Federal Register / Vol. 70, No. 181 / Tuesday, September 20, 2005 / Notices 55201 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 34–

52401 (September 9, 2005) (File No. 4–429) 

(‘‘Amendment No. 16’’). 

4On July 28, 2000, the Commission approved a 

national market system plan for the purpose of 

creating and operating an intermarket option market 

linkage proposed by the American Stock Exchange, 

LLC, Chicago Board Options Exchange, 

Incorporated, and International Securities 

Exchange, Inc. 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., PCX 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). 

5See Exchange Rule 6.92(a)(10). 

6See Section 2(16)(a) of the Linkage Plan and 

Exchange Rule 6.92(a)(12)(i). 

7The Commission added to this sentence 

pursuant to a telephone conversation with PCX, as 

noted herein. Telephone call between Steven 

Matlin, Senior Counsel, PCX, and Tim Fox, Special 

Counsel, Commission on September 12, 2005. 

8 15 U.S.C. 78f(b). 

9 15 U.S.C. 78f(b)(5). 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–52427; File No. SR–PCX–

2005–104] 

Self-Regulatory Organizations; Pacific 

Exchange, Inc.; Notice of Filing of 

Proposed Rule Change Relating to the 

Definition of Firm Customer Quote Size 

and the Removal of Certain 

Restrictions on Sending Secondary 

Principal Acting as Agent Orders 

Pursuant to 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 

September 7, 2005, the Pacific 

Exchange, Inc. (‘‘PCX’’ 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 PCX. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change 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 3 to the Plan for the Purpose 

of Creating and Operating an 

Intermarket Option Linkage (‘‘Linkage 

Plan’’).4 The Exchange is proposing to 

modify the definition of ‘‘Firm 

Customer Quote Size’’ (‘‘FCQS’’) 5 to 

provide automatic executions for 

Linkage Principal Acting as Agent 

Orders (‘‘P/A Orders’’) 6 up to the full 

size of the 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 PCX’s Web site at http:// 

www.pacificex.com, at the PCX’s Office 

of the Secretary, and at the 

Commission’s public reference room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

PCX included statements concerning the 

purpose of, and basis for, the proposed 

rule change 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 purpose of the proposed rule 

change is to modernize the definition of 

FCQS. At the time the Linkage 

commenced, options quote sizes were 

not disseminated through the Options 

Price Reporting Authority and most 

Linkage Plan participants 

(‘‘Participants’’) employed automatic 

execution systems that guaranteed 

automatic fills on orders 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 

Participants guaranteed they would 

automatically execute. Now that all 

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 

Participant receiving the P/A Order. 

Accordingly, the Participants submitted 

Amendment No. 16, and the Exchange 

is submitting herein a proposed rule 

change to amend the definition of 

FCQS, provided in PCX Rule 6.92(a)(9).7

The other purpose of the proposed 

rule change is to eliminate a 15-second 

wait period for sending a secondary 

P/A Order pursuant to Exchange Rule 

6.93. That Exchange Rule governs the 

manner in which a P/A Order larger 

than the FCQS can be broken into 

smaller P/A Orders. It provides that an 

initial P/A Order can be sent to the 

National Best Bid or Offer (‘‘NBBO’’) 

market for the FCQS, and that if the 

NBBO market continues to disseminate 

the same price after 15 seconds from the 

execution of the initial P/A Order, a 

secondary P/A Order can be sent (for at 

least the lesser of (i) the size of the 

disseminated quote; (ii) 100 contracts; 

or (iii) the remainder of the customer 

order underlying the P/A Orders). The 

15-second wait period is being 

eliminated because the dynamic quotes 

with size now employed by the 

Participants obviate the need for a 

manual quote refresh period for P/A 

Orders. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change 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 

facilitating transactions in securities, 

and to remove impediments to, and 

perfect the mechanism of a free and 

open market and a national market 

system. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The PCX does not believe that the 

proposed rule change would impose any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 35 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding, or 

(ii) as to which the PCX consents, the 

Commission will: 

A. By order approve such proposed 

rule change; or 

55202 Federal Register / Vol. 70, No. 181 / Tuesday, September 20, 2005 / Notices 

10 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3On 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 International Securities 

Exchange, Inc. See Securities Exchange Act Release 

No. 43086 (July 28, 2000), 65 FR 48023 (August 4, 

2000) (‘‘Linkage Plan’’). Subsequently, upon 

separate requests by the Phlx, 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 In Amendment No. 1, the Phlx revised the rule 

text to use terms consistent with Phlx’s current 

rules and the Linkage Plan, and made clarifying 

changes in the description of the substance of the 

proposed rule change and the purpose and statutory 

basis sections. 

5See Securities Exchange Act Release No. 52175 

(July 29, 2005), 70 FR 45480. 

6See Phlx Rule 1083(o). 

7See Phlx Rule 1083(k). 

8 15 U.S.C. 78f. 

9 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). 

10 15 U.S.C. 78f(b)(5). 

11 15 U.S.C. 78s(b)(2). 

B. Institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed 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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–PCX–2005–104 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Jonathan G. Katz, Secretary, 

Securities and Exchange Commission, 

Station Place, 100 F Street, NE., 

Washington, DC 20549–9303. 

All submissions should refer to File 

Number SR–PCX–2005–104. 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 (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed 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 U.S.C. 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Room. Copies of such filing also will be 

available for inspection and copying at 

the principal office of the Exchange. 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 publicly available. All 

submissions should refer to File 

Number SR–PCX–2005–104 and should 

be submitted on or before October 11, 

2005. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.10

Jonathan G. Katz, 

Secretary. 

[FR Doc. 05–18673 Filed 9–19–05; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–52416; File No. SR–Phlx–

2005–26] 

Self-Regulatory Organizations; 

Philadelphia Stock Exchange, Inc.; 

Order Approving a Proposed Rule 

Change and Amendment No. 1 Thereto 

To Amend the Exchange’s TradeThrough and Locked Markets Rules 

September 13, 2005. 

On April 26, 2005, the Philadelphia 

Stock Exchange, Inc. (‘‘Phlx’’), 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 Phlx Rules 1083 and 1086 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. On July 21, 2005, the Phlx 

filed Amendment No. 1 to the proposed 

rule change.4 The proposed rule change, 

as amended, was published for 

comment in the Federal Register on 

August 5, 2005.5 The Commission 

received no comments on the proposal. 

This order approves the proposed rule 

change, as amended. 

Under the proposed rule change, a 

Participant Exchange 6 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 7 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 Eligible Market Maker or 

other member may book an order 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 Phlx 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 8

and the rules and regulations 

thereunder applicable to a national 

securities exchange.9 In particular, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,10 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 Phlx’s 

members to execute their customer 

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,11 that the 

proposed rule change (SR–Phlx–2005–

26) as amended, is approved.