[Federal Register Volume 65, Number 220 (Tuesday, November 14, 2000)]
[Notices]
[Pages 68165-68166]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-29021]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43520; File No. 4-208]


Intermarket Trading System; Order Approving Fifteenth Amendment 
to the ITS Plan Relating to Remote Specialists, the National Market 
System Test System, Trade Adjustment Procedures, and Technical 
Revisions

November 3, 2000.
    On June 6, 2000, the Intermarket Trading System (``ITS'') submitted 
to the Securities and Exchange Commission (``Commission'') an amendment 
to the restated ITS Plan pursuant to Section 11A of theSecurities 
Exchange Act of 1934 (``Act''),\1\ and Rule 11A3a3-2 thereunder.\2\ The 
Participants filed the proposal to recognize the implementation of 
remote specialists and the National Market Test System. In addition, 
the Participants proposed to codify procedures for trade adjustment and 
to make technical revisions. Notice of the proposal appeared in the 
Federal Register on September 8, 2000.\3\ The Commission received no 
comments on the proposal. For the reasons discussed below, the 
Commission is approving the proposal.
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    \1\ 15 U.S.C. 78k-1.
    \2\ 17 CFR 240.11Aa3-2. The ITS is a National Market System 
(``NMS'') plan, which was designed to facilitate intermarket trading 
in exchange-listed equity securities based on current quotation 
information emanating from the linked markets. See Securities 
Exchange Act Release No. 19456 (January 27, 1983), 48 FR 4938 
(February 3, 1983).
    The ITS participants include the American Stock Exchange LLC 
(``Amex''), the Boston Stock Exchange, Inc. (``BSE''), the Chicago 
Board Options Exchange, Inc. (``CBOE''), the Chicago Stock Exchange, 
Inc. (``CHX''), the Cincinnati Stock Exchange, Inc. (``CSE''), the 
National Association of Securities Dealers, Inc. (``NASD''), the New 
York Stock Exchange, Inc. (``NYSE''), the Pacific Exchange, Inc. 
(``PCX''), and the Philadelphia Stock Exchange, Inc. (``PHLX'') 
(``Participants'').
    \3\ Securities Exchange Act Release No. 43240 (September 1, 
2000), 65 FR 54571 (September 8, 2000).
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    The proposal amends Sections 6(a)(ii)(B) and (E), 7(c) and 8(a) of 
the ITS Plan to reflect the changed manner in which the BSE and the PCX 
will interact with ITS, in particular that BSE and PCX specialists 
carry out their specialist operations off the floors of the BSE and the 
PCX.\4\
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    \4\ The BSE and PCX filed proposed rule changes with the 
Commission to implement these changes. The Commission approved the 
BSE's proposal on August 8, 2000. See Securities Exchange Act 
Release No. 43127 (August 8, 2000), 65 FR 49617 (August 14, 2000), 
(SR-BSE-99-01). The Commission approved the PCX's proposal on May 5, 
2000. See Securities Exchange Act Release No. 42759 (May 5, 2000), 
65 FR 30654 (May 12, 2000), (SR-PCX-99-39).
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    The proposal recognizes the National Market Test System (``NMTS'') 
as a stand-alone system that supports testing of the Consolidated Tape 
System, Consolidated Quotation System, ITS, and the Participants 
interfaced with these systems. The NMTS can be used during normal 
business hours and ITS will be responsible for one-third of the costs 
of the NMTS. The ITS Plan provisions for the NMTS equally divide the 
ITS costs among all Participants.
    The proposal adds Section 6(b)(iv) to the ITS Plan, which codifies 
the trade adjustment process whereby, and circumstances under which, 
supervisors monitoring Participants' markets may request the ITS 
Control Center to enter agreed-upon adjustments to system trades 
(price, size, buy or sell side, cancel or insert trade ``as of'' a 
prior day).
    The proposal makes several technical amendments dealing with the 
ITS/CAES Linkage as adopted by the Commission, eliminating the 
definition of the term ``ITS/CAES security (stock)'' and making other 
conforming changes. In addition, the revision reinserts text in the ITS 
Plan under Section 5(b)(ii) that the Commission inadvertently 
omitted.\5\ According to the Participants, the revisions are otherwise 
neutral as to their effect on the Commission's adopted amendment. 
Lastly, the revisions redesignate current Sections 12, 13, and 14 as 
Sections 13, 14, and 15 respectively, and current Section 15 as Section 
12 (with other conforming changes), and amending Section 3(a) to 
reflect the change in the Amex's corporate name from ``American Stock 
Exchange, Inc.'' to ``American Stock Exchange LLC.''
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    \5\ See Securities Exchange Act Release No. 42212 (December 9, 
1999), 64 FR 70297 (December 16, 1999) (adopting amendments to 
expand the ITS/CAES linkage to all listed securities).
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    The Commission finds that the proposed amendment is consistent with 
the Act in general, and in particular, with Sections 11A(a)(1)(C)(ii) 
and (D),\6\ which provide for fair competition among the Participants 
and their members, and the linking of markets for qualified securities 
through communications and data processing facilities that foster 
efficiency, enhance competition, increase the information available to 
brokers, dealers, and investors, facilitate the offsetting of 
investors' orders, and contribute to the best execution of such orders. 
The Commission also finds that the amendment is consistent with Rule 
11Aa3-2(c)(2),\7\ which requires the Commission to determine that the 
amendment is necessary and appropriate in the public interest, for

[[Page 68166]]

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.
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    \6\ 15 U.S.C. 78k-1(a)(1)(C)(ii) and (D).
    \7\ 17 CFR 240.11Aa3-2(c)(2).
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    The proposal provides for the recognition of the BSE's and the 
PCX's use of remote specialists to carry out their specialist 
operations off the floors of the BSE and the PCX. The proposal also 
provides for the implementation of the National Market Test System, 
which supports testing of the Consolidated Tape System, Consolidated 
Quotation System, and ITS. In addition, the proposal provides for the 
codification of procedures for trade adjustment. The Commission 
believes that the foregoing measures should improve the efficiency and 
reliability of ITS. Lastly, the proposal provides additional technical 
amendments to the ITS Plan consistent with ITS's purpose: to facilitate 
intermarket trading in exchange-listed equity securities.
    For the foregoing reasons, the Commission finds that the proposed 
amendment is consistent with Act and the rules and regulations 
thereunder applicable to the ITS and, in particular, Sections 
11A(a)(1)(C)(ii) and (D) of the Act \8\ and Rule 11Aa3-2(c)(2).\9\
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    \8\ 15 U.S.C. 78k-1(a)(1)(C)(ii) and (D).
    \9\ 17 CFR 240.11Aa3-2(c)(2).
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    It is therefore ordered, pursuant to Section 11A(a)(3)(B) of the 
Act,\10\ that the proposed amendment be, and hereby is, approved.
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    \10\ 15 U.S.C. 78k-1(a)(3)(B).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(29).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-29021 Filed 11-13-00; 8:45 am]
BILLING CODE 8010-01-M