Self-Regulatory Organizations; International Securities Exchange, Inc.; Order Approving a Proposed Rule Change To Amend the Exchange's Trade-Through and Locked Markets Rules, 55197-55198 [05-18616]

Download as PDF Federal Register / Vol. 70, No. 181 / Tuesday, September 20, 2005 / Notices III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective upon filing pursuant to Section 19(b)(3)(A)(iii) of the Act 5 and Rule 19b–4(f)(4) 6 thereunder because it does not adversely affect the safeguarding of securities or funds in the custody or control of DTC or for which it is responsible and does not significantly affect the respective rights or obligations of the clearing agency or persons using the service. At any time within sixty days of the filing of the rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml) or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–DTC–2005–11 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–9303. All submissions should refer to File Number SR–DTC–2005–11. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the rule change that are filed with the Commission, and all written communications relating to the rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 5 15 6 17 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(4). VerDate Aug<31>2005 14:53 Sep 19, 2005 Jkt 205001 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Section, 100 F Street, NE., Washington, DC 20549. Copies of such filings also will be available for inspection and copying at the principal office of DTC and on DTC’s Web site at https:// login.dtcc.com/dtcorg/. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–DTC– 2005–11 and should be submitted on or before October 11, 2005. For the Commission by the Division of Market Regulation, pursuant to delegated authority.7 Jonathan G. Katz, Secretary. [FR Doc. 05–18668 Filed 9–19–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–52418; File No. SR–ISE– 2005–33] Self-Regulatory Organizations; International Securities Exchange, Inc.; Order Approving a Proposed Rule Change To Amend the Exchange’s Trade-Through and Locked Markets Rules September 13, 2005. On July 8, 2005, the International Securities Exchange, Inc. (‘‘ISE’’), filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 to implement Amendment No. 15 to the Plan for the Purpose of Creating and Operating an Intermarket Option Linkage 3 by 7 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 On July 28, 2000, the Commission approved a national market system plan for the purpose of creating and operating an intermarket option linkage proposed by the American Stock Exchange LLC, the Chicago Board Options Exchange, Incorporated, and the ISE. See Securities Exchange Act Release No. 43086 (July 28, 2000), 65 FR 48023 (August 4, 2000) (‘‘Linkage Plan’’). Subsequently, upon separate requests by the Philadelphia Stock Exchange, Inc., the Pacific Exchange, Inc., and the Boston Stock Exchange, Inc., 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, 1 15 PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 55197 amending ISE Rules 1900 and 1903 to add a ‘‘trade and ship’’ exception to the definition of ‘‘Trade-Through’’ and add a ‘‘book and ship’’ exception to the provision relating to locked markets, respectively. The proposed rule change was published for comment in the Federal Register on August 5, 2005.4 The Commission received no comments on the proposal. This order approves the proposed rule change. Under the proposed rule change, an ISE member could trade an order at a price that is one minimum quoting increment inferior to the national best bid or offer (‘‘NBBO’’) if a Linkage Order 5 is sent contemporaneously to the market(s) disseminating the NBBO to satisfy all interest at the NBBO price. The proposed rule change also would provide that an ISE member may enter an order on the ISE that would otherwise lock another market if a Linkage Order is sent contemporaneously to such other market to satisfy all interest at the lock price and only the remaining portion of the order is booked. The ISE proposes that, under trade and ship, any execution received from the market disseminating the NBBO must (pursuant to agency obligations) be reassigned to the customer order that is underlying the Linkage Order that was sent to trade with the market disseminating the NBBO. After careful consideration, the Commission finds that the proposed rule change is consistent with the requirements of Section 6 of the Act 6 and the rules and regulations thereunder applicable to a national securities exchange.7 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,8 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 a national market system, and, in general, to protect investors and the public interest. The Commission believes that the proposed rule change should help to implement the Linkage Plan by facilitating the ability of ISE’s members to execute their customer 2000); and 49198 (February 5, 2004), 69 FR 7029 (February 12, 2004). 4 See Securities Exchange Act Release No. 52174 (July 29, 2005), 70 FR 45455. 5 See ISE Rule 1900(10). 6 15 U.S.C. 78f. 7 In approving this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 8 15 U.S.C. 78f(b)(5). E:\FR\FM\20SEN1.SGM 20SEN1 55198 Federal Register / Vol. 70, No. 181 / Tuesday, September 20, 2005 / Notices orders in a timely manner and potentially could decrease the incidence of Trade-Throughs and locked markets. It is therefore ordered, pursuant to Section 19(b)(2) of the Act,9 that the proposed rule change (SR–ISE–2005–33) is approved. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.10 Jonathan G. Katz, Secretary. [FR Doc. 05–18616 Filed 9–19–05; 8:45 am] BILLING CODE 8010–01–P II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change SECURITIES AND EXCHANGE COMMISSION [Release No. 34–52410; File No. SR–ISE– 2005–42] Self-Regulatory Organizations; International Securities Exchange, Inc.; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto Relating to the Definition of Firm Customer Quote Size in the Linkage Plan September 14, 2005. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’)1 and Rule 19b–4 thereunder,2 notice is hereby given that on August 31, 2005, the International Securities Exchange, Inc. (‘‘ISE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the ISE. On September 7, 2005, the Exchange submitted Amendment No. 1 to the proposed rule change.3 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its rules governing the operation of the intermarket option linkage (‘‘Linkage’’) to conform with a proposed amendment 4 to the Plan for the Purpose of Creating and Operating an Intermarket Linkage (‘‘Linkage Plan’’).5 9 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 Amendment No. 1 made technical corrections to the proposed rule change. 4 See Securities Exchange Act Release No. 52401 (September 9, 2005) (File No. 4–429). 5 On July 28, 2000, the Commission approved a national market system plan for the purpose of creating and operating an intermarket option market 10 17 VerDate Aug<31>2005 14:53 Sep 19, 2005 Jkt 205001 The Exchange is proposing: (i) to amend the definition of ‘‘Firm Customer Quote Size’’ (‘‘FCQS’’) 6 to provide automatic executions for Principal Acting as Agent Orders (‘‘P/A Orders’’) 7 sent via Linkage up to the full size of the receiving exchange’s disseminated quotation; and (ii) to eliminate a 15-second waiting period between the sending of P/A Orders. The text of the proposed rule change is available on ISE’s Web site (https:// www.iseoptions.com), at the ISE’s Office of the Secretary, and at the Commission’s Public Reference Room. In its filing with the Commission, the ISE included statements concerning the purpose of, and basis for, the proposed rule change, as amended, and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its rules governing Linkage trading in two areas: the definition of FCQS; and limitations on sending multiple P/A Orders. As to the definition of FCQS, the participants in the Linkage Plan (‘‘Participants’’) provide automatic execution to P/A Orders up to the FCQS. At the time the Participants adopted the Linkage Plan, options quote sizes were not disseminated through the Options Price Reporting Authority, and the floor-based exchanges employed automatic execution systems that guaranteed automatic fills on orders linkage proposed by the American Stock Exchange, LLC, Chicago Board Options Exchange, Incorporated, and ISE. See Securities Exchange Act Release No. 43086 (July 28, 2000), 65 FR 48023 (August 4, 2000). Subsequently, upon separate requests by the Philadelphia Stock Exchange, Inc., Pacific Exchange, Inc. and Boston Stock Exchange, Inc. 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 70850 (November 28, 2000), 43574 (November 16, 2000), 65 FR 70851 (November 28, 2000) and 49198 (February 5, 2004), 69 FR 7029 (February 12, 2004). 6 See Exchange Rule 1900(7). 7 See Section 2(16)(a) of the Linkage Plan and Exchange Rule 1900(10)(i). PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 under a certain contract size (which was generally a static number). As such, the FCQS was calculated based on the number of contracts the sending and receiving exchanges guaranteed they would automatically execute. Now that all the Participants disseminate dynamic quotes with size, the Participants believe that it is appropriate to calculate the FCQS based on the size of the disseminated quotation of the exchange receiving the P/A Order. As such, upon implementation of the proposed rule change, the ISE will provide incoming P/A Orders with executions up to the full size of the ISE’s disseminated quotation. With respect to multiple P/A Orders, the proposed rule change will eliminate a 15-second period members must wait before sending a second P/A Order. Specifically, ISE Rule 1901(c)(2)(ii) governs the manner in which the Participants will execute P/A Orders larger than the FCQS. ISE Rule 1901(c)(2)(ii) provides that an initial P/A Order may be sent to a Participant for execution at the FCQS; if the same Participant continues to disseminate the same price 15 seconds after the execution of the initial P/A Order, the market maker can send a second P/A Order, subject to certain restrictions. The Exchange proposes to eliminate the 15-second wait period because the Participants now employ dynamic quotes with size, obviating the need for a manual quote refresh period for P/A Orders. 2. Statutory Basis The Exchange believes that the proposed rule change, as amended, is consistent with Section 6(b) of the Act 8 in general, and furthers the objectives of Section 6(b)(5) of the Act 9 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transaction in securities, to remove impediments to and perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. In particular, the proposed rule change will help implement the Linkage Plan by providing greater automatic execution of Linkage Orders. 8 15 9 15 E:\FR\FM\20SEN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(5). 20SEN1

Agencies

[Federal Register Volume 70, Number 181 (Tuesday, September 20, 2005)]
[Notices]
[Pages 55197-55198]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-18616]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52418; File No. SR-ISE-2005-33]


Self-Regulatory Organizations; International Securities Exchange, 
Inc.; Order Approving a Proposed Rule Change To Amend the Exchange's 
Trade-Through and Locked Markets Rules

September 13, 2005.
    On July 8, 2005, the International Securities Exchange, Inc. 
(``ISE''), filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ to implement Amendment No. 15 to the Plan for the 
Purpose of Creating and Operating an Intermarket Option Linkage \3\ by 
amending ISE Rules 1900 and 1903 to add a ``trade and ship'' exception 
to the definition of ``Trade-Through'' and add a ``book and ship'' 
exception to the provision relating to locked markets, respectively. 
The proposed rule change was published for comment in the Federal 
Register on August 5, 2005.\4\ The Commission received no comments on 
the proposal. This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On July 28, 2000, the Commission approved a national market 
system plan for the purpose of creating and operating an intermarket 
option linkage proposed by the American Stock Exchange LLC, the 
Chicago Board Options Exchange, Incorporated, and the ISE. See 
Securities Exchange Act Release No. 43086 (July 28, 2000), 65 FR 
48023 (August 4, 2000) (``Linkage Plan''). Subsequently, upon 
separate requests by the Philadelphia Stock Exchange, Inc., the 
Pacific Exchange, Inc., and the Boston Stock Exchange, Inc., 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 Securities Exchange Act Release No. 52174 (July 29, 
2005), 70 FR 45455.
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    Under the proposed rule change, an ISE member could trade an order 
at a price that is one minimum quoting increment inferior to the 
national best bid or offer (``NBBO'') if a Linkage Order \5\ is sent 
contemporaneously to the market(s) disseminating the NBBO to satisfy 
all interest at the NBBO price. The proposed rule change also would 
provide that an ISE member may enter an order on the ISE that would 
otherwise lock another market if a Linkage Order is sent 
contemporaneously to such other market to satisfy all interest at the 
lock price and only the remaining portion of the order is booked. The 
ISE proposes that, under trade and ship, any execution received from 
the market disseminating the NBBO must (pursuant to agency obligations) 
be reassigned to the customer order that is underlying the Linkage 
Order that was sent to trade with the market disseminating the NBBO.
---------------------------------------------------------------------------

    \5\ See ISE Rule 1900(10).
---------------------------------------------------------------------------

    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of Section 6 of the Act 
\6\ and the rules and regulations thereunder applicable to a national 
securities exchange.\7\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\8\ 
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 
a national market system, and, in general, to protect investors and the 
public interest. The Commission believes that the proposed rule change 
should help to implement the Linkage Plan by facilitating the ability 
of ISE's members to execute their customer

[[Page 55198]]

orders in a timely manner and potentially could decrease the incidence 
of Trade-Throughs and locked markets.
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    \6\ 15 U.S.C. 78f.
    \7\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-ISE-2005-33) is approved.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 05-18616 Filed 9-19-05; 8:45 am]
BILLING CODE 8010-01-P
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