Document ID: SEC-2007-1249-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock  Exchange LLC
Posted Date: 2007-09-07T04:00Z

[Federal Register: September 7, 2007 (Volume 72, Number 173)]
[Notices]               
[Page 51481-51483]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07se07-101]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56343; File No. SR-Amex-2007-95]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change Relating to the Execution of 
NDX and RUT Combination Orders

August 30, 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 August 20, 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 the 
Exchange. 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)(l).
    \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 adopt rules and procedures regarding the 
definition and execution of NDX and RUT combination orders in Amex 
Rules 950-ANTE and 953-ANTE (c). The text of the proposed rule change 
is available at the 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, 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

[[Page 51482]]

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to adopt Commentary .01 to Amex Rule 950-
ANTE(e) to include the definition of NDX and RUT combination orders in 
Amex rules.\3\ Pursuant to proposed Commentary .01(a) to Amex Rule 950-
ANTE(e), a ``NDX Combination'' is a long (short) NDX call and a short 
(long) NDX put having the same expiration date and strike price. A 
``RUT Combination'' is a long (short) RUT call and a short (long) RUT 
put having the same expiration date and strike price. As defined in 
proposed Commentary .01(c) to Amex Rule 950-ANTE(e), a ``NDX 
combination order'' is an order to purchase or sell NDX options and the 
offsetting number of NDX Combinations defined by the delta. Likewise, a 
``RUT combination order'' is an order to purchase or sell RUT options 
and the offsetting number of RUT Combinations defined by the delta. The 
delta is defined as the positive (negative) number of NDX or RUT 
Combinations that must be sold (bought) to establish a market neutral 
hedge with the corresponding NDX or RUT option position. The proposal 
is limited to NDX and RUT options.
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    \3\ NDX is the NASDAQ-100 Index; RUT is the Russell 2000 Index.
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    The Exchange further proposes to adopt execution procedures 
regarding NDX and RUT combination orders in Amex Rule 953-ANTE(c). The 
proposed rule enables a member holding a NDX or RUT combination order, 
and bidding or offering in a multiple of the minimum price variation on 
the basis of a total debit or credit for the order, to execute the NDX 
or RUT combination order even if he has determined that the order may 
not otherwise be executable (e.g., the bids and offers displayed in the 
limit order book or in the trading crowd will not satisfy the net 
credit/net debit price of the order).
    This proposal permits the member to execute the order at the best 
net debit or credit price so long as: (1) No leg of the order would 
trade at a price outside the currently displayed bids or offers in the 
trading crowd or bids or offers in the limit order book; and (2) at 
least one leg of the order would trade at a price that is better than 
the corresponding bid or offer in the limit order book.
    The Exchange proposes that if a NDX or RUT combination order is not 
executed immediately, that same order may be executed and printed at 
the prices originally quoted for each of the component option series in 
the two (2) hour time period after the original quote, provided the 
prices originally quoted satisfied the requirements of proposed 
paragraphs (c)(i)(A) and (c)(i)(B) of Amex Rule 953-ANTE, and provided 
at the time of execution no individual leg of such order may trade 
ahead of the corresponding bid or offer in the NDX or RUT limit order 
book.
    The purpose of this proposal is to facilitate the hedging of NDX 
and RUT Combinations during times of market volatility. NDX and RUT 
market participants holding orders for options tied to combinations 
often experience difficulty in completing such transactions in a 
volatile market and are unable to complete the trade because the prices 
originally quoted for a component leg of the order may no longer be 
traded within displayed market quotes.
    The Amex notes that when transactions for the component series of a 
NDX or RUT Combination are traded out-of-range pursuant to the two (2) 
hour window permitted by proposed Amex Rule 953-ANTE(c), the trade will 
be price reported to the trading floor and to the Options Price 
Reporting Authority (``OPRA'') using a sold sale indicator to provide 
notice to the public that the reported prices were part of an out-of-
range combination trade.
    The Exchange represents that proposed Amex Rule 953-ANTE(c)(ii) 
will be used during times of market volatility for the benefit of the 
marketplace and investors in order to provide liquidity to larger-sized 
orders. Finally, as noted above, the component leg of an NDX or RUT 
combination order will be price reported to the trading floor and OPRA 
using a sold sale indicator that will act as notice to the public that 
the reported prices are part of an NDX or RUT combination order.
    Finally, the Amex further notes that it will issue a regulatory 
circular to its membership to explain the operation of Amex Rule 953-
ANTE(c). In the regulatory circular the Amex will remind its membership 
that the adoption of Amex Rule 953-ANTE(c) does not minimize the 
obligation of members to obtain best execution of options orders for 
their customers.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the Act 
\4\ in general and furthers the objectives of Section 6(b)(5) \5\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, 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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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    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

    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 self-regulatory organization 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.
    The Commission is considering granting accelerated approval of the 
proposed rule change at the end of a 15-day comment period.\6\
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    \6\ Amex requested accelerated approval of this proposed rule 
change prior to the 30th day after the date of publication of the 
notice of the filing thereof.
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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

[[Page 51483]]

Number SR-Amex-2007-95 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-2007-95. 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 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 available publicly. All 
submissions should refer to File Number SR-Amex-2007-95 and should be 
submitted on or before September 24, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-17670 Filed 9-6-07; 8:45 am]

BILLING CODE 8010-01-P