
[Federal Register: March 12, 2008 (Volume 73, Number 49)]
[Notices]               
[Page 13267-13268]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12mr08-122]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57441; File No. SR-ISE-2007-95]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Order Approving a Proposed Rule Change, as Modified by Amendment 
Nos. 2 and 3, Relating to Reserve Orders

March 6, 2008.
    On October 12, 2007, the International Securities Exchange, LLC 
(``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 establish a new order type 
called Reserve Orders. The ISE filed Amendment Nos. 1 and 2 to the 
proposal on January 17, 2008.\3\ The ISE filed Amendment No. 3 to the 
proposal on January 25, 2008.\4\ The proposed rule change, as modified 
by Amendment Nos. 2 and 3, was published for comment in the Federal 
Register on February 1, 2008.\5\ The Commission received no comment 
letters regarding the proposal, as modified by Amendment Nos. 2 and 3. 
This order approves the proposed rule change, as modified by Amendment 
Nos. 2 and 3.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 2 replaces the original filing and Amendment 
No. 1 in their entirety.
    \4\ Amendment No. 3 clarifies portions of the purpose section of 
the proposed rule change.
    \5\ Securities Exchange Act Release No. 57207 (January 25, 
2008), 73 FR 6225.
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    The Exchange proposes to amend ISE Rule 715, ``Types of Orders,'' 
to add a new order type, Reserve Orders.\6\ A Reserve Order is a 
single-sided limit order that has both a displayed portion and a non-
displayed or reserve portion, both of which are available for execution 
against incoming marketable orders.\7\ Non-marketable Reserve Orders 
rest on the book.\8\ The non-displayed portion of a Reserve Order will 
be available for execution only after all displayed interest at that 
price has been executed.\9\ Both the displayed and the non-displayed 
portions of a Reserve Order will be ranked initially by the specified 
limit price and time of entry, and both the displayed and non-displayed 
portions of a Reserve Order will trade in accordance with the priority 
and allocation provisions in ISE Rule 713.\10\
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    \6\ The ISE also proposes to revise paragraphs (c), (d), and (e) 
of ISE Rule 713, ``Priority of Quotes and Orders,'' to reflect the 
implementation of Reserve Orders.
    \7\ See ISE Rule 715(g)(1).
    \8\ See ISE Rule 715(g)(1).
    \9\ See ISE Rule 715(g)(5).
    \10\ See ISE Rule 715(g)(2), (3), and (5).
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    When the displayed portion of a Reserve Order has been decremented, 
in whole or in part, it will be refreshed from the non-displayed 
portion of the resting Reserve Order. Upon any refresh, the entire 
displayed portion of the order will be ranked at the specified limit 
price, assigned a new entry time (i.e., the time that the newly 
displayed portion of the order was refreshed), and given priority in 
accordance with ISE Rule 713.\11\ Any remaining non-displayed portion 
of the order will receive the same time stamp as the newly displayed 
portion of the order.\12\
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    \11\ See ISE Rule 715(g)(4).
    \12\ See ISE Rule 715(g)(5).
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    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national

[[Page 13268]]

securities exchange.\13\ Specifically, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the Act,\14\ which 
requires, in part, 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.
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    \13\ 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).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that Reserve Orders will provide market 
participants with greater flexibility in displaying and managing their 
orders. This may encourage market participants to bring liquidity to 
the Exchange that they might not otherwise have submitted. In addition, 
because the ISE's rules provide that the non-displayed portion of a 
Reserve Order will be available for execution only after all displayed 
interest at that price has been executed,\15\ there is an incentive for 
market participants to display their trading interest. The Commission 
also notes that the rules of another options exchange provide for the 
use of reserve orders,\16\ as do the rules of several exchanges trading 
equity securities.\17\
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    \15\ See ISE Rule 715(g)(5).
    \16\ See NYSE Arca Rules 6.62(c)(3) and 6.76(a). In addition, 
the NASDAQ Stock Market LLC (``Nasdaq'') has proposed to use Reserve 
Orders on the Nasdaq Options Market (``NOM''). See Securities 
Exchange Act Release No. 55667 (April 25, 2007), 72 FR 23869 (May 1, 
2007) (File No. SR-NASDAQ-2007-004) (notice of filing of a proposal 
to establish rules governing trading on NOM).
    \17\ See e.g., Amex Rule 131(s)-AEMI, NYSE Rule 204(d), Nasdaq 
Rule 4757(f)(2), and NYSE Arca Equities Rule 7.31(h)(e).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\18\ that the proposed rule change (SR-ISE-2007-95), as modified by 
Amendment Nos. 2 and 3, is approved.
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    \18\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-4838 Filed 3-11-08; 8:45 am]

BILLING CODE 8011-01-P
