Document ID: SEC-2006-1308-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC. et al.
Posted Date: 2006-10-06T04:00Z

[Federal Register: October 6, 2006 (Volume 71, Number 194)]
[Notices]               
[Page 59159-59161]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06oc06-102]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54548; File Nos. SR-Amex-2006-85; SR-BSE-2006-41; SR-
CBOE-2006-80; SR-CHX-2006-28; SR-NASDAQ-2006-038; SR-NSX-2006-11; SR-
NYSEArca-2006-69; SR-Phlx-2006-58]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Boston Stock Exchange, Inc.; Chicago Board Options Exchange, 
Incorporated; Chicago Stock Exchange, Inc.; NASDAQ Stock Market LLC; 
National Stock Exchange, Inc.; NYSE Arca, Inc., and Philadelphia Stock 
Exchange, Inc.; Notice of Filing and Order Granting Accelerated 
Approval to Proposed Rule Changes Relating to Exchange to Exchange 
Billing Under the Linkage Plan

September 29, 2006.
    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 12, 2006, September 22, 2006, September 27, 2006, 
September 26, 2006, September 27, 2006, September 22, 2006, September 
29, 2006, and September 18, 2006 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, Inc. (``NSX''), NYSE Arca, Inc. (``NYSE 
Arca''), and the Philadelphia Stock Exchange, Inc. (``Phlx'') 
(collectively, the ``Exchanges'' and ``Nasdaq''), respectively, filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule changes as described in Items I and II below. The 
Commission is publishing this notice to solicit comments on the 
proposed rule changes, from interested persons, and is approving the 
proposals on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240. 19b-4.
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I. Self-Regulatory Organizations' Statement of the Terms of Substance 
of the Proposed Rule Changes

    The Exchanges and Nasdaq each propose to permit themselves to bill 
directly, and to accept direct billing from, other participants in the 
proposed ``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'') that are 
unable to implement Sponsoring Member billing, as described herein, on 
October 1, 2006.
    These proposals do not require changes to the Exchanges' or 
Nasdaq's respective rule texts.

II. Self-Regulatory Organizations' Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Changes

    In their filings with the Commission, each Exchange and Nasdaq 
included statements concerning the purpose of, and basis for, the 
proposed rule changes and discussed any comments it received on the 
proposed rule changes. The text of these statements may be examined at 
the places specified in Item III below. The Exchanges and Nasdaq have 
prepared summaries, set forth in Sections A, B, and C below, of the 
most significant aspects of such statements.

A. Self-Regulatory Organizations' Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Changes

1. Purpose
    On July 17, 2006, the Amex, the BSE, Inc., the CBOE, the CHX, Inc., 
Nasdaq, the NSX, the NYSE, and the NYSE Arca, executed and filed with 
the Commission the Linkage Plan. Phlx subsequently executed the Linkage 
Plan on August 1, 2006.\3\ The Linkage Plan was filed with the 
Commission pursuant to Rule 608 of Regulation NMS under the Act.\4\ The 
purpose of the proposed Linkage Plan is to enable the Linkage Plan 
participants to act jointly in planning, developing, operating and 
regulating the NMS Linkage System (``Linkage'') that will 
electronically link the Linkage Plan Participant Markets to one 
another, as described in the Linkage Plan.\5\ The Plan would run 
concurrently with the ITS Plan from October 1, 2006 until February 5, 
2007.
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    \3\ See Securities Exchange Act Release No. 54239 (July 28, 
2006); 71 FR 44328 (August 4, 2006). A Linkage Plan, dated August 1, 
2006, reflecting Phlx's inclusion as a Linkage Plan participant, was 
received by the Commission on August 9, 2006.
    \4\ 17 CFR 242.608.
    \5\ The Commission approved the Linkage Plan today. See 
Securities Exchange Act No. (Sept. 29, 2006). Upon implementation of 
Rule 611 on February 5, 2007, the ITS Plan Participants expect to 
have submitted an amendment to eliminate the ITS Plan.
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    The Linkage Plan provides that orders must be sent to a Participant 
Market through the auspices of a member of that Participant Market 
(``Sponsoring Member''). An order entered through the Linkage must 
specify the member of the destination market (either clearing member or 
default Sponsoring Member).

[[Page 59160]]

Pursuant to the Linkage Plan, each market should maintain within the 
facilities of the Securities Industry Automation Corporation 
(``SIAC''), the facilities manager for the Linkage, a database of 
default Sponsoring Members for after-hours processing and billing for 
orders sent to a market where the originating firm is not a member of 
the market to which the order is sent for execution.
    Historically, ITS Plan Participants have not imposed transaction 
charges for executions of commitments delivered through ITS, although 
the ITS Plan does not prohibit such charges. Under the Linkage Plan, 
each participant would be accessed through its own members and could 
charge for orders executed in its market through the Linkage. The 
destination market would bill the clearing or Sponsoring Member for 
executions in that market, pursuant to that market's transaction fee 
schedule, based on the monthly reports provided by SIAC. Certain 
markets, however, may be unable to supply clearing or Sponsoring Member 
information on orders routed through the Linkage to other markets by 
October 1, 2006. In this case, the Linkage Plan participants have 
agreed to bill each other directly, based on data supplied by SIAC.\6\
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    \6\ The National Association of Securities Dealers, Inc. 
(``NASD'') is not a member of the Linkage Plan. In lieu of direct 
billing to or by the NASD, Linkage Plan participants expect to bill 
Alternative Display Facility (``ADF'') market participants directly 
and would be directly billed by ADF market participants, based upon 
data supplied by SIAC.
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    Example: A member of a self-regulatory organization (``SRO'') A 
that is not a member of SRO B sends an order through the Linkage to SRO 
B for execution. In routing the transaction through the Linkage, SRO A 
is unable to include Sponsoring Member information on the report. The 
transaction will be included in a monthly report provided to SRO B by 
SIAC (without identifying Sponsoring Member information), and SRO B may 
bill SRO A directly for the transaction in accordance with SRO B's 
transaction fee schedule applicable to the Linkage.
2. Statutory Basis
    The Exchanges and Nasdaq believe that the proposed rule changes are 
consistent with Sections 6(b) and 15A of the Act,\7\ in general, and 
further the objectives of Sections 6(b)(5) and 15A(b)(6) of the Act,\8\ 
in particular, in that they are designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, 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.
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    \7\ 15 U.S.C. 78f(b) and 15 U.S.C. 78o.
    \8\ 15 U.S.C. 78f(b)(5) and 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchanges and Nasdaq believe that the proposed rule changes 
will impose no 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

    The Exchanges and Nasdaq have neither solicited nor received 
comments on these proposals.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
changes are 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 rule-comments@sec.gov. Please include 

File Numbers SR-Amex-2006-85; SR-BSE-2006-41; SR-CBOE-2006-80; SR-CHX-
2006-28; SR-NASDAQ-2006-038; SR-NSX-2006-11; SR-NYSEArca-2006-69; and 
SR-Phlx-2006-58 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Numbers SR-Amex-2006-85; SR-
BSE-2006-41; SR-CBOE-2006-80; SR-CHX-2006-28; SR-NASDAQ-2006-038; SR-
NSX-2006-11; SR-NYSEArca-2006-69; and SR-Phlx-2006-58. These file 
numbers 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 submissions, all subsequent amendments, all 

written statements with respect to the proposed rule changes that are 
filed with the Commission, and all written communications relating to 
the proposed rule changes 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 the 
filings also will be available for inspection and copying at the 
principal offices of Amex, BSE, CBOE, CHX, Nasdaq, NSX, NYSE Arca, and 
Phlx. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Numbers SR-
Amex-2006-85; SR-BSE-2006-41; SR-CBOE-2006-80; SR-CHX-2006-28; SR-
NASDAQ-2006-038; SR-NSX-2006-11; SR-NYSEArca-2006-69; and SR-Phlx-2006-
58 and should be submitted on or before October 27, 2006.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Changes

    After careful consideration, the Commission finds that the proposed 
rule changes are consistent with the requirements of the Act and the 
rules and regulations thereunder, applicable to a national securities 
exchange and a national securities association.\9\ In particular, the 
Commission finds that the proposals are consistent with the provisions 
of Section 6(b)(5) \10\ and 15A(b)(6) \11\ in that they are designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, 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.
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    \9\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. See 
U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 15 U.S.C. 78o-3(b)(6).
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    The Linkage Plan, the purpose of which is to enable its 
participants to act jointly in planning, developing, operating and 
regulating the NMS Linkage System electronically linking

[[Page 59161]]

the Linkage Plan Participant Markets to one another, has been approved 
and will become operative on October 1, 2006. The Linkage Plan provides 
for a mechanism for charging for orders executed in each Participant 
Market using the information about a clearing or Sponsoring Member. 
Certain markets have indicated that they may be unable to supply 
clearing or Sponsoring Member information on orders routed through the 
Linkage to other markets, thus under these proposed rule changes, the 
participants have agreed to bill each other directly, based on data 
supplied by SIAC.
    The Exchanges and Nasdaq each have requested that the Commission 
approve their proposed rule changes on an accelerated basis. The 
Exchanges and Nasdaq state that they expect the Linkage Plan to become 
operative on October 1, 2006, and that accelerated approval would 
permit each Exchange and Nasdaq to implement exchange to exchange 
billing procedures at the start of the Linkage Plan's operation, 
allowing Linkage Plan participants who do not have a Sponsoring Member 
at each destination market, to use the Linkage Plan and pay fees 
directly to the other Linkage Plan participants.
    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act, for approving the proposed rule changes prior to the thirtieth 
day after the date of publication of notice in the Federal Register. 
Granting accelerated approval would permit the Exchanges and Nasdaq to 
implement exchange to exchange billing procedures at the start of the 
Linkage Plan's operation enabling Linkage Plan participants who were 
not able to find a Sponsoring Member at each of the destination 
markets, to use the Linkage Plan and pay fees directly to another 
Linkage Plan participant.
    Accordingly, the Commission finds that there is good cause, 
consistent with Section 19(b)(2) of the Act, to approve the proposed 
rule changes on an accelerated basis.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule changes (SR-Amex-2006-85; SR-BSE-2006-41; SR-
CBOE-2006-80; SR-CHX-2006-28; SR-NASDAQ-2006-038; SR-NSX-2006-11; SR-
NYSEArca-2006-69; SR-Phlx-2006-58) are hereby approved on an 
accelerated basis.
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    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
Nancy M. Morris,
Secretary.
 [FR Doc. E6-16565 Filed 10-5-06; 8:45 am]

BILLING CODE 8011-01-P