Document ID: SEC-2008-1239-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: American Stock Exchange LLC
Posted Date: 2008-09-12T04:00Z

[Federal Register: September 12, 2008 (Volume 73, Number 178)]
[Notices]               
[Page 53057-53059]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12se08-107]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58466; File No. SR-AMEX-2008-53]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change Related to Amendments to Rule 
925 (Confirmations) and Rule 921 (Opening of Accounts)

September 5, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is 
hereby given that on June 26, 2008, the American Stock Exchange LLC 
(the ``Amex'' or the ``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 prepared 
by the Exchange. 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.
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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 Amex Rule 925 to clarify that 
written confirmations relating to options transactions are not required 
to specify the options exchange or exchanges on which such options 
contracts were executed. The Exchange further proposes to amend Amex 
Rule 921 to permit a General Securities Sales Supervisor to approve the 
opening of an options account. The text of the proposed rule change is 
available at the Exchange, the Commission's Public Reference Room and 
http://www.amex.com.

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
a. Options Confirmation Rule (Rule 925)
    Amex Rule 925 requires that every member and member organization 
promptly furnish to each customer a written confirmation of each 
options transaction for such customer's account. This confirmation is 
required to disclose the type of option, the underlying security, the 
expiration month, the exercise price, the number of option contracts, 
the premium, commissions, the transaction and settlement dates, whether 
the transaction was a purchase or a sale (writing) transaction, whether 
the transaction was an opening or a closing transaction, and whether 
the transaction was effected on a principal or agency basis. In 
addition, Rule 925 requires that each confirmation, by appropriate 
symbols, must distinguish between Exchange option transactions and 
other transactions in option contracts and between such transactions 
and transactions in other options. Rule 925 has been interpreted over 
the years by market participants to require that written confirmations 
relating to options transactions specify the options exchange or 
exchanges on which such options contracts were executed. This proposal 
seeks to clarify that Rule 925 does not require the name of the options 
exchange or exchanges on which an options contract is executed.
    Prior to August 1999, an options class was typically listed on only 
one options exchange. In August 1999, the options exchanges began to 
multiply-list options classes that were previously listed on only one 
exchange. In October 1999, the Commission stated that it believed a 
linkage among options markets would benefit investors by increasing 
competition among markets (and market participants) to provide the best 
execution of customer orders.\3\ Subsequently, the Commission directed 
the options exchanges to act jointly in discussing, developing, and 
submitting for Commission approval an intermarket linkage plan for 
multiply-traded options. On July 28, 2000, the Commission approved the 
Plan for the Purpose of Creating and Operating an Intermarket Options 
Market Linkage (the ``Options Linkage Plan'' or ``Linkage Plan'') 
submitted by the Amex, the Chicago Board Options Exchange, Inc. and the 
International Securities

[[Page 53058]]

Exchange, Inc.\4\ The Philadelphia Stock Exchange, Inc., and the 
Pacific Stock Exchange agreed to participate in the Options Linkage 
Plan in November 2000.\5\ As a result of the introduction of multiple 
trading of options and the implementation of the Linkage Plan, the 
contracts in a customer options order could be executed on more than 
one options exchange and the significance of the options exchange or 
exchanges that execute a particular options transaction has diminished 
significantly.\6\
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    \3\ See Exchange Act Release No. 42029 (Oct. 19, 1999), 64 FR 
57674 (Oct. 26, 1999).
    \4\ See Exchange Act Release No. 43086 (Jul. 28, 2000), 65 FR 
48023 (Aug. 4, 2000).
    \5\ See Exchange Act Release Nos. 43573 (Nov. 16, 2000), 65 FR 
70850 (Nov. 28, 2000) and 43574 (Nov. 16, 2000), 65 FR 70851 (Nov. 
28, 2000) (approval order).
    \6\ Modifications to this paragraph discussed in telephone 
conference between Jeffrey P. Burns, Vice-President & Associate 
General Counsel, American Stock Exchange LLC, and Max Welsh, Special 
Counsel, Division of Trading and Markets, Securities and Exchange 
Commission, on August 7, 2008.
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    Under the duty of best execution, Amex members are required to 
exercise diligence to obtain the best price when routing customer 
options trades for execution. The Exchange, as well as the other 
members of the Options Self Regulatory Council (the ``OSRC''),\7\ 
believes that in light of the existing best execution and disclosure 
requirements, the usefulness of including on an options confirmation 
the name of the options exchange or exchanges on which an options 
transaction was effected does not outweigh the operational difficulties 
of capturing the information given the multiple trading of options and 
the application of the Options Linkage Plan industry-wide. 
Consequently, the proposal would amend Amex Rule 925 to make clear that 
written confirmations relating to options transactions are not required 
to specify the options exchange or exchanges on which such options 
contracts were executed.
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    \7\ The ORSC consists of the options exchanges and the Financial 
Industry Regulatory Authority, Inc. (``FINRA'').
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    The Exchange has worked with the other members of the OSRC in 
developing these proposed rule changes. Each member of the OSRC is 
expected to similarly file rule proposals to either delete the 
requirement that the written options confirmation disclose the name of 
the options exchange or exchanges on which the options transaction was 
executed, or clarify that no such requirement exists.
b. Options Account Opening Rule (Rule 921)
    Amex Rule 921 governs the opening of options accounts by members 
and member organizations. Specifically, Rule 921(c), relating to 
``Diligence in Opening Account,'' provides that in approving a 
customer's account for options transactions, a member or member 
organization shall exercise due diligence to learn the essential facts 
as to the customer and his investment objectives and financial 
situation, and shall make a record of such information (which shall be 
retained in accordance with Amex Rule 922). Based on such information, 
the branch manager or other registered options principal (``ROP'') is 
required to approve in writing the customer's account for options 
transactions. If the branch manager is not a ROP, the branch manager's 
approval of the account must be confirmed within a reasonable time by a 
ROP. The Exchange and the other members of the ORSC believe that an 
amendment to the current options account opening procedures is 
warranted so that a general securities sales supervisor, in addition to 
a ROP, is able to open an options account without the approval of a 
ROP. The other members of the ORSC are also expected to file similar 
amendments to their options account opening rules.
    The Exchange believes that permitting a general securities sales 
supervisor to approve the opening of an options account would be 
appropriate and would properly reflect the maturity of the options 
market and the manner in which the uses of options are more integrated 
with other securities in the implementation of investment 
strategies.\8\ In particular, the Exchange believes that the proposed 
amendment to Rule 921 would further permit member firms to integrate 
their options activities into their overall supervisory and compliance 
structures that monitor all securities products.
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    \8\ The Commission recently approved the elimination of the 
Senior Registered Options Principal (``SROP'') and Compliance 
Registered Options Principal (``CROP'') supervisory categories, 
permitting member firms to supervise their options activities 
through their overall supervisory and compliance programs that 
monitor all other securities products. See Exchange Act Release No. 
57738 (April 29, 2008), 73 FR 25805 (May 7, 2008) (approval order).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Exchange Act,\9\ in general, and furthers the 
objectives of Section 6(b)(5),\10\ 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 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, by clarifying options 
confirmation and account opening procedure rules to better reflect the 
realities of the modern options market and the compliance and 
regulatory structures adopted by firms. The Exchange believes that the 
proposal is consistent with Section 6(b)(5) Exchange Act because the 
proposed amendments to Amex Rules 925 and 921 better reflect the manner 
in which standardized options are listed and traded on the options 
exchanges and integrated into firms' general securities supervision and 
compliance programs.
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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 Exchange 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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will (A) by order approve 
such proposed rule change, or (B) institute proceedings to determine 
whether the proposed rule change should be disapproved.

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 Exchange 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

[[Page 53059]]

Number SR-AMEX-2008-53 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-2008-53. 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 Section, 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 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-2008-53 and should be 
submitted on or before October 3, 2008.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\11 \
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-21165 Filed 9-11-08; 8:45 am]

BILLING CODE 8010-01-P