Document ID: SEC-2007-0249-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2007-02-20T05:00Z

[Federal Register: February 20, 2007 (Volume 72, Number 33)]
[Notices]               
[Page 7780-7782]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20fe07-28]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55277; File No. SR-Amex-2007-19]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Revise the AEMI Rules to Conform to Changes Previously Made to the 
AEMI-One Rules for the Pilot

February 12, 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 February 9, 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. Amex has filed this proposal pursuant to Section 19(b)(3)(A) 
of the Act \3\ and Rule 19b-4(f)(5) 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)(5).
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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 changes to its AEMI rules to match 
several changes that have already been approved and implemented as part 
of the Exchange's AEMI-One rules. The proposed changes would: (i) 
Eliminate the order types ``buy minus'' and ``sell plus''; (ii) revise 
the descriptions of ``stop order'' and ``stop limit order'' to provide 
that ``too marketable'' stop and stop limit orders for exchange-traded 
funds (``ETFs'') will be executed, not rejected; (iii) codify the 
Exchange's interpretation that a Specialist will not be deemed to be 
``trading ahead'' of a percentage order if an aggressing order that 
executes against the Specialist's quote automatically elects the 
percentage order but the percentage order is not executed by that 
aggressing order due to insufficient remaining interest; (iv) revise 
the definition of ``specialist emergency quote'' to provide for an 
Exchange-wide upper limit on the number of such quotes that can be 
sequentially generated; (v) revise the definition of ``stabilizing 
quote'' to provide that such a quote may be issued when orders or 
quotes on the AEMI Book are exhausted and that auto-ex would be 
disabled after such a quote is generated so that the Specialist may 
step in to re-quote the market; (vi) revise two rules (including the 
definition of ``intermarket sweep order'') to provide, as required by 
Regulation NMS, that members who choose to send intermarket sweep 
orders to the Exchange will be obligated to protect the same quotations 
of other market centers that the Exchange is obligated to protect; and 
(vii) correct two internal references in Rule 205-AEMI and add a new 
subparagraph to provide for the execution of an unexecuted odd-lot 
balance on an aggressing order that is the result of an unexecuted odd-
lot balance on an intermarket sweep order that was routed to another 
market by the AEMI platform to access a better-priced protected 
quotation.
    The text of the proposed rule change is available on the Amex's Web 
site at http://www.amex.com, at the Exchange's principal office, 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. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange has recently adopted two sets of rules in connection 
with the operation of its new hybrid market trading platform for equity 
products and ETFs, designated as AEMISM (the ``Auction and 
Electronic Market Integration'' platform). The initial version of AEMI 
is referred to as ``AEMI-One'' and is currently operational on a pilot 
basis \5\ through the day prior to the final date set by the Commission 
for full operation of all automated trading centers that intend to 
qualify their quotations for trade-through protection under Rule 611 
\6\ of Regulation NMS (the latter date being referred to as the 
``Trading Phase Date'').\7\ On the Trading Phase Date, the regular AEMI 
rules will become effective \8\ and the AEMI-One rules will cease to be 
operative. In the final amendment to the AEMI-One rules just prior to 
their approval by the Commission, the Exchange made several changes 
that are now reflected in those AEMI-One rules. In addition, the 
Exchange subsequently filed with the Commission a proposed change to 
the AEMI-One rule on odd-lot order execution that was immediately 
effective on filing and that provides for the execution of an 
unexecuted odd-lot balance on an aggressing order that is the result of 
an unexecuted odd-lot

[[Page 7781]]

balance on an order that was routed to another market by the AEMI 
platform to access a better-priced protected quotation.\9\ The purpose 
of this filing is simply to make conforming changes to the regular AEMI 
rules so that they match the corresponding AEMI-One rules that have 
been approved by the Commission and that are currently effective.
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    \5\ See Securities Exchange Act Release No. 54709 (November 3, 
2006), 71 FR 65847 (November 9, 2006) (SR-Amex-2006-72) (Order 
Approving a Proposed Rule Change and Amendment No 1 Thereto, and 
Notice of Filing and Order Granting Accelerated Approval to 
Amendment No. 3, to Adopt New Rules to Implement on a Pilot Basis an 
Initial Version of AEMI, Its Proposed New Hybrid Market Trading 
Platform for Equity Products and Exchange Traded Funds).
    \6\ 17 CFR 242.611. The Order Protection Rule requires trading 
centers to establish, maintain, and enforce written policies and 
procedures reasonably designed to prevent the execution of trades at 
prices inferior to protected quotations displayed by other trading 
centers, subject to certain exceptions.
    \7\ The Trading Phase Date is currently established as March 5, 
2007.
    \8\ See Securities Exchange Act Release No. 54552 (September 29, 
2006), 71 FR 59546 (October 10, 2006) (SR-Amex-2005-104) (Order 
Approving a Proposed Rule Change and Amendments No. 1, 2, 3, 4, and 
5 Thereto, and Notice of Filing and Order Granting Accelerated 
Approval to Amendment No. 6, to Establish a New Hybrid Trading 
System Known as AEMI).
    \9\ See Securities Exchange Act Release No. 54866 (December 4, 
2006), 71 FR 71598 (December 11, 2006) (SR-Amex-2006-111) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating 
to Odd-Lot Rejections by Away Markets in the AEMI-One Pilot).
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Elimination of ``Buy Minus'' and ``Sell Plus'' Order Types
    The Exchange proposes to remove the order types ``buy minus'' and 
``sell plus'' from Rule 131-AEMI(n) (and all references thereto in the 
AEMI rules) due to lack of demand for these order types and the 
complexity of the coding that would be involved to incorporate them 
into the AEMI platform.
Execution of ``Too Marketable'' Stop and Stop Limit Orders for ETFs
    The Exchange proposes to revise the descriptions of ``stop order'' 
in Rule 131-AEMI(o) and ``stop limit order'' in Rule 131-AEMI(p) to 
provide that ``too marketable'' stop and stop limit orders for ETFs 
will be executed, not rejected.
Codification of Exchange Interpretation Regarding ``Trading Ahead'' of 
a Percentage Order
    The Exchange proposes to codify as Commentary .01 to Rule 154-AEMI 
its interpretation, based on several of the AEMI rules, that a 
Specialist will not be deemed to be ``trading ahead'' of a percentage 
order (of which he is the agent) if (i) An aggressing order that 
executes against the Specialist's quote automatically ``elects'' the 
percentage order (making it eligible for immediate execution) and (ii) 
the percentage order is not executed by that aggressing order due to 
insufficient remaining interest and therefore reverts back to unelected 
status. Additionally, the proposed Commentary will provide that any 
subsequent trade by the Specialist for his own account at the limit 
price of the percentage order will not constitute ``trading ahead'' if 
the percentage order has not been otherwise re-elected at that time.
Revised Definitions of ``Specialist Emergency Quote'' and ``Stabilizing 
Quote''
    The Exchange proposes to revise the definition of ``specialist 
emergency quote'' in Rule 1A-AEMI to provide for an exchange-wide upper 
limit (not to exceed ten) on the number of specialist emergency quotes 
that may be sequentially generated. A change in the definition of 
``stabilizing quote'' is also proposed to provide that a stabilizing 
quote may be issued when orders or quotes on the AEMI Book are 
exhausted, and that auto-ex would be disabled after the stabilizing 
quote is generated so that the Specialist may step in to re-quote the 
market.
Obligation of Members to Protected Quotations at Other Market Centers
    The Exchange proposes to add language to the definition of an 
``intermarket sweep order'' in Rule 131-AEMI(k) to provide, as required 
by Regulation NMS, that members who choose to send such orders to the 
Exchange will be obligated to protect the same quotations of other 
market centers that the Exchange is obligated to protect. Specifically, 
a member may submit an intermarket sweep order to the Exchange only if 
the member simultaneously sends an intermarket sweep order for the full 
displayed size of every other better-priced protected quotation 
displayed by other trading centers. The same requirement is being added 
to Rule 126A-AEMI (Protected Bids and Offers of Away Markets).
Revisions to Odd-Lot Order Execution Rule
    The Exchange proposes to correct two internal rule references in 
Rule 205-AEMI so that they refer to the appropriate AEMI rules. In 
addition, the Exchange proposes to add a new subparagraph (b)(viii) to 
provide for the execution of an unexecuted odd-lot balance on an 
aggressing order that is the result of an unexecuted odd-lot balance on 
an intermarket sweep order that was routed to another market by the 
AEMI platform to access a better-priced protected quotation. 
Specifically, if a partial-lot trade is received from an away market in 
response to an intermarket sweep order sent by AEMI, resulting in an 
unexecuted balance which comprises an odd lot, then any unexecuted odd-
lot balance on the aggressing order (including the unexecuted odd-lot 
balance from the intermarket sweep order) shall be traded immediately 
against the Specialist at the last trade price of the intermarket sweep 
order, and any remaining unexecuted round-lot balance shall reaggress 
the AEMI Book in accordance with Rule 126A-AEMI. Illustrative examples 
of the proposed rule provision were included in the related AEMI-One 
filing referenced above.\10\
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    \10\ The corresponding AEMI-One rule refers to an ``away market 
obligation'' (which is an immediate-or-cancel limit order) rather 
than an ``intermarket sweep order'' based on the expectation that 
not all markets would be able to receive and execute intermarket 
sweep orders during the period of the AEMI-One pilot.
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    The Exchange asserts that the proposal to effect the foregoing 
changes to the AEMI trading system does not significantly affect the 
protection of investors or the public interest, does not impose any 
significant burden on competition, and does not have the effect of 
limiting the access to or availability of the system.
2. Statutory Basis
    The proposed rule change is designed to be consistent with 
Regulation NMS, as well as consistent with Section 6(b) of the Act, in 
general, and furthers the objectives of Section 6(b)(5),\11\ in 
particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, 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.
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    \11\ 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 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 with respect to the 
proposed rule change.

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

    Because the proposed rule change does not: (1) Significantly affect 
the protection of investors or the public interest; (2) impose any 
significant burden on competition; and (3) have the effect of limiting 
the access to or availability of an existing order entry or trading 
system of the Exchange, the foregoing rule change has become effective 
immediately pursuant to Section 19(b)(3)(A)(iii) of the Act \12\ and 
Rule 19b-4(f)(5) \13\ thereunder. At any time within 60 days of the 
filing of such proposed rule change, the Commission

[[Page 7782]]

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 the furtherance of the 
purposes of the Act.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(5).
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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 at http://www.sec.gov/rules/sro.shtml.
; or     Send an e-mail to rule-comments@sec.gov. Please include 

File No. SR-Amex-2007-19 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-2007-19. 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 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 No. SR-Amex-2007-19 and should be submitted on or before March 13, 
2007.

    For the Commission, by the Division of Market Regulation, 
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. E7-2840 Filed 2-16-07; 8:45 am]

BILLING CODE 8010-01-P