[Federal Register Volume 69, Number 97 (Wednesday, May 19, 2004)]
[Notices]
[Pages 28953-28954]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-11259]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49689; File No. 4-429]


Joint Industry Plan; Notice of Filing of Amendment No. 10 to the 
Plan of the Purpose of Creating and Operating an Intermarket Options 
Linkage Regarding the Handling of Principal Acting as Agent Orders

May 12, 2004.
    Pursuant to section 11A of the Securities Exchange Act of 1934 (the 
``Act'') \1\ and Rule 11Aa3-2 thereunder,\2\ notice is hereby given 
that on February 18, 2004, March 1, 2004, March 23, 2004, April 20, 
2004, April 23, 2004, and April 27, 2004, the International Securities 
Exchange, Inc. (``ISE''), American Stock Exchange LLC (``Amex''), 
Chicago Board Options Exchange, Inc. (``CBOE''), Pacific Exchange, Inc. 
(``PCX''), Philadelphia Stock Exchange, Inc. (``Phlx''), and Boston 
Stock Exchange, Inc. (``BSE'') (collectively the ``Participants'') 
respectively submitted to the Securities and Exchange Commission 
(``SEC'' or ``Commission'') Amendment No. 10 to the Plan for the 
Purpose of Creating and Operating an Intermarket Options Linkage (the 
``Linkage Plan'').\3\ The amendment proposes to modify the manner in 
which a member of a Participant may send Principal Acting as Agent 
Orders (``P/A Orders'') that are larger than the Firm Customer Quote 
Size (``FCQS''). The Commission is publishing this notice to solicit 
comments from interested persons on the proposed Linkage Plan 
amendment.
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    \1\ 15 U.S.C. 78k-1.
    \2\ 17 CFR 240.11Aa3-2.
    \3\ On July 28, 2000, the Commission approved a national market 
system plan for the purpose of creating and operating an intermarket 
options market linkage proposed by the Amex, CBOE, and ISE. See 
Securities Exchange Act Release No. 43086 (July 28, 2000), 65 FR 
48023 (August 4, 2000). Subsequently, upon separate requests by the 
Phlx, PCX and BSE, the Commission issued orders to permit these 
exchanges to participate in the Linkage Plan. See Securities 
Exchange Act Release Nos. 43573 (November 16, 2000), 65 FR 70850 
(November 28, 2000), 43574 (November 16, 2000), 65 FR 70851 
(November 28, 2000) and 49198 (February 5, 2004), 69 FR 7029 
(February 12, 2004).

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[[Page 28954]]

I. Description and Purpose of the Amendment

    A P/A Order is an order for the principal account of a market maker 
that is authorized to represent customer orders, reflecting the terms 
of a related unexecuted customer order for which the market maker is 
acting as agent.\4\ The FCQS is the minimum size for which a 
Participant must provide an execution in its automatic execution system 
for a P/A Order, if the Participant's auto-ex system is available.
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    \4\ Section 2(16)(a) of the Linkage Plan.
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    Currently, the Linkage Plan provides a market maker with two ways 
to handle P/A Orders that are larger than the FCQS. First, the market 
maker may send a P/A Order larger than the FCQS representing the entire 
customer order for manual processing at the receiving Participant. 
Second, the market maker may send an initial P/A Order for up to the 
FCQS. If the market maker then seeks to send another P/A Order, it must 
send an order for the lesser of the entire remaining size of the 
underlying customer order or 100 contracts.
    The proposed Amendment addresses the handling of P/A orders if the 
market maker chooses the second alternative, the sending of multiple P/
A Orders. As currently drafted, the Linkage Plan does not recognize the 
possibility that a Participant's disseminated quotation may be for less 
than either the remaining size of the customer order or 100 contracts. 
Thus, the proposed Amendment specifies that a market maker sending a 
second P/A Order may limit such order to the lesser of: the remaining 
size of the customer order; 100 contracts; or the size of the receiving 
Participant's disseminated quotation.
    In addition, the Participants believe that there is a practical 
issue if multiple exchanges are displaying the same bid or offer. In 
that case, the Linkage Plan is unclear as to whether a market maker 
must send the entire order to one Participant or can send orders to 
multiple Participants, as long as they are for the size of the entire 
order, or 100 contracts, in the aggregate. The Amendment proposes to 
clarify the Linkage Plan to specify that a market maker may send P/A 
Orders to multiple exchanges, as long as all such orders, in the 
aggregate, are for the lesser of the entire remaining size of the 
customer order or 100 contracts. However, a market maker may limit the 
size of any single additional order to the size of the receiving 
market's disseminated quotation.
    Finally, the proposed Amendment modifies the provisions of the 
Linkage Plan relating to the time period within which a receiving 
Participant must inform the sending Participant of the amount of the 
order executed and the amount, if any, that was canceled, and the time 
period for which a sending Participant must wait while the receiving 
Participant continues to disseminate the same price at the national 
best bid or offer before sending a second P/A Order. Currently, the 
applicable time period for each such circumstance is 15 seconds. The 
proposed Amendment would permit the Options Linkage Authority to 
determine different applicable time periods for both circumstances, 
subject to approval by the Commission.

II. Implementation of the Plan Amendment

    The Participants intend to make the proposed amendment to the 
Linkage Plan reflected in this filing effective when the Commission 
approves the amendment.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed 
amendment to the Linkage Plan 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 protected]. Please include 
File Number 4-429 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to Joint Amendment No. 10 to File 
Number 4-429. 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 Section, 450 Fifth Street, NW., Washington, DC 20549. Copies 
of such filing also will be available for inspection and copying at the 
principal offices of the Amex, BSE, CBOE, ISE, PCX and Phlx. 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 Joint Amendment No. 10 to File Number 4-429 
and should be submitted on or before June 9, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(29).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 04-11259 Filed 5-18-04; 8:45 am]
BILLING CODE 8010-01-P