[Federal Register: April 17, 2008 (Volume 73, Number 75)]
[Notices]
[Page 20981-20983]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17ap08-102]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57644; File No. SR-Amex-2008-32]
Self-Regulatory Organizations; American Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to the Allocation of Executed Options Contracts
April 10, 2008.
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 March 26, 2008, 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 Amex proposes to modify the allocation in Exchange Rule 935-
ANTE relating to electronically executed option contracts. The text of
the proposed rule change is available on the Amex's Web site at http://
www.Amex.com, at the Office of the Secretary, the Amex 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
[[Page 20982]]
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 Exchange seeks to revise the allocation formula set forth in
Rule 935--ANTE (``Allocation of Executed Contracts'') when a specialist
is on parity for option orders of five (5) contracts or less that are
delivered and executed electronically in ANTE. Specifically, the
proposal provides that if the specialist is quoting at the Amex best
bid or offer (the ``ABBO''), after public customer market and
marketable limit orders have been executed, the specialist will be
entitled to receive the entire allocation of orders for five (5)
contracts or less.\5\
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\5\ See Securities Exchange Act Release Nos. 42808 (May 22,
2000), 65 FR 34515 (May 30, 2000)(ISE Rule 713) and 50100 (July 27,
2004), 69 FR 46612 (August 3, 2004) (Phlx Rule 1014(g)).
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Current Rule 935--ANTE provides that if the specialist is eligible
for an allocation, the specialist is entitled to receive an allocation
(not to exceed the size of the specialist's quote) equal to the greater
of either:
(i) The number of executed contracts to be allocated to the
specialist based upon the percentages set forth below;
------------------------------------------------------------------------
Approximate
number of
contracts
Number of market participants* on parity allocated to
the specialist
(percent)
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1....................................................... 60
2-4..................................................... 40
5-7..................................................... 30
8-15.................................................... 25
16 or more.............................................. 20
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* Not including non-broker-dealer customers.
or
(ii) The number of executed contracts the specialist would be
otherwise entitled to pursuant to the allocation algorithm (the
``Allocation Algorithm'').
Allocation Algorithm
The Allocation Algorithm provides that when more than one market
participant is quoting at the ABBO, the ANTE System allocates executed
contracts to non-broker-dealer customers first and then to all other
market participants based upon the following:
((Component A Percentage + Component B Percentage)/2) * Number of
Executed Contracts)).
Component A (Parity Component)--the percentage used for
Component A is an equal percentage, derived by dividing 100 by the
number of market participants quoting at the ABBO.
Component B (Size Pro Rata Component)--the percentage to
be used for Component B is the percentage that the size of each market
participant's quote or order at the ABBO represents relative to the
total number of contracts in the disseminated quote.
Final Weighting--A weighted average of the percentages derived for
Components A and B is calculated, and then multiplied by the size of
the incoming order. Currently, the weighting of Components A and B is
equal.
The proposed revision to Rule 935--ANTE permits the specialist to
receive a 100% allocation after marketable non-broker-dealer customer
orders are executed for orders of five (5) contracts or less. A
specialist will not receive any portion of an allocation unless it is
quoting at the ABBO at the time ANTE receives the executable order. In
addition, the size associated with the specialist's quote must be
sufficient to fill the portion of the order that would be allocated to
it.
The proposal also specifies that, on a quarterly basis, the
Exchange will evaluate what percentage of the volume executed on the
Exchange is comprised of orders for five (5) contracts or less executed
by specialists, and will reduce the size of the orders included in this
provision if such percentage is over 40%.\6\
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\6\ Supplementary Material .01(c) to International Securities
Exchange, LLC (``ISE'') Rule 713 excludes, for purposes of
calculating the percentage of volume executed on the ISE consisting
of orders of 5 contracts or less, the volume resulting from the
execution of orders in its Facilitation Mechanism. Unlike ISE, the
Exchange's ANTE system does not have a similar facilitation
mechanism or platform.
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The Exchange believes that the proposal will provide greater
incentive for specialists to competitively quote based on both price
and size and therefore will benefit the marketplace.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) \7\ of the
Act in general and furthers the objectives of Section 6(b)(5) \8\ in
particular in that it is designed to prevent fraudulent and
manipulative acts and practices, promote just and equitable principles
of trade, remove impediments to and perfect the mechanisms of a free
and open market and a national market system, and, in general, 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 believes that 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
The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from members or other interested
parties.
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\
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to provide 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, or such shorter time as designated by the
Commission. The Exchange has fulfilled this requirement.
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The Exchange notes that the proposed rule change is based on
similar proposals approved by the Commission.\11\ The Exchange has
asked the Commission to waive the operative delay to permit the
proposed rule change to become operative prior to the 30th day after
filing.
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\11\ See supra note 5.
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The Commission has determined that waiving the 30-day operative
delay of the Exchange's proposal is consistent with the protection of
investors and the
[[Page 20983]]
public interest. The Commission notes that the proposed rule change is
substantially similar to provisions in the rules of two other
exchanges.\12\ The Commission believes that, because the proposed rule
change raises no new regulatory issues, it is consistent with the
protection of investors and the public interest to permit Amex to
implement the proposal without needless delay.\13\ Therefore, the
Commission designates the proposal as operative upon filing.
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\12\ See supra note 5.
\13\ 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).
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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-2008-32 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-2008-32. 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, 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-2008-32 and should be
submitted on or before May 8, 2008.
For the Commission, by the Division of Trading and Markets,
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. E8-8194 Filed 4-16-08; 8:45 am]
BILLING CODE 8010-01-P