03-18124. Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendments No. 1 and 2 by International Securities Exchange, Inc., Relating to Fee Changes

July 10, 2003.

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 April 22, 2003, the International Securities Exchange, Inc. (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. On May 15, 2003, the ISE filed Amendment No. 1 to the proposed rule change.^[3] On July 8, 2003, the ISE filed Amendment No. 2 to the proposed rule change.^[4] The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons.

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

The Exchange is proposing changes to its Schedule of Fees in order to establish a fee for CLICK^TM through Virtual Private Network (“VPN”), a new type of technical connection to the Exchange. The text of the proposed rule change is available at the Office of the Secretary, the ISE, and at the Commission.

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 ⁵

The Exchange is proposing changes to its Schedule of Fees in order to establish a fee for CLICK^TM through VPN. A CLICK^TM through VPN connection is available to Electronic Access Members (“EAMs”) of the Exchange. CLICK^TM through VPN consists of CLICK^TM (the same front-end, order entry application currently widely utilized by EAMs) running over a secure “virtual private network” over the Internet. CLICK^TM through VPN was designed for EAMs that want a lower cost, lower bandwith connection to the Exchange than the traditional, dedicated network CLICK^TM connection. The Exchange also envisions that EAMs will use CLICK^TM through VPN as a back-up or disaster recovery connection to the Exchange. CLICK^TM through VPN is merely a different means of connecting to the Exchange's existing system. It does not change the operation of the Exchange's existing system, and it does not require any change to the Exchange's surveillance or communications rules. As a result, the Exchange is proposing to establish a monthly fee of $200 per Terminal for CLICK^TM through VPN. The purpose of the CLICK^TM through VPN Fee is to cover the Exchange's costs in connection with maintaining the virtual private network.

2. Statutory Basis

The Exchange believes that the basis under the Act for this proposed rule change is the requirement under section 6(b)(4) of the Act ^[6] 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 Exchange 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 Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange 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 has become effective pursuant to section 19(b)(3) of the Act,^[7] and Rule 19b-4(f)(2) ^[8] thereunder because it establishes or changes a due, fee, or other charge imposed by the Exchange. At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate such 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.^[9]

IV. Solicitation of Comments

Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change, as amended, 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 Section. Copies of such filing will also be available for inspection and copying at the principal office of the ISE. All submissions should refer to the File No. ISE-2003-14 and should be submitted by August 7, 2003.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.^[10]

Margaret H. McFarland,

Deputy Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  17 CFR 240.19b-4.

3.  See letter from Michael Simon, Senior Vice President and General Counsel, ISE, to Nancy Sanow, Assistant Director, Division of Market Regulation (“Division”), Commission, dated May 14, 2003 (“Amendment No. 1”). In Amendment No. 1, the ISE clarified that the word CLICK represents a registered trademark, as opposed to a defined term, and that CLICK/Trade Review Terminal fees do not apply to CLICK through VPN.

4.  See letter from Michael Simon, Senior Vice President and General Counsel, ISE, to Nancy Sanow, Assistant Director, Division, Commission, dated July 3, 2003 (“Amendment No. 2”). In Amendment No. 2, the ISE revises and replaces the original description contained in the purpose section of the notice. In particular, the revised purpose section clarifies that CLICK through VPN is a different means of connecting to the Exchange's existing trading system. ISE also notes that no changes are necessary to the existing ISE surveillance and communication rules to accommodate this connection, or its trading system.

5.  See Amendment No. 2, supra note 4.

6.  15 U.S.C. 78(f)(b)(4).

7.  15 U.S.C. 78s(b)(3)(A).

8.  17 CFR 19b-4(f)(2).

9.  For the purposes of calculating the 60-day abrogation period, the Commission considers the proposed rule change to have been filed on July 8, 2003, the date ISE filed Amendment No. 2.

10.  17 CFR 200.30-3(a)(12).