Self-Regulatory Organizations; American Stock Exchange, LLC; Order Approving a Proposed Rule Change To Establish a New Class of Off-Floor Market Makers in ETFs and Equities Called Designated Amex Remote Traders, 54303-54304 [E7-18727]
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Federal Register / Vol. 72, No. 184 / Monday, September 24, 2007 / Notices
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Dated: September 18, 2007.
Horace A. Thompson III,
Chairman.
[FR Doc. E7–18746 Filed 9–21–07; 8:45 am]
BILLING CODE 7600–01–P
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VerDate Aug<31>2005
14:43 Sep 21, 2007
Jkt 211001
Self-Regulatory Organizations;
American Stock Exchange, LLC; Order
Approving a Proposed Rule Change To
Establish a New Class of Off-Floor
Market Makers in ETFs and Equities
Called Designated Amex Remote
Traders
I. Introduction
On August 8, 2007, the American
Stock Exchange, LLC. (‘‘Amex’’ or
‘‘Exchange’’) 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 proposal to create a new
class of off-floor market makers, called
‘‘Designated Amex Remote Traders’’ or
‘‘DARTs,’’ in all ETF and equity-traded
securities that trade on the Exchange.
The proposed rule change was
published for comment in the Federal
Register on August 16, 2007.3 The
Commission received no comments
regarding the proposal. This order
approves the proposed rule change.
II. Description
The Exchange proposes to adopt
changes to its rules to create a new class
of off-floor market makers in all ETF
and equity-traded securities that trade
on the Exchange, including the
implementation of related changes to
the Exchange’s AEMI trading platform.
These market makers, to be called
‘‘Designated Amex Remote Traders’’ or
‘‘DARTs,’’ will be members or member
organizations physically located offfloor that will electronically enter
competitive quotations into AEMI on a
regular basis in all securities to which
they are assigned in the DART program.
DARTs will also have to meet certain
business requirements, which will
include minimum performance
standards. The proposed DART program
is similar to the Supplemental
Registered Options Traders (‘‘SROT’’)
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release No. 56236
(August 9, 2007), 72 FR 46113.
54303
program implemented by the Amex for
options,4 with its own unique caveats.
Under the DART proposal, an Amex
specialist firm may also be a DART,
although it may not be registered as
such in securities in which it is also the
specialist. In ETFs, DARTs will trade in
an identical way as Registered Traders
in the same securities on the Exchange
when auto-ex is on, with similar
obligations under Exchange rules such
as those relating to a course of dealings
that contributes to the maintenance of a
fair and orderly market. DARTs in
equity-traded securities will be subject
to the same obligations as DARTs in
ETFs and will not be subject to the
stabilization rules that are applicable to
equity specialists. A DART will not
participate in any post-trade allocation
in connection with an auction trade;
instead, a DART’s participation in an
auction pair-off on the Exchange will be
limited to the size of its quotation on the
AEMI Book at the time of the pair-off.
Amex will establish minimum
requirements for a DART to remain in
the program, which may be modified by
the Exchange from time to time.
Business requirements will include
minimum performance standards,
including that a DART’s quotations
must be on one side of the NBBO for a
required percentage of the time in all
assigned securities. Other performance
standards will include average
displayed size, average quoted spread,
and the ability of the DART to transact
in underlying markets in the case of a
derivative security. A DART that fails to
comply with one or more of the
performance standards, as determined
by the Chief Executive Officer of the
Exchange or his/her designee, may be
subject to loss of the benefits to which
it would otherwise be entitled under
Amex rules by virtue of its status as a
DART (e.g., rebates for providing
liquidity), including suspension or
termination of DART status. A DART
may be either a regular member of the
Exchange or an associate member of the
Exchange that meets the requirements
for electronic access to the Exchange’s
automated systems.
DARTs will receive benefits for
participating in and meeting the
requirements of the DART program.
While the Exchange anticipates
starting the program with a limited
group of DARTs, no specific upper limit
on the number of DARTs is anticipated.
In addition to the requirements cited
above, DARTs will be required to meet
eligibility criteria similar to those
2 17
PO 00000
Frm 00071
Fmt 4703
Sfmt 4703
4 See Amex Rule 993–ANTE (Supplemental
Registered Options Traders).
E:\FR\FM\24SEN1.SGM
24SEN1
54304
Federal Register / Vol. 72, No. 184 / Monday, September 24, 2007 / Notices
rfrederick on PROD1PC67 with NOTICES
specified in the SROT program, which
include:
(i) Adequacy of resources including
capital, technology, and personnel;
(ii) History of stability, superior
electronic capacity, and superior
operational capacity;
(iii) Level of market-making and/or
specialist experience in a broad array of
securities;
(iv) Ability to interact with order flow
in all types of markets;
(v) Existence of order flow
commitments;
(vi) Willingness and ability to make
competitive markets on the Exchange
and otherwise promote the Exchange in
a manner that is likely to enhance the
ability of the Exchange to compete
successfully for order flow in the equity
and ETF securities it trades; and
(vii) The number of member
organizations requesting approval to act
as a DART.
The regulatory requirements
applicable to DARTs will be surveilled
for by the FINRA Market Regulation
Amex Division (‘‘FINRA’’) consistent
with current surveillance procedures for
Registered Traders on the Exchange.
FINRA staff will work with Amex
technical staff on planning the
necessary changes to AEMI to capture
required surveillance data and in
surveilling the increased number of
market makers that the program is
expected to attract. Adjustments to
current technology and surveillance
procedures will likely also be
necessitated by the fact that the DARTs
will not be physically located on the
floor of the Exchange.
III. Discussion
After careful review, 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.5 In particular, the
Commission finds that the proposal is
consistent with Section 6(b)(5) of the
Act,6 which requires, among other
things, that a national securities
exchange’s rules be designed to promote
just and equitable principles of trade, to
remove impediments to and to perfect
the mechanism of a free and open
market and a national market system,
and, in general, to protect investors and
the public interest.
Under the proposal, DARTs would be
permitted to quote electronically in
equities and ETFs from off the
5 In
approving this proposal, 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).
VerDate Aug<31>2005
14:43 Sep 21, 2007
Jkt 211001
Exchange’s physical trading floor.
Introducing a new class of market
participant able to enter quotes from off
the physical trading floor should attract
new market makers to the Exchange,
which should increase the liquidity
available in those classes to which
DARTs are assigned.
The Commission notes that DARTs
will be required to meet certain
eligibility requirements. The existence
of order flow commitments between a
DART applicant and order flow
providers is one such factor. The
Exchange represents, and the
Commission emphasizes, that a future
change to, or termination of, any such
commitments would not be used by the
Exchange at any point in the future to
terminate or take remedial action
against a DART and that the Committee
would not take remedial action solely
because orders subject to any such
commitments were not subsequently
routed to the Exchange. Similarly, the
Exchange has included the ‘‘willingness
to promote the Exchange’’ as a factor
that the Committee may consider when
making its application decisions. The
Exchange represents, and the
Commission emphasizes, that the
Committee would not apply this factor
to in any way restrict, either directly or
indirectly, a DART’s activities as a
market maker or specialist on other
exchanges, or to restrict how a DART
handles orders it holds in a fiduciary
capacity to which it owes a duty of best
execution.
The Commission also notes that
should the Committee decide not to
approve a DART applicant, or should an
DART’s appointment be suspended or
terminated in one or more classes, a
DART applicant or DART, respectively,
would be entitled to a hearing under
Article IV, Section 1(g) of the Amex
Constitution and Amex Rule 40.
Proposed Amex Rule 110A(b)—AEMI
sets forth the obligations that a DART
would be required to fulfill.
Specifically, a DART would be required
to generate continuous, two-sided
quotations in all assigned securities that
are on at least one side of the NBBO for
a specified percentage of the time. A
DART’s affirmative obligations appear
to be sufficient to justify the benefits it
would receive as a market maker.
The proposal also requires
information barriers to be in place to
prevent the misuse of material, nonpublic information with any affiliates
that may conduct a brokerage business
in securities assigned to a DART, or that
may act as a specialist or market maker
in any security underlying a derivative
security assigned to a DART. DARTs
would also be required to comply with
PO 00000
Frm 00072
Fmt 4703
Sfmt 4703
Amex Rule 193 regarding the misuse of
material non-public information.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,7 that the
proposed rule change (SR–Amex–2007–
85) is approved.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.8
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–18727 Filed 9–21–07; 8:45am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56448; File No. SR–CBOE–
2007–111]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Retire Two Existing
Pilot Programs that Permit the
Exchange To list Options on the
Vanguard Emerging Markets Exchange
Traded Fund and the iShares MSCI
Emerging Markets Index Fund
September 17, 2007.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’)1 and Rule 19b-4 thereunder,2
notice is hereby given that on
September 11, 2007, the Chicago Board
Options Exchange, Incorporated
(‘‘CBOE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
substantially prepared by the Exchange.
The Exchange has designated the
proposed rule change as constituting a
stated policy, practice or interpretation
with respect to the meaning,
administration or enforcement of an
existing rule under Section
19(b)(3)(A)(i) of the Act,3 and Rule 19b4(f)(1) thereunder,4 which renders the
proposal effective upon filing of this
proposal with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
7 15
U.S.C. 78s(b)(2).
8 17
CFR 200.30–3(a)(12).
15 U.S.C. 78s(b)(1).
22 17 CFR 240.19b-4.
33 15 U.S.C. 78s(b)(3)(A)(i).
44 17 CFR 240.19b-4(f)(1).
11
E:\FR\FM\24SEN1.SGM
24SEN1
]]>Agencies
[Federal Register Volume 72, Number 184 (Monday, September 24, 2007)]
[Notices]
[Pages 54303-54304]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-18727]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56446; File No. SR-Amex-2007-85]
Self-Regulatory Organizations; American Stock Exchange, LLC;
Order Approving a Proposed Rule Change To Establish a New Class of Off-
Floor Market Makers in ETFs and Equities Called Designated Amex Remote
Traders
September 17, 2007.
I. Introduction
On August 8, 2007, the American Stock Exchange, LLC. (``Amex'' or
``Exchange'') 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
proposal to create a new class of off-floor market makers, called
``Designated Amex Remote Traders'' or ``DARTs,'' in all ETF and equity-
traded securities that trade on the Exchange. The proposed rule change
was published for comment in the Federal Register on August 16,
2007.\3\ The Commission received no comments regarding the proposal.
This order approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 56236 (August 9, 2007),
72 FR 46113.
---------------------------------------------------------------------------
II. Description
The Exchange proposes to adopt changes to its rules to create a new
class of off-floor market makers in all ETF and equity-traded
securities that trade on the Exchange, including the implementation of
related changes to the Exchange's AEMI trading platform. These market
makers, to be called ``Designated Amex Remote Traders'' or ``DARTs,''
will be members or member organizations physically located off-floor
that will electronically enter competitive quotations into AEMI on a
regular basis in all securities to which they are assigned in the DART
program. DARTs will also have to meet certain business requirements,
which will include minimum performance standards. The proposed DART
program is similar to the Supplemental Registered Options Traders
(``SROT'') program implemented by the Amex for options,\4\ with its own
unique caveats. Under the DART proposal, an Amex specialist firm may
also be a DART, although it may not be registered as such in securities
in which it is also the specialist. In ETFs, DARTs will trade in an
identical way as Registered Traders in the same securities on the
Exchange when auto-ex is on, with similar obligations under Exchange
rules such as those relating to a course of dealings that contributes
to the maintenance of a fair and orderly market. DARTs in equity-traded
securities will be subject to the same obligations as DARTs in ETFs and
will not be subject to the stabilization rules that are applicable to
equity specialists. A DART will not participate in any post-trade
allocation in connection with an auction trade; instead, a DART's
participation in an auction pair-off on the Exchange will be limited to
the size of its quotation on the AEMI Book at the time of the pair-off.
---------------------------------------------------------------------------
\4\ See Amex Rule 993-ANTE (Supplemental Registered Options
Traders).
---------------------------------------------------------------------------
Amex will establish minimum requirements for a DART to remain in
the program, which may be modified by the Exchange from time to time.
Business requirements will include minimum performance standards,
including that a DART's quotations must be on one side of the NBBO for
a required percentage of the time in all assigned securities. Other
performance standards will include average displayed size, average
quoted spread, and the ability of the DART to transact in underlying
markets in the case of a derivative security. A DART that fails to
comply with one or more of the performance standards, as determined by
the Chief Executive Officer of the Exchange or his/her designee, may be
subject to loss of the benefits to which it would otherwise be entitled
under Amex rules by virtue of its status as a DART (e.g., rebates for
providing liquidity), including suspension or termination of DART
status. A DART may be either a regular member of the Exchange or an
associate member of the Exchange that meets the requirements for
electronic access to the Exchange's automated systems.
DARTs will receive benefits for participating in and meeting the
requirements of the DART program.
While the Exchange anticipates starting the program with a limited
group of DARTs, no specific upper limit on the number of DARTs is
anticipated. In addition to the requirements cited above, DARTs will be
required to meet eligibility criteria similar to those
[[Page 54304]]
specified in the SROT program, which include:
(i) Adequacy of resources including capital, technology, and
personnel;
(ii) History of stability, superior electronic capacity, and
superior operational capacity;
(iii) Level of market-making and/or specialist experience in a
broad array of securities;
(iv) Ability to interact with order flow in all types of markets;
(v) Existence of order flow commitments;
(vi) Willingness and ability to make competitive markets on the
Exchange and otherwise promote the Exchange in a manner that is likely
to enhance the ability of the Exchange to compete successfully for
order flow in the equity and ETF securities it trades; and
(vii) The number of member organizations requesting approval to act
as a DART.
The regulatory requirements applicable to DARTs will be surveilled
for by the FINRA Market Regulation Amex Division (``FINRA'') consistent
with current surveillance procedures for Registered Traders on the
Exchange. FINRA staff will work with Amex technical staff on planning
the necessary changes to AEMI to capture required surveillance data and
in surveilling the increased number of market makers that the program
is expected to attract. Adjustments to current technology and
surveillance procedures will likely also be necessitated by the fact
that the DARTs will not be physically located on the floor of the
Exchange.
III. Discussion
After careful review, 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.\5\
In particular, the Commission finds that the proposal is consistent
with Section 6(b)(5) of the Act,\6\ which requires, among other things,
that a national securities exchange's rules be designed to promote just
and equitable principles of trade, to remove impediments to and to
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------
\5\ In approving this proposal, 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).
---------------------------------------------------------------------------
Under the proposal, DARTs would be permitted to quote
electronically in equities and ETFs from off the Exchange's physical
trading floor. Introducing a new class of market participant able to
enter quotes from off the physical trading floor should attract new
market makers to the Exchange, which should increase the liquidity
available in those classes to which DARTs are assigned.
The Commission notes that DARTs will be required to meet certain
eligibility requirements. The existence of order flow commitments
between a DART applicant and order flow providers is one such factor.
The Exchange represents, and the Commission emphasizes, that a future
change to, or termination of, any such commitments would not be used by
the Exchange at any point in the future to terminate or take remedial
action against a DART and that the Committee would not take remedial
action solely because orders subject to any such commitments were not
subsequently routed to the Exchange. Similarly, the Exchange has
included the ``willingness to promote the Exchange'' as a factor that
the Committee may consider when making its application decisions. The
Exchange represents, and the Commission emphasizes, that the Committee
would not apply this factor to in any way restrict, either directly or
indirectly, a DART's activities as a market maker or specialist on
other exchanges, or to restrict how a DART handles orders it holds in a
fiduciary capacity to which it owes a duty of best execution.
The Commission also notes that should the Committee decide not to
approve a DART applicant, or should an DART's appointment be suspended
or terminated in one or more classes, a DART applicant or DART,
respectively, would be entitled to a hearing under Article IV, Section
1(g) of the Amex Constitution and Amex Rule 40.
Proposed Amex Rule 110A(b)--AEMI sets forth the obligations that a
DART would be required to fulfill. Specifically, a DART would be
required to generate continuous, two-sided quotations in all assigned
securities that are on at least one side of the NBBO for a specified
percentage of the time. A DART's affirmative obligations appear to be
sufficient to justify the benefits it would receive as a market maker.
The proposal also requires information barriers to be in place to
prevent the misuse of material, non-public information with any
affiliates that may conduct a brokerage business in securities assigned
to a DART, or that may act as a specialist or market maker in any
security underlying a derivative security assigned to a DART. DARTs
would also be required to comply with Amex Rule 193 regarding the
misuse of material non-public information.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\7\ that the proposed rule change (SR-Amex-2007-85) is approved.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
---------------------------------------------------------------------------
pursuant to delegated authority.\8\
\8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-18727 Filed 9-21-07; 8:45am]
BILLING CODE 8010-01-P
