Document ID: SEC-2007-1266-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2007-09-12T04:00Z

[Federal Register: September 12, 2007 (Volume 72, Number 176)]
[Notices]               
[Page 52182-52183]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12se07-126]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56354; File No. SR-Amex-2007-40]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change, as Modified by Amendment No. 1 Thereto, Relating to 
Options Quote Size Mitigation

September 5, 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 24, 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 and 
II below, which Items have been substantially prepared by the Amex. On 
August 24, 2007, the Exchange filed Amendment No. 1 to the proposed 
rule change.\3\ The Commission is publishing this notice to solicit 
comments on the proposed rule change, as modified by Amendment No. 1 
thereto, from interested persons and to approve the proposal on an 
accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 superseded and replaced the original filing 
in its entirety.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to continue the options market data size 
mitigation pilot program (``Options Size Mitigation'' or ``Pilot 
Program'') from March 6, 2007 through March 5, 2008.
    The text of the proposed rule change is available at (http://www.amex.com
), at the Exchange, 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 III below. The 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 Amex is proposing to continue the effectiveness of Options Size 
Mitigation from March 6, 2007 through March 5, 2008. The Commission 
approved Options Size Mitigation on a four (4) month pilot basis on 
November 4, 2005.\4\ The Pilot Program was extended on March 25, 2006 
to March 5, 2007.\5\
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    \4\ See Securities Exchange Act Release No. 52741 (November 4, 
2005), 70 FR 69369 (November 15, 2005) (SR-Amex-2005-115) 
(``Approval Order'').
    \5\ See Securities Exchange Act Release No. 53867 (May 25, 
2006), 71 FR 31234 (June 1, 2006) (SR-Amex-2006-50).
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    The purpose of the proposal is to continue the effectiveness of the 
Pilot Program for the benefit of the Exchange and the marketplace by 
helping to enhance the Exchange's ability to process an ever increasing 
volume of incoming options quotes.\6\ The Exchange believes that the 
continuation of Options Size Mitigation will help to enhance the 
Exchange's ability to manage market data traffic.
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    \6\ In January 2000, OPRA capacity was 3,000 messages per second 
(``MPS'') with an expectation during the year to increase to 8,000 
and 12,000 MPS, respectively. As an example, one-minute and five-
minute peak output rates in March 2000 were 3,515 and 3,393 MPS, 
respectively. OPRA in 2001 increased system capacity to 24,000 MPS. 
Moving forward to February 9, 2007, the system capacity was 360,000 
MPS with one-second, 15-second and one-minute peak output rates of 
216,086 (12/22/2006), 199,731 MPS (12/22/2006) and 182,957 MPS (12/
22/2006), respectively. OPRA increased system capacity to 359,000 
MPS on March 13, 2007.
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    Under Options Size Mitigation, incoming market data is filtered 
prior to being forwarded to Exchange floor trading systems. When in 
effect, Options Size Mitigation accordingly filters market data by not 
processing incoming quotes (i.e. away market quotes) with size changes 
below a variable percent. However, Amex systems always maintain and 
display Amex quotations with accurate size regardless of whether 
Options Size Mitigation is in effect.
    As the Exchange has gained experience with Options Size Mitigation 
and increased quote traffic rates in recent months, a more targeted 
approach has been adopted. In the case of market data rate spikes, the 
Exchange will use Options Size Mitigation as needed. This typically 
occurs during the opening and when significant economic/market 
sensitive news is expected to be released. The Exchange submits that 
the initial Options Size Mitigation filtering level is always set at 
10% at the start of the trading day. If the Exchange experiences quote 
traffic that is trending near system capacity thresholds, the Exchange 
would adjust the filtering level upward from 10%, as necessary. As set 
forth in the Approval Order, the Exchange has the ability to increase 
the filtering level in 10% level increments as warranted. It is common 
for the Exchange to adjust the filtering level to 20% or 30%. The 
appropriate filtering level is determined by the head of the Exchange's 
Floor Operations (or his designee), in conjunction with two (2) Senior 
Floor Officials.
    As was the case in the original Pilot Program, the Exchange 
believes that Options Size Mitigation offers greater ability and 
flexibility to manage inbound quote traffic, especially in light of the 
Penny Quoting Pilot Program.\7\ Given the exponential increase in 
options quote traffic rates in recent years, the Exchange believes that 
the continuation of Options Size Mitigation is a necessary tool in 
connection with the processing of quote traffic.
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    \7\ See Securities Exchange Act Release No. 55162 (January 24, 
2007), 72 FR 4738 (February 1, 2007) (SR-Amex-2006-106).
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    Based on the Exchange's experience to date, the Exchange believes 
that it is

[[Page 52183]]

appropriate to continue the Pilot Program from March 6, 2007 through 
March 5, 2008.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act \8\ in general and furthers the objectives of 
Section 6(b)(5) \9\ 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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    \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 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. 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-2007-40 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-2007-40. 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 at 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 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-2007-40 and should be 
submitted on or before October 3, 2007.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    After careful consideration, the Commission finds that the 
Exchange's proposal to retroactively extend the Options Size Mitigation 
from March 6, 2007 to March 5, 2008 is consistent with the requirements 
of the Section 6 of the Act \10\ and the rules and regulations 
thereunder applicable to a national securities exchange.\11\ In 
particular, the Commission believes that the proposed rule change is 
consistent with Section 6(b)(5) of the Act, which requires, among other 
things, that the rules of a national securities exchange be 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.\12\
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    \10\ 15 U.S.C. 78f.
    \11\ In approving this proposed rule change, the Commission has 
considered its impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \12\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the Options Size Mitigation should 
continue uninterrupted to enhance the Amex's ability to process an 
increasing volume of incoming options quotes during high option quote 
volume periods and peaks. The Commission notes that Options Size 
Mitigation has operated on a pilot basis and the Amex believes it is 
functioning as intended.
    The Amex has requested that the Commission find good cause for 
approving the proposed rule change prior to the thirtieth day after 
publication of the notice thereof in the Federal Register. The 
Commission believes that granting accelerated approval of the proposal 
will allow the Amex to continue to operate the Options Size Mitigation 
program and thus, should facilitate the processing of incoming options 
quotes. The Commission notes that no comments were received in 
connection with the approval of the Pilot Program and no comments have 
been received during the operation of the Pilot Program. Accordingly, 
the Commission finds good cause, pursuant to Section 19(b)(2) of the 
Act,\13\ for approving the proposed rule change prior to the thirtieth 
day after publication of the notice thereof in the Federal Register.
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    \13\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change, as amended (SR-Amex-2007-40), 
is hereby approved on an accelerated basis for a period to expire on 
March 5, 2008.
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    \14\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-17935 Filed 9-11-07; 8:45 am]

BILLING CODE 8010-01-P