Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing of a Proposed Rule Change Relating to Margin Requirements for Fixed Return Options, 48258-48259 [E8-19030]

Download as PDF 48258 Federal Register / Vol. 73, No. 160 / Monday, August 18, 2008 / Notices FINRA, ISE, NASDAQ, NSX, NYSE, NYSE Arca, NYSE Regulation, and Phlx. 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 4–566 and should be submitted on or before September 8, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Florence E. Harmon, Acting Secretary. [FR Doc. E8–19068 Filed 8–15–08; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–58341; File No. SR–Amex– 2008–60] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing of a Proposed Rule Change Relating to Margin Requirements for Fixed Return Options August 11, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934, as amended (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on July 21, 2008, the American Stock Exchange LLC (‘‘Amex’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 462(d)10 to clarify the margin requirements applicable to Fixed Return Options (‘‘FROs’’ or ‘‘Fixed Return Options’’).3 sroberts on PROD1PC70 with NOTICES 16 17 CFR 200.30–3(a)(34). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240. 19b–4. 3 The Exchange commenced the trading of FROs on May 8, 2008. In August 2007, the Commission approved the Exchange proposal to list and trade FROs based on individual stocks and exchangetraded funds (‘‘ETFs’’). See Exchange Act Release No. 56251 (August 14, 2007), 72 FR 46523 (August 20, 2007). In connection with the ability to trade FROs, the Options Clearing Corporation (‘‘OCC’’) also filed proposed rule changes as well as a revision to the Options Disclosure Document (‘‘ODD’’). The Commission recently approved the VerDate Aug<31>2005 16:50 Aug 15, 2008 Jkt 214001 The text of the proposed rule change is available on the Amex’s Web site at http://www.amex.com, the Office of the Secretary, the Amex and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Amex included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Amex has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this proposal is to add clarity regarding the application of FRO margin requirements in connection with ‘‘spreads’’ and ‘‘straddle/combination’’ strategies. In addition, the proposal also seeks to clarify the use of ‘‘cover’’ and a ‘‘cash account’’ in connection with FROs. Currently, Rule 462(d)10 is silent regarding the use of ‘‘spread’’ and ‘‘straddle/combination’’ positions. With respect to a ‘‘spread’’ position in FROs, the Amex proposes that no margin be required on a Finish High 4 FRO (Finish Low 5 FRO) carried short in a customer’s account that is offset by a long Finish High FRO (Finish Low FRO) for the same underlying security or instrument that expires at the same time and has an exercise or strike price that is less than (greater than) the exercise or strike price of the short Finish High (Finish Low). As set forth in Rule 462(d)10(B), the long Finish High (Finish Low) must be paid for in full. In connection with a straddle/ combination, when a Finish High FRO ODD revisions so that FROs may commence trading on the Exchange. See Exchange Act Release No. 57744 (April 30, 2008), 73 FR 25072 (May 6, 2008) (SR–ODD–2008–01). The Commission previously approved proposed OCC rule changes in December 2007. See Exchange Act Release No. 56875 (November 30, 2007), 72 FR 69274 (December 7, 2007). 4 A ‘‘Finish High’’ FRO is defined in Rule 900 FRO(b)(2) as an option contract which returns $100 if the underlying security closes above the strike price at expiration. 5 A ‘‘Finish Low’’ FRO is defined in Rule 900 FRO(b)(3) as an option contract which returns $100 if the underlying security closes below the strike price at expiration. PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 is carried short in a customer’s account and there is also carried a short Finish Low FRO that expires at the same time and has an exercise price or strike price that is less than or equal to the exercise or strike price of the short Finish High, the initial and maintenance margin required would be the exercise settlement amount applicable to one contract. With respect to the concept of ‘‘cover’’ the Exchange proposes a clarification that ‘‘cover’’ is applicable only to ‘‘cash accounts.’’ In such a case, a FRO carried short in a customer’s account will be deemed a covered position, and eligible for the cash account, if either one of the following is held in the account at the time the FRO is written or is received into the account promptly thereafter: • Cash or cash equivalents equal to 100% of the exercise settlement amount; • A long FRO of the same type (Finish High or Finish Low) for the same underlying security or instrument that is paid for in full and expires at the same time, and has an exercise or strike price that is less than the exercise or strike price of the short in the case of a Finish High or greater than the exercise or strike price of the short in the case of a Finish Low; or • An escrow agreement. The escrow agreement must certify that the bank holds for the account of the customer as security for the agreement (A) cash, (B) cash equivalents, (C) one or more qualified equity securities, or (D) a combination thereof having an aggregate market value of not less than 100% of the exercise settlement amount and that the bank will promptly pay the member organization the cash settlement amount in the event the account is assigned an exercise notice. The Exchange believes that the proposed revision reducing the customer margin applicable to ‘‘spread’’ and ‘‘straddle/combination’’ positions in FROs is appropriate because risk exposure is significantly reduced under these strategies. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6 of the Exchange Act 6 in general and furthers the objectives of Section 6(b)(5) 7 in particular in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, 6 15 7 15 E:\FR\FM\18AUN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(5). 18AUN1 Federal Register / Vol. 73, No. 160 / Monday, August 18, 2008 / Notices and to remove impediments to and perfect the mechanism of a free and open market and a national market system. The Exchange believes that the proposal will benefit the marketplace and provide market participants with greater clarity in connection with their responsibilities in the trading and handling of FRO transactions. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange did not receive any written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will: (A) By order approve such proposed rule change, or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments 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–2008–60 on the subject line. sroberts on PROD1PC70 with NOTICES Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–Amex–2008–60. This file number should be included on the subject line if e-mail is used. To help the 16:50 Aug 15, 2008 Jkt 214001 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8 Florence. E. Harmon, Acting Secretary. [FR Doc. E8–19030 Filed 8–15–08; 8:45 am] BILLING CODE 8010–01–P 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: VerDate Aug<31>2005 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, 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–2008–60 and should be submitted on or before September 8, 2008. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–58343; File No. SR–DTC– 2008–06] Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change as Amended To Modify End of Day Settlement Procedures Relating to Settlement Acknowledgement Cut-off Time Frames for Settling Banks August 12, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 notice is hereby given that on June 19, 2008, The Depository Trust Company (‘‘DTC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) and on August 7, 2008, amended the proposed rule change as 8 17 1 15 PO 00000 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). Frm 00073 Fmt 4703 Sfmt 4703 48259 described in Items I, II, and III below, which items have been prepared primarily by DTC. The Commission is publishing this notice to solicit comments on the proposed rule change as amended from interested parties. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change DTC is seeking to modify its end of day settlement procedures relating to settlement acknowledgement cut-off timeframes for Settling Banks.2 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, DTC 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. DTC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of these statements.3 (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change DTC’s End-of-Day Settlement Processing controls and coordinates the settling of Participant accounts and Settling Bank accounts on DTC’s systems. The settlement process occurs through the Fedwire system and is initiated when DTC posts final figures for Participants and Settling Banks. Although the actual settlement process begins with the posting of the final settlement figures at approximately 3:45 pm each day,4 DTC operates a settlement system that provides Participants and Settling Banks with online reports throughout the processing day. These reports reflect gross debits, gross credits, and the net debit or credit for each Participant, and a net-net figure for each Settling Bank. Settling Banks, which settle for themselves, may also settle for other Participants. Currently, cut-off for Settling Banks to acknowledge their netnet settlement balance or to refuse to settle for a specific Participant is the later of 4:30 pm or 30 minutes after netnet settlement balances are first made 2 The term ‘‘Settling Bank’’ means a Participant, which is a bank or trust company, subject to supervision or regulation pursuant to Federal or State banking laws, and a party to an effective Settling Bank Agreement. 3 The Commission has modified the text of the summaries prepared by DTC. 4 All times are Eastern Standard Time. E:\FR\FM\18AUN1.SGM 18AUN1

Agencies

[Federal Register Volume 73, Number 160 (Monday, August 18, 2008)]
[Notices]
[Pages 48258-48259]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-19030]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58341; File No. SR-Amex-2008-60]


Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing of a Proposed Rule Change Relating to Margin 
Requirements for Fixed Return Options

August 11, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934, as amended (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is 
hereby given that on July 21, 2008, the American Stock Exchange LLC 
(``Amex'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I, II and III below, which Items have been prepared 
by the Exchange. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240. 19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to amend Rule 462(d)10 to clarify the margin 
requirements applicable to Fixed Return Options (``FROs'' or ``Fixed 
Return Options'').\3\
---------------------------------------------------------------------------

    \3\ The Exchange commenced the trading of FROs on May 8, 2008. 
In August 2007, the Commission approved the Exchange proposal to 
list and trade FROs based on individual stocks and exchange-traded 
funds (``ETFs''). See Exchange Act Release No. 56251 (August 14, 
2007), 72 FR 46523 (August 20, 2007). In connection with the ability 
to trade FROs, the Options Clearing Corporation (``OCC'') also filed 
proposed rule changes as well as a revision to the Options 
Disclosure Document (``ODD''). The Commission recently approved the 
ODD revisions so that FROs may commence trading on the Exchange. See 
Exchange Act Release No. 57744 (April 30, 2008), 73 FR 25072 (May 6, 
2008) (SR-ODD-2008-01). The Commission previously approved proposed 
OCC rule changes in December 2007. See Exchange Act Release No. 
56875 (November 30, 2007), 72 FR 69274 (December 7, 2007).
---------------------------------------------------------------------------

    The text of the proposed rule change is available on the Amex's Web 
site at http://www.amex.com, the Office of the Secretary, the Amex and 
at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The purpose of this proposal is to add clarity regarding the 
application of FRO margin requirements in connection with ``spreads'' 
and ``straddle/combination'' strategies. In addition, the proposal also 
seeks to clarify the use of ``cover'' and a ``cash account'' in 
connection with FROs.
    Currently, Rule 462(d)10 is silent regarding the use of ``spread'' 
and ``straddle/combination'' positions. With respect to a ``spread'' 
position in FROs, the Amex proposes that no margin be required on a 
Finish High \4\ FRO (Finish Low \5\ FRO) carried short in a customer's 
account that is offset by a long Finish High FRO (Finish Low FRO) for 
the same underlying security or instrument that expires at the same 
time and has an exercise or strike price that is less than (greater 
than) the exercise or strike price of the short Finish High (Finish 
Low). As set forth in Rule 462(d)10(B), the long Finish High (Finish 
Low) must be paid for in full.
---------------------------------------------------------------------------

    \4\ A ``Finish High'' FRO is defined in Rule 900 FRO(b)(2) as an 
option contract which returns $100 if the underlying security closes 
above the strike price at expiration.
    \5\ A ``Finish Low'' FRO is defined in Rule 900 FRO(b)(3) as an 
option contract which returns $100 if the underlying security closes 
below the strike price at expiration.
---------------------------------------------------------------------------

    In connection with a straddle/combination, when a Finish High FRO 
is carried short in a customer's account and there is also carried a 
short Finish Low FRO that expires at the same time and has an exercise 
price or strike price that is less than or equal to the exercise or 
strike price of the short Finish High, the initial and maintenance 
margin required would be the exercise settlement amount applicable to 
one contract.
    With respect to the concept of ``cover'' the Exchange proposes a 
clarification that ``cover'' is applicable only to ``cash accounts.'' 
In such a case, a FRO carried short in a customer's account will be 
deemed a covered position, and eligible for the cash account, if either 
one of the following is held in the account at the time the FRO is 
written or is received into the account promptly thereafter:
     Cash or cash equivalents equal to 100% of the exercise 
settlement amount;
     A long FRO of the same type (Finish High or Finish Low) 
for the same underlying security or instrument that is paid for in full 
and expires at the same time, and has an exercise or strike price that 
is less than the exercise or strike price of the short in the case of a 
Finish High or greater than the exercise or strike price of the short 
in the case of a Finish Low; or
     An escrow agreement.
    The escrow agreement must certify that the bank holds for the 
account of the customer as security for the agreement (A) cash, (B) 
cash equivalents, (C) one or more qualified equity securities, or (D) a 
combination thereof having an aggregate market value of not less than 
100% of the exercise settlement amount and that the bank will promptly 
pay the member organization the cash settlement amount in the event the 
account is assigned an exercise notice.
    The Exchange believes that the proposed revision reducing the 
customer margin applicable to ``spread'' and ``straddle/combination'' 
positions in FROs is appropriate because risk exposure is significantly 
reduced under these strategies.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Exchange Act \6\ in general and furthers the 
objectives of Section 6(b)(5) \7\ in particular in that it is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities,

[[Page 48259]]

and to remove impediments to and perfect the mechanism of a free and 
open market and a national market system. The Exchange believes that 
the proposal will benefit the marketplace and provide market 
participants with greater clarity in connection with their 
responsibilities in the trading and handling of FRO transactions.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition.

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

    The Exchange did not receive any written comments on the proposed 
rule change.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-2008-60 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Amex-2008-60. 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, 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-2008-60 and should be 
submitted on or before September 8, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).
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Florence. E. Harmon,
Acting Secretary.
[FR Doc. E8-19030 Filed 8-15-08; 8:45 am]
BILLING CODE 8010-01-P