Document ID: SEC-2006-0680-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations;proposed rule changes: American Stock Exchange LLC
Posted Date: 2006-05-25T04:00Z

[Federal Register: May 25, 2006 (Volume 71, Number 101)]
[Notices]               
[Page 30204-30206]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25my06-114]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53842; File No. SR-Amex-2006-45]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the Prohibition Against the Entry of Multiple Options 
Orders

May 19, 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 May 8, 2006, 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 by the Exchange. The Exchange 
has designated the proposed rule change as constituting a ``non-
controversial'' rule change under Section 19(b)(3)(A)(iii) of the 
Act,\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission.\5\ 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)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ The Amex has requested that the Commission waive the 30-day 
operative delay, as specified in Rule 19b-4(f)(6)(iii). 17 CFR 
240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to revise Amex Rule 933--ANTE(e) prohibiting 
the entry via the Amex New Trading Environment system (``ANTE'') of 
multiple orders for any account of the same beneficial owner in the 
same option within any fifteen (15) second period. The text of the 
proposed rule change appears below. Proposed deletions are in 
[brackets].
Rule 933--ANTE
Automatic Matching and Execution of Options Orders
    (a)-(d) No change.
    (e) The Options Trading Committee shall determine the size 
parameters of orders eligible for automatic matching and execution. The 
Committee may determine to set the eligible order size parameter in any 
option class as the disseminated quote size. [An automatic matching and 
execution eligible order for any account in which the same person is 
directly or indirectly interested may only be entered at intervals of 
no less than 15 seconds between entry of each such order in a call 
class and/or a put class for the same option. Members and member 
organizations are responsible for establishing procedures to prevent 
orders in a call class and/or a put class for the same option for any 
account in which the same person is directly or indirectly interested 
from being entered at intervals of less than 15 seconds.]
    (f)-(g) No change.
    Commentary * * * No change.
* * * * *

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. 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 Exchange proposes to revise Amex Rule 933--ANTE(e) in order to 
increase the number of orders handled through ANTE. Currently, Amex 
Rule 933--ANTE(e) prohibits the entry of multiple orders for any 
account of the same beneficial owner in the same option class within 
any fifteen (15) second period. The original purpose of the Rule in 
connection with the Exchange's Automatic Execution System (``Auto-Ex'') 
\6\ was to assist Exchange specialists and Registered Options Traders 
(``ROTs'') in managing their risk of multiple executions of orders 
delivered in rapid succession. Prior to the introduction of ANTE, 
specialists and ROTs would find it very difficult to timely revise 
their quotations. As a result, the Exchange, as well as the other 
options exchanges, at that time adopted rules to prohibit the entry of 
multiple orders for any account of the same beneficial owner within 
fifteen (15) seconds. The purpose of the Rule was to protect investors 
and other market participants from the potential

[[Page 30205]]

negative consequences that might result from Order Entry Firms or off-
floor broker-dealers ``picking off'' specialists and/or ROTs. The 
Exchange believed that if persons were allowed to effectively increase 
the size of Auto-Ex eligible orders by entering more than one such 
order at intervals of less than 15 seconds, Amex specialists and ROTs 
would be unable to make markets with the same liquidity as if there 
were effective limits on the size and frequency of Auto-Ex eligible 
orders.
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    \6\ The Auto-Ex system was established to provide small customer 
orders with an immediate single price execution.
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    The Amex has substantially improved its electronic trading systems 
such that the risk associated with multiple orders in the same option 
delivered for any account of the same or an affiliated beneficial 
account holder has become more manageable through electronic means. 
Specifically, ANTE now allows specialists and ROTs to submit 
proprietary electronic quotes through ANTE and to revise their quotes 
electronically, which reduces the risk of multiple executions of orders 
delivered in rapid succession before the specialist or ROT is able to 
revise its quotation. In addition, a revised and updated version of 
ANTE has incorporated a risk management tool to allow specialists and 
ROTs to set criteria for the system to adjust their quotes (the ``Quote 
Risk Manager'') if a certain number of trades are executed within a 
certain period of time. The Commission recently approved the Exchange's 
Quote Risk Manager.\7\ Due to the substantial increase in automated 
option order handling and risk mitigation tools provided by ANTE, the 
Amex submits that the fifteen (15) second prohibition currently 
included in its Amex Rule 933--ANTE(e) is unnecessary.
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    \7\ See Securities Exchange Act Release No. 53148 (January 19, 
2006), 71 FR 4386 (January 26, 2006) (SR-Amex-2005-131).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\8\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\9\ 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 regulating, 
clearing, settling, processing information with respect to, and 
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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    \8\ 15 U.S.C. 78f(b).
    \9\ 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 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) by its terms, 
does not become operative for 30 days after the date of the filing, or 
such shorter time as the Commission may designate, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\10\ and Rule 19b-4(f)(6) thereunder.\11\ As required by Rule 19b-
4(f)(6)(iii) under the Act, the Exchange also provided with the 
Commission with written 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.\12\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ Id.
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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.\13\ 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. The Exchange has asked the Commission to waive the 
30-day operative delay and allow the proposed rule change to become 
operative on May 8, 2006, the date that it was filed with the 
Commission. The Commission hereby grants that request.\14\ The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because the Commission has approved a similar proposed rule change by 
the Philadelphia Stock Exchange, Inc.,\15\ and thus the proposal does 
not raise any new regulatory issues.
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    \13\ Id.
    \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\ See Securities Exchange Act Release No. 51827 (June 13, 
2005), 70 FR 35491 (June 20, 2005) (SR-Phlx-2005-20).
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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 Number SR-Amex-2006-45 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 No. SR-Amex-2006-45. 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 the filing 
also will be available for inspection and copying at the principal 
office of the Exchange. All

[[Page 30206]]

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 No. SR-Amex-2006-45 and should be 
submitted on or before June 15, 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. E6-8052 Filed 5-24-06; 8:45 am]

BILLING CODE 8010-01-P