Federal Register / Vol. 73, No. 153 / Thursday, August 7, 2008 / Notices 46099 

9 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

members and persons associated with 

its members of the Exchange shall be 

appropriately disciplined for violation 

of the securities laws, the rules or 

regulations thereunder, or the rules of 

the Exchange; provide a fair procedure 

for imposition of such discipline; and 

ensure that a record is kept of such 

proceedings. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The proposed rule change does not 

impose any 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 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 35 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve such proposed 

rule change, or 

(B) Institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

The Exchange is targeting August 29, 

2008 for the closing date of the 

Transaction, and has requested that the 

Commission accelerate effectiveness of 

SR–Amex–2008–62 pursuant to Section 

19(b)(2) to a date no later than August 

29, 2008, if necessary in order to 

facilitate that timetable. To the extent 

the Commission determines to grant 

such request, the Exchange further 

requests that the instant filing be given 

similar accelerated treatment, to insure 

that proposed Rule 478T becomes 

operative and effective simultaneously 

with the other new disciplinary rules for 

the Exchange proposed in SR–Amex–

2008–62. 

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 

Number SR–Amex–2008–64 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549. 

All submissions should refer to File 

Number SR–Amex–2008–64. 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, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of such filing also will be 

available for inspection and copying at 

the principal office of the Exchange. 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–2008–64 and should 

be submitted on or before August 28, 

2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–18147 Filed 8–6–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58272; File No. SR–Amex–

2008–61] 

Self-Regulatory Organizations; 

American Stock Exchange LLC; Notice 

of Filing and Immediate Effectiveness 

of a Proposed Rule Change Relating to 

the Listing and Trading of BroadBased Index Binary Options 

July 31, 2008. 

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 July 29, 

2008, the American Stock Exchange LLC 

(the ‘‘Amex’’ or the ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared substantially by the 

Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to list and 

trade binary options based on certain 

broad-based indexes. 

The text of the proposed rule change 

is available at the Amex’s principal 

office, the Commission’s Public 

Reference Room, and http:// 

www.amex.com. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Amex included statements concerning 

the purpose of, and basis for, the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. The Exchange has 

prepared summaries, set forth in 

Sections A, B, and C below, of the most 

significant aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of this proposed rule 

change is to enable the listing and 

trading on the Exchange of binary 

options on certain broad-based 


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3A ‘‘broad stock index group’’ (referred to as a 

broad-based index) is defined in Amex Rule 

900C(b)(1) as a stock index group relating to a stock 

index which reflects representative stock market 

values or prices of a broad segment of the stock 

market. 

4See Securities Exchange Act Release No. 56251 

(August 14, 2007), 72 FR 46523 (August 20, 2007) 

(order approving File No. SR–Amex–2004–27). 

indexes.3 Currently, the Amex lists and 

trades a particular binary option called 

a Fixed Return OptionSM (‘‘FRO’’ or 

‘‘Fixed Return Option’’) on underlying 

individual stocks and exchange-traded 

fund (‘‘ETF’’) shares.4 FROs are not 

currently listed and traded on securities 

indexes. 

Binary options will have an exercise 

settlement amount that is equal to the 

applicable exercise settlement value 

multiplied by the applicable contract 

multiplier. The exercise settlement 

value will be an amount determined by 

the Exchange on a class-by-class basis 

and will be greater or equal to $10 and 

less than or equal to $1,000. The 

contract multiplier will also be 

established on a class-by-class basis and 

will be at least 1. Binary options are 

automatically exercised if the settlement 

value of the underlying index equals, 

exceeds, or is less than the exercise 

price, depending on the type of the 

option (i.e., call or put). Binary options 

will be based on the same framework as 

existing standardized options that are 

traded on the Amex and the other 

options exchanges; however, the payout 

of a binary option is an amount that is 

contingent upon the occurrence of the 

option being ‘‘in-’’ or ‘‘at-the-money’’

versus the degree to which the option is 

‘‘in-the-money.’’ As a result, the payout 

at expiration will be an ‘‘all-or-nothing’’

occurrence. 

Characteristics of Binary Options 

The proposed binary options will be 

European-style and will have an 

exercise settlement amount that is based 

on the exercise price in relation to the 

settlement value of the underlying 

broad-based index at expiration. After a 

particular binary option class has been 

approved for listing and trading on the 

Exchange, the Exchange may open for 

trading series of options on that class. In 

order to afford investors maximum 

flexibility, binary option series may 

expire from one day up to 36 months 

from the time that they are listed. Binary 

options will be quoted based on the 

existing strike intervals utilized for 

traditional index options (e.g., $2.50 per 

contract if the index is below 200 and 

$5.00 per contract is the index is above 

200) with minimum price variations, 

established by class, to be no less than 

$0.01. 

At expiration, the option will pay out 

an exercise settlement amount that is 

equal to the exercise settlement value 

multiplied by the contract multiplier. 

Unlike traditional index options, the 

value of the payout is not affected by the 

magnitude of the difference between the 

underlying index and the exercise price. 

Rather, the payout will be a set amount 

contingent upon whether the settlement 

value of the underlying index is: (1) 

Equal to or above the exercise price at 

expiration for call binary options; or (2) 

below the exercise price at expiration 

for put binary options. 

The OTC Market. Binary options have 

been traded in the over-the-counter 

(‘‘OTC’’) market for many years. 

However, OTC binary options have 

several disadvantages. OTC binary 

options are typically offered by an 

institution on a non-fungible basis so 

the customer can only purchase or close 

out the option from the particular 

institution that is issuing the option. As 

a result, OTC binary options lack 

transparency and a trading market 

(liquidity). The Amex’s proposal is 

intended to provide the market for 

binary options with a standardized 

product without the credit risk of an 

individual issuer. By providing a listed 

and standardized market for a class of 

binary options, the Exchange seeks to 

attract investors who desire a binary 

option but at the same time prefer the 

certainty and safeguards of a regulated 

and standardized marketplace. Binary 

options are designed to be a simplified 

version of traditional, exchange-traded 

options and to provide investors with a 

simple product with an easy to 

understand risk profile. 

Simplicity. Binary options are easier 

to understand and utilize than 

traditional options because of the 

manner of their payout (i.e., a set 

exercise settlement amount if the 

underlying closes at, below, or above 

the exercise price) and because they are 

cash-settled. A significant benefit of a 

binary option is that the buyer and 

writer of the option know the expected 

return at the time of purchase if the 

underlying index performs as expected. 

In contrast, the ‘‘traditional’’ option 

does not typically have a known return 

at the time of purchase, i.e., the return 

cannot be accurately determined until 

the option is nearing expiration due to 

price movements. In addition, because 

the return on the binary option is a set 

amount, a buyer of a binary option does 

not need to determine the absolute 

magnitude of the underlying index’s 

price movement relative to the exercise 

price, as is the case with traditional 

options. 

Risk Transparency. In addition, 

unlike traditional options where a 

writer has unlimited risk, the maximum 

obligation in connection with a binary 

option is known when the contract is 

written. And, unlike with an OTC 

binary option, counter-party credit risk 

is significantly reduced through the 

issuance and guarantee of the contracts 

by The Options Clearing Corporation 

(‘‘OCC’’). 

Liquidity. As an exchange-traded 

option, binary options will have the 

advantage of liquidity provided by 

Amex specialists, registered options 

traders (‘‘ROTs’’), supplemental 

registered options traders (‘‘SROTs’’), 

and remote registered options traders 

(‘‘RROTs’’), and, therefore, spreads 

should be tighter than exists in the OTC 

market. Further, the Exchange believes 

that standardization will enable more 

interested parties to become market 

participants. Therefore, the Exchange 

believes that the proposal offers a more 

transparent and level playing field than 

the OTC market. 

Discussion of Particular Rules 

Definitions. Proposed Rule 900BIN 

includes new proposed definitions 

applicable to binary options set forth in 

Rule 900BIN(b). In particular, the terms 

‘‘binary option,’’ ‘‘exercise price,’’

‘‘exercise settlement amount,’’ ‘‘contract 

multiplier,’’ and ‘‘reporting authority’’

are proposed to be defined. In addition, 

the term ‘‘call binary option’’ is 

proposed to be defined to mean an 

option that returns an exercise 

settlement amount if the settlement 

value of the underlying broad-based 

index is at or above the exercise price 

at expiration (i.e., in- or at-the-money). 

Also, the term ‘‘put binary option’’ is 

defined to mean an option that returns 

an exercise settlement amount if the 

settlement value of the underlying 

broad-based index is below the exercise 

price at expiration (i.e., in-the-money). 

Further, the term ‘‘settlement value’’

is defined to mean the value of the 

underlying broad-based index that is 

used to determine whether a binary 

option is in-, at-, or out-of-the-money. 

For binary options on a broad-based 

index on which traditional options on 

the same broad-based index are A.M.- 

settled, the ‘‘settlement value’’ is the 

reported opening level of such index as 

derived from the prices of the 

underlying securities on such day and 

as reported by the reporting authority 

for the index. For binary options on a 

broad-based index on which traditional 

options on the same broad-based index 

are P.M.-settled, the ‘‘settlement value’’

is the reported closing level of such 

index as derived from the prices of the 


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Federal Register / Vol. 73, No. 153 / Thursday, August 7, 2008 / Notices 46101 

5The Exchange recently filed a proposed rule 

change to slightly modify its margin requirements 

relating to FROs. Once approved by the 

Commission, the FRO margin requirements will be 

identical to the proposed margin rules for binary 

options. See File No. SR–Amex–2008–46. 

6Pursuant to Amex Rule 462(d)2.(F), the 

Exchange has the ability to determine at any time 

to impose higher margin requirements than those 

described above in respect of any binary option 

position when it deems such higher margin 

requirements are appropriate. 

underlying securities on such day and 

as reported by the reporting authority 

for the index. 

Designation of Binary Option 

Contracts and Maintenance Listing 

Standards. Proposed Rule 901BIN 

(Designation of Binary Options 

Contracts) provides that the Exchange 

may from time to time approve for 

listing and trading on the Exchange 

binary options on a broad-based index 

which has been selected in accordance 

with Commentary.02 to Rule 901C. 

Binary options will be a separate class 

from other options overlying the same 

broad-based index. Proposed Rule 

915BIN also provides that only binary 

option contracts approved by the 

Exchange and currently open for trading 

on the Exchange may be purchased or 

sold on the Exchange. Binary options 

dealt in on the Exchange will be 

designated as to expiration date, 

exercise price, exercise settlement 

value, contract multiplier, and 

underlying index. 

Binary options on broad-based 

indexes for which traditional options on 

the same broad-based index are A.M.- 

settled will be A.M.-settled, and binary 

options on broad-based indexes for 

which traditional options on the same 

broad-based index are P.M.-settled will 

be P.M.-settled. To the extent possible, 

the Exchange will recognize and treat 

binary options like existing 

standardized options. Standardized 

systems for listing, trading, transmitting, 

clearing, and settling options, including 

systems used by the OCC, will be 

employed in connection with binary 

options. In addition, binary options will 

have a symbology based on the current 

system, so that symbols are created that 

represent the expiration date, exercise 

price, exercise settlement value, and 

underlying index. 

Proposed Rule 901BIN provides that 

after a particular binary option has been 

approved for listing and trading on the 

Exchange, the Exchange may open for 

trading series of options on that class. 

Binary option series may be designated 

to expire from one day up to 36 months 

from the time that they are listed. The 

Exchange may add new series of options 

of the same class as provided for in Rule 

903C and the related Commentaries. 

Additional series of the same binary 

option class may be opened for trading 

on the Exchange when the Exchange 

deems it necessary to maintain an 

orderly market or to meet customer 

demand. The opening of a new series of 

binary options on the Exchange will not 

affect any other series of options of the 

same class previously opened. Proposed 

Rule 915BIN (Maintenance Listing 

Standards) provides that the 

maintenance listing standards set forth 

in Rule 901C and related Commentaries 

will be applicable to binary options on 

broad-based indexes. 

Margin Requirements. The Exchange 

is proposing to add Rule 462(d)11 to 

include requirements applicable to 

binary options. The proposed margin 

requirements are substantially similar to 

the current margin requirements 

applicable to FROs.5

For a Margin Account, no binary 

option carried for a customer shall be 

considered of any value for purposes of 

computing the margin required in the 

account of such customer. The initial 

and maintenance margin required on 

any binary option carried long in a 

customer’s account is 100% of the 

purchase price of such binary option 

(i.e., the premium). In connection with 

short positions in binary options, the 

customer margin required is the exercise 

settlement amount. As for spreads, no 

margin is required on a binary call 

option (put option) carried short in a 

customer’s account that is offset by a 

long binary call option (put option) for 

the same underlying security or 

instrument that expires at the same time 

and has an exercise price that is less 

than (greater than) the exercise price of 

the short call (put). The long call (put) 

must be paid for in full. As for a 

straddle/combination, when a binary 

call option is carried short in a 

customer’s account and there is also 

carried a short binary put option that 

expires at the same time and has an 

exercise price that is less than or equal 

to the exercise price of the short call, the 

initial and maintenance margin required 

is the exercise settlement amount 

applicable to one contract. 

For a cash account, a binary option 

carried short in a customer’s account 

will be deemed a covered position, and 

eligible for the cash account, if either 

one of the following is held in the 

account at the time the option is written 

or is received into the account promptly 

thereafter: (i) Cash or cash equivalents 

equal to 100% of the exercise settlement 

amount; (ii) a long binary option of the 

same type (put or call) for the same 

underlying security or instrument that is 

paid for in full and expires at the same 

time, and has an exercise price that is 

less than the exercise price of the short 

in the case of a call or greater than the 

exercise price of the short in the case of 

a put; or (iii) an escrow agreement. The 

escrow agreement must certify that the 

bank holds for the account of the 

customer as security for the agreement 

(A) cash, (B) cash equivalents, (C) one 

or more qualified equity securities, or 

(D) a combination thereof having an 

aggregate market value of not less than 

100% of the exercise settlement amount, 

and that the bank will promptly pay the 

member organization the cash 

settlement amount in the event the 

account is assigned an exercise notice. 

The Exchange believes that these 

proposed levels are appropriate because 

risk exposure is limited with binary 

options and the proposed customer 

initial and maintenance margin is equal 

to the maximum risk exposure.6

Limitations of Liability of the 

Exchange. The Exchange proposes in 

Rule 902BIN to apply the limitation of 

liability provision set forth in Rule 902C 

to binary options. 

Position Limits, Position Reporting 

Requirements, No Exercise Limits, and 

Other Restrictions. The Exchange is 

proposing a two-pronged approach to 

determine position limits for binary 

options. In determining compliance 

with Rule 904C, the Exchange proposes 

a fixed position limit of 15,000 contracts 

for binary options on a broad-based 

index for which traditional options on 

the same broad-based index have no 

position limit, provided that the 

exercise settlement amount is $10,000. 

For binary options that have an exercise 

settlement amount that is not equal to 

$10,000, the position limit will be 

15,000 times the ratio of 10,000 to the 

exercise settlement amount (e.g., if the 

binary option exercise settlement 

amount is $1,000, then the position 

limit is 150,000 contracts. If the binary 

option exercise settlement amount is 

$12,000, then the position limit is 

12,500 contracts). 

The Exchange proposes a formulaic 

position limit for binary options on a 

broad-based index for which traditional 

options on the same broad-based index 

have a position limit. The formulaic 

position limit will be calculated in 

accordance with the following 

methodology: (1) Determine the Market 

Capitalization of the S&P 500 Index; (2) 

determine the Market Capitalization of 

the broad-based index underlying the 

binary option; (3) calculate the Market 

Capitalization Ratio of the broad-based 

index underlying the binary option to 

the Market Capitalization of the S&P 500 

Index. The position limit for binary 

options subject to a formulaic limit with 


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46102 Federal Register / Vol. 73, No. 153 / Thursday, August 7, 2008 / Notices 

an exercise settlement amount of 

$10,000 will be: (i) 10,000 contracts if 

the Market Capitalization Ratio is 

greater than or equal to 0.50; (ii) 5,000 

contracts if the Market Capitalization 

Ratio is less than 0.50 but greater than 

or equal to 0.25; (iii) 2,500 contracts if 

the Market Capitalization Ratio is less 

than 0.25 but greater than or equal to 

0.10. The Exchange will seek 

Commission approval prior to 

establishing position limits for binary 

options on broad-based indexes that 

have a Market Capitalization Ratio that 

is less then 0.10. For binary options that 

have an exercise settlement amount that 

is not equal to $10,000, the position 

limit will be the ratio of 10,000 to the 

exercise settlement amount multiplied 

by the applicable formulaic limit. 

Proposed Rule 904BIN also provides 

that positions in binary options on the 

same broad-based index and/or an ETF 

tracking that broad-based index will be 

aggregated, irrespective of whether the 

positions have different exercise 

settlement amounts. In determining 

compliance with the position limits set 

forth in proposed Rule 904BIN, binary 

options will not be aggregated with nonbinary option contracts on the same or 

similar underlying security or broadbased index. In addition, binary options 

on broad-based indexes will not be 

aggregated with non-binary option 

contracts and/or Fixed Return Options 

on an underlying stock or stocks 

included within such broad-based 

index, and binary options on one broadbased index will not be aggregated with 

binary options on any other broad-based 

index. For purposes of the position 

limits established under proposed Rule 

904BIN, long positions in put binary 

options and short positions in call 

binary options will be considered to be 

on the same side of the market; and 

short positions in put binary options 

and long positions in call binary options 

will be considered to be on the same 

side of the market. 

Binary options will not be subject to 

the hedge exemption to the standard 

position limits found in Rule 904. 

Under proposed Rule 904BIN, the 

following qualified hedge exemption 

strategies and positions will be exempt 

from the established binary option 

position limits: (1) A binary option 

position ‘‘hedged’’ or ‘‘covered’’ by an 

appropriate amount of cash to meet the 

settlement obligation (e.g., $1,000 for a 

binary option with an exercise 

settlement amount of $1,000), (2) a 

binary option position ‘‘hedged’’ or 

‘‘covered’’ by a sufficient amount of a 

related or similar security to meet the 

settlement obligation, or (3) a binary 

option position ‘‘hedged’’ or ‘‘covered’’

by a traditional option covering the 

same underlying broad-based index 

sufficient to meet the settlement 

obligation. Binary options will not be 

subject to exercise limits due to the fact 

that they are European-style options and 

are automatically exercised at expiration 

if the settlement value of the underlying 

index is equal to or greater than the 

exercise price of a call binary option or 

less than the exercise price in the case 

of a put binary option. Proposed Rule 

905BIN confirms this. 

Proposed Rule 906BIN (Reporting of 

Positions) provides that positions in 

binary options shall be reported 

pursuant to Rule 906C (meaning the 

minimum position in the account which 

must be reported is 200 or more binary 

options). In computing reportable binary 

options positions under Rule 906C, 

positions in binary options will be 

reported to the Exchange when an 

account establishes an aggregate same 

side of the market position of 200 or 

more binary options, with the 

aggregation of position in accordance 

with Rule 904BIN. The Exchange 

believes that the reporting requirements 

and the surveillance procedures for 

hedged positions will enable the 

Exchange to closely monitor sizable 

positions and corresponding hedges. 

Proposed Rule 909BIN provides that 

binary options are subject to Rule 909C 

except for Commentaries .01 and.02 to 

Rule 909C because such Commentaries 

are relevant only for options that are 

settled by delivery of an underlying 

security. 

Determination of Exercise Price. The 

Exchange proposes in Rule 910BIN to 

provide that the determination of 

whether binary options are in-, at-, or 

out-of-the-money at expiration will be a 

function of the settlement value of the 

underlying broad-based index in 

relation to the type of binary option (i.e., 

put or call) and the exercise price. 

Trading Mechanics for Binary 

Options. The Exchange intends to trade 

binary options similar to the manner in 

which it trades other index options. 

Under the proposed rules, trading in 

binary options will be conducted in the 

following manner: 

• Trading Rotations, Halts, and 

Suspension of Trading (Proposed Rule 

918BIN): The trading rotation, halt, and 

suspension procedures contained in 

existing Rule 918C will be applicable to 

binary options. 

• Premium Bids and Offers; 

Minimum Increments; Priority and 

Allocation (Proposed Rule 951BIN): All 

bids and offers will be deemed to be for 

one contract unless a specific number of 

option contracts is expressed in the bid 

or offer. A bid or offer for more than one 

option contract which is not made allor-none will be deemed to be for that 

amount or any lesser number of options 

contracts. An all-or-none bid or offer 

will be deemed to be made only for the 

amount stated. All bids and offers made 

for binary option contracts related to an 

underlying index will be governed by 

Rules 951—ANTE (Premium Bids and 

Offers), Rule 951C (Minimum Price 

Variation), Rule 954 (Units of Trading), 

Rule 935—ANTE (Allocation of 

Executed Contracts), and Commentary 

.04 to Rule 950—ANTE(l) (Allocation of 

Executed Contracts Outside of ANTE), 

as applicable. The minimum price 

variation will be established on a classby-class basis by the Exchange and will 

not be less than $0.01. The rules of 

priority and order allocation procedures 

set forth in Rules 935—ANTE and 

Commentary .04 to Rule 950—ANTE(l) 

will apply to binary options. 

• Maximum Bid-Ask Differentials; 

Market-Maker Appointments and 

Obligations (Proposed Rule 952BIN): 

Proposed Rule 952BIN provides that 

specialists, ROTs, SROTs, and RROTs 

are expected to bid and offer so as to 

create differences of no more than 25% 

of the designated exercise settlement 

value between the bid and offer for each 

binary option contract or $5.00, 

whichever amount is wider, except 

during the last trading day prior to the 

expiration, where the maximum 

permissible price differential for binary 

options may be 50% or $5.00, 

whichever amount is wider. 

The allocation of securities to 

specialists and appointment of ROTs, 

SROTs, and RROTs in connection with 

binary option classes will be the same 

as the appointments for other options, 

as set out in existing Rule 27 (Specialist) 

and Rule 958—ANTE (ROTs, SROTs, 

and RROTs). 

• Automatic Exercise of Binary 

Option Contracts (Proposed Rule 

980BIN): Proposed Rule 980BIN 

provides that binary options will be 

automatically exercised at expiration if 

the settlement value of the underlying 

broad-based index is equal to or greater 

than the exercise price of a call binary 

option or less than the exercise price in 

the case of a put binary option. Rules 

981 and 982 will be inapplicable to 

binary options. 

• FLEX Trading Rules (Proposed Rule 

981BIN): Proposed Rule 981BIN 

provides that binary options will be 

eligible for trading as Flexible Exchange 

Options as provided for in Rules 900G 

et al. For purposes of Rule 903G, the 

applicable exercise settlement amount 

will be designated by the parties to the 

contract, the parties to the contract 

cannot designate an Exercise Style other 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 73, No. 153 / Thursday, August 7, 2008 / Notices 46103 

7See Securities Exchange Act Release No. 56875 

(November 30, 2007), 72 FR 69274 (December 7, 

2007) (File No. SR–OCC–2007–08). 

8See Securities Exchange Act Release No. 58043 

(June 26, 2008), 73 FR 38260 (July 3, 2008) (File No. 

SR–ODD–2008–02). 

9 15 U.S.C. 78f(b). 

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

11 17 CFR 240.19b–4(f)(6)(iii). 

12 15 U.S.C. 78s(b)(3)(A). 

13 17 CFR 240.19b–4(f)(6). 

14For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposal’s impact on efficiency, competition, and 

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

15See Securities Exchange Act Release No. 57850 

(May 22, 2008), 73 FR 31169 (May 30, 2008) (order 

approving File No. SR–CBOE–2006–105). 

than European-style, and the term 

‘‘index multiplier’’ as used in those 

rules will refer to the ‘‘contract 

multiplier’’ as defined in Rule 900BIN. 

Rule 906G will not apply to binary 

options and the position limit 

methodology set forth in Rule 904BIN 

shall apply. Rule 904G(g), regarding 

minimum quote width, will not apply to 

binary options and the minimum quote 

width set forth in Rule 952BIN will 

apply. 

OCC Rule Filing; Options Disclosure 

Document 

The OCC has amended its By-Laws 

and Rules to accommodate the listing 

and trading of binary options.7 The 

Exchange is also aware that OCC filed 

revisions to the Options Disclosure 

Document (‘‘ODD’’) in order to 

accommodate binary options. The 

Commission recently approved the ODD 

revisions.8

Systems Capacity 

The Amex believes the Exchange and 

the Options Price Reporting Authority 

have the necessary systems capacity to 

handle the additional traffic associated 

with the listing and trading of binary 

options. The Exchange does not 

anticipate that there will be any 

additional quote mitigation strategy 

necessary to accommodate the trading of 

binary options. 

Surveillance 

The Exchange represents that it has an 

adequate surveillance program in place 

for the trading of broad-based index 

binary options and intends to largely 

apply its existing surveillance program 

for index options and FROs to the 

trading of broad-based index binary 

options series. 

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) of the Act,9

in general, and furthers the objectives of 

Section 6(b)(5),10 in particular, in that it 

is 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 transaction in securities, 

and, in general, to protect investors and 

the public interest. The Exchange 

believes that the proposal will provide 

investors and the marketplace with 

additional investment opportunities as 

well as risk management tools as a 

result of the introduction of binary 

options on the Exchange. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

The Exchange did not receive any 

written comments on the proposed rule 

change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The Amex has designated the 

proposed rule change as one that: (1) 

Does not significantly affect the 

protection of investors or the public 

interest; (2) does not impose any 

significant burden on competition; and 

(3) does not become operative for 30 

days from the date of filing, or such 

shorter time as the Commission may 

designate if consistent with the 

protection of investors and the public 

interest. In addition, as required under 

Rule 19b–4(f)(6)(iii),11 the Amex 

provided the Commission with written 

notice of its intention to file the 

proposed rule change, along with a brief 

description of the text of the proposed 

rule change, at least five business days 

prior to filing the proposal with the 

Commission. Therefore, the proposed 

rule change has become effective 

pursuant to Section 19(b)(3)(A) of the 

Act 12 and Rule 19b–4(f)(6) 

thereunder.13

The Amex has requested that the 

Commission waive the 30-day operative 

delay. The Commission hereby grants 

the Amex’s request.14 The Amex’s 

proposal is substantially similar to a 

CBOE proposal that the Commission 

approved 15 and does not appear to raise 

any novel or significant issues. 

Therefore, the Commission believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest and 

designates the proposed rule change as 

operative upon filing. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in 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 

Number SR–Amex–2008–61 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–Amex–2008–61. 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, on official business days between 

the hours of 10 a.m. and 3 p.m. Copies 

of the filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 


sroberts on PROD1PC70 with NOTICES
46104 Federal Register / Vol. 73, No. 153 / Thursday, August 7, 2008 / Notices 

16 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). 

4 17 CFR 240.19b–4(f)(6). 

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

6See Securities Exchange Act Release No. 53666 

(April 17, 2006), 71 FR 21056 (April 24, 2006) (SR–

Amex–2005–107). 

7 15 U.S.C. 78f(b) 

8 15 U.S.C. 78f(b)(5). 

9 15 U.S.C. 78s(b)(3)(A). 

10 17 CFR 240.19b–4(f)(6). 

11 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–

4(f)(6)(iii) requires that a self-regulatory 

organization submit to the Commission written 

notice of its intent to file the proposed rule change, 

along with a brief description and text of the 

proposed rule change, at least five business days 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–Amex–

2008–61 and should be submitted on or 

before August 28, 2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–18154 Filed 8–6–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58277; File No. SR–Amex–

2008–59] 

Self-Regulatory Organizations; 

American Stock Exchange LLC; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change To Delete 

Outdated Sections of Its Delisting 

Rules 

July 31, 2008. 

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 July 24, 

2008, the American Stock Exchange LLC 

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

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by Amex. Amex filed the proposal as a 

‘‘non-controversial’’ proposed rule 

change pursuant to Section 

19(b)(3)(A)(iii) of the Act 3 and Rule 

19b–4(f)(6) thereunder,4 which renders 

it effective upon filing with the 

Commission. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Amex proposes to delete certain 

outdated sections of its rules related to 

delisting procedures that became 

inapplicable by their terms on April 24, 

2006. On that date, amendments to 

Amex Rule 18 and Sections 1010, 1011, 

1201, 1202, 1203, 1204, 1205 and 1206 

of the Amex Company Guide became 

effective for the purpose of conforming 

the Exchange’s rules to certain 

requirements of Rule 12d2–2 under the 

Act.5 The rule text adopted in 

connection with these amendments 

specifically provided that the portion of 

each rule that was effective only 

through April 23, 2006 would be 

rescinded after that date, and the 

purpose of this proposed rule change is 

to delete this language that is no longer 

applicable. The text of the proposed rule 

change is available at Amex, the 

Commission’s Public Reference Room, 

and www.amex.com. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

Amex included statements concerning 

the purpose of, and basis for, the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. Amex has prepared 

summaries, set forth in Sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

On April 17, 2006, the Commission 

approved a change to the Exchange’s 

delisting procedures to conform them to 

new procedural requirements for 

delisting as mandated by amendments 

to Rule 12d2–2 under the Act.6 Rule 

12d2–2 required all national securities 

exchanges, including the Exchange, to 

amend their delisting rules to conform 

to these new requirements. 

Consequently, on April 24, 2006, 

amendments to Rule 18 and Sections 

1010, 1011, 1201, 1202, 1203, 1204, 

1205 and 1206 of the Amex Company 

Guide became effective for the foregoing 

purpose, and other sections of these 

rules became inapplicable by their terms 

on that date. The rule text adopted in 

connection with these amendments 

specifically provided that the portion of 

each rule that was effective only 

through April 23, 2006 would be 

rescinded after that date, and the 

purpose of this proposed rule change is 

to delete this language that is no longer 

applicable. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with Section 

6(b) 7 of the Act in general, and furthers 

the objectives of Section 6(b)(5) 8 in 

particular, in that it is designed to 

prevent fraudulent and manipulative 

acts and practices, 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 Exchange believes 

that the proposed rule change is 

consistent with the protection of 

investors and the public interest 

because its elimination of obsolete rule 

text will make the Amex’s currently 

effective rules more transparent to 

investors and other interested parties, 

thereby eliminating potential confusion 

regarding the meaning of those rules 

that might otherwise result. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any 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 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, if 

consistent with the protection of 

investors and public interest, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 9 and Rule 19b–

4(f)(6) thereunder.10

A proposed rule change filed under 

Commission Rule 19b–4(f)(6) may not 

become operative prior to 30 days after 

the date of filing. However, Rule 19b–

4(f)(6)(iii) 11 permits the Commission to 


sroberts on PROD1PC70 with NOTICES