Over the course of February and March of 2007, the American Stock Exchange LLC, the Boston Stock Exchange, Inc., the Chicago Board Options Exchange, Incorporated and the International Securities Exchange, Inc. (each, an Exchange and, collectively, the Exchanges), respectively, filed with the Securities and Exchange Commission proposed rule changes and amendments thereto pertaining to the Intermarket Options Linkage (Linkage) to conform such rules to Joint Amendment No. 22 of the Plan for the Purpose of Creating and Operating an Intermarket Option Linkage.
The Exchanges propose to reduce the “turn-around” times in the Linkage to 5 seconds. Consequently, if a member of an Exchange does not receive a response to its linkage order (i.e., P/A Order and Principal Order) within 5 seconds, that member would be able to reject any response claiming to be an execution received thereafter. The member also would be able to trade through the Exchange that failed to respond within 5 seconds. Correspondingly, if a member of one Exchange responds to the Linkage Order more than 5 seconds after receiving that order, and the Exchange that sent the Linkage Order cancels such response, the member would be required to cancel any trade resulting from that order.
The SEC stated that reducing the time required by an Exchange to respond to a linkage order and reducing the amount of time a member sending a linkage order must wait before trading through a non-responsive Exchange should facilitate the more timely execution of orders across the Exchanges.