
[Federal Register: October 8, 2008 (Volume 73, Number 196)]
[Notices]               
[Page 59008-59009]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08oc08-110]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58710; File No. SR-ISE-2008-63]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Order Approving Proposed Rule Change Relating to the Price 
Improvement Mechanism

October 1, 2008.

I. Introduction

    On July 31, 2008, the International Securities Exchange, LLC 
(``Exchange'' or ``ISE'') 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

[[Page 59009]]

proposed rule change to modify its Price Improvement Mechanism 
(``PIM'') auction eligibility requirements to eliminate the requirement 
that there be at least three market makers quoting in the relevant 
series. The proposed rule change was published for comment in the 
Federal Register on August 27, 2008.\3\ 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 Securities Exchange Act Release No. 58401 (August 21, 
2008), 73 FR 50663.
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II. Description of the Proposal

    The Exchange's PIM auction process currently allows Electronic 
Access Members (``EAMs'') to enter two-sided orders (``Crossing 
Transaction'') to provide better prices than the ISE best bid or offer 
to agency orders.\4\ The customer side of these orders is then exposed 
to other members to give them an opportunity to participate in the 
trade at the proposed cross price or better. ISE's current rules 
require, among other things, that an EAM enter an order into the PIM 
only when there are at least three market makers quoting in the options 
series.\5\ The Exchange is now proposing to eliminate this requirement.
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    \4\ See Securities Exchange Act Release No. 50819 (December 8, 
2004), 69 FR 75093 (December 15, 2004) (approving rules implementing 
the PIM). See also Securities Exchange Act Release No. 57847 (May 
21, 2008), 73 FR 30987 (May 29, 2008) (approving a proposed rule 
change to permit a member to enter an agency order into the PIM at a 
price that is equal to the national best bid or offer (``NBBO'') 
when the ISE's best bid or offer is inferior to the NBBO).
    \5\ See ISE Rule 723(b)(1).
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III. Discussion

    After careful review, 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 
and, in particular, with Section 6(b)(5) of the Act,\6\ which requires, 
among other things, 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.\7\
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    \6\ 15 U.S.C. 78f(b)(5).
    \7\ In approving this proposed rule change, 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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    ISE's current requirement that there must be at least three market 
makers quoting in the option series at the time an EAM enters an order 
into the PIM was designed, in part, to increase the likelihood of 
competition in the auction. In approving ISE's proposal to establish 
the PIM, the Commission stated that it believed that the three market 
maker requirement would ``improve the opportunity for an [a]gency 
[o]rder to be exposed to a competitive auction.'' \8\
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    \8\ See Securities Exchange Act Release No. 50819 (December 8, 
2004), 69 FR 75093, 75096 (December 15, 2004).
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    ISE rules permit all members to enter improvement orders into the 
PIM for their own account or for the account of a public customer.\9\ 
Because of this opportunity for broad participation in PIM auctions, 
the Commission believes that orders submitted to the PIM will continue 
to be exposed to a meaningful, competitive auction, even without the 
three market maker requirement. For this reason, the Commission finds 
that ISE's proposal to eliminate the three market maker requirement is 
consistent with the Act.
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    \9\ See ISE Rule 723(c)(2).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-ISE-2008-63) be, and hereby 
is, approved.
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    \10\ 15 U.S.C. 78s(b)(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).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-23842 Filed 10-7-08; 8:45 am]

BILLING CODE 8011-01-P
