Document ID: SEC-2006-0969-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2006-07-31T04:00Z

[Federal Register: July 31, 2006 (Volume 71, Number 146)]
[Notices]               
[Page 43250-43251]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31jy06-119]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54206; File No. SR-Amex-2005-096]

 
Self-Regulatory Organizations; American Stock Exchange LLC; Order 
Granting Approval of a Proposed Rule Change and Amendment No. 1 Thereto 
Relating to the Relocation of Registered Options Traders Assigned 
Options Classes

July 25, 2006.

I. Introduction

    On September 22, 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 permit registered options traders (``ROTs'') to 
send proprietary electronic orders, representing a bona fide hedge and/
or liquidating orders, in an assigned option class for up to three (3) 
months following a relocation of such option class when the ROT is no 
longer physically present in such trading crowd. On April 5, 2006, the 
Exchange submitted Amendment No. 1 to the proposed rule change. The 
proposed rule change and Amendment No. 1 were published for comment in 
the Federal Register on April 20, 2006.\3\ The Commission received no 
comments on the proposal. This order approves the proposed rule change, 
as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 53640 (April 12, 2006), 
71 FR 20426 (April 20, 2006).
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II. Description of the Proposed Rule Change

    Amex Rule 110 (applicable to options through Amex Rule 950--
ANTE(a)) and Amex Rule 958--ANTE(a) require that each ROT be qualified 
and registered with the Exchange as a ROT and assigned by the Exchange 
to one or more classes of options. In addition, Amex Rule 958--ANTE(a) 
provides that Exchange options transactions initiated by a ROT on the 
floor of the Exchange for any account in which such ROT has an interest 
must be in his or her assigned classes and Amex Rule 958--ANTE(h) 
requires a ROT to be physically present at the specialist's post on the 
floor of the Exchange where the ROT's assigned options class is traded, 
whenever the ROT is using an automated quote calculation system, 
joining the specialist's quote in a given option class, or sending an 
order into the ANTE system in that option.
    When an option class is relocated on the trading floor, a ROT has 
two alternatives: (i) Stay in his or her present location and no longer 
keep the assigned options class, in which case, the ROT may only hedge 
and/or liquidate positions in the relocated options class by sending 
orders to another options exchange \4\ or (ii) keep the assigned 
options class and relocate with the option to the new location which 
may be difficult, and near impossible, depending on the ROTs other 
assigned classes. When an options class is relocated, the Exchange 
stated that a ROT would no longer be considered assigned to an option 
class once an assigned option class has been relocated to a different 
floor location and the ROT has not communicated his intention to 
relocate with such assigned options class.
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    \4\ See Amex Rule 958--ANTE(a).
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    Accordingly, the Exchange proposes to permit ROTs to apply to the 
Exchange to send proprietary electronic orders constituting bona fide 
hedging and/or position liquidations in a formerly assigned option 
class \5\ without the need to be physically present that the 
specialist's post for that formerly assigned options class, for up to a 
three (3) month period from the date the application is granted. The 
Exchange believes that providing ROTs with this limited ability to send 
orders for the purpose of creating a bona fide hedge or liquidating 
positions in a formerly assigned options class would provide an 
effective and efficient means for ROTs to reduce position risk. The 
Exchange determined that three (3) months is a reasonable amount of 
time considering that that is the time period within which an 
expiration of an options class normally occurs. The Exchange also 
considered whether advance notice of an option class relocation is more 
suitable than a three (3) month extension; however, according to the 
Exchange, advance notice may be difficult, if not impossible, for such 
occurrences as market maker consolidations and mergers which are often 
the cause for the relocation and thus the Exchange believes that the 
three (3) month extension is the best alternative.
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    \5\ The Exchange stated that a ROT must communicate his 
intention to relocate if he wants to keep the assigned option class. 
For purposes of this order, such relocated assigned option class 
shall be referred to as a ROT's ``formerly assigned option class.''
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    In order to send electronic orders in a formerly assigned options 
class under this proposal, a ROT would be required to submit an 
application in writing to the Exchange's Division of Regulation and 
Compliance (``R&C'') and the R&C must approve such application.\6\ The 
Exchange stated that the R&C would take into consideration several 
factors in determining whether to grant the ROT approval, including, 
but not limited to, if the ROT is in good standing with the Exchange, 
whether the ROT has had any recent regulatory issues and whether 
advance notice of the relocation was provided. The Exchange stated that 
the R&C would generally approve a ROT application to take advantage of 
the ability to send electronic orders under this proposal consistent 
with the absence of regulatory issues and sufficient advance notice of 
relocation. Once approved by R&C, a ROT would be able to send 
proprietary electronic orders, representing a bona fide hedge or 
position liquidation, in a formerly assigned option class, when such 
ROT is no longer physically present in the trading crowd, for a period 
of up to three (3) months, without extension.
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    \6\ Proposed Commentary .10 to Amex Rule 958-ANTE.
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III. Discussion

    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

[[Page 43251]]

exchange \7\ and, in particular, the requirements of Section 6(b) of 
the Act \8\ and the rules and regulations thereunder. Specifically, the 
Commission finds that the proposal is consistent with Section 6(b)(5) 
of the Act,\9\ in that it is designed to prevent fraudulent and 
manipulative acts and practices, promote just and equitable principles 
of trade, 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 believes that 
providing ROTs with a limited ability to send orders in connection with 
a bona fide hedge or liquidating position in a formerly assigned 
options class is a reasonable response by the Exchange to the need for 
ROTs to reduce the position risk that occurs when an options class is 
relocated.
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    \7\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-Amex-2005-096), as amended, 
is approved.
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    \10\ 15 U.S.C. 78f(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
Jill M. Peterson,
Assistant Secretary.
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    \11\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E6-12175 Filed 7-28-06; 8:45 am]

BILLING CODE 8010-01-P