

[Federal Register: August 29, 2006 (Volume 71, Number 167)]
[Notices]               
[Page 51238-51239]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29au06-89]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54343; File No. 4-429]

 
Joint Industry Plan; Order Approving Joint Amendment No. 19 to 
the Intermarket Option Linkage Plan To Modify the Manner in Which the 
Fee Applicable to New Participants Is Calculated

August 21, 2006.

I. Introduction

    On February 17, 2006, March 16, 2006, April 12, 2006, April 18, 
2006, May 2, 2006, and May 22, 2006, International Securities Exchange, 
Inc. (``ISE''), Philadelphia Stock Exchange, Inc. (``Phlx''), Chicago 
Board Options Exchange, Incorporated (``CBOE''), Boston Stock Exchange, 
Inc. (``BSE''), American Stock Exchange LLC (``Amex''), and NYSE Arca, 
Inc. (collectively, ``Participants'') \1\ respectively submitted to the 
Securities and Exchange Commission (``Commission'') Joint Amendment No. 
19 to the Plan for the Purpose of Creating and Operating an Intermarket 
Option Linkage (the ``Linkage Plan'') pursuant to Section 11A of the 
Securities Exchange Act of 1934 (the ``Act'') \2\ and Rule 608 of 
Regulation NMS.\3\ In the Joint Amendment, the Participants propose to 
modify the manner in which the fee applicable to new Participants is 
calculated.\4\ The proposed Joint Amendment was published in the 
Federal Register on June 22, 2006.\5\ No comments were received on the 
proposal. This order approves Joint Amendment No. 19 to the Linkage 
Plan.
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    \1\ A ``Participant'' is an Eligible Exchange whose 
participation in the Linkage Plan has become effective pursuant to 
Section 4(c) of the Linkage Plan. See Section 2(24) of the Linkage 
Plan.
    \2\ 15 U.S.C. 78k-1.
    \3\ 17 CFR 242.608. 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, Pacific Exchange, Inc. (n/k/a NYSE 
Arca, 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 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\ See Section 11(b) of the Linkage Plan.
    \5\ See Securities Exchange Act Release No. 54001 (June 15, 
2006), 71 FR 35960.
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II. Description and Purpose of the Amendment

    The purpose of Joint Amendment No. 19 is to modify the manner in 
which the

[[Page 51239]]

fee applicable to new Participants is calculated. The participation fee 
is determined by the Participants and is assessed in connection with an 
Eligible Exchange \6\ becoming a new Participant. The Joint Amendment 
provides that in determining the amount of the participation fee, the 
Participants shall consider one or both of the following: (i) The 
portion of costs previously paid by the Participants for the 
development, expansion, and maintenance of Linkage \7\ facilities 
which, under generally accepted accounting principles, could have been 
treated as capital expenditures and, if so treated, would have been 
amortized over the five years preceding the admission of the new 
Participant (and for this purpose all such capital expenditures shall 
be deemed to have a five-year amortizable life); and (ii) previous 
participation fees paid by other new Participants. These standards are 
substantially consistent with the participation fee standards contained 
in the Consolidated Tape Association / Consolidated Quotation Plans 
(``CTA/CQ Plans'').\8\ Further, the Participants would no longer be 
required to calculate the participation fee at least once a year. 
Instead, the participation fee would be calculated at the time an 
Eligible Exchange seeks to become a Participant.
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    \6\ See Section 2(6) of the Linkage Plan.
    \7\ See Section 2(14) of the Linkage Plan.
    \8\ See Section III(c)(2) of the CTA Plan.
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III. Discussion

    After careful consideration, the Commission finds that the proposed 
Joint Amendment to the Linkage Plan is consistent with the requirements 
of the Act and the rules and regulations thereunder. Specifically, the 
Commission finds that the proposed Joint Amendment is consistent with 
Section 11A of the Act and Rule 608 thereunder, in that the revised 
participation fee calculation methodology appears reasonably designed 
to provide specific, objective factors for determining entrance fees 
for new Participants. The Commission also believes that the proposed 
new standards, if appropriately employed by the Participants, should 
foster a fair and reasonable method for determining a Linkage 
participation fee amount.\9\ In making this finding the Commission 
notes that the proposal prescribes participation fee standards that are 
substantially similar to those standards already in place on the CTA/CQ 
Plans.\10\
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    \9\ The Commission notes that the amount of the participation 
fee would be determined in discussions among the Participants and 
each Eligible Exchange seeking to become a Participant in light of 
the participation fee standards enumerated in the Linkage Plan.
    \10\ See Section III(c)(2) of the CTA Plan. See Securities 
Exchange Act Release No. 51391 (March 17, 2005), 70 FR 15132 (March 
24, 2005) (SR-CTA/CQ-2004-01) (Order approving amendment to the CTA/
CQ Plans implementing new participant fees).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 11A of the Act \11\ 
and Rule 608 thereunder,\12\ that proposed Joint Amendment No. 19 to 
the Linkage Plan is hereby approved.
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    \11\ 15 U.S.C. 78k-1.
    \12\ 17 CFR 242.608.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(29).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-14277 Filed 8-28-06; 8:45 am]

BILLING CODE 8010-01-P
