Document ID: SEC-2008-0363-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: American Stock Exchange LLC
Posted Date: 2008-03-07T05:00Z

[Federal Register: March 7, 2008 (Volume 73, Number 46)]
[Notices]               
[Page 12479-12481]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07mr08-130]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57415; File No. SR-Amex-2008-16]

 
Self-Regulatory Organizations; American Stock Exchange, LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Make Permanent Two Pilot Programs That Increase Position and Exercise 
Limits on Equity Options

March 3, 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 February 29, 2008, 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 substantially prepared by the Exchange. 
The Exchange has designated this proposal as non-controversial under 
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.
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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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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange seeks to make permanent two pilot programs that 
increase standard position and exercise limits for equity option 
classes traded on the Exchange. 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.

[[Page 12480]]

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 Exchange is seeking to make permanent two pilot programs that 
increase position and exercise limits for equity options. The Exchange 
proposes to amend Rule 904 to permanently establish the increased 
limits of the two pilot programs.
    The first pilot program (``Rule 904 Pilot Program''), which 
commenced in March 2005 \5\ and was adopted by all the options 
exchanges, increased position and exercise limits for options on the 
QQQQ and equity options classes traded on the Exchange.
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    \5\ See Securities Exchange Act Release No. 51316 (March 3, 
2005); 70 FR 12251 (March 11, 2005) (notice of filing and immediate 
effectiveness of File No. SR-Amex 2005-029). The Pilot Program was 
extended five times and is due to expire on March 1, 2008. See 
Securities Exchange Act Release Nos. 56262 (August 15, 2007), 72 FR 
47089 (August 22, 2007) (SR-Amex-2007-86); 55226 (February 1, 2007), 
72 FR 6300 (February 9, 2007) (SR-Amex-2007-15); 54386 (August 30, 
2006), 71 FR 52831 (September 7, 2006) (SR-Amex-2006-75); 53349 
(February 22, 2006), 71 FR 10571 (March 1, 2006) (SR-Amex-2006-07); 
and 52260 (August 15, 2005), 70 FR 48991 (August 22, 2005) (SR-Amex-
2005-082).
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    The second pilot program, which commenced in January 2007, 
increased the position and exercise limits for options on the 
iShares[supreg] Russell 2000[supreg] Index Fund (``IWM'') (``IWM Option 
Pilot Program'') from 250,000 contracts to 500,000 contracts.\6\
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    \6\ The IWM Option Pilot Program doubles the position and 
exercise limits for IWM options under the Rule 904 Pilot Program. 
See Rule 904, Commentary .07. Absent both of these pilot programs, 
the standard position and exercise limit for IWM options is 75,000 
option contracts. The proposal that established the IWM Option Pilot 
Program was effective upon filing. See Securities Exchange Act 
Release No. 55163 (January 24, 2007), 72 FR 4547 (January 31, 2007) 
(SR-Amex-2007-11). The IWM Option Pilot Program has been extended 
twice by the Commission, and expires on March 1, 2008. See 
Securities Exchange Act Release Nos. 57145 (January 14, 2008), 73 FR 
3760 (January 22, 2008) (SR-Amex-2008-01); and 56090 (July 18, 
2007), 72 FR 40907 (July 25, 2007) (SR-Amex-2007-73).
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    The standard position limits were last increased nine years ago, on 
December 31, 1998.\7\ Since that time, there has been a steady increase 
in the number of accounts that (a) approach the position limit; (b) 
exceed the position limit; and (c) are granted an exemption to the 
standard limit.
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    \7\ See Securities Exchange Act Release No. 40875 (December 31, 
1998), 64 FR 1842 (January 12, 1999) (SR-Amex-98-22) (approving an 
increase in position limits and exercise limits).
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    The Exchange has not encountered any problems or difficulties 
relating to the two pilot programs since their inception. To the best 
of the Exchange's knowledge, any violations of position or exercise 
limits under the pilot programs were immaterial. None of the violations 
were deemed to be the result of manipulative activities. The Exchange 
believes that the increase in options volume and lack of evidence of 
market manipulation since the last position limits increase, and 
throughout the duration of the two pilot programs, justifies making 
permanent the Rule 904 Pilot Program and IWM Option Pilot Program.
    Furthermore, as the anniversary of listed options trading 
approaches its 35th year, the Exchange believes that the existing 
surveillance procedures and options positions reporting requirements at 
the Amex, at other options exchanges, and at the several clearing firms 
are capable of properly identifying unusual or illegal trading 
activity. The Exchange's procedures include daily monitoring of market 
movements via automated surveillance techniques to identify unusual 
activities in both options and their underlying securities.
    Accordingly, the Exchange represents that its surveillance 
procedures and reporting procedures, in conjunction with the financial 
requirements and risk management review procedures already in place at 
the clearing firms and the Options Clearing Corporation, will serve to 
adequately address any concerns the Commission may have with respect to 
account(s) engaging in any manipulative schemes or assuming too high a 
level of risk exposure.
    Moreover, the Exchange believes that the current financial 
requirements imposed by the Exchange and the Commission adequately 
address the concerns that a member or its customer may try to maintain 
an inordinately large unhedged position in an equity option.
    Finally, the Exchange expects continued options volume growth as 
opportunities for investors to participate in the options markets 
increase and evolve. The Exchange believes that the non-pilot position 
and exercise limits are restrictive, and returning to those limits will 
hamper fair and effective competition between the listed options 
markets and the over-the-counter markets. To date, there have been no 
adverse affects on the markets as a result of the past increases in the 
limits for equity options contracts.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Act \8\ in general and furthers the objectives of 
Section 6(b)(5) \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 facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
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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 Exchange believes that the proposed rule change will impose no 
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 by the Exchange on 
this proposal.

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

    The Exchange has designated the proposed rule change as one that: 
(1) Does not significantly affect the protection of investors or the 
public interest; (2) does not impose any significant burden on 
competition; and (3) does not become operative for 30 days from the 
date of filing, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest. 
Therefore, the foregoing rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \10\ and subparagraph (f)(6) of Rule 
19b-4

[[Page 12481]]

thereunder.\11\ The Exchange notes that the proposed rule change is 
based on a similar proposal recently approved by the Commission.\12\ 
The Exchange has asked the Commission to waive the operative delay to 
permit the proposed rule change to become operative prior to the 30th 
day after filing.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide 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, or such shorter time as designated by the 
Commission. The Exchange has fulfilled this requirement.
    \12\ See Securities Exchange Act Release No. 57352 (February 19, 
2008), 73 FR 10076 (February 25, 2008) (order granting accelerated 
approval to SR-CBOE-2008-07).
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    The Rule 904 Pilot Program and the IWM Option Pilot Program were 
scheduled to expire on March 1, 2008. The Commission believes that 
waiving the 30-day operative delay of the Exchange's proposal is 
consistent with the protection of investors and the public interest 
because it will allow the position and exercise limits to remain at 
consistent levels during the transition from the pilot programs to 
permanent status.\13\ Therefore, the Commission designates the proposal 
to be operative upon filing.
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    \13\ 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).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate the 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-2008-16 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-2008-16. 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 between the hours of 10 
a.m. and 3 p.m. Copies of such filings 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-2008-16 and should be 
submitted on or before March 28, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-4515 Filed 3-6-08; 8:45 am]

BILLING CODE 8011-01-P