Document ID: SEC-2007-0811-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2007-06-12T04:00Z

[Federal Register: June 12, 2007 (Volume 72, Number 112)]
[Notices]               
[Page 32368-32372]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12jn07-78]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55865; File No. SR-Amex-2007-51]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Backup Trading Arrangements

June 6, 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 May 21, 2007, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule

[[Page 32369]]

change as described in Items I and II below, which Items have been 
substantially prepared by the Exchange. The Exchange filed the proposed 
rule change as a ``noncontroversial'' rule change under Rule 19b-
4(f)(6) under the Act,\3\ which renders the proposal 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\ 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 adopt new rules authorizing the Amex to enter 
into arrangements with one or more other exchanges which would provide 
for backup trading facilities for Amex listed options on another 
exchange if the Amex's facility becomes disabled and is unavailable for 
trading. The proposed rules further provide for the availability of 
Amex trading facilities to another exchange to trade its listed options 
if that exchange's facility becomes disabled.
    The text of the proposed rule change is available on the Amex's Web 
site (http://www.amex.com), at Amex'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 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. 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 Amex proposes to adopt new Amex Rule 62 governing Backup 
Trading Arrangements. Proposed new Rule 62 sets forth procedures 
whereby Amex members and associated persons may use a Backup Exchange's 
facilities to conduct the trading of some or all of its Exclusively and 
Singly Listed Options for the duration of a disabling event. The Amex 
will provide for another exchange (a ``Disabled Exchange'') to trade 
its Exclusively and Singly Listed Options in the event they are unable 
to do so because of an emergency or extraordinary set of circumstances 
that severely and adversely affects its ability to trade (a ``Disabling 
Event'').

The Amex Is the Disabled Exchange

    Proposed Rule 62(a)(i) governs the trading of Exclusively Listed 
Options (``Exclusively Listed Options'' or ``ELOs'') if the Amex is the 
Disabled Exchange. The term ``exclusively listed option'' is defined as 
an option that is listed exclusively by an exchange (because such 
exchange has an exclusive license to use, or has proprietary rights in, 
the interest underlying the option). Proposed Rule 62(a)(i)(B) provides 
that the Amex may enter into arrangements with one or more other 
exchanges (each a ``Backup Exchange'') to permit the Amex and its 
members and associated persons and other personnel to use a portion of 
the Backup Exchange's facilities to conduct the trading of some or all 
of the Amex's Exclusively Listed Options if there were a Disabling 
Event. Such options shall trade as listings of Amex and the facility of 
the Backup Exchange used by the Amex for this purpose will be deemed to 
be a facility of the Amex.
    The Exchange's proposal further provides that the trading of Amex 
Exclusively Listed Options shall be conducted in accordance with the 
rules of the Backup Exchange. In addition, the Amex and the Backup 
Exchange may agree that other rules of the Amex will apply to such 
trading. The Backup Exchange rules that govern trading on Amex's 
facility at the Backup Exchange shall be deemed to be Amex rules for 
purposes of such trading.
    According to the Exchange's proposal, the Backup Exchange shall 
perform the related regulatory functions with respect to trading of 
Amex Exclusively Listed Options on the Amex's facility at the Backup 
Exchange, except as the Amex and the Backup Exchange may specifically 
agree otherwise. The Backup Exchange and the Amex shall coordinate with 
each other regarding surveillance and enforcement respecting trading of 
the Exclusively Listed Options on the Amex's facility at the Backup 
Exchange.
    If the Backup Exchange is unable to accommodate all Amex members 
that desire to trade on Amex's facility at the Backup Exchange, the 
Amex may determine which members shall be eligible to trade at that 
facility. Factors the Amex shall consider in making such determinations 
may include, but are not limited to, any one or more of the following: 
Whether the member is a specialist in the applicable product, the 
number of contracts traded by the member or member organization in the 
applicable product, market performance, and other factors relating to a 
member's contribution to the market in the applicable product or 
products during a specific period.
    The Exchange's proposal further provides that the members of the 
Backup Exchange shall not be authorized to trade in any Amex 
Exclusively Listed Options, except that the Amex may deputize willing 
floor brokers of the Backup Exchange as temporary Amex members to 
permit them to execute orders as brokers in the Amex Exclusively Listed 
Options traded on the Amex's facility at the Backup Exchange. 
Furthermore, the Backup Exchange has agreed that it will, at the 
instruction of Amex, select members of the Backup Exchange that are 
willing to be deputized by the Amex as temporary Amex members 
authorized to trade Amex Exclusively Listed Options on the Amex's 
facility at the Backup Exchange for a period of time following a 
Disabling Event as the Amex determines to be appropriate, and the Amex 
may deputize such members of the Backup Exchange as temporary Amex 
members for that purpose.
    The Exchange's proposal further provides that options listed by the 
Backup Exchange that do not satisfy the standard listing and 
maintenance criteria of the Backup Exchange will be subject, upon 
listing by the Backup Exchange, to delisting (and, thus, restrictions 
on opening new series, and engaging in opening transactions in those 
series with open interest, as may be provided in the rules of the 
Backup Exchange).
    Proposed Rule 62(a)(ii) governs the trading of singly listed 
options (a ``Singly Listed Option'' or ``SLO''). A Singly Listed Option 
is defined as an option that is not an Exclusively Listed Option, but 
that is listed by an exchange and not by any other national securities 
exchange. Proposed Rule 62(a)(ii) provides that the Amex may enter into 
arrangements with a Backup Exchange under which the Backup Exchange 
will agree, in the event of a Disabling Event, to list for trading 
Singly Listed Options that are then singly listed only by the Amex and 
not by the Backup Exchange. The proposed Rule further provides that any 
such options listed by the Backup Exchange shall trade on the Backup 
Exchange and in accordance with the rules of the Backup Exchange. Such 
options shall be traded by members of the Backup Exchange and by Amex 
members selected by the Amex to the

[[Page 32370]]

extent the Backup Exchange can accommodate Amex members in the capacity 
of temporary members of the Backup Exchange. If the Backup Exchange is 
unable to accommodate all Amex members that desire to trade at the 
Backup Exchange, the Amex may determine which of its members shall be 
eligible to trade at the Backup Exchange.
    Any Amex member who is granted temporary access to the Backup 
Exchange pursuant to this paragraph shall only be permitted to act in 
those Backup Exchange capacities that are authorized by the Backup 
Exchange and that are comparable to capacities in which the temporary 
member has been authorized to act on the Amex, and to trade in those 
options in which the temporary member is authorized to trade on the 
Amex. Finally, Singly Listed Options listed by the Backup Exchange that 
do not satisfy the standard listing and maintenance criteria of the 
Backup Exchange will be subject, upon listing by the Backup Exchange, 
to delisting (and, thus, restrictions on opening new series, and 
engaging in opening transactions in those series with open interest, as 
may be provided in the rules of the Backup Exchange).

The Amex Is the Backup Exchange

    Proposed Rule 62(b)(i) provides that the Amex may enter into 
arrangements with one or more other Disabled Exchanges to allow the 
Disabled Exchange and its members to use a portion of the Amex's 
facilities to conduct the trading of some or all of the Disabled 
Exchange's Exclusively Listed Options in the event of a Disabling 
Event.
    Proposed paragraph (B) provides that the trading of the Disabled 
Exchange's Exclusively Listed Options on the Disabled Exchange's 
facility at the Amex shall be conducted in accordance with Amex rules. 
The members of the Disabled Exchange that are trading on the Disabled 
Exchange's facility at the Amex (not including Amex members who become 
temporary members of the Disabled Exchange) will be subject to the 
rules of the Disabled Exchange governing or applying to the maintenance 
of a person's or a firm's status as a member of the Disabled Exchange. 
In addition, the Disabled Exchange and the Amex may agree that other 
Disabled Exchange rules will apply to such trading. The Disabled 
Exchange and the Amex have agreed to communicate to their respective 
members which rules apply in advance of trading.
    Proposed paragraph (C) provides that the Amex will perform the 
related regulatory functions with respect to trading of the Disabled 
Exchange's Exclusively Listed Options on the Disabled Exchange's 
facility at the Amex, in each case except as the Disabled Exchange and 
the Amex may specifically agree otherwise. The Amex and the Disabled 
Exchange have agreed to coordinate with each other regarding 
surveillance and enforcement respecting trading of the Disabled 
Exchange's Exclusively Listed Options on the Disabled Exchange's 
facility at the Amex. The Disabled Exchange has agreed that it shall 
retain the ultimate legal responsibility for the performance of its 
self-regulatory obligations with respect to the Disabled Exchange's 
facility at the Amex.
    Proposed paragraph (D) provides the Amex members shall not be 
authorized to trade in any Exclusively Listed Options of the Disabled 
Exchange, except that: (1) The Disabled Exchange may deputize willing 
Amex floor brokers as temporary members of the Disabled Exchange to 
permit them to execute orders as brokers in Exclusively Listed Options 
of the Disabled Exchange traded on the facility of the Disabled 
Exchange at the Amex; and (2) at the instruction of the Disabled 
Exchange, the Amex shall select Amex members that are willing to be 
deputized by the Disabled Exchange as temporary members of the Disabled 
Exchange authorized to trade the Disabled Exchange's Exclusively Listed 
Options on the facility of the Disabled Exchange at the Amex for such 
period of time following a Disabling Event as the Disabled Exchange 
determines to be appropriate, and the Disabled Exchange may deputize 
such Amex members as temporary members of the Disabled Exchange for 
that purpose.
    Proposed paragraph (b)(ii) provides that the Amex may enter into 
arrangements with a Disabled Exchange under which the Amex will agree, 
in the event of a Disabling Event, to list for trading options that are 
then singly listed only by the Disabled Exchange and not by the Amex. 
Singly Listed Options listed by the Amex shall trade on the Amex and in 
accordance with Amex rules. Such options shall be traded by Amex 
members and by members of the Disabled Exchange selected by the 
Disabled Exchange to the extent the Amex can accommodate members of the 
Disabled Exchange in the capacity of temporary members of Amex. Any 
member of a Disabled Exchange granted temporary access to conduct 
business on the Amex under this paragraph shall only be permitted to 
act in those Amex capacities that are authorized by the Amex, and that 
are comparable to capacities in which the temporary member has been 
authorized to act on the Disabled Exchange and to trade in those 
options in which the temporary member is authorized to trade on the 
Disabled Exchange.
    Classes of options listed by the Amex that does not satisfy Amex 
listing and maintenance criteria will be subject, upon listing by the 
Amex, t delisting (and, thus, restrictions on opening new series, and 
engaging in opening transactions in those series with open interest, as 
may be provided in Amex rules.)

Temporary Members of the Disabled Exchange and the Backup Exchange

    Paragraph (c) of proposed Rule 62 governs the member obligations of 
both the temporary members of the Disabled Exchange and the temporary 
members of the Backup Exchange. Proposed paragraph (A) provides that an 
Amex member acting as a temporary member of the Disabled Exchange shall 
be subject to, and obligated to comply with, the rules that govern the 
operation of the facility of the Disabled Exchange at the Amex to the 
extent applicable during the period of such trading. Such Amex member 
shall have none of the rights of a member of the Disabled Exchange 
except the right to conduct business on the facility of the Disabled 
Exchange at the Amex as described in the Exchange's proposal herein. 
Additionally, the member organization associated with such Amex member, 
if any, shall be responsible for all obligations arising out of that 
Amex member's activities on or relating to the Disabled Exchange. 
Finally, the proposed rule provides that the clearing member of such 
Amex member shall guarantee and clear the transactions of such Amex 
member on the Disabled Exchange.
    Similarly, the Exchange's proposal provides that a member of the 
Backup Exchange acting in the capacity of a temporary member of the 
Amex pursuant to proposed paragraph (a)(i)(F) shall be subject to, and 
obligated to comply with, the rules that govern the operation of the 
facility of the Amex at the Backup Exchange, including Amex rules to 
the extent applicable during the period of such trading. The proposed 
rule further provides that temporary members shall have none of the 
rights of an Amex member except the right to conduct business on the 
facility of Amex at the Backup Exchange as described herein. In 
addition, the member organization associated with such temporary 
member, if any, shall be responsible for all obligations arising out of 
that temporary member's

[[Page 32371]]

activities on or relating to the Amex and the clearing member of such 
temporary member shall guarantee and clear the transactions on the Amex 
of such temporary member.
    Proposed paragraph (c)(ii)(A) provides that an Amex member acting 
in the capacity of a temporary member of the Backup Exchange pursuant 
to paragraph (a)(ii)(B) shall be subject to, and obligated to comply 
with, the rules of the Backup Exchange that are applicable to the 
Backup Exchange's own members. Such Amex member shall have none of the 
rights of a member of the Backup Exchange except the right to conduct 
business on the Backup Exchange to the extent described in the proposed 
Rule. The member organization associated with such Amex member, if any, 
shall be responsible for all obligations arising out of that Amex 
member's activities on or relating to the Backup Exchange. Furthermore, 
the clearing member of such Amex member shall guarantee and clear the 
transactions of such Amex member on the Backup Exchange. Finally, such 
Amex member shall only be permitted to act in those capacities on the 
Backup Exchange that are authorized by the Backup Exchange and that are 
comparable to capacities in which the Amex member has been authorized 
to act on the Amex, and to trade in those options in which the Amex 
member is authorized to trade on the Amex.
    A member of Disabled Exchange acting in the capacity of a temporary 
member of the Amex pursuant to paragraph (b)(ii)(A) shall be subject 
to, and obligated to comply with, Amex rules that are applicable to 
Amex's own members. Such temporary member shall have none of the rights 
of an Amex member except the right to conduct business on the Amex to 
the extent described in the proposed Rule. The member organization 
associated with such temporary member, if any, shall be responsible for 
all obligations arising out of that temporary member's activities on or 
relating to the Amex. The clearing member of such temporary member 
shall guarantee and clear the transactions of such temporary member on 
the Amex and such temporary member shall only be permitted to act in 
those Amex capacities that are authorized by the Amex and that are 
comparable to capacities in which the temporary member has been 
authorized to act on the Disabled Exchange, and to trade in those 
option classes in which the temporary member is authorized to trade on 
the Disabled Exchange.

Member Proceedings

    Proposed paragraph (d) governs member proceedings that may take 
place regarding trading during a backup period. Proposed paragraph 
(d)(i) provides that if the Amex initiates an enforcement proceeding 
with respect to the trading during a backup period of the Singly Listed 
Options of the Disabled Exchange by a temporary member of the Amex or 
the Exclusively Listed Options of the Disabled Exchange by a member of 
the Disabled Exchange (other than an Amex member who is a temporary 
member of the Disabled Exchange), and such proceeding is in process 
upon the conclusion of the backup period, the Amex may transfer 
responsibility for such proceeding to the Disabled Exchange following 
the conclusion of the backup period. Moreover, arbitration of any 
disputes with respect to any trading during a backup period of Singly 
Listed Options of the Disabled Exchange or of Exclusively Listed 
Options of the Disabled Exchange on the Disabled Exchange's facility at 
the Amex will be conducted in accordance with Amex rules, unless the 
parties to an arbitration agree that it shall be conducted in 
accordance with the rules of the Disabled Exchange.
    Proposed Rule 62(d)(ii) provides that if the Backup Exchange 
initiates an enforcement proceeding with respect to the trading during 
a backup period of Amex Singly Listed Options by a temporary member of 
the Backup Exchange or Amex Exclusively Listed Options by an Amex 
member (other than a member of the Backup Exchange who is a temporary 
member of the Amex), and such proceeding is in process upon the 
conclusion of the backup period, the Backup Exchange may transfer 
responsibility for such proceeding to the Amex following the conclusion 
of the backup period. Furthermore, arbitration of any disputes with 
respect to any trading during a backup period of Amex Singly Listed 
Options on the Backup Exchange or of Amex Exclusively Listed Options on 
the facility of the Amex at the Backup Exchange will be conducted in 
accordance with the rules of the Backup Exchange, unless the parties to 
an arbitration agree that it shall be conducted in accordance with Amex 
rules.
    Finally, the proposed rule provides that Amex members are required 
to take appropriate actions as instructed by the Exchange to 
accommodate the Amex's backup trading arrangements.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \4\ of the 
Act 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, 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; and is not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers, or to regulate by virtue of any authority conferred by the Act 
matters not related to the purpose of the Act or the administration of 
the Exchange.
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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

    Because the proposed rule change: (i) Does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and (iii) by its terms, 
does not become operative for 30 days after the date of filing, the 
proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \6\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\7\ As required under Rule 19b-4(f)(6)(iii),\8\ the Exchange 
provided the Commission with written 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 
the filing of the proposed rule change.
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6).
    \8\ 17 CFR 240.19b-4(f)(6)(iii).

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[[Page 32372]]

    Amex has requested that the Commission waive the 30-day operative 
delay. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public 
interest.\9\ The Commission notes that the proposed rule change is 
modeled on a recently approved Philadelphia Stock Exchange 
proposal.\10\ Amex's proposal does not appear to raise any novel 
regulatory issues and will allow Amex without undue delay to implement 
backup trading arrangements for options--particularly exclusively 
listed options--in the event of a Disabling Event.
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    \9\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \10\ See Exchange Act Release No. 51926 (June 27, 2005), 70 FR 
38232 (July 1, 2005) (SR-PHLX-2004-65).
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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 the 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 Number SR-Amex-2007-51 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-2007-51. 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 offices 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 Number SR-Amex-2007-51 and should be submitted on or before July 
3, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-11265 Filed 6-11-07; 8:45 am]

BILLING CODE 8010-01-P