[Federal Register: May 25, 2006 (Volume 71, Number 101)]
[Notices]
[Page 30204-30206]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25my06-114]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53842; File No. SR-Amex-2006-45]
Self-Regulatory Organizations; American Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to the Prohibition Against the Entry of Multiple Options
Orders
May 19, 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 May 8, 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 and
II below, which Items have been prepared by the Exchange. The Exchange
has designated the proposed rule change as constituting a ``non-
controversial'' rule change under Section 19(b)(3)(A)(iii) of the
Act,\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal
effective upon filing with the Commission.\5\ 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).
\5\ The Amex has requested that the Commission waive the 30-day
operative delay, as specified in Rule 19b-4(f)(6)(iii). 17 CFR
240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to revise Amex Rule 933--ANTE(e) prohibiting
the entry via the Amex New Trading Environment system (``ANTE'') of
multiple orders for any account of the same beneficial owner in the
same option within any fifteen (15) second period. The text of the
proposed rule change appears below. Proposed deletions are in
[brackets].
Rule 933--ANTE
Automatic Matching and Execution of Options Orders
(a)-(d) No change.
(e) The Options Trading Committee shall determine the size
parameters of orders eligible for automatic matching and execution. The
Committee may determine to set the eligible order size parameter in any
option class as the disseminated quote size. [An automatic matching and
execution eligible order for any account in which the same person is
directly or indirectly interested may only be entered at intervals of
no less than 15 seconds between entry of each such order in a call
class and/or a put class for the same option. Members and member
organizations are responsible for establishing procedures to prevent
orders in a call class and/or a put class for the same option for any
account in which the same person is directly or indirectly interested
from being entered at intervals of less than 15 seconds.]
(f)-(g) No change.
Commentary * * * No change.
* * * * *
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. 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 revise Amex Rule 933--ANTE(e) in order to
increase the number of orders handled through ANTE. Currently, Amex
Rule 933--ANTE(e) prohibits the entry of multiple orders for any
account of the same beneficial owner in the same option class within
any fifteen (15) second period. The original purpose of the Rule in
connection with the Exchange's Automatic Execution System (``Auto-Ex'')
\6\ was to assist Exchange specialists and Registered Options Traders
(``ROTs'') in managing their risk of multiple executions of orders
delivered in rapid succession. Prior to the introduction of ANTE,
specialists and ROTs would find it very difficult to timely revise
their quotations. As a result, the Exchange, as well as the other
options exchanges, at that time adopted rules to prohibit the entry of
multiple orders for any account of the same beneficial owner within
fifteen (15) seconds. The purpose of the Rule was to protect investors
and other market participants from the potential
[[Page 30205]]
negative consequences that might result from Order Entry Firms or off-
floor broker-dealers ``picking off'' specialists and/or ROTs. The
Exchange believed that if persons were allowed to effectively increase
the size of Auto-Ex eligible orders by entering more than one such
order at intervals of less than 15 seconds, Amex specialists and ROTs
would be unable to make markets with the same liquidity as if there
were effective limits on the size and frequency of Auto-Ex eligible
orders.
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\6\ The Auto-Ex system was established to provide small customer
orders with an immediate single price execution.
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The Amex has substantially improved its electronic trading systems
such that the risk associated with multiple orders in the same option
delivered for any account of the same or an affiliated beneficial
account holder has become more manageable through electronic means.
Specifically, ANTE now allows specialists and ROTs to submit
proprietary electronic quotes through ANTE and to revise their quotes
electronically, which reduces the risk of multiple executions of orders
delivered in rapid succession before the specialist or ROT is able to
revise its quotation. In addition, a revised and updated version of
ANTE has incorporated a risk management tool to allow specialists and
ROTs to set criteria for the system to adjust their quotes (the ``Quote
Risk Manager'') if a certain number of trades are executed within a
certain period of time. The Commission recently approved the Exchange's
Quote Risk Manager.\7\ Due to the substantial increase in automated
option order handling and risk mitigation tools provided by ANTE, the
Amex submits that the fifteen (15) second prohibition currently
included in its Amex Rule 933--ANTE(e) is unnecessary.
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\7\ See Securities Exchange Act Release No. 53148 (January 19,
2006), 71 FR 4386 (January 26, 2006) (SR-Amex-2005-131).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\8\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\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 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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\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 or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change: (i) Does not significantly affect
the protection of investors or the public interest; (ii) does not
impose any significant burden on competition; and (iii) by its terms,
does not become operative for 30 days after the date of the filing, or
such shorter time as the Commission may designate, 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\ As required by Rule 19b-
4(f)(6)(iii) under the Act, the Exchange also provided with 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.\12\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6).
\12\ Id.
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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.\13\ 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 has asked the Commission to waive the
30-day operative delay and allow the proposed rule change to become
operative on May 8, 2006, the date that it was filed with the
Commission. The Commission hereby grants that request.\14\ The
Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest
because the Commission has approved a similar proposed rule change by
the Philadelphia Stock Exchange, Inc.,\15\ and thus the proposal does
not raise any new regulatory issues.
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\13\ Id.
\14\ 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).
\15\ See Securities Exchange Act Release No. 51827 (June 13,
2005), 70 FR 35491 (June 20, 2005) (SR-Phlx-2005-20).
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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-2006-45 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 No. SR-Amex-2006-45. 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
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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 No. SR-Amex-2006-45 and should be
submitted on or before June 15, 2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-8052 Filed 5-24-06; 8:45 am]
BILLING CODE 8010-01-P