Document ID: SEC-2006-1719-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2006-12-29T05:00Z

[Federal Register: December 29, 2006 (Volume 71, Number 250)]
[Notices]               
[Page 78474-78475]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29de06-116]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54995; File No. SR-Amex-2006-77]

 
Self-Regulatory Organizations; American Stock Exchange, LLC; 
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto To 
Amend Rules 918 and 918--Ante Regarding Trading Rotations, Halts and 
Suspensions

December 21, 2006.
    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 August 16, 2006, 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, II, 
and III below, which Items have been substantially prepared by the 
Exchange. On December 5, 2006, Amex 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 amended, from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \31\ In Amendment No. 1, Amex made clarifying changes to the 
purpose section and made technical changes to the proposed rule 
text.
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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 Rules 918 and 918--ANTE 
regarding trading rotations, halts and suspensions. The text of the 
proposed rule change is available on Amex's Web site (http://www.amex.com (ACRS 
), at Amex's Office of the Secretary, 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 Exchange proposes to eliminate reference to ``primary market'' 
set forth in Amex Rules 918(a) and 918--ANTE(a) and to amend the 
reference to ``primary market'' in Amex Rules 918(b) and 918--ANTE(b).
    The Exchange proposes to amend Amex Rules 918(a) and 918--ANTE(a) 
to delete the requirement that the opening of the trading rotation is 
dependent on the opening of the underlying security in the primary 
market. Currently, Amex Rules 918 and 918--ANTE(a) provide that a 
trading rotation shall be employed at the opening of each business day 
following the opening of the underlying security in the primary market. 
``Primary market'' is defined in Amex Rules 900(b)(26) and 900--
ANTE(b)(26) as (i) the principal exchange market in which the 
underlying security is traded so long as the underlying is principally 
traded on a national securities exchange, and (ii) the market reflected 
by the National Association of Securities Dealers Automated Quotation 
System (the ``NASDAQ'') if it is equity securities principally traded 
over-the-counter, or the market reflected by any widely recognized 
quotation dissemination system if it is any other type of security.
    As a result of the trading of underlying securities on multiple 
trading venues or markets (largely due to the introduction of 
Electronic Communication Networks or ``ECNs''), it has become 
increasingly difficult to determine, for purposes of Amex Rules 918(a) 
and 918--ANTE(a), which marketplace is the ``primary market.'' As an 
example, the Options Clearing Corporation (``OCC'') in connection with 
its methodology for obtaining underlying security prices at expiration 
changed to composite pricing.\4\ As a result of the number of 
securities exchanges and ECNs trading a particular underlying security, 
the Exchange submits that the analysis for determining the primary 
market has become overly burdensome and uncertain, subjecting Exchange 
staff to

[[Page 78475]]

instances of ``second guessing'' due to the varying degrees of 
interpretation. Accordingly, for market certainty, the Exchange submits 
that trading in an option should start once the underlying security has 
opened for trading regardless of the particular market.
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    \4\ A ``composite'' security price is defined as the last 
reported sale price from any primary listing market (i.e., Amex, 
NYSE and Nasdaq), participating regional exchanges or other markets. 
See OCC Memo to Members 18930 (May 29, 2003) and Securities 
Exchange Act Release No. 49045 (January 8, 2004), 69 FR 2377 
(January 15, 2004).
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    Amex Rules 918(b) and 918--ANTE(b) provide that trading on any 
Exchange option contract may be halted or suspended whenever the 
Exchange deems such action appropriate. Included in these rules is a 
list of factors that the Exchange may use to determine if a trading 
halt or suspension is warranted. Pursuant to Amex Rules 918(b)(1) and 
918--ANTE(b)(1), the Exchange may consider to halt or suspend trading 
in an option contract if the underlying security has been halted or 
suspended in the primary market. Similarly, the Exchange may also 
consider, pursuant to Amex Rules 918(b)(2) and 918--ANTE(b)(2), halting 
or suspending trading in an option contract if the opening of such 
underlying stock in the primary market has been delayed due to unusual 
circumstances.
    As set forth above, the Exchange submits that the use of the term 
``primary market'' is ambiguous and subject to varying degrees of 
interpretation. However, unlike openings, trading halts and suspensions 
should not directly correspond to a halt or suspension in the 
underlying in any market because such standard is too low for halting 
or suspending trading in an option. Accordingly, the Exchange proposes 
to implement trading halts and suspensions in any options contract if, 
with respect to Amex Rules 918(b)(1) and 918--ANTE(b)(1), the 
underlying security is subject to a trading halt or suspension across 
several markets or in the primary listed market. Similarly, a trading 
halt or suspension may also be implemented, with respect to Amex Rules 
918(b)(2) and 918--ANTE(b)(2), if the opening of such underlying stock 
across several markets or in the primary listed market has been delayed 
due to unusual circumstances.
    The Exchange proposes to eliminate reference to ``primary market'' 
set forth in Amex Rule 918(a) and Rule 918--ANTE(a) and to amend the 
reference to ``primary market'' in Amex Rule 918(b) and Rule 918--
ANTE(b). In addition, the Exchange also proposes to make clarifying 
changes to these rules so that trading rotations, halts and suspensions 
apply to any options on a stock, exchange traded fund and trust issued 
receipt. In Amendment No. 1, the Exchange noted that adding references 
to ``exchange traded fund and trust issued receipt'' to the proposed 
rule text is intended to codify an existing practice on the Exchange.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Act\5\ in general and furthers the objectives of 
Section 6(b)(5) \6\ 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, and 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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    \5\ 15 U.S.C. 78f(b).
    \6\ 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

    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 Amex consents, the Commission will:
    (A) By order approve such proposed rule change, as amended, 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 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 2006-77 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 2006-77. 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 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 2006-77 and should be submitted on or before 
January 19, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E6-22398 Filed 12-28-06; 8:45 am]

BILLING CODE 8011-01-P