Document ID: SEC-2007-1277-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2007-09-14T04:00Z

[Federal Register: September 14, 2007 (Volume 72, Number 178)]
[Notices]               
[Page 52589-52591]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14se07-73]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56377; File No. SR-Amex-2007-84]

 
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 Commentary .02 to 
Amex Rule 950-ANTE(d)

September 10, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on August 7, 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 prepared substantially by the 
Exchange. On September 7, 2007, the Exchange filed Amendment No. 1 to 
the proposal.\3\ The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 
19(b)(3)(A),\4\ and Rule 19b-4(f)(6) thereunder,\5\ which renders 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\ In Amendment No. 1, the Exchange made technical, non-
substantive corrections to the filing.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 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 amend Commentary .02 to Rule 950-ANTE(d) 
to permit the member firm guarantee to be set at either 20% or 40% and 
to permit the guarantee to apply to certain specified solicited orders.
    The text of the proposed rule change is available on the Amex's Web 
site at http://www.amex.com, the Amex's Office of the Secretary, and at 

the Commission's Public Reference Room.

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 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
    The purpose of this proposed rule change is to permit the 
Facilitation Procedures Committee (``Committee''), appointed by the 
Board, on a class-by-class basis, to apply the member firm guarantee 
currently available for facilitation crosses, to solicited orders which 
improve the quoted market. The Exchange proposes either a 20% or a 40% 
guarantee, to be determined by the Committee. The current member firm 
guarantee provides that a member firm is entitled to a participation 
guarantee of 40% if the order is traded at a price that matches or 
improves the market. The Amex submits that the proposal is similar to 
amendments adopted by the Chicago Board Options Exchange, Incorporated 
(``CBOE'').\6\
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    \6\ See Securities Exchange Act Release No. 53543 (March 23, 
2006), 71 FR 15780 (March 29, 2006) (SR-CBOE-2006-21).
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    A solicited order is an order solicited by a member firm (floor 
broker) to trade with another order. The Amex submits that orders which 
improve the quoted market that are solicited in order to facilitate a 
public customer order should receive a similar guaranteed participation 
as a member firm facilitating its customer's order if so determined by 
the Facilitation Procedures Committee.
    Pursuant to Commentary .02(a)-(c) to Rule 950-ANTE(d), a floor 
broker holding an order for its public customer and a facilitation 
order is permitted to cross the orders if (i) floor broker discloses on 
its order ticket for the public customer order which is subject to 
facilitation, all the terms of such order, including, if applicable, 
any contingency involving other options, underlying securities, or 
related securities; (ii) the floor broker requests bids and offers for 
the option series subject to facilitation, then discloses the public 
customer order and any contingency respecting such order which is 
subject to facilitation and identifies the order as being subject to 
facilitation; and (iii) after providing an opportunity for such bids 
and offers to be made, the floor broker on behalf of the public 
customer whose order is subject to facilitation, either bids at or 
above the highest bid or at or below the lowest offer in the market. 
After all other market participants are given an opportunity to accept 
the bid or offer made on behalf of the public customer whose order is 
subject to facilitation, the floor broker may cross all or any 
remaining part of such order and the facilitation order at such 
customer's bid or offer by announcing in public outcry that he is 
crossing such orders, stating the quantity and price(s).
    Notwithstanding the provisions provided for in Commentary .02(a)-
(c) of 950-ANTE(d), in cases where a member firm is seeking to 
facilitate its own public customer's order, Commentary .02(d)(1) to 
Rule 950-ANTE(d) currently provides that member firms are entitled to 
participate in the firm's proprietary account as the contra-side of 
that order to the extent of 40% of the remaining contracts, after 
public customer orders on the specialist's book or customer orders 
represented by a floor broker in the crowd have been filled, provided 
the order trades at a price that matches or improves the market. This 
member firm guarantee provides, under certain conditions, the ability 
to cross 40% of the customer order on behalf of a member organization 
before the specialist and/or registered options traders in the crowd 
can participate in the transaction. The provision generally applies to 
orders of 400 contracts or more. However, the Exchange is currently 
permitted to establish smaller eligible order sizes, on a class-by-
class basis, provided that size is not for fewer than 50 contracts.
    The proposed amendments to Commentary .02(d) to Rule 950-ANTE would 
allow the Committee to (i) determine if solicited orders which improve 
the quoted market may be crossed in the same manner as facilitation 
cross transactions, including that the floor broker complies with the 
disclosure and quote request process described above and (ii) to 
establish smaller eligible order sizes (i.e., less than 400 contracts 
but not less than 50 contracts), a determination that is currently made 
by the Exchange.
    Current Commentary .02(d)(1) to Rule 950-ANTE(d) permits a member 
seeking to facilitate its own public customer's

[[Page 52590]]

option order to participate as the contra-side of that order to the 
extent of 40% of the remaining contracts provided certain criteria are 
satisfied. In February 2005, the Exchange received Commission approval 
to implement a member firm guarantee of 40% for facilitation crosses 
for orders traded at the market or better than the market.\7\ The 
proposed changes would provide the Exchange with discretion by 
permitting participation to the extent of either 20% or 40% as 
determined on a class-by-class basis by the Committee. Additionally, 
the proposal would eliminate references to equity option orders and 
index options orders so that all options orders would be subject to the 
proposed changes.
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    \7\ See Securities Exchange Act Release No. 51275 (February 28, 
2005), 70 FR 10709 (March 4, 2005).
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    The Exchange further proposes amendments to Commentary .02(d)(3) 
and (4) to Rule 950-ANTE(d) to include both facilitation and solicited 
orders.
    Furthermore, the proposed amendments would also allow the 
Committee, under authority properly delegated by the Amex, to exempt a 
particular option class from the application of Commentary .02 to Rule 
950-ANTE(d).
    The Exchange also notes that Commentary .04 to Rule 950-ANTE(d) 
still applies to solicited orders. Notwithstanding Commentary .04 to 
Rule 950-ANTE(d), however, the participation guarantees of 20% or 40% 
set forth in amended Commentary .02(d)(1) will apply in those cases 
where a member firm is seeking to cross a public customer order with a 
solicited order.
    Section 11(a)(1) of the Act \8\ makes it unlawful for a member of 
an exchange to effect a transaction for its own account on that 
exchange unless a specific exception applies. The exceptions are set 
forth in Section 11(a)(1) \9\ and in various rules adopted by the 
Commission subsequent to the enactment of Section 11(a). In connection 
with the use of affiliated or ``house'' floor brokers by Amex members, 
Section 11(a)(1)(G) of the Act \10\ provides an exemption from the 
prohibitions of Section 11(a) for transactions effected for a member's 
own account (``G Orders''), if the member meets a business mix test 
that requires it to be primarily engaged in the business of 
underwriting and distributing securities, selling securities to 
customers and/or acting as a broker, and provided more than 50% of its 
gross revenues is derived from such businesses and related 
activities.\11\ However, all G Orders must yield priority to any bid or 
offer at the same price for the account of a person who is not or is 
not associated with a member. Therefore, if a G Order is entered by a 
floor broker as part of a solicited transaction, the G Order will not 
be permitted an execution ahead of any non-member order on the 
book.\12\
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    \8\ 15 U.S.C. 78k(a)(1).
    \9\ Id.
    \10\ 15 U.S.C. 78k(a)(1)(G).
    \11\ Rule 11a1-1(T)(b) under the Act, 17 CFR 240.11a1-1(T)(b), 
provides additional guidance to members seeking to meet the business 
mix test requirements of Section 11(a)(1)(G)(i), 15 U.S.C. 
78k(a)(1)(G)(i).
    \12\ Because the ANTE System is not programmed to recognize 
``G'' orders and provide for the order to yield to all non-member 
accounts, affiliated floor brokers are prohibited from sending ``G'' 
orders in options into the ANTE System. This prohibition is 
necessary in order to prevent a violation of Section 11(a)(1) of the 
Act, 15 U.S.C. 78k(a)(1), by a member using an affiliated broker to 
represent a ``G'' order.
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    The Committee will meet quarterly and will be chaired by the 
Chairman of the Board (``Chairman'') or his or her designee who will 
vote to break ties. Each quarter the composition of the Committee will 
be determined by the Chairman or his or her designee who will choose 
two (2) specialist representatives, two (2) ROT representatives and two 
(2) floor broker representatives from a pool annually chosen by the 
Board to serve on the Committee.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the Act 
\13\ in general, and furthers the objectives of Section 6(b)(5) of the 
Act \14\ 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 facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(5).
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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

    Because the foregoing 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, provided that the self-regulatory organization 
has given the Commission written notice of its intent to file 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, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \15\ and Rule 19b-4(f)(6) 
thereunder.\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6).
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    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 or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.
    Amex has asked that the Commission waive the 30-day operative delay 
contained in Rule 19b-4(f)(6)(iii) under the Act.\17\ Because the 
proposal would establish rules that are substantially similar to rules 
that have been adopted by another exchange,\18 \ the Commission 
believes that the proposal does not raise new regulatory issues, and 
that waiver of the 30-day operative delay is consistent with the 
protection of investors and the public interest. Accordingly, the 
Commission designates the proposal to be effective and operative upon 
filing with the Commission.\19 \
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    \17\ 17 CFR 240.19b-4(F)(6)(iii).
    \18\ See supra note 6.
    \19\ For purposes only of waiving the 30-day operative delay of 
this proposal, 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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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:

[[Page 52591]]

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-2007-84 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-2007-84. 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 am and 3 pm. Copies of such 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-2007-84 and should be 
submitted on or before October 5, 2007. 

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-18131 Filed 9-13-07; 8:45 am]

BILLING CODE 8010-01-P