[Federal Register: November 14, 2007 (Volume 72, Number 219)]
[Notices]
[Page 64094-64095]
[DOCID:fr14no07-83]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56761; SR-Amex-2007-65; SR-BSE-2007-45; SR-CBOE-2007-
64; SR-ISE-2007-44; SR-NYSEArca-2007-65]

Self-Regulatory Organizations; American Stock Exchange LLC;
Boston Stock Exchange, Inc.; Chicago Board Options Exchange,
Incorporated; International Securities Exchange, LLC; Order Approving
Proposed Rule Changes; and NYSEArca, Inc.; Order Approving Proposed
Rule Change and Amendment No. 1 Thereto Relating to the Definition of a
Complex Trade

November 7, 2007.

I. Introduction

    On June 27, 2007, September 13, 2007, June 12, 2007, June 1, 2007,
and July 6, 2007, the American Stock Exchange LLC (``Amex''), the
Boston Stock Exchange, Inc. (``BSE''), the Chicago Board Options
Exchange, Incorporated (``CBOE''), the International Securities
Exchange, LLC (``ISE''), and NYSE Arca, Inc. (``NYSE Arca'') (each, an
``Exchange'' and, collectively, the ``Exchanges''), respectively, filed
with the Securities and Exchange Commission (``Commission''), pursuant
to section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'')
\1\ and Rule 19b-4 thereunder,\2\ proposed rule changes to amend each
of their respective rules governing the operation of the Intermarket
Option Linkage (``Linkage'') to modify the definition of ``complex
trade'' to include stock-option trades. On July 11, 2007, NYSE Arca
filed Amendment No. 1 to its proposed rule change.\3\ The proposed rule
changes, as

amended, were published for comment in the Federal Register on October
4, 2007.\4\ The Commission received no comments on the proposed rule
changes. This order approves the proposed rule changes, as amended.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 to SR-NYSEArca-2007-65 effected technical
corrections to the proposed rule change.
    \4\ Securities Exchange Act Release No. 56555 (September 27,
2007), 72 FR 56814.
---------------------------------------------------------------------------

II. Description of the Proposals

    Under section 8(c)(iii)(G) of the Plan for the Purpose of Creating
and Operating an Intermarket Option Linkage (``Linkage Plan''),\5\ the
Linkage Plan participants (``Participants'') may amend the definition
of the term ``complex trade'' from time to time. The Participants have
agreed to change the definition of ``complex trade'' to extend the
associated trade-through liability exemption to cover certain stock-
option trades. Accordingly, each of the Exchanges has submitted a
proposal that would amend each such Exchange's definition of ``complex
trade,'' set forth in the Exchange's respective rules pertaining to the
Linkage, to include the execution of a stock-option order to buy or
sell a stated number of units of an underlying stock or a security
convertible into the underlying stock (``convertible security'')
coupled with the purchase or sale of option contract(s) on the opposite
side of the market representing either (A) the same number of units of
the underlying stock or convertible security, or (B) the number of
units of the underlying stock or convertible security necessary to
create a delta neutral position, but in no case in a ratio greater than
eight option contracts per unit of trading of the underlying stock or
convertible security established for that series by the Options
Clearing Corporation.\6\
---------------------------------------------------------------------------

    \5\ On July 28, 2000, the Commission approved a national market
system plan for the purpose of creating and operating the Linkage
proposed by Amex, CBOE, and ISE. See Securities Exchange Act Release
No. 43086 (July 28, 2000), 65 FR 48023 (August 4, 2000).
Subsequently, the Philadelphia Stock Exchange, Inc. (``Phlx''),
Pacific Exchange, Inc. (n/k/a NYSE Arca, Inc.), and BSE joined 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).
    \6\ The Exchanges propose to amend their respective rules that
define ``complex trade'' for Linkage purposes, namely Amex Rule
940(b)(3), Boston Options Exchange Rule Chapter XII, Section 1(c),
CBOE Rule 6.80(4), ISE Rule 1900(3), and NYSE Arca Rule 6.92(a)(4).
    The Phlx filed a proposed rule change with the Commission to
amend its definitions of ``synthetic option'' and ``complex trade''
to conform such definitions with the related ``stock option'' and
``complex trade'' definitions of the Exchanges. See Securities
Exchange Act Release No. 56608 (October 3, 2007), 72 FR 57985
(October 11, 2007) (SR-Phlx-2007-40). The Commission is approving
proposed rule change SR-Phlx-2007-40 in a separate order today. See
Securities Exchange Act Release No. 56760 (November 7, 2007).
---------------------------------------------------------------------------

III. Discussion

    After careful review, the Commission finds that the proposed rule
changes, as amended, are consistent with the requirements of the Act
and the rules and regulations thereunder applicable to national
securities exchanges.\7\ In particular, the Commission finds that the
proposed rule changes, as amended, are consistent with the provisions
of section 6(b)(5) of the Act,\8\ which requires, among other things,
that national securities exchanges' rules be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to remove impediments to and to perfect
the mechanism of a free and open market and a national market system
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \7\ In approving these proposals, the Commission has considered
the proposed rules' impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission believes that by amending the definition of
``complex trade'' to include certain stock-option orders as described
above, and by providing a consistent definition of ``complex trade'' in
the rules of the Exchanges, the proposals may facilitate the execution
of such complex orders.

IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\9\ that the proposed rule changes (SR-Amex-2007-65; SR-BSE-2007-
45; SR-CBOE-2007-64; SR-ISE-2007-44; SR-NYSEArca-2007-65), as amended,
are approved.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-22165 Filed 11-13-07; 8:45 am]

BILLING CODE 8011-01-P