Document ID: SEC-2007-0952-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2007-07-13T04:00Z

[Federal Register: July 13, 2007 (Volume 72, Number 134)]
[Notices]               
[Page 38634-38636]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13jy07-122]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56032; File No. SR-Amex-2007-66]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
Extend the Quarterly Options Series Pilot Program

July 9, 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 June 28, 2007, the American Stock Exchange LLC (``Exchange'' or 
``Amex'') 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 the Exchange. 
The Exchange has designated this proposal as non-controversial under 
Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) 
thereunder,\4\ which renders the proposed rule change 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)(iii).
    \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 seeks a one-year extension of the pilot program 
allowing the listing and trading of options series that expire at the 
close of business on the last business day of a calendar quarter 
(``Pilot Program''). The text of the proposed rule change is available 
on the Exchange's Web site (http://www.amex.com), at the Exchange'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. 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 Pilot Program, which began in July 2006, allows the Amex to 
list and trade options series that expire at the close of business on 
the last business day of a calendar quarter (``Quarterly Options 
Series'').\5\ The Exchange is proposing to extend the Pilot Program 
from July 10, 2007, through and including July 10, 2008.
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    \5\ See Securities Exchange Act Release No. 54137 (July 12, 
2006), 71 FR 41283 (July 20, 2006) (``Pilot Program Release'').
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    The Exchange also proposes to incorporate certain changes to its 
rules regarding Quarterly Options Series as recently filed by the other 
options Exchanges and approved by the Commission.\6\ In this regard, 
the Exchange proposes to amend Rule 903C, Series of Stock Index 
Options, to provide that the strike price of each Quarterly Options 
Series will be fixed at a price per share, with at least two, but not 
more than five, strike prices above, and two, but not more than five, 
strike prices below the value of the underlying security at the time 
that a Quarterly Options Series is opened for trading on the Exchange. 
The Exchange further proposes to eliminate the restriction that it may 
only list strike prices for a Quarterly Options Series based on an 
underlying index that are within $5 from the closing price of the 
underlying index on the preceding day. In place of this restriction, 
the Exchange proposes to include language in Rule 903C that would allow 
the Exchange to open additional strike prices of a Quarterly Options 
Series that are above (below) the value of the underlying index, 
provided that the total number of strike prices above (below) the value 
of the underlying index, including the additional strike prices, is no 
greater than five. The Exchange believes that so limiting the number of 
Quarterly Options Series based on an underlying index that may be 
opened ensures that the addition of the new series through this Pilot 
Program would have only a negligible impact on the Exchange's and 
Option Price Reporting Authority's (``OPRA'') quoting capacity. The

[[Page 38635]]

opening of any new Quarterly Options Series shall not affect the series 
of options of the same class previously opened.
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    \6\ See Exchange Act Release No. 54762 (November 16, 2006), 71 
FR 67663 (November 22, 2006) (SR-CBOE-2006-93) (Order approving 
proposed rule change); see also Exchange Act Release No. 55301 
(February 15, 2007), 72 FR 8238 (February 23, 2007) (SR-Phlx-2007-
08) (Notice of filing and immediate effectiveness of proposed rule 
change).
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    The Pilot Program report (``Report''), which is attached as Exhibit 
3 to the Form 19b-4 filed with the Commission, provides data regarding 
the Pilot Program as required in the Pilot Program Release. Under the 
terms of the Pilot Program, the Exchange may select five (5) option 
classes on which Quarterly Options Series may be opened on any 
Quarterly Options Opening Date. Also under the terms of the Pilot 
Program, the Exchange may list Quarterly Options Series on any option 
class that is selected by another securities exchange with a similar 
Pilot Program under its rules. As noted in the Report, the five classes 
which the Exchange is currently trading were all selected by another 
securities exchange. The Exchange has not selected any additional 
classes of quarterly options for the Pilot at this time.
    As the data in the Report indicates, the Amex volume trends in 
Quarterly Options as compared to all options in the Pilot securities 
shows higher utilization rates throughout the year. Specifically, for 
the last 3 months of the Pilot, from March to May 2007, the five (5) 
option classes selected by the Amex for Quarterly Options accounted for 
10.4% of total options volume, as compared to 3.8% for the first three 
months. Furthermore, a look at open interest reveals that, on average, 
Quarterly Options account for 13.4% of total open interest in the Pilot 
Program classes. The open interest in Quarterly Options has generally 
trended higher during the time period evaluated. In January 2007, open 
interest in Quarterly Options totaled 1,620,610, a figure which grew to 
3,574,263 in May. These numbers give further proof of increased 
investor use of the Quarterly Options. Accordingly, the Exchange 
believes that an extension of the Pilot Program for one-year through 
July 10, 2008, is warranted in order to satisfy the institutional 
demand for such options and to provide additional flexibility as well 
as an additional risk management tool to investors.
    The Exchange notes that it possesses adequate systems capacity to 
support the trading of Quarterly Options Series.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \7\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \8\ in particular, in that it 
is 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
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

    The Exchange has designated the proposed rule change as one that: 
(1) Does not significantly affect the protection of investors or the 
public interest; (2) does not impose any significant burden on 
competition; and (3) does not become operative for 30 days from the 
date of filing, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest. 
Therefore, the foregoing rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \9\ and subparagraph (f)(6) of Rule 19b-
4 thereunder.\10\ The Exchange has asked the Commission to waive the 
operative delay to permit the Pilot Program extension to become 
effective prior to the 30th day after filing.\11\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ As required under Rule 19b-4(f)(6)(iii), the Exchange 
provided the Commission with written notice of its intent to file 
the proposed rule change at least five business days before doing 
so.
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because it will allow the benefits of the Pilot Program to continue 
without interruption.\12\ Therefore, the Commission designates the 
proposal operative upon filing.\13\
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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\ As set forth in the Pilot Program Release, if the Exchange 
were to propose an extension, an expansion, or permanent approval of 
the Pilot Program, the Exchange would submit, along with any filing 
proposing such amendments to the program, a report that would 
provide an analysis of the Pilot Program covering the entire period 
during which the Pilot Program was in effect. The report would 
include, at a minimum: (1) Data and written analysis on the open 
interest and trading volume in the classes for which Quarterly 
Option Series were opened; (2) an assessment of the appropriateness 
of the option classes selected for the Pilot Program; (3) an 
assessment of the impact of the Pilot Program on the capacity of the 
Exchange, OPRA, and market data vendors (to the extent data from 
market data vendors is available); (4) any capacity problems or 
other problems that arose during the operation of the Pilot Program 
and how the Exchange addressed such problems; (5) any complaints 
that the Exchange received during the operation of the Pilot Program 
and how the Exchange addressed them; and (6) any additional 
information that would assist in assessing the operation of the 
Pilot Program. The report must be submitted to the Commission at 
least sixty (60) days prior to the expiration date of the Pilot 
Program. See Pilot Program Release, supra note 5.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate the 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 No. SR-Amex-2007-66 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-2007-66. 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 Commissions 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

[[Page 38636]]

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 such 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-2007-66 and should be submitted on 
or before August 3, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-13598 Filed 7-12-07; 8:45 am]

BILLING CODE 8010-01-P