13146 Federal Register / Vol. 72, No. 53 / Tuesday, March 20, 2007 / Notices 

9For purposes only of waiving the 30-day 

operative delay of this proposal, the Commission 

has considered the propose rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

10 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Release Act 55179 

(January 26, 2007), 72 FR 05091 (February 2, 2007). 

4See Letter from Christopher Cornette, Member, 

Amex, to Florence E. Harmon, Deputy Secretary, 

Commission, received February 14, 2007. 

5See Letter from Claire P. McGrath, Senior Vice 

President & General Counsel, Amex, to Nancy M. 

Morris, Secretary, Commission, dated March 12, 

2007 (‘‘Amex Response Letter’’). 

6See Securities Exchange Act Release No. 54552 

(September 29, 2006), 71 FR 59546 (October 10, 

2006). 

7For example, assume that a Specialist’s bid for 

1,000 shares is part of the Amex best bid and there 

are no better-priced protected quotations at other 

trading centers. The Specialist has a PPI order to 

buy 3,000 shares priced one tick better than the 

Amex best bid. Assume that an incoming market 

order to sell 3,000 shares is received by AEMI. The 

system would execute 1,000 shares against the 

Specialist’s PPI order, and the remainder would 

execute one tick down at the Amex best bid (based 

on the Exchange’s rules of priority and parity). The 

remaining size of the PPI order (2,000 shares) is 

ignored because the PPI order may execute only up 

to the size of the Specialist’s displayed bid at the 

APQ. 

Commission designates the proposal to 

be operative upon filing with the 

Commission.9

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 

necessary of appropriate in the public 

interest, for the protection of investors, 

or otherwise in the furtherance of the 

purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is 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 rulecomments@sec.gov. Please include File 

No. SR–Amex–2007–30 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

Station Place, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–Amex–2007–30. This file 

number 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 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change 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 filing also will be 

available for inspection and copying at 

the principal office of Amex. 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 

Number SR–Amex–2007–30 and should 

be submitted on or before April 10, 

2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.10

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–4978 Filed 3–19–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55464; File No. SR–Amex–

2007–08] 

Self-Regulatory Organizations; 

American Stock Exchange LLC; Order 

Granting Approval of a Proposed Rule 

Change to Establish a Passive Price 

Improvement Order for Specialists and 

Registered Traders 

March 13, 2007. 

I. Introduction 

On January 19, 2007, the American 

Stock Exchange LLC (‘‘Amex’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change pursuant to Section 19(b)(1) of 

the Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder.2

The proposed rule change was 

published for comment in the Federal 

Register on February 2, 2007.3 The 

Commission received one comment 

letter.4 On March 12, 2007, Amex 

submitted a response to the comment 

letter.5 This order approves the 

proposed rule change. 

II. Description of the Proposal 

Amex proposes to amend the rules for 

its AEMI trading platform 6 to add a 

Passive Price Improvement (‘‘PPI’’) 

order type. PPI orders are undisplayed 

orders that, to execute, would have to be 

inside the automated best bid and offer 

of the Exchange (also referred to as the 

‘‘Amex Published Quote’’ or ‘‘APQ’’) by 

at least a tick. They would be the only 

method for Specialists and Registered 

Traders to offer price improvement 

electronically. A Specialist or Registered 

Trader would have to have at least one 

active quote on a particular side of a 

security on the AEMI book to enter and 

maintain a PPI order in the same 

security on the same side. A Specialist 

or Registered Trader that meets this 

quoting requirement could enter only 

one PPI order on each side for a 

security. A PPI order could not form 

part of the APQ and would be visible 

only to the entering Specialist or 

Registered Trader (or his firm). 

AEMI would make a PPI order eligible 

for execution if at least one of the 

following conditions were met: 

1. The Specialist’s or Registered 

Trader’s displayed quote is at the APQ 

on the side of the PPI order that would 

be executed. In this case, the PPI order 

would be executed up to (a) the size of 

the Specialist’s or Registered Trader’s 

displayed quote on that side or (b) the 

size of the incoming order, whichever is 

smaller. 

2. The Specialist’s or Registered 

Trader’s displayed quote is one tick 

away from the APQ on the side of the 

PPI order that would be executed. In 

this case, the PPI order would be 

executed up to (a) half of the size of the 

Specialist’s or Registered Trader’s 

displayed quote on that side or (b) the 

size of the incoming order, whichever is 

smaller. 

The AEMI system would ignore (i.e., 

make ineligible for execution against an 

otherwise marketable aggressing order, 

without canceling) the remaining size of 

a PPI order beyond the thresholds 

described above.7 The AEMI system 

would also ignore a PPI order in the 

following circumstances: 

• The PPI order locks or crosses the 

automated NBBO or APQ as a result of 

a change in the automated NBBO or 

APQ; 

• The PPI order equals the APQ on 

the same side of the market; 


pwalker on PROD1PC71 with NOTICES
Federal Register / Vol. 72, No. 53 / Tuesday, March 20, 2007 / Notices 13147 

8Amex Response Letter at 1. 

9 In approving this proposed rule change, the 

Commission notes that it has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

10 15 U.S.C. 78f(b)(5). 

11See Securities Exchange Act Release Nos. 

53539 (March 22, 2006), 71 FR 16353, 16381–82 

(March 31, 2006) (‘‘NYSE Hybrid Approval Order’’) 

and 54511 (September 25, 2006), 71 FR 58460 

(October 3, 2006). 

12See 71 FR at 16382. 

13Amex Response Letter at 1. 

14 15 U.S.C. 78s(b)(2). 

15 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A)(ii). 

4 17 CFR 240.19b–4(f)(2). 

• There is a negotiated trade; or 

• AEMI’s auto-execution 

functionality is disabled. 

In addition, the AEMI system would 

cancel a PPI order in three 

circumstances: (1) if the Specialist’s or 

Registered Trader’s best quote is 

withdrawn; (2) at the end of the day; or 

(3) there is a trading halt in the security. 

If there were multiple PPI orders at 

the same price, the Specialist’s PPI 

order would have priority, and any 

remaining size of an aggressing order 

would be executed against Registered 

Trader PPI orders in time priority. 

Intermarket sweep orders would be 

generated as necessary to clear any 

better-priced protected quotations at 

other trading centers before executing 

any PPI orders on the AEMI system. 

To reflect the proposed rule change as 

described above, changes are proposed 

to the following AEMI rules: Rule 123–

AEMI (Manner of Bidding and Offering), 

Rule 131–AEMI (Types of Orders), Rule 

157–AEMI (Orders with More than One 

Broker), and Rule 170–AEMI 

(Registration and Functions of 

Specialists). 

III. Summary of Comments and Amex 

Response 

The Commission received one 

comment letter opposing the proposed 

rule change. The commenter argued that 

limiting the use of PPI Orders to 

Specialists and Registered Traders gives 

them ‘‘an unfair advantage’’ and thus is 

not consistent with Section 6(b) of the 

Act. 

The commenter noted that the 

Specialist would have access to 

aggressing orders that could be priceimproved but Floor Brokers would not. 

The commenter suggested that there 

would be many instances where Floor 

Brokers would be willing to provide 

price improvement but would not 

publicly display such interest in order 

to minimize any potential market 

impact. The commenter also suggested 

that PPI Orders could be misused to 

trade ahead of a Floor Broker’s 

marketable orders instead of providing 

price improvement. 

In its response to comments, Amex 

asserted that Floor Brokers are able to 

operate effectively and compete with 

Specialists and Registered Traders. For 

example, Amex pointed out that Floor 

Brokers have the exclusive use of 

certain order types on AEMI (e.g., 

percentage orders and reserve orders). 

Amex also emphasized that the use of 

PPI Orders would be monitored and 

policed electronically. Amex stated that 

its regulatory program would be able to 

detect possible unfair trading practices. 

Finally, Amex represented that it ‘‘is in 

the process of developing the means by 

which other market participants, 

including floor brokers, would have the 

ability to systematically provide such 

price improvement.’’ 8

IV. Discussion and Commission’s 

Findings 

After careful consideration, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.9 In 

particular, the Commission finds that 

the proposal is consistent with the 

requirements of Section 6(b)(5) of the 

Act,10 which requires, among other 

things, that the Exchange’s rules be 

designed to promote just and equitable 

principles of trade, 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. 

The Commission previously has 

found similar exchange rules to be 

consistent with the Act.11 The 

Commission does not believe that the 

comment raises any issue that would 

preclude approval of the current 

proposal. As the Commission noted in 

the NYSE Hybrid Approval Order, 

Specialists today are permitted to offer 

price improvement to incoming orders 

in the auction market.12 In this 

proposal, Amex seeks to provide its 

Specialists and Registered Traders with 

the ability to continue to offer price 

improvement in an electronic 

environment, but only if certain 

conditions are met. A Specialist’s or 

Registered Trader’s PPI order is eligible 

for execution only if its quote on the 

same side of the market is at or one tick 

away from the APQ. If the Specialist’s 

or Registered Trader’s quotation is at the 

APQ, a PPI order is eligible to execute 

up to the same size as its quotation; if 

it is one tick away from the APQ, the 

PPI order is eligible to execute up to one 

half the size of its quotation. A PPI order 

will be ignored if the Specialist’s or 

Registered Trader’s quotation is more 

than one tick away from the APQ. Thus, 

a Specialist’s ability to benefit from the 

PPI order is directly correlated with the 

extent to which it quotes competitive 

markets in size. The Commission notes, 

moreover, that Amex has represented 

that it ‘‘is in the process of developing 

the means by which other market 

participants, including floor brokers, 

would have the ability to systematically 

provide such price improvement.’’ 13

The Commission further notes that a 

PPI order could execute only against a 

marketable incoming limit order. An 

incoming order that is not marketable 

against a PPI order (or a protected 

quotation) and that improves the APQ 

would be quoted as part of the new 

APQ. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,14 that the 

proposed rule change (SR–Amex–2007–

08), be, and it hereby is, approved. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.15

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–5005 Filed 3–19–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55450; File No. SR–BSE–

2007–11] 

Self-Regulatory Organizations; Boston 

Stock Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of 

Proposed Rule Change To Amend the 

Existing Fee Schedules 

March 13, 2007. 

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 March 2, 

2007, the Boston Stock Exchange, Inc. 

(‘‘BSE’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II and III 

below, which Items have been 

substantially prepared by the Exchange. 

The BSE has designated this proposal as 

one changing a due, fee, or other charge 

under Section 19(b)(3)(A)(ii) of the Act 3

and Rule 19b–4(f)(2) thereunder,4 which 

renders the proposal effective upon 

filing with the Commission. The 

Commission is publishing this notice to 


pwalker on PROD1PC71 with NOTICES