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27See paragraphs 2(d)(i)–(iv) and (e)(i)–(iv) of the 

proposed 17d–2 Plan. 

28See paragraph 2(a) of the proposed 17d–2 Plan. 

29See paragraph 2(c) of the proposed 17d–2 Plan. 

30See paragraph 5 of the proposed 17d–2 Plan. 

31See paragraph 14 of the proposed 17d–2 Plan. 

The Commission notes that, as reflected in 

paragraph 14, Commission approval is required for 

any Party to terminate its participation in the Plan. 

32 15 U.S.C. 78q(d). 

33 17 CFR 200.30–3(a)(34). 

1 17 CFR 242.608. 

2See letter from Michael J. Simon, General 

Counsel, ISE, to Nancy M. Morris, Secretary, 

Commission, dated September 12, 2007 (‘‘ISE Letter 

1’’); and letter from Peter G. Armstrong, Managing 

Director, Options, NYSE Arca, to Nancy M. Morris, 

Secretary, Commission, dated September 14, 2007 

(‘‘NYSE Arca Letter 1’’). 

3See letter from Michael J. Simon, General 

Counsel, ISE, to Nancy M. Morris, Secretary, 

Commission, dated December 10, 2007; and letter 

from Peter G. Armstrong, Managing Director, 

Options, NYSE Arca, to Nancy M. Morris, Secretary, 

Commission, dated December 10, 2007. 

4Amendment No. 2 superseded Amendment No. 

1 and replaced it in its entirety. See letter from 

both NYSE and FINRA or NYSE Amex 

and FINRA. Accordingly, the Plan 

promotes efficiency by reducing costs to 

Common Members. Furthermore, 

because FINRA, NYSE, and NYSE Amex 

will coordinate their regulatory 

functions in accordance with the Plan, 

the Plan should promote investor 

protection and the public interest. 

In particular, the Commission notes 

that, under the proposed Plan, FINRA, 

NYSE, and NYSE Amex have allocated 

regulatory responsibility for Common 

Rules to the extent that such 

responsibilities involve member firm 

regulation. The Plan also sets forth those 

areas for which NYSE and NYSE Amex 

will retain regulatory responsibility, 

including: examinations of conduct or 

actions by a Common Member covered 

by NYSE-only or NYSE Amex-only rules 

and/or by related Federal laws or 

regulations; surveillance, investigation, 

and enforcement with respect to 

conduct or action relating to trading on 

or through the systems and facilities of 

NYSE or NYSE Amex and conduct 

otherwise covered by NYSE-only or 

NYSE Amex-only rules, as well as 

whether such conduct may constitute a 

violation of Federal laws or regulations; 

processing of applications for trading 

licenses or other membership in NYSE 

or NYSE Amex; and qualification and 

registration of member firm personnel to 

effect transactions or work on the floor 

of NYSE or NYSE Amex pursuant to 

such SRO’s rules.27

In addition, the proposed Plan 

provides that NYSE and NYSE Amex 

will retain regulatory responsibility for 

the application of any Common Rule as 

it pertains to matters other than member 

firm regulation, including matters 

relating to such SRO’s retained 

responsibilities as set forth in the Plan 

(the ‘‘Non-Exclusive Common Rules’’). 

The Non-Exclusive Common Rules are 

specifically annotated in the List of 

Common Rules and include those rules 

for which FINRA, NYSE, and NYSE 

Amex will each bear their respective 

regulatory responsibilities, consistent 

with the scope of the 17d–2 Plan. Such 

rules are ‘‘non-exclusive’’ in the sense 

that they may relate to member firm 

regulation (for which FINRA would 

assume regulatory responsibility) as 

well as matters other than member firm 

regulation (for which NYSE or NYSE 

Amex would retain regulatory 

responsibility). Accordingly, NYSE and 

NYSE Amex will each bear 

responsibility for the application of 

their Non-Exclusive Common Rules 

concerning their particular regulatory 

responsibilities. 

According to the Plan, whenever any 

Party seeks to make a change to any of 

its rules that are Common Rules, before 

filing a proposed rule change with the 

Commission, it will inform the other 

Parties of the intended change to 

determine whether the other Parties will 

propose a conforming change to its 

version of the Common Rule. If the 

Parties do not agree to propose 

conforming changes, the Parties agree to 

file with the Commission an 

amendment to the 17d–2 Plan to delete 

such rule from the list of Common 

Rules.28 Finally, the proposed Plan 

requires the Parties annually (or more 

frequently if required by changes in the 

rules of a Party) to confirm in writing 

the accuracy of the list of Common 

Rules.29 This provision ensures that the 

Parties keep the Common Rules up-todate vis-a`-vis the other Parties and 

should facilitate the ability of the Parties 

to accurately administer their 

responsibilities under the proposed Plan 

consistent with the scope of the Plan 

declared effective by the Commission 

herein. 

The proposed Plan also requires the 

Parties to share information on a 

number of matters, including, for 

example, financial and operational 

matters of Common Members, thirdparty complaints, and disciplinary 

actions.30 The Commission believes that 

the information-sharing provisions 

contained in the proposed Plan fosters 

cooperation and coordination among the 

Parties, thereby promoting investor 

protection and removing impediments 

to the development of a national market 

system. 

Finally, the Plan permits any Party to 

terminate the Plan at any time, subject 

to 180 days written notice to the other 

Parties and subject to Commission 

approval.31

V. Conclusion 

This Order gives effect to the Plan 

filed with the Commission in File No. 

4–587. The Parties shall notify all 

members affected by the Plan of their 

rights and obligations under the Plan. 

It is therefore ordered, pursuant to 

Section 17(d) of the Act,32 that the Plan, 

made by and among NYSE, NYSE 

Regulation, NYSE Amex, and FINRA, 

that is contained in File No. 4–587 and 

filed pursuant to Rule 17d–2, is hereby 

approved and declared effective. 

It is therefore ordered that NYSE and 

NYSE Amex are relieved of those 

responsibilities allocated to FINRA 

under the Plan in File No. 4–587. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.33

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–18762 Filed 8–5–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60405; File No. 4–546] 

Joint Industry Plan; Order Approving 

the National Market System Plan 

Relating to Options Order Protection 

and Locked/Crossed Markets 

Submitted by the Chicago Board 

Options Exchange, Incorporated, 

International Securities Exchange, 

LLC, The NASDAQ Stock Market LLC, 

NASDAQ OMX BX, Inc., NASDAQ OMX 

PHLX, Inc., NYSE Amex LLC, and 

NYSE Arca, Inc. 

July 30, 2009. 

I. Introduction 

The proposed Options Order 

Protection and Locked/Crossed Market 

Plan (‘‘Proposed Plan’’) was filed 

jointly, pursuant to Rule 608 of 

Regulation NMS under the Securities 

Exchange Act of 1934 (‘‘Act’’) 

(‘‘Regulation NMS’’) (‘‘Rule 608’’),1 by 

the International Securities Exchange, 

LLC (‘‘ISE’’) and NYSE Arca, Inc. 

(‘‘NYSE Arca’’) on September 13, 2007 

and September 18, 2007, respectively, 

with the Securities and Exchange 

Commission (‘‘Commission’’).2 On 

December 11, 2007, ISE and NYSE Arca 

separately filed Amendment No. 1 to the 

Proposed Plan.3 On April 24, 2008, and 

April 17, 2008, ISE and NYSE Arca, 

respectively, filed Amendment No. 2 to 

the Proposed Plan.4 On November 10, 


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Michael J. Simon, General Counsel, ISE, to Nancy 

M. Morris, Secretary, Commission, dated April 16, 

2008; and letter from Peter G. Armstrong, Managing 

Director, Options, NYSE Arca, to Nancy M. Morris, 

Secretary, Commission, dated April 16, 2008. 

5See letter from Michael J. Simon, General 

Counsel, ISE, to Florence Harmon, Acting Secretary, 

Commission, dated November 7, 2008 (‘‘ISE Letter 

2’’); and letter from Peter G. Armstrong, Managing 

Director, Options, NYSE Arca, to Florence Harmon, 

Acting Secretary, Commission, dated October 30, 

2008 (‘‘NYSE Arca Letter 2’’). 

6 In their respective filings of the Proposed Plan, 

Amex, BSE, CBOE, Nasdaq, and Phlx incorporated 

the changes made by ISE and NYSE Arca in 

Amendment No. 2. See letters from Jeffrey P. Burns, 

Vice President and Associate General Counsel, 

Amex, to Nancy M. Morris, Secretary, Commission, 

dated June 17, 2008 (‘‘Amex Letter 1’’); Bruce 

Goodhue, Chief Regulatory Officer, BSE, to Florence 

Harmon, Acting Secretary, Commission, dated July 

8, 2008 (‘‘BSE Letter 1’’); Edward J. Joyce, President 

and Chief Operating Officer, CBOE, to Nancy M. 

Morris, Secretary, Commission, dated April 29, 

2008 (‘‘CBOE Letter 1’’); Jeffrey S. Davis, Vice 

President and Deputy General Counsel, The 

NASDAQ OMX Group, Inc., to Nancy M. Morris, 

Secretary, Commission, dated May 7, 2008 

(‘‘Nasdaq Letter 1’’); and Richard S. Rudolph, Vice 

President and Counsel, Phlx, to Nancy M. Morris, 

Secretary, Commission, dated June 17, 2008 (‘‘Phlx 

Letter 1’’). 

7 In their respective Amendment No. 1 to the 

Proposed Plan, BSE, CBOE, NYSE Alternext, Phlx, 

and Nasdaq made changes identical to those made 

by ISE and NYSE Arca in Amendment No. 3. See 

letters from Edward J. Joyce, President and Chief 

Operating Officer, CBOE, to Florence Harmon, 

Acting Secretary, Commission, dated November 25, 

2008 (‘‘CBOE Letter 2’’); Jeffrey P. Burns, Managing 

Director, NYSE Alternext, to Florence Harmon, 

Acting Secretary, Commission, dated November 25, 

2008 (‘‘Amex Letter 2’’); John Katovich, Vice 

President, BSE, to Florence Harmon, Acting 

Secretary, Commission, dated December 1, 2008 

(‘‘BSE Letter 2’’); Richard S. Rudolph, Vice 

President and Counsel, Phlx, to Florence Harmon, 

Acting Secretary, Commission, dated December 3, 

2008 (‘‘Phlx Letter 2’’); and Jeffrey S. Davis, Vice 

President and Deputy General Counsel, The 

NASDAQ OMX Group, Inc., to Florence Harmon, 

Acting Secretary, Commission, dated December 4, 

2008 (‘‘Nasdaq Letter 2’’). 

8Securities Exchange Act Release No. 59647 

(March 30, 2009), 74 FR 15010 (File No. 4–546) 

(‘‘Proposed Plan Notice’’). The full text of the 

Proposed Plan submitted by the Proposing 

Exchanges, is available on the Commission’s Web 

site at http://sec.gov/rules/sro/nms/nmsarchive/ 

nms2007.shtml#4-546, at each Proposing Exchange, 

and at the Commission’s Public Reference Room. 

9Letter from John C. Nagel, Managing Director & 

Deputy General Counsel, Citadel Investment Group 

L.L.C. (‘‘Citadel’’) to Nancy M. Morris, Secretary, 

Commission, dated July 18, 2008 (‘‘Citadel Letter’’). 

The Citadel Letter cited to Citadel’s comments 

made in a letter from John C. Nagel, Managing 

Director & Deputy General Counsel, Citadel to 

Nancy M. Morris, Secretary, Commission, dated 

July 15, 2008 (Petition for Rulemaking to Address 

Excessive Access Fees in the Options Markets) 

(‘‘Petition for Rulemaking’’). 

10 15 U.S.C. 78k–1. See also 17 CFR 242.608(b)(2). 

The approved Options Order Protection and 

Locked/Crossed Market Plan, which incorporates 

the changes the Commissions deems necessary or 

appropriate, is attached here as Appendix A and is 

referred to herein as the ‘‘Options Linkage Plan.’’ 

11 15 U.S.C. 78k–1. 

12 15 U.S.C. 78k–1(a)(1)(C). 

13 15 U.S.C. 78k–1(a)(3)(B). 

14 17 CFR 242.608(b)(2). 

15See Securities Exchange Act Release No. 43086 

(July 28, 2000), 65 FR 48023 (August 4, 2000) (File 

No. 4–429). 

16See Securities Exchange Act Release Nos. 

43573 (November 16, 2000), 65 FR 70851 

(November 28, 2000) (File No. 4–429) and 43574 

(November 16, 2000), 65 FR 70850 (November 28, 

2000) (File No. 4–429). 

17See Securities Exchange Act Release No. 49198 

(February 5, 2004), 69 FR 7029 (February 12, 2004) 

(File No. 4–429). 

18See Securities Exchange Act Release No. 57545 

(March 21, 2008), 73 FR 16394 (March 27, 2008) 

(File No. 4–429). 

19Section 8(c) of the Current Plan. 

20Section 8(c)(iii) of the Current Plan. 

2008 and October 31, 2008, ISE and 

NYSE Arca, respectively, filed 

Amendment No. 3 to the Proposed 

Plan.5 On April 30, 2008, May 8, 2008, 

June 18, 2008, June 18, 2008, and July 

9, 2008, respectively, Chicago Board 

Options Exchange, Incorporated 

(‘‘CBOE’’), The NASDAQ Stock Market 

LLC (‘‘Nasdaq’’), American Stock 

Exchange LLC (‘‘Amex’’) (f/k/a NYSE 

Alternext US LLC, ‘‘NYSE Alternext,’’ 

n/k/a NYSE Amex LLC, ‘‘NYSE Amex’’), 

Philadelphia Stock Exchange, 

Incorporated (n/k/a NASDAQ OMX 

PHLX, Inc., ‘‘Phlx’’), and Boston Stock 

Exchange, Inc. (‘‘BSE’’) (n/k/a NASDAQ 

OMX BX, Inc., ‘‘BX’’ and together with 

ISE, NYSE Arca, CBOE, Nasdaq, Amex, 

and Phlx, the ‘‘Proposing Exchanges’’) 

filed with the Commission the Proposed 

Plan.6 On November 25, 2008, 

November 26, 2008, December 2, 2008, 

December 4, 2008, and December 5, 

2008, CBOE, NYSE Alternext, BSE, 

Phlx, and Nasdaq, respectively, filed 

Amendment No. 1 to the Proposed 

Plan.7 On April 2, 2009, a detailed 

summary of the Proposed Plan was 

published for comment in the Federal 

Register.8

The Commission received one 

comment on the Proposed Plan.9

This order approves the Proposed 

Plan, with changes as the Commission 

deems necessary or appropriate, thus 

authorizing CBOE, ISE, Nasdaq, BX, 

Phlx, Amex, and NYSE Arca to act 

jointly to implement the Proposed Plan, 

as modified herein, as a means of 

facilitating a national market system in 

accordance with the requirements of 

Section 11A of the Act.10

II. Background 

A. Section 11A of the Act 

In 1975, Congress directed the 

Commission, through the enactment of 

Section 11A of the Act,11 to facilitate the 

establishment of a national market 

system to link together the individual 

markets that trade securities. Congress 

found the development of a national 

market system to be in the public 

interest and appropriate for the 

protection of investors and the 

maintenance of fair and orderly markets 

to assure fair competition among the 

exchange markets.12 Section 

11A(a)(3)(B) of the Act directs the 

Commission, ‘‘by rule or order, to 

authorize or require self-regulatory 

organizations to act jointly with respect 

to matters as to which they share 

authority under this title in planning, 

developing, operating, or regulating a 

national market system (or a subsystem 

thereof) or one or more facilities.’’ 13 The 

Commission’s approval of a national 

market system plan is conditioned upon 

a finding that the proposed plan is 

‘‘necessary or appropriate in the public 

interest, for the protection of investors 

and the maintenance of fair and orderly 

markets, to remove impediments to, and 

perfect the mechanism of, a national 

market system, or otherwise in 

furtherance of the purposes of the 

Act.’’ 14

B. Current Plan 

Currently, the Proposing Exchanges 

are signatories to the Plan for the 

Purpose of Creating and Operating an 

Intermarket Option Linkage (‘‘Current 

Plan’’). The Current Plan is a national 

market system plan linking its 

participants. The Commission approved 

the Current Plan on July 28, 2000.15

Subsequently, both Pacific Exchange, 

Inc. (n/k/a ‘‘NYSE Arca’’) and Phlx 

submitted proposed amendments to the 

Current Plan to become participants to 

the Current Plan. These proposed 

amendments were approved on 

November 16, 2000.16 On February 5, 

2004, BSE’s proposed amendment to 

become a participant to the Current Plan 

became effective.17 Further, Nasdaq’s 

proposed amendment to become a 

participant to the Current Plan became 

effective on March 21, 2008.18

The Current Plan requires its 

participants to avoid, absent reasonable 

justification and during normal market 

conditions, trading at a price inferior to 

that displayed on another market 

(‘‘trade-through’’).19 The Current Plan 

provides for several exceptions to tradethrough liability, including, among 

other things, systems malfunction, 

failure of the receiving market to 

respond to an incoming order within 30 

seconds, failure of the market traded 

through to complain within the 

specified time period, complex trades, 

trading rotations, and non-firm 

quotations on the market that was 

traded through.20 The Current Plan also 

provides a mechanism by which a 

member of a participating exchange 


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21Section 8(c)(ii) of the Current Plan. 

22Section 7(a)(i)(C) of the Current Plan. 

23Sections 5, 9, and 10 of the Current Plan. 

24Section 5(c)(i) of the Current Plan. 

25See ISE Letter 2 and NYSE Arca Letter 2, supra 

note 5; see also Amex Letter 2, BSE Letter 2, CBOE 

Letter 2, Nasdaq Letter 2, and Phlx Letter 2, supra 

note 7. 

26Sections 2(16)(a) and 7(a)(ii)(A), (B) of the 

Current Plan. 

27Sections 2(16)(b) and 7(a)(ii)(C) of the Current 

Plan. 

28Sections 2(16)(c) and 7(a)(ii)(D) of the Current 

Plan. 

29See Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496 (June 29, 2005) (File 

No. S7–10–04) (‘‘NMS Release’’); 17 CFR 242.600 et 

seq. 

30 15 U.S.C. 78k–1. 

31 15 U.S.C. 78k–1(a)(3)(B). 

32 17 CFR 242.608. 

33 15 U.S.C. 78k–1(a)(3)(B). 

34 17 CFR 242.608. 

35The Commission has modified the Proposed 

Plan to amend Section 7 of the Proposed Plan 

relating to the implementation date of the plan (see 

infra notes 140–143 and accompanying text). 

36 17 CFR 242.608(b)(2). 

37See supra note 29. 

38See Citadel Letter, supra note 9. 

39See Petition for Rulemaking, supra note 9. 

40The Options Linkage Plan defines 

‘‘Participant’’ to mean an Eligible Exchange whose 

participation in the plan has become effective 

pursuant to Section 3(c) of the Options Linkage 

Plan. See Section 2(15) of the Options Linkage Plan. 

The Options Linkage Plan defines ‘‘Eligible 

Exchange’’ to mean a national securities exchange 

registered with the Commission in accordance with 

Section 6(a) of the Act that, among other things, is 

a Participant Exchange in OCC (as that term is 

defined in Section VII of the OCC by-laws) and is 

a party to the OPRA Plan (as that term is described 

in Section I of the OPRA Plan). ‘‘OPRA Plan’’ means 

the plan filed by the Options Price Reporting 

Authority with the Commission pursuant to Section 

11A(a)(1)(C)(iii) of the Act and approved by the 

could seek satisfaction if a customer 

order is traded through.21

Under the Current Plan, its 

participants agree that the 

dissemination of ‘‘locked’’ or ‘‘crossed’’ 

markets should be avoided, and, if their 

members lock or cross a market, they 

should take remedial actions to unlock 

or uncross such market.22 Further, the 

Current Plan contains provisions to 

address trade comparison, clearing, 

trading halts, non-firm quotations, and 

administration of the Current Plan.23

Except with respect to the addition of 

new participants and the withdrawal of 

current participants, any proposed 

change to the Current Plan must be 

approved unanimously by its 

participants.24

The participating exchanges comply 

with the requirements of the Current 

Plan, including the prohibition against 

trade-throughs, by utilizing a stand 

alone system (‘‘Linkage Hub’’) to send 

and receive specific order types. The 

Linkage Hub is a centralized data 

communications network that 

electronically links the options 

exchanges to one another. The Options 

Clearing Corporation (‘‘OCC’’) operates 

the Linkage Hub.25

There are three defined order types 

under the Current Plan that its 

participants could route through the 

Linkage Hub to limit trade-throughs: 

orders represented by eligible market 

makers on behalf of customers 

(‘‘Principal Acting as Agent Orders’’ or 

‘‘P/A Orders’’); 26 orders for the 

principal accounts of market makers 

and specialists (‘‘Principal Orders’’); 27

and orders intended to satisfy tradethrough liabilities (‘‘Satisfaction 

Orders’’).28 Non-market-maker brokerdealers do not have access to the 

Linkage Hub. 

C. Proposed Plan 

The Proposing Exchanges are now 

seeking approval of an alternative 

linkage plan, the Proposed Plan. As 

described in more detail below, the 

Proposed Plan would not require a 

central linkage mechanism akin to the 

Current Plan’s Linkage Hub, and would 

introduce certain new features to 

linkages between options markets, 

including an Intermarket Sweep Order 

(‘‘ISO’’) similar to that available for 

NMS stocks under Regulation NMS.29

III. Discussion 

As discussed above, in 1975, Congress 

directed the Commission, through the 

enactment of Section 11A of the Act,30

to facilitate the development of a 

national market system consistent with 

the objectives of the Act. In particular, 

Section 11A(a)(3)(B) of the Act 31

authorizes the Commission ‘‘by rule or 

order, to authorize or require selfregulatory organizations to act jointly 

with respect to matters as to which they 

share authority under this title in 

planning, developing, operating, or 

regulating a national market system (or 

a subsystem thereof) or one or more 

facilities.’’ Rule 608 establishes the 

procedures for filing, amending, and 

approving a national market system 

plan. Approval of such a plan is 

conditioned upon a finding that the 

proposed plan ‘‘is necessary or 

appropriate in the public interest, for 

the protection of investors and the 

maintenance of fair and orderly markets, 

to remove impediments to, and perfect 

the mechanisms of, a national market 

system, or otherwise in furtherance of 

the purposes of the Act.’’ 32

After careful review, the Commission 

has determined to approve the Proposed 

Plan, pursuant to Section 11A(a)(3)(B) of 

the Act 33 and Rule 608 thereunder,34

with changes set forth herein as the 

Commission has deemed necessary and 

appropriate.35 Specifically, the 

Commission finds that changes to the 

Proposed Plan set forth herein are 

necessary and appropriate in the public 

interest. The Commission further finds 

that the Options Linkage Plan is in 

furtherance of the purposes of the Act 

in that it requires the protection of the 

best priced displayed quotes and 

avoidance and reconciliation of locked 

and crossed markets, and thus is 

necessary and appropriate in the public 

interest, for the protection of investors 

and the maintenance of fair and orderly 

markets, to remove impediments to, and 

perfect the mechanisms of, a national 

market system.36

The Commission believes that 

Proposed Plan’s decentralized structure 

will allow the Proposing Exchanges to 

take advantage of new technology that 

allow for efficient routing and 

executions. The Proposed Plan will give 

the Proposing Exchanges greater 

flexibility for order handling as it would 

allow the exchanges to utilize private 

linkages, instead of requiring each 

Proposing Exchange to connect to, and 

participate in the maintenance of, a 

centralized hub. In addition, the 

Proposed Plan would permit the use of 

ISOs in the options markets. As such, 

the Proposed Plan would allow the 

Proposing Exchanges to move towards 

the market structure approved by the 

Commission for NMS stocks under 

Regulation NMS.37 The Commission 

believes that the Options Linkage Plan 

will allow the Proposing Exchanges to 

update the way in which they 

accomplish effective quote protection 

and locked and crossed market 

reconciliation. For the reasons described 

above, the Commission believes that 

these provisions of the Options Linkage 

Plan will provide benefits to the options 

markets, including the Proposing 

Exchanges and market participants 

generally. 

In its comment letter on the Proposed 

Plan, Citadel referenced the comments it 

made with regard to access fees in the 

options markets in its Petition for 

Rulemaking.38 There, Citadel 

encouraged the Commission to institute 

a rulemaking proceeding to limit the 

fees that options exchanges may charge 

non-members to obtain access to 

quotations.39 Commission staff is 

currently considering Citadel’s petition. 

A. Order Protection 

1. Requirement of Reasonable Policies 

and Procedures 

The Options Linkage Plan requires 

each Participant 40 to establish, 


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Commission and declared effective as of January 22, 

1976, as from time to time amended. See Section 

2(14) of the Options Linkage Plan. For the 

definitions of ‘‘Trade-Through,’’ ‘‘Best Bid’’ or ‘‘Best 

Offer,’’ ‘‘Locked Market,’’ and ‘‘Crossed Market,’’ 

see infra notes 42, 44, and 119 and accompanying 

texts. 

41Section 5(a)(i) of the Options Linkage Plan. 

42Section 2(21) of the Options Linkage Plan. 

43Section 2(17) of the Options Linkage Plan. 

Protected Bid and Protected Offer, together are 

referred to herein as ‘‘Protected Quotation.’’ See 

Section 2(18) of the Options Linkage Plan. 

44Sections 2(1) and 2(2) of the Options Linkage 

Plan. 

45Section 5(a)(ii) of the Options Linkage Plan. 

46See Rule 611(a) of Regulation NMS (17 CFR 

242.611(a)). 

47 15 U.S.C. 78k–1(a)(1)(C). 48See NMS Release at 37535, supra note 29. 

49 17 CFR 242.608(c). 

50See Proposed Plan Notice at 15012, supra note 

8, for a more detailed description of the proposed 

Trade-Through exceptions. 

51Section 5(a)(i) of the Options Linkage Plan. 

52Section 5(b)(x) of the Options Linkage Plan. 

53Rule 611 of Regulation NMS, known also as the 

Order Protection Rule, governs trade-through 

liability for NMS Stocks. See 17 CFR 242.611. 

54Section 5(b)(i) of the Options Linkage Plan. 

55Section 5(b)(ii) of the Options Linkage Plan. 

56Section 5(b)(iii) of the Options Linkage Plan. 

For the definition of a ‘‘Crossed Market,’’ see infra 

note 119 and accompanying text. 

57Section 5(b)(iv)–(v) of the Options Linkage 

Plan. 

58Section 5(b)(vi) of the Options Linkage Plan. 

59Section 5(b)(vii) of the Options Linkage Plan. 

60Section 5(b)(viii) of the Options Linkage Plan. 

61Section 5(b)(ix) of the Options Linkage Plan. 

maintain, and enforce written policies 

and procedures as approved by the 

Commission that are reasonably 

designed to prevent Trade-Throughs in 

that Participant’s market in Eligible 

Options Classes.41 A ‘‘TradeThrough’’ 42 is defined as a transaction 

in an option series, either as principal 

or agent, at a price that is lower than a 

Protected Bid or higher than a Protected 

Offer. A ‘‘Protected Bid’’ or a ‘‘Protected 

Offer’’ 43 means a bid or offer in an 

option series that is displayed by an 

Eligible Exchange, is disseminated 

pursuant to the OPRA Plan, and is the 

Best Bid or Best Offer of an Eligible 

Exchange. A ‘‘Best Bid’’ or ‘‘Best 

Offer’’ 44 means the highest bid price or 

the lowest offer price communicated by 

a member of an Eligible Exchange to any 

broker-dealer or to any customer at 

which such member is willing to buy or 

sell, either as principal or agent. 

The Options Linkage Plan also 

requires each Participant to agree to 

conduct surveillance of its market on a 

regular basis to ascertain the 

effectiveness of the policies and 

procedures to prevent Trade-Throughs 

and to take prompt action to remedy 

deficiencies in such policies and 

procedures.45

As is the case currently for NMS 

stocks under Regulation NMS,46 the 

Commission believes the Options 

Linkage Plan’s policies and proceduresbased approach to preventing TradeThroughs in options is in the public 

interest, appropriate for the protection 

of investors and the maintenance of fair 

and orderly markets, and is consistent 

with Section 11A(a)(1)(C) of the Act.47

The requirement in Section 5(a)(i) of the 

Options Linkage Plan is virtually 

identical to the requirement in Rule 

611(a) of Regulation NMS. The 

Commission expects the Participants in 

the Options Linkage Plan will establish, 

maintain, and enforce written policies 

and procedures comparable to those 

established, maintained and enforced by 

the market centers subject to Rule 

611(a). The Commission believes that a 

policies and procedures-based approach 

to preventing Trade-Throughs in 

options is reasonable given the 

increasingly high volume of trading in 

options, and the latencies and other 

discrepancies in the delivery and 

receipt of quotation data. The 

requirement of written policies and 

procedures, as well as the responsibility 

assigned to Participants to regularly 

surveil to ascertain the effectiveness of 

their procedures and take prompt 

remedial steps, is designed to achieve 

the objective of eliminating all TradeThroughs that reasonably can be 

prevented, while also recognizing the 

inherent difficulties of eliminating 

Trade-Through transactions that, 

despite a Participant’s reasonable 

efforts, may occur. 

The Commission believes that each 

Participant’s policies and procedures 

must enable it to monitor, on a real-time 

basis, the Protected Quotations 

displayed by Eligible Exchanges so as to 

determine the prices at which the 

Participant can and cannot execute 

trades. In addition, the Commission 

believes that a Participant’s policies and 

procedures must establish objective 

standards and parameters governing its 

use of the exceptions set forth in Section 

5(b) of the Options Linkage Plan, 

discussed below, and expects each 

Participant’s order-handling and trading 

systems to be programmed in 

accordance with these policies and 

procedures. Finally, the Participant 

must take such steps as are necessary to 

enable it to enforce its policies and 

procedures effectively. For example, the 

Commission believes that Participants 

will need to establish procedures such 

as regular exception reports to evaluate 

their trading and order-routing 

practices. The Commission believes that 

each Participant Exchange will need to 

examine such reports to affirm that its 

policies and procedures have been 

followed by its personnel and properly 

coded into its systems and, if not, to 

promptly identify the reasons and take 

remedial action.48

Participants’ obligations under the 

Options Linkage Plan to maintain and 

enforce policies and procedures 

reasonably designed to prevent TradeThroughs is reinforced by the Options 

Linkage Plan’s explicit assignment of 

responsibility to Participants to surveil 

to ascertain the effectiveness of their 

policies and procedures. Participants 

cannot merely establish policies and 

procedures that may be reasonable 

when created and assume that such 

policies and procedures continue to 

satisfy the requirements of the Options 

Linkage Plan. Rather, the Commission 

believes that Participants must regularly 

assess the continuing effectiveness of 

their procedures and take prompt action 

when needed to remedy deficiencies. In 

particular, Participants must engage in 

regular surveillance to determine 

whether Trade-Throughs are occurring 

without an applicable exception and 

whether they have failed to implement 

and maintain policies and procedures 

that would have reasonably prevented 

such Trade-Throughs. Further, this 

requirement is an important element of 

a Participant’s obligations under Rule 

608(c) of Regulation NMS, which 

require that each self-regulatory 

organization, absent reasonable 

justification or excuse, enforce 

compliance with any national market 

system plan by its members and persons 

associated with its members.49

2. Exceptions to Trade-Throughs 

The Options Linkage Plan provides 

exceptions for certain transactions from 

the prohibition against TradeThroughs.50 The Options Linkage Plan 

also provides that, if a Participant relies 

on an exception, it would be required to 

establish, maintain, and enforce written 

policies and procedures reasonably 

designed to assure compliance with the 

terms of the exception.51 Except for the 

proposed exception for stopped orders 

and price improvement,52 the 

exceptions in the Options Linkage Plan 

correspond to trade-through exceptions 

found in either the Current Plan or in 

Regulation NMS.53 The Options Linkage 

Plan includes the following exceptions 

from the prohibition against TradeThroughs: system issues; 54 trading 

rotations; 55 crossed markets; 56

intermarket sweep orders; 57 quote 

flickering; 58 non-firm quotes; 59

complex trades; 60 customer stopped 

orders; 61 stopped orders and price 


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62Section 5(b)(x) of the Options Linkage Plan. 

63Section 5(b)(xi) of the Options Linkage Plan. 

64 17 CFR 242.608(b)(2). 

65 15 U.S.C. 78k–1(a)(1)(C). 

66Section 5(b)(i) of the Options Linkage Plan. 

67See NMS Release at 37535, supra note 29. 

68 Id. 

69 17 CFR 242.608(b)(2). 

70 15 U.S.C. 78k–1(a)(1)(C). 

71Section 5(b)(ii) of the Options Linkage Plan. 

72See Section 8(c)(iii)(E) of the Current Plan. 

73See Rule 611(b)(3) of Regulation NMS under 

the Act (17 CFR 242.611(b)(3)). 

74See ISE Letter 2 and NYSE Arca Letter 2, supra 

note 5; see also Amex Letter 2, BSE Letter 2, CBOE 

Letter 2, Nasdaq Letter 2, and Phlx Letter 2, supra 

note 7. 

75See ISE Letter 2 and NYSE Arca Letter 2, supra 

note 5; see also Amex Letter 2, BSE Letter 2, Nasdaq 

Letter 2, and Phlx Letter 2, supra note 7. 

76 17 CFR 242.608(b)(2). 

77 15 U.S.C. 78k–1(a)(1)(C). 

78Section 5(b)(iii) of the Options Linkage Plan. 

79See Rule 611(b)(4) of Regulation NMS (17 CFR 

242.611(b)(4)). 

80 17 CFR 242.608(b)(2). 

81 15 U.S.C. 78k–1(a)(1)(C). 

82Section 5(b)(iv) and (v) of the Options Linkage 

Plan. 

83See Rule 611(b)(5) and (6) of Regulation NMS 

(17 CFR 242.611(b)(5) and (6)). 

improvement; 62 and benchmark 

trades.63

The Commission believes these 

exceptions will permit a workable 

intermarket price protection structure 

for the options market, and are 

consistent with the principle of price 

protection. As discussed below, the 

Commission finds that each of these 

exceptions is in the public interest, 

appropriate for the protection of 

investors and the maintenance of fair 

and orderly markets,64 and believes 

each assures fair competition among 

exchange markets, consistent with 

Section 11A(a)(1)(C) of the Act.65

System Issues: 66 This exception, 

similar to an exception in the Current 

Plan, permits a Participant to trade 

through a Protected Quotation if the 

Eligible Exchange displaying the 

Protected Quotation that was traded 

through was experiencing a failure, 

material delay, or malfunction of its 

systems or equipment when the TradeThrough occurred. This exception gives 

Participants a ‘‘self-help’’ remedy if 

another Eligible Exchange repeatedly 

fails to provide an immediate response 

to incoming orders attempting to access 

its quotes. As the Commission stated in 

approving a parallel exception for stocks 

under Regulation NMS, the Eligible 

Exchange receiving an order can only be 

held responsible for its own turnaround 

time (i.e., from the time it first received 

an order to the time it transmits a 

response to the order). Accordingly, the 

routing exchange will be required to 

develop policies and procedures that 

allow for any potential delays in 

transmission not attributable to the 

receiving exchange. This exception also 

covers any failure or malfunction of an 

Eligible Exchange’s systems or 

equipment, as well as any material 

delay.67

Participants will need to establish 

specific objective parameters governing 

their use of this ‘‘self-help’’ exemption 

as part of their reasonable policies and 

procedures. The Commission believes, 

for example, a single failure to respond 

within one second generally will not 

justify future bypassing of another 

Eligible Exchange’s quotations. Many 

failures to respond within one second in 

a short time period, in contrast, clearly 

will warrant use of the exception. The 

Commission believes that a Participant 

making use of this exception must 

notify the non-responding Eligible 

Exchange immediately after (or at the 

same time as) electing this exception 

pursuant to reasonable and objective 

standards contained in its policies and 

procedures in order to alert the nonresponding Eligible Exchange that the 

Participant intends to make use of this 

exception with respect to the nonresponding Eligible Exchange’s 

quotes.68

The Commission believes that a 

Participant should be entitled to bypass 

an away market’s quotations if that 

market fails to respond to incoming 

orders attempting to access a displayed 

quote. The Commission believes that 

this exception will provide Participants 

with the necessary flexibility for dealing 

with problems that occur on an away 

market during the trading day. Further, 

the Commission finds that this 

exception is in the public interest, 

appropriate for the protection of 

investors and the maintenance of fair 

and orderly markets,69 and believes it 

assures fair competition among 

exchange markets, consistent with 

Section 11A(a)(1)(C) of the Act.70

Trading Rotations: 71 This exception, 

which is carried over from the Current 

Plan 72 and similar to an exception 

available for NMS stocks under 

Regulation NMS,73 permits a Participant 

to trade through a Protected Quotation 

disseminated by an Eligible Exchange 

during a trading rotation. Options 

exchanges use a trading rotation to open 

an option for trading or reopen an 

option after a trading halt. 

As noted by the Participants, the 

trading rotation is effectively a single 

price auction to price the option,74 and 

there are no practical means to include 

prices on other exchanges in that 

auction.75 As such, the Commission 

emphasizes that the exception will not 

permit a Participant to declare a trading 

halt merely to be able to circumvent the 

operation of the Options Linkage Plan’s 

Trade-Through provisions upon 

reopening; instead, the Commission 

believes a Participant must conduct, 

pursuant to its rules, a formalized and 

transparent process for executing orders 

during reopening after a trading halt 

that involves the queuing and ultimate 

execution of multiple orders at a single 

equilibrium price. In addition, a 

Participant must have formally declared 

a trading halt pursuant to its rules. 

Therefore, the Commission finds that it 

is reasonable to include this as an 

exception to the general prohibition on 

Trade-Throughs as it is in the public 

interest, appropriate for the protection 

of investors and the maintenance of fair 

and orderly markets,76 and believes it 

assures fair competition among 

exchange markets, consistent with 

Section 11A(a)(1)(C) of the Act.77

Crossed Markets: 78 This exception 

permits a Participant to trade through a 

Protected Quotation when the market is 

crossed, and corresponds to an 

exception for NMS stocks under 

Regulation NMS.79 A Crossed Market 

occurs when a Protected Bid is higher 

than a Protected Offer in a given options 

class. The Commission believes that it is 

appropriate to permit executions 

without regard to Trade-Throughs in a 

Crossed Market because allowing such 

transactions should permit the market to 

quickly resolve any unintentional 

crosses. For the foregoing reasons, the 

Commission finds that this exception is 

in the public interest, appropriate for 

the protection of investors and the 

maintenance of fair and orderly 

markets,80 and believes it assures fair 

competition among exchange markets, 

consistent with Section 11A(a)(1)(C) of 

the Act.81

Intermarket Sweep Orders: 82 The 

Options Linkage Plan includes two 

exceptions from the prohibition against 

Trade-Throughs for certain transactions 

involving ISOs. These two exceptions 

correspond to the exceptions relating to 

ISOs for NMS stocks under Regulation 

NMS.83 First, the Options Linkage Plan 

permits a Participant to execute orders 

marked as ISOs even when the 

Participant is not at the national best bid 

or offer (‘‘NBBO’’). Second, a Participant 

is permitted to execute a transaction 

when such transaction is not at the 

NBBO, provided it simultaneously 

‘‘sweeps’’ all better priced Protected 

Quotations by routing an ISO to execute 

against the full displayed size of any 

Protected Quotation that was traded 

through. 


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84Section 2(9) of the Options Linkage Plan. 

85See NMS Release at 37523, supra note 29. 

86 17 CFR 242.608(b)(2). 

87 15 U.S.C. 78k–1(a)(1)(C). 

88Section 5(b)(vi) of the Options Linkage Plan. 

89See Rule 611(b)(8) of Regulation NMS (17 CFR 

242.611(b)(8)). 

90See NMS Release at 37536, supra note 29. 

91 17 CFR 242.608(b)(2). 

92 15 U.S.C. 78k–1(a)(1)(C). 

93Section 5(b)(vii) of the Options Linkage Plan. 

94See Section 8(c)(iii)(C) of the Current Plan. 

95See Section 2(11) of the Options Linkage Plan. 

96The Commission notes that, when quotations in 

an Eligible Options Class are Non-Firm, exchange 

rules require the exchange to provide notice that its 

quotations are Non-Firm by appending an indicator 

to its quotations. See, e.g., CBOE Rule 43.14(b) and 

NYSE Arca Rule 6.86(d)(1)(C). 

97 17 CFR 242.608(b)(2). 

98 15 U.S.C. 78k–1(a)(1)(C). 

99Section 5(b)(viii) of the Options Linkage Plan. 

100Section 8(c)(iii)(G) of the Current Plan. 

101See, e.g., ISE Rule 722. 

102See ISE Letter 2 and NYSE Arca Letter 2, 

supra note 5; see also Amex Letter 2, BSE Letter 2, 

CBOE Letter 2, Nasdaq Letter 2, and Phlx Letter 2, 

supra note 7. 

103All changes to rules of national securities 

exchanges are subject to notice, comment and 

Commission review pursuant to Section 19(b) of the 

Act. 15 U.S.C. 78s(b). 

104 17 CFR 242.608(b)(2). 

105 15 U.S.C. 78k–1(a)(1)(C). 

An ISO is defined as a limit order for 

an options series that, when routed to 

an Eligible Exchange, is identified as an 

Intermarket Sweep Order and, 

simultaneously with the routing of the 

order, one or more additional orders, as 

necessary, are routed to execute against 

the full displayed size of any Protected 

Bid, in the case of a limit order to sell, 

or any Protected Offer, in the case of a 

limit order to buy, for the options series 

with a price that is superior to the limit 

price of the order.84 Any such 

additional orders would also be marked 

as ISOs. 

The availability of ISOs will allow the 

Participants to access multiple price 

levels simultaneously displayed on the 

same or multiple markets, without 

violating the prohibition against TradeThroughs. As the Commission stated 

with respect to ISOs for stocks under 

Regulation NMS, the Commission 

believes that allowing a Participant to 

immediately execute an order identified 

as an ISO when that exchange is not at 

the NBBO is fully consistent with the 

principle of protecting the best 

displayed prices because the exception 

is premised on the condition that the 

market participant sending the ISO has 

already attempted to access all betterpriced Protected Quotations up to their 

displayed size. Consequently, there is 

no reason why a Participant that 

receives an ISO while displaying an 

inferior-priced quotation should be 

required to delay an execution of the 

order.85 This exception should help to 

ensure more efficient and faster 

executions. 

The second ISO Trade-Through 

exception, under subparagraph (b)(v) of 

Section 5 of the Options Linkage Plan, 

should benefit market participants in 

their ability to handle orders efficiently. 

For example, market participants should 

be able to use this exception to more 

efficiently execute block trades one or 

more minimum price increments away 

from the NBBO. So long as ISOs are 

simultaneously routed to execute 

against better-priced Protected 

Quotation on other markets, the block 

order could be executed 

contemporaneously with the routing of 

the ISOs. 

The Commission notes that Section 

5(c) of the Options Linkage Plan 

requires Participants to take reasonable 

steps to establish that ISOs are properly 

routed in an attempt to execute against 

all applicable Protected Quotations. 

For the reasons stated above, the 

Commission finds that the exception 

from Trade-Through liability when an 

exchange or market participants sends 

an ISO is in the public interest, 

appropriate for the protection of 

investors and the maintenance of fair 

and orderly markets,86 and believes it 

assures fair competition among 

exchange markets, consistent with 

Section 11A(a)(1)(C) of the Act.87

Quote Flickering: 88 Subparagraph 

(b)(vi) of Section 5 of the Options 

Linkage Plan sets forth an exception for 

flickering quotations, and corresponds 

to an exception for NMS stocks under 

Regulation NMS.89 It excepts a 

transaction if the Eligible Exchange 

displaying the Protected Quotation that 

was traded through had displayed, 

within one second prior to execution of 

the Trade-Through, a Best Bid or Best 

Offer, as applicable, for the options 

series with a price that was equal or 

inferior to the price of the TradeThrough transaction. 

As the Commission stated with 

respect to the similar exception for 

stocks under Regulation NMS,90 this 

exception thereby provides a ‘‘window’’ 

to address false indications of TradeThroughs that in actuality are 

attributable to rapidly moving 

quotations. It should also reduce the 

number of instances in which a 

Participant must alter its normal trading 

procedures and route orders to other 

trading centers to comply with the 

Options Linkage Plan. The exception is 

thereby intended to promote more 

workable intermarket price protection. 

The Commission finds it is in the public 

interest, appropriate for the protection 

of investors and the maintenance of fair 

and orderly markets,91 and believes it 

assures fair competition among 

exchange markets, consistent with 

Section 11A(a)(1)(C) of the Act.92

Non-Firm Quotes: 93 This exception, 

which is carried over from the Current 

Plan,94 permits a Participant to trade 

through a Protected Quotation that was 

‘‘Non-Firm.’’ 95 ‘‘Non-Firm’’ is defined 

to mean, with respect to Quotations in 

an Eligible Options Class, that members 

of a Participant are relieved of their 

obligations under that Participant’s firm 

quote rule in that Eligible Options 

Class.96

The Commission believes that 

Participants should not be required to 

protect the price of an away market 

when that market identifies its quotes as 

‘‘Non-Firm.’’ The Commission finds that 

this exception is in the public interest, 

appropriate for the protection of 

investors and the maintenance of fair 

and orderly markets,97 and believes it 

assures fair competition among 

exchange markets, consistent with 

Section 11A(a)(1)(C).98

Complex Trades: 99 This exception 

carries forward the complex trade 

exception in Section 8(c)(iii)(G) of the 

Current Plan 100 and permits a 

Participant to trade through a Protected 

Quotation if the transaction was part of 

a ‘‘complex trade.’’ The definition of 

‘‘complex trade’’ would be implemented 

through rules adopted by the 

Participants, which would be subject to 

notice, comment, and Commission 

review pursuant to the Section 19(b) 

rule filing process. 

Complex trades, such as those 

submitted by market participants under 

the Proposing Exchanges complex order 

mechanisms,101 are composed of 

multiple transactions effected at a net 

price. As the Proposing Exchanges 

state,102 it is not always practical to 

require each leg to be transacted at a 

price that does not constitute a TradeThrough, and the Commission believes 

that permitting an exception for 

transactions effected as a portion of a 

complex trade is appropriate. By 

narrowly crafting the definition of 

complex trades in each Participants’ 

rules,103 the Commission believes that 

this exception will not undercut the 

general Trade-Through protections of 

the Options Linkage Plan, and finds it 

is in the public interest, appropriate for 

the protection of investors and the 

maintenance of fair and orderly 

markets,104 and believes it assures fair 

competition among exchange markets, 

consistent with Section 11A(a)(1)(C).105


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106Section 5(b)(ix) of the Options Linkage Plan. 

107 ‘‘Customer’’ would be defined to mean an 

individual or organization that is not a ‘‘Broker/ 

Dealer.’’ See Section 2(5) of the Options Linkage 

Plan. 

108See Rule 611(b)(9) of Regulation NMS (17 CFR 

242.611(b)(9)). 

109See NMS Release at 37527, supra note 29. 

110 17 CFR 242.608(b)(2). 

111 15 U.S.C. 78k–1(a)(1)(C). 

112Section 5(b)(x) of the Options Linkage Plan. 

113See, e.g., Securities Exchange Act Release No. 

50819 (December 8, 2004), 69 FR 75093 (December 

15, 2004) (SR–ISE–2003–06) (approving rules 

implementing ISE’s Price Improvement Mechanism 

under ISE Rule 723). 

114 17 CFR 242.608(b)(2). 

115 15 U.S.C. 78k–1(a)(1)(C). 

116Section 5(b)(xi) of the Options Linkage Plan. 

117See Rule 611(b)(7) of Regulation NMS (17 CFR 

242.611(b)(7)). 

118 15 U.S.C. 78k–1(a)(1)(C). 

119Section 6 of the Options Linkage Plan. A 

‘‘Locked Market’’ is defined as a quoted market in 

which a Protected Bid is equal to a Protected Offer 

in a series of an Eligible Options Class. See Section 

2(10) of the Options Linkage Plan. A ‘‘Crossed 

Market’’ is defined as a quoted market in which a 

Protected Bid is higher than a Protected Offer in a 

series of an Eligible Options Class. See Section 2(4) 

of the Options Linkage Plan. 

120See Rule 610(d) of Regulation NMS (17 CFR 

242.610(d)). 

121Section 6(a) of the Options Linkage Plan. 

122Section 6(b) of the Options Linkage Plan. 

123Section 6(c) of the Options Linkage Plan. The 

Commission notes that the proposed rule changes 

relating to all necessary implementing rules of the 

Participants, including those required by Section 6 

of the Options Linkage Plan, would be subject to 

notice, comment, and Commission review pursuant 

to Section 19(b) of the Act. 

Customer Stopped Orders: 106 This 

exception permits a Participant to trade 

through a Protected Quotation if the 

trade executed a ‘‘stopped order.’’ The 

exception requires that the ‘‘stopped 

order’’ be for the account of a 

Customer; 107 that the Customer agreed 

to the specified price on an order-byorder basis; and that the price of the 

Trade-Through was, for a stopped buy 

order, lower than the national Best Bid 

in the options series at the time of 

execution, or, for a stopped sell order, 

higher than the national Best Offer in 

the options series at the time of 

execution. This exception corresponds 

to the customer stopped order exception 

under Regulation NMS.108

The Commission recognizes that the 

use of stopped orders is a valuable tool, 

particularly for the execution of large 

orders.109 The Commission believes that 

this narrowly-drawn exception would 

give market participants the ability to 

execute large Customer orders over time 

at a price agreed upon by a Customer, 

even though the price of the option may 

change before the order is executed in 

its entirety, without undermining the 

general principles of price protection 

under the Options Linkage Plan. For 

these reasons, the Commission finds 

that this exception is in the public 

interest, appropriate for the protection 

of investors and the maintenance of fair 

and orderly markets,110 and assures fair 

competition among exchange markets, 

consistent with Section 11A(a)(1)(C) of 

the Act.111

Stopped Orders and Price 

Improvement: 112 This exception 

permits a Participant to trade through a 

Protected Quotation if the transaction 

that constituted the Trade-Through was 

the execution by a Participant of an 

order that is stopped at a price that did 

not constitute a Trade-Through at the 

time of the stop. This exception allows 

a Participant to seek price improvement 

for an order, even if the market moves 

in the interim, and the transaction 

ultimately is effected at a price that 

would trade through the then currentlydisplayed market. The rules of several of 

the Proposing Exchanges currently 

contain provisions relating to price 

improvement mechanisms.113

These price improvement 

mechanisms offer price improvement to 

orders received by the exchange during 

a specified period of time (‘‘auction’’). 

During this auction period, the NBBO 

could move from where it was when the 

order was received. However, the 

exchange is only required to guarantee 

a price no worse than the NBBO at the 

time the order was received. Thus, 

following the auction, an execution 

could result in a Trade-Through if the 

NBBO improves from the time the order 

was received although, had the order 

been executed at the time of receipt, the 

execution would not have resulted in a 

Trade-Through. 

This exception would allow a 

Participant to seek price improvement 

for an order, even if the market moves 

in the interim, and the transaction 

ultimately is effected at a price that 

would trade through the then currentlydisplayed market. By allowing this 

exception, the Commission expects that 

Participants would be able to continue 

to use price improvement mechanisms, 

thereby offering market participants 

potentially better-priced executions. 

The Commission finds that this 

exception is in the public interest, 

appropriate for the protection of 

investors and the maintenance of fair 

and orderly markets,114 and believes it 

assures fair competition among 

exchange markets, consistent with 

Section 11A(a)(1)(C) of the Act.115

Benchmark Trades: 116 This exception 

permits a Participant to trade through a 

Protected Quotation if the trade was 

executed at a price not based directly or 

indirectly on the quoted price of an 

options series at the time of execution 

and for which the material terms were 

not reasonably determinable at the time 

of the commitment to make the trade. 

This exception allows a ‘‘benchmark 

order’’ and corresponds to an exception 

for NMS stocks under Rule 611 of 

Regulation NMS.117 A common example 

of a benchmark order for NMS stocks is 

a volume-weighted average price, or 

‘‘VWAP,’’ order. The Commission notes 

that none of the Proposing Exchanges 

currently permit these types of options 

trades, and any Participant seeking to 

make use of this exception would be 

required to submit a proposed rule 

change which would be subject to 

notice, comment and Commission 

review under Section 19(b) of the Act. 

The Commission finds that this 

exception is in the public interest, 

appropriate for the protection of 

investors and the maintenance of fair 

and orderly markets, and believes it 

assures fair competition among 

exchange markets, consistent with 

Section 11A(a)(1)(C) of the Act.118

B. Locked and Crossed Markets 

The Options Linkage Plan also 

addresses Locked and Crossed 

Markets.119 The requirements in the 

Options Linkage Plan relating to Locked 

and Crossed Markets are virtually 

identical to those applicable to market 

centers for NMS stock under Regulation 

NMS.120

Specifically, the Options Linkage Plan 

requires each Participant to establish, 

maintain, and enforce written rules that 

require their members reasonably to 

avoid displaying Locked and Crossed 

Markets.121 Participants would also be 

required to establish, maintain, and 

enforce written rules reasonably 

designed to assure the reconciliation of 

Locked and Crossed Markets.122 Finally, 

the Options Linkage Plan would provide 

that Participants must establish, 

maintain, and enforce written rules that 

prohibit their members from engaging in 

a pattern or practice of displaying 

Locked and Crossed Markets, subject to 

exceptions as may be contained in the 

Participants’ rules, as approved by the 

Commission.123

The Commission recognizes that 

Section 6 of the Options Linkage Plan, 

by restricting Locked Markets, can 

prohibit the display of an order that 

would otherwise have been displayed 

and reduced the quoted spread to zero. 

However, as the Commission stated 

with respect to locked markets for 

stocks under Regulation NMS, the 


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124See NMS Release at 37547, supra note 29. 

125 15 U.S.C. 78s(b)(1). 

126 17 CFR 242.608(b)(2). 

127 15 U.S.C. 78k–1(a)(1)(C). 

128Section 3(c) of the Options Linkage Plan. 

129For a definition of a ‘‘Participant Exchange,’’ 

see Section VII of the OCC by-laws. 

130For more information on who is a party to the 

OPRA Plan, see Section I of the OPRA Plan. 

131Section 4(b) of the Options Linkage Plan. 

132 Id. These requirements are identical to those 

contained in the Current Plan. See Sections 4(c)(i) 

and 5(c) of the Current Plan. The Current Plan also 

requires that an eligible exchange pay a fee to join 

the Current Plan. See Section 4(c)(i)(iv) of the 

Current Plan. The Options Linkage Plan does not 

require an Eligible Exchange to pay a fee to join the 

Options Linkage Plan. 

133 17 CFR 242.608(b)(2). 

134 15 U.S.C. 78k–1(a)(1)(C). 

135Section 3(d) of the Options Linkage Plan. 

136Section 4(c) of the Options Linkage Plan. 

137 Id. These requirements are identical to those 

contained in the Current Plan. See Sections 4(d) 

and 5(c)(iii) of the Current Plan. 

138 17 CFR 242.608(b)(2). 

139 15 U.S.C. 78k–1(a)(1)(C). 

140See Section 7 of the Proposed Plan. 

141That is, CBOE, ISE, Nasdaq, BX, Phlx, Amex 

and NYSE Arca. 

142See, e.g., Securities Exchange Act Release Nos. 

60014 (June 1, 2009); and 74 FR 27224 (June 8, 

2009) (SR–ISE–2009–27) and 60015 (June 1, 2009); 

74 FR 27375 (June 9, 2009) (SR–NYSEAmex–2009– 

19) which propose rules such as provisions that 

contain relevant definitions, an order protection 

rule, and a locked and crossed market rule, which 

correspond to the provisions in the Options Linkage 

Plan. 

Commission believes that Locked 

Markets may not actually represent two 

market participants willing to buy and 

sell at the same price. Instead, a locking 

market participant may not truly be 

willing to trade at the displayed locking 

price, but chooses to lock rather than 

execute against the already-displayed 

quotation to receive a liquidity rebate. 

The Commission believes that giving 

priority to the first-displayed Protected 

Bid or Protected Offer, particularly 

when it includes a public customer’s 

order, will encourage price discovery 

and contribute to fair and orderly 

markets.124

The Options Linkage Plan is designed 

to ensure that the display of locked and 

crossed markets would be restricted, 

while also recognizing that locked and 

crossed markets do occur accidentally 

and cannot always be avoided. Thus, 

the Options Linkage Plan requires that 

the Participants have written rules that 

are reasonably designed to assure the 

reconciliation of any lock or cross. 

Further, the Options Linkage Plan 

expressly prohibits a pattern or practice 

of locking or crossing away markets. 

In addition, the Options Linkage Plan 

would allow exceptions to its general 

Locked and Crossed Markets provision 

as might be contained in a given 

Participant’s rules. As with all proposed 

rule changes of national securities 

exchanges, such rule changes would be 

subject to notice, comment and 

Commission review under Section 

19(b)(1) of the Act.125 The Commission 

believes that these provisions are 

designed to ensure that the display of 

Locked and Crossed Markets will be 

limited and that any such display will 

be promptly reconciled. 

For the reasons stated above, the 

Commission finds that the Options 

Linkage Plan’s provisions relating to 

Locked and Crossed Markets are in the 

public interest, appropriate for the 

protection of investors and the 

maintenance of fair and orderly 

markets,126 and believes they assure fair 

competition among exchange markets, 

consistent with Section 11A(a)(1)(C).127

C. Joining the Proposed Plan 

Any national securities exchange 

would be eligible to become a 

Participant by executing a copy of the 

Options Linkage Plan and providing 

each Participant with a copy of such 

executed Options Linkage Plan 128 if it 

is: (1) Registered with the Commission 

in accordance with Section 6(a) of the 

Act; (2) a Participant Exchange in 

OCC; 129 and (3) a party to the OPRA 

Plan.130 Further, any such national 

securities exchange wishing to become 

a Participant would be required to file 

an amendment to the Options Linkage 

Plan by executing a copy of the Options 

Linkage Plan and filing such executed 

Options Linkage Plan to the 

Commission.131 Such amendment 

would be effective when the 

amendment is approved by the 

Commission or otherwise becomes 

effective pursuant to Section 11A of the 

Act and Rule 608 thereunder.132 The 

Commission finds that this process for 

joining the Options Linkage Plan is in 

the public interest,133 and believes it is 

consistent with Section 11A(a)(1)(C) 

because it is designed to ensure that 

reasonable procedures are in place to 

permit additional exchanges to also 

participate in the Options Linkage 

Plan.134

D. Withdrawal From the Proposed Plan 

Any Participant would be able to 

withdraw from the Options Linkage 

Plan at any time by providing not less 

than 30 days’ prior written notice to 

each of the other Participants of such 

intent to withdraw.135 To withdraw, 

such Participant also would be required 

to effect an amendment to the Options 

Linkage Plan by submitting such 

amended Options Linkage Plan to the 

Commission for approval.136 In 

submitting the amended Options 

Linkage Plan to the Commission, the 

Participant proposing to withdraw from 

the Options Linkage Plan would be 

required to state how the Participant 

plans to accomplish, by alternate means, 

the goal of the Options Linkage Plan 

regarding limiting Trade-Throughs of 

prices on other exchanges trading the 

same options classes.137 Such 

withdrawal from the Options Linkage 

Plan would be effective when the 

amendment is approved by the 

Commission or otherwise becomes 

effective pursuant to Section 11A of the 

Act and Rule 608 thereunder. Upon the 

effectiveness of such withdrawal, the 

withdrawing Participant would have no 

further rights or obligations under the 

Options Linkage Plan. 

The Commission finds that these 

requirements for withdrawal from the 

Options Linkage Plan are in the public 

interest, appropriate for the protection 

of investors and the maintenance of fair 

and orderly markets,138 and believes it 

assures fair competition among 

exchange markets, consistent with 

Section 11A(a)(1)(C).139

E. Implementation 

The Proposed Plan states that the 

‘‘[Participants] shall implement [the 

plan] * * * no later than February 27, 

2009; provided that, unless the 

[Commission] otherwise authorizes, the 

[Participants] shall not implement [the 

plan] until all Eligible Exchanges either 

(1) have become parties to [the plan] 

and the [Commission] has approved all 

necessary implementing rules or (2) 

have developed the ability to accept and 

execute incoming Intermarket Sweep 

Orders.’’ 140

To provide clarity to market 

participants regarding the 

implementation date of the plan, the 

Commission, after consultation with the 

Proposing Exchanges, has modified the 

Proposed Plan to change the 

implementation date in Section 7 from 

February 27, 2009 to August 31, 2009. 

In addition, the Commission notes that 

all seven options exchanges 141 have 

joined in filing the Proposed Plan with 

the Commission, and each has 

submitted proposed rule changes 

pursuant to Section 19(b) of the Act to 

modify its rules to comply with the 

Options Linkage Plan.142 The 

Commission believes that the provision 

that would permit the plan to be 

implemented if an Eligible Exchange 

‘‘developed the ability to accept and 

execute incoming Intermarket Sweep 

Orders,’’ even if such exchange had not 

become a party to the plan is no longer 

necessary because all seven options 

exchanges have joined the Options 


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143See id. 

144 15 U.S.C. 78k–1(a)(3)(B). 

145 17 CFR 242.608. 

146The approved Plan is attached here as 

Appendix A. 

Linkage Plan and therefore will, upon 

implementation of the Options Linkage 

Plan, accept and execute ISOs. 

The Commission finds that these 

modifications to Section 7 of the 

Proposed Plan are necessary and 

appropriate and will further the 

purposes of the Act by providing clarity 

to market participants regarding the 

implementation of the plan while 

providing appropriate time to selfregulatory organizations to prepare for 

implementation. 

With these modifications, unless the 

Commission otherwise authorizes, the 

plan may only be implemented by the 

Proposing Exchanges when all 

Proposing Exchanges’ proposed rule 

changes containing the necessary 

implementing rules 143 have been 

approved by the Commission. 

IV. Conclusion 

It is hereby ordered, that pursuant to 

Section 11A(a)(3)(B) of the Act 144 and 

Rule 608 thereunder,145 that the 

Proposed Plan submitted by CBOE, ISE, 

Nasdaq, BX, Phlx, Amex, and NYSE 

Arca, as modified herein, is approved 

and declared effective,146 and that 

CBOE, ISE, Nasdaq, BX, Phlx, Amex, 

and NYSE Arca are authorized to act 

jointly to implement the Options Order 

Protection and Locked/Crossed Market 

Plan as a means of facilitating a national 

market system. 

By the Commission. 

Florence E. Harmon, 

Deputy Secretary. 

Appendix A 

Options Order Protection and Locked/ 

Crossed Market Plan 

Section 1—Preamble 

The Participants submit to the SEC this 

Plan providing a framework for order 

protection and addressing Locked and 

Crossed Markets in Eligible Options Classes. 

The purpose of the Plan is to enable the 

Participants to act jointly in establishing a 

framework for providing order protection and 

addressing Locked and Crossed Markets in 

Eligible Options Classes. In addition, the 

Plan provides for a non-exclusive method for 

achieving order protection and addressing 

Locked and Crossed Markets. The 

Participants will submit to the SEC for 

approval their respective rules that will 

implement the framework of the Plan. The 

Participants request that the SEC issue an 

order pursuant to Section 11A(a)(3)(B) of the 

Exchange Act and Rule 608 thereunder 

evidencing its approval of the Plan. 

Section 2—Definitions 

(1) ‘‘Best Bid’’ and ‘‘Best Offer’’ mean the 

highest priced Bid and the lowest priced 

Offer. 

(2) ‘‘Bid’’ or ‘‘Offer’’ means the bid price 

or the offer price communicated by a member 

of an Eligible Exchange to any Broker/Dealer, 

or to any customer, at which it is willing to 

buy or sell, as either principal or agent, but 

shall not include indications of interest. 

(3) ‘‘Broker/Dealer’’ means an individual or 

organization registered with the SEC in 

accordance with Section 15(b)(1) of the 

Exchange Act or a foreign broker or dealer 

exempt from such registration pursuant to 

Rule 15a–6 under the Exchange Act. 

(4) ‘‘Crossed Market’’ means a quoted 

market in which a Protected Bid is higher 

than a Protected Offer in a series of an 

Eligible Class. 

(5) ‘‘Customer’’ means an individual or 

organization that is not a Broker/Dealer. 

(6) ‘‘Eligible Exchange’’ means a national 

securities exchange registered with the SEC 

in accordance with Section 6(a) of the 

Exchange Act that: (a) As a Participant 

Exchange in OCC (as that term is defined in 

Section VII of the OCC by-laws); (b) is a party 

to the OPRA Plan (as that term is described 

in Section I of the OPRA Plan); and (c) if the 

national securities exchange chooses not to 

become a party to this Plan, is a participant 

in another plan approved by the Commission 

providing for comparable Trade-Through and 

Locked and Crossed Market protection. 

(7) ‘‘Eligible Options Class’’ means all 

option series overlying a security (as that 

term is defined in Section 3(a)(10) of the 

Exchange Act) or group of securities, 

including both put options and call options, 

which class is available for trading on two or 

more Eligible Exchanges. 

(8) ‘‘Exchange Act’’ means the Securities 

Exchange Act of 1934, as amended. 

(9) ‘‘Intermarket Sweep Order (ISO)’’ 

means a limit order for an options series that 

meets the following requirements: 

(a) When routed to an Eligible Exchange, 

the order is identified as an ISO; 

(b) Simultaneously with the routing of the 

order, one or more additional ISOs, as 

necessary, are routed to execute against the 

full displayed size of any Protected Bid, in 

the case of a limit order to sell, or any 

Protected Offer, in the case of a limit order 

to buy, for the options series with a price that 

is superior to the limit price of the ISO, with 

such additional orders also marked as ISOs. 

(10) ‘‘Locked Market’’ means a quoted 

market in which a Protected Bid is equal to 

a Protected Offer in a series of an Eligible 

Options Class. 

(11) ‘‘Non-Firm’’ means, with respect to 

Quotations in an Eligible Options Class, that 

members of a Participant are relieved of their 

obligations under that Participant’s firm 

quote rule in that Eligible Options Class. 

(12) ‘‘OCC’’ means The Options Clearing 

Corporation. 

(13) ‘‘OPRA’’ means the Options Price 

Reporting Authority. 

(14)’’OPRA Plan’’ means the plan filed 

with the SEC pursuant to Section 

11Aa(1)(C)(iii) of the Exchange Act, approved 

by the SEC and declared effective as of 

January 22, 1976, as from time to time 

amended. 

(15) ‘‘Participant’’ means an Eligible 

Exchange whose participation in the Plan has 

become effective pursuant to Section 3(c) of 

the Plan. 

(16) ‘‘Plan’’ means the plan amended and 

restated in this instrument as from time to 

time amended in accordance with its 

provisions. 

(17) ‘‘Protected Bid’’ or ‘‘Protected Offer’’ 

means a Bid or Offer in an options series, 

respectively, that: 

a. Is displayed by an Eligible Exchange; 

b. Is disseminated pursuant to the OPRA 

Plan; and 

c. Is the Best Bid or Best Offer, 

respectively, of an Eligible Exchange. 

(18) ‘‘Protected Quotation’’ means a 

Protected Bid or Protected Offer. 

(19) ‘‘Quotation’’ means a Bid or Offer. 

(20) ‘‘SEC’’ means the United States 

Securities and Exchange Commission. 

(21) ‘‘Trade-Through’’ means a transaction 

in an options series, either as principal or 

agent, at a price that is lower than a Protected 

Bid or higher than a Protected Offer. 

Section 3—Parties to the Plan 

(a) List of Parties 

The parties to the Plan are as follows: 

Boston Stock Exchange, Inc., registered as 

a national securities exchange under the 

Exchange Act and having its principal place 

of business at 100 Franklin Street, Boston, 

Massachusetts 02110. 

Chicago Board Options Exchange, 

Incorporated, registered as a national 

securities exchange under the Exchange Act 

and having its principal place of business at 

400 South LaSalle Street, Chicago, Illinois 

60605. 

International Securities Exchange, LLC, 

registered as a national securities exchange 

under the Exchange Act and having its 

principal place of business at 60 Broad 

Street, New York, New York 10004. 

The NASDAQ Stock Market LLC, 

registered as a national securities exchange 

under the Exchange Act and having its 

principal place of business at One Liberty 

Plaza, 50th Floor, New York, New York 

10006. 

NASDAQ OMX PHLX, Inc., registered as a 

national securities exchange under the 

Exchange Act and having its principal place 

of business at 1900 Market Street, 

Philadelphia, Pennsylvania 19103. 

NYSE Alternext US LLC, registered as a 

national securities exchange under the 

Exchange Act and having its principal place 

of business at 11 Wall Street, New York, NY 

10005. 

NYSE Arca, Inc., registered as a national 

securities exchange under the Exchange Act 

and having its principal place of business at 

100 South Wacker Drive, Suite 1800, 

Chicago, IL 60606. 

(b) Compliance Undertaking 

By subscribing to and submitting the Plan 

for filing with the SEC, each Participant 

agrees to enforce compliance by its members 

with the provisions of the Plan. 

(c) Entry of New Participants 

The Participants agree that any other 

Eligible Exchange may become a Participant 

by: (i) Executing a copy of the Plan, as then 

in effect; (ii) providing each then-current 


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Participant with a copy of such executed 

Plan; and (iii) effecting an amendment to the 

Plan as specified in Section 4(b) of the Plan. 

(d) Withdrawal from the Plan 

Any Participant may withdraw from the 

Plan at any time by: (i) Providing not less 

than 30 days’ prior written notice to each of 

the other Participants of such intent to 

withdraw; and (ii) effecting an amendment to 

the Plan as specified in Section 4(c) of the 

Plan. Upon the effectiveness of such 

withdrawal the withdrawing Participant shall 

have no further rights or obligations 

whatsoever under the Plan. 

Section 4—Amendments to the Plan 

(a) General Amendment Authority 

Except with respect to: 

(i) the addition of new Participants to the 

Plan; and 

(ii) the withdrawal of a Plan Participant, 

any proposed change in, addition to, or 

deletion from the Plan may be effected only 

by means of a written amendment to the Plan 

that is unanimously approved by the 

Participants and that: (A) sets forth the 

change, addition or deletion; (B) is executed 

on behalf of each Participant; and (C) is 

approved by the SEC or otherwise becomes 

effective pursuant to Section 11A of the 

Exchange Act and Rule 608 thereunder. 

(b) New Participants 

With respect to new Participants, an 

amendment to the Plan may be effected by 

a new Eligible Exchange executing a copy of 

the Plan, as then in effect (with the only 

change being the addition of the new 

Participant’s name in Section 3(a) of the 

Plan), and submitting such executed Plan to 

the SEC. Such amendment will be effective 

when the amendment is approved by the SEC 

or otherwise becomes effective pursuant to 

Section 11A of the Exchange Act and Rule 

608 thereunder. 

(c) Withdrawal from the Plan 

A Participant seeking to withdraw from the 

Plan shall effect an amendment to the Plan 

as then in effect (with the only change being 

the deletion of the Participant’s name in 

Section 3(a) of the Plan) by submitting such 

amended Plan to the SEC for approval. In 

submitting the amended Plan to the SEC, the 

Participant proposing to withdraw from the 

Plan shall state how the Participant plans to 

accomplish, by alternate means, the goal of 

the Plan regarding limiting Trade-Throughs 

of prices on other exchanges trading the same 

options classes. Such withdrawal from the 

Plan shall be effective when the amendment 

is approved by the SEC or otherwise becomes 

effective pursuant to Section 11A of the 

Exchange Act and Rule 608 thereunder. 

Section 5—Order Protection 

(a) Order Protection 

(i) Prevention of Trade-Throughs. Each 

Participant agrees that it shall establish, 

maintain and enforce written policies and 

procedures as approved by the SEC that are 

reasonably designed to prevent TradeThroughs in that Participant’s market in 

Eligible Options Classes that do not fall 

within an exception set forth in paragraph (b) 

below, and, if relying on such exception, that 

are reasonably designed to assure compliance 

with the terms of the exception. 

(ii) Surveillance. Each Participant agrees to 

conduct surveillance of its market on a 

regular basis to ascertain the effectiveness of 

the policies and procedures required by 

paragraph (a)(1) of this section, and to take 

prompt action to remedy deficiencies in such 

policies and procedures. 

(b) Exceptions. 

(i) The transaction that constituted the 

Trade-Through was effected when the 

Eligible Exchange displaying the Protected 

Quotation that was traded through was 

experiencing a failure, material delay, or 

malfunction it its systems or equipment; 

(ii) The transaction traded through a 

Protected Quotation being disseminated by 

an Eligible Exchange during a trading 

rotation; 

(iii) The transaction that constituted the 

Trade-Through occurred when there was a 

Crossed Market; 

(iv) The transaction that constituted the 

Trade-Through was the execution of an order 

identified as an Intermarket Sweep Order; 

(v) The transaction that constituted the 

Trade-Through was effected by a Participant 

that simultaneously routed an Intermarket 

Sweep Order to execute against the full 

displayed size of any Protected Quotation 

that was traded through; 

(vi) The Eligible Exchange displaying the 

Protected Quotation that was traded through 

had displayed, within one second prior to 

execution of the Trade-Through, a Best bid or 

Best offer, as applicable, for the options 

series with a price that was equal or inferior 

to the price of the Trade-Through transaction; 

(vii) The Protected Quotation traded 

through was being disseminated from an 

Eligible Exchange whose Quotations were 

Non-Firm with respect to such options series; 

(viii) The transaction that constituted the 

Trade-Through was effected as a portion of 

a ‘‘complex trade,’’ as defined in the rules of 

a Participant; 

(ix) The transaction that constituted the 

Trade-Through was the execution by a 

Participant of an order for which, at the time 

of receipt of the order, a member of the 

Participant had guaranteed an execution at 

no worse than a specified price (a ‘‘stopped 

order’’), where: 

(A) The stopped order was for the account 

of a Customer; 

(B) the Customer agreed to the specified 

price on an order-by-order basis; and 

(C) the price of the Trade-Through was, for 

a stopped buy order, lower than the national 

Best Bid in the options series at the time of 

execution, or, for a stopped sell order, higher 

than the national Best Offer in the options 

series at the time of execution; 

(x) The transaction that constituted the 

Trade-Through was the execution by a 

Participant of an order which was stopped at 

a price that did not Trade-Through another 

Eligible Exchange at the time of the stop; or 

(xi) The transaction that constituted the 

Trade-Through was the execution of an order 

at a price that was not based, directly or 

indirectly, on the quoted price of the options 

series at the time of execution and for which 

the material terms were not reasonably 

determinable at the time the commitment to 

execute the order was made. 

(c) Intermarket Sweep Orders. Participants 

shall take reasonable steps to establish that 

Intermarket Sweep Orders meet the 

requirements of Section 2(9) of the Plan. 

Section 6—Locked and Crossed Markets 

The Participants agree that they shall 

establish, maintain and enforce written rules 

that: 

(a) Require their members reasonably to 

avoid displaying Locked and Crossed 

Markets; 

(b) Are reasonably designed to assure the 

reconciliation of Locked and Crossed 

Markets; and 

(c) Prohibit its members from engaging in 

a pattern or practice of displaying Locked 

and Crossed Markets; 

in all cases subject to such exceptions as may 

be contained in the rules of a Participant 

approved by the Commission. 

Section 7—Implementation 

The Parties shall implement this Plan on 

a date upon which all Parties agree, but no 

later than August 31, 2009; provided that, 

unless the SEC otherwise authorizes, the 

Parties shall not implement this Plan unless 

all Eligible Exchanges have become parties to 

this Plan and the SEC has approved all 

necessary implementing rules. 

Section 8—Counterparts and Signatures 

The Plan may be executed in any number 

of counterparts, no one of which need 

contain all signatures of all Participants, and 

as many of such counterparts as shall 

together contain all such signatures shall 

constitute one and the same instrument. 

In Witness Whereof, this Plan has been 

executed as of the lll 2009 by each of the 

parties hereto. 

CHICAGO BOARD OPTIONS EXCHANGE, 

INCORPORATED 

By: lllllllllllllllllll

Date: llllllllllllllllll

INTERNATIONAL SECURITIES EXCHANGE, 

LLC 

By: lllllllllllllllllll

Date: llllllllllllllllll

The NASDAQ STOCK MARKET LLC 

By: lllllllllllllllllll

Date: llllllllllllllllll

NASDAQ OMX BX, INC. 

By: lllllllllllllllllll

Date: llllllllllllllllll

NASDAQ OMX PHLX, Inc. 

By: lllllllllllllllllll

Date: llllllllllllllllll

NYSE AMEX LLC 

By: lllllllllllllllllll

Date: llllllllllllllllll

NYSE ARCA, INC. 

By: lllllllllllllllllll

Date: llllllllllllllllll

[FR Doc. E9–18763 Filed 8–5–09; 8:45 am] 

BILLING CODE 8010–01–P 


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