

[Federal Register: November 14, 2007 (Volume 72, Number 219)]
[Notices]               
[Page 64094-64095]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14no07-83]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56761; SR-Amex-2007-65; SR-BSE-2007-45; SR-CBOE-2007-
64; SR-ISE-2007-44; SR-NYSEArca-2007-65]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Boston Stock Exchange, Inc.; Chicago Board Options Exchange, 
Incorporated; International Securities Exchange, LLC; Order Approving 
Proposed Rule Changes; and NYSEArca, Inc.; Order Approving Proposed 
Rule Change and Amendment No. 1 Thereto Relating to the Definition of a 
Complex Trade

November 7, 2007.

I. Introduction

    On June 27, 2007, September 13, 2007, June 12, 2007, June 1, 2007, 
and July 6, 2007, the American Stock Exchange LLC (``Amex''), the 
Boston Stock Exchange, Inc. (``BSE''), the Chicago Board Options 
Exchange, Incorporated (``CBOE''), the International Securities 
Exchange, LLC (``ISE''), and NYSE Arca, Inc. (``NYSE Arca'') (each, an 
``Exchange'' and, collectively, the ``Exchanges''), respectively, filed 
with the Securities and Exchange Commission (``Commission''), pursuant 
to section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') 
\1\ and Rule 19b-4 thereunder,\2\ proposed rule changes to amend each 
of their respective rules governing the operation of the Intermarket 
Option Linkage (``Linkage'') to modify the definition of ``complex 
trade'' to include stock-option trades. On July 11, 2007, NYSE Arca 
filed Amendment No. 1 to its proposed rule change.\3\ The proposed rule 
changes, as

[[Page 64095]]

amended, were published for comment in the Federal Register on October 
4, 2007.\4\ The Commission received no comments on the proposed rule 
changes. This order approves the proposed rule changes, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 to SR-NYSEArca-2007-65 effected technical 
corrections to the proposed rule change.
    \4\ Securities Exchange Act Release No. 56555 (September 27, 
2007), 72 FR 56814.
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II. Description of the Proposals

    Under section 8(c)(iii)(G) of the Plan for the Purpose of Creating 
and Operating an Intermarket Option Linkage (``Linkage Plan''),\5\ the 
Linkage Plan participants (``Participants'') may amend the definition 
of the term ``complex trade'' from time to time. The Participants have 
agreed to change the definition of ``complex trade'' to extend the 
associated trade-through liability exemption to cover certain stock-
option trades. Accordingly, each of the Exchanges has submitted a 
proposal that would amend each such Exchange's definition of ``complex 
trade,'' set forth in the Exchange's respective rules pertaining to the 
Linkage, to include the execution of a stock-option order to buy or 
sell a stated number of units of an underlying stock or a security 
convertible into the underlying stock (``convertible security'') 
coupled with the purchase or sale of option contract(s) on the opposite 
side of the market representing either (A) the same number of units of 
the underlying stock or convertible security, or (B) the number of 
units of the underlying stock or convertible security necessary to 
create a delta neutral position, but in no case in a ratio greater than 
eight option contracts per unit of trading of the underlying stock or 
convertible security established for that series by the Options 
Clearing Corporation.\6\
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    \5\ On July 28, 2000, the Commission approved a national market 
system plan for the purpose of creating and operating the Linkage 
proposed by Amex, CBOE, and ISE. See Securities Exchange Act Release 
No. 43086 (July 28, 2000), 65 FR 48023 (August 4, 2000). 
Subsequently, the Philadelphia Stock Exchange, Inc. (``Phlx''), 
Pacific Exchange, Inc. (n/k/a NYSE Arca, Inc.), 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).
    \6\ The Exchanges propose to amend their respective rules that 
define ``complex trade'' for Linkage purposes, namely Amex Rule 
940(b)(3), Boston Options Exchange Rule Chapter XII, Section 1(c), 
CBOE Rule 6.80(4), ISE Rule 1900(3), and NYSE Arca Rule 6.92(a)(4).
    The Phlx filed a proposed rule change with the Commission to 
amend its definitions of ``synthetic option'' and ``complex trade'' 
to conform such definitions with the related ``stock option'' and 
``complex trade'' definitions of the Exchanges. See Securities 
Exchange Act Release No. 56608 (October 3, 2007), 72 FR 57985 
(October 11, 2007) (SR-Phlx-2007-40). The Commission is approving 
proposed rule change SR-Phlx-2007-40 in a separate order today. See 
Securities Exchange Act Release No. 56760 (November 7, 2007).
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III. Discussion

    After careful review, the Commission finds that the proposed rule 
changes, as amended, are consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to national 
securities exchanges.\7\ In particular, the Commission finds that the 
proposed rule changes, as amended, are consistent with the provisions 
of section 6(b)(5) of the Act,\8\ which requires, among other things, 
that national securities exchanges' rules be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to remove impediments to and to perfect 
the mechanism of a free and open market and a national market system 
and, in general, to protect investors and the public interest.
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    \7\ In approving these proposals, the Commission has considered 
the proposed rules' impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that by amending the definition of 
``complex trade'' to include certain stock-option orders as described 
above, and by providing a consistent definition of ``complex trade'' in 
the rules of the Exchanges, the proposals may facilitate the execution 
of such complex orders.

IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\9\ that the proposed rule changes (SR-Amex-2007-65; SR-BSE-2007-
45; SR-CBOE-2007-64; SR-ISE-2007-44; SR-NYSEArca-2007-65), as amended, 
are approved.
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    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-22165 Filed 11-13-07; 8:45 am]

BILLING CODE 8011-01-P
