[Federal Register: February 20, 2007 (Volume 72, Number 33)]
[Notices]
[Page 7780-7782]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20fe07-28]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55277; File No. SR-Amex-2007-19]
Self-Regulatory Organizations; American Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Revise the AEMI Rules to Conform to Changes Previously Made to the
AEMI-One Rules for the Pilot
February 12, 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 February 9, 2007, 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. Amex has filed this proposal pursuant to Section 19(b)(3)(A)
of the Act \3\ and Rule 19b-4(f)(5) thereunder,\4\ which renders it
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).
\4\ 17 CFR 240.19b-4(f)(5).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to adopt changes to its AEMI rules to match
several changes that have already been approved and implemented as part
of the Exchange's AEMI-One rules. The proposed changes would: (i)
Eliminate the order types ``buy minus'' and ``sell plus''; (ii) revise
the descriptions of ``stop order'' and ``stop limit order'' to provide
that ``too marketable'' stop and stop limit orders for exchange-traded
funds (``ETFs'') will be executed, not rejected; (iii) codify the
Exchange's interpretation that a Specialist will not be deemed to be
``trading ahead'' of a percentage order if an aggressing order that
executes against the Specialist's quote automatically elects the
percentage order but the percentage order is not executed by that
aggressing order due to insufficient remaining interest; (iv) revise
the definition of ``specialist emergency quote'' to provide for an
Exchange-wide upper limit on the number of such quotes that can be
sequentially generated; (v) revise the definition of ``stabilizing
quote'' to provide that such a quote may be issued when orders or
quotes on the AEMI Book are exhausted and that auto-ex would be
disabled after such a quote is generated so that the Specialist may
step in to re-quote the market; (vi) revise two rules (including the
definition of ``intermarket sweep order'') to provide, as required by
Regulation NMS, that members who choose to send intermarket sweep
orders to the Exchange will be obligated to protect the same quotations
of other market centers that the Exchange is obligated to protect; and
(vii) correct two internal references in Rule 205-AEMI and add a new
subparagraph to provide for the execution of an unexecuted odd-lot
balance on an aggressing order that is the result of an unexecuted odd-
lot balance on an intermarket sweep order that was routed to another
market by the AEMI platform to access a better-priced protected
quotation.
The text of the proposed rule change is available on the Amex's Web
site at 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 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange has recently adopted two sets of rules in connection
with the operation of its new hybrid market trading platform for equity
products and ETFs, designated as AEMISM (the ``Auction and
Electronic Market Integration'' platform). The initial version of AEMI
is referred to as ``AEMI-One'' and is currently operational on a pilot
basis \5\ through the day prior to the final date set by the Commission
for full operation of all automated trading centers that intend to
qualify their quotations for trade-through protection under Rule 611
\6\ of Regulation NMS (the latter date being referred to as the
``Trading Phase Date'').\7\ On the Trading Phase Date, the regular AEMI
rules will become effective \8\ and the AEMI-One rules will cease to be
operative. In the final amendment to the AEMI-One rules just prior to
their approval by the Commission, the Exchange made several changes
that are now reflected in those AEMI-One rules. In addition, the
Exchange subsequently filed with the Commission a proposed change to
the AEMI-One rule on odd-lot order execution that was immediately
effective on filing and that provides for the execution of an
unexecuted odd-lot balance on an aggressing order that is the result of
an unexecuted odd-lot
[[Page 7781]]
balance on an order that was routed to another market by the AEMI
platform to access a better-priced protected quotation.\9\ The purpose
of this filing is simply to make conforming changes to the regular AEMI
rules so that they match the corresponding AEMI-One rules that have
been approved by the Commission and that are currently effective.
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\5\ See Securities Exchange Act Release No. 54709 (November 3,
2006), 71 FR 65847 (November 9, 2006) (SR-Amex-2006-72) (Order
Approving a Proposed Rule Change and Amendment No 1 Thereto, and
Notice of Filing and Order Granting Accelerated Approval to
Amendment No. 3, to Adopt New Rules to Implement on a Pilot Basis an
Initial Version of AEMI, Its Proposed New Hybrid Market Trading
Platform for Equity Products and Exchange Traded Funds).
\6\ 17 CFR 242.611. The Order Protection Rule requires trading
centers to establish, maintain, and enforce written policies and
procedures reasonably designed to prevent the execution of trades at
prices inferior to protected quotations displayed by other trading
centers, subject to certain exceptions.
\7\ The Trading Phase Date is currently established as March 5,
2007.
\8\ See Securities Exchange Act Release No. 54552 (September 29,
2006), 71 FR 59546 (October 10, 2006) (SR-Amex-2005-104) (Order
Approving a Proposed Rule Change and Amendments No. 1, 2, 3, 4, and
5 Thereto, and Notice of Filing and Order Granting Accelerated
Approval to Amendment No. 6, to Establish a New Hybrid Trading
System Known as AEMI).
\9\ See Securities Exchange Act Release No. 54866 (December 4,
2006), 71 FR 71598 (December 11, 2006) (SR-Amex-2006-111) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating
to Odd-Lot Rejections by Away Markets in the AEMI-One Pilot).
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Elimination of ``Buy Minus'' and ``Sell Plus'' Order Types
The Exchange proposes to remove the order types ``buy minus'' and
``sell plus'' from Rule 131-AEMI(n) (and all references thereto in the
AEMI rules) due to lack of demand for these order types and the
complexity of the coding that would be involved to incorporate them
into the AEMI platform.
Execution of ``Too Marketable'' Stop and Stop Limit Orders for ETFs
The Exchange proposes to revise the descriptions of ``stop order''
in Rule 131-AEMI(o) and ``stop limit order'' in Rule 131-AEMI(p) to
provide that ``too marketable'' stop and stop limit orders for ETFs
will be executed, not rejected.
Codification of Exchange Interpretation Regarding ``Trading Ahead'' of
a Percentage Order
The Exchange proposes to codify as Commentary .01 to Rule 154-AEMI
its interpretation, based on several of the AEMI rules, that a
Specialist will not be deemed to be ``trading ahead'' of a percentage
order (of which he is the agent) if (i) An aggressing order that
executes against the Specialist's quote automatically ``elects'' the
percentage order (making it eligible for immediate execution) and (ii)
the percentage order is not executed by that aggressing order due to
insufficient remaining interest and therefore reverts back to unelected
status. Additionally, the proposed Commentary will provide that any
subsequent trade by the Specialist for his own account at the limit
price of the percentage order will not constitute ``trading ahead'' if
the percentage order has not been otherwise re-elected at that time.
Revised Definitions of ``Specialist Emergency Quote'' and ``Stabilizing
Quote''
The Exchange proposes to revise the definition of ``specialist
emergency quote'' in Rule 1A-AEMI to provide for an exchange-wide upper
limit (not to exceed ten) on the number of specialist emergency quotes
that may be sequentially generated. A change in the definition of
``stabilizing quote'' is also proposed to provide that a stabilizing
quote may be issued when orders or quotes on the AEMI Book are
exhausted, and that auto-ex would be disabled after the stabilizing
quote is generated so that the Specialist may step in to re-quote the
market.
Obligation of Members to Protected Quotations at Other Market Centers
The Exchange proposes to add language to the definition of an
``intermarket sweep order'' in Rule 131-AEMI(k) to provide, as required
by Regulation NMS, that members who choose to send such orders to the
Exchange will be obligated to protect the same quotations of other
market centers that the Exchange is obligated to protect. Specifically,
a member may submit an intermarket sweep order to the Exchange only if
the member simultaneously sends an intermarket sweep order for the full
displayed size of every other better-priced protected quotation
displayed by other trading centers. The same requirement is being added
to Rule 126A-AEMI (Protected Bids and Offers of Away Markets).
Revisions to Odd-Lot Order Execution Rule
The Exchange proposes to correct two internal rule references in
Rule 205-AEMI so that they refer to the appropriate AEMI rules. In
addition, the Exchange proposes to add a new subparagraph (b)(viii) to
provide for the execution of an unexecuted odd-lot balance on an
aggressing order that is the result of an unexecuted odd-lot balance on
an intermarket sweep order that was routed to another market by the
AEMI platform to access a better-priced protected quotation.
Specifically, if a partial-lot trade is received from an away market in
response to an intermarket sweep order sent by AEMI, resulting in an
unexecuted balance which comprises an odd lot, then any unexecuted odd-
lot balance on the aggressing order (including the unexecuted odd-lot
balance from the intermarket sweep order) shall be traded immediately
against the Specialist at the last trade price of the intermarket sweep
order, and any remaining unexecuted round-lot balance shall reaggress
the AEMI Book in accordance with Rule 126A-AEMI. Illustrative examples
of the proposed rule provision were included in the related AEMI-One
filing referenced above.\10\
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\10\ The corresponding AEMI-One rule refers to an ``away market
obligation'' (which is an immediate-or-cancel limit order) rather
than an ``intermarket sweep order'' based on the expectation that
not all markets would be able to receive and execute intermarket
sweep orders during the period of the AEMI-One pilot.
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The Exchange asserts that the proposal to effect the foregoing
changes to the AEMI trading system does not significantly affect the
protection of investors or the public interest, does not impose any
significant burden on competition, and does not have the effect of
limiting the access to or availability of the system.
2. Statutory Basis
The proposed rule change is designed to be consistent with
Regulation NMS, as well as consistent with Section 6(b) of the Act, in
general, and furthers the objectives of Section 6(b)(5),\11\ in
particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, 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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\11\ 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 will impose no 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 does not: (1) Significantly affect
the protection of investors or the public interest; (2) impose any
significant burden on competition; and (3) have the effect of limiting
the access to or availability of an existing order entry or trading
system of the Exchange, the foregoing rule change has become effective
immediately pursuant to Section 19(b)(3)(A)(iii) of the Act \12\ and
Rule 19b-4(f)(5) \13\ thereunder. At any time within 60 days of the
filing of such proposed rule change, the Commission
[[Page 7782]]
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 the furtherance of the
purposes of the Act.
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(5).
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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 at http://www.sec.gov/rules/sro.shtml.
; or Send an e-mail to rule-comments@sec.gov. Please include
File No. SR-Amex-2007-19 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-2007-19. 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 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 No. SR-Amex-2007-19 and should be submitted on or before March 13,
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. E7-2840 Filed 2-16-07; 8:45 am]
BILLING CODE 8010-01-P