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Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the International Securities Exchange LLC, Relating to Adoption of a Marketing Fee

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Start Preamble Start Printed Page 17590 March 26, 2001.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”) [1] and Rule 19b-4 thereunder,[2] notice is hereby given that on February 26, 2001, the International Securities Exchange LLC (the “Exchange” or the “ISE”) filed with the Securities and Exchange Commission the proposed rule change as described in Items I, II, and III below, which items have been prepared by the ISE. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The ISE is proposing to establish a fee to fund Exchange marketing and business development efforts, and to reduce the payment for order flow fee by an amount equal to the new fee.

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 ISE included statements concerning the purpose of, and basis for, the 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 IV below. The ISE 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 ISE operates a payment for order flow program as approved by the Commission.[3] This program is funded through a $.75 fee that ISE market makers pay on each customer contract they execute.[4] According to the terms of the ISE's program, the payment for order flow funds may be used by the ISE's primary market makers (“PMMs”) only to pay Electronic Access Members for order flow sent to the Exchange. The ISE administers the disbursement of these funds as instructed by the PMMs. By the terms of the program, however, the ISE may not itself utilize these funds.

The ISE proposes to reduce the $.75 fee to $.65 per contract and to adopt a marketing fee of $.10 to be paid by market makers for each customer contract they execute. The purpose of this proposed rule change is to provide the ISE with a source of funding for marketing efforts aimed at increasing order flow from Electronic Access Members to the Exchange, while not increasing the total fees that ISE market makers pay. The ISE would not use these funds to make cash payments for order flow. Rather, the ISE would use the money for general marketing and business development activities that would supplement the PMM's efforts to attract order flow to the ISE.

2. Basis

The basis for the proposed rule change is the requirement under Section 6(b)(4) of the Act [5] that an exchange have an equitable allocation of reasonable dues, fees and other charges among its members and other persons using its facilities.

B. Self-Regulatory Organization's Statement on Burden on Competition

The ISE believes that the proposed rule change does not impose any 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 ISE has not solicited, and does not intend to solicit, comments on this proposed rule change. The ISE has not received any unsolicited written comments from members or other interested parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

The foregoing rule change, which establishes or changes a due, fee, or other charge applicable to members of the Exchange, has become effective pursuant to Section 19(b)(3)(A) of the Act [6] and Rule 19b-4(f)(2) thereunder.[7] At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate the rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.

IV. 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. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. Copies of the submission, 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. Copies of the filing will also be available for inspection and copying at the principal office of the ISE. All submissions should refer to SR-ISE-01-06 and should be submitted by April 23, 2001.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[8]

Jonathan G. Katz,


End Signature End Preamble


3.  See Securities Exchange Act Release No. 43833 (January 10, 2001), 66 FR 7822 (January 25, 2001) (SR-ISE-00-10).

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4.  See Securities Exchange Act Release No. 43919 (February 1, 2001), 66 FR 9612 (February 8, 2001) (SR-ISE-01-01).

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[FR Doc. 01-8027 Filed 3-30-01; 8:45 am]