[Federal Register Volume 70, Number 152 (Tuesday, August 9, 2005)]
[Notices]
[Pages 46224-46225]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-4271]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52167; File No. 4-429]


Joint Industry Plan; Notice of Filing of Amendment No. 15 to the 
Plan for the Purpose of Creating and Operating an Intermarket Option 
Linkage Relating to a ``Trade and Ship'' Exception to the Definition of 
``Trade-Through'' and a ``Book and Ship'' Exception to the Locked 
Markets Provision

July 29, 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 13, 2005, April 22, 2005, April 26, 2005, April 27, 2005, 
May 5, 2005, and June 2, 2005, the International Securities Exchange 
(``ISE''), the American Stock Exchange LLC (``Amex''), the Chicago 
Board Options Exchange, Incorporated (``CBOE''), the Pacific Exchange, 
Inc. (``PCX''), the Boston Stock Exchange, Inc. (``BSE''), and the 
Philadelphia Stock Exchange, Inc. (``Phlx'') (collectively, 
``Participants''), respectively, filed with the Securities and Exchange 
Commission (``Commission'') an amendment (``Joint Amendment No. 15'') 
to the Plan for the Purpose of Creating and Operating an Intermarket 
Option Linkage (``Linkage Plan'').\3\ In Joint Amendment No. 15, the 
Participants propose to add a ``trade and ship'' exception to the 
definition of ``Trade-Through'' \4\ and a ``book and ship'' exception 
to the locked markets provision of the Linkage Plan.\5\ The Commission 
is publishing this notice to solicit comments from interested persons 
on proposed Joint Amendment No. 15.
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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 (``Linkage'') proposed by 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 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 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). On June 27, 2001, May 30, 2002, January 29, 
2003, June 18, 2003, January 29, 2004, June 15, 2004, June 17, 2004, 
July 2, 2004, October 19, 2004, and May 19, 2005, the Commission 
approved joint amendments to the Linkage Plan. See Securities 
Exchange Act Release Nos. 44482 (June 27, 2001), 66 FR 35470 (July 
5, 2001); 46001 (May 30, 2002), 67 FR 38687 (June 5, 2002); 47274 
(January 29, 2003), 68 FR 5313 (February 3, 2003); 48055 (June 18, 
2003), 68 FR 37869 (June 25, 2003); 49146 (January 29, 2004), 69 FR 
5618 (February 5, 2004); 49863 (June 15, 2004), 69 FR 35081 (June 
23, 2004); 49885 (June 17, 2004), 69 FR 35397 (June 24, 2004); 49969 
(July 2, 2004), 69 FR 41863 (July 12, 2004); 50561 (October 19, 
2004), 69 FR 62920 (October 28, 2004); and 51721 (May 19, 2005), 70 
FR 30498 (May 26, 2005).
    \4\ See Section 2(29) of the Linkage Plan.
    \5\ Specified in Section 7(a)(i)(C) of the Linkage Plan.
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I. Description and Purpose of the Proposed Amendment

    The purpose of Joint Amendment No. 15 is to provide that (i) a 
Participant may trade an order at a price that is one minimum quoting 
increment inferior to the national best bid or offer (``NBBO'') if a 
Linkage Order \6\ is transmitted contemporaneously to the NBBO 
market(s) to satisfy all interest at the NBBO price (this is the 
``trade and ship'' concept); and (ii) a Participant may book an order 
that would lock another Participant if a Linkage Order is sent 
contemporaneously to such other Participant to satisfy all interest at 
the lock price (this is the ``book and ship'' concept). Under the trade 
and ship proposal, any execution received from the NBBO market must 
(pursuant to agency obligations) be reassigned to the customer order 
underlying the Linkage Order that would be transmitted to trade with 
the NBBO market. The following examples illustrate the applications of 
these concepts.
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    \6\ See Section 2(16) of the Linkage Plan.
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    Trade and Ship Example. Participant A is disseminating an offer of 
$2.00 for 100 contracts. Participant B is disseminating the national 
best offer of $1.95 for 10 contracts. No other market is at $1.95. 
Participant A receives a 100-contract customer buy order to pay $2.00.
    Under the trade and ship proposal, Participant A could execute 90 
contracts (or 100 contracts) of the customer order at $2.00, provided 
that Participant A simultaneously transmits a 10-contract Principal 
Acting as Agent (``P/A'') Order \7\ to Participant B to pay $1.95. 
Assuming an execution was obtained from Participant B, the customer 
would receive the 10-contract fill at $1.95 and 90 contracts at $2.00 
(if the customer order was originally filled in its entirety at $2.00, 
an adjustment would be required to provide the customer with the $1.95 
price for 10 contracts to reflect the P/A Order execution). As 
proposed, this would not be deemed a Trade-Through.
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    \7\ See Section 2(16) of the Linkage Plan.
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    Book and Ship Example. Participant A is disseminating a $1.85-$2.00 
market. Participant B is disseminating a $1.80-$1.95 market. The $1.95 
offer is for 10 contracts. No other market is at $1.95. Participant A 
receives a customer order to buy 100 contracts at $1.95. Under the book 
and ship proposal, Participant A could book 90 contracts of the 
customer buy order at $1.95, provided that Participant A simultaneously 
transmitted a 10-contract P/A Order to Participant B to pay $1.95. 
Assuming an execution was obtained from Participant B, the customer 
would receive the 10-contract fill, and the rest of the customer's 
order would be displayed as a $1.95 bid on Participant A. The national 
best offer would likely be $2.00. As proposed, this would not be deemed 
a ``locked'' market for purposes of the Linkage Plan.

II. Implementation of the Proposed Amendment

    The Participants intend to make proposed Joint Amendment No. 15 
effective when the Commission approves Joint Amendment No. 15.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether proposed Joint 
Amendment No. 15 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, 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

[[Page 46225]]

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. 15 
that are filed with the Commission, and all written communications 
relating to proposed Joint Amendment No. 15 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 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 30, 2005.
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    \8\ 17 CFR 200.30-3(a)(29).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-4271 Filed 8-8-05; 8:45 am]
BILLING CODE 8010-01-P