Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Manner in Which Executed Contracts Are Allocated, 29193-29194 [E6-7642]

Download as PDF Federal Register / Vol. 71, No. 97 / Friday, May 19, 2006 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–53798; File No. SR–Amex– 2006–25] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Manner in Which Executed Contracts Are Allocated May 12, 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 March 14, 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. Amex has filed the proposed rule change pursuant to Section 19(b)(3)(A) 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Amex Rule 935–ANTE to revise the manner in which executed contracts are allocated. The text of the proposed rule change is available on the Amex’s Web site (http://www.amex.com), at the principal office of 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, Amex included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposal. 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. wwhite on PROD1PC61 with NOTICES 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)(6) 5 As required under Rule 19b–4(f)(6)(iii), Amex provided the Commission with written notice of its intent to file the proposed rule change at least five business days prior to the filing date. VerDate Aug<31>2005 17:37 May 18, 2006 Jkt 208001 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange’s ANTE System currently automatically allocates executed contracts among market participants on a trade (i.e., market participants who were either quoting or had orders at the Amex best bid or offer (‘‘ABBO’’) at the time of execution) as follows: (i) All non-broker-dealer customer orders will be allocated first; (ii) specialist participating in the quote will be allocated executed contracts in accordance with the specialist participation schedules set forth in Amex Rule 935–ANTE; and (iii) remaining executed contracts will be allocated to broker-dealers and competing market makers as one ANTE Participant, and registered options traders as individual ANTE Participants in accordance with provisions also set forth in Amex Rule 935–ANTE. The specialist participation schedules provide specialists with an enhanced participation based upon their role as specialists and their heightened obligations and responsibilities to the marketplace. While this methodology creates an incentive for specialists and registered options traders to quote competitively, Amex believes that it does not create an incentive to display large size quotes. Amex believes that advertising liquidity through large size quotes is necessary in today’s competitive options marketplace. In order to compete effectively with the other options exchanges, the Amex asserts that it must provide incentives to its specialists and registered options traders to display large size quotes. Therefore, Amex is proposing to amend Amex Rule 935–ANTE to revise the manner in which executed contracts are allocated when more than one market participant is either quoting or has orders at the Amex best bid or offer at the time the execution occurs. The proposed methodology will incorporate parity splits, which reward participants for posting their best quotes, blended with a size pro rata component, which Amex believes will provide incentive for specialists and registered options traders to quote larger sizes. The requirement that all non-broker-dealer customer orders be allocated first will remain in place under the revised methodology. The allocation algorithm will have two components. Component A is the parity component of the algorithm. In this component all market participants (except for non-brokerdealer customers) who were either PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 29193 quoting or had orders at the ABBO will be treated equally. Accordingly, the percentage used for Component A is an equal percentage derived by dividing 100 by the number of market participants at the ABBO. The Amex believes that the component gives market participants an incentive to quote at a better price than their counterparts, regardless of the size of their quote. Component B is the size pro rata component and is designed to reward market participants who quote in size. The percentage 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 bid (for sell orders) and offer (for buy orders). The weight each component will have in the final percentage used to allocate executed contracts will initially be equal. The Options Trading Committee 6 will have the ability to modify the weighting of Components A and B if the Committee believes such modifications will further enhance specialists’ and registered options traders’ incentives to quote competitively or will increase liquidity. The specialist will continue to receive an enhanced participation under the revised methodology. If the specialist is quoting at the ABBO the specialist’s allocation will be the greater of (i) the amount the specialist would receive pursuant to the allocation algorithm; or (ii) the amount the specialist would be entitled pursuant to the current specialist participation schedule set forth in Amex Rule 935–ANTE. The proposed allocation algorithm will only apply to orders executed in the ANTE System. Orders executed outside the ANTE System will continue to be allocated pursuant to Amex Rule 950– ANTE (l), Commentary .03. The Exchange believes the proposed allocation algorithm with its blended parity and size pro rata components will provide further incentives to specialists and registered options traders to quote more competitively and in larger size. The Exchange anticipates putting the proposed allocation methodology into effect once changes to the ANTE System to accommodate the methodology have been completed. The ANTE System changes were expected to be in place for all options products by April 7, 2006. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with 6 The Options Trading Committee is comprised of the two Floor Governors and the Chairman or their designees of the Options Specialist Association, the Options Market Makers Association and the Floor Brokers Association. E:\FR\FM\19MYN1.SGM 19MYN1 29194 Federal Register / Vol. 71, No. 97 / Friday, May 19, 2006 / Notices the Act and the rules and regulations under the Act applicable to a national securities exchange and, in particular, the requirements of Section 6(b) of the Act.7 Specifically, the Exchange believes the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act 8 in that the rules of an exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts and practices, and, in general, to protect investors and the public interest. B. Self-Regulatory Organization’s Statement on Burden on Competition Amex does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. 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. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change (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 thirty days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, it has become effective pursuant to Section 19(b)(3)(A) of the Act 9 and Rule 19b–4(f)(6) 10 thereunder. The Commission notes that the 30-day operative delay has elapsed and therefore the filing is effective. At any time within 60 days of the filing of the proposed rule change the Commission may summarily abrogate such proposed 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. wwhite on PROD1PC61 with NOTICES IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(5). 9 15 U.S.C. 78s(b)(3)(A). 10 17 CFR 240.19b–4(f)(6). change is consistent with the Act. Comments may be submitted by any of the following methods: SECURITIES AND EXCHANGE COMMISSION Electronic Comments [Release No. 34–53804, File No. SR-MSRB– 2006–02] • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include SR– Amex–2006–25 on the subject line. Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Order Approving Proposed Rule Change Relating to Restated Articles of Incorporation and By-Laws 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–2006–25. 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 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 No. SR–Amex–2006–25 and should be submitted on or before June 9, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.11 Jill M. Peterson, Assistant Secretary. [FR Doc. E6–7642 Filed 5–18–06; 8:45 am] BILLING CODE 8010–01–P 7 15 VerDate Aug<31>2005 17:37 May 18, 2006 11 17 Jkt 208001 PO 00000 CFR 200.30–3(a)(12). Frm 00076 Fmt 4703 Sfmt 4703 May 15, 2006. On March 20, 2006, the Municipal Securities Rulemaking Board (‘‘MSRB’’ or ‘‘Board’’), filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘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 consisting of the MSRB’s Restated Articles of Incorporation and By-Laws. The proposed rule change is intended to expand the indemnification provisions for Board members and employees and to make other revisions to the Board’s Articles of Incorporation and By-Laws. The proposed rule change was published for comment in the Federal Register on April 14, 2006.3 The Commission received no comment letters regarding the proposal. The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to the MSRB 4 and, in particular, the requirements of Section 15B(b)(2)(C) of the Act 5 and the rules and regulations thereunder. Section 15B(b)(2)(C) of the Act requires, among other things, that the MSRB’s rules 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 municipal securities, to remove impediments to and perfect the mechanism of a free and open market in municipal securities, and, in general, to protect investors and the public interest.6 In particular, the Commission finds that the proposed rule change will clarify provisions 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 53616 (April 7, 2006), 71 FR 19571 (April 14, 2006). 4 In approving this rule the Commission notes that it has considered the proposed rule’s impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f). 5 15 U.S.C. 78o–4(b)(2)(C). 6 Id. 2 17 E:\FR\FM\19MYN1.SGM 19MYN1

Agencies

[Federal Register Volume 71, Number 97 (Friday, May 19, 2006)]
[Notices]
[Pages 29193-29194]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-7642]



[[Page 29193]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53798; File No. SR-Amex-2006-25]


Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the Manner in Which Executed Contracts Are Allocated

May 12, 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 March 14, 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. Amex has 
filed the proposed rule change pursuant to Section 19(b)(3)(A) 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.
---------------------------------------------------------------------------

    \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)(6)
    \5\ As required under Rule 19b-4(f)(6)(iii), Amex provided the 
Commission with written notice of its intent to file the proposed 
rule change at least five business days prior to the filing date.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Amex Rule 935-ANTE to revise the 
manner in which executed contracts are allocated. The text of the 
proposed rule change is available on the Amex's Web site (http://
www.amex.com), at the principal office of 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, Amex included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposal. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange's ANTE System currently automatically allocates 
executed contracts among market participants on a trade (i.e., market 
participants who were either quoting or had orders at the Amex best bid 
or offer (``ABBO'') at the time of execution) as follows: (i) All non-
broker-dealer customer orders will be allocated first; (ii) specialist 
participating in the quote will be allocated executed contracts in 
accordance with the specialist participation schedules set forth in 
Amex Rule 935-ANTE; and (iii) remaining executed contracts will be 
allocated to broker-dealers and competing market makers as one ANTE 
Participant, and registered options traders as individual ANTE 
Participants in accordance with provisions also set forth in Amex Rule 
935-ANTE. The specialist participation schedules provide specialists 
with an enhanced participation based upon their role as specialists and 
their heightened obligations and responsibilities to the marketplace. 
While this methodology creates an incentive for specialists and 
registered options traders to quote competitively, Amex believes that 
it does not create an incentive to display large size quotes. Amex 
believes that advertising liquidity through large size quotes is 
necessary in today's competitive options marketplace. In order to 
compete effectively with the other options exchanges, the Amex asserts 
that it must provide incentives to its specialists and registered 
options traders to display large size quotes.
    Therefore, Amex is proposing to amend Amex Rule 935-ANTE to revise 
the manner in which executed contracts are allocated when more than one 
market participant is either quoting or has orders at the Amex best bid 
or offer at the time the execution occurs. The proposed methodology 
will incorporate parity splits, which reward participants for posting 
their best quotes, blended with a size pro rata component, which Amex 
believes will provide incentive for specialists and registered options 
traders to quote larger sizes. The requirement that all non-broker-
dealer customer orders be allocated first will remain in place under 
the revised methodology. The allocation algorithm will have two 
components. Component A is the parity component of the algorithm. In 
this component all market participants (except for non-broker-dealer 
customers) who were either quoting or had orders at the ABBO will be 
treated equally. Accordingly, the percentage used for Component A is an 
equal percentage derived by dividing 100 by the number of market 
participants at the ABBO. The Amex believes that the component gives 
market participants an incentive to quote at a better price than their 
counterparts, regardless of the size of their quote. Component B is the 
size pro rata component and is designed to reward market participants 
who quote in size. The percentage 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 bid (for sell orders) and offer (for buy orders). The 
weight each component will have in the final percentage used to 
allocate executed contracts will initially be equal. The Options 
Trading Committee \6\ will have the ability to modify the weighting of 
Components A and B if the Committee believes such modifications will 
further enhance specialists' and registered options traders' incentives 
to quote competitively or will increase liquidity. The specialist will 
continue to receive an enhanced participation under the revised 
methodology. If the specialist is quoting at the ABBO the specialist's 
allocation will be the greater of (i) the amount the specialist would 
receive pursuant to the allocation algorithm; or (ii) the amount the 
specialist would be entitled pursuant to the current specialist 
participation schedule set forth in Amex Rule 935-ANTE. The proposed 
allocation algorithm will only apply to orders executed in the ANTE 
System. Orders executed outside the ANTE System will continue to be 
allocated pursuant to Amex Rule 950-ANTE (l), Commentary .03. The 
Exchange believes the proposed allocation algorithm with its blended 
parity and size pro rata components will provide further incentives to 
specialists and registered options traders to quote more competitively 
and in larger size.
---------------------------------------------------------------------------

    \6\ The Options Trading Committee is comprised of the two Floor 
Governors and the Chairman or their designees of the Options 
Specialist Association, the Options Market Makers Association and 
the Floor Brokers Association.
---------------------------------------------------------------------------

    The Exchange anticipates putting the proposed allocation 
methodology into effect once changes to the ANTE System to accommodate 
the methodology have been completed. The ANTE System changes were 
expected to be in place for all options products by April 7, 2006.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with

[[Page 29194]]

the Act and the rules and regulations under the Act applicable to a 
national securities exchange and, in particular, the requirements of 
Section 6(b) of the Act.\7\ Specifically, the Exchange believes the 
proposed rule change is consistent with the requirements of Section 
6(b)(5) of the Act \8\ in that the rules of an exchange be designed to 
promote just and equitable principles of trade, to prevent fraudulent 
and manipulative acts and practices, and, in general, to 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).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    Amex does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.

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.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change (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 thirty days from the date on 
which it was filed, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest, it has become effective pursuant to Section 19(b)(3)(A) of 
the Act \9\ and Rule 19b-4(f)(6) \10\ thereunder. The Commission notes 
that the 30-day operative delay has elapsed and therefore the filing is 
effective.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change the Commission may summarily abrogate such proposed 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 
SR-Amex-2006-25 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-2006-25. 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 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 No. SR-
Amex-2006-25 and should be submitted on or before June 9, 2006.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6-7642 Filed 5-18-06; 8:45 am]
BILLING CODE 8010-01-P