interest.\5\ The ISE has 
reduced the exposure period for the other special order mechanisms 
contained in Rule 716, the Facilitation Mechanism and the Solicited 
Order Mechanism, to three seconds and has found that this is more than 
enough time for market participants to respond.

[[Page 58650]]

Because the longer exposure period introduces unnecessary market risk 
to orders entered into the Block Order Mechanism, the Exchange proposes 
to reduce the Block Order Mechanism exposure period to three seconds.
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    \5\ At the conclusion of this time period, either an execution 
occurs automatically, or the order is cancelled. Bids (offers) on 
the Exchange at the time the block order is executed that are priced 
higher (lower) than the block execution price, as well as responses 
that are priced higher (lower) than the block execution price, are 
executed at the block execution price. Responses, quotes and non-
customer orders at the block execution price participate in the 
execution of the block order according to the allocation method set 
forth in ISE Rule 713(e). See ISE Rule 716(c).
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2. Statutory Basis
    The basis under the Act for this proposed rule change is found in 
Section 6(b)(5),\6\ in that the proposed rule change is designed to 
promote just and equitable principles of trade, 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. In particular, the proposed rule change will reduce 
unnecessary market risk for orders entered into the Block Order 
Mechanism.
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    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition.

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. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \7\ and Rule 19b-
4(f)(6) thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the 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.
    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\9\ 
However, Rule 19b-4(f)(6)(iii) \10\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The ISE provided the Commission with 
written notice of its intent to file this proposed rule change at least 
five business days prior to the date of filing of the proposed rule 
change. In addition, the ISE has requested that the Commission waive 
the 30-day operative delay. The Commission has previously stated its 
belief that in an electronic environment--such as that of the ISE 
options market--reducing the exposure period for orders to three 
seconds could facilitate the prompt execution of such orders, while 
providing market participants with an adequate opportunity to compete 
for them.\11\ Thus, the Commission believes that waiving the 30-day 
operative delay for the instant proposed rule change is consistent with 
the protection of investors and the public interest. For this reason, 
the Commission designates the proposal to be effective and operative 
immediately.\12\
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    \9\ 17 CFR 240.19b-4(f)(6)(iii).
    \10\ Id.
    \11\ See, e.g., Securities Exchange Act Release Nos. 52711 
(November 1, 2005), 70 FR 67508 (November 7, 2005) (SR-ISE-2004-04); 
53384 (February 27, 2006), 71 FR 11280 (March 6, 2006) (SR-PCX-2005-
135); and 53567 (March 29, 2006), 71 FR 17529 (April 6, 2006) (SR-
CBOE-2006-09).
    \12\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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 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 Number SR-ISE-2006-52 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-2006-52. 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-2006-52 and should be submitted on or before October 
25, 2006.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
Nancy M. Morris,
Secretary.
[FR Doc. E6-16363 Filed 10-3-06; 8:45 am]

BILLING CODE 8010-01-P
