Document ID: SEC-2007-0668-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2007-05-11T04:00Z

[Federal Register: May 11, 2007 (Volume 72, Number 91)]
[Notices]               
[Page 26853-26854]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11my07-102]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55714; File No. SR-Amex-2007-43]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to a One-Year Extension of the $1 Strike Price Pilot Program

May 7, 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 30, 2007, 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 substantially prepared by Amex. 
The Exchange has filed the proposal as a ``non-controversial'' rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6) thereunder,\4\ which renders it 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).
    \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 extend the $1 strike price pilot program 
(``Pilot Program'') for one year through June 5, 2008. The text of the 
proposed rule change is available at Amex, 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, 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. 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 Pilot Program was established in June 2003,\5\ with three one-
year extensions granted by the Commission in June 2004, June 2005, and 
May 2006.\6\ The Exchange believes that the Pilot Program has operated 
as designed, providing investors with greater flexibility in achieving 
their investment strategies in connection with stocks trading below 
$20. Accordingly, the Exchange believes that a one-year extension is 
reasonable and consistent with the intent of the Pilot Program.
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    \5\ See Securities Exchange Act Release No. 48024 (June 12, 
2003), 68 FR 36617 (June 18, 2003) (SR-Amex-2003-36) (``Pilot 
Approval Order'').
    \6\ See Securities Exchange Act Release Nos. 49813 (June 4, 
2004), 69 FR 33088 (June 14, 2004) (SR-Amex-2004-45); 51770 (May 31, 
2005), 70 FR 33226 (June 7, 2005) (SR-Amex-2005-40); and 53843 (May 
19, 2006), 71 FR 30455 (May 26, 2006) (collectively, ``Pilot Program 
Extension Notices'').
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    The Pilot Program permits the Exchange to select a total of five 
individual stocks on which options series may be listed at $1 strike 
price intervals. To be eligible for the Pilot Program, an underlying 
stock must close below $20 on its primary market on the previous 
trading day. If selected, the Exchange may list $1 strike prices at $1 
intervals from $3 to $20, however, a $1 strike price may not be listed 
that is greater than $5 from the underlying stock's closing price on 
its primary market on the previous day. The Exchange may also list $1 
strikes on any other options class designated by another options 
exchange that employs a similar pilot program approved by the 
Commission.
    The Pilot Program prohibits the Exchange from listing $1 strikes on 
any series of individual equity options classes that have greater than 
nine months until expiration. In addition, the Exchange is also 
restricted from listing any series that would result in strike prices 
being $0.50 apart.
    To date, the Exchange believes that the Pilot Program has been 
beneficial to investors and the options market by providing investors 
with greater flexibility in the trading of equity options that overlie 
stocks trading below $20. In this manner, options investors are able to 
better tailor their strategies through the availability of $1 strikes. 
The Pilot Program Report, attached as Exhibit 3 to the proposal, 
provides data regarding the Pilot Program as required

[[Page 26854]]

in the Pilot Program Extension Notices.\7\ Amex notes that, as the data 
indicates, the $1 strikes exhibited higher volume and open interest 
than the ``standard'' strike price intervals. Specifically, the five 
options classes selected by Amex for $1 strikes had a trading volume of 
327,115 contracts, while the ``standard'' strikes for the same options 
classes had a trading volume 290,191 contracts. Of even greater 
significance is the difference in open interest between the $1 strikes 
and ``standard'' strikes. As of April 30, 2007, $1 strikes open 
interest totaled 685,808 contracts versus 396,777 contracts for 
``standard'' strikes. Given the limited nature of the Pilot Program, 
the Exchange submits that the impact on systems has been minimal. 
Accordingly, Amex believes that an extension of the Pilot Program for 
one year through June 5, 2008, is warranted.
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    \7\ See Pilot Program Extension Notices, supra note 6.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the Section 6(b) of the Act,\8\ in general, and furthers the 
objective of Section 6(b)(5) of the Act,\9\ in particular, in that it 
is designed to promote just and equitable principles of trade and to 
remove impediments to and perfect the mechanism of a free and open 
market.
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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 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

    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 rule change does not: (1) Significantly 
affect the protection of investors or the public interest; (2) impose 
any significant burden on competition; and (3) become operative for 30 
days from the date of this filing, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section 
19(b)(3)(A) of the Act\10\ and Rule 19b-4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). Rule 19b-4(f)(6) also requires the 
self-regulatory organization to give the Commission 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. Amex 
has satisfied the five-day pre-filing requirement. As set forth in 
the Commission's initial approval of the Pilot Program, if Amex 
proposes to: (1) Extend the Pilot Program; (2) expand the number of 
options eligible for inclusion in the Pilot Program; or (3) seek 
permanent approval of the Pilot Program, it must submit a Pilot 
Program report to the Commission along with the filing of its 
proposal to extend, expand, or seek permanent approval of the Pilot 
Program. Amex must file any proposal to expand or seek permanent 
approval of the Pilot Program and the Pilot Program report with the 
Commission at least 60 days prior to the expiration of the Pilot 
Program. The Pilot Program report must cover the entire time the 
Pilot Program was in effect and must include: (1) Data and written 
analysis on the open interest and trading volume for options (at all 
strike price intervals) selected for the Pilot Program; (2) delisted 
options series (for all strike price intervals) for all options 
selected for the Pilot Program; (3) an assessment of the 
appropriateness of $1 strike price intervals for the options Amex 
selected for the Pilot Program; (4) an assessment of the impact of 
the Pilot Program on the capacity of Amex's, the Options Price 
Reporting Authority's, and vendors' automated systems; (5) any 
capacity problems or other problems that arose during the operation 
of the Pilot Program and how Amex addressed them; (6) any complaints 
that Amex received during the operation of the Pilot Program and how 
Amex addressed them; and (7) any additional information that would 
help to assess the operation of the Pilot Program. See Pilot 
Approval Order, supra note 5.
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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.

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-2007-43 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-2007-43. 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 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 submissions should refer to File No. SR-
Amex-2007-43 and should be submitted on or before June 1, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-9076 Filed 5-10-07; 8:45 am]

BILLING CODE 8010-01-P