Document ID: SEC-2006-0248-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2006-02-27T05:00Z

[Federal Register: February 27, 2006 (Volume 71, Number 38)]
[Notices]               
[Page 9841-9843]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27fe06-78]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53332; File No. SR-Amex-2006-16]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Amend Its Rule 903 To Provide That the Exchange Will Typically Open 
Four Expiration Months for Each Class of Options Open for Trading

February 17, 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 February 15, 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 Amex. The Amex filed 
this proposal as a ``non-controversial'' 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 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).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ As required by Rule 19b-4(f)(6)(iii), 17 CFR 240.19b-
4(f)(6)(iii), the Amex submitted 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.
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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 903 to provide that the 
Exchange will typically open four expiration months for each class of 
options open for trading. The text of the proposed rule change is 
available on the Amex's Web site at http://www.amex.com, the Office of 

the Secretary of the Amex 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 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 IV below. The 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 Exchange is proposing to amend Amex Rule 903 in order to avoid 
confusion and conform to industry standard. The Amex states that this 
proposal will not change the manner in which options expiration months 
are offered and listed, but instead, will clearly set forth how the 
Exchange will add these additional series.
    Current Amex Rule 903 sets forth the manner in which options series 
are offered and listed on the Exchange. In connection with expiration 
month series, the rule provides that at the commencement of trading on 
the Exchange of a particular class of options relating to an underlying 
stock or Exchange-Traded Fund Share, series of options having three 
different expiration months in three-month intervals will normally be 
opened. Although Amex Rule 903 does not specifically provide that four 
expiration months will be open for trading for each options class, the 
Exchange in 1989 received approval together with the other options 
exchanges to provide four expiration months.\6\ Accordingly, the 
Exchange submits that this amendment to Amex Rule 903 largely 
implements the prior Commission approval permitting four outstanding 
expiration months.
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    \6\ See Securities Exchange Act Release Nos. 26934 (June 14, 
1989), 54 FR 26283 (June 22, 1989) and 22099 (May 31, 1985), 50 FR 
23862 (June 6, 1985).
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    The other options exchanges provide that they will open four 
expiration months for each class of options open for trading with the 
first two months being the two nearest months, regardless of the 
quarterly cycle on which the class trades; and the third and fourth 
being the next two months of the quarterly cycle previously designated 
by the exchange for that specific class.\7\ The Exchange believes that 
it is necessary to amend its rules to codify and conform the listing of 
options expiration months to the industry standard. Specifically, the 
Exchange is proposing to add new paragraph (b) to Amex Rule 903 to 
provide that the Exchange will usually open four expiration months for 
each class of options open for trading on the Exchange. The first two 
expiration months will be the two nearest term months, regardless of 
the quarterly cycle on which the options class trades while the third 
and fourth expiration months will be the next two months of the 
quarterly cycle previously designated by the Exchange for the specific 
class. For example, if the Exchange listed, in late April, a new stock 
option on a January-April-July-October quarterly cycle, the Exchange 
would list the two nearest term months (May and June) and the next two 
expiration months of the cycle (July and October). When the May series 
expires, the Exchange would then add the January series. When the June 
series expires, the Exchange would add the August series as the next 
nearest month, and would not add April.
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    \7\ See, e.g., Chicago Board Options Exchange, Incorporated 
(``CBOE'') Rule 5.5 and International Securities Exchange, Inc. 
(``ISE'') Rule 504.
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    Current Exchange Rule 903 permits additional expiration month 
series of the same options class to be added at or about the time a 
prior expiration month series expires. The rules of the other options 
exchanges provide that, due to unusual market conditions, new series of 
options on an individual stock (including an Exchange-Traded Fund

[[Page 9842]]

Share) may be added up until five business days prior to expiration.\8\ 
The Amex states that the rules of the other options exchanges also 
permit new series of options on individual stocks and Exchange-Traded 
Fund Shares to be added until the beginning of the month in which the 
options contracts expire. In order to conform to market convention, the 
Exchange is proposing to add new paragraph (d) to Amex Rule 903 as well 
as Commentary .04. New paragraph (d) provides for the opening of 
additional series of options of the same class, which new series would 
not affect the prior series of the same class previously opened, in the 
event the Exchange deems such to be necessary to maintain an orderly 
market, to meet customer demand or when the market price of the 
underlying stock or Exchange-Traded Fund Share moves substantially from 
the initial exercise price or prices. Commentary .04 provides that such 
new series of options on individual stocks and Exchange-Traded Fund 
Shares may be added until five business days prior to expiration. It 
also provides that a new series of FLEX Equity Options may be added on 
any business day prior to the expiration date.
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    \8\ The Exchange received Commission approval in 1985 relating 
to the manner of adding additional options series. See Securities 
Exchange Act Release No. 21929 (April 10, 1985), 50 FR 15258 (April 
17, 1985). This proposal seeks to implement this prior Commission 
approval.
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    The Exchange believes that its Rule 903 should be amended as 
proposed in order to conform the Exchange's options offering and 
listing standards to previously approved rule filings as well as to 
conform to industry standard.
2. Statutory Basis
    The Exchange believes 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 
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; and is not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers, or to regulate by virtue of any authority conferred by the Act 
matters not related to the purpose of the Act or the administration of 
the Exchange.
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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 Amex does not believe that the proposed rule change will impose 
any burden on competition that is not necessary or appropriate in the 
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

    The Amex has neither solicited nor received comments on the 
proposed rule change.

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

    Because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, 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) thereunder.
    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 designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest.
    The Amex has asked the Commission to waive the 30-day operative 
delay. The Commission believes that the proposed rule change does not 
raise any new regulatory issues; the proposed rule is identical to CBOE 
Rule 5.5 and ISE Rule 504. Waiver of the 30-day operative period would 
enable the Exchange to implement the proposal as quickly as possible, 
and thereby provide for greater uniformity with respect to the manner 
in which options series are offered and listed. Therefore, the 
Commission finds that waiving the 30-day operative delay is consistent 
with the protection of investors and the public interest.\11\ For this 
reason, the Commission designates that the proposal has become 
effective and operative immediately upon filing with the Commission.
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    \11\ 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. 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 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.\12\
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    \12\ See Rule 19b-4(f)(6)(iii), 17 CFR 240.19b-4(f)(6)(iii).
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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-2006-16 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 No. SR-Amex-2006-16. 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. Copies of such 
filing will also be available for inspection and copying at the 
principal office of the Amex. 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

[[Page 9843]]

submissions should refer to File No. SR-Amex-2006-16 and should be 
submitted on or before March 20, 2006.
    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).

Nancy M. Morris,
Secretary.
 [FR Doc. E6-2688 Filed 2-24-06; 8:45 am]

BILLING CODE 8010-01-P