Document ID: SEC-2006-1301-0001
Agency: sec
Document Type: Notice
Title: Joint industry plan: American Stock Exchange LLC et al.
Posted Date: 2006-10-06T04:00Z

[Federal Register: October 6, 2006 (Volume 71, Number 194)]
[Notices]               
[Page 59148-59157]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06oc06-99]                         

[[Page 59148]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54551; File No. 4-524]

 
Joint Industry Plan; Order Approving NMS Linkage Plan Filed by 
the American Stock Exchange LLC, Boston Stock Exchange, Inc., Chicago 
Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., The 
NASDAQ Stock Market LLC, National Stock Exchange, New York Stock 
Exchange LLC, NYSE Arca, Inc., and Philadelphia Stock Exchange, Inc.

September 29, 2006.

I. Introduction

    On July 17, 2006, pursuant to Rule 608 of the Securities Exchange 
Act of 1934 (``Act''),\1\ the American Stock Exchange LLC (``Amex''), 
the Boston Stock Exchange, Inc. (``BSE''), the Chicago Board Options 
Exchange, Incorporated (``CBOE''), the Chicago Stock Exchange, Inc. 
(``CHX''), The NASDAQ Stock Market LLC (``Nasdaq''), the National Stock 
Exchange (``NSX''), the New York Stock Exchange LLC (``NYSE''), and 
NYSE Arca, Inc. (``NYSE Arca'') (``Linkage Participants'') filed with 
the Securities and Exchange Commission (``Commission'') an executed 
copy of the ``Plan for the Purpose of Creating and Operating an 
Intermarket Communications Linkage Pursuant to Section 11A(a)(3)(B) of 
the Securities Exchange Act of 1934'' (``Linkage Plan'' or ``Plan''), a 
national market system plan to create and operate an intermarket 
communications linkage pursuant to Section 11A(a)(3)(B) of the Act.\2\ 
The Linkage Plan was initially executed by the eight self-regulatory 
organizations (``SROs'') listed above. The Philadelphia Stock Exchange, 
Inc. (``Phlx'') subsequently executed the Linkage Plan on August 1, 
2006.\3\ The Commission published the Linkage Plan for comment in the 
Federal Register on August 4, 2006.\4\ No comments were received on the 
Plan. This Order approves the Linkage Plan, thus authorizing the Plan 
Participants to act jointly in planning, developing, operating and 
regulating the NMS Linkage System (``Linkage'' or ``System'') that will 
electronically link the Participant Markets to one another, as 
described in the Linkage Plan, so as to further the objectives of 
Congress as set forth in Section 11A of the Act.\5\ A copy of the Plan, 
as approved, is attached as Exhibit A.
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    \1\ 17 CFR 242.608.
    \2\ 15 U.S.C. 78k-1(a)(3)(B).
    \3\ A Linkage Plan, dated August 1, 2006, reflecting Phlx's 
inclusion as a Linkage Participant, was received by the Commission 
on August 9, 2006.
    \4\ See Securities Exchange Act Release No. 54239 (July 28, 
2006), 71 FR 44328.
    \5\ 15 U.S.C. 78k-1.
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II. Background

    Currently, the connectivity between markets is provided pursuant to 
the Intermarket Trading System (``ITS'') Plan, a National Market System 
plan, which was designed to facilitate intermarket trading in exchange-
listed equity securities based on current quotation information 
emanating from the linked markets.\6\ Physical access is provided by 
ITS connectivity, and the terms of access are governed by the ITS Plan. 
Participants in the ITS Plan have agreed not to charge for access to 
their markets through the ITS. The ITS Plan provides grievance 
procedures for instances when a market's quote is traded through and 
sets forth procedures to follow in the event of a locked or crossed 
market.
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    \6\ See Securities Exchange Act Release No. 14661 (Apr. 14, 
1978), 43 FR 17419 (Apr. 24, 1978) (temporarily approving the ITS 
Plan). See also Securities Exchange Act Release No. 19456 (Jan. 27, 
1983), 48 FR 4938 (Feb. 3, 1983) (permanently approving the ITS 
Plan).
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    When the Commission adopted Regulation NMS over a year ago,\7\ it 
stated its belief that fair and efficient access to markets can be 
achieved without a collective intermarket linkage facility such as ITS, 
if baseline intermarket access rules are established. The Commission 
adopted Rule 610 (Access Rule) that requires non-discriminatory direct 
or indirect access and enables the use of private linkages offered by a 
variety of connectivity providers. The Commission also adopted Rule 611 
(The Order Protection Rule) that establishes intermarket protection 
against trade-throughs for all NMS stocks. The required date for full 
operation of Regulation NMS-compliant trading systems of all automated 
trading centers that intend to qualify their quotations for trade-
through protection under Rule 611 is February 5, 2007 (``Trading Phase 
Date'').\8\
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    \7\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
    \8\ See Securities Exchange Act Release No. 53829 (May 18, 
2006), 71 FR 30038 (May 24, 2006) (extending Rule 610 and Rule 611 
compliance dates).
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    Following the adoption of Regulation NMS and considering the 
limitations of the ITS Plan, and anticipating its termination, the ITS 
Participants (other than the NASD) agreed to the Linkage Plan, which, 
together with the ITS Plan, would govern the operation of the System 
until the termination of the ITS Plan, which is expected to take place 
on the Trading Phase Date.\9\ After the Trading Phase Date and until 
the SROs otherwise arrange to meet their access responsibilities, the 
operation of the System would be governed by the Linkage Plan.\10\ The 
Linkage Plan is intended to serve as an interim solution until all 
Participants are able to make other arrangements to meet their access 
responsibilities.\11\
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    \9\ Because the Linkage Plan does not contain trade-through and 
locked/crossed market prohibitions, it is necessary to preserve the 
operation of the ITS Plan for the period before the Trading Phase 
Date. It is the Commission's understanding that the ITS Plan 
Participants intend to file with the Commission a request for the 
termination of the ITS Plan. See letter from ITS Plan Participants 
to Nancy Morris, Secretary, Commission, dated September 18, 2006 
(the ``Letter'').
    \10\ As provided in Sections 11 and 13 of the Linkage Plan, the 
Linkage Plan is to become operative on October 1, 2006 and will 
terminate on June 30, 2007. Linkage Plan Participants that wish to 
extend the term could agree to do so, subject to Commission 
approval.
    \11\ The National Association of Securities Dealers, Inc. 
(``NASD'') is not planning to join the Linkage Plan and until the 
Trading Phase Date will continue to maintain its connectivity under 
the ITS Plan.
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    Until the Trading Phase Date, the Linkage Plan would run 
concurrently with the ITS Plan. Therefore, until the Trading Phase 
Date, when the ITS Plan is expected to terminate, all Linkage Plan 
Participants remain subject to the ITS Plan. To permit the Linkage Plan 
Participants to commence trading pursuant to the Linkage Plan, the ITS 
Plan Participants have requested that the Commission issue an exemption 
from certain provisions of the ITS Plan that would interfere with the 
operation of the Linkage Plan.\12\
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    \12\ With the exception of SRO rules pertaining to locked and 
crossed markets, the ITS Plan Participants have requested relief 
from the requirement to enforce compliance with those SRO rules, 
which correspond to the requested ITS Plan exemptions. See the 
Letter. The Linkage Plan Participants will continue to be subject to 
Section 8(d)(i) of the ITS Plan (Trade-Throughs; Locked Markets) and 
corresponding SRO rules.
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III. Description of the Linkage Plan

A. Operation of the Linkage Plan

    The System includes the data processing hardware, software and 
communications network that electronically link the Participant Markets 
to one another. The System accommodates only regular-way trading. All 
System trades must be compared, cleared and settled through Commission-
registered clearing corporations. The System is designed to accommodate 
trading in any Eligible Security, as defined in Section VII of the 
Consolidated Tape Association (``CTA'') Plan. Section VII of the CTA 
Plan provides generally that Eligible Securities include equity 
securities

[[Page 59149]]

registered on the NYSE, the Amex or another national securities 
exchange whose original listing requirements substantially meet those 
of NYSE or Amex except for securities that are listed on the Nasdaq 
Stock Market. The particular securities that may be traded through the 
System at any time are selected by the Supervisory Committee. The 
Supervisory Committee may add or delete System securities as it deems 
appropriate and may delay the commencement of trading in any Eligible 
Security if capacity or other operational considerations require a 
delay.
    The Securities Industry Automation Corporation (``SIAC'') serves as 
the System's facilities manager and has responsibility for the 
operation and maintenance of the System. SIAC performs its function as 
facilities manager in accordance with Plan provisions and subject to 
the administrative oversight of the Supervisory Committee.\13\
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    \13\ Section 5(d) of the Linkage Plan.
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    The System accepts only immediate-or-cancel limit orders. Orders 
must be sent to a Participant Market through the auspices of a member 
of that Participant, known as a Sponsoring Member.\14\ The minimum 
information that must be specified in an order includes the Sponsoring 
Member; the ``give-up'' in the originating Participant Market; the 
security; the side (buy or sell); the amount to be bought or sold 
(which must be for one unit of trading (i.e., 100 shares) or any 
multiple thereof); and the price.\15\ The price must be equal to the 
bid or offer then being furnished by the destination Participant 
Market. An order must specify a ``time in force'' of 5, 15 or 120 
seconds, after which the order will expire if unexecuted.
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    \14\ In the event that the Participants are unable to implement 
Sponsoring Member billing on October 1, 2006, the Participants have 
agreed to accept direct exchange-to-exchange billing and have filed 
proposed rule changes to this effect. See, e.g., Securities Exchange 
Act Release No. 54480 (Sept. 21, 2006), 71 FR 57596 (Sept. 29, 
2006).
    \15\ Section 6(a)(ii) of the Linkage Plan.
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    After Trading Phase Date, all routed limit orders will be presumed 
by the executing market to be intermarket sweep orders sent in 
accordance with Rule 611(b) of Regulation NMS.\16\ The trading rules 
applicable in destination Participant Markets will apply to orders 
received in the market and the execution of those orders in the 
market.\17\
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    \16\ Section 6(a)(v) of the Linkage Plan.
    \17\ Section 6(b) of the Linkage Plan.
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B. Terms and Conditions of Access

    Section 3(c) of the Plan provides that any national securities 
exchange or national securities association may become a Plan 
Participant by agreeing, in an amendment to the Plan adopted in 
accordance with its provisions, to comply, and to enforce compliance, 
with the Plan as provided in Section 3(b) of the Plan. An applicant for 
Plan participation is required to pay SIAC an amount estimated by SIAC 
to cover development costs to be incurred to accommodate the new 
Participant. In addition, before the applicant becomes a Plan 
Participant, the applicant must pay SIAC actual development costs in 
excess of estimated development costs, or SIAC will reimburse the 
applicant estimated development costs that were paid and are in excess 
of actual development costs. A new Participant shares in development 
costs incurred after it becomes a Participant in accordance with 
Section 10(a)(iii)(A).\18\
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    \18\ Section 10(a)(iii)(C) of the Linkage Plan.
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C. Fees and Charges

    The Linkage Plan imposes no fees or charges in connection with 
orders executed through the Linkage. A Sponsoring Member is subject to 
applicable transaction charges imposed by the executing market.\19\ 
Each Participant is free to determine whether or not to impose, and the 
amount of, a fee or charge on its members in connection with use of its 
facilities to access the System. Any such fee or charge must not be of 
such size, or so structured, as to discourage use of the System.\20\
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    \19\ The Sponsoring Member is responsible for paying applicable 
transaction fees of the destination market.
    \20\ Section 10(b) of the Linkage Plan. Any fees charged by 
Participants must be filed with the Commission pursuant to Section 
19(b) of the Act.
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D. Dispute Resolution

    The Linkage Plan does not include specific provisions regarding 
resolution of disputes between or among Participants. Section 4(d) of 
the Plan provides that no action or inaction by the Supervisory 
Committee shall prejudice any Participant's right to present its views 
to the Commission or any other person with respect to any matter 
relating to the System or to seek to enforce its views in any other 
forum it deems appropriate. In addition, Section 6(b) provides that the 
trading rules of the destination market apply to orders received in 
that market, as well as to executions of orders in that market. Each 
Participant determines the extent to which its trading rules apply to 
members in its market with respect to the members' issuance of orders 
from the market and executions that occur in the market.

IV. Discussion

    In Section 11A of the Act,\21\ Congress directed the Commission 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 \22\ authorizes the Commission ``by rule or order, to authorize or 
require SROs 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 under the Act establishes the procedures 
for filing, amending, and approving national market system plans.\23\ 
Pursuant to paragraph (b)(2) of Rule 608, 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 mechanisms of, a 
national market system, or otherwise in furtherance of the purposes of 
the Act''.\24\
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    \21\ 15 U.S.C. 78k-1.
    \22\ 15 U.S.C. 78k-1(a)(3)(B).
    \23\ 17 CFR 242.608.
    \24\ 17 CFR 242.608(b)(2).
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    After carefully considering the proposed Linkage Plan, the 
Commission has determined to approve, pursuant to Section 11A(a)(3)(B) 
of the Act,\25\ and Rule 608 thereunder,\26\ the Linkage Plan, thus 
authorizing the Plan Participants to act jointly to implement the 
Plan's intermarket linkage.\27\
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    \25\ 15 U.S.C. 78k-1(a)(3)(B).
    \26\ 17 CFR 242.608.
    \27\ Although Phlx initially did not sign the Plan, it 
subsequently executed the Linkage Plan on August 1, 2006. A Linkage 
Plan, dated August 1, 2006, reflecting Phlx's inclusion as a Linkage 
Participant, was received by the Commission on August 9, 2006.
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    In 1975, Congress determined that the ``linking of all markets'' 
for NMS stocks through communications and data processing facilities 
would ``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 investors' orders''.\28\ All SROs that trade exchange-
listed stocks currently are linked through ITS, an intermarket linkage 
facility. ITS provides a means of access to exchanges and Nasdaq by 
permitting each market to send a

[[Page 59150]]

``commitment to trade'' through the system, with receiving markets 
generally having up to 30 seconds to respond. ITS also provides access 
to quotations of participants without fees and establishes uniform 
rules to govern quoting practices. Although ITS promotes access among 
participants that is uniform and free, it also is often slow and 
limited. Moreover, it is governed by a unanimous vote requirement that 
has at times impeded innovation in the system or its set of rules. In 
contrast, there is no collective intermarket linkage system for Nasdaq 
stocks. Instead, access is achieved primarily through private linkages 
among individual trading centers. This approach has demonstrated its 
benefits among electronic markets; it is flexible and can readily 
incorporate technological advances as they occur.
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    \28\ Section 11A(a)(1)(D) of the Act.
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    Rule 610 adopted by the Commission in Regulation NMS \29\ reflects 
the Commission's determination that fair and efficient access to 
markets can be achieved without an intermarket linkage facility such as 
ITS, if baseline intermarket access rules are established.
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    \29\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
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    The proposed Linkage Plan would govern the operation of the System 
together with the ITS Plan until the termination of the ITS Plan 
expected to take place on the Trading Phase Date.\30\ After the Trading 
Phase Date and until the SROs otherwise arrange to meet their access 
responsibilities, the operation of the System would be governed by the 
Linkage Plan.\31\ The Linkage Plan is intended to serve as an interim 
solution until all Participants otherwise arrange to meet their access 
responsibilities.\32\
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    \30\ The Linkage Plan does not contain trade-through and locked/
crossed market prohibitions, therefore it is necessary to preserve 
the operation of the ITS Plan for the period before the Trading 
Phase Date. It is the Commission's understanding that the ITS Plan 
Participants intend to file with the Commission a request for the 
termination of the ITS Plan. See the Letter.
    \31\ As provided in Sections 11 and 13 of the Linkage Plan, the 
Linkage Plan is to become operative on October 1, 2006 and will 
terminate on June 30, 2007. Linkage Plan Participants that wished to 
extend the term could agree to do so, subject to Commission 
approval.
    \32\ NASD is not planning to join the Linkage Plan and until the 
Trading Phase Date will maintain its connectivity under the ITS 
Plan.
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    To permit the Linkage Plan Participants to commence trading 
pursuant to the Linkage Plan, the ITS Plan Participants have requested 
that the Commission issue an exemption from certain provisions of the 
ITS Plan that would interfere with the operation of the Linkage 
Plan.\33\ In a separate action, the Commission today has granted an 
exemption from certain provisions of the ITS Plan that could interfere 
with the operation of the Linkage Plan, but until the Trading Phase 
Date, the Linkage Plan Participants will continue to be subject to 
certain provisions of the ITS Plan and corresponding SRO rules 
governing Trade-Throughs and Locked Markets, as well as to some other 
provisions of the ITS Plan.\34\
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    \33\ With the exception of SRO rules pertaining to locked and 
crossed markets, the ITS Plan Participants have requested relief 
from the requirement to enforce compliance with those SRO rules, 
which correspond to the requested ITS Plan exemptions. See the 
Letter.
    \34\ See letter from Erik R. Sirri, Director, Division of Market 
Regulation, Commission, dated September 29, to Robert Hill, 
Chairman, ITS Operating Committee.
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    In approving the Linkage Plan, the Commission finds that the 
Linkage Plan is consistent with the Act in that it enhances intermarket 
competition by providing a means of intermarket access for Eligible 
securities, pending the full implementation of Regulation NMS and, 
therefore, would promote investor protection and the maintenance of 
fair and orderly markets.

V. Conclusion

    It is hereby ordered, pursuant to Section 11A(a)(3)(B) of the 
Act,\35\ and Rule 608 thereunder,\36\ that the Linkage Plan submitted 
by the Linkage Plan Participants is approved and the Linkage Plan 
Participants (and any other self-regulatory organization which agrees 
to be a Plan Participant) are authorized to act jointly in planning, 
developing, operating or regulating the Linkage Plan as a means of 
facilitating a national market system.\37\
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    \35\ 15 U.S.C. 78k-1(a)(3)(B).
    \36\ 17 CFR 242.608.
    \37\ 17 CFR 200.30-2(a)(27).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Nancy M. Morris,
Secretary.

Exhibit A

Plan for the Purpose of Creating and Operating an Intermarket 
Communications Linkage Pursuant to Section 11A(a)(3)(B) of the 
Securities Exchange Act of 1934

    Agreement made as of June 12, 2006, among American Stock Exchange 
LLC, Boston Stock Exchange, Inc., Chicago Board Options Exchange, Inc., 
Chicago Stock Exchange, Inc., Nasdaq Stock Market LLC, National Stock 
Exchange, New York Stock Exchange LLC, and NYSE \1\Arca, Inc.
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    \1\ The Philadelphia Stock Exchange, Inc. (``Phlx'') 
subsequently executed the Linkage Plan on August 1, 2006. A Linkage 
Plan, dated August 1, 2006, reflecting Phlx's inclusion as a Linkage 
Plan participant, was sent to the Commission on August 8, 2006.
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    Whereas, the undersigned national securities exchanges are parties 
to the plan submitted to the Securities and Exchange Commission (the 
``SEC'') for the purpose of creating and operating an intermarket 
communications linkage pursuant to section 11A(a)(3)(B) of the 
Securities Exchange Act of 1934 (the ``Act'').
    Now, Therefore, in consideration of the premises and the mutual 
covenants and agreements contained herein, the parties agree to submit 
this Agreement called the NMS Linkage Plan to the SEC for approval 
pursuant to section 11A(a)(3)(B) of the Act and Rule 608 thereunder.
    1. Definitions.
    (1) ``Application'' means any use of the System to facilitate 
trades between Participant Markets that is described in the NMS Linkage 
Plan.
    (2) ``CTA Plan'' means the plan filed with the SEC pursuant to SEC 
Rule 17a-15 (subsequently amended and redesignated as Rule 11Aa3-1, and 
subsequently amended and redesignated as Rule 601), approved by the SEC 
and declared effective as of May 17, 1974, as from time to time 
amended.
    (3) ``CTA Plan Processor'' means the organization serving as 
recipient and processor of last sale prices under the CTA Plan.
    (4) ``Eligible Security'' has the meaning assigned to that term in 
the CTA Plan.
    (5) ``NMS Linkage Plan'' or ``Linkage Plan'' means this plan as 
from time to time amended in accordance with the provisions hereof.
    (6) ``NMS Linkage System'' (``Linkage'' or ``Linkage System'') 
means the system described in section 5.
    (7) ``Network A Eligible Security'' has the meaning assigned to 
that term in the CTA Plan.
    (8) ``Network B Eligible Security'' has the meaning assigned to 
that term in the CTA Plan.
    (9) ``Participant'' means a party to the Linkage Plan with respect 
to which such plan has become effective pursuant to section 13.
    (10) ``Participant('s) Market'' means a facility for the trading of 
System securities operated by a Participant.
    (11) ``System'' means the data processing hardware, software and 
communications network that links electronically the Participant 
Markets to one another. The System includes (a) computers that perform 
such functions as message validation, processing, logging and switching 
and (b) from a functional standpoint, (i) high speed communications 
lines that link such computers with the Participant Markets (either 
directly or through Participant

[[Page 59151]]

Switches), and (ii) Linkage System stations.
    (12) ``System security (stock)'' means a security (stock) selected 
for trading through the Applications in accordance with section 
5(b)(ii).
    (13) ``System trade'' means any trade made through any Application.
    2. Purpose of Linkage Plan. The purpose of the Linkage Plan is to 
enable the Participants to act jointly in planning, developing, 
operating and regulating the system as described in the Linkage Plan so 
as to further the objectives of Congress as set forth in section 11A(a) 
of the Act and to facilitate compliance by the Participants and their 
respective members with SEC Rules 610 and 611.
    3. Parties. 
    (a) List of Parties. The parties to the Linkage Plan are as 
follows: American Stock Exchange LLC (``AMEX''), registered as a 
national securities exchange under the Act and having its principal 
place of business at 86 Trinity Place, New York, New York 10006.
    Boston Stock Exchange, Inc. (``BSE''), registered as a national 
securities exchange under the Act and having its principal place of 
business at 100 Franklin Street, Boston, Massachusetts 02110. Chicago 
Board Options Exchange, Inc. (``CBOE''), registered as a national 
securities exchange under the Act and having its principal place of 
business at 400 South LaSalle Street, Chicago, Illinois 60605.
    Chicago Stock Exchange, Inc. (``CHX''), registered as a national 
securities exchange under the Act and having its principal place of 
business at One Financial Place, 440 South LaSalle Street, Chicago, 
Illinois 60605.
    Nasdaq Stock Market LLC (``Nasdaq''), registered as a national 
securities exchange under the Act and having its principal place of 
business at 1 Liberty Plaza, 165 Broadway, New York, NY 10006.
    National Stock Exchange (``NSX''), registered as a national 
securities exchange under the Act and having its principal place of 
business at 440 South LaSalle Street, Suite 2600, Chicago, Illinois 
60605.
    New York Stock Exchange LLC (``NYSE''), registered as a national 
securities exchange under the Act and having its principal place of 
business at 11 Wall Street, New York, New York 10005. NYSE Arca, Inc. 
(``Arca''), registered as a national securities exchange under the Act 
and having its principal place of business at 100 S. Wacker Drive, 
Chicago, IL 60606.
    Philadelphia Stock Exchange, Inc. (``Phlx''), registered as a 
national securities exchange under the Act and having its principal 
place of business at 1900 Market Street, Philadelphia, Pennsylvania 
19103.
    (b) Compliance Undertaking. By subscribing to and submitting the 
Linkage Plan for filing with the SEC, each undersigned party agrees to 
comply to the best of its ability and, absent reasonable justification 
or excuse, to enforce compliance by its members in their use of the 
Linkage through its facilities with the provisions of the Linkage Plan.
    (c) New Participants. The Participants agree that any other 
national securities exchange or national securities association may 
subscribe to the Linkage Plan and become a Participant by agreeing, in 
an amendment to the Linkage Plan adopted in accordance with its 
provisions, to comply and to enforce compliance with the provisions of 
the Linkage Plan as provided in section 3(b).
    4. Administration of Linkage Plan.
    (a) Supervisory Committee: Composition, Voting. Each Participant 
shall select from its staff one individual to represent such 
Participant as a member of the Supervisory Committee under the Linkage 
Plan. Except as may be specifically otherwise provided herein, action 
taken pursuant to the vote of a majority of the members of the 
Supervisory Committee present at a meeting of the committee at which a 
majority of the full committee is present shall be deemed to be the 
action of the Supervisory Committee.
    (b) Supervisory Committee: Authority. The Supervisory Committee 
shall not be a policy-making or a rule-making body, but shall, either 
directly or by delegating its functions to individuals, subcommittees 
established by it from time to time or others, (i) oversee development 
of the System in accordance with the specifications therefore agreed 
upon by each Participant, (ii) monitor the operation of the System and 
(iii) advise the Participants with respect to any deficiencies, 
problems or recommendations as the Supervisory Committee may deem 
appropriate in its administration of the Linkage Plan. In this 
connection, the Supervisory Committee shall have authority to develop 
procedures and make administrative decisions necessary to facilitate 
the operation of the System in accordance with the provisions of the 
Linkage Plan.
    (c) Amendments to Linkage Plan. Any proposed change in, addition 
to, or deletion from the Linkage Plan may be effected only by means of 
a written amendment to the Linkage Plan which sets forth the change, 
addition or deletion, is executed on behalf of each Participant and is 
approved by the SEC or otherwise becomes effective pursuant to section 
11A of the Act and Rule 608(b).
    (d) Participant's Rights. No action or inaction by the Supervisory 
Committee shall prejudice any Participant's right to present its views 
to the SEC or any other person with respect to any matter relating to 
the System or to seek to enforce its views in any other forum it deems 
appropriate.
    5. The System.
    (a) System Monitoring.
    (i) Linkage Supervisory Stations. Each Participant will maintain a 
Linkage supervisory station where supervisors appointed by such 
Participant will be able to coordinate trade adjustments.
    (ii) Linkage Control Center. The System also includes the Linkage 
control center (``LCC''), which monitors and controls communications 
within the System, including the processing of error conditions. The 
LCC staff is able to display and, when authorized by any Participant, 
to modify the security and market records of that Participant's Market 
as such records relate to the System. The LCC staff is also able to 
indicate whether or not any Participant Market is open for System 
trades. In addition, the LCC may be used as ``back-up'' for the Linkage 
supervisory system-wide broadcasts. Finally, the LCC staff is able to 
enter adjustments of any trade pursuant to the procedures specified in 
section 6(a)(iv) and to perform data base control after trading hours.
    (b) General Operation.
    (i) Registered Clearing Corporations. The System accommodates only 
regular-way trading, and all System trades must be compared, cleared 
and settled through clearing corporations registered with the SEC that 
maintain facilities through which such transactions may be compared and 
settled and that agree to supply each Participant with data reasonably 
requested in order to permit such Participant to enforce compliance by 
its members with its rules, the provisions of the Act, the rules and 
regulations thereunder, and the Linkage Plan.
    (ii) Selection of System Securities. The System is designed to 
accommodate trading in any Eligible Security. The particular securities 
that may be traded through the System at any time (``System 
securities'') shall be selected by the Supervisory Committee. The 
Supervisory Committee may add or delete System securities as it deems 
appropriate and may delay the commencement of trading in any Eligible 
Security if capacity or other

[[Page 59152]]

operational considerations shall require such delay.
    (c) Administrative Messages. Administrative messages, as 
distinguished from orders, responses thereto and trade adjustment 
inputs (including names later information), may also be sent through 
the System. There are two categories of administrative messages that 
can be sent by Participant members: Single destination and security 
broadcast. Another category of administrative message, a ``system-wide 
broadcast'', may be sent through the System only from the Linkage 
control center.
    (d) Facilities Manager. The Securities Industry Automation 
Corporation (``SIAC'') serves as the System's facilities manager and 
has responsibility for the operation and maintenance of the System. 
SIAC performs its function as facilities manager in accordance with the 
provisions of the Linkage Plan and subject to the administrative 
oversight of the Supervisory Committee.
    6. Linkage System.
    (a) Technical Matters.
    (i) The System shall accept immediate or cancel (``IOC'') orders, 
provided however, that, upon the request of a Participant or 
Participants, and in accordance with Section 10(a)(iii)(A) relating to 
New Development Costs Sharing, the System shall accommodate additional 
order types to be utilized by such Participant or Participants. Orders 
must be sent to a Participant market through the auspices of a member 
of that Participant, known as a Sponsoring Member. Each market will 
maintain within SIAC a database of default Sponsoring Members (not to 
exceed 10) for after hours processing and billing for orders sent to a 
market where the originating firm is not a member of the destination 
market.
    (ii) Order Information. An order shall, at a minimum, specify the 
following:
    (A) The member of the destination market (either clearing member or 
Sponsoring Member); \2\
---------------------------------------------------------------------------

    \2\ The member of the destination market will be identified by a 
unique clearing number. If the clearing number provided by the 
originating Participant Market does not identify a member of the 
destination market, SIAC will identify the default Sponsoring Member 
of the originating market at the destination market for the security 
in question and that Sponsoring Member's identification information 
will be included on the order to the destination market on all 
reports sent to the destination market, including any report for 
billing purposes. The member identified on the order will be 
responsible for any fees in the destination market. SIAC will 
provide to Participants a key to match the clearing number to the 
member's name.
---------------------------------------------------------------------------

    (B) Original clearing member or omnibus clearing account of the 
originating Participant Market, commonly referred to as the Give-Up,
    (C) The receiving Participant Market,
    (D) The security that is the subject of the order,
    (E) Designation of the order as an order to buy or to sell,
    (F) The amount of the security to be bought or sold, which amount 
shall be for one unit of trading or any multiple thereof,
    (G) A price equal to the offer or bid price then being furnished by 
the destination Participant Market, which price shall represent the 
price at or below which the security is to be bought or the price at or 
above which the security is to be sold, respectively,
    (H) To facilitate application of the short sale rule in effect in 
the destination Participant Market, a designation of the order as 
``short'' or ``short exempt'' whenever it is a order to sell short, and
    (I) Time in force as 5, 15 or 120 seconds.\3\
---------------------------------------------------------------------------

    \3\ A Participant Market may prevent the execution, through its 
facilities, of an otherwise marketable System order, prior to the 5, 
15 or 120 second time in force parameter assigned to that order, if 
the time in force parameter would result in the issuance of an 
expiration notice to the sending market before execution of such 
order could be reported to SIAC. Any such procedure must be 
effective pursuant to a filing with the SEC. No order with a time in 
force parameter of 5 or 15 seconds shall be sent to AMEX, CBOE, CHX, 
or PHLX prior to the earlier of (i) the date on which all automated 
trading centers intending to qualify their quotations for trade-
through protection under Rule 611 of Regulation NMS must have 
achieved full operation of Regulation NMS-compliant trading systems 
or (ii) the date on which AMEX, CBOE, CHX, or PHLX, as the case may 
be, has notified the Supervisory Committee in writing that it is 
capable of accepting and executing such orders. If an order with 
either of these time in force parameters is sent to AMEX, CBOE, CHX, 
or PHLX prior to such time, it will not be executed due to system 
limitations.
---------------------------------------------------------------------------

    (iii) Order Validation, Routing. At the time of transmission, each 
order undergoes validation procedures. If the order passes the 
validation procedures, the System assigns a unique order identifier 
number (a ``OID'') to the order, time stamps it and logs it on a mass 
storage device (the ``daily log''). The System also sends a 
transmission acceptance message to the Participant Market that 
originated the order. The order is then routed to the destination 
Participant Market. If the order is accepted, in whole or in part, in 
the destination Participant Market, the execution is reported back 
through the System to the originating and receiving Participant 
Markets.
    The System rejects the transmission of a response that fails the 
validation check and sends an appropriate error message to the 
Participant Market that originated the response. The validation of a 
response causes the System to retrieve the related order from the daily 
log and update it with appropriate response information. This log forms 
the basis from which the after-hours reports described in section 7(a) 
are produced. Validation also causes the System to send a transmission 
acceptance message to the Participant Market that originated the 
response. The System then sends the response to the Participant Market 
that originated the order. When an order is only partially executed, 
the unexecuted shares are not filled, and the System generates a 
cancellation for the unexecuted quantity and appends the cancellation 
to the execution report that it sends to the Participant Market that 
originated the order.
    (iv) Trade Adjustments. In accordance with section 5(a)(ii), 
supervisors monitoring the Participant Markets may request the LCC to 
enter adjustments to trades (i.e., to price, share size, buy or sell 
side, to cancel a trade or to insert a trade ``as-of'' a prior day). 
The following sets forth the procedures to facilitate trade adjustments 
and to authorize the LCC to make such adjustments. All requests among 
Participants and to the LCC for trade adjustments shall be in the form 
of administrative messages sent through the System. For the purposes of 
this section 6(a)(vi), administrative messages sent or received among 
Participant Markets, or sent to the LCC, shall be deemed to have been 
issued by supervisors of Participant Markets authorized by such 
Participant Markets to issue such administrative messages.
    (A) Adjustments on Trade Day. The LCC shall make an adjustment to a 
trade entered into that same day based upon an administrative message 
request made from a supervisor of the Participant Market that received 
and executed the order (``executing market supervisor''). Such request 
shall not be made to the LCC unless an executing market supervisor has 
received from a supervisor in the Participant Market that issued the 
order (``issuing market supervisor''), in the form of an administrative 
message sent through the System, agreement as to the terms of, and 
authorization to make, the adjustment. The administrative message 
request to the LCC by the executing market supervisor shall specify the 
terms of, and authorization to the LCC to make, the adjustment.
    In the event that, notwithstanding the provisions of the prior 
paragraph, an executing market supervisor requests the LCC to make a 
trade adjustment without having received an administrative message from 
an issuing market supervisor, and the LCC has

[[Page 59153]]

made such requested adjustment, then the LCC shall, at the request and 
direction of an issuing market supervisor, made prior to the settlement 
for such trade, readjust such trade to its terms as they existed prior 
to such adjustment.
    (B) Adjustments for Prior Trade Day. Except as provided in the 
preceding paragraph, the LCC shall make an adjustment to a trade 
entered into on a prior day only upon administrative message requests 
made from both executing and issuing market supervisors, each message 
specifying the same terms of, and authorization to the LCC to make, the 
adjustment.
    (C) The provisions of paragraphs (A) and (B) of this section 
6(a)(iv) shall not restrict the ability of any Participant Market to 
unilaterally request the LCC to end adjustments to trades or to cancel 
or adjust any System trade executed in its market pursuant to its rules 
pertaining to clearly erroneous transactions or obvious errors, and 
system malfunctions. The sending market may invoke any appellate or 
review process provided by such rules on behalf of the Sponsoring 
Member. In the event of any cancellation or adjustment, the executing 
market shall notify the LCC and all affected Participants by 
administrative message specifying the terms of the cancellation or 
adjustment and authorizing the LCC to make the adjustments or cancel 
the trades.
    (D) LCC Confirmation. The LCC shall, after making a trade 
adjustment, send an administrative message to both the executing and 
sending market supervisors confirming that the adjustment has been made 
and specifying the terms of the adjustment.
    (v) Intermarket Sweep Orders. All routed limit orders shall be 
presumed by the executing market to be orders sent pursuant to the 
intermarket sweep order exception in SEC Rule 611(b).
    (vi) Other. Each Participant shall also determine how orders 
received in the market for which it has responsibility are to be 
handled therein and agrees that any procedures it may adopt in this 
regard shall be consistent with the provisions of the Linkage Plan and 
the efficient operation of the System. Participants are required to 
execute orders at a minimum at the size of their displayed quotes. Each 
Participant shall insure that no communication shall be entered into 
the System from its market except (A) on behalf of a member of such 
Participant who is permitted by the Linkage Plan and such Participant's 
rules to use the System with respect to the security or securities that 
are the subject of the communication or (B) by employees of such 
Participant in performance of such Participant's obligations under the 
Linkage Plan.
    (b) Participant Trading Rules. The trading rules applicable in 
destination Participant Markets shall apply to orders received in such 
market and executions of orders therein. Each Participant shall 
determine the extent to which its trading rules shall apply to members 
within its market insofar as such members' issuance of orders from such 
market and resulting executions are concerned.
    7. Comparison and Settlement. Comparison of a side of a System 
trade furnished by a Participant shall be the responsibility of such 
Participant.
    (a) After Hours Functions. The functions of the System after the 
close of trading in all Participant Markets shall consist of the 
following:
    (i) The System's daily log of messages will be put on tape for 
retention;
    (ii) The System will generate four reports:
    (A) An order/response report that will match orders to trade with 
the appropriate responses,
    (B) An order/cancellation report that will list all orders to trade 
that were canceled,
    (C) A trade adjustment report that will list all adjustments made 
to previously executed System trades, and
    (D) A traffic summary report that will indicate the number of 
orders to trade, the number of responses and the number of 
administrative messages entered from each Participant Market during the 
trading day; and
    (iii) The System will generate the clearing tape referred to in 
section 7(b).
    (b) Clearing Tape. At the end of each trading day, the System 
generates a clearing tape as part of after-hours processing. This tape 
is in OID sequence, includes all of the day's System trades, and shows:
    (i) The OID,
    (ii) The originating Participant and clearing member(s), or the 
clearing corporation(s) through which such clearing member(s) shall 
settle the trade,
    (iii) The destination Participant and destination clearing 
member(s), or the clearing corporation(s) through which such clearing 
member(s) shall settle the trade,
    (iv) The type of trade action (buy or sell),
    (v) The security symbol,
    (vi) The executed quantity and price, and
    (vii) The date and time of trade.
    Adjustments to any System trade made by agreement between both 
sides of the trade are included in the tape and shown as a separate 
``trade adjustment record''. If a trade has been adjusted, the original 
trade record is followed by trade adjustment record(s). The trade 
adjustment record(s) carry the same OID as the original trade record. 
There are two types of trade adjustments, System trade cancellations 
and System trade changes. For System trade cancellations, the 
adjustment record negates the original trade record. For example, a 
cancellation of a trade to buy is reflected on the adjustment record as 
a ``negative buy''. For System trade changes, there are two adjustment 
records. The first adjustment record negates the original trade record. 
The second adjustment record logs the trade data as adjusted for, e.g., 
a change in action, security, quantity and/or price. The adjustment 
records are generated from the trade adjustment file that is created 
during trading hours and from inputs from the Linkage control center 
pursuant to requests from the Participants' supervisors.
    (c) Comparison of System Trades. The contra side of each System 
trade ultimately is the clearing interface account used to identify the 
clearing corporation through which the comparison of such side is 
completed. If both sides of a System trade are to settle through the 
same clearing corporation, the clearing corporation may, at its option, 
either book each side against the clearing member responsible for that 
side or offset each side against an internal omnibus account (in which 
case the omnibus account will net to zero).
    While sorting and format changes may be required, the various 
clearing corporations are able to use the System clearing tape as the 
basic input to their trade comparison operations. The clearing 
member(s) responsible for an Exchange-supplied side of a System trade 
shall follow routine comparison procedures. In instances where an 
uncompared transaction cannot be resolved through routine procedures, 
the Exchange-supplied side(s) of the trade discrepancy will be handled 
in accordance with the rules of the Participant(s) and clearing 
corporation(s) involved.
    Once comparison has been completed, clearance and settlement can 
proceed in a routine manner. System trades are processed with all other 
transactions through established clearing interfaces.
    (d) Participant Settlement Obligations. The rules of each 
Participant shall be designed to assure that if a System trade reported 
on the clearing tape (as adjusted) at the close of any trading day, as 
such trade relates to such Participant, cannot be compared

[[Page 59154]]

notwithstanding the use of routine comparison procedures, such 
Participant shall on the scheduled settlement date honor such 
uncompared trade; provided, however, that, if such a System trade as it 
relates to such Participant is rejected or excluded from the settlement 
operation conducted by the clearing corporation to which it was 
reported for settlement either because of the insolvency of the 
member(s) for whose account(s) it was to be settled or for any other 
reason (other than failure to compare), such Participant shall not be 
obligated to honor such trade and such trade shall be returned to such 
member(s).
    In the event that a System trade as it relates to any Participant 
is rejected or excluded from the settlement operation conducted by the 
clearing corporation to which it was reported for settlement for any 
reason other than failure to compare, neither the Participant from 
whose market the side of the trade that is rejected or excluded was 
supplied, the Participant from whose market the contra side of such 
trade was supplied nor any clearing corporation to which either side of 
the trade was submitted shall be obligated to honor the trade. Instead, 
the member(s) constituting the contra side of the rejected or excluded 
trade (the ``contra party'') shall, without unnecessary delay after 
receipt of notice of such rejection or exclusion, close out such trade 
in the best available market, except insofar as the rules of the 
clearing corporation to which the contra side was submitted or of the 
Participant from whose market the contra side was supplied are 
applicable and provide an alternative method for closing. The rules of 
each Participant shall state the foregoing closing obligations of the 
contra party.
    8. Pre-Opening Price Information.
    The NYSE and AMEX will disseminate, through the System, pre-opening 
price information whenever a member in that Participant market, in 
arranging an opening transaction in his or her market in a System 
security, anticipates that the opening transaction will be at a price 
that represents a change from the ``previous day's consolidated closing 
price'' of more than the ``applicable price change''.
    The ``previous day's consolidated closing price'' is the last price 
at which a transaction in the security was reported by the CTA Plan 
Processor on the last previous day on which transactions in the 
security were reported by the CTA Plan Processor. The ``applicable 
price changes'' are:

------------------------------------------------------------------------
                                                            Applicable
                                    Consolidated closing   price change
             Security                       price            ($) (more
                                                               than)
------------------------------------------------------------------------
Network A.........................  Under $15...........            0.10
                                    $15 or over.........        \4\ 0.25
Network B.........................  Under $5............            0.10
                                    $5 or over..........        \5\ 0.25
------------------------------------------------------------------------

    Prior to the opening of trading in a System security for which the 
NYSE or AMEX has disseminated pre-opening price information, orders in 
that security shall be sent to that Participant through the 
Participant's order delivery system and not the NMS Linkage.
---------------------------------------------------------------------------

    \4\ If the previous day's consolidated closing price of a 
Network A Eligible Security exceeded $100 and the security does not 
underlie an individual stock option contract listed and currently 
trading on a national securities exchange, the ``applicable price 
change'' is one dollar.
    \5\ If the previous day's consolidated closing price of a 
Network B Eligible Security exceeded $75 and the security is not a 
Portfolio Depositary Receipt, Index Fund Share, or Trust Issued 
Receipt, or does not underlie an individual stock option contract 
listed and currently trading on a national securities exchange, the 
``applicable price change'' is one dollar.
---------------------------------------------------------------------------

    9. Operating Hours. Regular trading hours are from 9:30 a.m. to 4 
p.m. eastern time. The normal operating hours of the System are 9 a.m. 
to 6:30 p.m. eastern time or such other period as the Supervisory 
Committee, by affirmative vote of all its members, may specify. Any 
period outside the normal operating hours of the System is herein 
referred to as an ``additional period''. The System shall be operable 
during any additional period requested in writing by any two or more 
Participants; provided that such Participants have agreed to pay all 
costs and expenses attributable to the operation of the System during 
such additional period as agreed to by those Participants.
    10. Financial Matters.
    (a) Costs. The Participants shall share the ``development costs'' 
and ``production costs'', in accordance with the provisions of this 
section 10(a).
    (i) Costs Definitions
    (A) ``Computer software'' includes all programs or routines 
developed by or at the direction of the System's facilities manager 
(including such development in connection with the Intermarket Trading 
System) to cause computers to perform tasks required for any one or 
more Applications and the documentation required to describe and 
maintain those programs. Computer programs of all classes, for example, 
operating systems, execution systems, monitors, compilers and 
translators, assembly routines, and utility programs are included.
    (B) ``Development costs'' mean all costs incurred by the System's 
facilities manager in developing and improving the computer software 
and installing hardware as necessary to facilitate System functionality 
(including any testing conducted in connection with the System).
    (C) ``Installing hardware as necessary'' includes, but is not 
limited to, installation and maintenance of all installations and 
computer facilities required to support the System.
    (D) ``New Participant'' means any national securities exchange or 
national securities association that becomes a Participant in 
accordance with section 3(c) after SEC approval of this Linkage Plan.
    (E) ``Production costs'' mean all operating expenses associated 
with the operation of the System, including all costs and expenses 
(including appropriate overhead costs and all applicable taxes however 
designated, exclusive of net income taxes) of the System's facilities 
manager associated with, relating to, or resulting from its operation 
or maintenance of the System, but excluding any cost or expense 
associated with any Participant's self-regulatory function. Production 
costs also include the costs and expenses of the facilities manager: 
(i) In maintaining ``hot lines'' that permit conversations among 
broker-dealers and staff in different Participant Markets and with the 
Systems control center; and (ii) associated with reports rendered by a 
firm of independent accountants pursuant to paragraph (a)(vi) of this 
section 10.
    (F) ``Routed orders base'' for any calendar quarter means the total 
number of orders sent through the System.

[[Page 59155]]

    (G) ``Share of the routed orders base'' of any Participant as 
computed for any calendar quarter means a fraction, the numerator of 
which is the total number of orders sent through the System by that 
Participant during the calendar quarter and the denominator of which is 
the routed orders base for the calendar quarter.
    (H) ``Share of the transactions base'' for a calendar quarter 
means:
    (1) For any Participant other than AMEX or NYSE, a fraction, the 
numerator of which is the total number of transactions in Network A 
Eligible Securities that the Participant reports to the CTA Plan 
Processor during that quarter and the denominator of which is the 
quarter's transactions base;
    (2) For AMEX, a fraction, the numerator of which is the number of 
transactions in ``Top Ten Network B Eligible Securities'' (as clause 
(2) of section 10(a)(i)(I) defines that term) that AMEX reports to the 
CTA Plan Processor during that quarter and the denominator of which is 
the quarter's transactions base; and
    (3) For NYSE, the fraction derived by subtracting from 1 (one) the 
sum of all other Participants' shares of the transaction base for the 
quarter.
    (I) ``Transactions base'' for any calendar quarter means the sum of 
(1) the number of transaction reports in Network A Eligible Securities 
that the CTA Plan Processor disseminates during the quarter and (2) the 
number of transaction reports in the ``Top Ten Network B Eligible 
Securities'' that the CTA Plan Processor disseminates during the 
quarter. A quarter's ``Top Ten Network B Eligible Securities'' refers 
to the ten Network B Eligible securities for which the CTA Plan 
Processor disseminates the greatest number of transaction reports 
during that quarter.
    (ii) Dispute Costs Excluded. The development costs and production 
costs shall not include any cost or expense incurred by any Participant 
as a result of or in connection with the defense of any claim, suit or 
proceeding against the Supervisory Committee or any one or more of the 
Participants relating to the Linkage Plan or the operation of the 
System. All such costs and expenses incurred by any Participant shall 
be borne by such Participant without contribution or reimbursement.
    (iii) Development Costs.
    (A) New Development Costs Sharing. Development costs shall not be 
incurred except as agreed to by all Participants. Each Participant 
shall pay a fraction equal to its share of the transactions base for 
the calendar quarter preceding the calendar quarter during which the 
Participants agree to incur such cost. Any development costs that are 
incurred for the benefit of less than all Participants shall be shared 
by the Participant or Participants that benefit therefrom as they shall 
mutually agree.
    (B) Development Costs Payment. Development costs will be computed 
by the System's facilities manager as soon as practicable following the 
close of the calendar month or, if relatively small, the calendar 
quarter during which they were incurred. Each Participant's share shall 
be billed to, and payable by, such Participant promptly thereafter.
    (C) New Participant's Share of Development Costs. At the time any 
national securities exchange or national securities association applies 
to become a new Participant, such applicant shall be charged by, and 
shall pay to, the System's facilities manager an amount estimated by 
the System's facilities manager to cover development costs to be 
incurred to accommodate such applicant's status as a Participant. Prior 
to the effective date of the SEC's approval of such Participant status, 
the applicant shall pay to the System's facility manager actual 
development costs in excess of estimated development costs, if any, or 
the System's facility manager shall reimburse to the applicant 
estimated development costs that were paid and that are in excess of 
actual development costs. Each new Participant shall share in 
development costs incurred after it becomes a Participant in accordance 
with section 10(a)(iii)(A).
    (D) Title to Software. The entire right, title and interest in and 
to all ``computer software'' (as defined in section 10(a)(i)(A)) 
developed prior to July 1, 1978 shall be vested in the Participants who 
share the cost of such computer software as joint owners. The entire 
right, title and interest in and to all computer software developed 
after June 30, 1978 shall be vested in the Participant who pays the 
cost thereof. If more than one Participant shares in the cost of 
computer software developed after June 30, 1978, then the entire right, 
title and interest in and to such computer software, the cost of which 
is so shared, shall be vested in the Participants who share such cost 
as joint owners. The System's facilities manager shall use computer 
software solely for the purpose of performing tasks required for the 
Applications as provided in the Linkage Plan.
    (iv) Production Costs
    (A) Production Costs Sharing. The production costs attributable to 
any calendar quarter shall be shared by the markets that were 
Participants during any portion of the calendar quarter. Each such 
Participant, except the NYSE, shall pay 50% of the fraction of such 
production costs equal to its share of the routed orders base as 
computed for the calendar quarter. Notwithstanding the foregoing, the 
aggregate dollar amount of all of a Participant's quarterly payments 
shall not exceed its ``Production Costs Sharing Cap''. A Participant's 
``Production Costs Sharing Cap'' means total production costs for 
calendar year 2005 multiplied by 50 percent of the Participant's 
percentage of the routed order base for the period commencing January 
1, 2005, and ending July 31, 2005. The NYSE shall pay those production 
costs that this Paragraph does not require the other Participants to 
pay.
    (B) Production Costs Payment. Production costs will be computed by 
the System's facilities manager as soon as practicable following the 
close of each calendar month. Each Participant's (or former 
Participant's) estimated share thereof shall be billed by the System's 
facilities manager and shall be payable to the System's facilities 
manager promptly following receipt. Any appropriate adjustment will be 
made between the System's facilities manager and each Participant 
promptly following the close of each calendar quarter.
    (v) Communications Connection Costs. Each Participant shall bear 
100% of the costs to provide communication connection from a 
Participant's facilities to the System's communications facilities 
maintained by the facilities manager.
    (vi) Accounts. The System's facilities manager and the independent 
public accountants hereinafter referred to shall furnish any 
information and/or documentation reasonably requested in writing by a 
majority of the Participants in support of or relating to any of the 
computations referred to in this section 10(a). All expenses, 
allocations and computations referred to or required by this section 
10(a) shall be reported at least annually to the Participants. For even 
numbered years, (or such other yearly interval as the Supervisory 
Committee, by affirmative vote of all its members, may specify), such 
reports shall be rendered by a firm of independent public accountants 
(which may be the firm regularly employed by the NYSE or the System's 
facilities manager), and such accountants shall render their opinion 
that such expenses, allocations and computations have been reported in 
accordance with the understanding among the Participants as set forth 
in this section 10(a). For those years when a firm of independent 
public accountants is not engaged to render a report, the facilities 
manager's internal auditor shall review all

[[Page 59156]]

expenses, allocations and computations referred to or required by this 
section 10(a) and that internal auditor shall report that such 
expenses, allocations and computations have been reported in accordance 
with the understanding among the Participants as set forth in this 
section 10(a).
    (b) User Charges. Each Participant shall be free to determine 
whether or not to impose a fee or charge on some or all of its members 
in connection with use of its facilities to access the System and, if 
so, the amount of such fee or charge. Any fee or charge that may be 
imposed by any Participant shall not be of such size, and shall not be 
so structured, as to discourage use of the System.
    (c) Facilities Manager Liability Limits. The System's facilities 
manager shall not be liable to any Participant or to any member of any 
Participant using or having access to the System or to any other person 
for any loss or damage resulting from any non-performance, or 
interruption in the operation of the System, from any inaccuracies, 
errors or omissions in any of the information conveyed or received 
through the System, or from any delays or errors in the transmission of 
any such information, or for making trade adjustments.
    11. Termination; withdrawal. The Linkage Plan will terminate on 
June 30, 2007. Participants that wish to extend the term may agree to 
do so, subject to filing with and approval by the SEC. During the term 
of the Plan a Participant may withdraw with 30 days notice if it 
continues to maintain connectivity to all other Participants and accept 
orders through the Linkage until June 30, 2007. A withdrawing 
Participant's right to send orders through the Linkage shall terminate 
on the date the withdrawal is effective. In addition, a withdrawing 
Participant's obligation to share development and production costs 
shall terminate on the date the withdrawal is effective, provided, 
however, that such Participant shall remain liable for, and shall pay 
upon demand, its portion of the costs of developing and operating the 
System and any other amounts payable by it as determined pursuant to 
sections 10 and 12 of the Linkage Plan.
    12. System Inoperability.
    (a) General. In the event of a disaster that renders the System 
inoperable, the NYSE has authorized the facilities manager to utilize a 
designated NYSE operating system (the ``NYSE System'') on a preemptive 
and priority basis to function as detailed in section (c)(i), below.
    (b) Participants' Implementation Obligations.
    (i) At any time the NYSE System assumes the functions of the 
System, all Plan provisions not inconsistent with this section 12, and 
Participant rules and policies governing use of the System will 
continue to apply.
    (ii) Each Participant's cost of maintaining communications 
connectivity to the NYSE System shall be borne by that Participant.
    (c) NYSE Implementation Obligations. In consideration of the fees 
to be paid to the NYSE as specified in paragraph (d) of this section 
12, the NYSE agrees:
    (i) To have and to make available the NYSE System to assume the 
functions of the System on a preemptive and priority basis in the event 
of a disaster which renders the System inoperable. Such system is 
composed of computers and peripheral equipment sufficient to operate 
the System at a minimum of 50% of the System's rated 150 messages per 
second capacity and 75% of the System's disk capacity.
    (ii) that the facilities manager is authorized to take the actions 
necessary to make the NYSE System available to assume the functions of 
the System within two hours in the event of a limited disaster and on 
the next day in the event of a full site disaster. The facilities 
manager is authorized to make the determinations that, in its good 
faith judgment, there has been a limited disaster or full site 
disaster, the System is inoperable, and the NYSE System will assume the 
functions of the System.
    (iii) That the NYSE System will be located at a site remote from 
the site where the System is located.
    (d) Implementation Obligations of Participants Other than NYSE 
(``Other Participants'').
    (i) Fees. In consideration of the NYSE's making available the NYSE 
System to assume the functions of the System in the event of a 
disaster, the Other Participants agree to pay to the NYSE: (A) a 
preemptive and priority reserve fee totaling $24,800 per calendar 
quarter (such reserve fee shall be adjusted each January by the same 
percentage change as in the Consumer Price Index as calculated by the 
U.S. Department of Commerce for the preceding calendar year); and (B) a 
per diem fee, if in the event of a disaster the NYSE System assumes the 
functions of the System, for each day in excess of five consecutive 
trading days that the NYSE System is so utilized. Such per diem fee 
shall equal 1/250 of the yearly dollar amount the facilities manager 
charges the NYSE to operate the NYSE System.
    This subsection (d)(i) shall become effective on the date that the 
facilities manager confirms in writing to the Supervisory Committee 
that it has taken all actions necessary to make the NYSE System 
available to assume the functions of the System as specified in 
subsection (c) of this section 12. If such effective date is other than 
the first day of the calendar quarter, then the preemptive and priority 
reserve fee for such calendar quarter shall be calculated pro rata 
based upon the number of days in such calendar quarter that the NYSE 
System is so available.
    (ii) Fee Sharing. Each of the Other Participants agrees to pay a 
share of the preemptive and priority reserve and per diem fees based 
upon a proportional share of its production costs excluding the NYSE's 
share.
    (iii) Fee Payment. Fee payment will be computed by the System's 
facilities manager as soon as practicable following the close of each 
calendar month. Each Other Participant's (or former Participant's) 
estimated share thereof shall be billed by the System's facilities 
manager and shall be payable to the System's facilities manager 
promptly following receipt. Any appropriate adjustment will be made 
between the System's facilities manager and each Other Participant 
promptly following the close of each calendar quarter. The facilities 
manager shall forward such payments to the NYSE as the NYSE may from 
time to time instruct the facilities manager.
    (e) Liability Limits. Neither the NYSE nor the facilities manager 
shall be liable to any Participant, to any member of any Participant 
using or having access to the NYSE system, or to any other person for 
any loss or damage resulting from any non-performance or interruption 
in the operation of the NYSE System, from any inaccuracies, errors or 
omissions in any of the information conveyed or received through the 
NYSE System, or from any delays, omissions, or errors in the 
transmissions, or errors in the transmission of any such information.
    (f) Termination.
    (i) In the event that the NYSE determines to withdraw the NYSE 
System from use by the Linkage, it shall so notify the Supervisory 
Committee, in writing, a minimum of six months prior to such 
withdrawal.
    (ii) In the event of such withdrawal, this section 12 shall be 
terminated and the Participants must then determine whether they should 
provide for alternative procedures in the event of System 
inoperability.
    13. Effective Date: The Linkage Plan shall become operative on 
October 1, 2006.
    14. Counterparts. The Linkage Plan may be executed in any number of 
counterparts, no one of which need

[[Page 59157]]

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.
By---------------------------------------------------------------------
AMERICAN STOCK EXCHANGE LLC.

By---------------------------------------------------------------------
NATIONAL STOCK EXCHANGE.

By---------------------------------------------------------------------
BOSTON STOCK EXCHANGE, INC.

By---------------------------------------------------------------------
NEW YORK STOCK EXCHANGE LLC.

By---------------------------------------------------------------------
CHICAGO BOARD OPTIONS EXCHANGE, INC.

By---------------------------------------------------------------------
NYSE ARCA, INC.

By---------------------------------------------------------------------
CHICAGO STOCK EXCHANGE, INC.

By---------------------------------------------------------------------
PHILADELPHIA STOCK EXCHANGE, INC.

By---------------------------------------------------------------------
NASDAQ STOCK MARKET LLC.

[FR Doc. 06-8543 Filed 10-5-06; 8:45 am]

BILLING CODE 8011-01-P