[Federal Register Volume 70, Number 143 (Wednesday, July 27, 2005)]
[Notices]
[Pages 43469-43470]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3986]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52074; File No. 4-429]


Joint Industry Plan; Notice Filing of Amendment No. 17 to the 
Plan for the Purpose of Creating and Operating an Intermarket Option 
Linkage Regarding Modifying the 80/20 Test for Determining Limitations 
on Principal Order Access to Linkage

July 20, 2005.
    Pursuant to Section 11A of the Securities Exchange Act of 1934 
(``Act'')\1\ and Rule 11Aa3-2 thereunder,\2\ notice is hereby given 
that on April 20, 2005, May 20, 2005, May 12, 2005, April 13, 2005, 
April 27, 2005 and May 11, 2005, the American Stock Exchange LLC 
(``Amex''), the Boston Stock Exchange, Inc. (``BSE''), the Chicago 
Board Options Exchange, Incorporated (``CBOE''), the International 
Securities Exchange (``ISE''), the Pacific Exchange, Inc. (``PCX''), 
and the Philadelphia Stock Exchange, Inc. (``Phlx'') (collectively, 
``Participants''), respectively, filed with the Securities and Exchange 
Commission (``Commission'') Joint Amendment No. 17 to the Plan for the 
Purpose of Creating and Operating an Intermarket Option Linkage 
(``Linkage Plan'').\3\ In Joint Amendment No. 17, the Participants 
propose to modify the ``80/20 Test'' to determine limitations on 
principal order access to Linkage.\4\
---------------------------------------------------------------------------

    \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 (``Linkage'') proposed by Amex, CBOE, and 
ISE. See Securities Exchange Act Release No. 43086 (July 28, 2000), 
65 FR 48023 (August 4, 2000). Subsequently, Phlx, PCX, and BSE 
joined the Linkage Plan. See Securities Exchange Act Release Nos. 
43573 (November 16, 2000), 65 FR 70851 (November 28, 2000); 43574 
(November 16, 2000), 65 FR 70850 (November 28, 2000); and 49198 
(February 5, 2004), 69 FR 7029 (February 12, 2004).
    \4\ Specified in Section 8(b)(iii) of the Linkage Plan.
---------------------------------------------------------------------------

I. Description and Purpose of the Proposed Amendment

    The purpose of the Joint Amendment is to modify the so-called ``80-
20 Test'' (``Test'') contained in Section 8(b)(iii) of the Linkage 
Plan, which provides that market makers should send Principal Orders 
through the Linkage on a limited basis and not as a primary aspect of 
their business.\5\ The Test implements this general principle by 
prohibiting a market maker from sending Principal Orders in an eligible 
option class if, in the last calendar quarter, the market maker's 
Principal Order contract volume is disproportionate to the market 
maker's contract volume executed against customer orders in its own 
market.
---------------------------------------------------------------------------

    \5\ A Principal Order is an order for the principal account of 
an eligible market maker that does not relate to a customer order 
the market maker is holding. See Section 2(16)(b) of the Linkage 
Plan.
---------------------------------------------------------------------------

    The Participants believe that applying the Test has resulted in 
anomalies for market makers with limited volume in an eligible option 
class. Specifically, if a market maker has very little overall trading 
volume in an option, the execution of one or two Principal Orders 
during a calendar quarter could result in the market maker failing to 
meet the Test. This would bar the market maker from using the Linkage 
to send Principal Orders for the following calendar quarter. The 
Participants contend that it was not their intent to bar market makers 
with limited volume from sending Principal Orders through the Linkage 
in these circumstances since such trading clearly was not ``a primary 
aspect of their business.'' Thus, Joint Amendment No. 17 proposes to 
create a de minimis exemption from the Test for market makers that have 
total contract volume of less than 1000 contracts in an options class 
for a calendar quarter.

II. Implementation of the Proposed Amendment

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

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether proposed Joint 
Amendment No. 17 is consistent with

[[Page 43470]]

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, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.
    All submissions should refer 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 proposed Joint Amendment No. 17 that are 
filed with the Commission, and all written communications relating to 
proposed Joint Amendment No. 17 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 
filings 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 publicly available. All 
submissions should refer to File Number 4-429 and should be submitted 
on or before August 17, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
Jonathan G. Katz,
Secretary.
---------------------------------------------------------------------------

    \6\ 17 CFR 200.30-3(a)(29).
---------------------------------------------------------------------------

[FR Doc. E5-3986 Filed 7-26-05; 8:45 am]
BILLING CODE 8010-01-P