Self-Regulatory Organizations; International Stock Exchange, Inc.; Order Approving Proposed Rule Change Establishing a De Minimis Exception to the 80/20 Test, 53035-53036 [E5-4830]

Download as PDF Federal Register / Vol. 70, No. 171 / Tuesday, September 6, 2005 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–52348; File No. SR–CBOE– 2005–57] Self-Regulatory Organizations; Chicago Board Options Exchange, Inc.; Order Approving a Proposed Rule Change Relating to the 80/20 Test of the Plan for the Purpose of Creating and Operating an Intermarket Option Linkage August 26, 2005. I. Introduction On July 19, 2005, the Chicago Board Options Exchange, Incorporation (‘‘CBOE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change seeking to modify the 80/20 Test in determining limitations on Principal Order 3 access under the rules imposed by Plan for the Purpose of Creating and Operating an Intermarket Option Linkage (‘‘Linkage Plan’’) 4 and related rules. The proposed rule change was noticed for comment in the Federal Register on July 27, 2005.5 The Commission received no comments on the proposed rule change. This order approves the proposed rule change. The purpose of the proposed rule change is to modify the 80/20 Test contained in Exchange Rule 6.85. The Rule provides that Market-Makers should send Principal Orders through the Linkage on a limited basis and not as a primary aspect of their business. The Test implements this general principle by prohibiting a Market-Maker from sending Principal Orders in an eligible option class if, in the last calendar quarter, the Market-Maker’s 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3A Principal Order is an order for the account of an Eligible Market-Maker that does not relate to a customer order the Market-Maker is holding. See Exchange Rule 6.80(12)(ii). 4 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, Chicago Board Options Exchange, Inc., and International Securities Exchange, Inc. See Securities Exchange Act Release No. 43086 (July 28, 2000), 65 FR 48023 (August 4, 2000). Subsequently, Philadelphia Stock Exchange, Inc., Pacific Exchange, and Boston Stock Exchange, Inc. 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). 5 See Securities Exchange Act Release No. 52068 (July 20, 2005), 70 FR 43473. 2 17 VerDate Aug<18>2005 13:21 Sep 02, 2005 Jkt 205001 Principal Order contract volume is disproportionate to the Market-Maker’s contract volume executed against customer orders in its own market. The Exchange believes that applying the Test has resulted in anomalies for Market-Makers with limited volume in an eligible option class. Specifically, if a Market-Maker has very little overall trading volume in an option, the execution of one or two Principal Orders during a calendar quarter could result in the Market-Maker failing to meet the Test. This would bar the Market-Maker from using the Linkage to send Principal Orders in that options class for the following calendar quarter. The Exchange believes that it was not the intent of the Participants to the Linkage Plan to bar Market-Makers with limited volume from sending Principal Orders through the Linkage in these circumstances since such trading clearly was not ‘‘a primary aspect of their business.’’ Thus, the proposed rule change proposes to create a de minimis exemption from the 80/20 Test for Market-Makers that have total contract volume of less than 1,000 contracts in an options class for a calendar quarter. II. Discussion After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.6 In particular, the Commission finds that the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act 7 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 to protect investors and the public interest. The Commission believes that the proposed rule change will increase the availability of Linkage to members of the Participants by limiting the applicability of the 80/20 Test in situations where market makers have minimal trading volume in a particular options class. The Commission recognizes that the Exchange does not believe that it is necessary to bar market makers with limited volume from sending Principal Orders through the Linkage, as such trading does not raise concerns that a member is sending such orders as ‘‘a primary aspect of their business.’’ The 6 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 7 15 U.S.C. 78f(b)(5). PO 00000 Frm 00057 Fmt 4703 Sfmt 4703 53035 Commission believes that the de minimis exemption from the 80/20 Test proposed by the Exchange for market makers that have a total contract volume of less than 1,000 contracts in an options class for a calendar quarter should ensure that specialists and ROTs with relatively low volume in a particular options class can send a reasonable number of Principal Orders without being barred from using the Linkage by application of the 80/20 Test in the following calendar quarter. III. Conclusion For the foregoing reasons, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder. It is therefore ordered, pursuant to Section 19(b)(2) of the Act,8 that the proposed rule change (SR–CBOE–2005– 57) is approved. For the Commission by the Division of Market Regulation, pursuant to delegated authority.9 Margaret H. McFarland, Deputy Secretary. [FR Doc. E5–4831 Filed 9–2–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–52347; File No. SR–ISE– 2005–23] Self-Regulatory Organizations; International Stock Exchange, Inc.; Order Approving Proposed Rule Change Establishing a De Minimis Exception to the 80/20 Test August 26, 2005. I. Introduction On May 13, 2005, the International Stock Exchange, Inc. (‘‘ISE’’ or ‘‘Exchange’’) 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 a proposed rule change seeking to amend ISE Rule 1904 to establish a de minimis exception to the 80/20 Test limiting market makers’ use of Principal Orders 3 under the rules 8 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 The Exchange defines a Principal Order as an order for the principal account of a market maker (or equivalent entity on another Participant Exchange) and which is not a Principal Acting as Agent Order. See Chapter 19, Rule 1900(10)(ii) of the ISE Rules. 9 17 E:\FR\FM\06SEN1.SGM 06SEN1 53036 Federal Register / Vol. 70, No. 171 / Tuesday, September 6, 2005 / Notices imposed by the Plan for the Purpose of Creating and Operating an Intermarket Option Linkage (‘‘Linkage Plan’’) 4 and related rules. The proposed rule change was noticed for comment in the Federal Register on July 26, 2005.5 The Commission received no comments on the proposed rule change. This order approves the proposed rule change. II. Description The purpose of this proposed rule change is to implement proposed Joint Amendment No. 17 to the Linkage Plan. Joint Amendment No. 17, together with this proposed rule change, would establish a de minimis exception to the ‘‘80/20 Test’’ set forth in Section 8(b)(iii) of the Linkage Plan and ISE Rule 1904. Section 8(b)(iii) of the Linkage Plan permits market makers to access away markets on a limited basis for their own principal trading. The Linkage Plan enforces this limitation via the 80/20 Test, which generally requires at least 80 percent of a market maker’s trading volume in an option class to be on its own exchange for the market maker to be able to use Linkage to send Principal Orders for its own account in that class. If a market maker ‘‘fails’’ the 80/20 Test in an option class during a calendar quarter, it cannot send Principal Orders through Linkage in that class during the next calendar quarter. The options exchanges have agreed to adopt a de minimis exception to the 80/ 20 Test. As proposed by the Exchange, the 80/20 Test would not apply to any market maker that has total volume of less than 1,000 contracts in an option during a calendar quarter. At this low volume, even a small number of Principal Orders could result in the market maker being disqualified from Linkage in that class for a calendar quarter. The Exchange believes that this proposed exception would address such concerns. III. Discussion After careful review, the Commission finds that the proposed rule change is 4 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 the American Stock Exchange, LLC, Chicago Board Options Exchange, Inc., and the ISE. See Securities Exchange Act Release No. 43086 (July 28, 2000), 65 FR 48023 (August 4, 2000). Subsequently, the Philadelphia Stock Exchange, Inc., the Pacific Exchange, Inc. and the Boston Stock Exchange, Inc. 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). 5 See Securities Exchange Act Release No. 52069 (July 20, 2005), 70 FR 43203 (July 26, 2005). VerDate Aug<18>2005 13:21 Sep 02, 2005 Jkt 205001 consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.6 In particular, the Commission finds that the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act 7 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 to protect investors and the public interest. The Commission believes that the proposed rule change will increase the availability of Linkage to members of the Participants by limiting the applicability of the 80/20 Test in situations where market makers have minimal trading volume in a particular options class. The Commission recognizes that the Exchange does not believe that it is necessary to bar market makers with limited volume from sending Principal Orders through the Linkage, as such trading does not raise concerns that a member is sending such orders as ‘‘a primary aspect of their business.’’ The Commission believes that the de minimis exemption from the 80/20 Test proposed by the Exchange for market makers that have a total contract volume of less than 1,000 contracts in an options class for a calendar quarter should ensure that members with relatively low volume in a particular options class can send a reasonable number of Principal Orders without being barred from using the Linkage by application of the 80/20 Test in the following calendar quarter. IV. Conclusion For the foregoing reasons, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder. It is therefore ordered, pursuant to Section 19(b)(2) of the Act,8 that the proposed rule change (SR–ISE–2005–23) is approved. SMALL BUSINESS ADMINISTRATION Notice Seeking Exemption Under Section 312 of the Small Business Investment Act, Conflicts of Interest Notice is hereby given that Odyssey Venture Partners II, L.P. (‘‘Applicant’’), 610 Newport Center Drive, Suite 1400, Newport Beach, CA 92660, an SBIC Applicant under the Small Business Investment Act of 1958, as amended (‘‘the Act’’), in connection with the financing of a small concern, has sought an exemption under section 312 of the Act and section 107.730, Financings which Constitute Conflicts of Interest, of the Small Business Administration (‘‘SBA’’) rules and regulations (13 CFR 107.730 (2004)). Odyssey Venture Partners II, L.P. proposes to provide equity financing to Oryxe Energy International, Inc., 6 Thomas Avenue, Irvine, CA 92618. The financing is contemplated for working capital and research & development. A conflict of interest exemption is required because the Oryxe investment is considered financing of an Associate under 13 CFR 107.730(a). Oryxe is an Associate of the Applicant for two reasons: (1) Affiliates of Applicant, Odyssey Strategic Partners (OSP) and Odyssey Strategic Equity (OSE), had a greater than 10 percent fully diluted investment in Oryxe prior to Applicant’s initial investment; (2) Walter Schindler, one of Applicant’s principals, serves as chairman and CEO of Oryxe. Notice is hereby given that any interested person may submit written comments on the transaction to the Associate Administrator for Investment, U.S. Small Business Administration, 409 Third Street, SW., Washington, DC 20416. ´ Jaime Guzman-Fournier, Associate Administrator for Investment [FR Doc. 05–17581 Filed 9–2–05; 8:45 am] BILLING CODE 8625–01–M SMALL BUSINESS ADMINISTRATION For the Commission by the Division of Market Regulation, pursuant to delegated authority.9 Margaret H. McFarland, Deputy Secretary. [FR Doc. E5–4830 Filed 9–2–05; 8:45 am] [Disaster Declaration # 10167 and # 10168] BILLING CODE 8010–01–P SUMMARY: This is a notice of an Administrative declaration of a disaster for the State of Florida dated 08/25/ 2005. Incident: Severe Storms and Flooding. Incident Period: 07/29/2005 through 08/14/2005. DATES: Effective Date: 08/25/2005. 6 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 7 15 U.S.C. 78f(b)(5) 8 15 U.S.C. 78s(b)(2). 9 17 CFR 200.30–3(a)(12). PO 00000 Frm 00058 Fmt 4703 Sfmt 4703 FLORIDA Disaster # FL–00007 Small Business Administration. Notice. AGENCY: ACTION: E:\FR\FM\06SEN1.SGM 06SEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 70, Number 171 (Tuesday, September 6, 2005)]
[Notices]
[Pages 53035-53036]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-4830]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52347; File No. SR-ISE-2005-23]


Self-Regulatory Organizations; International Stock Exchange, 
Inc.; Order Approving Proposed Rule Change Establishing a De Minimis 
Exception to the 80/20 Test

August 26, 2005.

I. Introduction

    On May 13, 2005, the International Stock Exchange, Inc. (``ISE'' or 
``Exchange'') 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\ a 
proposed rule change seeking to amend ISE Rule 1904 to establish a de 
minimis exception to the 80/20 Test limiting market makers' use of 
Principal Orders \3\ under the rules

[[Page 53036]]

imposed by the Plan for the Purpose of Creating and Operating an 
Intermarket Option Linkage (``Linkage Plan'') \4\ and related rules.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Exchange defines a Principal Order as an order for the 
principal account of a market maker (or equivalent entity on another 
Participant Exchange) and which is not a Principal Acting as Agent 
Order. See Chapter 19, Rule 1900(10)(ii) of the ISE Rules.
    \4\ 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 the American Stock 
Exchange, LLC, Chicago Board Options Exchange, Inc., and the ISE. 
See Securities Exchange Act Release No. 43086 (July 28, 2000), 65 FR 
48023 (August 4, 2000). Subsequently, the Philadelphia Stock 
Exchange, Inc., the Pacific Exchange, Inc. and the Boston Stock 
Exchange, Inc. 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).
---------------------------------------------------------------------------

    The proposed rule change was noticed for comment in the Federal 
Register on July 26, 2005.\5\ The Commission received no comments on 
the proposed rule change. This order approves the proposed rule change.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 52069 (July 20, 
2005), 70 FR 43203 (July 26, 2005).
---------------------------------------------------------------------------

II. Description

    The purpose of this proposed rule change is to implement proposed 
Joint Amendment No. 17 to the Linkage Plan. Joint Amendment No. 17, 
together with this proposed rule change, would establish a de minimis 
exception to the ``80/20 Test'' set forth in Section 8(b)(iii) of the 
Linkage Plan and ISE Rule 1904.
    Section 8(b)(iii) of the Linkage Plan permits market makers to 
access away markets on a limited basis for their own principal trading. 
The Linkage Plan enforces this limitation via the 80/20 Test, which 
generally requires at least 80 percent of a market maker's trading 
volume in an option class to be on its own exchange for the market 
maker to be able to use Linkage to send Principal Orders for its own 
account in that class. If a market maker ``fails'' the 80/20 Test in an 
option class during a calendar quarter, it cannot send Principal Orders 
through Linkage in that class during the next calendar quarter.
    The options exchanges have agreed to adopt a de minimis exception 
to the 80/20 Test. As proposed by the Exchange, the 80/20 Test would 
not apply to any market maker that has total volume of less than 1,000 
contracts in an option during a calendar quarter. At this low volume, 
even a small number of Principal Orders could result in the market 
maker being disqualified from Linkage in that class for a calendar 
quarter. The Exchange believes that this proposed exception would 
address such concerns.

III. Discussion

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\6\ 
In particular, the Commission finds that the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act \7\ 
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 
to protect investors and the public interest. The Commission believes 
that the proposed rule change will increase the availability of Linkage 
to members of the Participants by limiting the applicability of the 80/
20 Test in situations where market makers have minimal trading volume 
in a particular options class.
---------------------------------------------------------------------------

    \6\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(5)
---------------------------------------------------------------------------

    The Commission recognizes that the Exchange does not believe that 
it is necessary to bar market makers with limited volume from sending 
Principal Orders through the Linkage, as such trading does not raise 
concerns that a member is sending such orders as ``a primary aspect of 
their business.'' The Commission believes that the de minimis exemption 
from the 80/20 Test proposed by the Exchange for market makers that 
have a total contract volume of less than 1,000 contracts in an options 
class for a calendar quarter should ensure that members with relatively 
low volume in a particular options class can send a reasonable number 
of Principal Orders without being barred from using the Linkage by 
application of the 80/20 Test in the following calendar quarter.

IV. Conclusion

    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulations thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-ISE-2005-23) is approved.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\9\
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-4830 Filed 9-2-05; 8:45 am]
BILLING CODE 8010-01-P

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.