Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change and Amendment Nos. 1, 2, 3 and 4 Relating to Listing Standards for Broad-Based Index Options and Concentration Limits for Narrow-Based Index Option Listing Standards, 70898-70901 [E5-6447]
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70898
Federal Register / Vol. 70, No. 225 / Wednesday, November 23, 2005 / Notices
Pike, Rockville, MD 20852. The PDR
reproduction contractor will copy
documents for a fee.
Dated at Lisle, Illinois, this 14th day of
November 2005.
For the Nuclear Regulatory Commission.
Jamnes L. Cameron,
Chief, Decommissioning Branch, Division of
Nuclear Materials Safety Region III.
[FR Doc. E5–6459 Filed 11–22–05; 8:45 am]
BILLING CODE 7590–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Pub. L. 94–409, that the
Securities and Exchange Commission
will hold the following meetings during
the week of November 28, 2005:
Formal orders of investigations;
Institution and settlement of injunctive
actions;
Institution and settlement of
administrative proceedings of an
enforcement nature;
Opinions; and a
Regulatory matter bearing
enforcement implications.
At times, changes in Commission
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scheduling of meeting items.
For further information and to
ascertain what, if any, matters have been
added, deleted or postponed, please
contact:
The Office of the Secretary at (202)
551–5400.
Dated: November 18, 2005.
Jonathan G. Katz,
Secretary.
[FR Doc. 05–23250 Filed 11–18–05; 4:07 pm]
BILLING CODE 8010–01–P
An Open Meeting will be held on Tuesday,
November 29, 2005 at 10 a.m. in Room L–
002, the Auditorium, and a Closed Meeting
will be held on Wednesday, November 30,
2005 at 10 a.m.
SECURITIES AND EXCHANGE
COMMISSION
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the Closed Meeting. Certain
staff members who have an interest in
the matters may also be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c),(3), (5), (7), (9)(B), and
(10) and 17 CFR 200.402(a), (3), (5), (7),
9(ii) and (10) permit consideration of
the scheduled matters at the Closed
Meeting.
Commissioner Atkins, as duty officer,
voted to consider the items listed for the
closed meeting in closed session.
The subject matter of the Open
Meeting scheduled for Tuesday,
November, 29, 2005 will be:
Self-Regulatory Organizations;
American Stock Exchange LLC; Notice
of Filing and Order Granting
Accelerated Approval of a Proposed
Rule Change and Amendment Nos. 1,
2, 3 and 4 Relating to Listing
Standards for Broad-Based Index
Options and Concentration Limits for
Narrow-Based Index Option Listing
Standards
The Commission will consider whether to
propose amendments to the proxy rules
under Section 14 of the Securities Exchange
Act of 1934. The proposed amendments
would provide an alternative model by
which companies conducting proxy
solicitations could satisfy the Rule 14a–3
requirement to furnish proxy materials by
posting those proxy materials on an Internet
Web site and providing shareholders with
notice of the Internet availability of the
materials. Other soliciting persons also
would be permitted to follow the proposed
alternative model.
The subject matter of the Closed
Meeting scheduled for Wednesday,
November 30, 2005 will be:
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[Release No. 34–52781; File No. SR–Amex–
2005–069]
November 16, 2005.
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 24,
2005, 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 Amex. On August 17, 2005, the
Amex filed Amendment No. 1 to the
proposed rule change.3 On September
13, 2005, the Amex filed Amendment
No. 2 to the proposed rule change.4 On
September 28, 2005, the Amex filed
Amendment No. 3 to the proposed rule
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Amendment No. 1 replaced the original filing in
its entirety.
4 In Amendment No. 2, the Amex made minor
revisions to the proposed rule text and clarified that
the request for expedited review and accelerated
effectiveness set forth in Amendment No. 1
includes the revision to concentration limits for
narrow-based index options.
2 17
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change.5 On September 30, 2005, the
Amex filed Amendment No. 4 to the
proposed rule change.6 The Commission
is publishing this notice to solicit
comments on the proposed rule change,
as amended, from interested persons
and is approving the proposal on an
accelerated basis.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to adopt new
Commentary .02 to Amex Rule 901C
and amend Amex Rule 904C to adopt
generic listing standards and position
and exercise limits for broad-based
index options. The Exchange also
proposes to revise the concentration
limitation for narrow-based index
option generic listing standards in
Commentary .03 to Amex Rule 901C.
The text of the proposed rule change is
available on the Amex’s Web site
(https://www.amex.com), at the Amex’s
Office of the Secretary 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 III below. The 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
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Listing and Maintenance Standards and
Position and Exercise Limits for BroadBased Index Options
The Amex proposes to adopt new
Commentary .02(a) to Amex Rule 901C
to establish initial listing standards for
broad-based index options. The
proposal will allow the Amex to list,
pursuant to Rule 19b–4(e) under the
5 In Amendment No. 3, the Amex set forth its
interpretation of the term ‘‘major market data
vendor’’ in proposed Commentary .02(a)(11) to Rule
901C to include the Options Price Reporting
Authority (OPRA) and the Consolidated Tape
Association (CTA), as well as other securities
information processors. The Exchange also set forth
how the term ‘‘vendor’’ is defined in Rule
600(b)(83) of Regulation NMS under the Act.
6 In Amendment No. 4, the Amex made minor
revisions to the proposed rule text.
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Federal Register / Vol. 70, No. 225 / Wednesday, November 23, 2005 / Notices
Act,7 broad-based index options that
meet the ‘‘generic’’ listing standards in
new Commentary .02(a) to Amex Rule
901C. The listing standards require,
among other things, that the underlying
index be a broad stock index group, as
defined in Amex Rule 900C(b)(1); that
options on the index be a.m.-settled;
that the index be capitalizationweighted, modified capitalizationweighted, price-weighted, or equal
dollar-weighted; and that the index be
comprised of at least 50 securities, all of
which must be ‘‘NMS stocks,’’ as
defined in Rule 600 of Regulation
NMS.8 In addition, new Commentary
.02(a) to Amex Rule 901C requires that
the index’s component securities meet
certain minimum market capitalization
and average daily trading volume
requirements; that no single component
account for more than 10% of the
weight of the index and that the five
highest weighted components represent
no more than 33% of the weight of the
index; that the index value be widely
disseminated at least every 15 seconds;
and that the Amex have written
surveillance procedures in place with
respect to the index options.
The Amex also proposes to adopt new
Commentary .02(b) to Amex Rule 901C,
which establishes maintenance
standards for broad-based index options
listed pursuant to new Commentary
.02(a) to Amex Rule 901C. In addition,
the Amex proposes to amend Amex
Rule 904C to establish position limit
and exercise limits of 25,000 contracts
on the same side of the market for
broad-based index options listed
pursuant to new Commentary .02(a) to
Amex Rule 901C.9
Narrow-Based Index Options ‘‘Generic’’
Listing Standards
Commentary .02(a)(7) (redesignated as
Commentary .03(a)(7)) to Amex Rule
901C provides that no single component
security may represent more than 25%
of the weight of the index, and that the
7 17
CFR 240.19b–4(e).
Amendment No. 4, supra note 6. Rule 600
of Regulation NMS defines an ‘‘NMS stock’’ to
mean ‘‘any NMS security other than an option.’’ An
‘‘NMS security’’ is ‘‘any security or class of
securities for which transaction reports are
collected, processed, and made available pursuant
to an effective transaction reporting plan, or an
effective national market system plan for reporting
transactions in listed options.’’ See 17 CFR 242.600.
9 See Amendment No. 4, supra note 6. Amex Rule
905C establishes exercise limits for index options
at the same levels as the corresponding index
option’s position limits. The Exchange also
proposes to make minor technical changes to the
rule text of Amex Rule 904C. Telephone
conversation between Jeffrey Burns, Associate
General Counsel, Amex, and Kate Robbins,
Attorney, Division of Market Regulation,
Commission, on August 30, 2005.
8 See
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Jkt 208001
five highest weighted component
securities in the index may not, in the
aggregate, account for more than 50%
(60% for an index consisting of fewer
than 25 component securities) of the
weight of the index. The Exchange
proposes to amend Commentary
.02(a)(7) to increase the 25%
concentration limit for the highest
weighted component stock to 30%, and
to increase the concentration limit for
the five most highly weighted stocks in
an index consisting of fewer than 25
component securities from 60% to 65%.
In addition, the continuing listing
standard found in Commentary .02(d)(1)
(redesignated as Commentary .03(d)(1))
to Amex Rule 901C will be similarly
revised to reflect the proposed increase
in percentage weights of a single issuer
to 30% and the five most highly
weighted stocks in an index consisting
of fewer than 25 component securities
to 65%. The Exchange believes that the
proposed revision to Commentary .02 to
Amex Rule 901C should provide
additional flexibility in the listing and
trading of narrow-based index options
while continuing to serve the intended
purpose of preventing a single security
or small number of securities from
dominating an index.10
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
section 6 of the Act 11 in general and
furthers the objectives of section
6(b)(5) 12 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
facilitating transactions in securities,
and to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system.
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.
10 See Securities Exchange Act Release No. 51267
(February 25, 2005), 70 FR 10715 (March 4, 2005)
(approving an identical proposal by the
International Securities Exchange, Inc. (‘‘ISE’’) to
increase the concentration limits for narrow-based
index option generic listing standards).
11 15 U.S.C. 78f(b).
12 15 U.S.C. 78f(b)(5).
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70899
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange did not receive any
written comments on the proposed rule
change.
III. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change, as amended, is consistent with
the Act. Comments may be submitted by
any of the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–Amex–2005–069 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–9303.
All submissions should refer to File
Number SR–Amex–2005–069. 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 (https://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 Amex. 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–2005–069 and
should be submitted on or before
December 14, 2005.
E:\FR\FM\23NON1.SGM
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70900
Federal Register / Vol. 70, No. 225 / Wednesday, November 23, 2005 / Notices
IV. Commission’s Findings and Order
Granting Accelerated Approval of the
Proposed Rule Change
After careful review, the Commission
finds that the proposed rule change, as
amended, is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange.13 In
particular, the Commission finds that
the proposed rule change, as amended,
is consistent with section 6(b)(5) of the
Act,14 which requires, among other
things, that the 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 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.
To list options on a particular broadbased index, the Amex currently must
file a proposed rule change with the
Commission pursuant to section 19(b)(1)
of the Act and Rule 19b–4 thereunder.
However, Rule 19b–4(e) provides that
the listing and trading of a new
derivative securities product by a selfregulatory organization (‘‘SRO’’) will not
be deemed a proposed rule change
pursuant to Rule 19b–4(c)(1) if the
Commission has approved, pursuant to
section 19(b) of the Act, the SRO’s
trading rules, procedures, and listing
standards for the product class that
would include the new derivative
securities product, and the SRO has a
surveillance program for the product
class.
As described more fully above, the
Amex proposes to establish listing
standards for broad-based index
options. The Commission’s approval of
the Amex’s listing standards for broadbased index options will allow options
that satisfy the listing standards to begin
trading pursuant to Rule 19b–4(e),
without constituting a proposed rule
change within the meaning of section
19(b) of the Act and Rule 19b–4, for
which notice and comment and
Commission approval is necessary.15
The Amex’s ability to rely on Rule 19b–
4(e) to list broad-based index options
that meet the requirements of
Commentary .02(a) to Amex Rule 901C
potentially reduces the time frame for
bringing these securities to the market,
thereby promoting competition and
making new broad-based index options
available to investors more quickly.
The Commission notes that the Amex
has represented that it has adequate
trading rules, procedures, listing
standards, and surveillance program for
broad-based index options. Amex’s
existing index option trading rules and
procedures will apply to broad-based
index options listed pursuant to
Commentary .02(a) to Amex Rule 901C.
Other existing Amex rules, including
provisions addressing sales practices
and margin requirements, also will
apply to these options. In addition, the
Amex proposes to establish position and
exercise limits of 25,000 contracts on
the same side of the market for broadbased index options listed pursuant to
Commentary .02(a) to Amex Rule
901C.16 The Commission believes that
the proposed position and exercise
limits should serve to minimize
potential manipulation concerns.
The Amex represents that it has
adequate surveillance procedures for
broad-based index options and that it
intends to apply its existing surveillance
procedures for index options to monitor
trading in broad-based index options
listed pursuant to Commentary .02(a) to
Amex Rule 901C. In addition, because
Commentary .02(a) to Amex Rule 901C
requires that each component of an
index be an ‘‘NMS stock,’’ as defined in
Rule 600 of Regulation NMS under the
Act, each index component must trade
on a registered national securities
exchange or through Nasdaq.
Accordingly, the Amex will have access
to information concerning trading
activity in the component securities of
an underlying index through the
Intermarket Surveillance Group
(‘‘ISG’’).17 Commentary .02(a) to Amex
Rule 901C also provides that non-U.S.
index components that are not subject to
a comprehensive surveillance sharing
agreement between the Amex and the
primary market(s) trading the index
components may comprise no more
than 20% of the weight of the index.18
16 See
13 In
approving this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
14 15 U.S.C. 78f(b)(5).
15 When relying on Rule 19b–4(e), the SRO must
submit Form 19b–4(e) to the Commission within
five business days after the SRO begins trading the
new derivative securities product. See Securities
Exchange Act Release No. 40761 (December 8,
1998), 63 FR 70952 (December 22, 1998) (File No.
S7–13–98).
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17:33 Nov 22, 2005
Jkt 208001
Amendment No. 4, supra note 6.
ISG was formed on July 14, 1983, to,
among other things, coordinate more effectively
surveillance and investigative information sharing
arrangements in the stock and options markets. All
of the registered national securities exchanges and
the National Association of Securities Dealers, Inc.,
are members of the ISG. In addition, futures
exchanges and non-U.S. exchanges and associations
are affiliate members of the ISG.
18 However, such non-U.S. index components, as
‘‘NMS stocks,’’ would be registered under Section
12 of the Act and listed and traded on a national
17 The
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The Commission believes that these
requirements will help to ensure that
the Amex has the ability to monitor
trading in broad-based index options
listed pursuant to Commentary .02(a) to
Amex Rule 901C and in the component
securities of the underlying indexes.
The Commission believes that the
requirements in Commentary .02(a) to
Amex Rule 901C regarding, among other
things, the minimum market
capitalization, trading volume, and
relative weightings of an underlying
index’s component stocks are designed
to ensure that the markets for the
index’s component stocks are
adequately capitalized and sufficiently
liquid, and that no one stock dominates
the index. In addition, Commentary
.02(a) to Amex Rule 901C requires that
the underlying index be a ‘‘broad stock
index group,’’ as defined in Amex Rule
900C(b)(1).19 The Commission believes
that these requirements minimize the
potential for manipulating the
underlying index.
The Commission believes that the
requirement in Commentary .02(a) to
Amex Rule 901C that the current index
value be widely disseminated at least
once every 15 seconds by the one or
more major market data vendors 20
during the time an index option trades
on the Amex should provide
transparency with respect to current
index values and contribute to the
transparency of the market for broadbased index options. In addition, the
Commission believes, as it has noted in
other contexts, that the requirement in
Commentary .02(a) to Amex Rule 901C
that an index option be settled based on
the opening prices of the index’s
component securities, rather than on
closing prices, could help to reduce the
potential impact of expiring index
options on the market for the index’s
component securities.21
The Commission believes that
increasing the concentration limits for
narrow-based index options listed
pursuant to Commentary .03 to Amex
securities exchange or Nasdaq, where there is last
sale reporting.
19 Amex Rule 900C(b)(1) defines ‘‘broad stock
index group’’ to mean a stock index group relating
to a stock index which reflects representative stock
market values or prices of a broad segment of the
stock market.
20 The Amex has set forth its interpretation of the
term ‘‘major market data vendor’’ for the purposes
of Commentary .02(a)(11) to Amex Rule 901C to
include the OPRA and the CTA, as well as other
securities information processors. See Amendment
No. 3, supra note 5.
21 See, e.g., Securities Exchange Act Release No.
30944 (July 21, 1992), 57 FR 33376 (July 28, 1992)
(order approving a Chicago Board Options
Exchange, Incorporated proposal to establish
opening price settlement for S&P 500 Index
options).
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Federal Register / Vol. 70, No. 225 / Wednesday, November 23, 2005 / Notices
Rule 901C should provide additional
flexibility to the Exchange in listing and
trading narrow-based index options and
reduce the instances in which the
addition of a new series is restricted.
The proposed rule change should also
reduce instances where an index option
listed on the Exchange is temporarily
out of compliance with the
concentration limits set forth under
Commentary .03 to Amex Rule 901C
because of changes in the market value
of the underlying index components.
Lastly, the Commission believes that
that the concentration limit listing
standards should continue to serve the
purpose for which they were originally
intended of not permitting a single
security or a small number of securities
to dominate an index.
The Commission finds good cause for
approving the proposed rule change, as
amended, prior to the 30th day after the
date of publication of the notice of filing
in the Federal Register. The Exchange
has requested accelerated approval of
the proposed rule change. The proposal
implements listing and maintenance
standards and position and exercise
limits for broad-based index options
substantially identical to those recently
approved for the ISE.22 In addition, the
proposal implements concentration
limits for narrow-based index options
substantially identical to those
previously approved for the
Philadelphia Stock Exchange, Inc.,
which were subject to the full comment
period with no comments received,23
and for the ISE, which were approved
by the Commission on an accelerated
basis.24
The Commission does not believe that
the Exchange’s proposal raises any
novel regulatory issues. Therefore, the
Commission finds good cause,
consistent with section 19(b)(2) of the
Act,25 to approve the proposed rule
change, as amended, on an accelerated
basis.
V. Conclusion
It is therefore ordered, pursuant to
section 19(b)(2) of the Act,26 that the
proposed rule change (SR–Amex–2005–
069), as amended, is hereby approved
on an accelerated basis.
22 See Securities Exchange Act Release No. 52578
(October 7, 2005); 70 FR 60590 (October 18, 2005).
23 See Securities Exchange Act Release No. 50945
(December 29, 2004), 70 FR 1498 (January 7, 2005).
24 See supra note 10.
25 15 U.S.C. 78s(b)(2).
26 Id.
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For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.27
Jonathan G. Katz,
Secretary.
[FR Doc. E5–6447 Filed 11–22–05; 8:45 am]
BILLING CODE 8010–01–P
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
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.
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
27 17
CFR 200.30–3(a)(12).
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).
4 See Securities Exchange Act Release No. 52563
(October 4, 2005), 70 FR 59380.
1 15
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70901
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.
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
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).
7 See proposed Commentary .01(5) to Amex Rule
916 (currently Commentary .01(6) to Amex Rule
916).
E:\FR\FM\23NON1.SGM
23NON1
]]>Agencies
[Federal Register Volume 70, Number 225 (Wednesday, November 23, 2005)]
[Notices]
[Pages 70898-70901]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-6447]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-52781; File No. SR-Amex-2005-069]
Self-Regulatory Organizations; American Stock Exchange LLC;
Notice of Filing and Order Granting Accelerated Approval of a Proposed
Rule Change and Amendment Nos. 1, 2, 3 and 4 Relating to Listing
Standards for Broad-Based Index Options and Concentration Limits for
Narrow-Based Index Option Listing Standards
November 16, 2005.
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 24, 2005, 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 Amex. On August 17,
2005, the Amex filed Amendment No. 1 to the proposed rule change.\3\ On
September 13, 2005, the Amex filed Amendment No. 2 to the proposed rule
change.\4\ On September 28, 2005, the Amex filed Amendment No. 3 to the
proposed rule change.\5\ On September 30, 2005, the Amex filed
Amendment No. 4 to the proposed rule change.\6\ The Commission is
publishing this notice to solicit comments on the proposed rule change,
as amended, from interested persons and is approving the proposal on an
accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1 replaced the original filing in its
entirety.
\4\ In Amendment No. 2, the Amex made minor revisions to the
proposed rule text and clarified that the request for expedited
review and accelerated effectiveness set forth in Amendment No. 1
includes the revision to concentration limits for narrow-based index
options.
\5\ In Amendment No. 3, the Amex set forth its interpretation of
the term ``major market data vendor'' in proposed Commentary
.02(a)(11) to Rule 901C to include the Options Price Reporting
Authority (OPRA) and the Consolidated Tape Association (CTA), as
well as other securities information processors. The Exchange also
set forth how the term ``vendor'' is defined in Rule 600(b)(83) of
Regulation NMS under the Act.
\6\ In Amendment No. 4, the Amex made minor revisions to the
proposed rule text.
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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 new Commentary .02 to Amex Rule 901C
and amend Amex Rule 904C to adopt generic listing standards and
position and exercise limits for broad-based index options. The
Exchange also proposes to revise the concentration limitation for
narrow-based index option generic listing standards in Commentary .03
to Amex Rule 901C. The text of the proposed rule change is available on
the Amex's Web site (https://www.amex.com), at the Amex's Office of the
Secretary 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 III below. The 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
Listing and Maintenance Standards and Position and Exercise Limits for
Broad-Based Index Options
The Amex proposes to adopt new Commentary .02(a) to Amex Rule 901C
to establish initial listing standards for broad-based index options.
The proposal will allow the Amex to list, pursuant to Rule 19b-4(e)
under the
[[Page 70899]]
Act,\7\ broad-based index options that meet the ``generic'' listing
standards in new Commentary .02(a) to Amex Rule 901C. The listing
standards require, among other things, that the underlying index be a
broad stock index group, as defined in Amex Rule 900C(b)(1); that
options on the index be a.m.-settled; that the index be capitalization-
weighted, modified capitalization-weighted, price-weighted, or equal
dollar-weighted; and that the index be comprised of at least 50
securities, all of which must be ``NMS stocks,'' as defined in Rule 600
of Regulation NMS.\8\ In addition, new Commentary .02(a) to Amex Rule
901C requires that the index's component securities meet certain
minimum market capitalization and average daily trading volume
requirements; that no single component account for more than 10% of the
weight of the index and that the five highest weighted components
represent no more than 33% of the weight of the index; that the index
value be widely disseminated at least every 15 seconds; and that the
Amex have written surveillance procedures in place with respect to the
index options.
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\7\ 17 CFR 240.19b-4(e).
\8\ See Amendment No. 4, supra note 6. Rule 600 of Regulation
NMS defines an ``NMS stock'' to mean ``any NMS security other than
an option.'' An ``NMS security'' is ``any security or class of
securities for which transaction reports are collected, processed,
and made available pursuant to an effective transaction reporting
plan, or an effective national market system plan for reporting
transactions in listed options.'' See 17 CFR 242.600.
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The Amex also proposes to adopt new Commentary .02(b) to Amex Rule
901C, which establishes maintenance standards for broad-based index
options listed pursuant to new Commentary .02(a) to Amex Rule 901C. In
addition, the Amex proposes to amend Amex Rule 904C to establish
position limit and exercise limits of 25,000 contracts on the same side
of the market for broad-based index options listed pursuant to new
Commentary .02(a) to Amex Rule 901C.\9\
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\9\ See Amendment No. 4, supra note 6. Amex Rule 905C
establishes exercise limits for index options at the same levels as
the corresponding index option's position limits. The Exchange also
proposes to make minor technical changes to the rule text of Amex
Rule 904C. Telephone conversation between Jeffrey Burns, Associate
General Counsel, Amex, and Kate Robbins, Attorney, Division of
Market Regulation, Commission, on August 30, 2005.
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Narrow-Based Index Options ``Generic'' Listing Standards
Commentary .02(a)(7) (redesignated as Commentary .03(a)(7)) to Amex
Rule 901C provides that no single component security may represent more
than 25% of the weight of the index, and that the five highest weighted
component securities in the index may not, in the aggregate, account
for more than 50% (60% for an index consisting of fewer than 25
component securities) of the weight of the index. The Exchange proposes
to amend Commentary .02(a)(7) to increase the 25% concentration limit
for the highest weighted component stock to 30%, and to increase the
concentration limit for the five most highly weighted stocks in an
index consisting of fewer than 25 component securities from 60% to 65%.
In addition, the continuing listing standard found in Commentary
.02(d)(1) (redesignated as Commentary .03(d)(1)) to Amex Rule 901C will
be similarly revised to reflect the proposed increase in percentage
weights of a single issuer to 30% and the five most highly weighted
stocks in an index consisting of fewer than 25 component securities to
65%. The Exchange believes that the proposed revision to Commentary .02
to Amex Rule 901C should provide additional flexibility in the listing
and trading of narrow-based index options while continuing to serve the
intended purpose of preventing a single security or small number of
securities from dominating an index.\10\
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\10\ See Securities Exchange Act Release No. 51267 (February 25,
2005), 70 FR 10715 (March 4, 2005) (approving an identical proposal
by the International Securities Exchange, Inc. (``ISE'') to increase
the concentration limits for narrow-based index option generic
listing standards).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6 of the Act \11\ in general and furthers the objectives
of section 6(b)(5) \12\ 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 facilitating transactions in securities, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system.
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\11\ 15 U.S.C. 78f(b).
\12\ 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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange did not receive any written comments on the proposed
rule change.
III. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, is consistent with the Act. Comments may be
submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-Amex-2005-069 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-9303.
All submissions should refer to File Number SR-Amex-2005-069. 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 (https://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 Amex. 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-2005-069 and should be submitted on or before
December 14, 2005.
[[Page 70900]]
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
After careful review, the Commission finds that the proposed rule
change, as amended, is consistent with the requirements of the Act and
the rules and regulations thereunder applicable to a national
securities exchange.\13\ In particular, the Commission finds that the
proposed rule change, as amended, is consistent with section 6(b)(5) of
the Act,\14\ which requires, among other things, that the 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 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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\13\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
\14\ 15 U.S.C. 78f(b)(5).
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To list options on a particular broad-based index, the Amex
currently must file a proposed rule change with the Commission pursuant
to section 19(b)(1) of the Act and Rule 19b-4 thereunder. However, Rule
19b-4(e) provides that the listing and trading of a new derivative
securities product by a self-regulatory organization (``SRO'') will not
be deemed a proposed rule change pursuant to Rule 19b-4(c)(1) if the
Commission has approved, pursuant to section 19(b) of the Act, the
SRO's trading rules, procedures, and listing standards for the product
class that would include the new derivative securities product, and the
SRO has a surveillance program for the product class.
As described more fully above, the Amex proposes to establish
listing standards for broad-based index options. The Commission's
approval of the Amex's listing standards for broad-based index options
will allow options that satisfy the listing standards to begin trading
pursuant to Rule 19b-4(e), without constituting a proposed rule change
within the meaning of section 19(b) of the Act and Rule 19b-4, for
which notice and comment and Commission approval is necessary.\15\ The
Amex's ability to rely on Rule 19b-4(e) to list broad-based index
options that meet the requirements of Commentary .02(a) to Amex Rule
901C potentially reduces the time frame for bringing these securities
to the market, thereby promoting competition and making new broad-based
index options available to investors more quickly.
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\15\ When relying on Rule 19b-4(e), the SRO must submit Form
19b-4(e) to the Commission within five business days after the SRO
begins trading the new derivative securities product. See Securities
Exchange Act Release No. 40761 (December 8, 1998), 63 FR 70952
(December 22, 1998) (File No. S7-13-98).
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The Commission notes that the Amex has represented that it has
adequate trading rules, procedures, listing standards, and surveillance
program for broad-based index options. Amex's existing index option
trading rules and procedures will apply to broad-based index options
listed pursuant to Commentary .02(a) to Amex Rule 901C. Other existing
Amex rules, including provisions addressing sales practices and margin
requirements, also will apply to these options. In addition, the Amex
proposes to establish position and exercise limits of 25,000 contracts
on the same side of the market for broad-based index options listed
pursuant to Commentary .02(a) to Amex Rule 901C.\16\ The Commission
believes that the proposed position and exercise limits should serve to
minimize potential manipulation concerns.
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\16\ See Amendment No. 4, supra note 6.
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The Amex represents that it has adequate surveillance procedures
for broad-based index options and that it intends to apply its existing
surveillance procedures for index options to monitor trading in broad-
based index options listed pursuant to Commentary .02(a) to Amex Rule
901C. In addition, because Commentary .02(a) to Amex Rule 901C requires
that each component of an index be an ``NMS stock,'' as defined in Rule
600 of Regulation NMS under the Act, each index component must trade on
a registered national securities exchange or through Nasdaq.
Accordingly, the Amex will have access to information concerning
trading activity in the component securities of an underlying index
through the Intermarket Surveillance Group (``ISG'').\17\ Commentary
.02(a) to Amex Rule 901C also provides that non-U.S. index components
that are not subject to a comprehensive surveillance sharing agreement
between the Amex and the primary market(s) trading the index components
may comprise no more than 20% of the weight of the index.\18\ The
Commission believes that these requirements will help to ensure that
the Amex has the ability to monitor trading in broad-based index
options listed pursuant to Commentary .02(a) to Amex Rule 901C and in
the component securities of the underlying indexes.
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\17\ The ISG was formed on July 14, 1983, to, among other
things, coordinate more effectively surveillance and investigative
information sharing arrangements in the stock and options markets.
All of the registered national securities exchanges and the National
Association of Securities Dealers, Inc., are members of the ISG. In
addition, futures exchanges and non-U.S. exchanges and associations
are affiliate members of the ISG.
\18\ However, such non-U.S. index components, as ``NMS stocks,''
would be registered under Section 12 of the Act and listed and
traded on a national securities exchange or Nasdaq, where there is
last sale reporting.
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The Commission believes that the requirements in Commentary .02(a)
to Amex Rule 901C regarding, among other things, the minimum market
capitalization, trading volume, and relative weightings of an
underlying index's component stocks are designed to ensure that the
markets for the index's component stocks are adequately capitalized and
sufficiently liquid, and that no one stock dominates the index. In
addition, Commentary .02(a) to Amex Rule 901C requires that the
underlying index be a ``broad stock index group,'' as defined in Amex
Rule 900C(b)(1).\19\ The Commission believes that these requirements
minimize the potential for manipulating the underlying index.
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\19\ Amex Rule 900C(b)(1) defines ``broad stock index group'' to
mean a stock index group relating to a stock index which reflects
representative stock market values or prices of a broad segment of
the stock market.
---------------------------------------------------------------------------
The Commission believes that the requirement in Commentary .02(a)
to Amex Rule 901C that the current index value be widely disseminated
at least once every 15 seconds by the one or more major market data
vendors \20\ during the time an index option trades on the Amex should
provide transparency with respect to current index values and
contribute to the transparency of the market for broad-based index
options. In addition, the Commission believes, as it has noted in other
contexts, that the requirement in Commentary .02(a) to Amex Rule 901C
that an index option be settled based on the opening prices of the
index's component securities, rather than on closing prices, could help
to reduce the potential impact of expiring index options on the market
for the index's component securities.\21\
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\20\ The Amex has set forth its interpretation of the term
``major market data vendor'' for the purposes of Commentary
.02(a)(11) to Amex Rule 901C to include the OPRA and the CTA, as
well as other securities information processors. See Amendment No.
3, supra note 5.
\21\ See, e.g., Securities Exchange Act Release No. 30944 (July
21, 1992), 57 FR 33376 (July 28, 1992) (order approving a Chicago
Board Options Exchange, Incorporated proposal to establish opening
price settlement for S&P 500 Index options).
---------------------------------------------------------------------------
The Commission believes that increasing the concentration limits
for narrow-based index options listed pursuant to Commentary .03 to
Amex
[[Page 70901]]
Rule 901C should provide additional flexibility to the Exchange in
listing and trading narrow-based index options and reduce the instances
in which the addition of a new series is restricted. The proposed rule
change should also reduce instances where an index option listed on the
Exchange is temporarily out of compliance with the concentration limits
set forth under Commentary .03 to Amex Rule 901C because of changes in
the market value of the underlying index components. Lastly, the
Commission believes that that the concentration limit listing standards
should continue to serve the purpose for which they were originally
intended of not permitting a single security or a small number of
securities to dominate an index.
The Commission finds good cause for approving the proposed rule
change, as amended, prior to the 30th day after the date of publication
of the notice of filing in the Federal Register. The Exchange has
requested accelerated approval of the proposed rule change. The
proposal implements listing and maintenance standards and position and
exercise limits for broad-based index options substantially identical
to those recently approved for the ISE.\22\ In addition, the proposal
implements concentration limits for narrow-based index options
substantially identical to those previously approved for the
Philadelphia Stock Exchange, Inc., which were subject to the full
comment period with no comments received,\23\ and for the ISE, which
were approved by the Commission on an accelerated basis.\24\
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\22\ See Securities Exchange Act Release No. 52578 (October 7,
2005); 70 FR 60590 (October 18, 2005).
\23\ See Securities Exchange Act Release No. 50945 (December 29,
2004), 70 FR 1498 (January 7, 2005).
\24\ See supra note 10.
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The Commission does not believe that the Exchange's proposal raises
any novel regulatory issues. Therefore, the Commission finds good
cause, consistent with section 19(b)(2) of the Act,\25\ to approve the
proposed rule change, as amended, on an accelerated basis.
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\25\ 15 U.S.C. 78s(b)(2).
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V. Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\26\ that the proposed rule change (SR-Amex-2005-069), as amended,
is hereby approved on an accelerated basis.
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\26\ Id.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. E5-6447 Filed 11-22-05; 8:45 am]
BILLING CODE 8010-01-P
