Document ID: SEC-2007-1068-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2007-08-03T04:00Z

[Federal Register: August 3, 2007 (Volume 72, Number 149)]
[Notices]               
[Page 43300-43302]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03au07-104]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56159; File No. SR-Amex-2007-76]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change as 
Modified by Amendment No. 1 Thereto Relating to an Extension of the 
Penny Quoting Pilot Program

July 27, 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 July 25, 2007, 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 substantially prepared by the Amex. On 
July 27, 2007, the Exchange filed Amendment No. 1 to the proposal. The 
Exchange filed the proposal as a ``non-controversial'' proposed rule 
change pursuant to section 19(b)(3)(A) of the

[[Page 43301]]

Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which rendered the proposal 
effective upon filing with the Commission. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend through September 27, 2007 the 
current pilot program that permits quoting of a limited number of 
options classes in pennies (the ``Penny Quoting Pilot Program''). The 
text of the proposed rule change is available at Amex, 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 Exchange 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 Amex is proposing to extend the current Penny Quoting Pilot 
Program through September 27, 2007. The Exchange believes that an 
extension of the Penny Quoting Pilot Program is appropriate for the 
purpose of further studying the effects of penny quoting. In this 
manner, a measured and deliberate expansion of the Penny Quoting Pilot 
Program, if warranted, can be better implemented by the options 
exchanges.
    As approved by the Commission, the current Penny Quoting Penny 
Quoting Pilot Program consists of thirteen (13) options classes.\5\ The 
quoting requirements in connection with the Penny Quoting Pilot Program 
provide for: (i) A minimum price variation (``MPV'') of $0.01 for 
options with premiums of up to $3; or (ii) a MPV of $0.05 for options 
with premiums of $3 or greater, except for QQQQ options which trade at 
an MPV of $0.01 for all premiums. As required by the Commission's 
approval order, the Amex previously filed its pilot report (the ``Amex 
Pilot Report'') comparing quotation and trading activity in the three 
(3) months prior to the Penny Quoting Pilot Program to the first three 
(3) months of the Penny Quoting Pilot Program.
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    \5\ See Securities Exchange Act Release No. 55162 (January 24, 
2007), 72 FR 4738 (February 1, 2007).
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    As part of the Penny Quoting Pilot Program, the Exchange also 
implemented a quote mitigation strategy due to concerns regarding 
system capacity. The Exchange believes that the quote mitigation 
strategies in place since the introduction of the Penny Quoting Pilot 
Program have been effective. Therefore, in this filing, the Exchange is 
also proposing to extend the effectiveness of the quote mitigation 
strategies through September 27, 2007.
    The Amex Pilot Report made the following findings: (1) Spreads 
narrowed meaningfully in all series in the Pilot classes with the 
greatest effect occurring in the lowest premium options; (2) Quoted 
size at the top of the book decreased sharply in all series and the 
most in the series with $.01 MPVs; (3) Volume growth, while difficult 
to accurately analyze, was largely limited to 2 of the 13 Pilot 
classes; (4) Quote traffic grew at very significant rates; and (5) Only 
3 of the 13 Pilot classes achieved the ``most beneficial results'' of 
tighter spreads and higher volume and all 3 were ``index-based'' 
products (SMH, QQQQ, and IWM). The Exchange believes that an extension 
of the Penny Quoting Pilot Program is warranted so that the Commission 
and the options exchanges may better study and understand the effects 
of penny quoting.
    Based on the experience to date, the Exchange believes that an 
extension of the Penny Quoting Pilot Program through September 27, 2007 
is appropriate.
2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with section 6(b) of the Act \6\ in general, and furthers the 
objectives of section 6(b)(5) of the Act,\7\ in particular, in that it 
is designed 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.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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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 either solicited or received by the 
Exchange.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change has become effective pursuant to section 
19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) thereunder,\9\ because 
the foregoing proposed rule 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 the public interest.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30-days after the date of filing.\10\ 
However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest.\11\ The Exchange has requested that 
the Commission waive the 5-day pre-filing requirement and the 30-day 
operative delay. The Commission believes that waiving the 5-day pre-
filing requirement and the 30-day operative delay is consistent with 
the protection of investors and the public interest because such waiver 
will ensure continuity of the Exchange's rules and will allow the Penny 
Quoting Pilot Program to remain in effect without interruption. For 
these reasons, the Commission designates the proposal to be operative 
upon filing with the Commission.\12\
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    \10\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the self-regulatory organization to give the 
Commission 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 prior to the date of filing of the 
proposed rule change, or such shorter time as designated by the 
Commission.
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

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[[Page 43302]]

    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.\13\
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    \13\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change under 
section 19(b)(3)(C) of the Act, the Commission considers the period 
to commence on July 27, 2007, the date on which Amex submitted 
Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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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 rule-comments@sec.gov. Please include 

File Number SR-Amex-2007-76 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-Amex-2007-76. 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 the filing also will be available for 
inspection and copying at the principal office of the 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-2007-76 and should be 
submitted on or before August 24, 2007.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
Nancy M. Morris,
Secretary.
 [FR Doc. E7-15059 Filed 8-2-07; 8:45 am]

BILLING CODE 8010-01-P