Document ID: SEC-2005-0354-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2005-12-12T05:00Z

[Federal Register: December 12, 2005 (Volume 70, Number 237)]
[Notices]               
[Page 73488-73489]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12de05-94]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52893; File No. SR-Amex-2005-067]

 
Self-Regulatory Organizations; American Stock Exchange LLC; Order 
Approving Proposed Rule Change To Expand Its $2.50 Strike Price 
Interval Program

December 5, 2005.

I. Introduction

    On June 17, 2005, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend Commentary .06 to Amex Rule 903 to expand 
the $2.50 Strike Price Interval Program for individual equity options 
to allow the listing of options with $2.50 strike price intervals for 
strike prices between $50 and $75. The Commission published the 
proposed rule change for comment in the Federal Register on November 3, 
2005.\3\ The Commission received no comments on the proposal. This 
order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 52690 (October 27, 
2005), 70 FR 66869.
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II. Description of the Proposal

    The $2.50 Strike Price Interval Program (``Program'') was initially 
adopted in 1995 as a joint pilot program of the options exchanges, 
which permits them to list options with $2.50 strike price intervals up 
to $50 on a total of up to 100 option classes.\4\ The Program was later 
expanded and permanently approved in 1998 to allow the options 
exchanges collectively to select up to 200 classes on which to list 
options with $2.50 strike price intervals.\5\ Of these 200 option 
classes eligible for the Program, 51 classes were allocated to Amex 
pursuant to a formula approved by the Commission as part of the 
permanent approval of the Program. Each options exchange, in addition, 
is permitted to list options with $2.50 strike price intervals on any 
option class that another exchange selects as part of its Program. 
Under the Program currently, an option with a $2.50 strike price 
interval may be listed only if the strike price is between $25 and 
$50.\6\
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    \4\ See Securities Exchange Act Release No. 35993 (July 19, 
1995), 60 FR 38073 (July 25, 1995) (approving File Nos. SR-Phlx-95-
08, SR-Amex-95-12, SR-PSE-95-07, SR-CBOE-95-19, and SR-NYSE-95-12).
    \5\ See Securities Exchange Act Release No. 40662 (November 12, 
1998), 63 FR 64297 (November 19, 1998) (approving File Nos. SR-Amex-
98-21, SR-CBOE-98-29, SR-PCX-98-31, and SR-Phlx-98-26).
    \6\ See, e.g., Amex Rule 903, Commentary .06.
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    The Exchange proposes to amend Commentary .06 to Amex Rule 903 to 
allow the listing of options with $2.50 strike price intervals for 
options with strike prices between $50 and $75. However, the $2.50 
strike price intervals between $50 and $75 must be no more than $10 
from the closing price of the underlying stock in its primary market on 
the preceding day. For example, and as expressly described in the 
proposed change to Commentary .06 to Amex Rule 903, if an option class 
has been selected as part of the Program, and the underlying stock 
closes at $48.50 in its primary market, Amex could list options with 
strike prices of $52.50 and $57.50 on the next business day. If the 
underlying stock closes at $54, Amex could list options with strike 
prices of $52.50, $57.50, and $62.50 on the next business day. The 
proposed rule change does not increase the total number of option 
classes that Amex may select for the Program.
    In addition, the Exchange has proposed other technical changes to 
Commentary .06 to Amex Rule 903, including expressly noting in the rule 
text that: (1) the total number of option classes, i.e., 51, that the 
Amex has been allocated of the 200 classes that are eligible for the 
Program; and (2) an option class shall remain in the Program until 
otherwise designated by the Exchange and a decertification notice is 
sent to the Options Clearing Corporation.

III. Discussion

    After careful review, 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.\7\ 
In particular, the

[[Page 73489]]

Commission finds that the proposed rule change is consistent with 
Section 6(b)(5) of the Act, which requires, among other things, that 
the rules of a national securities exchange be designed 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.\8\ The Commission believes that this proposal is a 
reasonable means of providing investors with greater flexibility to 
establish equity options positions that can be better tailored to meet 
their investment objectives.
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    \7\ In approving this rule proposal, 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).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Commission has previously noted a concern with the pressures on 
system capacity caused by the proliferation of illiquid options series. 
However, this proposal should not exacerbate the problem of increased 
quote traffic. As a result of this proposal, Amex will be permitted to 
list options with $2.50 strike price intervals with strike prices 
between $50 and $75, but the total number of classes that Amex is 
authorized to list pursuant to its $2.50 Strike Price Interval Program 
remains unchanged.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-Amex-2005-067) be, and it 
hereby is, approved.
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    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
 [FR Doc. E5-7189 Filed 12-9-05; 8:45 am]

BILLING CODE 8010-01-P