
[Federal Register: November 19, 2007 (Volume 72, Number 222)]
[Notices]               
[Page 65116-65117]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19no07-110]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56781; File No. SR-ISE-2007-93]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Order Granting Accelerated Approval of a 
Proposed Rule Change To Send P/A Orders Through Linkage Prior to the 
Opening of Trading

November 13, 2007.
    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 October 1, 2007, the International Securities Exchange, LLC 
(``Exchange'' or ``ISE'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which items have been substantially prepared by 
the ISE. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons and is approving 
the proposed rule change on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(l).
    \2\ 17 CFR 240. 19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE proposes to amend ISE Rule 701 to permit the sending of 
Principal Acting as Agent Orders (``P/A Orders'')\3\ through the 
Intermarket Options Linkage (``Linkage'') prior to the opening of 
trading. This proposal would conform ISE Rule 701 to Joint Amendment 
No. 23 \4\ of the Linkage Plan.\5\ The text of the proposed rule change 
is available at the ISE, at the Commission's Public Reference Room, and 
at http://www.ise.com.
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    \3\ See Section 2(16)(a) of the Plan for the Purpose of Creating 
and Operating an Intermarket Option Linkage (``Linkage Plan'').
    \4\ See Securities Exchange Act Release No. 56780 (November 13, 
2007) (File No. 4-429).
    \5\ On July 28, 2000, the Commission approved a national market 
system plan for the purpose of creating and operating an intermarket 
options market linkage proposed by the Amex, CBOE, and ISE. See 
Securities Exchange Act Release No. 43086 (July 28, 2000), 65 FR 
48023 (August 4, 2000). Subsequently, Phlx, Pacific Exchange, Inc. 
(n/k/a NYSE Arca, Inc.), and BSE joined the Linkage Plan. See 
Securities Exchange Act Release Nos. 43573 (November 16, 2000), 65 
FR 70851 (November 28, 2000); 43574 (November 16, 2000), 65 FR 70850 
(November 28, 2000); and 49198 (February 5, 2004), 69 FR 7029 
(February 12, 2004).
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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 Exchange included statements 
concerning the purpose of, and basis for, its 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 III below. The Exchange 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 ISE Rule 701 to conform it to a 
proposed amendment to section 7(a)(i) of the Linkage Plan. The proposed 
rule change will permit the use of Linkage prior to the opening of 
trading. Prior to the Commission's approval of Joint Amendment No. 23 
to the Linkage Plan, the Linkage Plan did not permit use of Linkage 
before an exchange opens for trading and disseminates a quotation in an 
options series. In addition, there was no trade-through protection for 
opening trades. As a result, if there was a better market away at the 
time a Participant opens its market, the ISE Primary Market Maker 
(``PMM''), responsible both for the opening and for protecting customer 
orders, could not access that market for a customer. The customer thus 
could receive a price inferior to the national best bid and offer. This 
amendment to ISE Rule 701 will allow the sending of Linkage P/A Orders 
prior to the opening, allowing the PMM to access better markets on 
behalf of customers prior to the ISE's opening.
    In implementing this proposed rule change, the Exchange will ensure 
that customers always receive the best price for their orders. Under 
the Linkage Plan, a receiving market has five seconds to respond to a 
P/A Order,\6\ and the receiving market can reject a response it 
receives more than five seconds after sending the order.\7\ In the 
unlikely event that the ISE opens its market during this five-second 
period, it is possible that the

[[Page 65117]]

opening price could differ from the price of an executed P/A Order 
(either higher or lower). In that case, the ISE represents that it will 
ensure that the PMM provides the customer with the most advantageous 
price. Thus, the proposed rule change only can benefit customers by 
providing them with possible price improvement at the opening.
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    \6\ See Linkage Plan Section 7(a)(ii)(B)(1)(a).
    \7\ See Linkage Plan Section 7(a)(iii).
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations under the Act applicable to 
national securities exchanges and, in particular, the requirements of 
section 6(b) of the Act.\8\ Specifically, the Exchanges believe the 
proposed rule change is consistent with the requirements of section 
6(b)(5) of the Act \9\ that the rules of an exchange be designed to 
prevent fraudulent and manipulative acts, 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change would impose no 
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 neither solicited nor received comments on this 
proposal.

III. 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-2007-93 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-2007-93. 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 submissions, 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, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filings also will be available for 
inspection and copying at the principal offices of the Exchange. 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 No. SR-ISE-2007-93 and should be 
submitted on or before December 10, 2007.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Changes

    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulations thereunder, applicable to national securities 
exchanges.\10\ In particular, the Commission finds that the proposal is 
consistent with the provisions of section 6(b)(5) of the Act \11\ in 
that it is 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. The Commission believes that allowing the Exchange to 
send P/A Orders to the Linkage prior to the opening should facilitate 
investors' intermarket access to superior prices.
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    \10\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. See 
U.S.C. 78c(f).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Commission finds good cause for approving the proposed rule 
change before the 30th day after the date of publication of notice of 
filing thereof in the Federal Register. Granting accelerated approval 
would facilitate the implementation of the proposed rule change in 
conjunction with the Join Amendment No. 23 to the Linkage Plan.\12\ In 
addition, the Commission notes that the Exchange has committed to 
ensuring that, for Linkage P/A Orders sent prior to the opening, PMMs 
will provide customers with the most advantageous price in the event 
that the ISE opens its market while the Exchange is awaiting a response 
to such a P/A Order. Therefore, the Commission finds good cause, 
consistent with section 19(b)(2) of the Act,\13\ to approve the 
proposed rule change on an accelerated basis.
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    \12\ See supra note 4.
    \13\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the Act 
\14\, that the proposed rule change (SR-ISE-2007-93) be, and it hereby 
is, approved on an accelerated basis.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 15 U.S.C. 78s(b)(2).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-22552 Filed 11-16-07; 8:45 am]

BILLING CODE 8011-01-P
