Document ID: SEC-2008-0585-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: American Stock Exchange LLC
Posted Date: 2008-04-17T04:00Z

[Federal Register: April 17, 2008 (Volume 73, Number 75)]
[Notices]               
[Page 20983-20985]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17ap08-103]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57645; File No. SR-Amex-2008-35]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Clarify That Current Limitations on the Trade Allocation Match for 
Registered Traders in ETFs Also Apply to DARTs

April 10, 2008.
    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 3, 2008, 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. 
Amex filed the proposed rule change pursuant to Section 19(b)(3)(A) 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Amex proposes to amend Commentary .01 to its Rule 157-AEMI to 
clarify that certain limitations currently applicable to its market 
makers, who enter quotations in exchange-traded funds (``ETFs'') into 
the AEMI system from the floor of the Exchange (known as ``Registered 
Traders''), are also applicable to its market makers in ETFs who enter 
quotations into AEMI from an off-floor location (known as ``Designated 
Amex Remote Traders'' or ``DARTs''). These limitations address whether 
ETF market makers that have a relationship with the same member 
organization may trade in the same security at the same time. The 
proposed rule change would provide that, if such ETF market makers are 
allowed to trade in the same security at the same time, the current 
limit on the trade allocation match that the related market makers may 
receive would not depend on whether their respective quotes are entered 
from on or off the floor of the Exchange (i.e., whether they are 
Registered Traders or DARTs). The purpose of these limitations is 
therefore to ensure fairness in trading crowds.
    The text of the proposed rule change is available on Amex's Web 
site at http://www.amex.com, at the Amex'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, Amex 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Commentary .01 to the Exchange's Rule 157-AEMI currently prohibits 
Registered Traders (i.e., market makers in ETFs who enter quotations in 
the form of Crowd Orders into the AEMI system from the floor of the 
Exchange)

[[Page 20984]]

that have a relationship with the same member organization from trading 
in the same security at the same time: (i) if they are ``affiliated'' 
(as defined in the Exchange's rules); or (ii) in the event they are not 
``affiliated,'' if the member organization's combined share of their 
profits and/or losses exceeds 100% of these profits and/or losses. 
Further, even if two or more such related Registered Traders are 
permitted to trade in the same security at the same time based on the 
foregoing criteria, Commentary .01 to Rule 157-AEMI limits them to the 
trade allocation match they could get if there were only two of them in 
the trading crowd. The purpose of the foregoing restrictions is to 
ensure fairness in trading crowds by preventing a single firm or joint 
account from ``packing the crowd'' in order to increase that entity's 
match.
    Amex recently adopted changes to its rules creating a new class of 
off-floor market makers in ETFs that trade on the Exchange.\5\ These 
market makers (i.e., DARTs), although located off-floor and not 
physically part of the trading crowd, nonetheless also enter their 
quotations in the form of Crowd Orders into AEMI from their off-floor 
locations. The Exchange desires to clarify its intent that the 
foregoing limitations on the Exchange's ETF market makers should not 
depend on whether their respective quotations are entered from on or 
off the floor of the Exchange (i.e., whether the market makers are 
Registered Traders or DARTs). In other words, a member organization, 
having one or more Registered Traders on the floor of the Exchange, 
should not be provided with an incentive to create a DART simply to 
increase the combined trade allocation match that could be received 
from the same level of market making activity. Such an outcome would 
not be consistent with the Exchange's policy of ensuring fairness in 
trading crowds.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 57241 (January 31, 
2008), 73 FR 7335 (February 7, 2008) (SR-Amex-2007-138).
---------------------------------------------------------------------------

    Consequently, the Exchange proposes to add an additional paragraph 
to Commentary .01 of Rule 157-AEMI to clarify that a DART, having a 
relationship with the same member organization as a Registered Trader 
in the same security, shall be treated as if it were another Registered 
Trader under the provisions of Commentary .01 for the purposes of: (i) 
determining whether it and the Registered Trader may trade in that 
security at the same time; and (ii) applying the limitation on the 
trade allocation match they may receive even if they are permitted to 
trade in that security at the same time. The proposed rule change would 
also require the DART to provide certain relationship documentation 
that a Registered Trader in the same situation would be required to 
provide.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \6\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \7\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
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.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that 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 foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) Impose any significant burden on competition; and
    (iii) 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, it 
has become effective pursuant to Section 19(b)(3)(A) of the Act \8\ and 
Rule 19b-4(f)(6) thereunder.\9\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). The Commission notes that the 
Exchange satisfied the five day pre-filing notice requirement.
---------------------------------------------------------------------------

    The Exchange has asked the Commission to designate the proposal as 
operative as of filing. The Commission hereby grants Amex's 
request.\10\ The Commission believes that waiving the 30-day pre-
operative delay is consistent with the protection of investors and the 
public interest because, by clarifying that the existing rule relating 
to ETF market maker allocations applies to DARTs, it will eliminate 
immediately any incentive for an Amex registered trader to establish a 
DART in order to obtain an unfair trade allocation.
---------------------------------------------------------------------------

    \10\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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.

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-2008-35 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-2008-35. 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, 100 F Street, NE., 
Washington, DC 20549, on official business days

[[Page 20985]]

between the hours of 10 a.m. and 3 p.m. Copies of such filing will also 
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-2008-35 and should be submitted on or before May 8, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Nancy M. Morris,
Secretary.
[FR Doc. E8-8277 Filed 4-16-08; 8:45 am]

BILLING CODE 8010-01-P