Document ID: SEC-2007-0649-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2007-05-08T04:00Z

[Federal Register: May 8, 2007 (Volume 72, Number 88)]
[Notices]               
[Page 26186-26188]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08my07-113]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55685; File No. SR-Amex-2007-41]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Order Granting Accelerated Approval of a Proposed 
Rule Change Relating to the Continuation of a Quote Assist Feature in 
the ANTE System on a Pilot Program Basis

April 30, 2007.
    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 April 24, 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 substantially prepared by the Exchange. 
The Commission is publishing this notice and order to solicit comments 
on the proposed rule change from interested persons and to grant 
accelerated approval to the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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 Amex Rule 958A--ANTE (e) (the 
``Rule'') to extend until April 30, 2008, its pilot program 
implementing a quote-assist feature in the Exchange's ANTE system 
(``Pilot Program''). The text of the proposed rule change is available 
at the Exchange, the Commission's Public Reference Room and (http://www.amex.com/
).

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 III below. 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 Rule currently requires all option specialists to execute or 
display customer limit orders that improve the bid or offer by price or 
size immediately upon receipt, unless one of the exceptions set forth 
in the Rule applies. ``Immediately upon receipt'' is defined in the 
Rule ``as soon as practicable which shall mean, under normal market 
conditions, no later than 30 seconds after receipt''.\3\
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    \3\ See Securities Exchange Act Release No. 51062 (January 21, 
2005) 70 FR 4163 (January 28, 2005).
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    In order to assist the specialists in complying with the Rule as 
described above, the ANTE System provides specialists with an automated 
quote assist feature on a pilot program basis.\4\

[[Page 26187]]

The quote assist feature automatically displays eligible limit orders 
within a configurable time that can be set on a class-by-class basis by 
the Exchange. The time frame within which limit orders must be 
addressed, a maximum of 30 seconds under the Rule, may be set to a 
shorter time period by the Exchange. The specialist maintaining the 
quote assist feature may then use the feature to automatically display 
orders within a shorter time period than the time period set by the 
Exchange.
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    \4\ See Securities Exchange Act Release Nos. 49747 (May 20, 
2004), 69 FR 30344, 30347 (May 27, 2004) (approving implementation 
of the ANTE system, including the quote assist feature on a pilot 
basis); 51955 (June 30, 2005), 70 FR 39812 (July 11, 2005) 
(extending the Pilot Program until April 30, 2006); and 53950 (June 
6, 2006) 71 FR 34401 (June 14, 2006) (extending the Pilot Program 
until April 30, 2007).
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    While all customer limit orders are expected to be displayed 
immediately, the quote assist feature can be set to automatically 
display limit orders at or close to the end of the 30-second time frame 
or within any other shorter time frame established by the Exchange. In 
instances where the specialist has not addressed the order within the 
applicable 30-second period, the quote assist feature will 
automatically display the eligible customer limit order in the limit 
order book at or close to the end of that period. The quote assist 
feature helps to ensure that eligible customer limit orders are 
displayed within the required time period then in effect. Rule 958A--
ANTE (e)(4) currently requires the specialist to maintain and keep 
active the limit order quote assist feature. The specialist may 
establish the time frame within which the quote assist feature displays 
eligible customer limit orders, which time frame does not exceed the 
customer limit order display requirement set forth in the Rule. The 
specialist may deactivate the quote assist feature provided Floor 
Official approval is obtained. The specialist must obtain Floor 
Official approval as soon as practicable but in no event later than 
three minutes after deactivation. If the specialist does not receive 
approval within three minutes after deactivation, the Exchange will 
review the matter as a regulatory issue. Floor Officials will grant 
approval only in instances when there is an unusual influx of orders or 
movement of the underlying that would result in gap pricing or other 
unusual circumstances. The Exchange will document all instances where a 
Floor Official has granted approval.
    The Exchange notes that the quote assist feature does not relieve 
the specialists of their obligation to display customer limit orders 
immediately. To the extent that a specialist excessively relies on the 
quote assist feature to display eligible limit orders without 
attempting to address the orders immediately, the specialist could be 
violating the Rule. However, brief or intermittent reliance on the 
quote assist feature by a specialist during an unexpected surge in 
trading activity in an option class would not violate the Rule if used 
when the specialist is not physically able to address all the eligible 
limit orders within 30 seconds. The Exchange has issued a regulatory 
notice discussing excessive reliance on the quote assist feature.
    The Exchange will continue to conduct surveillance to ensure that 
specialists comply with their obligation to execute or book all 
eligible limit orders within the time period prescribed by Exchange 
rules. The Exchange commits to conduct surveillance designed to detect 
whether specialists as a matter of course rely on the quote-assist 
feature to display all eligible limit orders. A practice of excessive 
reliance upon the quote assist feature will be reviewed by the Division 
of Regulation and Compliance as a possible violation of the Rule. The 
Exchange runs its limit order display exception report at various 
display intervals in an attempt to detect a pattern suggestive of undue 
reliance on the quote assist feature. The Exchange reports to the 
Commission every three months the statistical data it uses to determine 
whether there has been impermissible reliance on the quote assist 
feature by specialists.
    The Exchange now proposes to continue the quote assist feature on a 
pilot program basis from April 30, 2007 until April 30, 2008.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\5\ in general, and furthers the objectives of Section 6(b)(5) of 
the Act,\6\ in particular, in that it is designed to prevent fraudulent 
and manipulative acts and practices and to promote just and equitable 
principles of trade.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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.

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. 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-2007-41 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Amex-2007-41. 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-2007-41 and should be submitted on or before May 
29, 2007.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    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 26188]]

exchange.\7\ In particular, the Commission finds that the proposed rule 
change is consistent with the requirements of Section 6(b)(5) of the 
Act,\8\ which requires, among other things, that the rules of the 
Exchange be designed to promote just and equitable principles of trade, 
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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    \7\ In approving the proposed rule, the Commission has 
considered the 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 believes that the quote assist feature should help 
to ensure that eligible customer limit orders are displayed within the 
required time period. The Commission notes that the Exchange represents 
that it will continue to conduct surveillance to ensure that 
specialists comply with their obligation to execute or book all 
eligible limit orders within the time period prescribed by Exchange 
rules, and that excessive reliance upon the quote assist feature will 
be reviewed by the Exchange as a possible violation of the Rule.
    The Exchange has requested that the Commission approve the proposed 
rule change prior to the thirtieth day after publication of notice of 
the filing in the Federal Register. The Commission believes that 
granting accelerated approval will allow the Exchange to continue to 
operate the Pilot Program without interruption. Accordingly, the 
Commission finds good cause, pursuant to Section 19(b)(2) of the 
Act,\9\ for approving the proposal prior to the thirtieth day after 
publication of the notice of the filing thereof in the Federal 
Register.
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    \9\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-Amex-2007-41) is hereby 
approved on an accelerated basis.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-8734 Filed 5-7-07; 8:45 am]

BILLING CODE 8010-01-P