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Self-Regulatory Organizations; International Securities Exchange LLC; Order Granting Approval to Proposed Rule Change Relating to Mandatory System Testing

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Start Preamble May 23, 2002.

On February 13, 2002, the International Securities Exchange LLC (the “Exchange” or the “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 proposed rule change relating to mandatory systems testing. Specifically, the ISE proposed a new rule, ISE Rule 419 (“Mandatory Systems Testing”), to allow the Exchange to designate certain systems tests as mandatory for specified classes of members and to discipline members that failed to engage in a mandatory test. In addition, the Exchange proposed modifications to ISE Rule 1614 (“Imposition of Fines for Minor Rule Violations”) to set forth the applicable fines for a member's failure to engage in a mandatory systems test under ISE Rule 419.

The proposed rule change was published for comment in the Federal Register on April 17, 2002.[3] The Commission received no comments on the proposal.

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 [4] and, in particular, the requirements of Section 6 of the Act [5] and the rules and regulations thereunder. Specifically, the Commission believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,[6] which requires, among other things, that the Exchange's rules be designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism for a free and open market and a national market system and, in general, to protect investors and the public interest. In addition, the Commission believes that the proposal is consistent with Section 6(b)(6) of the Act,[7] which requires the Exchange's rules to provide that its members and persons associated with its members be appropriately disciplined for violation of the provisions of the Act, the rules or regulations thereunder, or the rules of the Exchange.

The Commission believes that the rule change should improve ISE's ability to work closely with its members in testing new systems changes in a timely manner. In addition, the Commission believes that the rule change should allow the Exchange to ascertain whether its members' systems are compatible with the Exchange's systems, which should benefit ISE's members as well as investors that transact business on the Exchange.

It is therefore ordered, pursuant to Section 19(b)(2) of the Act,[8] that the proposed rule change (File No. SR-ISE-2002-07) be, and it hereby is, approved.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[9]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


3.  Securities Exchange Act Release No. 45726 (April 10, 2002), 67 FR 18964.

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4.  In approving this proposed rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

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[FR Doc. 02-13483 Filed 5-29-02; 8:45 am]