Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Exchange Liability for the Actions or Omission of Amex Book Clerks, 65773-65776 [E7-22840]

Download as PDF Federal Register / Vol. 72, No. 225 / Friday, November 23, 2007 / Notices This order approves Joint Amendment No. 24. mstockstill on PROD1PC66 with NOTICES II. Description of the Proposed Amendment In Joint Amendment No. 24, the Participants proposed to modify section 7(a)(ii)(C) of the Linkage Plan so as to eliminate the Class Gate restriction on P Order access through the Linkage. Currently, section 7(a)(ii)(C) of the Linkage Plan provides that, once a Participant automatically executes a P Order in a series of an Eligible Option Class, it may reject any other P Orders sent in the same Eligible Option Class by the same Participant for 15 seconds after the initial execution unless there is a price change in the receiving Participant’s disseminated offer (bid) in the series in which there was the initial execution and such price continues to be the NBBO. After the 15 second period, and until the sooner of one minute after the initial execution or a change in its disseminated offer (bid), section 7(a)(ii)(C) provides that the Participant that provided the initial execution is not obligated to execute any P Orders received from the same Participant in the same Eligible Option Class in its automatic execution system. In Joint Amendment No. 24, the Participants proposed to eliminate the Class Gate restriction because all Participants have removed restrictions on non-customer access to the automatic execution systems, rendering the Class Gate restriction unnecessary. III. Discussion and Commission Findings After careful consideration of Joint Amendment No. 24, the Commission finds that approving Joint Amendment No. 24 is consistent with the requirements of the Act and the rules and regulations thereunder. Specifically, the Commission finds that Joint Amendment No. 24 is consistent with section 11A of the Act 5 and Rule 608 thereunder 6 in that it is appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets. The Commission recognizes that, at the time of the creation of the Linkage, certain Participants had restrictions on noncustomer access to their automatic execution systems. The Class Gate provision served to protect those Participants that did not limit noncustomer access against being obligated to automatically execute an unlimited number of P Orders. Since the implementation of the Linkage, all 5 15 6 17 U.S.C. 78k–1. CFR 242.608. VerDate Aug<31>2005 16:16 Nov 21, 2007 Jkt 214001 Participants have removed restrictions on non-customer access to their automatic execution systems. All of the exchanges, therefore, allow access to their trading platforms orders on behalf of non-member market makers. The Commission believes that the greater access to automatic execution systems has rendered the Class Gate provision unnecessary and that eliminating the Class Gate provision should facilitate the more efficient operation of the options markets. IV. Conclusion It is therefore ordered, pursuant to section 11A of the Act 7 and Rule 608 thereunder,8 that Joint Amendment No. 24 is approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.9 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–22842 Filed 11–21–07; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–56787; File No. SR–Amex– 2007–108] Self-Regulatory Organizations; American Stock Exchange LLC; Order Approving a Proposed Rule Change To Increase the Annual Listing Fees for Certain Stock Issues of Listed Companies November 15, 2007. On October 3, 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 proposed rule change to amend Section 141 of the Amex Company Guide to increase the annual listing fees for certain stock issues of listed companies. The proposed rule change was published for comment in the Federal Register on October 16, 2007.3 The Commission received no comment letters on the proposal. This order approves the proposed rule change. Amex proposes to amend Section 141 of the Amex Company Guide to raise the 7 15 U.S.C. 78k–1. CFR 242.608. 9 17 CFR 200.30–3(a)(29). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 56636 (October 10, 2007), 72 FR 58691. 8 17 PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 65773 annual listing fee, for any stock issue of 50 million shares or less, to $27,500 per year. Currently, for such issues, Amex charges between $16,500 and $24,500 per year, depending on the number of shares outstanding. After careful review, the Commission finds that Amex’s proposal is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.4 In particular, the Commission finds that the proposal is consistent with Section 6(b)(4) of the Act,5 which requires, among other things, that the rules of the Exchange provide for the equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using the Exchange’s facilities. The Commission notes that no comments were received on the proposed fee increase, which is comparable to the annual listing fee imposed by another exchange that has been approved by the Commission.6 It is therefore ordered, pursuant to Section 19(b)(2) of the Act,7 that the proposed rule change (SR–Amex–2007– 108), be, and hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–22777 Filed 11–21–07; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–56805; File No. SR–Amex– 2007–122] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Exchange Liability for the Actions or Omission of Amex Book Clerks November 16, 2007. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’)1 and Rule 19b–4 thereunder,2 4 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). 5 15 U.S.C. 78f(b)(4). 6 See Securities Exchange Act Release No. 55202 (January 30, 2007), 72 FR 6017 (February 8, 2007) (SR–NASDAQ–2006–040) (approving $27,500 annual fee on Nasdaq Capital Market issuers for any amount of shares outstanding). 7 15 U.S.C. 78s(b)(2). 8 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. E:\FR\FM\23NON1.SGM 23NON1 65774 Federal Register / Vol. 72, No. 225 / Friday, November 23, 2007 / Notices notice is hereby given that on November 16, 2007, the American Stock Exchange LLC (‘‘Exchange’’ or ‘‘Amex’’) 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 has designated this proposal as non-controversial under section 19(b)(3)(A)(iii) of the Act3 and Rule 19b–4(f)(6) thereunder,4 which renders the proposed rule change effective upon filing with the Commission. 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 adopt new Rule 996—ANTE providing for the limited liability of the Exchange in connection with the actions of Amex Book Clerks (‘‘ABCs’’). The text of the proposed rule change is available at Amex, the Commission’s Public Reference Room, and http://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 these statements may be examined at the places specified in Item IV 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 Statutory Basis for, the Proposed Rule Change mstockstill on PROD1PC66 with NOTICES 1. Purpose The purpose of the proposed rule change is to permit members, member organizations, and associated persons of member organizations to bring a claim or claims against the Exchange, in limited circumstances, for the actions of an ABC. The Commission, in April 2007, published for public comment in the Federal Register the Exchange’s proposal to eliminate the agency obligations of specialists and establish 3 15 4 17 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). VerDate Aug<31>2005 16:16 Nov 21, 2007 Jkt 214001 ABCs.5 In connection with the approval of the ABC proposal, the Exchange submits this filing relating to the liability of the Exchange for the actions of ABCs. The ABC will be an Exchange employee or independent contractor designated by the Exchange to be responsible for: (i) Maintaining and operating the customer limit order book and display book for assigned options classes; and (ii) effecting proper executions of orders placed in the customer order limit book. The ABC will be prohibited from having an affiliation with any member that is approved to act as a specialist, registered options trader (‘‘ROT’’), remote registered options trader (‘‘RROT’’) and supplemental registered options trader (‘‘SROT’’) on the Exchange. In addition, ABCs are also responsible for handling Linkage Orders6 in all appointed options classes. As a result, the ABC will have the means to: (1) Utilize an options specialist’s account to route P/A Orders and Satisfaction Orders to away markets based on prior instructions that must be provided by the options specialist to the ABC, and (2) handle all Linkage Orders or portions of Linkage Orders received by the Exchange that are not automatically executed. The ABC also would have the means to utilize the options specialist’s account to fill Satisfaction Orders that result from a trade-through that the Exchange effects. Article IV, section 1(e) of the Amex Constitution provides that the Exchange, its affiliates, officers, Governors, committee members, employees or agents shall not be liable to a member, member organization, or a person associated with a member or a member organization for any loss, expense, damages or claims that arise out of the use or enjoyment of the facilities or services afforded by the Exchange, any interruption in or failure or unavailability of any such facilities or 5 See Securities Exchange Act Release No. 55583 (April 5, 2007), 72 FR 18695 (April 13, 2007) (notice of filing of SR–Amex–2006–107). 6 ‘‘Linkage Order’’ means an immediate or cancel order routed through the Linkage as permitted under the Linkage Plan. There are three types of Linkage Orders: (i) ‘‘Principal Acting as Agent (‘‘P/ A’’) Order,’’ which is an order for the principal account of a specialist (or equivalent entity on another Participant Exchange that is authorized to represent Public Customer orders), reflecting the terms of a related unexecuted Public Customer order for which the specialist is acting as agent; (ii) ‘‘Principal Order,’’ which is an order for the principal account of an Eligible Market Maker (or equivalent entity on another Participant Exchange) and is not a P/A Order; and (iii) ‘‘Satisfaction Order,’’ which is an order sent through the Linkage to notify a Participant Exchange of a Trade-Through and to seek satisfaction of the liability arising from that Trade-Through. PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 services, or any action taken or omitted to be taken in respect to the business of the Exchange except to the extent such loss, expense, damages or claims are attributable to the willful misconduct, gross negligence, bad faith or fraudulent or criminal acts of the Exchange or its officers, employees or agent acting within the scope of their authority. However, Article IV, section 1(e) does permit the Board of Governors of the Exchange to provide, by rule, Exchange liability with respect to Exchange facilities which implement the electronic transmission of orders for the purchase or sale of securities traded on the Exchange to the floor of the Exchange or between the floor of the Exchange and other markets. Accordingly, proposed Rule 996—ANTE would permit Exchange liability, in limited circumstances, relating to the actions of ABCs for: (i) Maintaining and operating the customer limit order book and display book; and (ii) effecting proper executions of orders placed in the customer order limit book. Limitation of Liability. The liability of the Exchange for claims arising out of errors or omissions made by ABCs will be limited as follows: • As to any one or more claims made by a single member on a single trading day, the Exchange shall not be liable in excess of the larger of $75,000 or the amount of any recovery obtained by the Exchange under any applicable insurance maintained by the Exchange. • As to the aggregate of all claims made by all members on a single trading day, the Exchange shall not be liable in excess of the larger of $100,000 or the amount of the recovery obtained by the Exchange under any applicable insurance maintained by the Exchange. • As to the aggregate of all claims made by all members during a single calendar month, the Exchange shall not be liable in excess of the larger of $250,000 or the amount of the recovery obtained by the Exchange under any applicable insurance maintained by the Exchange. If all of the claims arising out of errors or omissions by an ABC cannot be fully satisfied because they exceed the applicable maximum amount of liability provided for above, then the maximum amount will be allocated among all such claims arising on a single trading day or during a single calendar month, as applicable, based upon the proportion that each such claim bears to the sum of all such claims. Exchange liability will also be limited if a member, member organization or the Exchange fails to close out an uncompared trade as set forth in Rule E:\FR\FM\23NON1.SGM 23NON1 Federal Register / Vol. 72, No. 225 / Friday, November 23, 2007 / Notices mstockstill on PROD1PC66 with NOTICES 960.7 In such a case, the opposing party’s liability with respect to any claims arising from such trade will be limited to the lesser of: (1) The loss which would have been experienced by the claimant if the uncompared trade had been closed out at the opening off trading on the next business day as provided in Rule 960; or (2) the actual loss realized by the claimant. Furthermore, the Exchange’s potential liability is also limited if any damage is caused by an error or omission of an ABC which is the result of any error or omission of a member organization. Under such circumstances, the member organization will be required to indemnify the Exchange and hold it harmless from any claim of liability resulting from or relating to such damage. Procedure. Absent reasonable justification or excuse, any claim by a member, member organization, or persons associated with a member or member organization for losses arising from errors or omissions of an ABC, and any claim by the Exchange for indemnification under paragraph (g) of Proposed Rule 996—ANTE, must be presented in writing to the opposing party within ten (10) business days following the transaction giving rise to the claim; provided, that if an error or omission has resulted in an unmatched trade, then any claim based thereon shall be presented after the unmatched trade has been closed out but within ten (10) business days following such resolution of the unmatched trade. For purposes of proposed Rule 996— ANTE, the term ‘‘transaction’’ means any single order or instruction which is placed with an ABC, or any series of orders or instructions, which is placed with an ABC at substantially the same time by the same member and which relates to any one or more series of options of the same class. All errors and omissions made by an ABC with respect to or arising out of any transaction will give rise to a ‘‘single claim’’ against the Exchange. The Exchange will retain any defenses to such claim or claims that it may have. In addition, no claim will be permitted to arise as to errors or omissions which are found to have resulted from any failure by a member or by any person acting on behalf of a member, to enter or cancel an order with such ABC on a timely basis or clearly and accurately to communicate to such ABC: (i) The description or symbol of the security involved; or (ii) The exercise price or option contract price; or (iii) The type of option; or (iv) The number of trading units; or (v) The expiration month; or (vi) Any other information or data which is material to the transaction. Arbitration. Pursuant to proposed Rule 996—ANTE, all disputed claims will be referred to binding arbitration with the decision of a majority of the arbitrators selected to hear and determine the controversy deemed final. There will be no appeal right to the Board of Governors from any decision of an arbitration panel. The arbitration panel will be composed of an odd number of panelists. Each of the parties to the dispute will select one Exchange member to serve as panelist on the arbitration panel. The panelists so selected shall then select one or more additional panelist(s); provided that the additional panelist(s) so selected are members of the Exchange and that no member of the arbitration panel may have any direct or indirect financial interest in the claim. In the event that the initial panelists selected by the parties to the dispute cannot agree on the selection of the additional panelist(s), such additional panelist(s) shall be appointed by a Floor Official chosen by a random draw who has no direct or indirect financial interest in the claim. The NASD Code of Arbitration Procedure for Industry Disputes (Article VIII of the Amex Constitution) shall apply to any arbitration proceeding. 7 Commentary .01(b) to Rule 960 provides that all rejected options transaction notices (‘‘ROTNs’’) must be ‘‘OK’d’’ or ‘‘DK’d’’ not later than one-half hour prior to the opening of trading on the first business day following the trade date unless an agent (including a specialist) was involved in the execution of a transaction, where the time limit shall be extended to fifteen minutes prior to such opening (these time limits may be extended by a Floor Official). The Exchange believes that the proposed rule change will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. VerDate Aug<31>2005 16:16 Nov 21, 2007 Jkt 214001 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6 of the Act 8 in general and furthers the objectives of section 6(b)(5) of the Act 9 in particular in that it would remove impediments to and perfect the mechanism of a free and open market in a manner consistent with the protection of investors and the public interest. B. Self-Regulatory Organization’s Statement on Burden on Competition 8 15 9 15 PO 00000 U.S.C. 78f. U.S.C. 78f(b)(5). Frm 00078 Fmt 4703 65775 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to section 19(b)(3)(A) of the Act 10 and subparagraph (f)(6) of Rule 19b–4 thereunder. 11 Because the foregoing proposed rule change: (i) Does not significantly affect the protection of investors or the public interest; (ii) does not impose any significant burden on competition; and (iii) does not become operative for 30 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, the proposed rule change has become effective pursuant to section 19(b)(3)(A) of the Act and Rule 19b–4(f)(6)(iii) thereunder. 12 A proposed rule change filed under Rule 19b–4(f)(6) normally does not become operative for 30 days after the date of filing. However, Rule 19b– 4(f)(6)(iii) permits the Commission to waive the operative delay if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the operative delay to permit the proposed rule change to become effective prior to the 30th day after filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. The Commission notes that the proposal is substantially identical to the Chicago Board Options Exchange’s (‘‘CBOE’’) rules regarding limitation of exchange liability for acts and omission of CBOE Par Officials, 13 previously published for comment and approved by the Commission, 14 and the Exchange’s 10 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). 12 The Exchange has satisfied the requirement under Rule 19b-4(f)(6)(iii) that it give written notice to the Commission of its intent to file the proposed rule change at least five business days prior to filing. 13 See CBOE Rules 6.7, ‘‘Exchange Liability,’’ and 7.11, ‘‘Liability of Exchange for Actions of Order Book Officials, and PAR Officials.’’ 14 See Securities Exchange Act Release Nos. 52017 (July 12, 2005), 70 FR 41453 (July 19, 2005) (notice of filing of SR–CBOE–2005–46) and 52798 11 17 Continued Sfmt 4703 E:\FR\FM\23NON1.SGM 23NON1 65776 Federal Register / Vol. 72, No. 225 / Friday, November 23, 2007 / Notices proposal raises no new issues of regulatory concern. Waiving the operative delay will allow the proposal to become effective simultaneously with Amex’s proposal to establish ABCs, which we are approving separately today. 15 Therefore, the Commission has determined to waive the 30-day delay and allow the proposed rule change to become operative immediately. 16 At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in 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 rulecomments@sec.gov. Please include File No. SR–Amex–2006–67 on the subject line. Paper Comments mstockstill on PROD1PC66 with NOTICES • 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–2007–122. 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 Commissions 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 (November 18, 2005), 70 FR 71344 (November 28, 2005) (order approving SR–CBOE–2005–46). 15 See Securities Exchange Act Release No. 56804 (November 16, 2007) (order approving SR–Amex– 2006–107). 16 For purposes only of waiving the operative delay of this proposal, the Commission notes that it has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). VerDate Aug<31>2005 16:16 Nov 21, 2007 Jkt 214001 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, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–Amex–2007–122 and should be submitted on or before December 14, 2007. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–22840 Filed 11–21–07; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–56792; File No. SR–CBOE– 2006–99] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Amendment Nos. 2 and 3 to Proposed Rule Change Relating to FLEX Options Trading and Order Granting Accelerated Approval to Proposed Rule Change as Amended November 15, 2007. I. Introduction On November 27, 2006, the Chicago Board Options Exchange, Incorporated (‘‘Exchange’’ or ‘‘CBOE’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change providing for the trading of Flexible Exchange (‘‘FLEX’’) Options on a new electronic platform, and to make certain corresponding revisions to its existing open-outcry FLEX rules. On August 17, 2007, CBOE filed Amendment No. 1 to the proposed rule change. On August 30, 2007, the proposed rule change, as 17 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 amended, was published for comment in the Federal Register.3 No comments were received on the proposal. On November 7, 2007 and November 15, 2007, CBOE filed Amendment Nos. 2 and 3, respectively, to the proposed rule change.4 This notice and order solicits comments from interested persons on Amendment Nos. 2 and 3 and grants accelerated approval to the proposed rule change, as amended. II. Description of Proposal FLEX Options provide investors with the ability to customize basic option features including size, expiration date, exercise style, and certain exercise prices. Currently, Exchange members may trade FLEX Options in open outcry. Markets are created when a member submits a request for quotes (‘‘RFQ’’) to the crowd. This system is referred to herein as the ‘‘FLEX RFQ System.’’ The Exchange has proposed an alternate framework for trading FLEX Options using a ‘‘hybrid’’ platform, which will incorporate both open outcry and electronic trading functionality (referred to herein as the ‘‘FLEX Hybrid Trading System’’ or the ‘‘System’’). Some key features of the new FLEX Hybrid Trading System are the following: • Method of Operation: Transactions can take place through either an openoutcry RFQ process similar to the existing FLEX RFQ System or a new, Internet- and API-based electronic trading platform. Currently, the FLEX RFQ System does not provide for a book, and quotes and orders expire at the conclusion of the RFQ process. By contrast, the new System may allow FLEX Orders to be entered and trade via an electronic book (the ‘‘Book’’). The Exchange would determine on a classby-class basis whether to make a Book available.5 • Access: CBOE members seeking to use the new System must apply to and be approved by the Exchange. Approved members are collectively referred to as ‘‘FLEX Traders.’’ In addition, nonmembers that meet certain conditions may be offered ‘‘sponsored access’’ to the new System. • Market-Maker Participation: As with the existing FLEX rules, there are two types of FLEX Market-Makers: FLEX Appointed Market-Makers and FLEX Qualified Market-Makers. The responsibilities and obligations of FLEX Market-Makers on the new System, and changes to the corresponding rules of 3 Securities Exchange Act Release No. 56311 (August 23, 2007), 72 FR 50133. 4 See infra Section II(D). 5 See Rule 24B.5(b)(1). E:\FR\FM\23NON1.SGM 23NON1

Agencies

[Federal Register Volume 72, Number 225 (Friday, November 23, 2007)]
[Notices]
[Pages 65773-65776]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-22840]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56805; File No. SR-Amex-2007-122]


Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Exchange Liability for the Actions or Omission of Amex Book 
Clerks

November 16, 2007.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'')\1\ and Rule 19b-4 thereunder,\2\

[[Page 65774]]

notice is hereby given that on November 16, 2007, the American Stock 
Exchange LLC (``Exchange'' or ``Amex'') 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 has designated this proposal as 
non-controversial under section 19(b)(3)(A)(iii) of the Act\3\ and Rule 
19b-4(f)(6) thereunder,\4\ which renders the proposed rule change 
effective upon filing with the Commission. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt new Rule 996--ANTE providing for the 
limited liability of the Exchange in connection with the actions of 
Amex Book Clerks (``ABCs''). The text of the proposed rule change is 
available at Amex, the Commission's Public Reference Room, and http://
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 these statements may be examined at the places specified in 
Item IV 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to permit members, 
member organizations, and associated persons of member organizations to 
bring a claim or claims against the Exchange, in limited circumstances, 
for the actions of an ABC. The Commission, in April 2007, published for 
public comment in the Federal Register the Exchange's proposal to 
eliminate the agency obligations of specialists and establish ABCs.\5\ 
In connection with the approval of the ABC proposal, the Exchange 
submits this filing relating to the liability of the Exchange for the 
actions of ABCs.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 55583 (April 5, 
2007), 72 FR 18695 (April 13, 2007) (notice of filing of SR-Amex-
2006-107).
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    The ABC will be an Exchange employee or independent contractor 
designated by the Exchange to be responsible for: (i) Maintaining and 
operating the customer limit order book and display book for assigned 
options classes; and (ii) effecting proper executions of orders placed 
in the customer order limit book. The ABC will be prohibited from 
having an affiliation with any member that is approved to act as a 
specialist, registered options trader (``ROT''), remote registered 
options trader (``RROT'') and supplemental registered options trader 
(``SROT'') on the Exchange. In addition, ABCs are also responsible for 
handling Linkage Orders\6\ in all appointed options classes. As a 
result, the ABC will have the means to: (1) Utilize an options 
specialist's account to route P/A Orders and Satisfaction Orders to 
away markets based on prior instructions that must be provided by the 
options specialist to the ABC, and (2) handle all Linkage Orders or 
portions of Linkage Orders received by the Exchange that are not 
automatically executed. The ABC also would have the means to utilize 
the options specialist's account to fill Satisfaction Orders that 
result from a trade-through that the Exchange effects.
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    \6\ ``Linkage Order'' means an immediate or cancel order routed 
through the Linkage as permitted under the Linkage Plan. There are 
three types of Linkage Orders: (i) ``Principal Acting as Agent (``P/
A'') Order,'' which is an order for the principal account of a 
specialist (or equivalent entity on another Participant Exchange 
that is authorized to represent Public Customer orders), reflecting 
the terms of a related unexecuted Public Customer order for which 
the specialist is acting as agent; (ii) ``Principal Order,'' which 
is an order for the principal account of an Eligible Market Maker 
(or equivalent entity on another Participant Exchange) and is not a 
P/A Order; and (iii) ``Satisfaction Order,'' which is an order sent 
through the Linkage to notify a Participant Exchange of a Trade-
Through and to seek satisfaction of the liability arising from that 
Trade-Through.
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    Article IV, section 1(e) of the Amex Constitution provides that the 
Exchange, its affiliates, officers, Governors, committee members, 
employees or agents shall not be liable to a member, member 
organization, or a person associated with a member or a member 
organization for any loss, expense, damages or claims that arise out of 
the use or enjoyment of the facilities or services afforded by the 
Exchange, any interruption in or failure or unavailability of any such 
facilities or services, or any action taken or omitted to be taken in 
respect to the business of the Exchange except to the extent such loss, 
expense, damages or claims are attributable to the willful misconduct, 
gross negligence, bad faith or fraudulent or criminal acts of the 
Exchange or its officers, employees or agent acting within the scope of 
their authority. However, Article IV, section 1(e) does permit the 
Board of Governors of the Exchange to provide, by rule, Exchange 
liability with respect to Exchange facilities which implement the 
electronic transmission of orders for the purchase or sale of 
securities traded on the Exchange to the floor of the Exchange or 
between the floor of the Exchange and other markets. Accordingly, 
proposed Rule 996--ANTE would permit Exchange liability, in limited 
circumstances, relating to the actions of ABCs for: (i) Maintaining and 
operating the customer limit order book and display book; and (ii) 
effecting proper executions of orders placed in the customer order 
limit book.
    Limitation of Liability. The liability of the Exchange for claims 
arising out of errors or omissions made by ABCs will be limited as 
follows:
     As to any one or more claims made by a single member on a 
single trading day, the Exchange shall not be liable in excess of the 
larger of $75,000 or the amount of any recovery obtained by the 
Exchange under any applicable insurance maintained by the Exchange.
     As to the aggregate of all claims made by all members on a 
single trading day, the Exchange shall not be liable in excess of the 
larger of $100,000 or the amount of the recovery obtained by the 
Exchange under any applicable insurance maintained by the Exchange.
     As to the aggregate of all claims made by all members 
during a single calendar month, the Exchange shall not be liable in 
excess of the larger of $250,000 or the amount of the recovery obtained 
by the Exchange under any applicable insurance maintained by the 
Exchange.
    If all of the claims arising out of errors or omissions by an ABC 
cannot be fully satisfied because they exceed the applicable maximum 
amount of liability provided for above, then the maximum amount will be 
allocated among all such claims arising on a single trading day or 
during a single calendar month, as applicable, based upon the 
proportion that each such claim bears to the sum of all such claims.
    Exchange liability will also be limited if a member, member 
organization or the Exchange fails to close out an uncompared trade as 
set forth in Rule

[[Page 65775]]

960.\7\ In such a case, the opposing party's liability with respect to 
any claims arising from such trade will be limited to the lesser of: 
(1) The loss which would have been experienced by the claimant if the 
uncompared trade had been closed out at the opening off trading on the 
next business day as provided in Rule 960; or (2) the actual loss 
realized by the claimant.
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    \7\ Commentary .01(b) to Rule 960 provides that all rejected 
options transaction notices (``ROTNs'') must be ``OK'd'' or ``DK'd'' 
not later than one-half hour prior to the opening of trading on the 
first business day following the trade date unless an agent 
(including a specialist) was involved in the execution of a 
transaction, where the time limit shall be extended to fifteen 
minutes prior to such opening (these time limits may be extended by 
a Floor Official).
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    Furthermore, the Exchange's potential liability is also limited if 
any damage is caused by an error or omission of an ABC which is the 
result of any error or omission of a member organization. Under such 
circumstances, the member organization will be required to indemnify 
the Exchange and hold it harmless from any claim of liability resulting 
from or relating to such damage.
    Procedure. Absent reasonable justification or excuse, any claim by 
a member, member organization, or persons associated with a member or 
member organization for losses arising from errors or omissions of an 
ABC, and any claim by the Exchange for indemnification under paragraph 
(g) of Proposed Rule 996--ANTE, must be presented in writing to the 
opposing party within ten (10) business days following the transaction 
giving rise to the claim; provided, that if an error or omission has 
resulted in an unmatched trade, then any claim based thereon shall be 
presented after the unmatched trade has been closed out but within ten 
(10) business days following such resolution of the unmatched trade.
    For purposes of proposed Rule 996--ANTE, the term ``transaction'' 
means any single order or instruction which is placed with an ABC, or 
any series of orders or instructions, which is placed with an ABC at 
substantially the same time by the same member and which relates to any 
one or more series of options of the same class. All errors and 
omissions made by an ABC with respect to or arising out of any 
transaction will give rise to a ``single claim'' against the Exchange. 
The Exchange will retain any defenses to such claim or claims that it 
may have. In addition, no claim will be permitted to arise as to errors 
or omissions which are found to have resulted from any failure by a 
member or by any person acting on behalf of a member, to enter or 
cancel an order with such ABC on a timely basis or clearly and 
accurately to communicate to such ABC:
    (i) The description or symbol of the security involved; or
    (ii) The exercise price or option contract price; or
    (iii) The type of option; or
    (iv) The number of trading units; or
    (v) The expiration month; or
    (vi) Any other information or data which is material to the 
transaction.
    Arbitration. Pursuant to proposed Rule 996--ANTE, all disputed 
claims will be referred to binding arbitration with the decision of a 
majority of the arbitrators selected to hear and determine the 
controversy deemed final. There will be no appeal right to the Board of 
Governors from any decision of an arbitration panel. The arbitration 
panel will be composed of an odd number of panelists. Each of the 
parties to the dispute will select one Exchange member to serve as 
panelist on the arbitration panel. The panelists so selected shall then 
select one or more additional panelist(s); provided that the additional 
panelist(s) so selected are members of the Exchange and that no member 
of the arbitration panel may have any direct or indirect financial 
interest in the claim. In the event that the initial panelists selected 
by the parties to the dispute cannot agree on the selection of the 
additional panelist(s), such additional panelist(s) shall be appointed 
by a Floor Official chosen by a random draw who has no direct or 
indirect financial interest in the claim. The NASD Code of Arbitration 
Procedure for Industry Disputes (Article VIII of the Amex Constitution) 
shall apply to any arbitration proceeding.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6 of the Act \8\ in general and furthers the objectives of 
section 6(b)(5) of the Act \9\ in particular in that it would remove 
impediments to and perfect the mechanism of a free and open market in a 
manner consistent with the protection of investors and the public 
interest.
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change will 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.

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

    The Exchange has filed the proposed rule change pursuant to section 
19(b)(3)(A) of the Act \10\ and subparagraph (f)(6) of Rule 19b-4 
thereunder. \11\ Because the foregoing proposed rule change: (i) Does 
not significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) does not become operative for 30 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, 
the proposed rule change has become effective pursuant to section 
19(b)(3)(A) of the Act and Rule 19b-4(f)(6)(iii) thereunder. \12\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ The Exchange has satisfied the requirement under Rule 19b-
4(f)(6)(iii) that it give written notice to the Commission of its 
intent to file the proposed rule change at least five business days 
prior to filing.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to waive the operative 
delay if such action is consistent with the protection of investors and 
the public interest. The Exchange has asked the Commission to waive the 
operative delay to permit the proposed rule change to become effective 
prior to the 30th day after filing.
    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
The Commission notes that the proposal is substantially identical to 
the Chicago Board Options Exchange's (``CBOE'') rules regarding 
limitation of exchange liability for acts and omission of CBOE Par 
Officials, \13\ previously published for comment and approved by the 
Commission, \14\ and the Exchange's

[[Page 65776]]

proposal raises no new issues of regulatory concern. Waiving the 
operative delay will allow the proposal to become effective 
simultaneously with Amex's proposal to establish ABCs, which we are 
approving separately today. \15\ Therefore, the Commission has 
determined to waive the 30-day delay and allow the proposed rule change 
to become operative immediately. \16\
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    \13\ See CBOE Rules 6.7, ``Exchange Liability,'' and 7.11, 
``Liability of Exchange for Actions of Order Book Officials, and PAR 
Officials.''
    \14\ See Securities Exchange Act Release Nos. 52017 (July 12, 
2005), 70 FR 41453 (July 19, 2005) (notice of filing of SR-CBOE-
2005-46) and 52798 (November 18, 2005), 70 FR 71344 (November 28, 
2005) (order approving SR-CBOE-2005-46).
    \15\ See Securities Exchange Act Release No. 56804 (November 16, 
2007) (order approving SR-Amex-2006-107).
    \16\ For purposes only of waiving the operative delay of this 
proposal, the Commission notes that it has considered the proposed 
rule's impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in 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 
File No. SR-Amex-2006-67 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-2007-122. 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 Commissions 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, 100 F Street, NE., Washington, DC 
20549, on official business days between the hours of 10 a.m. and 3 
p.m. Copies of such filing also will be available for inspection and 
copying at the principal office of the Exchange. All comments received 
will be posted without change; the Commission does not edit personal 
identifying information from submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-Amex-2007-122 and should be submitted on 
or before December 14, 2007.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-22840 Filed 11-21-07; 8:45 am]
BILLING CODE 8011-01-P