

[Federal Register: November 23, 2007 (Volume 72, Number 225)]
[Notices]               
[Page 65772-65773]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23no07-109]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56806; File No. 4-429]

 
Joint Industry Plan; Order Approving Joint Amendment No. 24 to 
the Plan for the Purpose of Creating and Operating an Intermarket 
Option Linkage Regarding Elimination of the Class Gate

November 16, 2007.

I. Introduction

    On September 14, 2007, September 19, 2007, August 29, 2007, August 
30, 2007, and September 26, 2007, American Stock Exchange LLC 
(``Amex''), Boston Stock Exchange, Inc. (``BSE''), Chicago Board 
Options Exchange, Incorporated (``CBOE''), International Securities 
Exchange, LLC (``ISE''), NYSE Arca, Inc. (``NYSE Arca''), and 
Philadelphia Stock Exchange, Inc. (``Phlx'') (collectively, the 
``Participants''), respectively, filed with the Securities and Exchange 
Commission (``Commission'') pursuant to Section 11A of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 608 thereunder\2\ an 
amendment (``Joint Amendment No. 24'') to the Plan for the Purpose of 
Creating and Operating an Intermarket Option Linkage (``Linkage 
Plan'').\3\ In Joint Amendment No. 24, the Participants propose to 
eliminate the ``Class Gate'' restriction on Principal Order (``P 
Order'') access through the Linkage. The proposed Joint Amendment No. 
24 was published in the Federal Register on October 12, 2007.\4\ The 
Commission received no comments on Joint Amendment No. 24.

[[Page 65773]]

This order approves Joint Amendment No. 24.
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    \1\ 15 U.S.C. 78k-1.
    \2\ 17 CFR 242.608.
    \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, Phlx, Pacific Exchange, 
Inc. (n/k/a NYSE Arca), 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).
    \4\ See Securities Exchange Act Release No. 56596 (October 2, 
2007), 72 FR 58133.
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II. Description of the Proposed Amendment

    In Joint Amendment No. 24, the Participants proposed to modify 
section 7(a)(ii)(C) of the Linkage Plan so as to eliminate the Class 
Gate restriction on P Order access through the Linkage. Currently, 
section 7(a)(ii)(C) of the Linkage Plan provides that, once a 
Participant automatically executes a P Order in a series of an Eligible 
Option Class, it may reject any other P Orders sent in the same 
Eligible Option Class by the same Participant for 15 seconds after the 
initial execution unless there is a price change in the receiving 
Participant's disseminated offer (bid) in the series in which there was 
the initial execution and such price continues to be the NBBO. After 
the 15 second period, and until the sooner of one minute after the 
initial execution or a change in its disseminated offer (bid), section 
7(a)(ii)(C) provides that the Participant that provided the initial 
execution is not obligated to execute any P Orders received from the 
same Participant in the same Eligible Option Class in its automatic 
execution system. In Joint Amendment No. 24, the Participants proposed 
to eliminate the Class Gate restriction because all Participants have 
removed restrictions on non-customer access to the automatic execution 
systems, rendering the Class Gate restriction unnecessary.

III. Discussion and Commission Findings

    After careful consideration of Joint Amendment No. 24, the 
Commission finds that approving Joint Amendment No. 24 is consistent 
with the requirements of the Act and the rules and regulations 
thereunder. Specifically, the Commission finds that Joint Amendment No. 
24 is consistent with section 11A of the Act \5\ and Rule 608 
thereunder \6\ in that it is appropriate in the public interest, for 
the protection of investors and the maintenance of fair and orderly 
markets. The Commission recognizes that, at the time of the creation of 
the Linkage, certain Participants had restrictions on non-customer 
access to their automatic execution systems. The Class Gate provision 
served to protect those Participants that did not limit non-customer 
access against being obligated to automatically execute an unlimited 
number of P Orders. Since the implementation of the Linkage, all 
Participants have removed restrictions on non-customer access to their 
automatic execution systems. All of the exchanges, therefore, allow 
access to their trading platforms orders on behalf of non-member market 
makers. The Commission believes that the greater access to automatic 
execution systems has rendered the Class Gate provision unnecessary and 
that eliminating the Class Gate provision should facilitate the more 
efficient operation of the options markets.
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    \5\ 15 U.S.C. 78k-1.
    \6\ 17 CFR 242.608.
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IV. Conclusion

    It is therefore ordered, pursuant to section 11A of the Act \7\ and 
Rule 608 thereunder,\8\ that Joint Amendment No. 24 is approved.
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    \7\ 15 U.S.C. 78k-1.
    \8\ 17 CFR 242.608.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(29).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-22842 Filed 11-21-07; 8:45 am]

BILLING CODE 8011-01-P
