Document ID: SEC-2008-1270-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: American Stock Exchange LLC
Posted Date: 2008-09-18T04:00Z

[Federal Register: September 18, 2008 (Volume 73, Number 182)]
[Notices]               
[Page 54184-54186]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18se08-89]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58516; File No. SR-Amex-2008-69]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Related to the Listing and Trading of Options on Section 107 Securities

September 11, 2008.
    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 September 3, 2008, 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 prepared by the Exchange. Amex 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 add new Commentary .11 to Rule 915 and new 
Commentary .12 to Rule 916 to enable the listing and trading of options 
on securities meeting the requirements of Sections 107D, 107E, 107F, 
107G, 107H or 107I of the Amex Company Guide (the ``Company Guide'').
    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, 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 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to adopt new Commentary .11 to Rule 915 and 
new Commentary .12 to Rule 916 to enable the listing and trading of 
options on index-linked securities (``Index-Linked Securities''), 
commodity-linked securities (``Commodity-Linked Securities''), 
currency-linked securities (``Currency-Linked Securities''), fixed 
income-linked securities (``Fixed Income-Linked Securities''), futures-
linked securities (``Futures-Linked Securities'') and combination-
linked securities (``Combination-Linked Securities'') (collectively 
known as ``Section 107 Securities'' as defined in Sections 107D, 107E, 
107F, 107G, 107H and 107I, respectively, of the Company Guide) that are 
principally traded on a national securities exchange and an ``NMS 
Stock'' (as defined in Rule 600 of Regulation NMS under the Securities 
Exchange Act of 1934 (the ``1934 Act'')).
    Section 107 Securities are designed for investors who desire to 
participate in a specific market segment by providing

[[Page 54185]]

exposure to one or more identifiable underlying securities, 
commodities, currencies, derivative instruments or market indexes of 
the foregoing (``Underlying Index'' or ``underlying Indexes''). Section 
107 Securities are the non-convertible debt of an issuer that have a 
term of at least one (1) year but not greater than thirty (30) years. 
Despite the fact that Section 107 Securities are linked to an 
underlying index, each trades as a single, exchange-listed security. 
Accordingly, rules pertaining to the listing and trading of standard 
equity options will apply to Section 107 Securities. The Exchange does 
not propose any changes to rules pertaining to Stock Index Options.
Listing Criteria
    The Exchange will consider listing and trading options on Section 
107 Securities provided the Section 107 Securities meet the criteria 
for underlying securities set forth in Commentary .01 to Rule 915. The 
Exchange proposes that Section 107 Securities deemed appropriate for 
options trading represent ownership of a security that provides for the 
payment at maturity, as described below.
     Index-Linked Securities are securities that provide for 
the payment at maturity of a cash amount based on the performance of an 
underlying index or indexes of equity securities (``Equity Reference 
Asset'').
     Commodity-Linked Securities are securities that provide 
for the payment at maturity of a cash amount based on the performance 
of one or more physical commodities or commodity futures, options or 
other commodity derivatives or Commodity-Based Trust Shares or a basket 
or index of any of the foregoing (``Commodity Reference Asset'').
     Currency-Linked Securities are securities that provide for 
the payment at maturity of a cash amount based on the performance of 
one or more currencies, or options or currency futures or other 
currency derivatives or Currency Trust Shares \5\ or a basket or index 
of any of the foregoing (``Currency Reference Asset'').
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    \5\ See Amex Rule 1200B-AEMI(b). The term ``Currency Trust 
Shares'' means a security that (i) is issued by a trust that holds a 
specified non-U.S. currency deposited with the trust; (ii) when 
aggregated in some specified minimum number may be surrendered to 
the trust by the beneficial owner to receive the specified non-U.S. 
currency; and (iii) pays beneficial owners interest and other 
distributions on the deposited non-U.S. currency, if any, declared 
and paid by the trust.
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     Fixed Income-Linked Securities are securities that provide 
for the payment at maturity of a cash amount based on the performance 
of one or more notes, bonds, debentures or evidence of indebtedness 
that include, but are not limited to, U.S. Department of the Treasury 
securities (``Treasury Securities''), government-sponsored entity 
securities (``GSE Securities''), municipal securities, trust preferred 
securities, supranational debt and debt of a foreign country or a 
subdivision thereof or a basket or index of any of the foregoing 
(``Fixed Income Reference Asset'');
     Futures-Linked Securities are securities that provide for 
the payment at maturity of a cash amount based on the performance of an 
index of (a) futures on Treasury Securities, GSE Securities, 
supranational debt and debt of a foreign country or a subdivision 
thereof, or options or other derivatives on any of the foregoing; or 
(b) interest rate futures or options or derivatives on the foregoing in 
this subparagraph (b) (``Futures Reference Asset''); and
     Combination-Linked Securities are securities that provide 
for the payment at maturity of a cash amount based on the performance 
of any combination of two or more Equity Reference Assets, Commodity 
Reference Assets, Currency Reference Assets, Fixed Income Reference 
Assets or Futures Reference Assets (``Combination Reference Asset'').
    For the purposes of Commentary .11 to Rule 915, Equity Reference 
Assets, Commodity Reference Assets, Currency Reference Assets, Fixed 
Income Reference Assets, Futures Reference Assets and Combination 
Reference Assets, will be collectively referred to as ``Reference 
Assets,'' as defined in Sections 107D, 107E, 107F, 107G, 107H and 107I, 
respectively, of the Company Guide. Section 107 Securities must meet 
the criteria and guidelines for underlying securities set forth in 
Commentary .01 to Rule 915, or the Section 107 Securities must be 
redeemable at the option of the holder at least on a weekly basis 
through the issuer at a price related to the applicable underlying 
Reference Asset. In addition, the issuing company is obligated to issue 
or repurchase the securities in aggregation units for cash or cash 
equivalents satisfactory to the issuer of Section 107 Securities which 
underlie the option as described in the Section 107 Securities 
prospectus.
Continued Listing Requirements
    Options on Section 107 Securities will be subject to all Exchange 
rules governing the trading of equity options. The current continuing 
or maintenance listing standards for options traded on the Amex will 
continue to apply.
    The Exchange proposes to establish Commentary .12 to Rule 916 which 
will include criteria related to the continued listing of options on 
Section 107 Securities.
    Under the applicable continued listing criteria in proposed 
Commentary .12 to Rule 916, options on Section 107 Securities initially 
approved for trading pursuant to proposed Commentary .11 to Rule 915 
may be subject to the suspension of opening transactions as follows: 
(1) Non-compliance with the terms of proposed Commentary .11 to Rule 
915; (2) non-compliance with the terms of Commentary .01 to Rule 916, 
except that in the case of options covering Section 107 Securities 
approved pursuant to proposed Commentary .11(c)(2) to Rule 915 that are 
redeemable at the option of the holder at least on a weekly basis, then 
option contracts of the class covering such Securities may only 
continue to be open for trading as long as the Securities are listed on 
a national securities exchange and are an ``NMS stock'' as defined in 
Rule 600 of Regulation NMS; (3) in the case of any Section 107 Security 
trading pursuant to Commentary .11 to Rule 915, the value of the 
Reference Asset is no longer calculated or available; or (4) such other 
event shall occur or condition exist that in the opinion of the 
Exchange makes further dealing in such options on the Exchange 
inadvisable.
    The Exchange represents that the listing and trading of options on 
Section 107 Securities pursuant to proposed Commentary .11 to Rule 915 
will not have any effect on the rules pertaining to position and 
exercise limits \6\ or margin.\7\
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    \6\ See Amex Rules 904 and 905.
    \7\ See Amex Rules 462.
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    The Exchange will implement surveillance procedures for options on 
Section 107 Securities, including adequate comprehensive surveillance 
sharing agreements with markets trading in non-U.S. components, as 
applicable. The Amex represents that these procedures will be adequate 
to properly monitor Exchange trading of options on these securities and 
to deter and detect violations of Exchange rules.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6 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 foster cooperation and coordination with

[[Page 54186]]

persons engaged in facilitating transactions in securities, to remove 
impediments to and perfect the mechanisms of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest. The Exchange submits that the instant proposal to 
adopt generic initial and continued listing criteria for options on 
Section 107 Securities will serve to provide enhanced risk management 
tools for investors that, to date, have been absent in connection with 
Section 107 Securities. In addition, the Exchange further believes that 
the proposed listing criteria together with the Exchange's surveillance 
procedures will serve 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 nor received with respect to the 
proposed rule change.

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

    Because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest, the proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) 
thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide 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 filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. The Exchange has fulfilled this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange requests that the Commission waive 
the 30-day operative delay so that the Exchange is able to compete with 
other options exchanges that are currently permitted to list and trade 
options on Section 107 Securities. The Commission believes that waiving 
the 30-day operative delay is consistent with the protection of 
investors and the public interest.\12\ The Commission notes the 
proposal is substantively identical to proposals that were recently 
approved by the Commission, and does not raise any new regulatory 
issues.\13\ For these reasons, the Commission designates the proposed 
rule change as operative upon filing.
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    \12\ For 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).
    \13\ See Securities Exchange Act Release Nos. 58203 (July 22, 
2008), 73 FR 43812 (July 28, 2008) (SR-NYSEArca-2008-57) and 58204 
(July 22, 2008), 73 FR 43807 (July 28, 2008) (SR-CBOE-2008-64).
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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 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-2008-69 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Amex-2008-69. 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 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-2008-69 and should be 
submitted on or before October 9, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-21761 Filed 9-17-08; 8:45 am]

BILLING CODE 8010-01-P