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Federal Register / Vol. 73, No.

46 / Friday, March 7, 2008 / Notices 12489

For the Commission, by the Division of Exchange’s principal office, and at the Option Pilot Program,’’ commenced on
Trading and Markets, pursuant to delegated Commission’s Public Reference Room. January 25, 2007, and increases the
authority.14 position and exercise limits for IWM
Florence E. Harmon, II. Self-Regulatory Organization’s
options from 250,000 contracts to
Deputy Secretary. Statement of the Purpose of, and
500,000 contracts.7
[FR Doc. E8–4513 Filed 3–6–08; 8:45 am]
Statutory Basis for, the Proposed Rule The standard position limits were last
Change increased in 1998. Since that time, there
BILLING CODE 8011–01–P
In its filing with the Commission, the has been a steady increase in the
Exchange included statements number of accounts that (a) approach
SECURITIES AND EXCHANGE concerning the purpose of, and basis for, the position limit; (b) exceed the
COMMISSION the proposed rule change and discussed position limits; and (c) are granted an
[Release No. 34–57416; File No. SR–ISE– any comments it received on the exemption to the applicable position
2008–20] proposed rule change. The text of these limit. The Exchange represents that over
statements may be examined at the the course of the last year, when both
Self-Regulatory Organizations; places specified in Item IV below. The pilot programs were in effect, the
International Securities Exchange, Exchange has prepared summaries, set Exchange’s Market Surveillance
LLC; Notice of Filing and Immediate forth in Sections A, B, and C below, of Department encountered only a handful
Effectiveness of Proposed Rule the most significant aspects of such of violations. The Exchange believes
Change, as Modified by Amendment statements. that all of these violations were deemed
No. 1 Thereto, To Make Permanent Two inadvertent and were due primarily to
A. Self-Regulatory Organization’s miscounting, technical problems, or a
Pilot Programs That Increase Position
Statement of the Purpose of, and misinterpretation of position limit
and Exercise Limits on Equity Options
Statutory Basis for, the Proposed Rule calculation methodologies. None of
March 3, 2008. Change these violations were deemed to be a
Pursuant to Section 19(b)(1) of the 1. Purpose result of manipulative activities.
Securities Exchange Act of 1934 Since the last position limit increase,
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 The purpose of the proposed rule there has been an exponential increase
notice is hereby given that on February change is to make permanent two pilot in the overall volume of exchange
28, 2008, the International Securities programs that increase position and traded options. Part of this volume is
Exchange, LLC (‘‘Exchange’’ or ‘‘ISE’’), exercise limits for equity options. To attributable to a corresponding increase
filed with the Securities and Exchange permanently establish the two pilot in the number of overall market
Commission (‘‘Commission’’) the programs, the Exchange proposes to participants. This growth in market
proposed rule change as described in amend Rule 412, Position Limits, and participants has in turn brought about
Items I and II below, which Items have Rule 414, Exercise Limits. Rule 412 additional depth and increased liquidity
been substantially prepared by the subjects equity options to one of five in exchange traded options.
Exchange. On February 29, 2008, NYSE different position limits depending on Further, since the last position limit
submitted Amendment No. 1 to the the trading volume and outstanding increase, and throughout the duration of
proposed rule change.3 The Exchange shares of the underlying security. Rule the two pilot programs, the Exchange
has designated this proposal as non- 414 establishes exercise limits for the has not encountered any regulatory
controversial under Section corresponding options at the same issues regarding the applicable position
19(b)(3)(A)(iii) of the Act 4 and Rule levels as the corresponding security’s limits, and states that there is a lack of
19b–4(f)(6) thereunder,5 which renders position limits. evidence of market manipulation
the proposed rule change effective upon The first pilot program, the ‘‘Rule 412 schemes, which justifies making
filing with the Commission. The Pilot Program,’’ commenced on March permanent the Rule 412 and IWM
Commission is publishing this notice to 2, 2005, and provides for an increase to Option Pilot Programs.
solicit comments on the proposed rule the standard (or ‘‘non-pilot’’) position As the anniversary of listed options
change, as amended, from interested and exercise limits for equity option trading approaches its 35th year, the
persons. contracts and for options on the Exchange believes that the existing
PowerShares QQQ Trust (‘‘QQQQ’’).6 surveillance procedures and options
I. Self-Regulatory Organization’s
The second pilot program, the ‘‘iShares reporting requirements at the ISE, at
Statement of the Terms of Substance of
Russell 2000 Index Fund (‘IWM’) other options exchanges, and at the
the Proposed Rule Change
several clearing firms are capable of
The Exchange seeks to make 6 The Rule 412 Pilot Program was approved by
properly identifying unusual and/or
permanent two pilot programs that the Commission on March 2, 2005. See Securities
illegal trading activity. The Exchange’s
increase position and exercise limits for Exchange Act Release No. 51295 (March 2, 2005),
70 FR 11292 (March 8, 2005) (SR–ISE–2005–14).
equity options. To permanently The Rule 412 Pilot Program has been extended five 7 The IWM Option Pilot Program doubles the
establish the two pilot programs, the times for six month periods by the Commission, position and exercise limits for IWM options under
Exchange proposes to amend Rule 412, and expires on March 1, 2008. See Securities the Rule 412 Pilot Program. See Rule 412,
Position Limits, and Rule 414, Exercise Exchange Act Release Nos. 52265 (August 15, Supplementary Materials .01. Absent both of these
2005), 70 FR 48996 (August 22, 2005) (SR–ISE– pilot programs, the standard position and exercise
Limits. The text of the proposed rule 2005–39); 53345 (February 22, 2006), 71 FR 10579 limit for IWM options is 75,000 option contracts.
change is available on the Exchange’s (March 1, 2006) (SR–ISE–2006–10); 54335 (August The proposal that established the IWM Option
Web site (http://www.ise.com), at the 18, 2006), 71 FR 50954 (August 28, 2006) (SR–ISE– Pilot Program was effective upon filing. See
2006–47); 55311 (February 16, 2007), 72 FR 8408 Securities Exchange Act Release No. 55175 (January
14 17 (February 26, 2007) (SR–ISE–2007–15); and 56263 25, 2007), 72 FR 4753 (February 1, 2007) (SR–ISE–
CFR 200.30–3(a)(12).
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1 15
(August 15, 2007), 72 FR 47105 (August 22, 2007) 2007–07). The IWM Option Pilot Program has been
U.S.C. 78s(b)(1). (SR–ISE–2007–69).
2 17 CFR 240.19b–4.
extended twice by the Commission and expires on
In connection with the March 21, 2007, transfer March 1, 2008. See Securities Exchange Act Release
3 In Amendment No. 1, the Exchange made a
of sponsorship of the Nasdaq-100 Trust, the name Nos. 56020 (July 6, 2007), 72 FR 38109 (July 12,
technical correction to the proposed rule text. of the trust was changed to the ‘‘PowerShares QQQ 2007) (SR–ISE–2007–56); and 57144 (January 14,
4 15 U.S.C. 78s(b)(3)(A)(iii).
Trust.’’ See QQQQ prospectus available at http:// 2008), 73 FR 3785 (January 22, 2008) (SR–ISE–
5 17 CFR 240.19b–4(f)(6). www.powershares.com/pdf/P-QQQ-PRO-1.pdf. 2008–03).

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12490 Federal Register / Vol. 73, No. 46 / Friday, March 7, 2008 / Notices

procedures include daily monitoring of C. Self-Regulatory Organization’s Commission may summarily abrogate
market movements via automated Statement on Comments on the the rule change if it appears to the
surveillance techniques to identify Proposed Rule Change Received From Commission that such action is
unusual activities in both options and Members, Participants or Others necessary or appropriate in the public
their underlying securities. The Exchange has not solicited, and interest, for the protection of investors,
Accordingly, the Exchange represents does not intend to solicit, comments on or otherwise in furtherance of the
that its surveillance procedures and this proposed rule change. The purposes of the Act.
options reporting procedures, in Exchange has not received any IV. Solicitation of Comments
conjunction with the financial unsolicited written comments from
requirements and risk management members or other interested parties. Interested persons are invited to
review procedures generally in place at submit written data, views, and
III. Date of Effectiveness of the arguments concerning the foregoing,
the clearing firms and the Options Proposed Rule Change and Timing for
Clearing Corporation, will serve to including whether the proposed rule
Commission Action change is consistent with the Act.
adequately address any concerns the
Commission may have with respect to The Exchange has designated the Comments may be submitted by any of
account(s) engaging in any manipulative proposed rule change as one that: (1) the following methods:
schemes or assuming too high a level of Does not significantly affect the Electronic Comments:
risk exposure. Further, the Exchange protection of investors or the public
believes that the current financial interest; (2) does not impose any • Use the Commission’s Internet
requirements imposed by the Exchange significant burden on competition; and comment form (http://www.sec.gov/
and by the Commission adequately (3) does not become operative for 30 rules/sro.shtml); or
address concerns that a member or its days from the date of filing, or such • Send an e-mail to rule-
customer may try to maintain an shorter time as the Commission may comments@sec.gov. Please include File
inordinately large unhedged position in designate if consistent with the No. SR–ISE–2008–20 on the subject
an equity option. protection of investors and the public line.
interest. Therefore, the foregoing rule
The Exchange believes that the Paper Comments
change has become effective pursuant to
trading volume in equity options will Section 19(b)(3)(A) of the Act 9 and • Send paper comments in triplicate
continue to grow and that such subparagraph (f)(6) of Rule 19b–4 to Nancy M. Morris, Secretary,
continued growth provides investors an thereunder.10 The Exchange notes that Securities and Exchange Commission,
opportunity to participate in the options the proposed rule change is based on a 100 F Street, NE., Washington, DC
markets. The Exchange believes that the similar proposal recently approved by 20549–1090.
non-pilot position and exercise limits the Commission.11 The Exchange has All submissions should refer to File
are restrictive, and maintaining those asked the Commission to waive the Number SR–ISE–2008–20. This file
limits will hamper the listed options operative delay to permit the proposed number should be included on the
markets from being able to compete rule change to become operative prior to subject line if e-mail is used. To help the
fairly and effectively with the over-the- the 30th day after filing. Commission process and review your
counter markets. The Rule 412 Pilot Program and the comments more efficiently, please use
Equity option position limits have IWM Option Pilot Program were only one method. The Commission will
been gradually expanded from 1,000 scheduled to expire on March 1, 2008. post all comments on the Commissions
contracts in 1973 to the current level of The Commission believes that waiving Internet Web site (http://www.sec.gov/
75,000 contracts for the largest and most the 30-day operative delay of the rules/sro.shtml). Copies of the
actively traded equity options. To date, Exchange’s proposal is consistent with submission, all subsequent
there have been no adverse affects on the protection of investors and the amendments, all written statements
the markets as a result of these past public interest because it will allow the with respect to the proposed rule
increases in the limits for equity option position and exercise limits to remain at change that are filed with the
contracts. consistent levels during the transition Commission, and all written
from the pilot programs to permanent communications relating to the
2. Statutory Basis status.12 Therefore, the Commission proposed rule change between the
The Exchange believes that the designates the proposal to be operative Commission and any person, other than
proposed rule change is consistent with upon filing. those that may be withheld from the
the requirements provided under At any time within 60 days of the
public in accordance with the
Section 6(b)(5) 8 of the Act that the rules filing of the proposed rule change, the
provisions of 5 U.S.C. 552, will be
of an exchange be designed to promote 9 15
available for inspection and copying in
U.S.C. 78s(b)(3)(A).
just and equitable principles of trade, to 10 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– the Commission’s Public Reference
prevent fraudulent and manipulative 4(f)(6)(iii) requires a self-regulatory organization to Room, 100 F Street, NE., Washington,
acts and, in general, to protect investors provide the Commission with written notice of its DC 20549, on official business days
and the public interest. intent to file the proposed rule change, along with between the hours of 10 a.m. and 3 p.m.
a brief description and text of the proposed rule
B. Self-Regulatory Organization’s change, at least five business days prior to the date Copies of such filing also will be
Statement on Burden on Competition of filing of the proposed rule change, or such available for inspection and copying at
shorter time as designated by the Commission. The the principal office of the Exchange. All
Exchange has fulfilled this requirement. comments received will be posted
The Exchange believes that the 11 See Securities Exchange Act Release No. 57352
proposed rule change does not impose without change; the Commission does
sroberts on PROD1PC70 with NOTICES

(February 19, 2008), 73 FR 10076 (February 25,


any burden on competition that is not 2008) (order granting accelerated approval to SR– not edit personal identifying
necessary or appropriate in furtherance CBOE–2008–07). information from submissions. You
12 For purposes only of waiving the 30-day
of the purposes of the Act. should submit only information that
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
you wish to make available publicly. All
8 15 U.S.C. 78(f)(b)(5). and capital formation. See 15 U.S.C. 78c(f). submissions should refer to File

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Federal Register / Vol. 73, No. 46 / Friday, March 7, 2008 / Notices 12491

Number SR–ISE–2008–20 and should be in Item IV below. NSCC has prepared provided with audited financial
submitted on or before March 28, 2008. summaries, set forth in sections (A), (B), information that is acceptable to NSCC.6
For the Commission, by the Division of and (C) below, of the most significant The new Policy Statement would also
Trading and Markets, pursuant to delegated aspects of such statements.3 require that a foreign entity (1) be
authority.13 subject to regulation in its home country
A. Self-Regulatory Organization’s
Florence E. Harmon, and (2) be in good standing with its
Statement of the Purpose of, and
Deputy Secretary. home country regulator.
Statutory Basis for, the Proposed Rule The proposed rule change is
[FR Doc. E8–4516 Filed 3–6–08; 8:45 am] Change consistent with the requirements of
BILLING CODE 8011–01–P
NSCC Rule 2 and Addendum B to Section 17A(b)(3)(F) of the Act. The
NSCC’s Rules address the admission of proposed rule change does not unfairly
SECURITIES AND EXCHANGE applicants as NSCC members. NSCC’s discriminate against foreign entities
COMMISSION Rules provide that admission as a seeking admission as members because
member is subject to an applicant’s it appropriately takes into account the
[Release No. 34–57391; File No. SR–NSCC– demonstration that it meets NSCC’s unique risks to NSCC raised by their
2007–15] standards of financial responsibility, admission.
operational capability, and character.
Self-Regulatory Organizations; Additionally, each member must B. Self-Regulatory Organization’s
National Securities Clearing continue to be in a position to Statement on Burden on Competition
Corporation; Notice of Filing of a demonstrate to NSCC that it meets these NSCC perceives no impact on
Proposed Rule Change Relating to the standards. The purpose of the proposed competition by reason of the proposed
Admission of Foreign Entities rule change is to establish admission rule change.
February 27, 2008. criteria that will permit a well-qualified C. Self-Regulatory Organization’s
Pursuant to Section 19(b)(1) of the foreign entity to become an NSCC Statement on Comments on the
Securities Exchange Act of 1934 member and thereby obtain direct Proposed Rule Change Received From
(‘‘Act’’),1 notice is hereby given that on access to NSCC’s services while Members, Participants, or Others
November 16, 2007, National Securities assuring that the unique risks associated
Clearing Corporation (‘‘NSCC’’) filed with the admission of foreign entities Written comments from NSCC
with the Securities and Exchange are adequately addressed. Participants or others have not been
Commission (‘‘Commission’’) the The admission of foreign entities as solicited or received on the proposed
proposed rule change as described in members raises a number of unique rule change.
Items I, II, and III below, which items risks and issues, including that (1) the III. Date of Effectiveness of the
have been prepared primarily by NSCC. entity is not subject to U.S. federal or Proposed Rule Change and Timing for
The Commission is publishing this state regulation, (2) the operation of the Commission Action
notice to solicit comments on the laws of the entity’s home country and
time zone differences 4 may impede the Within thirty-five days of the date of
proposed rule change from interested publication of this notice in the Federal
persons. successful exercise of NSCC’s rights and
remedies particularly in the event of the Register or within such longer period (i)
I. Self-Regulatory Organization’s entity’s failure to settle, and (3) financial as the Commission may designate up to
Statement of the Terms of Substance of information about the foreign entity ninety days of such date if it finds such
the Proposed Rule Change made available to NSCC for monitoring longer period to be appropriate and
The proposed rule change would purposes may be less adequate than publishes its reasons for so finding or
establish a policy statement regarding information about U.S.-based entities. (ii) as to which the self-regulatory
the admission of entities that are The proposed rule change would add organization consents, the Commission
organized in a foreign country and are a new Policy Statement 5 to NSCC’s will:
not subject to U.S. federal or state Rules that in addition to requiring (A) By order approve the proposed
regulation (‘‘foreign entities’’) as execution of the standard NSCC rule change or
Membership Agreement would require a (B) institute proceedings to determine
members of NSCC.2
foreign entity to enter into a series of whether the proposed rule change
II. Self-Regulatory Organization’s undertakings and agreements that are should be disapproved.
Statement of the Purpose of, and designed to address jurisdictional IV. Solicitation of Comments
Statutory Basis for, the Proposed Rule concerns and to assure that NSCC is
Change Interested persons are invited to
submit written data, views, and
In its filing with the Commission, 3 The Commission has modified parts of these

statements. arguments concerning the foregoing,


NSCC included statements concerning
4 Time zone differences could complicate including whether the proposed rule
the purpose of and basis for the communications between the foreign member and change is consistent with the Act.
proposed rule change and discussed any its U.S. Settling Bank with respect to the timely Comments may be submitted by any of
comments it received on the proposed payment of the member’s net debit to NSCC,
including intraday demands for payment. These the following methods:
rule change. The text of these statements
differences could also delay NSCC’s receipt of
may be examined at the places specified information available in the member’s home
Electronic Comments
13 17
country to others (including its other creditors) • Use the Commission’s Internet
CFR 200.30–3(a)(12). about the member’s financial condition on the basis
1 15 U.S.C. 78s(b)(1). of which NSCC would have taken steps to protect
comment form (http://www.sec.gov/
rules/sro.shtml) or
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2 The Depository Trust Company (‘‘DTC’’) has the interests of NSCC and its members.
filed a similar proposed rule change that would 5 NSCC’s proposed ‘‘Policy Statement on the

permit DTC to adopt a similar policy statement with Admission of Non-U.S. Entities as Direct Clearing 6 In the Policy Statement, NSCC has reserved the

respect to the admission of foreign entities as Corporation Members’’ is attached as Exhibit 5 to right to waive certain of the criteria where such
participants. Securities Exchange Act Release No. its filing, which can be found at http:// criteria are inappropriate to a particular applicant
57392 (February 27, 2008) (File No. SR–DTC–2007– www.dtcc.com/downloads/legal/rule_filings/2007/ or class of applicants (e.g., a foreign government or
16). nscc/2007–15.pdf. international securities clearing corporation).

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