Document ID: SEC-2005-0194-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2005-11-03T05:00Z

[Federal Register: November 3, 2005 (Volume 70, Number 212)]
[Notices]               
[Page 66869-66870]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03no05-89]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52690; File No. SR-Amex-2005-067]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change To Expand Its $2.50 Strike 
Price Program

October 27, 2005.
    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 June 17, 2005, 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, II, 
and III below, which Items have been prepared by the Amex. 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.
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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 Commentary .06 to Amex Rule 903 to 
expand the $2.50 Strike Price Program (``2.50 Strike Program'') for 
individual equity options to allow the listing of 2.50 point strike 
prices between $50 and $75. Below is the text of the proposed rule 
change. Proposed new language is in italics; proposed deletions are in 
[brackets].
* * * * *

Rule 903. Series of Options Open for Trading

    (a) through (d). No Change.
Commentary * * *
    .01 through .05 No Change.
    .06 (a) $2.50 Strike Price Program. Pursuant to a program initially 
approved by the SEC in 1995, [The options exchanges] the Exchange may 
select up to [200] 51 options classes on individual stocks for which 
the interval of strike prices will be $2.50 where the strike price is 
greater than $25 but less than $50. [The 200 options classes are 
selected by the various options exchanges pursuant to any agreement 
mutually agreed to by the individual exchanges and approved by the 
Commission.] In addition to those options selected by the Exchange, the 
strike price interval may be $2.50 in any multiply-traded option once 
another exchange trading that option selects such option, as part of 
this program. [The Exchange and any of the other options exchanges may 
also list strike prices of $2.50 on any option class that was selected 
by the NYSE pursuant to this program.]
    (b) In addition, on any option class that has been selected as part 
of the $2.50 Strike Price Program pursuant to paragraph (a) above, the 
Exchange may list $2.50 strike prices between $50 and $75, provided the 
$2.50 strike prices between $50 and $75 are no more than $10 from the 
closing price of the underlying stock in its primary market on the 
preceding day. For example, if an option class has been selected as 
part of the $2.50 Strike Price Program, and the underlying stock closes 
at $48.50 in its primary market, the Exchange may list the $52.50 
strike price and the $57.50 strike price on the next business day. If 
an underlying security closes at $54, the Exchange may list the $52.50 
strike price, the $57.50 strike price and the $62.50 strike price on 
the next business day.
    (c) An option class shall remain in the $2.50 Strike Price Program 
until otherwise designated by the Exchange and a decertification notice 
is sent to the Options Clearing Corporation.

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 had 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.

[[Page 66870]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposal is to expand the current 2.50 Strike 
Program for individual equity options to permit the listing of 2.50 
point strike prices between $50 and $75, provided the 2.50 point strike 
prices are no more than $10 from the closing price of the underlying 
stock in its primary market \3\ on the preceding day. In addition, the 
proposed rule change clarifies that an option class will remain in the 
2.50 Strike Program until the Exchange otherwise designates and sends a 
decertification notice to the Options Clearing Corporation.
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    \3\ The term ``primary market'' is defined in Amex Rule 
900(b)(26) to mean (a) in respect of an underlying security that is 
principally traded on a national securities exchange, the principal 
exchange market in which the underlying security is traded; and (b) 
in respect of an underlying security which is principally traded in 
the over-the-counter market, in the case of equity securities, the 
market reflected by Nasdaq, and in the case of all other securities, 
the market reflected by any widely recognized quotation 
dissemination system or service.
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    The current 2.50 Strike Program is set forth in Commentary .06 to 
Amex Rule 903. The 2.50 Strike Program permits the Exchange to list 
2.50 point strike prices for selected options trading at strike prices 
greater than $25 but less than $50, excluding LEAPS. Initially adopted 
in 1995 as a pilot program, the options exchanges at that time were 
permitted to list 2.50 point strike prices up to $50 on a total of up 
to 100 option classes.\4\ In 1998, the pilot was permanently approved 
and expanded to allow the options exchanges to select up to 200 option 
classes for 2.50 point strike prices up to $50.\5\ Of the current 200 
options classes eligible for the 2.50 Strike Program, 51 have been 
allocated to the Amex. In addition, each options exchange is permitted 
to list 2.50 point strike prices on any option class that another 
options exchange selects under the 2.50 Strike Program.
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    \4\ See Securities Exchange Act Release No. 35993 (July 15, 
1995), 60 FR 35993 (July 19, 1995).
    \5\ See Securities Exchange Act Release No. 41662 (November 12, 
1998), 63 FR 64297 (November 19, 1998).
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    The Exchange believes that the 2.50 Strike Program has created 
additional trading opportunities for customers benefiting the 
marketplace. The existence of 2.50 point strike prices affords 
customers the ability to more closely tailor investment strategies to 
the precise movement of the underlying security. Accordingly, the Amex 
believes that the proposal to expand the 2.50 Strike Program for 2.50 
point strike prices between $50 and $75 should further benefit 
customers and the market by providing greater trading opportunities for 
those underlying stocks that have low volatility and thus trade in a 
narrow range.
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),\7\ in particular, in that it is designed 
to promote just and equitable principles of trade, remove impediments 
to and perfect the mechanisms of a free and open market and a national 
market system, and, in general, protect investors and the public 
interest.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 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 would 
impose any burden on competition 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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding, or (ii) as to 
which the Amex consents, the Commission will:
    (A) By order approve such proposed rule change; or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-2005-067 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.

All submissions should refer to File Number SR-Amex-2005-067. 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 Section, 100 F Street, 
NE., Washington, DC 20549. Copies of such filing also will 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 publicly available. All 
submissions should refer to File Number SR-Amex-2005-067 and should be 
submitted on or before November 25, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. E5-6093 Filed 11-2-05; 8:45 am]

BILLING CODE 8010-01-P