[Federal Register Volume 70, Number 181 (Tuesday, September 20, 2005)]
[Notices]
[Pages 55202-55203]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-18621]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52416; File No. SR-Phlx-2005-26]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Order Approving a Proposed Rule Change and Amendment No. 1 Thereto To 
Amend the Exchange's Trade-Through and Locked Markets Rules

September 13, 2005.
    On April 26, 2005, the Philadelphia Stock Exchange, Inc. 
(``Phlx''), filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ to implement Amendment No. 15 to the Plan for the 
Purpose of Creating and Operating an Intermarket Option Linkage \3\ by 
amending Phlx Rules 1083 and 1086 to add a ``trade and ship'' exception 
to the definition of ``Trade-Through'' and add a ``book and ship'' 
exception to the provision relating to locked markets, respectively. On 
July 21, 2005, the Phlx filed Amendment No. 1 to the proposed rule 
change.\4\ The proposed rule change, as amended, was published for 
comment in the Federal Register on August 5, 2005.\5\ The Commission 
received no comments on the proposal. This order approves the proposed 
rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On July 28, 2000, the Commission approved a national market 
system plan for the purpose of creating and operating an intermarket 
option linkage proposed by the American Stock Exchange LLC, the 
Chicago Board Options Exchange, Incorporated, and the International 
Securities Exchange, Inc. See Securities Exchange Act Release No. 
43086 (July 28, 2000), 65 FR 48023 (August 4, 2000) (``Linkage 
Plan''). Subsequently, upon separate requests by the Phlx, the 
Pacific Exchange, Inc., and the Boston Stock Exchange, Inc., 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).
    \4\ In Amendment No. 1, the Phlx revised the rule text to use 
terms consistent with Phlx's current rules and the Linkage Plan, and 
made clarifying changes in the description of the substance of the 
proposed rule change and the purpose and statutory basis sections.
    \5\ See Securities Exchange Act Release No. 52175 (July 29, 
2005), 70 FR 45480.
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    Under the proposed rule change, a Participant Exchange \6\ could 
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 \7\ is sent contemporaneously to the market(s) disseminating the 
NBBO to satisfy all interest at the NBBO price. The proposed rule 
change also would provide that an Eligible Market Maker or other member 
may book an order that would otherwise lock another market if a Linkage 
Order is sent contemporaneously to such other market to satisfy all 
interest at the lock price and only the remaining portion of the order 
is booked. The Phlx proposes that, under trade and ship, any execution 
received from the market disseminating the NBBO must (pursuant to 
agency obligations) be reassigned to the customer order that is 
underlying the Linkage Order that was sent to trade with the market 
disseminating the NBBO.
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    \6\ See Phlx Rule 1083(o).
    \7\ See Phlx Rule 1083(k).
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    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of Section 6 of the Act 
\8\ and the rules and regulations thereunder applicable to a national 
securities exchange.\9\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\10\ 
which requires, among other things, that the rules of an exchange be 
designed to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest. The Commission believes that the proposed rule change 
should help to implement the Linkage Plan by facilitating the ability 
of Phlx's members to execute their customer orders in a timely manner 
and potentially could decrease the incidence of Trade-Throughs and 
locked markets.
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    \8\ 15 U.S.C. 78f.
    \9\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(5).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-Phlx-2005-26) as amended, is 
approved.
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    \11\ 15 U.S.C. 78s(b)(2).


[[Page 55203]]


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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 05-18621 Filed 9-19-05; 8:45 am]
BILLING CODE 8010-01-P