
[Federal Register: March 18, 2008 (Volume 73, Number 53)]
[Notices]               
[Page 14520-14521]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18mr08-130]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57468; File No. SR-ISE-2008-09]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Order Approving Proposed Rule Change To Amend Exchange Rules 
Related to the Imposition of Fines for Minor Rule Violations

March 11, 2008.
    On January 18, 2008, 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 amend ISE Rule 1614, 
``Imposition of Fines for Minor Rule Violations,'' to add summary fines 
for violations of ISE Rule 1100, ``Exercise of Options Contracts.'' The 
proposed rule change was published for comment in the Federal Register 
on February 5, 2008.\3\ The Commission received no comments regarding 
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 Securities Exchange Act Release No. 57229 (January 29, 
2008), 73 FR 6753.
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    The Exchange proposes to add a summary fine schedule pursuant to 
its Minor Rule Violation Plan (``MRVP'') that will apply to any member 
who fails to submit to the Exchange in a timely manner pursuant to ISE 
Rule 1100 (or a regulatory information circular issued pursuant to ISE 
Rule 1100) an ``Advice Cancel'' or exercise instruction relating to the 
exercise or nonexercise of a noncash-settled equity option. The 
Exchange believes that imposing the

[[Page 14521]]

fine levels specified with respect to both individual members and 
member organizations, and providing for a rolling 24-month surveillance 
period, will serve as an effective deterrent to such violative 
conduct.\4\
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    \4\ In addition, as a member of the Intermarket Surveillance 
Group, the Exchange, as well as certain other self-regulatory 
organizations (``SROs'') executed and filed on October 29, 2007 with 
the Commission, a final version of an Agreement pursuant to Section 
17(d) of the Act (the ``17d-2 Agreement''). As set forth in the 17d-
2 Agreement, the SROs have agreed that their respective rules 
concerning the filing of Expiring Exercise Declarations, also 
referred to as Contrary Exercise Advices, of options contracts, are 
common rules. As a result, the proposal to amend ISE's MRVP will 
result in further consistency in sanctions among the SROs that are 
signatories to the 17d-2 Agreement concerning Contrary Exercise 
Advice violations.
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    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.\5\ In 
particular, the Commission believes that the proposal is consistent 
with Section 6(b)(5) of the Act,\6\ which requires that the rules of an 
exchange be designed to promote just and equitable principles of trade, 
to facilitate transactions in securities, 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 further believes that ISE's proposal to impose sanctions 
on individuals and member organizations who fail to submit Advice 
Cancel or exercise instructions in a timely manner is consistent with 
Sections 6(b)(1) and 6(b)(6) of the Act,\7\ which require that the 
rules of an exchange enforce compliance with, and provide appropriate 
discipline for, violations of Commission and Exchange rules. In 
addition, the Commission finds that the proposal is consistent with the 
public interest, the protection of investors, or otherwise in 
furtherance of the purposes of the Act, as required by Rule 19d-1(c)(2) 
under the Act,\8\ which governs minor rule violation plans. The 
Commission believes that the proposed rule change should strengthen the 
Exchange's ability to carry out its oversight and enforcement 
responsibilities as an SRO in cases where full disciplinary proceedings 
are unsuitable in view of the minor nature of the particular violation.
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    \5\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
    \8\ 17 CFR 240.19d-1(c)(2).
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    In approving this proposed rule change, the Commission in no way 
minimizes the importance of compliance with ISE rules and all other 
rules subject to the imposition of fines under the MRVP. The Commission 
believes that the violation of any SRO rules, as well as Commission 
rules, is a serious matter. However, the MRVP provides a reasonable 
means of addressing rule violations that do not rise to the level of 
requiring formal disciplinary proceedings, while providing greater 
flexibility in handling certain violations. The Commission expects that 
ISE would continue to conduct surveillance with due diligence and make 
a determination based on its findings, on a case-by-case basis, whether 
a fine of more or less than the recommended amount is appropriate for a 
violation under the ISE MRVP or whether a violation requires formal 
disciplinary action.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\9\ and Rule 19d-1(c)(2) under the Act,\10\ that the proposed rule 
change (SR-ISE-2008-09) be, and hereby is, approved and declared 
effective.
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    \9\ 15 U.S.C. 78s(b)(2).
    \10\ 17 CFR 240.19d-1(c)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(44).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-5351 Filed 3-17-08; 8:45 am]

BILLING CODE 8011-01-P
