1 Securities Exchange Act Release No. 42456 (February 24, 2000), 65 FR 11402 (March 2, 2000). On October 19, 1999, the
SEC issued an order directing the exchanges to file a national market system plan for linking the options markets within 90
days. See Securities Exchange Act Release No. 42029 (October 19, 1999), 64 FR 57674 (October 26, 1999).
2 The International Securities Exchange, which the SEC recently approved as a national securities exchange, submitted a plan
identical to the Amex/CBOE Plan.
[11713]
March 9, 2000
TO: EQUITY MARKETS ADVISORY COMMITTEE No. 14-00
SEC RULES COMMITTEE No. 36-00
RE: SEC RELEASE PROPOSING OPTIONS MARKETS LINKAGE PLANS
______________________________________________________________________________
The Securities and Exchange Commission (“SEC”) has published for comment proposed plans
filed by the American Stock Exchange (“Amex”), Chicago Board Options Exchange (“CBOE”), Pacific
Exchange (“PCX”), and Philadelphia Stock Exchange (“Phlx”) for the purpose of creating and operating
an inter-market options linkage.1 The plans reflect consensus on the majority of issues pertaining to a
linkage. Consensus was not achieved, however, on the issues of price/time priority and access to the
linkage. Three separate linkage plans were therefore submitted by the exchanges. The Amex and the
CBOE filed identical plans (the “Amex/CBOE plan”) while the PCX and the Phlx filed separate plans.2
A copy of the SEC’s release is attached. The release requests comment on a broad range of issues
relating to the proposed linkage of the options markets.
Regarding the issue of price/time priority, the Amex/CBOE Plan would not provide for
intermarket price/time priority and would allow an exchange receiving an order to match a better price
that was displayed at another market. The plan filed by the Phlx, however, would impose a strict
price/time priority requirement. Under the Phlx plan, even if an exchange receiving an order is quoting
at the national best bid or offer (“NBBO”), it would not be permitted to trade with that order unless it
were the market that first displayed the best price. It would instead have to route the order to the
market with priority. Finally, the PCX plan would permit an exchange quoting at the NBBO, but not
first in time, to either route the order to the market that was at the NBBO first, or execute the order at a
price better than the NBBO.
2Comments on this proposal are due to the SEC no later than April 3. If you have any
comments you would like the Institute to consider including in a comment letter, please provide
them to Ari Burstein by phone at (202) 371-5408, by fax at (202) 326-5839, or by e-mail at
aburstein@ici.org no later than March 24.
Ari Burstein
Assistant Counsel
Attachment