Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Order Approving Proposed Rule Change, and Amendments No. 1 and 2 Thereto, Relating to Sending Principal Orders Via the Intermarket Options Linkage, 53263-53264 [E5-4855]

Download as PDF Federal Register / Vol. 70, No. 172 / Wednesday, September 7, 2005 / Notices II. Description The purpose of this proposed rule change, as amended, is to implement proposed Joint Amendment No. 17 to the Linkage Plan. Joint Amendment No. 17, together with this proposed rule change, would modify the ‘‘80/20 Test’’ set forth in section 8(b)(iii) of the Linkage Plan and PCX Rule 6.96. PCX Rule 6.96 stats that Market Makers should send Principal Orders through Linkage on a limited basis and not as a primary aspect of their business. The 80/20 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 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 80/20 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 option class for the following calendar quarter. The Exchange contends that it was not its intention to bar Market Makers with limited volume from sending Principal Order through the Linkage in these circumstances since such trading was not ‘‘a primary aspect of their business.’’ Thus, the proposed rule would 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 option class for a calendar quarter. 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 6 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, completion, and capital formation. 15 U.S.C. 78c(f). 7 15 U.S.C. 78f(b)(5). VerDate Aug<18>2005 15:05 Sep 06, 2005 Jkt 205001 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 minimus 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–PCX–2005– 61), as amended, is approved. For the Commission by the Division of Market Regulation, pursuant to delegated authority.9 Jonathan G. Katz, Secretary. [FR Doc. 05–17707 Filed 9–6–05; 8:45 am] BILLING CODE 8010–01–M 8 15 9 17 PO 00000 U.S.C. 78s(b)(2). CFR 200.3(a)(12). Frm 00116 Fmt 4703 Sfmt 4703 53263 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–52344; File No. SR–Phlx– 2005–33] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Order Approving Proposed Rule Change, and Amendments No. 1 and 2 Thereto, Relating to Sending Principal Orders Via the Intermarket Options Linkage August 26, 2005. I. Introduction On May 6, 2005, the Philadelphia Stock Exchange, Inc. (‘‘Phlx’’ 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 Phlx Rule 1087, Limitation on Principal Order 3 Access, relating to the Plan for the Purpose of Creating and Operating an Intermarket Option Linkage (‘‘Linkage Plan’’) 4 and related rules. On May 11, 2005, the Phlx submitted Amendment No. 1 to the proposed rule change. On July 8, 2005, the Exchange submitted Amendment No. 2. The proposed rule change, as amended, 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, as amended. II. Description The purpose of this proposed rule change, as amended, 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 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 A ‘‘Principal Order’’ is an order for the principal account of an eligible market maker that does not relate to a customer order the market maker is holding. See Section 2(16)(b) of the Linkage Plan. 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 International Stock Exchange, Inc. See Securities Exchange Act Release No. 43086 (July 28, 2000), 65 FR 48023 (August 4, 2000). Subsequently, the Phlx, 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. 52072 (July 20, 2005), 70 FR 43495 (July 27, 2005). 2 17 E:\FR\FM\07SEN1.SGM 07SEN1 53264 Federal Register / Vol. 70, No. 172 / Wednesday, September 7, 2005 / Notices in Section 8(b)(iii) of the Linkage Plan and Phlx Rule 1087. Section 8(b)(iii) of the Linkage Plan provides that Eligible Market Makers should send Principal Orders through the Linkage on a limited basis and not as a primary aspect of their business. The 80/20 Test implements this policy in the Linkage Plan and Phlx Rule 1087 by prohibiting a specialist or registered options trader (‘‘ROT’’) from sending Principal Orders in an eligible option class if, in the last calendar quarter, the specialist or ROT’s Principal Order contract volume is disproportionate to the specialist or ROT’s contract volume executed against customer orders in its own market. The Exchange believes that applying the 80/20 Test has resulted in anomalies for ROTs with limited volume in an eligible option class. In particular, if a ROT 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 ROT failing to meet the 80/20 Test. This would then prohibit the ROT from using the Linkage to send Principal Orders in that options class for the following calendar quarter. The Exchange believes that it is not the intent of the Linkage Plan and Exchange rules to prohibit ROTs with limited volume from sending Principal Orders through the Linkage in these circumstances since such trading clearly is not ‘‘a primary aspect of their business.’’ Accordingly, the proposed rule change seeks to establish a de minimis exception from the 80/20 Test in Phlx Rule 1087 for specialists and ROTs that have total contract volume of less than 1,000 contracts in an option class for a calendar quarter. 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 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). VerDate Aug<18>2005 15:05 Sep 06, 2005 Jkt 205001 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 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. 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-Phlx-2005– 33), as amended, is approved. For the Commission by the Division of Market Regulation, pursuant to delegated authority.9 Jonathan G. Katz, Secretary. [FR Doc. E5–4855 Filed 9–6–05; 8:45 am] BILLING CODE 8010–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #10180 and #10181] Alabama Disaster #AL–00003 Small Business Administration. Notice. AGENCY: ACTION: SUMMARY: This is a Notice of the Presidential declaration of a major disaster for the State of Alabama (FEMA–1605–DR), dated 08/29/2005. Incident: Hurricane Katrina. Incident Period: 08/29/2005 and continuing. DATES: Effective Date: 08/29/2005. Physical Loan Application Deadline Date: 10/28/2005. EIDL Loan Application Deadline Date: 05/29/2006. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Disaster Area Office 3, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the President’s major disaster declaration on 08/29/2005, applications for disaster loans may be filed at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: Primary Counties: Baldwin, Mobile, Washington. Contiguous Counties: Alabama: Choctaw, Clarke, Escambia, Monroe. Florida: Escambia. Mississippi: George, Greene, Jackson Wayne. The Interest Rates are: Percent Homeowners With Credit Available Elsewhere ......................... Homeowners Without Credit Available Elsewhere .................. Businesses With Credit Available Elsewhere ................................. Businesses & Small Agricultural Cooperatives Without Credit Available Elsewhere .................. Other (Including Non-Profit Organizations) With Credit Available Elsewhere ................................. Businesses And Non-Profit Organizations Without Credit Available Elsewhere ......................... U.S.C. 78s(b)(2). 9 17 CFR 200.30–3(a)(12). PO 00000 Frm 00117 Fmt 4703 6.557 4.000 4.750 4.000 BILLING CODE 8025–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #10176 and #10177] Louisiana Disaster #LA–00002 ACTION: Sfmt 4703 2.687 The number assigned to this disaster for physical damage is 101808 and for economic injury is 101810 (Catalog of Federal Domestic Assistance Numbers 59002 and 59008) Herbert L. Mitchell, Associate Administrator for Disaster Assistance. [FR Doc. 05–17689 Filed 9–6–05; 8:45 am] Small Business Administration. Notice. AGENCY: 8 15 5.375 E:\FR\FM\07SEN1.SGM 07SEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 70, Number 172 (Wednesday, September 7, 2005)]
[Notices]
[Pages 53263-53264]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-4855]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52344; File No. SR-Phlx-2005-33]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Order Approving Proposed Rule Change, and Amendments No. 1 and 2 
Thereto, Relating to Sending Principal Orders Via the Intermarket 
Options Linkage

August 26, 2005.

I. Introduction

    On May 6, 2005, the Philadelphia Stock Exchange, Inc. (``Phlx'' 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 Phlx Rule 1087, Limitation on 
Principal Order \3\ Access, relating to the Plan for the Purpose of 
Creating and Operating an Intermarket Option Linkage (``Linkage Plan'') 
\4\ and related rules. On May 11, 2005, the Phlx submitted Amendment 
No. 1 to the proposed rule change. On July 8, 2005, the Exchange 
submitted Amendment No. 2. The proposed rule change, as amended, 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, as amended.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ A ``Principal Order'' is an order for the principal account 
of an eligible market maker that does not relate to a customer order 
the market maker is holding. See Section 2(16)(b) of the Linkage 
Plan.
    \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 
International Stock Exchange, Inc. See Securities Exchange Act 
Release No. 43086 (July 28, 2000), 65 FR 48023 (August 4, 2000). 
Subsequently, the Phlx, 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. 52072 (July 20, 
2005), 70 FR 43495 (July 27, 2005).
---------------------------------------------------------------------------

II. Description

    The purpose of this proposed rule change, as amended, 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

[[Page 53264]]

in Section 8(b)(iii) of the Linkage Plan and Phlx Rule 1087.
    Section 8(b)(iii) of the Linkage Plan provides that Eligible Market 
Makers should send Principal Orders through the Linkage on a limited 
basis and not as a primary aspect of their business. The 80/20 Test 
implements this policy in the Linkage Plan and Phlx Rule 1087 by 
prohibiting a specialist or registered options trader (``ROT'') from 
sending Principal Orders in an eligible option class if, in the last 
calendar quarter, the specialist or ROT's Principal Order contract 
volume is disproportionate to the specialist or ROT's contract volume 
executed against customer orders in its own market.
    The Exchange believes that applying the 80/20 Test has resulted in 
anomalies for ROTs with limited volume in an eligible option class. In 
particular, if a ROT 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 ROT failing to meet the 80/20 Test. This 
would then prohibit the ROT from using the Linkage to send Principal 
Orders in that options class for the following calendar quarter. The 
Exchange believes that it is not the intent of the Linkage Plan and 
Exchange rules to prohibit ROTs with limited volume from sending 
Principal Orders through the Linkage in these circumstances since such 
trading clearly is not ``a primary aspect of their business.'' 
Accordingly, the proposed rule change seeks to establish a de minimis 
exception from the 80/20 Test in Phlx Rule 1087 for specialists and 
ROTs that have total contract volume of less than 1,000 contracts in an 
option class for a calendar quarter.

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 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.

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-Phlx-2005-33), as amended, 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).
---------------------------------------------------------------------------

Jonathan G. Katz,
Secretary.
[FR Doc. E5-4855 Filed 9-6-05; 8:45 am]
BILLING CODE 8010-01-P

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