[Federal Register: March 17, 2006 (Volume 71, Number 52)]
[Notices]
[Page 13875-13882]
[DOCID:fr17mr06-126]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53450; File No. SR-ISE-2006-04]

Self-Regulatory Organizations; International Securities Exchange,
Inc.; Notice of Filing of Proposed Rule Change Relating to Its Proposal
To Reorganize From Its Current Structure Into a Holding Company
Structure

March 8, 2006.
    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 January 12, 2006, the International Securities Exchange, Inc.
(``ISE, Inc.'') 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 prepared by ISE, Inc. The Exchange
filed Amendment No. 1 to the proposed rule change on March 3, 2006, and
withdrew Amendment No. 1 on March 3, 2006. On March 3, 2006, the
Exchange filed Amendment No. 2.\3\ The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Partial Amendment No. 2 dated March 3, 2006 (``Amendment
No. 2'').
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    ISE, Inc. is proposing to reorganize from its current structure
into a holding company structure as more fully described below. The
text of the proposed rule change is available on ISE, Inc.'s Web site
(http://www.iseoptions.com), at the principal office of ISE, Inc., and

at the Commission's Public Reference Room. The text of Exhibit 5 of the
proposed rule change, as well as Amendment No. 2, is also available on
the Commission's Web site (http://www.sec.gov/rules/sro.shtml).

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, ISE, Inc. 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. ISE, Inc. 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
    ISE, Inc. proposes to reorganize from the current structure of ISE,
Inc., a Delaware corporation, into a holding company structure (the
``Reorganization'').\4\ A holding company, International Securities
Exchange Holdings, Inc., a Delaware corporation (``ISE Holdings''), and
its wholly owned subsidiary, International Securities Exchange, LLC, a
Delaware limited liability company (``ISE, LLC''), have been formed in
contemplation of the Reorganization. Consummation of the Reorganization
is conditioned upon satisfaction of certain conditions, including
approval of the Reorganization by the Commission.\5\ After satisfaction
of these conditions, ISE, Inc. will merge into ISE, LLC, with ISE, LLC
as the surviving entity of the merger (the ``Merger''). In the Merger:
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    \4\ For a discussion of ISE, Inc.'s current capital stock and
governance structure, see Securities Exchange Act Release No. 51029
(January 12, 2005), 70 FR 3233 (January 21, 2005) (SR-ISE-2004-29)
(relating to the approval of certain amendments to ISE, Inc.'s
Certificate of Incorporation, Constitution, and ISE Rules in
connection with ISE, Inc.'s initial public offering) (``IPO
Order''). In connection with the initial public offering. ISE, Inc.
filed a registration statement on Form S-1 with the Commission (File
No. 333-117145).
    This proposed rule change includes: (a) The deletion of the
Amended and Restated Certificate of Incorporation of ISE, Inc.
(``ISE, Inc. Amended Certificate'') and Amended and Restated
Constitution of ISE, Inc. (``ISE, Inc. Amended Constitution''); (b)
the proposed Certificate of Incorporation of International
Securities Exchange Holdings, Inc. (``Holdings Certificate``); (c)
the proposed Bylaws of International Securities Exchange Holdings,
Inc. (``Holdings Bylaws``); (d) the proposed Limited Liability
Company Agreement of International Securities Exchange, LLC (``LLC
Agreement``); (e) the proposed Constitution of International
Securities Exchange, LLC (``LLC Constitution''); and (f) certain
proposed amendments to the Rules of ISE, Inc. (the ``ISE Rules``) to
reflect the Reorganization.
    \5\ ISE, Inc. has received a private letter ruling from the
Internal Revenue Service Relating to the treatment of the proposed
Reorganization under U.S. Federal tax law with respect to ISE, Inc.,
its stockholders, and ISE Holdings. The ruleing provides assurances
that the Reorganization and related transactions will not result in
any material taxes to the holders of shares of ISE, Inc. Class A
Common Stock, par value $.01 per share (``Class A Common Stock''),
ISE, Inc. Class B Common Stock, Series B-1, par value $.01 per share
(``Series B-1 Common Stock''), ISE, Inc. Class B Common Stock,
Series B-2, par value $.01 per share (``Aeries B-2 Common Stock''),
or ISE, Inc. Class B Common Stock, Series B-3, par value $.01 per
share (``Series B-3 Common Stock'' and together with the Series B-1
Common Stock and Series B-2 Common Stock, the ``Class B Common
Stock''). See Internal Revenue Service PLR-135357-04 (November 17,
2004.
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    (1) Each outstanding share of Class A Common Stock will be
converted into one share of ISE Holdings common stock, par value $.01
per share (``ISE Holdings Common Stock'');
    (2) Each outstanding share of Series B-1 Common Stock will be
converted into one PMM Right (``PMM Right''). Each PMM Right provides
the holder with (a) the right to vote on the election of the PMM
Directors of ISE, LLC,\6\ (b) the right to vote on any change in,
amendment or modification of, the Core Rights \7\ or the definition of
Core Rights, and (c) the predicate to obtaining the trading rights and
privileges associated with each PMM Right as set forth in the LLC
Constitution and ISE Rules for a PMM;
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    \6\ ``PMM Directors'' as defined in Section 3.2(b) of proposed
LLC Constitution means two directors, who must be officers,
directors, or partners of Primary Market Makers (``PMM's''), elected
by a plurality vote of the holders of the PMM Rights voting together
as a class.
    \7\ ``Core Rights'' as defined in Section 2.2 of proposed LLC
Agreement means any increase in the number of authorized PMM Rights
or CMM Rights.
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    (3) Each outstanding share of Series B-2 Common Stock will be
converted into one CMM Right (``CMM Right''). Each CMM Right provides
the holder with (a) the right to vote on the election of the CMM
Directors,\8\ (b) the right to vote on any change in, amendment or
modification of, the Core Rights or the definition of Core Rights, and
(c) the predicate to obtaining the trading rights and privileges of
each CMM Right as set

forth in the LLC Constitution and ISE Rules for a CMM; and
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    \8\ ``CMM Directors'' as defined in Section 3.2(b) of proposed
LLC Constitution means two directors, who must be officers,
directors, or partners of Competitive Market Makers (``CMMs''),
elected by a plurality vote of the holders of the CMM Rights voting
together as a class.
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    (4) Each share of Series B-3 Common Stock will be converted into
one EAM Right (``EAM Right'' and together with the PMM Rights and CMM
Rights, the ``Exchange Rights''). Each EAM Right provides the holder
thereof with (a) the right to vote on the election of the EAM Directors
\9\ and (b) the predicate to obtaining the trading rights and
privileges of such EAM Right as set forth in the LLC Constitution and
ISE Rules for an EAM.
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    \9\ ``EAM Directors'' as defined in Section 3.2(b) of proposed
LLC Constitution means two directors, who must be officers,
directors, or partners of Electronic Access Members (``EAMs'')
elected by a plurality vote of the holders of the EAM Rights voting
together as a class. The PMM Directors, CMM Directors, and EAM
Directors are collectively referred to as the ``Exchange
Directors.''
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    As a result of the Merger, the holders of shares of Class A Common
Stock will become stockholders of ISE Holdings and holders of Series B-
1 Common Stock, Series B-2 Common Stock, and Series B-3 Common Stock
will become holders of PMM Rights, CMM Rights, and EAM Rights,
respectively, in ISE, LLC, as further described below. Effectively, ISE
Holdings will become the sole equity owner of ISE, LLC, and the shares
of ISE Holdings Common Stock will in turn be publicly held.
Furthermore, upon consummation of the Merger, the percentage of the
outstanding shares of ISE Holdings Common Stock held after the Merger
by each holder of Class A Common Stock will be identical to the
percentage of Class A Common Stock that such holder held prior to the
Merger. The percentage of Exchange Rights held after the Merger by each
holder of Class B Common Stock will also be identical to the percentage
of Class B Common Stock that such holder held prior to the Merger,
giving effect to the particular series of Class B Common Stock and
class of Exchange Rights held and to be held by such holder.
    ISE, Inc. represents that, currently, no Person, either alone or
together with its Related Persons, owns more than 40 percent of the
outstanding shares of any class or series of stock of ISE, Inc., and no
member, either alone or together with its Related Persons, owns more
than 20 percent of the outstanding shares of any class or series of
stock of ISE, Inc.\10\ Accordingly, ISE, Inc. has no reason to believe
that the Reorganization, as detailed above, will result in any large
concentrations of ownership or voting power by ISE, Inc.'s current
stockholders or members. In addition, ISE, Inc. represents that it will
continue to have a trading concentration limit and a 20% member
ownership limit.\11\
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    \10\ ``Person'' means an individual, partnership (general or
limited), joint stock company, corporation, limited liability
company, trust or unincorporated organization, or any governmental
entity or agency or political subdivision thereof. See ISE, Inc.
Amended Certificate, Article Fourth, Subdivision III. Currently,
``Related Person'' means (1) With respect to any Person, all
``affiliates'' and ``associates'' of such Person (as such terms are
defined in Rule 12b-2 under the Act); (2) with respect to any Person
constituting an exchange member (as defined in the ISE, Inc. Amended
Constitution), any broker or dealer with which such Exchange Member
is associated; and (3) any two or more Persons that have any
agreement, arrangement, or understanding (whether or not in writing)
to act together for the purpose of acquiring, voting, holding, or
disposing of shares of the capital stock of ISE, Inc. See ISE, Inc.
Amended Certificate, Article Fourth, Subdivision III. ISE, Inc.
proposes to modify the definition of ``Related Persons'' in
connection with the Reorganization to also include, with respect to
any Person, any executive officer (as defined under Rule 3b-7 under
the Act), director, general partner, manager, or managing member, as
applicable, and, with respect to any Person that is an executive
officer (as defined under Rule 3b-7 under the Act), director,
general partner, manager, or managing member of a company,
corporation, or similar entity, such company, corporation, or
entity, as applicable. See proposed Holdings Certificate, Article
Fourth, Subdivision III.
    \11\ For the member trading oncentration limit, see ISE Rule
303(b), which will continue to exist after the Reorganization, and
proposed LLC Agreement, Section 6.5. ISE, Inc. proposes to modify
Section 6.5(a) of proposed LLC Agreement to include lessees of
Exchange Rights and to clarify that holders and lessees of Exchange
Rights also may not exercise any of the non-trading rights
associated with more than 20% of such Exchange Rights. ISE, Inc.
also notes that the Commission is in the process of reviewing issues
relating to new ownership structures of self-regulatory
organizations (``SROs'') and has proposed rules relating to the
ownership of SROs, including imposing limitations on member
ownership of an SRO or facility of an SRO. See Securities Exchange
Act Release No. 50699 (November 18, 2004), 69 FR 71126 (December 8,
2004).
    ISE, Inc. also notes that the Commission recently approved a
separate proposal to amend ISE Rule 303 to increase the 20% member
trading concentration limit to 30% for PMMs only, provided that in
approving any PMM to exercise the trading privileges associated with
more than 20% of the PMMs, the board of directors of ISE, Inc. (the
``ISE, Inc. Board'') will not approve any arrangement in which the
PMM would gain ownership or voting rights in excess of those
permitted under the ISE, Inc. Amended Certificate or ISE, Inc.
Amended Constitution. See Securities Exchange Act Release No. 53271
(February 10, 2006), 71 FR 8625 (February 17, 2006). See also
Amendment No. 2, supra note 3.
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a. Description of ISE, LLC
i. General
    ISE, LLC will be a wholly owned subsidiary of ISE Holdings. As the
sole LLC member of ISE, LLC, ISE Holdings will have sole voting control
over ISE, LLC, except for certain matters relating to Exchange
Rights.\12\ Specifically, as noted below, the composition of and
qualifications for the Board of Directors of ISE, LLC (the ``LLC
Board'') will be the same as they are for the ISE, Inc. Board, and ISE
Holdings will have the sole right to vote on the election of a majority
of the members of the LLC Board. In general, however, the management
and administration of ISE, LLC will be carried out by the LLC Board and
by the executive officers of ISE, LLC, who will be appointed by the LLC
Board.\13\ In addition, to further preserve the autonomy of ISE, LLC,
all meetings of the LLC Board pertaining to the self-regulatory
function of ISE, LLC (including disciplinary matters) or to the
structure of the market in which ISE, LLC regulates will be closed to
all persons other than the LLC Board and officers, staff, counsel, or
other advisors of ISE, LLC whose participation is necessary or
appropriate to the proper discharge of ISE, LLC's regulatory functions
and any representative of the Commission. No members of the Board of
Directors of ISE Holdings (the ``Holdings Board'') who are not also LLC
Board members and no officers, staff, counsel, or advisors of ISE
Holdings who are not also officers, staff, counsel, or advisors of ISE,
LLC will be allowed to participate in such meetings.\14\
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    \12\ The proposed LLC Agreement only permits ISE, LLC to have
one LLC member at any given time, and assignment of the sole LLC
member interest is subject to Commission approval. Proposed LLC
Agreement, Sections 2.1, 3.1, and 7.1. ISE Holdings will not have
any voting rights with respect to the Core Rights, the election of
Exchange Directors, or any other matters relating to the Exchange
Rights, such as the eligibility and approval of persons to own,
transfer or lease Exchange Rights, rulemaking, supervision of
entities holding Exchange Rights, and the like. Proposed LLC
Agreement, Section 2.2.
    \13\ Proposed LLC Constitution, Section 5.1(a). See also
proposed LLC Agreement, Section 5.1.
    \14\ Proposed LLC Constitution, Section 3.2(d).
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ii. Exchange Operations
    ISE, LLC will operate as a registered ``national securities
exchange'' under Section 6 of the Act \15\ and will maintain ISE,
Inc.'s current regulatory authority over its members.\16\ All persons
using ISE, LLC as an exchange will continue to be subject to the
current ISE Rules, as proposed to be modified herein in order to
reflect the Reorganization.\17\ ISE, LLC will continue to carry out the
statutory responsibilities to enforce compliance of its members with
the provisions of the Federal securities laws and ISE Rules.\18\

 ISE, LLC will continue to be required to approve any changes to ISE
Rules and governing documents of ISE, LLC and to file any such changes
with the Commission pursuant to Section 19(b) of the Act and Rule 19b-4
thereunder.\19\
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    \15\ 15 U.S.C. 78f.
    \16\ For purposes of the Act, the holders or lessees of Exchange
Rights will be deemed ``members'' of ISE, LLC.
    \17\ ISE, Inc. is proposing to amend the ISE Rules to, among
other things, change references to ``Class B common stock,'' ``Class
B stockholders,'' ``shares,'' and similar or derivative words to
``Exchange Rights,'' ``Exchange Rights holders,'' and ``Rights'' and
the like.
    \18\ In addition, in discharging his or her responsibilities as
a member of the LLC Board, each director shall take into
consideration the effect that his or her actions would have on the
ability of ISE, LLC to carry out its responsibilities under the Act
and on the ability of ISE, LLC to engage in conduct that fosters and
does not interfere with ISE, LLC's ability to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanisms of a
free and open market and a national market system, and in general,
to protect investors and the public interest. In discharging his or
her responsibilities as a member of the LLC Board, each director
also shall comply with the Federal securities laws and rules and
regulations thereunder and cooperate with the Commission. Proposed
LLC Agreement, Section 5.1(b).
    \19\ 15 U.S.C. 78s(b) and 17 CFR 240.19b-4.
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    In addition, ISE, LLC is proposing to adopt a new ISE Rule 312,
which will provide that, without prior Commission approval, ISE, LLC or
any entity with which it is affiliated shall not, directly or
indirectly through one or more intermediaries, acquire or maintain an
ownership interest in a Member or non-member owner, and a Member or
non-member owner shall not be or become an affiliate of ISE, LLC or an
affiliate of any affiliate of ISE, LLC. Nothing in the new ISE Rule 312
will prohibit a Member or non-member owner from acquiring or holding
any equity interest in ISE Holdings, Inc. that is permitted by the
Holdings Certificate or prohibit any Member from being or becoming an
affiliate of ISE, LLC or an affiliate of any affiliate of ISE, LLC
solely by reason of any officer, director, or partner of such Member
being or becoming an Exchange Director pursuant to the LLC
Constitution.\20\
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    \20\ The term ``Member,'' as proposed to be defined in ISE Rule
100, means an organization that has been approved to exercise
trading rights associated with Exchange Rights.
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    All confidential information pertaining to the self-regulatory
function of ISE, LLC (including but not limited to disciplinary
matters, trading data, trading practices, and audit information)
contained in books and records of ISE, LLC shall: (1) Not be made
available to any persons (other than as provided below) other than to
those officers, directors, employees, and agents of ISE, LLC that have
a reasonable need to know the contents thereof; (2) be retained in
confidence by ISE, LLC and the officers, directors, employees, and
agents of ISE, LLC; and (3) not be used for any commercial purposes.
Nothing in the LLC Agreement shall be interpreted to limit or impede
the rights of the Commission to access and examine such confidential
information pursuant to the Federal securities laws and rules and
regulations thereunder or to limit or impede the ability of any
officers, directors, employees, or agents of ISE, LLC to disclose such
confidential information to the Commission.\21\
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    \21\ Proposed LLC Agreement, Section 4.1(b).
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    As the registered SRO, ISE, LLC will continue to have ultimate
responsibility for the administration and enforcement of the rules
governing its options business operations. The regulatory relationship
that ISE, Inc. currently maintains with the National Association of
Securities Dealers (``NASD'') will not be affected by the
Reorganization, and ISE, LLC, as the successor-in-interest to ISE,
Inc., will continue to have the same regulatory relationship with the
NASD.\22\ The Reorganization will not affect the current disciplinary
process. ISE, LLC's disciplinary process will be the same as the
process for ISE, Inc. and will continue to be governed by the Business
Conduct Committee, which is comprised of members.\23\ All decisions
with respect to the listing and delisting of options and related
products will continue to be made in accordance with ISE Rules.
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    \22\ See Securities Exchange Act Release No. 4781 (May 14,
2003), 68 FR 27869 (May 21, 2003) (approving an agreement pursuant
to Rule 17d-2 of the Act between the NASD and ISE, Inc.).
    \23\ Currently, the Chief Regulatory Officer of ISE, Inc.
authorizes the institution of disciplinary actions, and ISE, Inc.,
with the assistance of the NASD staff, if appropriate, conducts
disciplinary proceedings before the Business Conduct Committee.
Decisions of the Business Conduct Committee may be appealed to the
Committee for Review of ISE, Inc., which is composed of directors of
ISE, Inc.
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    ISE, Inc. currently is a participant in various national market
system plans, including the Options Price Reporting Authority, which
provides options price reporting, and the Options Intermarket Linkage
Plan, which addresses intermarket options trading. After the
Reorganization, ISE, LLC proposes to continue to participate in these
plans and have a representative serve on the committees overseeing
these plans.
iii. Organization, Management and Governance of ISE, LLC
    Since ISE, LLC will be the surviving entity in the Merger, the LLC
Agreement and the LLC Constitution will function as the charter and
bylaws of the surviving entity. ISE, Inc. represents that the
provisions of the LLC Agreement and LLC Constitution are substantively
the same as the current ISE, Inc. Amended Certificate and ISE, Inc.
Amended Constitution, respectively, insofar as exchange operations and
structure and corporate governance are concerned.\24\ ISE, LLC will
continue to have a similar interpretation regarding the payment of
``dividends'' to ``stockholders,'' except that the interpretation will
relate to distributions to the sole LLC member and holders of Exchange
Rights. Specifically, ISE, LLC will interpret ISE Rules to require that
any revenue it receives from regulatory fees or penalties will be
segregated and applied to fund the legal, regulatory, and surveillance
operations of ISE, LLC and will not be used to pay distributions to the
sole LLC member or holders of Exchange Rights, except in the event of
liquidation of ISE, LLC, in which case the sole LLC member will be
entitled to the distribution of ISE, LLC's remaining assets.\25\
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    \24\ See IPO Order, supra note 4. In addition, while the ISE,
Inc. Amended Constitution currently only requires that no officers
may be holders of shares of Class B Common Stock or affiliated with
an exchange member, ISE, LLC will require that no officers or
employees of ISE, LLC may be holders of Exchange Rights or
affiliated with an Exchange Member. Proposed LLC Constitution,
Section 4.5. ISE, Inc. also is codifying its current practice of
prohibiting the transfer or lease of fractional portions of any
Exchange Rights. Proposed LLC Constitution, Sections 12.1, 12.2, and
12.4.
    \25\ See Securities Exchange Act Release No. 45803 (April 23,
2002), 67 FR 21306 (April 30, 2002) (adopting this interpretation in
connection with ISE, Inc.'s demutualization).
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    As is the case currently with respect to the ISE, Inc. Board, the
LLC Board will be comprised of 15 members,\26\ eight of whom will be
Non-Industry Directors \27\ elected by ISE Holdings as the sole LLC
member, six of whom will be Exchange Directors elected by a plurality
of the holders of the Exchange Rights, and the Chief Executive Officer

of ISE, LLC.\28\ Each year, the Nominating Committee, which is not a
committee of the LLC Board, will nominate the Exchange Directors, and
the Corporate Governance Committee, which is a committee of the LLC
Board, will nominate the Non-Industry Directors.\29\ Holders of
Exchange Rights also may nominate Exchange Directors by petition.\30\
The initial members of the LLC Board were the individuals serving as
directors of ISE, Inc. on the date of formation of ISE, LLC.\31\
Similar to the manner of election of the current ISE, Inc. Board, at
the first annual meeting of the sole LLC member and holders of Exchange
Rights and at each subsequent annual meeting, ISE Holdings will elect
the Non-Industry Directors, and holders of Exchange Rights will elect
the Exchange Directors, to serve until the next annual meeting or until
their successors are elected and qualified.\32\ The Chairman of the LLC
Board is a Non-Industry Director who is elected by the LLC Board. Each
director of ISE, LLC holds office for a term of two years, except the
Chief Executive Officer of ISE, LLC who holds office for a term of one
year or such earlier time as such person no longer serves as Chief
Executive Officer. The directors, other than the Chief Executive
Officer, are divided into two classes, designated as Class I and Class
II directors. At each annual meeting, the successors of the class of
directors whose term expires at that meeting will be elected to hold
office for a term expiring at the annual meeting held in the second
year following the year of their election and until their successors
are elected and qualified. If there is a vacancy on the LLC Board, the
vacancy will be filled by the LLC Board, and the person chosen to fill
the vacancy will serve until the expiration of the term of office of
the class to which such person was elected. No Exchange Director may
serve more than three consecutive terms, and, after a two-year hiatus,
may be eligible to serve as an Exchange Director again.\33\
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    \26\ ISE, Inc. proposes that the number of members of the LLC
Board may only be changed by the LLC Board with the approval of the
affirmative vote of the holders of two-thirds of the then
outstanding Exchange Rights. Proposed LLC Constitution, Section 3.2.
Currently, the number of ISE, Inc. Board members can only be changed
by the ISE, Inc. Board with the approval of the affirmative vote of
the holders of two-thirds of the voting power of the then
outstanding shares of Class A Common Stock. ISE, Inc. Amended
Certificate, Article Seventh.
    \27\ ``Non-Industry Director'' means a director that meets the
requirements of ``non-industry representative.'' Proposed LLC
Constitution, Section 3.2(b). The term ``non-industry
representative'' means any person who would not be considered an
``industry representative,'' as well as (i) a person affiliated with
a broker or dealer that operates solely to assist the securities-
related activities of the business of non-member affiliates or (ii)
an employee of an entity that is affiliated with a broker or dealer
that does not account for a material portion of the revenues of the
consolidated entity and who is primarily engaged in the business of
the non-member entity. Proposed LLC Constitution, Section 13.1(w).
These definitions are the same as the current definitions. See ISE,
Inc. Amended Constitution, Sections 3.2(b) and 14.1(q).
    \28\ Proposed LLC Agreement, Section 5.2 and proposed LLC
Constitution, Section 3.2(b). Pursuant to Section 4.6 of proposed
LLC Constitution, the Chief Executive Officer of ISE, LLC is elected
by the LLC Board and will be nominated by the LLC Board for a
directorship by virtue of his or her office.
    \29\ See proposed LLC Constitution, Section 3.10. See also ISE,
Inc. Amended Constitution, Section 3.10.
    \30\ ISE, Inc. represents that the petition process following
the Reorganization will be substantially similar to the petition
process in place currently for ISE, Inc., except that petitions
submitted for nominees for Exchange Directors of ISE, LLC will not
be required to contain all the information that is required to be
disclosed pursuant to Regulation 14A under the Act since ISE, LLC
will not be subject to the proxy requirements under the Act. In
addition, for purposes of determining whether a person has been
nominated for election by petition by the requisite percentage set
forth in the proposed LLC Constitution, no Exchange Member, alone or
together with its affiliates, may account for more than fifty
percent (50%) of the signatures of the holders of outstanding
Exchange Rights of the series entitled to elect such person, and any
such signatures by such Exchange Member, alone or together with its
affiliates, in excess of such fifty percent (50%) limitation shall
be disregarded. Id.
    \31\ The current directors of ISE, LLC are the same directors of
ISE, Inc. immediately following the 2005 Annual Meeting of
Stockholders of ISE, Inc.
    \32\ See proposed LLC Constitution, Section 3.2(c). See also
Amendment No. 2, supra note 3.
    \33\ Proposed LLC Constitution, Section 3.2(e). ISE, Inc. did
not impose term limits on Non-Industry Directors, and ISE, LLC does
not propose to do so, though the ISE, LLC Corporate Governance
Committee may determine whether and how to provide for such term
limits at a later time.
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    ISE, LLC will have a Finance & Audit Committee, a Corporate
Governance Committee, and a Compensation Committee, all of which will
be governed by charters.\34\ As is currently the case with respect to
ISE, Inc. and its shares of Class B Common Stock, ISE, LLC will require
ownership of an Exchange Right as a predicate to obtaining the trading
rights and privileges associated with such Exchange Right.\35\ Holders
of PMM and CMM Rights will be entitled to the same Core Rights to which
the holders of Series B-1 Common Stock and Series B-2 Common Stock are
entitled with respect to ISE, Inc.\36\
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    \34\ Proposed LLC Constitution, Sections 5.4, 5.5 and 5.6. ISE,
Inc. proposes that the LLC Board may designate additional committees
by resolution passed by a majority of the whole LLC Board. Proposed
LLC Constitution, Section 5.1. Currently, the ISE, Inc. Board may
designate additional committees by a resolution of a majority of a
quorum. ISE, Inc. Amended Constitution, Section 5.1
    \35\ ISE, Inc. Amended Certificate, Article Fourth, Subdivision
II(b)(ii) and proposed LLC Agreement, Section 6.2.
    \36\ ISE, Inc. Amended Certificate, Article Fourth, Subdivision
II(b)(v)(B) and proposed LLC Agreement, Section 6.3(b).
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    ISE, LLC will have officers, including a President and Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer,
Chief Information Officer, Chief Regulatory Officer, and Chief
Marketing Officer, who will manage the business and affairs of ISE,
LLC, subject to the oversight of the LLC Board and, in some cases, the
approval of ISE Holdings as the sole LLC member.\37\ The initial
officers of ISE, LLC will be the individuals currently serving as the
officers of ISE, Inc.
---------------------------------------------------------------------------

    \37\ Under Delaware law, certain events such as a sale of all or
substantially all of the assets, merger, or liquidation of ISE, LLC
may require the approval of ISE Holdings.
---------------------------------------------------------------------------

    The organizational documents of ISE, LLC will differ from the ISE,
Inc.'s organizational documents in several notable respects. Because
ISE, LLC is not a corporation and has limited liability members instead
of stockholders, ISE Holdings and Exchange Right holders will not have
voting, dividend, and liquidation rights typically associated with
common stock under state corporate law.\38\ For example, the LLC Act
does not statutorily confer the same or similar voting rights on
limited liability members as are conferred to stockholders, pursuant to
the Delaware General Corporation Law. Accordingly, following the
Reorganization, the sole LLC member and the Exchange Right holders will
not statutorily be entitled to vote on certain items with respect to
which the holders of Class A and Class B Common Stock would have had a
voting right (i.e., an increase or decrease in the aggregate number of
authorized shares of Class A or Class B Common Stock, a change in par
value, and any alteration or change in the powers, preferences, or
special rights of the shares so as to affect them adversely).
---------------------------------------------------------------------------

    \38\ Because Exchange Rights will not have ``par value''
following the Reorganization, holders of EAMs also will not be
entitled to a return of the $0.01 par value per share upon
withdrawal from ISE, LLC. Additionally, the holders of Exchange
Rights will not be ``members'' of ISE, LLC for purposes of the
Delaware Limited Liability Company Act (the ``LLC Act''). Proposed
LLC Agreement, Section 6.1.
---------------------------------------------------------------------------

    ISE, Inc. notes that some of these items are irrelevant in the
context of a wholly-owned limited liability company (e.g., the notion
of par value and certain Class A holder voting rights that instead will
be relevant at the ISE Holdings level), but where still relevant and
practical, ISE, Inc. has attempted to preserve in proposed LLC
Agreement and proposed LLC Constitution certain rights of the holders
of Class B Common Stock following the Reorganization. As a result,
holders of Exchange Rights will continue to be entitled to vote with
respect to the Core Rights (that is, any increase in the number of PMM
Rights or CMM Rights to be approved by holders of a majority of PMM
Rights, voting as a separate class, and CMM Rights, voting as a
separate class) and with respect to any amendments that would alter or
change the powers, preferences, or special rights of one or more series
of Exchange Rights so as to affect them adversely (to be approved by
holders of a majority of Exchange Rights entitled to vote thereon).\39\
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    \39\ The sole LLC member will have a similar right to approve
amendments to the proposed LLC Constitution if such amendments would
alter or change the powers, preferences, or special rights of the
sole LLC member so as to affect it adversely. Proposed LLC
Agreement, Section 8.1 and proposed LLC Constitution, Section 10.1.
---------------------------------------------------------------------------

    Also, since ISE, LLC will have ISE Holdings as its sole LLC member,
ISE, Inc. deems certain of the antitakeover

provisions in the ISE, Inc. organizational documents less necessary for
ISE, LLC. Specifically, ISE, LLC's organizational documents will not:
(1) Deny the right of ISE Holdings to call a special meeting; (2)
require ``advance notice'' of ISE Holdings'' or Exchange Right holders'
proposals; (3) except as described herein, impose an ownership or
voting limitation on ISE Holdings (or any corrective mechanism with
respect to any ownership limitation); \40\ or (4) require any super-
majority votes with respect to certain significant matters, such as
mergers.\41\
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    \40\ ISE, Inc. notes that ownership and voting limitations will
not be relevant to a wholly owned subsidiary of a holding company,
although ISE Holdings itself will have substantially the same
ownership and voting limitations that ISE, Inc. currently has, as
described below. Additionally, as stated earlier, ISE, LLC will
continue to have a trading concentration limit and 20% member
ownership limit pursuant to ISE Rule 303(b), except as described
herein, and proposed LLC Agreement, Section 6.5. See supra note 11
for a discussion of certain modifications to ISE Rule 303(b)
approved in a separate rule filing by the Commission. See also
Amendment No. 2, supra note 3.
    \41\ For the text of the current antitakeover provisions, see
ISE, Inc. Amended Certificate, Article Eighth and ISE, Inc. Amended
Constitution, Section 2.2 (pertaining to calling a special meeting);
ISE, Inc. Amended Constitution, Section 2.7 (pertaining to ``advance
notice'' provisions); ISE, Inc. Amended Certificate, Article Fourth,
Subdivision III (pertaining to ownership and voting limitations);
and ISE, Inc. Amended Certificate, Article Seventh (pertaining to
super-majority votes). In addition, because ISE, LLC will be a
wholly-owned subsidiary of ISE Holdings, and ISE Holdings will be
entitled to elect a majority of the LLC Board, it is deemed less
necessary to allow the sole LLC member to amend the proposed LLC
Constitution (currently, ISE, Inc. stockholders representing at
least a majority of the voting power may amend the ISE, Inc. Amended
Constitution). However, the sole LLC member has the right to approve
amendments to proposed LLC Constitution if such amendments would
alter or change the powers, preferences, or special rights of the
sole LLC member so as to affect it adversely. For the text of the
current power to amend the ISE, Inc. Amended Constitution, see ISE,
Inc. Amended Constitution, Section 11.1. For the text of the
proposed power to amend the LLC Constitution, see proposed LLC
Constitution, Section 10.1.
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b. Description of ISE Holdings
i. General
    ISE Holdings will be governed by the Holdings Certificate and the
Holdings Bylaws. ISE Holdings will not cause ISE, LLC to be operated in
a manner inconsistent with ISE, LLC's regulatory and oversight
functions.\42\ The Holdings Certificate and Holdings Bylaws, as well as
the LLC Agreement and LLC Constitution, are intended to ensure that the
Reorganization will not unduly interfere with or restrict the ability
of ISE, LLC or the Commission to effectively carry out their respective
regulatory oversight responsibilities under the Act and generally to
enable ISE, LLC to operate in a manner that complies with the Federal
securities laws, including furthering the objectives of Section 6(b)(5)
of the Act.\43\ In addition, ISE Holdings and its officers, directors,
employees, and agents will be required to submit to the jurisdiction of
the U.S. Federal courts, the Commission, and ISE, LLC for the purposes
of any suit, action, or proceeding, pursuant to the U.S. Federal
securities laws and the rules or regulations thereunder arising out of,
or relating to, the activities of ISE, LLC and will waive any claims of
inconvenient forum or improper venue.\44\
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    \42\ In particular, ISE Holdings, its officers, directors, and
employees will give due regard to the preservation of the
independence of the self-regulatory function of ISE, LLC and will
not interfere with the effectuation of any decision by the LLC Board
relating to such function. Proposed Holdings Bylaws, Section 1.5.
    \43\ 15 U.S.C. 78f(b)(5).
    \44\ Proposed Holdings Bylaws, Section 1.4. ISE Holdings and its
officers, directors, employees, and agents will also maintain an
agent for service of process in the U.S. Id.
---------------------------------------------------------------------------

    The ISE Holdings Common Stock will have the traditional features of
common stock, including voting, dividend, and liquidation rights.\45\
Except as described below, the holders of ISE Holdings Common Stock
will be entitled to vote on all matters submitted to the stockholders
for a vote, and, except as discussed below, each holder will have one
vote per share of ISE Holdings Common Stock owned.\46\ As discussed
further below, holders of ISE Holdings Common Stock will be subject to
substantially the same ownership and voting limitations with respect to
ISE Holdings Common Stock to which the holders of Class A Common Stock
currently are subject.
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    \45\ ISE Holdings will be authorized to pay dividends to the
stockholders of ISE Holdings as and when declared by the Holdings
Board.
    \46\ ISE Holdings may issue preferred stock in the future, the
terms of which will be determined by the Holdings Board.
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ii. Organization, Management and Governance of ISE Holdings
    ISE Holdings will be governed under the direction of the Holdings
Board. The number of directors shall be fixed by resolution of the
Holdings Board and is expected to be nine immediately following the
Reorganization.\47\ Each year, the Corporate Governance Committee of
ISE Holdings will nominate candidates for election as directors for the
class of directors standing for election at the ISE Holdings annual
meeting of stockholders.\48\ As required by the New York Stock
Exchange, Inc. (the ``NYSE''), where the Class A Common Stock currently
trades and where ISE, Inc. intends that the ISE Holdings Common Stock
will be listed and traded, a majority of the directors of ISE Holdings
must be deemed ``independent'' within the meaning of the NYSE's listing
standards.\49\ The directors of ISE Holdings, other than the Chief
Executive Officer of ISE Holdings, will be divided into two classes and
will be elected by a plurality of the votes cast by stockholders at
each annual meeting of stockholders at which a quorum is present.\50\
The directors will serve staggered two-year terms, with the term of
office of one class expiring each year.\51\ The Chief Executive Officer
will hold office for a term of one year or such earlier time as such
person no longer serves as Chief Executive Officer.\52\ The Chairman of
the Holdings Board will be elected by the Holdings Board. If there is a
vacancy on the Holdings Board, the vacancy will be filled by the
Holdings Board, and the person elected to fill the vacancy will serve
until the expiration of the term of office of the class to which such
person was elected.\53\
---------------------------------------------------------------------------

    \47\ The Holdings Board is currently comprised of two directors;
one is the Chief Executive Officer of ISE, Inc., and the other is
the Secretary of ISE, Inc.
    \48\ Proposed Holdings Bylaws, Section 3.10(c).
    \49\ Section 303A of the NYSE Listed Company Manual.
    \50\ Proposed Holdings Certificate, Article Fifth.
    \51\ Id. ISE, Inc. represents that it will address term limits,
if any, in ISE Holdings' Corporate Governance Principles to be
adopted in connection with the Reorganization.
    \52\ Id.
    \53\ Proposed Holdings Bylaws, Section 3.3.
---------------------------------------------------------------------------

    ISE Holdings will have officers, including a President and Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer,
Chief Information Officer, General Counsel, and Chief Marketing
Officer, who will manage the business and affairs of ISE Holdings,
subject to the oversight of the Holdings Board. The initial officers of
ISE Holdings will be the individuals currently serving as officers of
ISE, Inc.
    ISE Holdings will have a Board Executive Committee, Finance & Audit
Committee, Compensation Committee, and a Corporate Governance
Committee. The Finance & Audit, Compensation, and Corporate Governance
committees will be governed by charters that comply with the NYSE's
listing standards.
    The Holdings Certificate and Holdings Bylaws will contain
substantially the same ownership limitations (including the same
corrective mechanisms), voting limitations, and antitakeover provisions
\54\ that are contained in the

ISE, Inc. Amended Certificate and ISE, Inc. Amended Constitution.\55\
If a Person, either alone or with its Related Persons,\56\ beneficially
owns shares of stock of ISE Holdings in violation of the relevant
ownership limitation, ISE Holdings will apply substantially the same
corrective procedures that were approved by the Commission in
connection with ISE, Inc.'s initial public offering.\57\ ISE, Inc.
believes that the ownership and voting limitations will prevent any
stockholder or group of stockholders acting together from exercising
undue control over the operation of ISE, LLC.\58\ Specifically, ISE,
Inc. believes that these ownership and voting limitations are designed
to prohibit any Person, either alone or with its Related Persons, from
having the power to control a substantial number of outstanding votes
entitled to be cast on any matter without Commission review and, more
importantly, that may be adverse to ISE, LLC's or the Commission's
regulatory oversight responsibilities. ISE, Inc. also believes that
these provisions serve to protect the integrity of ISE, LLC's and the
Commission's regulatory oversight responsibilities and allow the
Commission to review, and subject to public notice and comment, the
acquisition of substantial ownership or voting power by any stockholder
or group of stockholders.
---------------------------------------------------------------------------

    \54\ The antitakeover provisions relate to such things as
special meetings of stockholders, required stockholder vote with
respect to certain actions, and advance notice of stockholder
proposals (including the nomination of directors). Proposed Holdings
Bylaws, Article II.
    \55\ See IPO Order, supra note 4. For the sake of clarity, ISE,
Inc. notes that the Special Trustee (as defined in the ISE, Inc.
Amended Certificate and proposed Holdings Certificate) who holds the
Excess Shares (as defined in the ISE, Inc. Amended Certificate and
proposed Holdings Certificate) is currently ISE, Inc. and, after the
Reorganization, will be ISE Holdings and that in each instance, ISE,
Inc. and ISE Holdings can also appoint a special trustee who is
unaffiliated with it or any Person or Related Person owning Excess
Shares. ISE, Inc. Amended Certificate, Article Fourth, Subdivision
III(c)(ii) and proposed Holdings Certificate, Article Fourth,
Subdivision III(c)(ii).
    \56\ See supra note 10.
    \57\ See supra note 4 (implementing corrective procedures
relating to the ownership limitations) and ISE, Inc. Amended
Certificate, Article Fourth, Subdivision III(c) (setting forth the
corrective procedures relating to the ownership limitations).
    \58\ ISE, Inc. also believes that, much like the 20% member
ownership limitation, the 20% voting limitation cannot be waived by
the Holdings Board with respect to members.
---------------------------------------------------------------------------

iii. Exchange-Related Matters
    Pursuant to the Holdings Certificate, in discharging his or her
responsibilities as a member of the Holdings Board, each director shall
take into consideration the effect that ISE Holdings's actions would
have on the ability of ISE, LLC to carry out its responsibilities under
the Act and on the ability of ISE, LLC and ISE Holdings to engage in
conduct that fosters and does not interfere with ISE, LLC's and ISE
Holdings' ability to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to and
facilitating transactions in securities, to remove impediments to and
perfect the mechanisms of a free and open market and a national market
system, and, in general, to protect investors and the public
interest.\59\ In addition, in discharging his or her responsibilities
as a member of the Holdings Board, each director shall comply with the
Federal securities laws and rules and regulations thereunder and
cooperate with ISE, LLC and the Commission.\60\ Furthermore, in
discharging his or her responsibilities as an officer or employee of
ISE Holdings, each officer or employee shall comply with the Federal
securities laws and rules and regulations thereunder and shall
cooperate with ISE, LLC and the Commission.\61\
---------------------------------------------------------------------------

    \59\ Proposed Holdings Certificate, Article Twelfth.
    \60\ Id.
    \61\ Id.
---------------------------------------------------------------------------

    Moreover, for so long as ISE Holdings controls, directly or
indirectly, ISE, LLC, each officer, director, and employee of ISE
Holdings shall give due regard to the preservation of the independence
of the self-regulatory function of ISE, LLC and to ISE, LLC's
obligations under the Act and the rules thereunder, including, without
limitation, Section 6(b) of the Act \62\ and shall not take any actions
which he or she knows or reasonably should have known would interfere
with the effectuation of any decisions by the LLC Board relating to
ISE, LLC's regulatory functions (including disciplinary matters) or
which would adversely affect the ability of ISE, LLC to carry out ISE,
LLC's responsibilities under the Act.\63\
---------------------------------------------------------------------------

    \62\ 15 U.S.C. 78f(b).
    \63\ Proposed Holdings Bylaws, Section 1.5. ISE Holdings also
will take reasonable steps necessary to cause its officers,
directors, and employees prior to accepting a position as such to
consent in writing to the applicability to them of Article Twelfth,
Article Thirteenth and Article Fourteenth of proposed Holdings
Certificate and Sections 1.4 and 1.5 of proposed Holdings Bylaws, as
applicable, with respect to their activities related to ISE, LLC.
Proposed Holdings Bylaws, Section 1.6.
---------------------------------------------------------------------------

    ISE, Inc. believes that these provisions would help ensure that
directors, officers, and employees of ISE Holdings are cognizant of,
and take into account, when carrying out their duties and
responsibilities as directors, officers, and employees of ISE Holdings,
the fact that ISE Holdings would operate an exchange that is subject to
regulatory oversight by the Commission and that the ISE, LLC is
required to be operated in compliance with Federal securities laws.
ISE, Inc. believes that these provisions also would help ensure that
the Commission is able to effectively fulfill its regulatory
obligations with respect to ISE, LLC.
    Pursuant to the Holdings Certificate and Holdings Bylaws, for so
long as ISE Holdings controls, directly or indirectly, ISE, LLC, any
amendment to the Holdings Certificate and Holdings Bylaws must be
submitted by the Holdings Board to the LLC Board and, if the LLC Board
determines that such amendment is required, under Section 19 of the Act
\64\ and the rules promulgated thereunder, to be filed with, or filed
with and approved by, the Commission before such amendment may be
effective under Section 19 of the Act and the rules promulgated
thereunder, then such amendment shall not be filed with the Secretary
of State of the State of Delaware until filed with, or filed and
approved by, the Commission, as the case may be.\65\ In short, if the
LLC Board determines that an amendment to the Holdings Certificate and
Holdings Bylaws must be filed with, or filed with and approved by, the
Commission as a proposed rule change pursuant to Section 19 of the Act
and Rule 19b-4 thereunder,\66\ such amendment will not become effective
until it becomes effective pursuant to the Rule 19b-4 filing process.
---------------------------------------------------------------------------

    \64\ 15 U.S.C. 78s.
    \65\ Proposed Holdings Certificate, Article Sixteenth and
proposed Holdings Bylaws, Section 10.1.
    \66\ 15 U.S.C. 78s and 17 CFR 19b-4.
---------------------------------------------------------------------------

    ISE, Inc. believes that these provisions would help to preserve the
ability of ISE, LLC to carry out its regulatory responsibilities under
the Act and would help to provide the Commission with the ability to
review and subject to public notice and comment any changes in proposed
Holdings Certificate and proposed Holdings Bylaws that could have the
potential to affect ISE, LLC's and the Commission's regulatory
responsibilities regarding ISE, LLC.
    Pursuant to proposed Holdings Certificate, all confidential
information pertaining to the self-regulatory function of ISE, LLC
(including but not limited to disciplinary matters, trading data,
trading practices, and audit information) contained in books and
records of ISE, LLC that shall come into the possession of ISE Holdings
shall: (1) Not be made available to any Persons (other than as provided
below) other than to those

officers, directors, employees, and agents of ISE Holdings that have a
reasonable need to know the contents thereof; (2) be retained in
confidence by ISE Holdings and the officers, directors, employees, and
agents of ISE Holdings; and (3) not be used for any commercial
purposes. Nothing in the Holdings Certificate shall be interpreted to
limit or impede the rights of the Commission to access and examine such
confidential information pursuant to the Federal securities laws and
rules and regulations thereunder or to limit or impede the ability of
any officers, directors, employees, or agents of ISE Holdings to
disclose such confidential information to the Commission.\67\
---------------------------------------------------------------------------

    \67\ Proposed Holdings Certificate, Article Thirteenth.
---------------------------------------------------------------------------

    For so long as ISE Holdings controls, directly or indirectly, ISE,
LLC, the books, records, premises, officers, directors, and employees
of ISE Holdings shall be deemed to be the books, records, premises,
officers, directors, and employees of ISE, LLC for purposes of and
subject to oversight pursuant to the Act but only to the extent they
relate to the exchange business of ISE, LLC.\68\ In addition, the books
and records of ISE, LLC and ISE Holdings will be kept within the
U.S.\69\ ISE, Inc. believes that these provisions would help to ensure
access to ISE Holdings' books and records by the Commission and, to the
extent ISE Holdings' books and records relate to the operation or
administration of ISE, LLC, would help enable the Commission to carry
out its regulatory responsibilities regarding ISE, LLC.
---------------------------------------------------------------------------

    \68\ Proposed Holdings Certificate, Article Fourteenth.
    \69\ Proposed Holdings Bylaws, Section 1.3.
---------------------------------------------------------------------------

    Pursuant to proposed Holdings Certificate, ISE Holdings shall
comply with the Federal securities laws and rules and regulations
thereunder and shall cooperate with ISE, LLC and the Commission,
pursuant to their respective regulatory authority.\70\ In addition, ISE
Holdings shall take reasonable steps necessary to cause its agents to
cooperate with ISE, LLC and the Commission, pursuant to their
respective regulatory authority with respect to such agents' activities
related to ISE, LLC.\71\ ISE, Inc. believes that these provisions would
help to ensure that ISE Holdings will not interfere with the
Commission's regulatory responsibilities by ensuring that ISE Holdings
will comply with Federal securities laws, cooperates with ISE, LLC and
the Commission pursuant to their respective regulatory authority, and
takes reasonable steps to ensure that its agents do not interfere with
the Commission's ability to carry out its regulatory responsibilities.
---------------------------------------------------------------------------

    \70\ Proposed Holdings Certificate, Article Fifteenth.
    \71\ Id.
---------------------------------------------------------------------------

    ISE, Inc. believes that the Reorganization will permit ISE, LLC to
continue ISE, Inc.'s current function as a national securities exchange
while its corporate parent, ISE Holdings, may, through greater
organizational flexibility, facilitate access to capital markets,
promote new business opportunities, facilitate future acquisitions and
the formation of strategic alliances, and create a framework for future
growth.
2. Statutory Basis
    ISE, Inc. believes that the proposed rule change is consistent with
the requirements of the Act and the rules and regulations thereunder
that are applicable to a national securities exchange and, in
particular, with the requirements of Section 6(b) of the Act.\72\ The
Exchange believes that the proposal is consistent with the requirement
under Section 6(b)(1) of the Act \73\ that an exchange be so organized
and has the capacity to be able to carry out the purposes of the Act
and to comply, and (subject to any rule or order of the Commission
pursuant to Section 17(d) \74\ or 19(g)(2) \75\ of the Act) to enforce
compliance by its members and persons associated with its members, with
the provisions of the Act, the rules and regulations thereunder, and
the rules of the exchange. ISE, Inc. also believes this proposed rule
change furthers the objective of Section 6(b)(5) of the Act \76\ that
an exchange have rules that, among other things, are designed 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.
---------------------------------------------------------------------------

    \72\ 15 U.S.C. 78f(b). See also Amendment No. 2, supra note 3.
    \73\ 15 U.S.C. 78f(b)(1).
    \74\ 15 U.S.C. 78q(d).
    \75\ 15 U.S.C. 78s(g)(2).
    \76\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    ISE, Inc. believes that the proposed rule change does not impose
any burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others

    ISE, Inc. has not solicited, and does not intend to solicit,
comments on this proposed rule change. ISE, Inc. 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

    Within 35 days of the date of publication of this notice in the
Federal Register or within such other period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    A. By order approve the proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule
change should be disapproved.

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<EMAIL_ADDRESS>Please include

File No. SR-ISE-2006-04 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-ISE-2006-04. 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 Commissions 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. Copies of such filing also will be available for
inspection and copying at the principal office of the ISE. 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-2006-04 and should be
submitted by April 7, 2006.

    For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\77\
---------------------------------------------------------------------------

    \77\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Nancy M. Morris,
Secretary.
[FR Doc. E6-3855 Filed 3-16-06; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register Volume 87, Number 162 (Tuesday, August 23, 2022)]
[Rules and Regulations]
[Pages 51614-51616]
[FR Doc No: 2022-18074]

=======================================================================
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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 541

[Docket No. NHTSA-2022-0012]
RIN 2127-AM41

Federal Motor Vehicle Theft Prevention Standard; Final Listing of
2020 Light Duty Truck Lines Subject to the Requirements of This
Standard and Exempted Vehicle Lines for Model Year 2020

AGENCY: National Highway Traffic Safety Administration (NHTSA), U.S.
Department of Transportation.

ACTION: Final rule.

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SUMMARY: This final rule announces NHTSA's determination that there are
no new model year 2020 light duty truck lines subject to the parts-
marking requirements of the Federal motor vehicle theft prevention
standard. The agency determined no new models were high-theft or had
major parts that are interchangeable with a majority of the covered
major parts of passenger car or multipurpose passenger vehicle lines.
This final rule also identifies those vehicle lines that have been
granted an exemption from the parts-marking requirements because they
are equipped with antitheft devices determined to meet certain
criteria.

DATES: This final rule is effective August 23, 2022.

FOR FURTHER INFORMATION CONTACT: Ms. Carlita Ballard, Office of
International Policy, Fuel Economy and Consumer Programs, NHTSA, West
Building, W43-439, NRM-310, 1200 New Jersey Avenue SE, Washington, DC
20590. Ms. Ballard's phone number is<PHONE_NUMBER>. Her fax number is
(202) 493-2990.

SUPPLEMENTARY INFORMATION: The theft prevention standard (49 CFR part
541) applies to (1) all passenger car lines; (2) all multipurpose
passenger vehicle (MPV) lines with a gross vehicle weight rating (GVWR)
of 6,000 pounds or less; (3) low-theft light-duty truck (LDT) lines
with a GVWR of 6,000 pounds or less that have major parts that are
interchangeable with a majority of the covered major parts of passenger
car or MPV lines; and (4) high-theft LDT lines with a GVWR of 6,000
pounds or less.
    The purpose of the theft prevention standard is to reduce the
incidence of motor vehicle theft by facilitating the tracing and
recovery of parts from stolen vehicles. The standard seeks to
facilitate such tracing by requiring that vehicle identification
numbers (VINs), VIN derivative numbers, or other symbols be placed on
major component vehicle parts. The theft prevention standard requires
motor vehicle manufacturers to inscribe or affix VINs onto covered
original equipment major component parts, and to inscribe or affix a
symbol identifying the manufacturer and a common symbol identifying the
replacement component parts for those original equipment parts, on all
vehicle lines subject to the requirements of the standard.
    49 U.S.C. 33104(d) provides that once a line has become subject to
the theft prevention standard, the line remains subject to the
requirements of the standard unless it is exempted under 49 U.S.C.
33106. Section 33106 provides that a manufacturer may petition annually
to have one vehicle line exempted from the requirements of section
33104, if the line is equipped with an antitheft device meeting certain
conditions as standard equipment. The exemption is granted if NHTSA
determines that the antitheft device is likely to be as effective as
compliance with the theft prevention standard in reducing and deterring
motor vehicle thefts.
    49 CFR part 543 establishes the process through which manufacturers
may seek an exemption from the theft prevention standard. Manufacturers
may request an exemption under 49 CFR 543.6 by providing specific
information about the antitheft device, its capabilities, and the
reasons the petitioner believes the device to be as effective at
reducing and deterring theft as compliance with the parts-marking

requirements,\1\ or manufacturers may request an exemption under a more
streamlined process outlined in 49 CFR 543.7 if the vehicle line is
equipped with an antitheft device (an ``immobilizer'') as standard
equipment that complies with one of the standards specified in that
section.\2\ If the exemption is sought under 49 CFR 543.6, NHTSA
publishes a notice of its decision to grant or deny the exemption
petition in the Federal Register and notifies the petitioner in
writing; if the petition is sought under section 49 CFR 543.7, NHTSA
notifies the petitioner in writing of the agency's decision to grant or
deny the exemption petition.
---------------------------------------------------------------------------

    \1\ 49 CFR 543.6.
    \2\ 49 CFR 543.7.
---------------------------------------------------------------------------

    NHTSA annually publishes the names of LDT lines NHTSA has
determined to be high theft pursuant to 49 CFR part 541, LDT lines that
NHTSA has determined to have major parts that are interchangeable with
a majority of the covered major parts of passenger car or MPV lines,
and vehicle lines that NHTSA has exempted from the theft prevention
standard. Appendix A to part 541 identifies those LDT lines subject to
the theft prevention standard beginning in a given model year. Appendix
A-I to part 541 also lists those vehicle lines that NHTSA has exempted
from the theft prevention standard.
    For MY 2020, there are no new LDT lines that will be subject to the
theft prevention standard in accordance with the procedures published
in 49 CFR part 542.
    Appendix A-I identifies those vehicle lines that have been exempted
by the agency from the parts-marking requirements of part 541 and is
amended to include eleven MY 2020 vehicle lines newly exempted in full.
The eleven exempted vehicle lines are the Hyundai Genesis G70, Honda
Acura TLX, Jeep Gladiator, Nissan Versa, Toyota C-HR, GM Buick Encore,
Porsche Taycan, Ford Lincoln Corsair, BMW 2 series, Jaguar Land Rover
E-Pace and the Tesla Model Y. NHTSA has either previously granted these
exemption requests and published the determination in the Federal
Register if the exemption was sought under 49 CFR 543.6, or has
notified the manufacturer of the grant of exemption if the exemption
was sought under 49 CFR 543.7.
    Each year the agency also amends the appendices to part 541 to
remove vehicle lines that have not been manufactured for the United
States market in over 5 years. We believe that including those vehicle
lines would be unnecessary. Therefore, the agency is removing the BMW
X1, Ford Taurus, Jaguar XK, Land Rover LR2 and the Mazda 5 vehicle
lines from the Appendix A-I listing. However, NHTSA will continue to
maintain a comprehensive database of all exemptions on our website.
    The changes made in this notice are purely informational. The
eleven vehicle lines that will be added to appendix A-I of part 541
were granted exemptions in accordance with the procedures of 49 CFR
part 543 and 49 U.S.C. 33106 and notices of the grants of those
exemptions were published in the Federal Register, or the manufacturer
was notified by grant letter. Therefore, NHTSA finds good cause under 5
U.S.C. 553(b)(3)(B) that notice and opportunity for comment on this
final rule is unnecessary. Further, public comment on the listing of
selections and exemptions is not contemplated by 49 U.S.C. chapter 331.
For the same reasons, since this revised listing only informs the
public of previous agency actions and does not impose additional
obligations on any party, NHTSA finds good cause under 5 U.S.C.
553(d)(3) to make the amendment made by this notice effective on the
date this notice is published in the Federal Register.

Regulatory Notices

A. Executive Order 12866 and DOT Regulatory Policies and Procedures

    This rulemaking document was not reviewed by the Office of
Management and Budget (OMB) under Executive Order (E.O.) 12866. It is
not considered to be significant under E.O. 12866 or the Department's
Regulatory Policies and Procedures. The purpose of this final rule is
to provide information to the public about vehicle lines that must
comply with the parts-marking requirements of NHTSA's theft prevention
standard and vehicles that NHTSA has exempted from those requirements.
Since the purpose of the final rule is to inform the public of actions
NHTSA has already taken, either determining that new lines are subject
to parts-marking requirements or exempting vehicle lines from those
requirements, the final rule will not impose any new burdens.

B. National Environmental Policy Act

    NHTSA has analyzed this final rule for the purposes of the National
Environmental Policy Act. The agency has determined that implementation
of this action will not have any significant impact on the quality of
the human environment as it merely informs the public about previous
agency actions. Accordingly, no environmental assessment is required.

C. Executive Order 13132 (Federalism)

    The agency has analyzed this rulemaking in accordance with the
principles and criteria contained in Executive Order 13132 and has
determined that it does not have sufficient federal implications to
warrant consultation with State and local officials or the preparation
of a federalism summary impact statement. As discussed above, this
final rule only provides information to the public about previous
agency actions.

D. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 requires agencies to
prepare a written assessment of the costs, benefits and other effects
of proposed or final rules that include a Federal mandate likely to
result in the expenditure by State, local or tribal governments, in the
aggregate, or by the private sector, of more than $100 million annually
($120.7 million as adjusted annually for inflation with base year of
1995). The assessment may be combined with other assessments, as it is
here.
    This final rule will not result in expenditures by State, local or
tribal governments or automobile manufacturers and/or their suppliers
of more than $120.7 million annually. This document informs the public
of previously granted exemptions. Since the only purpose of this final
rule is to inform the public of previous actions taken by the agency,
no new costs or burdens will result.

E. Executive Order 12988 (Civil Justice Reform)

    Pursuant to Executive Order 12988, ``Civil Justice Reform,'' \3\
the agency has considered whether this final rule has any retroactive
effect. We conclude that it would not have such an effect as it only
informs the public of previous agency actions. In accordance with
section 49 U.S.C. 33118, when a Federal theft prevention standard is in
effect, a State or political subdivision of a State may not have a
different motor vehicle theft prevention standard for a motor vehicle
or major replacement part. 49 U.S.C. 33117 provides that judicial
review of this rule may be obtained pursuant to 49 U.S.C. 32909.
Section 32909 does not require submission of a petition for
reconsideration or other administrative proceedings before parties may
file suit in court.
---------------------------------------------------------------------------

    \3\ See 61 FR 4729, February 7, 1996.

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F. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501, et
seq.), Federal agencies must obtain approval from the Office of
Management and Budget (OMB) for each collection of information they
conduct, sponsor, or require through regulations. There are no
information collection requirements associated with this final rule.

List of Subjects in 49 CFR Part 541

    Administrative practice and procedure, Labeling, Motor vehicles,
Reporting and recordkeeping requirements.

    In consideration of the foregoing, 49 CFR part 541 is amended as
follows:

PART 541--[AMENDED]

0
1. The authority citation for part 541 continues to read as follows:

    Authority: 49 U.S.C. 33101, 33102, 33103, 33104, 33105 and
33106; delegation of authority at 49 CFR 1.95.

0
2. Appendix A-I to Part 541 is revised to read as follows:

Appendix A-I to Part 541--Lines With Antitheft Devices Which Are
Exempted From the Parts-Marking Requirements of This Standard Pursuant
to 49 CFR Part 543

------------------------------------------------------------------------
                 Manufacturer                        Subject lines
------------------------------------------------------------------------
BMW..........................................  MINI, MINI Countryman
                                                (MPV), X1 (MPV), X1, X2
                                                (MPV), X3 (MPV), X4
                                                (MPV), X5 (MPV), Z4, 2
                                                Series,\1\ 3 Series, 4
                                                Series, 5 Series, 6
                                                Series, 7 Series, 8
                                                Series.
CHRYSLER.....................................  200, 300, Dodge Charger,
                                                Dodge Challenger, Dodge
                                                Dart, Dodge Journey,
                                                Fiat 500, Fiat 124
                                                Spider, Jeep Cherokee,
                                                Jeep Compass, Jeep Grand
                                                Cherokee (MPV), Jeep
                                                Gladiator,\1\ Jeep
                                                Patriot, Jeep Wrangler/
                                                Wrangler JK,\2\ Jeep
                                                Wrangler JL (new), Town
                                                and Country MPV.
FORD MOTOR CO................................  C-Max, EcoSport, Edge,
                                                Escape, Explorer,
                                                Fiesta, Focus, Fusion,
                                                Lincoln Corsair,\1\
                                                Lincoln MKC, Lincoln
                                                MKX, Lincoln Nautilus,
                                                Mustang.
GENERAL MOTORS...............................  Buick LaCrosse/Regal,
                                                Buick Encore,\1\ Buick
                                                Verano, Cadillac ATS,
                                                Cadillac CTS, Cadillac
                                                SRX, Cadillac XTS,
                                                Cadillac XT4, Chevrolet
                                                Bolt, Chevrolet Camaro,
                                                Chevrolet Corvette,
                                                Chevrolet Cruze,
                                                Chevrolet Equinox,
                                                Chevrolet Impala/Monte
                                                Carlo, Chevrolet Malibu,
                                                Chevrolet Sonic,
                                                Chevrolet Spark,
                                                Chevrolet Volt, GMC
                                                Terrain.
HONDA........................................  Accord, Acura TLX,\1\
                                                Acura MDX, Civic, CR-V,
                                                Passport, Pilot.
HYUNDAI......................................  Azera, Equus, Genesis
                                                G70,\1\ Genesis G80,\3\
                                                IONIQ.
JAGUAR.......................................  F-Type, XE, XF, XJ, Land
                                                Rover Discovery Sport,
                                                Land Rover E-Pace,\1\
                                                Land Rover F-Pace, Land
                                                Rover Range Rover
                                                Evoque, Land Rover
                                                Velar.
KIA..........................................  Niro, Stinger.
MASERATI.....................................  Ghibli, Levante (SUV),
                                                Quattroporte.
MAZDA........................................  2, 3, 5, 6, CX-3, CX-5,
                                                CX-9, MX-5 Miata.
MERCEDES-BENZ................................  smart Line Chassis, smart
                                                USA fortwo, SL-Line
                                                Chassis (SL-Class), (the
                                                models within this line
                                                are): SL400/SL450,
                                                SL550, SL 63/AMG, SL 65/
                                                AMG, SLK-Line Chassis
                                                (SLK-Class/SLC-Class),
                                                (the models within this
                                                line are): SLK 250, SLK
                                                300, SLK 350, SLK 55
                                                AMG, SLC 300 AMG, SLC
                                                43, S-Line Chassis (S/CL/
                                                S-Coupe Class/S-Class
                                                Cabriolet/Mercedes
                                                Maybach), (the models
                                                within this line are):
                                                S400 Hybrid, S550, S600,
                                                S63 AMG, S65 AMG,
                                                Mercedes-Maybach S560,
                                                Mercedes-Maybach S650,
                                                CL550, CL600, CL63 AMG,
                                                CL65 AMG, NGCC Chassis
                                                Line (CLA/GLA/B-Class/A-
                                                Class), (the models
                                                within this line are):
                                                A220, B250e, CLA250,
                                                CLA45 AMG, GLA250, GLA45
                                                AMG, C-Line Chassis (C-
                                                Class/CLK/GLK-Class/GLC-
                                                Class), (the models
                                                within this line are):
                                                C63 AMG, C240, C250,
                                                C300, C350, CLK 350, CLK
                                                550, CLK 63AMG, GLK250,
                                                GLK350, E-Line Chassis
                                                (E-Class/CLS Class),
                                                (the models within this
                                                line are): E55, E63 AMG,
                                                E320 BLUETEC, E350
                                                BLUETEC, E320/E320DT
                                                CDi, E350/E500/E550,
                                                E400 HYBRID, CLS400,
                                                CLS500/550, CLS55 AMG,
                                                CLS63 AMG.
MITSUBISHI...................................  Eclipse Cross, iMiEV,
                                                Lancer, Outlander,
                                                Outlander Sport, Mirage.
NISSAN.......................................  Altima, Juke, Leaf,
                                                Maxima, Murano, NV200
                                                Taxi, Pathfinder, Quest,
                                                Rogue, Kicks, Sentra,
                                                Infiniti Q70, Infiniti
                                                Q50/60, Infiniti QX50,
                                                Infiniti QX60, Versa.\1\
PORSCHE......................................  911, Boxster/Cayman,
                                                Macan, Panamera,
                                                Taycan.\1\
SUBARU.......................................  Ascent, Forester,
                                                Impreza, Legacy,
                                                Outback, WRX, XV
                                                Crosstrek/Crosstrek.\4\
TESLA........................................  Model 3, Model S, Model
                                                X, Model Y.\1\
TOYOTA.......................................  Avalon, Camry, Corolla, C-
                                                HR,\1\ Highlander, Lexus
                                                ES, Lexus GS, Lexus LS,
                                                Lexus NX, Lexus RX,
                                                Prius, RAV4, Sienna.
VOLKSWAGEN...................................  Atlas, Beetle, Eos,
                                                Jetta, Passat, Tiguan,
                                                Golf/Golf Sport wagen/
                                                eGolf/Alltrack, Audi A3,
                                                Audi A4, Audi A4Allroad
                                                MPV, Audi A6, Audi A8,
                                                Audi Q3, Audi Q5, Audi
                                                TT.
VOLVO........................................  S60.
------------------------------------------------------------------------
\1\ Granted an exemption from the parts-marking requirements beginning
  with MY 2020.
\2\ Jeep Wrangler (2009-2019) nameplate changed to Jeep Wrangler JK, JK
  discontinued after MY 2018.
\3\ Hyundai discontinued use of its parts-marking exemption for the
  Genesis vehicle line beginning with the 2010 model year, line was
  reintroduced as the Genesis G80.
\4\ Subaru XV Crosstrek nameplate changed to Crosstrek beginning with MY
  2016.

    Issued under authority delegated in 49 CFR 1.95 and 501.5.
Steven S. Cliff,
Administrator.

[FR Doc. 2022-18074 Filed 8-22-22; 8:45 am]
BILLING CODE 4910-59-P


[Federal Register: September 11, 2006 (Volume 71, Number 175)]
[Notices]
[Page 53434-53435]
[DOCID:fr11se06-62]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. ER06-1226-000]

Valero Power Marketing LLC; Notice of Issuance of Order

September 5, 2006.
    Valero Power Marketing, LLC (Valero) filed an application for
market-based rate authority, with an accompanying tariff. The proposed
market-based rate tariff provides for the sale of energy, capacity and
ancillary services at market-based rates. Valero also requested waivers
of various Commission regulations. In particular, Valero requested that
the Commission grant blanket approval under 18 CFR part 34 of all
future issuances of securities and assumptions of liability by Valero.
    On August 16, 2006, pursuant to delegated authority, the Director,
Division of Tariffs and Market Development--West, granted the requests
for blanket approval under part 34. The Director's order also stated
that the Commission would publish a separate notice in the Federal
Register establishing a period of time for the filing of protests.
Accordingly, any person desiring to be heard or to protest the blanket
approvals of issuances of securities or assumptions of liability by
Valero should file a motion to intervene or protest with the Federal
Energy Regulatory Commission, 888 First Street, NE., Washington, DC
20426, in accordance with Rules 211 and 214 of the Commission's Rules
of Practice and Procedure. 18 CFR 385.211, 385.214 (2004).
    Notice is hereby given that the deadline for filing motions to
intervene or protest is September 15, 2006.
    Absent a request to be heard in opposition by the deadline above,
Valero is authorized to issue securities and assume obligations or
liabilities as a guarantor, indorser, surety, or otherwise in respect
of any security of another person; provided that such issuance or
assumption is for some lawful object within the corporate purposes of
Valero, compatible with the public interest, and is reasonably
necessary or appropriate for such purposes.
    The Commission reserves the right to require a further showing that
neither public nor private interests will be adversely affected by
continued approvals of Valero's issuance of securities or assumptions
of liability.
    Copies of the full text of the Director's Order are available from
the

Commission's Public Reference Room, 888 First Street, NE., Washington,
DC 20426. The Order may also be viewed on the Commission's Web site at
http://www.ferc.gov, using the eLibrary link. Enter the docket number

excluding the last three digits in the docket number filed to access
the document. Comments, protests, and interventions may be filed
electronically via the Internet in lieu of paper. See, 18 CFR
385.2001(a)(1)(iii) and the instructions on the Commission's Web site
under the ``e-Filing'' link. The Commission strongly encourages
electronic filings.

Magalie R. Salas,
Secretary.
[FR Doc. E6-14964 Filed 9-8-06; 8:45 am]

BILLING CODE 6717-01-P