Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change and Amendment Nos. 1 and 2 Thereto Relating to Criteria for Securities That Underline Options Traded on the Exchange, 78476-78479 [E6-22400]

Download as PDF 78476 Federal Register / Vol. 71, No. 250 / Friday, December 29, 2006 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54983; File No. SR–Amex– 2006–87] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change and Amendment Nos. 1 and 2 Thereto Relating to Criteria for Securities That Underline Options Traded on the Exchange December 20, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on September 13, 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 substantially prepared by the Exchange. The Exchange filed Amendment No. 1 to the proposed rule change on November 22, 2006.3 The Exchange filed Amendment No. 2 to the proposed rule change on December 14, 2006.4 This order provides notice of the proposed rule change as modified by Amendment Nos. 1 and 2 and approved the proposed rule change as amended on an accelerated basis. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Amex Rules 3, 915, 916, and 957 to enable the listing and trading on the Exchange of options on ExchangeTraded Fund Shares that hold a specified non-U.S. currency or currencies. The text of the proposed rule change is available at the Amex, the Commission’s Public Reference Room, and on the Amex’s Web site at http:// www.amex.com. 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 Amendment No. 1 replaced and superseded the proposed rule change as originally filed in its entirety. 4 In Amendment No. 2, which supplemented the filing as amended by Amendment No. 1, the Exchange corrected typographical errors and made non-substantive, technical changes to the proposed rule text contained in Exhibits 4 and 5 of Amendment No. 1 to the proposed rule change, and also made a minor clarifying change to Section I of the 19b–4. pwalker on PROD1PC69 with NOTICES 2 17 VerDate Aug<31>2005 18:15 Dec 28, 2006 Jkt 211001 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item III below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to amend Amex Rules 3, 915, 916, and 957 to enable the listing and trading on the Exchange of options on Exchange-Traded Fund Shares that hold a specified non-U.S. currency or currencies. Amex Rule 915, Commentary .06, currently provides that securities deemed appropriate for options trading shall include shares or other securities (‘‘Exchange-Traded Fund Shares’’ or ‘‘ETFs’’) that are principally traded on a national securities exchange or through the facilities of a registered national securities association, and are defined as an NMS Stock. Commentary .06 further states that these shares or securities must also represent an interest in a registered investment company organized as an open-end management investment company, a unit investment trust or a similar entity which holds securities constituting or otherwise based on or representing an investment in an index or portfolio of securities. The Exchange proposes to amend Commentary .06 to Rule 915 to expand the type of options to include options on ETFs that represent an interest in a trust or other similar entity that holds specified non-U.S. currency or currencies deposited with the trust or similar entity. The Exchange is also proposing to require that for Funds that hold a specified non-U.S. currency or currencies deposited with the trust, the Exchange will have entered into a comprehensive surveillance sharing agreement with the marketplace or marketplaces with last sale reporting that represent(s) the highest volume in derivatives (options or futures) on the specified non-U.S. currency or currencies, which are utilized by the PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 national securities exchange where the underlying Funds are listed and traded.5 The proposed amendment to Amex Rule 915 would permit the Exchange to list options on, for example, the Euro Currency Trust (‘‘Trust’’).6 The Trust issues Euro Shares (‘‘Shares’’) that represent units of fractional undivided beneficial interest in, and ownership of, the Trust. PADCO Advisors II, Inc., d/ b/a Rydex Investments, is the sponsor of the Trust (‘‘Sponsor’’) 7 and may be deemed the ‘‘issuer’’ of the Shares pursuant to Section 2(a)(4) of the Securities Act of 1933, as amended. The Bank of New York is the trustee of the Trust (‘‘Trustee’’), JPMorgan Chase Bank, N.A., London Branch, is the depository for the Trust, and Rydex Distributors, Inc. is the distributor for the Trust. The Trust intends to issue additional Shares on a continuous basis through the Trustee. As stated in the Trust’s registration statement, the investment objective of the Trust is for the Shares to reflect the price of the euro.8 The Shares may be purchased from the Trust only in one or more blocks of 50,000 Shares, as described in the prospectus under ‘‘Creation and Redemption of Shares.’’ A block of 50,000 shares is called a Basket. The Trust issues Shares in Baskets on a continuous basis to certain authorized participants (‘‘Authorized Participants’’). Each Basket, when created, is offered and sold to an Authorized Participant at a price in euro equal to the net asset value (‘‘NAV’’) for 50,000 Shares on the day that the order to create the Basket is accepted by the Trustee. On December 12, 2005, the Shares were sold to the public by Authorized Participants at varying prices in dollars by reference to, among other things, the market price of euro and the trading price of the Shares on the New York Stock Exchange LLC (‘‘NYSE’’) at the time of each sale. The Shares trade on the NYSE under the symbol ‘‘FXE.’’ The Shares may also trade in other markets. The Exchange believes that permitting options on foreign currency-based Exchange-Traded Fund Shares to trade on the Exchange is consistent with the 5 See proposed Amex Rule 915, Commentary .06(b)(iv). 6 See Securities Exchange Act Release No. 53059 (January 5, 2006), 71 FR 2072 (January 12, 2006) (SR–Amex–2005–128). 7 The Sponsor maintains a public Web site on behalf of the Trust, http://www.currencyshares.com, which contains information about the Trust and the Shares. 8 See Registration No. 333–125581. The Exchange notes that the Trust is not a registered investment company under the Investment Company Act of 1940 (the ‘‘1940 Act’’) and is not required to register under the 1940 Act. E:\FR\FM\29DEN1.SGM 29DEN1 Federal Register / Vol. 71, No. 250 / Friday, December 29, 2006 / Notices pwalker on PROD1PC69 with NOTICES Commission’s approval order of a rule change filed by the NYSE to list and trade shares of the Trust.9 This proposed rule change to the Exchange’s listing criteria for Exchange-Traded Fund Shares is intended to provide appropriate listing standards for options on shares of these and similar types of foreign currency-based ExchangeTraded Fund Shares that may be listed in the future. For options trading, Exchange-Traded Fund Shares will continue to need to satisfy the listing standards in Commentary .06 to Amex Rule 915. Specifically, the Exchange-Traded Fund Shares must be traded on a national securities exchange or through the facilities of a registered national securities association and must be an ‘‘NMS Stock’’ as defined under Rule 600 of Regulation NMS.10 The ExchangeTraded Fund Shares must also either: (1) Meet the criteria and guidelines under Amex Rule 915 (Criteria for Underlying Securities); or (2) be available for creation or redemption each business day in cash or in-kind from the investment company, issuing trust, or other entity at a price related to the net asset value, and the investment company, issuing trust, or other entity shall provide that Exchange-Traded Fund Shares may be created even though some or all of the securities required to be deposited have not been received by the unit investment trust or the management investment company, provided the authorized creation participant has undertaken to deliver the shares as soon as possible and such undertaking has been secured by the delivery and maintenance of collateral consisting of cash or cash equivalents satisfactory to the fund which underlies the option as described in the fund or unit trust prospectus. Under the applicable continued listing criteria in Commentary .07 to Amex Rule 916, the Exchange-Traded Fund Shares may be subject to delisting as follows: (1) Following the initial twelve-month period beginning upon the commencement of trading of the Exchange-Traded Fund Shares, there are fewer than 50 record and/or beneficial holders of the Exchange-Traded Fund Shares for 30 or more consecutive trading days; (2) the value of the euro is no longer calculated or available; 11 or (3) such other event occurs or condition exists that in the opinion of the Exchange makes further dealing on the Exchange inadvisable. Additionally, the Exchange-Traded Fund Shares shall not be deemed to meet the requirements for continued approval, and the Exchange shall not open for trading any additional series of option contracts of the class covering such Exchange-Traded Fund Shares, if trading in the shares is halted or suspended on their primary market, or if the Exchange-Traded Fund Shares are delisted in accordance with the terms of Amex Rule 916. The Exchange represents that the expansion of the types of investments that may be held by an ExchangeTraded Fund Share under Amex rules will not have any effect on the rules pertaining to position and exercise limits 12 or margin.13 The Exchange is proposing to amend Amex Rule 957 to ensure that Specialists and Registered Traders handling Exchange-Traded Fund Shares provide the Exchange with all necessary information relating to their trading in the applicable non-U.S. currency, nonU.S. currency options, futures or options on futures on such currency, or any other derivatives based on such currency. In addition, the revision to Amex Rule 957 will prohibit a specialist or registered trader from engaging in trading in non-U.S. currency, non-U.S. currency options, futures, options on futures or non-U.S. currency and other derivatives based on such currency from trading in an account which has not been reported to the Exchange. Finally, the Exchange is proposing to amend Amex Rule 3 to require members and member organizations to establish, maintain, and enforce written policies and procedures to prevent the misuse of material nonpublic information in connection with trading in securities issued by, among others, currency trust shares or similar entities, or in any related securities or related options or other derivative securities, or in any related non-U.S. currency, non-U.S. currency options, futures or options on futures on such currency, or any other derivatives based on such currency while in possession of material nonpublic information concerning that 9 See Securities Exchange Act Release No. 52843 (November 28, 2005), 70 FR 72486 (December 5, 2005) (SR–NYSE–2005–65). 10 In light of the implementation of certain aspects of Regulation NMS, the Exchange hereby seeks to amend Commentary .06 to Amex Rule 915 to reflect that Exchange-Traded Fund Shares must be NMS Stocks as defined under Rule 600 of Regulation NMS instead of ‘‘national market’’ securities. 11 The Exchange states that euro pricing information based on the euro spot price is available to investors on a 24-hour basis from numerous financial information service providers, and there are a variety of other public Web sites proving information on foreign currency and euro, including Bloomberg, CBS MarketWatch, and Yahoo! Finance. 12 See Amex Rules 904 and 905. 13 See Amex Rule 462. VerDate Aug<31>2005 18:15 Dec 28, 2006 Jkt 211001 PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 78477 currency trust share or similar entity. The Exchange further proposes to require such procedures to prevent the trading of any of the foregoing securities while in possession of knowledge concerning imminent transactions of the same securities. Finally, the Exchange proposes to require procedures to prevent the disclosure of material nonpublic information involving the foregoing to another person. The Exchange represents that it has an adequate surveillance program in place for options on Exchange-Traded Fund Shares based on the value of a non-U.S. currency or currencies. In addition, the Exchange may obtain trading information via the Intermarket Surveillance Group (‘‘ISG’’) from other exchanges who are members or affiliates of the ISG. Specifically, the Amex can obtain such information from the Philadelphia Stock Exchange (‘‘Phlx’’) in connection with euro options trading on the Phlx and from the Chicago Mercantile Exchange (‘‘CME’’) and the London International Financial Futures Exchange (‘‘LIFFE’’) in connection with euro futures trading on those exchanges.14 2. Statutory Basis The proposed rule change is consistent with Section 6(b) 15 of the Act, in general, and furthers the objectives of Section 6(b)(5),16 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, protect investors and the public interest. B. Self-Regulatory Organization’s Statement on Burden on Competition The proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were solicited or received with respect to the proposed rule change by the Exchange. III. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, 14 The Amex and PHLX are members of the ISG. CME and LIFFE are affiliate members of the ISG. 15 15 U.S.C. 78f(b). 16 15 U.S.C. 78f(b)(5). E:\FR\FM\29DEN1.SGM 29DEN1 78478 Federal Register / Vol. 71, No. 250 / Friday, December 29, 2006 / Notices securities exchange.17 In particular, the Commission finds that the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act, which requires, among other Electronic Comments things, that the rules of an exchange be • Use the Commission’s Internet designed to prevent fraudulent and comment form (http://www.sec.gov/ manipulative acts and practices, to rules/sro.shtml); or promote just and equitable principles of • Send an e-mail to ruletrade, to remove impediments to and comments@sec.gov. Please include File perfect the mechanism of a free and Number SR–Amex–2006–87 on the open market and a national market subject line. system, and, in general, to protect investors and the public interest.18 Paper Comments Further, the Commission finds that the • Send paper comments in triplicate Exchange’s proposal is substantially to Nancy M. Morris, Secretary, similar to one it recently approved for Securities and Exchange Commission, the International Securities Exchange 100 F Street, NE., Washington, DC LLC (‘‘ISE’’).19 20549–1090. Currently, Amex’s rules permit it to All submissions should refer to File list options on Exchange-Traded Fund Number SR–Amex–2006–87. This file Shares that represent an interest in a number should be included on the registered investment company subject line if e-mail is used. To help the organized as an open-end management Commission process and review your investment company, a unit investment comments more efficiently, please use trust or a similar entity which holds only one method. The Commission will securities constituting or otherwise post all comments on the Commission’s based on or representing an investment Internet Web site at http://www.sec.gov/ in an index or portfolio of securities.20 rules/sro.shtml. Copies of the The Exchange’s proposal would allow it submission, all subsequent to list and trade options on Exchangeamendments, all written statements Traded Fund Shares whose investment with respect to the proposed rule assets consist of a specified non-U.S. change that are filed with the currency or currencies deposited with a Commission, and all written trust or similar entity. For example, the communications relating to the proposed rule change would allow the proposed rule change between the Exchange to list options on the Euro Commission and any person, other than Currency Trust. those that may be withheld from the The underlying Exchange-Traded public in accordance with the Fund Shares would continue to need to provisions of 5 U.S.C. 552, will be satisfy the listing standards in Amex available for inspection and copying in Rule 915. To accommodate the listing the Commission’s Public Reference and trading of options on ExchangeRoom. Copies of the filing also will be Traded Fund Shares investing primarily available for inspection and copying at in non-U.S. currency, the Exchange the principal office of the Exchange. All proposes to amend Amex Rule 3 to comments received will be posted require a member or member without change; the Commission does organization to establish, maintain, and not edit personal identifying enforce written policies and procedures information from submissions. You designed to prevent the misuse of any should submit only information that material nonpublic information it might you wish to make available publicly. All have or receive in a related security, submissions should refer to File No. option, or derivative security or in the SR–Amex–2006–87 and should be applicable non-U.S. currency, non-U.S. submitted on or before January 19, 2007. currency options, futures or options on futures on such currency, or any other IV. Commission’s Findings and Order derivatives based on such currency. In Granting Accelerated Approval of the addition, the Exchange proposes to Proposed Rule Change amend Amex Rule 957 to require that Amex has asked the Commission to approve its proposal on an accelerated 17 In approving this proposed rule change, the basis to accommodate its timetable for Commission has considered the proposed rule’s listing options on Exchange-Traded impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). Fund Shares, as described above. After 18 15 U.S.C. 78f(b)(5). careful consideration, the Commission 19 See Securities Exchange Act Release No. 54087 finds that the proposed rule change is (June 30, 2006), 71 FR 38918 (July 10, 2006) (SRconsistent with the requirements of the ISE–2005–60). The Amex stated that it based its Act and the rules and regulations proposed rule change on the ISE filing. 20 See Amex Rule 915, Commentary .06. thereunder applicable to a national pwalker on PROD1PC69 with NOTICES including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: VerDate Aug<31>2005 18:15 Dec 28, 2006 Jkt 211001 PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 Specialists and Registered Traders handling Exchange-Traded Fund Shares provide the Exchange with all necessary information relating to their trading in the applicable non-U.S. currency, nonU.S. currency options, futures or options on futures on such currency, or any other derivatives based on such currency. Each Specialist and Registered Trader also would be obligated to conduct all trading in the ExchangeTraded Fund Shares in account(s) which have been reported to the Exchange. The Commission believes that these requirements are designed to minimize the potential for manipulating the underlying currency held by the Exchange-Traded Fund Shares. As proposed, the Exchange-Traded Fund Shares must be traded on a national securities exchange or through the facilities of a registered national securities association and must be an ‘‘NMS stock’’ as defined under Rule 600 of Regulation NMS.21 The ExchangeTraded Fund Shares must also either: (1) Meet the criteria and guidelines under Amex Rule 915, Commentary .01; or (2) be available for creation or redemption each business day from and through the investment company, issuing trust, or other entity in cash or in-kind at a price related to net asset value, and the investment company, issuing trust, or other entity shall provide that shares may be created even though some or all of the investments required to be deposited have not been received by the unit investment trust or the management investment company, provided that the person obligated to deposit the investments has undertaken to deliver the investment assets as soon as possible and such undertaking has been secured by the delivery and maintenance of collateral consisting of cash or cash equivalents satisfactory to the fund which underlies the option, as described in the fund or unit trust prospectus. Furthermore, the Commission notes that the Exchange has represented that the expansion of the types of investments that may be held by Exchange-Traded Fund Shares under Amex rules will not have any effect on the rules pertaining to position and exercise limits or margin. Finally, under the proposed change to Amex Rule 916, Commentary .07, Exchange-Traded Fund Shares would not be deemed to meet the requirements for continued approval, and the Exchange would not open for trading any additional series of option contracts of the class covering such ExchangeTraded Fund Shares, if the ExchangeTraded Fund Shares are delisted in 21 17 E:\FR\FM\29DEN1.SGM CFR 242.600(b)(47). 29DEN1 pwalker on PROD1PC69 with NOTICES Federal Register / Vol. 71, No. 250 / Friday, December 29, 2006 / Notices accordance with Commentary .01(5) of Amex Rule 916 or trading in the shares are halted or suspended in their primary market. Additionally, as proposed, the Exchange will consider the suspension of opening transactions in any series of options covering Exchange-Traded Fund Shares if the value of the non-U.S. currency on which the Exchange-Traded Fund Shares are based is no longer calculated or available. The Commission believes that the proposed change to Amex Rule 916 with respect to withdrawal of approval is consistent with the protection of investors and the public interest. The Commission notes that the Exchange has represented that it has an adequate surveillance program in place for options on Exchange-Traded Fund Shares, including those funds that are based on the value of a non-U.S. currency. In addition, the Exchange has represented that it is able to obtain currency-related trading information via the ISG from other exchanges who are members or affiliates of the ISG, as discussed above, in connection with options and futures trading on those exchanges. The Commission finds good cause for approving the proposed rule change, as amended, prior to the thirtieth day after the date of publication of the notice of filing thereof in the Federal Register. The Exchange has requested accelerated approval because this proposed rule change is based on, and is substantially similar to, a proposal by the ISE that the Commission recently approved.22 Accordingly, this proposal raises no new or novel regulatory issues that have not been previously considered by the Commission. In addition, the Commission notes that it did not receive any comments on the ISE’s proposal. The Commission believes that expanding Amex Rule 915 to encompass options on Exchange-Traded Fund Shares that represent interests in a trust that holds non-U.S. currency deposited with the trust will provide investors with an additional investment choice and that accelerated approval of the proposal will allow investors to begin trading these products promptly. Additionally, the proposal contains measures that are designed to minimize the potential for manipulation of the underlying currency held by the Exchange-Traded Fund Shares. Therefore, the Commission finds good cause, consistent with Section 19(b)(2) 22 See Securities Exchange Act Release No. 54087 (June 30, 2006), 71 FR 38918 (July 10, 2006) (SR– ISE–2005–60). VerDate Aug<31>2005 18:15 Dec 28, 2006 Jkt 211001 of the Act,23 to approve the amended proposal on an accelerated basis. V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,24 that the proposed rule change (SR-Amex-2006– 87), as modified by Amendment Nos. 1 and 2, be, and it hereby is, approved on an accelerated basis. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.25 Florence E. Harmon, Deputy Secretary. [FR Doc. E6–22400 Filed 12–28–06; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55000; File No. SR–BSE– 2006–47] Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto to Eliminate Fees on Certain Exchange Traded Funds and to Establish Fees on Certain Options on Indexes December 21, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on November 14, 2006, the Boston Stock Exchange, Inc. (‘‘BSE’’ 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 BSE. On December 20, 2006, BSE filed Amendment No. 1 to the proposed rule change.3 The BSE has designated this proposal as one establishing or changing a due, fee, or other charge applicable only to a member under Section 19(b)(3)(A)(ii) of the Act,4 and Rule 19b–4(f)(2) thereunder,5 which renders 23 15 U.S.C. 78s(b)(2). U.S.C. 78s(b)(2). 25 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 In Amendment No. 1, the Exchange, among other things: (1) Clarified that the proposed rule change establishes fees applicable only to members for transactions in options on indices effected by members; (2) made additional amendments to correct certain errors and omissions; and (3) corrected certain errors in the purpose section of the proposed rule change. Changes made in Amendment No. 1 have been incorporated into this notice. 4 15 U.S.C. 78s(b)(3)(A)(ii). 5 17 CFR 240.19b–4(f)(2). 24 15 PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 78479 the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change BSE is proposing to amend the Fee Schedule of the Boston Options Exchange (‘‘BOX’’) to remove the surcharge fee for certain Exchange Traded Funds (‘‘ETFs’’) and to establish fees applicable only to members for transactions in options on indices effected by members. The BOX Fee Schedule is available at the Exchange, the Commission’s Public Reference Room, and http:// www.bostonoptions.com. 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 BSE 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. The BSE 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 BSE is proposing to amend the BOX Fee Schedule to remove the surcharge fee for transactions in options on the ETF Nasdaq 100 (‘‘QQQQs’’), the Standard & Poor’s (‘‘S&P’’) Depository Receipts (‘‘SPY’’), the iShares Nasdaq Biotechnology Index Fund (‘‘IBB’’), iShares Russell 2000 Index Fund (‘‘IWM’’), iShares Russell 2000 Growth Index Fund (‘‘IWO’’), the S&P Energy Select Sector SPDR Fund (‘‘XLE’’) and the S&P Financial Select Sector SPDR Fund (‘‘XLF’’). The Exchange is proposing to remove the surcharge from its Fee Schedule because it no longer pays a licensing fee on such ETFs. The Exchange is also proposing to establish a fifteen (15) cent surcharge fee for transactions in options on the Russell 2000 Index (‘‘RUT’’),6 the full 6 Russell 2000is a trademark and service mark of the Frank Russell Company, used under license. Neither Frank Russell Company’s Publication of the Russell Indexes nor its licensing of its trademarks E:\FR\FM\29DEN1.SGM Continued 29DEN1

Agencies

[Federal Register Volume 71, Number 250 (Friday, December 29, 2006)]
[Notices]
[Pages 78476-78479]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-22400]



[[Page 78476]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54983; File No. SR-Amex-2006-87]


Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Order Granting Accelerated Approval of a Proposed 
Rule Change and Amendment Nos. 1 and 2 Thereto Relating to Criteria for 
Securities That Underline Options Traded on the Exchange

December 20, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on September 13, 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 substantially prepared by the Exchange. 
The Exchange filed Amendment No. 1 to the proposed rule change on 
November 22, 2006.\3\ The Exchange filed Amendment No. 2 to the 
proposed rule change on December 14, 2006.\4\ This order provides 
notice of the proposed rule change as modified by Amendment Nos. 1 and 
2 and approved the proposed rule change as amended 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 and superseded the proposed rule 
change as originally filed in its entirety.
    \4\ In Amendment No. 2, which supplemented the filing as amended 
by Amendment No. 1, the Exchange corrected typographical errors and 
made non-substantive, technical changes to the proposed rule text 
contained in Exhibits 4 and 5 of Amendment No. 1 to the proposed 
rule change, and also made a minor clarifying change to Section I of 
the 19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Amex Rules 3, 915, 916, and 957 to 
enable the listing and trading on the Exchange of options on Exchange-
Traded Fund Shares that hold a specified non-U.S. currency or 
currencies. The text of the proposed rule change is available at the 
Amex, the Commission's Public Reference Room, and on the Amex's Web 
site at http://www.amex.com.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of those statements may be examined at the places specified in 
Item III below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend Amex Rules 3, 
915, 916, and 957 to enable the listing and trading on the Exchange of 
options on Exchange-Traded Fund Shares that hold a specified non-U.S. 
currency or currencies. Amex Rule 915, Commentary .06, currently 
provides that securities deemed appropriate for options trading shall 
include shares or other securities (``Exchange-Traded Fund Shares'' or 
``ETFs'') that are principally traded on a national securities exchange 
or through the facilities of a registered national securities 
association, and are defined as an NMS Stock. Commentary .06 further 
states that these shares or securities must also represent an interest 
in a registered investment company organized as an open-end management 
investment company, a unit investment trust or a similar entity which 
holds securities constituting or otherwise based on or representing an 
investment in an index or portfolio of securities. The Exchange 
proposes to amend Commentary .06 to Rule 915 to expand the type of 
options to include options on ETFs that represent an interest in a 
trust or other similar entity that holds specified non-U.S. currency or 
currencies deposited with the trust or similar entity. The Exchange is 
also proposing to require that for Funds that hold a specified non-U.S. 
currency or currencies deposited with the trust, the Exchange will have 
entered into a comprehensive surveillance sharing agreement with the 
marketplace or marketplaces with last sale reporting that represent(s) 
the highest volume in derivatives (options or futures) on the specified 
non-U.S. currency or currencies, which are utilized by the national 
securities exchange where the underlying Funds are listed and 
traded.\5\
---------------------------------------------------------------------------

    \5\ See proposed Amex Rule 915, Commentary .06(b)(iv).
---------------------------------------------------------------------------

    The proposed amendment to Amex Rule 915 would permit the Exchange 
to list options on, for example, the Euro Currency Trust 
(``Trust'').\6\ The Trust issues Euro Shares (``Shares'') that 
represent units of fractional undivided beneficial interest in, and 
ownership of, the Trust. PADCO Advisors II, Inc., d/b/a Rydex 
Investments, is the sponsor of the Trust (``Sponsor'') \7\ and may be 
deemed the ``issuer'' of the Shares pursuant to Section 2(a)(4) of the 
Securities Act of 1933, as amended. The Bank of New York is the trustee 
of the Trust (``Trustee''), JPMorgan Chase Bank, N.A., London Branch, 
is the depository for the Trust, and Rydex Distributors, Inc. is the 
distributor for the Trust. The Trust intends to issue additional Shares 
on a continuous basis through the Trustee.
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    \6\ See Securities Exchange Act Release No. 53059 (January 5, 
2006), 71 FR 2072 (January 12, 2006) (SR-Amex-2005-128).
    \7\ The Sponsor maintains a public Web site on behalf of the 
Trust, http://www.currencyshares.com, which contains information 
about the Trust and the Shares.
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    As stated in the Trust's registration statement, the investment 
objective of the Trust is for the Shares to reflect the price of the 
euro.\8\ The Shares may be purchased from the Trust only in one or more 
blocks of 50,000 Shares, as described in the prospectus under 
``Creation and Redemption of Shares.'' A block of 50,000 shares is 
called a Basket. The Trust issues Shares in Baskets on a continuous 
basis to certain authorized participants (``Authorized Participants''). 
Each Basket, when created, is offered and sold to an Authorized 
Participant at a price in euro equal to the net asset value (``NAV'') 
for 50,000 Shares on the day that the order to create the Basket is 
accepted by the Trustee. On December 12, 2005, the Shares were sold to 
the public by Authorized Participants at varying prices in dollars by 
reference to, among other things, the market price of euro and the 
trading price of the Shares on the New York Stock Exchange LLC 
(``NYSE'') at the time of each sale. The Shares trade on the NYSE under 
the symbol ``FXE.'' The Shares may also trade in other markets.
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    \8\ See Registration No. 333-125581. The Exchange notes that the 
Trust is not a registered investment company under the Investment 
Company Act of 1940 (the ``1940 Act'') and is not required to 
register under the 1940 Act.
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    The Exchange believes that permitting options on foreign currency-
based Exchange-Traded Fund Shares to trade on the Exchange is 
consistent with the

[[Page 78477]]

Commission's approval order of a rule change filed by the NYSE to list 
and trade shares of the Trust.\9\ This proposed rule change to the 
Exchange's listing criteria for Exchange-Traded Fund Shares is intended 
to provide appropriate listing standards for options on shares of these 
and similar types of foreign currency-based Exchange-Traded Fund Shares 
that may be listed in the future.
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    \9\ See Securities Exchange Act Release No. 52843 (November 28, 
2005), 70 FR 72486 (December 5, 2005) (SR-NYSE-2005-65).
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    For options trading, Exchange-Traded Fund Shares will continue to 
need to satisfy the listing standards in Commentary .06 to Amex Rule 
915. Specifically, the Exchange-Traded Fund Shares must be traded on a 
national securities exchange or through the facilities of a registered 
national securities association and must be an ``NMS Stock'' as defined 
under Rule 600 of Regulation NMS.\10\ The Exchange-Traded Fund Shares 
must also either: (1) Meet the criteria and guidelines under Amex Rule 
915 (Criteria for Underlying Securities); or (2) be available for 
creation or redemption each business day in cash or in-kind from the 
investment company, issuing trust, or other entity at a price related 
to the net asset value, and the investment company, issuing trust, or 
other entity shall provide that Exchange-Traded Fund Shares may be 
created even though some or all of the securities required to be 
deposited have not been received by the unit investment trust or the 
management investment company, provided the authorized creation 
participant has undertaken to deliver the shares as soon as possible 
and such undertaking has been secured by the delivery and maintenance 
of collateral consisting of cash or cash equivalents satisfactory to 
the fund which underlies the option as described in the fund or unit 
trust prospectus.
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    \10\ In light of the implementation of certain aspects of 
Regulation NMS, the Exchange hereby seeks to amend Commentary .06 to 
Amex Rule 915 to reflect that Exchange-Traded Fund Shares must be 
NMS Stocks as defined under Rule 600 of Regulation NMS instead of 
``national market'' securities.
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    Under the applicable continued listing criteria in Commentary .07 
to Amex Rule 916, the Exchange-Traded Fund Shares may be subject to 
delisting as follows: (1) Following the initial twelve-month period 
beginning upon the commencement of trading of the Exchange-Traded Fund 
Shares, there are fewer than 50 record and/or beneficial holders of the 
Exchange-Traded Fund Shares for 30 or more consecutive trading days; 
(2) the value of the euro is no longer calculated or available; \11\ or 
(3) such other event occurs or condition exists that in the opinion of 
the Exchange makes further dealing on the Exchange inadvisable. 
Additionally, the Exchange-Traded Fund Shares shall not be deemed to 
meet the requirements for continued approval, and the Exchange shall 
not open for trading any additional series of option contracts of the 
class covering such Exchange-Traded Fund Shares, if trading in the 
shares is halted or suspended on their primary market, or if the 
Exchange-Traded Fund Shares are delisted in accordance with the terms 
of Amex Rule 916.
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    \11\ The Exchange states that euro pricing information based on 
the euro spot price is available to investors on a 24-hour basis 
from numerous financial information service providers, and there are 
a variety of other public Web sites proving information on foreign 
currency and euro, including Bloomberg, CBS MarketWatch, and Yahoo! 
Finance.
---------------------------------------------------------------------------

    The Exchange represents that the expansion of the types of 
investments that may be held by an Exchange-Traded Fund Share under 
Amex rules will not have any effect on the rules pertaining to position 
and exercise limits \12\ or margin.\13\
---------------------------------------------------------------------------

    \12\ See Amex Rules 904 and 905.
    \13\ See Amex Rule 462.
---------------------------------------------------------------------------

    The Exchange is proposing to amend Amex Rule 957 to ensure that 
Specialists and Registered Traders handling Exchange-Traded Fund Shares 
provide the Exchange with all necessary information relating to their 
trading in the applicable non-U.S. currency, non-U.S. currency options, 
futures or options on futures on such currency, or any other 
derivatives based on such currency. In addition, the revision to Amex 
Rule 957 will prohibit a specialist or registered trader from engaging 
in trading in non-U.S. currency, non-U.S. currency options, futures, 
options on futures or non-U.S. currency and other derivatives based on 
such currency from trading in an account which has not been reported to 
the Exchange.
    Finally, the Exchange is proposing to amend Amex Rule 3 to require 
members and member organizations to establish, maintain, and enforce 
written policies and procedures to prevent the misuse of material 
nonpublic information in connection with trading in securities issued 
by, among others, currency trust shares or similar entities, or in any 
related securities or related options or other derivative securities, 
or in any related non-U.S. currency, non-U.S. currency options, futures 
or options on futures on such currency, or any other derivatives based 
on such currency while in possession of material nonpublic information 
concerning that currency trust share or similar entity. The Exchange 
further proposes to require such procedures to prevent the trading of 
any of the foregoing securities while in possession of knowledge 
concerning imminent transactions of the same securities. Finally, the 
Exchange proposes to require procedures to prevent the disclosure of 
material nonpublic information involving the foregoing to another 
person.
    The Exchange represents that it has an adequate surveillance 
program in place for options on Exchange-Traded Fund Shares based on 
the value of a non-U.S. currency or currencies. In addition, the 
Exchange may obtain trading information via the Intermarket 
Surveillance Group (``ISG'') from other exchanges who are members or 
affiliates of the ISG. Specifically, the Amex can obtain such 
information from the Philadelphia Stock Exchange (``Phlx'') in 
connection with euro options trading on the Phlx and from the Chicago 
Mercantile Exchange (``CME'') and the London International Financial 
Futures Exchange (``LIFFE'') in connection with euro futures trading on 
those exchanges.\14\
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    \14\ The Amex and PHLX are members of the ISG. CME and LIFFE are 
affiliate members of the ISG.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \15\ of 
the Act, in general, and furthers the objectives of Section 
6(b)(5),\16\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, promote just and 
equitable principles of trade, remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, protect investors and the public interest.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    No written comments were solicited or received with respect to the 
proposed rule change by the Exchange.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing,

[[Page 78478]]

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 (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-Amex-2006-87 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-Amex-2006-87. 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 at http://www.sec.gov/
rules/sro.shtml. Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room. Copies of the 
filing also will be available for inspection and copying at the 
principal office of the Exchange. All 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-2006-87 and should be submitted on or before January 
19, 2007.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    Amex has asked the Commission to approve its proposal on an 
accelerated basis to accommodate its timetable for listing options on 
Exchange-Traded Fund Shares, as described above. After careful 
consideration, the Commission finds that the proposed rule change is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\17\ In particular, the Commission finds that the proposed 
rule change is consistent with the requirements of Section 6(b)(5) of 
the Act, which requires, among other things, that the rules of an 
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.\18\ Further, the Commission finds that the Exchange's 
proposal is substantially similar to one it recently approved for the 
International Securities Exchange LLC (``ISE'').\19\
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    \17\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \18\ 15 U.S.C. 78f(b)(5).
    \19\ See Securities Exchange Act Release No. 54087 (June 30, 
2006), 71 FR 38918 (July 10, 2006) (SR-ISE-2005-60). The Amex stated 
that it based its proposed rule change on the ISE filing.
---------------------------------------------------------------------------

    Currently, Amex's rules permit it to list options on Exchange-
Traded Fund Shares that represent an interest in a registered 
investment company organized as an open-end management investment 
company, a unit investment trust or a similar entity which holds 
securities constituting or otherwise based on or representing an 
investment in an index or portfolio of securities.\20\ The Exchange's 
proposal would allow it to list and trade options on Exchange-Traded 
Fund Shares whose investment assets consist of a specified non-U.S. 
currency or currencies deposited with a trust or similar entity. For 
example, the proposed rule change would allow the Exchange to list 
options on the Euro Currency Trust.
---------------------------------------------------------------------------

    \20\ See Amex Rule 915, Commentary .06.
---------------------------------------------------------------------------

    The underlying Exchange-Traded Fund Shares would continue to need 
to satisfy the listing standards in Amex Rule 915. To accommodate the 
listing and trading of options on Exchange-Traded Fund Shares investing 
primarily in non-U.S. currency, the Exchange proposes to amend Amex 
Rule 3 to require a member or member organization to establish, 
maintain, and enforce written policies and procedures designed to 
prevent the misuse of any material nonpublic information it might have 
or receive in a related security, option, or derivative security or in 
the applicable non-U.S. currency, non-U.S. currency options, futures or 
options on futures on such currency, or any other derivatives based on 
such currency. In addition, the Exchange proposes to amend Amex Rule 
957 to require that Specialists and Registered Traders handling 
Exchange-Traded Fund Shares provide the Exchange with all necessary 
information relating to their trading in the applicable non-U.S. 
currency, non-U.S. currency options, futures or options on futures on 
such currency, or any other derivatives based on such currency. Each 
Specialist and Registered Trader also would be obligated to conduct all 
trading in the Exchange-Traded Fund Shares in account(s) which have 
been reported to the Exchange. The Commission believes that these 
requirements are designed to minimize the potential for manipulating 
the underlying currency held by the Exchange-Traded Fund Shares.
    As proposed, the Exchange-Traded Fund Shares must be traded on a 
national securities exchange or through the facilities of a registered 
national securities association and must be an ``NMS stock'' as defined 
under Rule 600 of Regulation NMS.\21\ The Exchange-Traded Fund Shares 
must also either: (1) Meet the criteria and guidelines under Amex Rule 
915, Commentary .01; or (2) be available for creation or redemption 
each business day from and through the investment company, issuing 
trust, or other entity in cash or in-kind at a price related to net 
asset value, and the investment company, issuing trust, or other entity 
shall provide that shares may be created even though some or all of the 
investments required to be deposited have not been received by the unit 
investment trust or the management investment company, provided that 
the person obligated to deposit the investments has undertaken to 
deliver the investment assets as soon as possible and such undertaking 
has been secured by the delivery and maintenance of collateral 
consisting of cash or cash equivalents satisfactory to the fund which 
underlies the option, as described in the fund or unit trust 
prospectus. Furthermore, the Commission notes that the Exchange has 
represented that the expansion of the types of investments that may be 
held by Exchange-Traded Fund Shares under Amex rules will not have any 
effect on the rules pertaining to position and exercise limits or 
margin.
---------------------------------------------------------------------------

    \21\ 17 CFR 242.600(b)(47).
---------------------------------------------------------------------------

    Finally, under the proposed change to Amex Rule 916, Commentary 
.07, Exchange-Traded Fund Shares would not be deemed to meet the 
requirements for continued approval, and the Exchange would not open 
for trading any additional series of option contracts of the class 
covering such Exchange-Traded Fund Shares, if the Exchange-Traded Fund 
Shares are delisted in

[[Page 78479]]

accordance with Commentary .01(5) of Amex Rule 916 or trading in the 
shares are halted or suspended in their primary market. Additionally, 
as proposed, the Exchange will consider the suspension of opening 
transactions in any series of options covering Exchange-Traded Fund 
Shares if the value of the non-U.S. currency on which the Exchange-
Traded Fund Shares are based is no longer calculated or available. The 
Commission believes that the proposed change to Amex Rule 916 with 
respect to withdrawal of approval is consistent with the protection of 
investors and the public interest.
    The Commission notes that the Exchange has represented that it has 
an adequate surveillance program in place for options on Exchange-
Traded Fund Shares, including those funds that are based on the value 
of a non-U.S. currency. In addition, the Exchange has represented that 
it is able to obtain currency-related trading information via the ISG 
from other exchanges who are members or affiliates of the ISG, as 
discussed above, in connection with options and futures trading on 
those exchanges.
    The Commission finds good cause for approving the proposed rule 
change, as amended, prior to the thirtieth day after the date of 
publication of the notice of filing thereof in the Federal Register. 
The Exchange has requested accelerated approval because this proposed 
rule change is based on, and is substantially similar to, a proposal by 
the ISE that the Commission recently approved.\22\ Accordingly, this 
proposal raises no new or novel regulatory issues that have not been 
previously considered by the Commission. In addition, the Commission 
notes that it did not receive any comments on the ISE's proposal. The 
Commission believes that expanding Amex Rule 915 to encompass options 
on Exchange-Traded Fund Shares that represent interests in a trust that 
holds non-U.S. currency deposited with the trust will provide investors 
with an additional investment choice and that accelerated approval of 
the proposal will allow investors to begin trading these products 
promptly. Additionally, the proposal contains measures that are 
designed to minimize the potential for manipulation of the underlying 
currency held by the Exchange-Traded Fund Shares. Therefore, the 
Commission finds good cause, consistent with Section 19(b)(2) of the 
Act,\23\ to approve the amended proposal on an accelerated basis.
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    \22\ See Securities Exchange Act Release No. 54087 (June 30, 
2006), 71 FR 38918 (July 10, 2006) (SR-ISE-2005-60).
    \23\ 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,\24\ that the proposed rule change (SR-Amex-2006-87), as modified 
by Amendment Nos. 1 and 2, be, and it hereby is, approved on an 
accelerated basis.
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    \24\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E6-22400 Filed 12-28-06; 8:45 am]
BILLING CODE 8011-01-P