Document ID: SEC-2007-1795-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2007-12-31T05:00Z

[Federal Register: December 31, 2007 (Volume 72, Number 249)]
[Notices]               
[Page 74379-74380]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31de07-99]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57030; File No. SR-Amex-2007-135]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Related to Section 107D(g) of the Amex Company Guide

December 21, 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 December 7, 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 Amex. The 
Exchange has filed the proposal pursuant to section 19(b)(3)(A) of the 
Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ 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\ 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 proposes to amend section 107D(g) of the Amex Company 
Guide (the ``Company Guide'') to create a limited exception to the 
requirement that 90% of an index's numerical value underlying an 
issuance of index-linked securities (``Index Securities'') and at least 
80% of the total number of component securities will meet the then 
current criteria for standardized options trading on a national 
securities exchange. This exception will apply only when (i) no 
underlying component security represents more than 10% of the dollar 
weight of the index and (ii) the index has a minimum of 20 components.
    The text of the proposed rule change is available on the Amex's Web 
site at http://www.amex.com, the Office of the Secretary, the Amex 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, 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 purpose of this proposal is to provide a limited exception to 
the requirement set forth in section 107D(g)(v) of the Company Guide 
requiring that 90% of an underlying index's numerical value and at 
least 80% of the total number of component securities meet the criteria 
for standardized options trading set forth in Amex Rule 915. In 
connection with foreign-based indexes, this requirement essentially 
prohibits the use of the generic listing standard for Index Securities 
that are linked to, or based on, the performance of a foreign or 
international index. The Exchange submits that this was not the 
intention of the generic listing standard, and therefore, proposes a 
limited exception to the options eligibility requirement for component 
securities of an underlying index. We believe this proposed rule change 
will permit a number of foreign or international indexes to be the 
subject of Index Securities listed and traded on the Exchange.
    Section 107D of the Company Guide provides generic listing 
standards to permit the listing and trading of Index Securities 
pursuant to Rule 19b-4(e) under the 1934 Act.\5\ As a result, the 
Exchange may list Index Securities based on an index or indexes (the 
``Underlying Index'') that meet the criteria set forth in paragraph (g) 
of section 107D of the Company Guide. Specifically, an Underlying Index 
is required to either be (i) an index meeting the specific criteria set 
forth in Section 107D(g); or (ii) an index previously approved for the 
trading of options or other derivative securities by the Commission 
under section 19(b)(2) of the 1934 Act and rules thereunder.
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    \5\ See Securities Exchange Act Release No. 51563 (April 15, 
2005), 70 FR 21257 (April 25, 2005).
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    The application of Amex Rule 915 in connection with foreign-based 
indexes is especially problematic as a result of the requirement in the 
Rule that requires an underlying security to be duly registered and be 
an ``NMS stock'' as defined in Rule 600 of Regulation NMS under the 
Securities Exchange Act of 1934 (the ``1934 Act'').\6\ In addition, the 
issuer of an underlying foreign security is unlikely to be able to 
comply with all applicable requirements of the 1934 Act as required by 
Rule 915.
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    \6\ NMS stock is defined as an ``NMS security'' other than an 
option. ``NMS security'' is defined as any security or class of 
securities for which transaction reports are collected, processed 
and made available pursuant to an effective transaction reporting 
plan other than options. In addition, although foreign securities 
may meet the minimum market capitalization and trading volume 
requirements, the other criteria set forth Rule 915 will be 
difficult for foreign securities to comply with.
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    All of the options exchanges apply the same criteria to securities 
underlying exchange-traded options. These criteria relate primarily to 
the distribution and trading volume of the securities underlying an 
option \7\ and, as such, are duplicative of the minimum market 
capitalization and trading volume requirements for securities 
underlying Index Securities set forth in section 107D(g)(i) and (ii). 
The Exchange notes that the requirement of section 107D(g) that a 
component included in a securities index must have had a trading volume 
of at least 1,000,000 shares per month over the most recent six month 
period \8\ is significantly more stringent

[[Page 74380]]

than the requirement of the options rules that the security have a 
trading volume of 2,400,000 shares over a twelve month period. However, 
while a significant number of securities meet the minimum market 
capitalization and trading volume requirements for components of 
securities indexes under section 107D(g), many do not meet the current 
criteria for standardized options trading. The Exchange believes that 
the explicit market capitalization and trading volume requirements of 
section 107D(g) are sufficient to ensure that any security underlying a 
series of Index Securities will have a liquid trading market. In 
addition, the proposed enhanced concentration limits and minimum number 
of components that would need to be met by an issuer in order to avail 
itself of the proposed exemption would significantly reduce the 
possibility of manipulation of the index. Based on the foregoing, the 
Exchange believes that the added protection of requiring that such 
securities be qualified for options trading is unnecessary.
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    \7\ The rules require a minimum of 7,000,000 publicly-held 
shares, 2,000 holders, a trading volume of 2,400,000 in the 
preceding 12 months and a market price of at least $3.00 per share 
for securities that are ``covered securities'' as defined in Section 
18(b)(1)(A) of the Securities Act of 1933 and a market price of 
$7.50 for securities that are not ``covered securities.''
    \8\ Except that for each of the lowest weighted component 
securities in the index that in the aggregate account for no more 
than 10% of the weight of the index, the trading volume must be at 
least 500,000 shares per month in each of the last six months.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations under the Act applicable to a 
national securities exchange and, in particular, the requirements of 
section 6(b) of the Act.\9\ Specifically, the Exchange believes the 
proposed rule change is consistent with the section 6(b)(5) Act \10\ 
requirements that the rules of an exchange be designed to promote just 
and equitable principles of trade, to prevent fraudulent and 
manipulative acts and, in general, to protect investors and the public 
interest.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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 forgoing 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 
after 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 \11\ and Rule 19b-4(f)(6) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date of filing.\13\ 
However, Rule 19b-4(f)(6)(iii) \14\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange 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 because waiver will 
permit the Exchange to implement the proposed rule change as soon as 
possible thereby permitting potential issuers to avail themselves of 
the revised listing criteria. In addition, the Commission notes that it 
has recently approved a proposal by another Exchange, which included 
identical rule text to that proposed by Amex.\15\ For these reasons, 
the Commission designates the proposed rule change to be operative upon 
filing with the Commission.\16\
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    \13\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to 
the Commission 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 filing 
of the proposed rule change, or such shorter time as designated by 
the Commission. The Commission has determined to grant the 
Exchange's request to waive the five-day pre-filing notice 
requirement.
    \14\ Id.
    \15\ See Securities Exchange Act Release No. 56879 (December 3, 
2007), 72 FR 69271 (December 7, 2007) (NYSEArca-2007-110).
    \16\ For the purposes only of waiving the 30-day operative 
delay, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of such 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 Number SR-Amex-2007-135 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-2007-135. 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 the filing also will 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 Number SR-Amex-2007-135 
and should be submitted on or before January 22, 2008.
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    \17\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Nancy M. Morris,
Secretary.
 [FR Doc. E7-25374 Filed 12-28-07; 8:45 am]

BILLING CODE 8011-01-P