[Federal Register Volume 70, Number 181 (Tuesday, September 20, 2005)]
[Notices]
[Pages 55191-55192]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-18669]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52429; File No. SR-BSE-2005-39]


Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change Relating to the Definition of 
Firm Customer Quote Size and Limitations on Sending of Multiple P/A 
Orders on the Boston Options Exchange

September 14, 2005.
    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 September 13, 2005, the Boston Stock Exchange, Inc. (``BSE'' or 
``Exchange'') 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 the BSE. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend its rules governing the 
operation of the intermarket option linkage (``Linkage'') on the Boston 
Options Exchange (``BOX'') to conform with a proposed amendment \3\ to 
the Plan for the Purpose of Creating and Operating an Intermarket 
Option Linkage (``Linkage Plan'').\4\ The Exchange is proposing: (i) To 
amend the definition of ``Firm Customer Quote Size'' (``FCQS'') \5\ to 
provide automatic executions for Principal Acting as Agent Orders (``P/
A Orders'') \6\ sent via Linkage up to the full size of a Participant's 
disseminated quotation; and (ii) to eliminate a 15-second waiting 
period between the sending of P/A Orders.
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    \3\ See Securities Exchange Act Release No. 52401 (September 9, 
2005) (File No. 4-429) (``Amendment No. 16'').
    \4\ On July 28, 2000, the Commission approved a national market 
system plan for the purpose of creating and operating an intermarket 
option market linkage proposed by the American Stock Exchange, LLC, 
Chicago Board Options Exchange, Incorporated, and International 
Securities Exchange, Inc. See Securities Exchange Act Release No. 
43086 (July 28, 2000), 65 FR 48023 (August 4, 2000). Subsequently, 
upon separate requests by the Philadelphia Stock Exchange, Inc., 
Pacific Exchange, Inc., 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).
    \5\ See Section 2(11) of the Linkage Plan and Chapter XII, 
Section 1(g) of BOX's Rules.
    \6\ See Section 2(16)(a) of the Linkage Plan and Chapter XII, 
Section 1(j)(i) of BOX's Rules.
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    The text of the proposed rule amendment is available on BSE's Web 
site at http://www.bostonstock.com, at the BSE's Office of the 
Secretary, and at the Commission's public reference room.

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

    In its filing with the Commission, the Exchange 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. The Exchange 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
    The Exchange proposes to amend its rules governing Linkage in two 
areas: the definition of FCQS and limitations on sending multiple P/A 
Orders.
    The Linkage Plan participants (``Participants'') provide automatic 
execution to P/A Orders up to the FCQS, if automatic execution is 
available. At the time the Participants adopted the Linkage Plan, 
options quote sizes were not disseminated through the Options Price 
Reporting Authority, and the floor-based Participants employed 
automatic execution systems that guaranteed automatic fills on orders 
under a certain contract size (which generally was a static number). As 
such, the FCQS was calculated based on the number of contracts the 
sending and receiving Participants guaranteed they would automatically 
execute. Now that

[[Page 55192]]

all Participants disseminate dynamic quotes with size, the Participants 
believe that it is appropriate to calculate the FCQS based on the size 
of the disseminated quotation of the Participant receiving the P/A 
Order. Accordingly, the Participant Exchanges submitted Amendment No. 
16 to the Linkage Plan, and the Exchange proposes to amend the 
definition of FCQS to Chapter XII, Section 1(g) of BOX Rules. As such, 
upon implementation of the proposed rule change and Amendment No. 16, a 
Participant will provide incoming P/A Orders with executions up to the 
full size of a Participant's disseminated quotation.
    The proposed rule change will eliminate a 15-second period 
Participants must wait before sending a second P/A Order. Specifically, 
Chapter XII, Section 2(c) of BOX's Rules governs the manner in which P/
A Orders larger than the FCQS are handled. It provides that an initial 
P/A Order may be sent to a Participant for execution at the FCQS; if 
the same Participant continues to disseminate the same price 15 seconds 
after the execution of the initial P/A Order, the market maker can send 
a second P/A Order, subject to certain restrictions. The Exchange 
proposes to eliminate the 15-second wait period because the 
Participants now employ dynamic quotes with size, obviating the need 
for a manual quote refresh period for P/A Orders.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \8\ in particular, in that it is designed 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 mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. Specifically, the Exchange 
believes the proposed rule change will help promote the Linkage Plan by 
providing greater automatic execution of Linkage orders.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

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

    Written comments were neither solicited nor received.

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 longer 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 BSE consents, the Commission will:
    A. By order approve such 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 protected]. Please include 
File Number SR-BSE-2005-39 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 SR-BSE-2005-39. 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 Room. Copies 
of such filing also will be available for inspection and copying at the 
principal office of the Exchange. 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 SR-BSE-2005-39 and should be submitted on or before October 
11, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).

Jonathan G. Katz,
Secretary.
[FR Doc. 05-18669 Filed 9-19-05; 8:45 am]
BILLING CODE 8010-01-P