[Federal Register: November 23, 2005 (Volume 70, Number 225)]
[Notices]
[Page 70901-70902]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23no05-146]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-52782; File No. SR-Amex-2004-74]
Self-Regulatory Organizations; American Stock Exchange LLC; Order
Approving Proposed Rule Change and Amendment No. 1 Thereto Relating to
the Elimination of Commentary .01(5) to Amex Rule 916 and Amendment to
Amex Rules Relating to the Definition of ``NMS Stock''
November 16, 2005.
On August 27, 2004, the American Stock Exchange LLC (``Amex'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
eliminate Commentary .01(5) to Amex Rule 916 (``Commentary .01(5)'').
The proposal would permit the opening of new option series on an
underlying security previously approved for Amex option transactions
when the issuer of the underlying security has failed to timely file
reports required by the Act and has not corrected such failure within
30 days after the due date of the report. On September 26, 2005, Amex
amended the proposal to replace the term ``national market system
security'' with the term ``NMS stock'' in its rules for consistency
with Regulation NMS.\3\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, Amex proposed to amend Amex Rule 915(a)
and Commentary .01(6) to Amex Rule 916, in order to substitute the
term ``NMS stock'' for the term ``national market system security,''
for consistency with Regulation NMS. See Securities Exchange Act
Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005).
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The proposed rule change, as amended, was published for comment in
the Federal Register on October 12, 2005.\4\ The Commission received no
comments on the proposal.
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\4\ See Securities Exchange Act Release No. 52563 (October 4,
2005), 70 FR 59380.
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After careful review of the proposal, the Commission finds that the
proposed rule change, as amended, is consistent with the requirements
of the Act and the rules and regulations applicable to a national
securities exchange.\5\ The Commission believes that the elimination of
Commentary .01(5) is consistent with section 6(b)(5) of the Act,\6\
which requires that rules of a national securities exchange be 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, 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\ The Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\6\ 15 U.S.C. 78f(b)(5).
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The Commission notes that currently, when an issuer of a security
has failed to timely file its reports required under the Act, the
issuer's security may continue to trade on the primary market for a
period of time. Notwithstanding the fact that the underlying security
may continue to trade, Commentary .01(5) prevents Amex from opening new
series of options covering the underlying security of the delinquent
filer. This treatment potentially denies investors the opportunity to
trade at strike prices that may more accurately reflect the current
market in the underlying security. Moreover, the Commission believes
that elimination of Commentary .01(5) could help reduce investor
confusion arising from inconsistent treatment of the underlying
security and options covering the underlying security. Finally, the
Commission notes that pursuant to Amex rule, the underlying security
will not be deemed to meet Amex's requirements for continued approval
if such underlying security is not subject to an effective transaction
reporting plan and other requirements that address the liquidity and
pricing of the underlying security.\7\ Amex has represented it has
procedures in place to monitor whether the underlying security
continues to trade or is delisted from its primary market and will
cease opening new series of options in such security and allow the
existing series of options to expire. Amex has also represented that if
the underlying security has been halted or suspended in its primary
market, Amex may halt trading in the option class pursuant to Amex Rule
918(b) and shall halt trading pursuant to
[[Page 70902]]
Amex Rule 117. The Commission expects Amex to diligently execute its
oversight responsibilities with respect to the listing status of the
underlying security, and, in the event of such a delisting, to promptly
take the appropriate actions with respect to any options covering such
security.
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\7\ See proposed Commentary .01(5) to Amex Rule 916 (currently
Commentary .01(6) to Amex Rule 916).
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It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\8\ that the proposed rule change (SR-Amex-2004-74), as amended, is
approved.
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\8\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. E5-6448 Filed 11-22-05; 8:45 am]
BILLING CODE 8010-01-P