E7-13068. Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change as Modified by Amendment No. 1 Thereto Relating to a Fee Reduction and Fee Cap in Options on IWM

June 28, 2007.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) ^[1] and Rule 19b-4 thereunder,^[2] notice is hereby given that on June 1, 2007, the International Securities Exchange, LLC (“ISE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by the Exchange. On June 26, 2007, the Exchange filed Amendment No. 1 to the proposed rule change.^[3] ISE has designated this proposal as one establishing or changing a due, fee, or other charge imposed by ISE under Section 19(b)(3)(A)(ii) of the Act ^[4] and Rule 19b-4(f)(2) thereunder,^[5] which renders the proposal effective upon filing with the Commission. 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

ISE proposes to establish a reduction and a cap in fees for trading options on the iShares Russell 2000® Index Fund (“IWM”). The text of the proposed rule change is available at the Exchange, its Web Site at http://www.iseoptions.com/​legal/​proposed_​rule_​changes.asp, and the Commission's Public Reference Room.

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 Exchange 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 Exchange 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 Exchange proposes to amend its Schedule of Fees to impose, on a pilot basis until June 30, 2007, both a reduction in and a cap on exchange transaction and comparison fees for IWM options. Specifically, any Member with monthly Average Daily Volume (“ADV”) of 8,000 contracts in IWM options would receive a $.10 discount from the standard transaction fees for contracts traded above that amount, up to ADV of 10,000 contracts in IWM options. For contracts in IWM options traded in excess of 10,000 ADV for a month, the Exchange will waive all transaction and comparison fees. The proposed fee discount program applies to ISE Market Maker orders, non-ISE Market Maker orders, and Firm Proprietary orders in IWM options. The Exchange's current transaction fees for these order types are as follows: For ISE Market Maker orders, the transaction fees range from $.21 to $.12 a contract, depending on the Exchange's trading volume, plus a comparison fee of $.03 per contract; for non-ISE Market Maker orders and Firm Proprietary orders, the transaction fees are $.37 and $.15, respectively, plus a comparison fee of $.03 per contract. The fee reduction and waiver is intended to increase the Exchange's competitiveness in trading IWM options. The Exchange notes that the proposed discount will apply to transaction fees only and not to the payment for order flow fee or any licensing surcharge fee that may be applicable to the trading of options in IWM.

This proposal is similar to the volume-based discount fee program currently in place for trading in options on the NASDAQ-100 Index Tracking Stock® (QQQQ®) and for trading in the Exchange's Facilitation Mechanism.^[6]

2. Statutory Basis

The basis under the Act for this proposed rule change is the requirement under Section 6(b)(4) of the Act ^[7] 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 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 proposed rule change has been designated as a fee change pursuant to Section 19(b)(3)(A)(ii) of the Act ^[8] and Rule 19b-4(f)(2) ^[9] thereunder, because it establishes or changes a due, fee, or other charge imposed by the Exchange. Accordingly, the proposal took effect upon filing with the Commission. 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.^[10]

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. Comments may be submitted by any of the following methods:

Electronic Comments

• Use the Commission's Internet comment form (http://www.sec.gov/​rules/​sro.shtml); or
• Send an e-mail to [e-mail]. Please include File Number SR-ISE-2007-39 on the subject line.

Paper Comments

• Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2007-39. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/​rules/​sro.shtml). 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, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-ISE-2007-39 and should be submitted on or before July 27, 2007.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.¹¹

Florence E. Harmon,

Deputy Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  17 CFR 240.19b-4.

3.  Amendment No. 1 made clarifying changes to the purpose section, clarified the operation of the Exchange's waiver program with respect to the Comparison and Non-ISE Market Maker fees, and corrected a typographical error in Exhibit 5.

4.  15 U.S.C. 78s(b)(3)(A)(ii).

5.  17 CFR 240.19b-4(f)(2).

6.  See Securities Exchange Act Release No. 49147 (January 29, 2004), 69 FR 5629 (February 5, 2004) (SR-ISE-2003-32).

7.  15 U.S.C. 78f(b)(4).

8.  15 U.S.C. 78s(b)(3)(A)(ii).

9.  17 CFR 240.19b-4(f)(2).

10.  For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposed rule change under Section 19(b)(3)(C) of the Act, the Commission considers the period to commence on June 26, 2007, the date on which ISE filed Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).

11.  17 CFR 200.30-3(a)(12).