Document ID: SEC-2006-0901-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2006-07-18T04:00Z

[Federal Register: July 18, 2006 (Volume 71, Number 137)]
[Notices]               
[Page 40760-40762]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18jy06-89]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54131; File No. SR-Amex-2006-66]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Extend the Short Term Option Series Pilot Program

July 12, 2006.
    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 10, 2006, the American Stock Exchange LLC (``Exchange'' or 
``Amex'') 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 the Exchange. Amex has 
designated this proposal as noncontroversial under

[[Page 40761]]

Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) 
thereunder,\4\ which renders the proposed rule change 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
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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)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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    The Exchange proposes to amend Amex Rules 903(h) and 903C(a)(v) to 
extend until July 12, 2007, its pilot program for listing and trading 
Short Term Option Series (``Pilot Program''). The text of the proposed 
rule change is available on the Exchange's Web site (http://www.amex.com
), at the Exchange's principal office, 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 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 purpose of the proposed rule change is to extend the Pilot 
Program for an additional year, through July 12, 2007.\5\ The Pilot 
Program allows Amex to list and trade Short Term Option Series, which 
expire one week after the date on which a series is opened. Under the 
Pilot Program, Amex may select up to five approved options classes on 
which Short Term Option Series could be opened.\6\ A series could be 
opened on any Friday that is a business day and would expire on the 
next Friday that is a business day. If a Friday were not a business 
day, the series could be opened (or would expire) on the first business 
day immediately prior to that Friday. Short Term Option Series would be 
P.M.-settled, except for Short Term Option Series on indexes, which 
would be A.M.-settled.
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    \5\ The Commission approved the Pilot Program on July 12, 2005. 
See Securities Exchange Act Release No. 52014 (July 12, 2005), 70 FR 
41244 (July 18, 2005) (SR-Amex-2005-035). Under Amex Rules 903(h) 
and 903C(a)(v), the Pilot Program is scheduled to expire on July 12, 
2006.
    \6\ A Short Term Option Series could be opened in any options 
class that satisfied the applicable listing criteria under Amex 
rules (i.e., stock options, options on exchange traded funds as 
defined under Commentary .06 of Amex Rule 915, or options on 
indexes). The Exchange could also list and trade Short Term Option 
Series on any options class that is selected by another exchange 
that employs a similar pilot program.
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    For each class selected for the Pilot Program, the Exchange usually 
would open five Short Term Option Series in that class for each 
expiration date. The strike price of each Short Term Option Series 
would be fixed at a price per share, with at least two strike prices 
above and two strike prices below the value of the underlying security 
or calculated index value at about the time that the Short Term Option 
Series is opened. Amex would not open a Short Term Option Series in the 
same week that the corresponding monthly options series is expiring, 
because the monthly options series in its last week before expiration 
is functionally equivalent to the Short Term Option Series. The 
intervals between strike prices on a Short Term Option Series would be 
the same as the intervals between strike prices on the corresponding 
monthly options series.
    The Exchange believes that Short Term Option Series can provide 
investors with a flexible and valuable tool to manage risk exposure, 
minimize capital outlays, and be more responsive to the timing of 
events affecting the securities that underlie option contracts. At the 
same time, the Exchange is cognizant of the need to be cautious in 
introducing a product that can increase the number of outstanding 
strike prices. While the Exchange has not listed any Short Term Option 
Series during the first year of the Pilot Program, there has been 
significant investor interest in trading short-term options at the 
Chicago Board Options Exchange (``CBOE'').\7\ To have the ability to 
respond to potential customer interest, and to remain competitive, the 
Exchange proposes the continuation of the Pilot Program.
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    \7\ CBOE filed a report with the Commission on June 13, 2006, 
stating that CBOE has listed Short Term Options Series in four 
different options classes. See Securities Exchange Act Release No. 
53984 (June 14, 2006), 71 FR 35718 (June 21, 2006) (extending CBOE's 
Short Term Option Series pilot program).
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    In the original proposal to establish the Pilot Program, the 
Exchange stated that if it were to propose an extension, expansion, or 
permanent approval of the program, the Exchange would submit, along 
with any filing proposing such amendments to the program, a report 
providing an analysis of the Pilot Program covering the entire period 
during which the Pilot Program was in effect.\8\ Since the Exchange did 
not list any One Week Options Series during the first year of the Pilot 
Program, there is no data available to compile such a report at this 
time. Therefore the Exchange did not submit a report with its proposal 
to extend the Pilot Program.
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    \8\ See Form 19b-4 for File No. SR-Amex-2005-035, filed March 
23, 2005.
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2. Statutory Basis
    The Exchange believes that Short Term Option Series could stimulate 
customer interest in options and provide a flexible and valuable tool 
to manage risk exposure, minimize capital outlays, and be more 
responsive to the timing of events affecting the securities that 
underlie option contracts. For these reasons, the Exchange believes 
that 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) of 
the Act \10\ in particular in that it is designed to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 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 solicited or received with respect to the 
proposed rule change.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \11\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\12\ Because the foregoing

[[Page 40762]]

proposed rule change (i) does not significantly affect the protection 
of investors or the public interest; (ii) does not impose any 
significant burden on competition; and (iii) does not 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, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\13\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ Rule 19b-4(f)(6)(iii) requires the Exchange to give written 
notice to the Commission of its intent to file the proposed rule 
change five business days prior to filing. The Commission has 
determined to waive the five-day pre-filing requirement for this 
proposal.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to waive the operative 
delay if such action is consistent with the protection of investors and 
the public interest. The Exchange has asked the Commission to waive the 
operative delay to permit the Pilot Program extension to become 
effective prior to the 30th day after filing.
    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because doing so will allow the benefits of the Pilot Program to 
continue without interruption.\14\ Therefore, the Commission designates 
that the proposal will become operative on July 12, 2006.\15\
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    \14\ 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. See 15 U.S.C. 
78c(f).
    \15\ As set forth in the Exchange's original filing proposing 
the Pilot Program, if the Exchange were to propose an extension, 
expansion, or permanent approval of the Pilot Program, the Exchange 
would submit, along with any filing proposing such amendments to the 
program, a report that would provide an analysis of the Pilot 
Program covering the entire period during which the Pilot Program 
was in effect. The report would include, at a minimum: (1) Data and 
written analysis on the open interest and trading volume in the 
classes for which Short Term Option Series were opened; (2) an 
assessment of the appropriateness of the options classes selected 
for the Pilot Program; (3) an assessment of the impact of the Pilot 
Program on the capacity of Amex, OPRA, and market data vendors (to 
the extent data from market data vendors is available); (4) any 
capacity problems or other problems that arose during the operation 
of the Pilot Program and how Amex addressed such problems; (5) any 
complaints that Amex received during the operation of the Pilot 
Program and how Amex addressed them; and (6) any additional 
information that would assist in assessing the operation of the 
Pilot Program. The report must be submitted to the Commission at 
least 60 days prior to the expiration date of the Pilot Program. See 
Form 19b-4 for File No. SR-Amex-2005-035, filed March 23, 2005.
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    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 rule-comments@sec.gov. Please include 

File No. SR-Amex-2006-66 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-2006-66. 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. 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-2006-66 and should be submitted on or before August 
8, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-11326 Filed 7-17-06; 8:45 am]

BILLING CODE 8010-01-P