[Federal Register Volume 73, Number 46 (Friday, March 7, 2008)]
[Notices]
[Pages 12479-12481]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-4515]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57415; File No. SR-Amex-2008-16]
Self-Regulatory Organizations; American Stock Exchange, LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Make Permanent Two Pilot Programs That Increase Position and Exercise
Limits on Equity Options
March 3, 2008.
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 February 29, 2008, 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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange seeks to make permanent two pilot programs that
increase standard position and exercise limits for equity option
classes traded on the Exchange. The text of the proposed rule change is
available on the Exchange's Web site (http://www.amex.com), at the
Exchange's principal office, and at the Commission's Public Reference
Room.
[[Page 12480]]
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 Exchange is seeking to make permanent two pilot programs that
increase position and exercise limits for equity options. The Exchange
proposes to amend Rule 904 to permanently establish the increased
limits of the two pilot programs.
The first pilot program (``Rule 904 Pilot Program''), which
commenced in March 2005 \5\ and was adopted by all the options
exchanges, increased position and exercise limits for options on the
QQQQ and equity options classes traded on the Exchange.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 51316 (March 3,
2005); 70 FR 12251 (March 11, 2005) (notice of filing and immediate
effectiveness of File No. SR-Amex 2005-029). The Pilot Program was
extended five times and is due to expire on March 1, 2008. See
Securities Exchange Act Release Nos. 56262 (August 15, 2007), 72 FR
47089 (August 22, 2007) (SR-Amex-2007-86); 55226 (February 1, 2007),
72 FR 6300 (February 9, 2007) (SR-Amex-2007-15); 54386 (August 30,
2006), 71 FR 52831 (September 7, 2006) (SR-Amex-2006-75); 53349
(February 22, 2006), 71 FR 10571 (March 1, 2006) (SR-Amex-2006-07);
and 52260 (August 15, 2005), 70 FR 48991 (August 22, 2005) (SR-Amex-
2005-082).
---------------------------------------------------------------------------
The second pilot program, which commenced in January 2007,
increased the position and exercise limits for options on the
iShares[supreg] Russell 2000[supreg] Index Fund (``IWM'') (``IWM Option
Pilot Program'') from 250,000 contracts to 500,000 contracts.\6\
---------------------------------------------------------------------------
\6\ The IWM Option Pilot Program doubles the position and
exercise limits for IWM options under the Rule 904 Pilot Program.
See Rule 904, Commentary .07. Absent both of these pilot programs,
the standard position and exercise limit for IWM options is 75,000
option contracts. The proposal that established the IWM Option Pilot
Program was effective upon filing. See Securities Exchange Act
Release No. 55163 (January 24, 2007), 72 FR 4547 (January 31, 2007)
(SR-Amex-2007-11). The IWM Option Pilot Program has been extended
twice by the Commission, and expires on March 1, 2008. See
Securities Exchange Act Release Nos. 57145 (January 14, 2008), 73 FR
3760 (January 22, 2008) (SR-Amex-2008-01); and 56090 (July 18,
2007), 72 FR 40907 (July 25, 2007) (SR-Amex-2007-73).
---------------------------------------------------------------------------
The standard position limits were last increased nine years ago, on
December 31, 1998.\7\ Since that time, there has been a steady increase
in the number of accounts that (a) approach the position limit; (b)
exceed the position limit; and (c) are granted an exemption to the
standard limit.
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 40875 (December 31,
1998), 64 FR 1842 (January 12, 1999) (SR-Amex-98-22) (approving an
increase in position limits and exercise limits).
---------------------------------------------------------------------------
The Exchange has not encountered any problems or difficulties
relating to the two pilot programs since their inception. To the best
of the Exchange's knowledge, any violations of position or exercise
limits under the pilot programs were immaterial. None of the violations
were deemed to be the result of manipulative activities. The Exchange
believes that the increase in options volume and lack of evidence of
market manipulation since the last position limits increase, and
throughout the duration of the two pilot programs, justifies making
permanent the Rule 904 Pilot Program and IWM Option Pilot Program.
Furthermore, as the anniversary of listed options trading
approaches its 35th year, the Exchange believes that the existing
surveillance procedures and options positions reporting requirements at
the Amex, at other options exchanges, and at the several clearing firms
are capable of properly identifying unusual or illegal trading
activity. The Exchange's procedures include daily monitoring of market
movements via automated surveillance techniques to identify unusual
activities in both options and their underlying securities.
Accordingly, the Exchange represents that its surveillance
procedures and reporting procedures, in conjunction with the financial
requirements and risk management review procedures already in place at
the clearing firms and the Options Clearing Corporation, will serve to
adequately address any concerns the Commission may have with respect to
account(s) engaging in any manipulative schemes or assuming too high a
level of risk exposure.
Moreover, the Exchange believes that the current financial
requirements imposed by the Exchange and the Commission adequately
address the concerns that a member or its customer may try to maintain
an inordinately large unhedged position in an equity option.
Finally, the Exchange expects continued options volume growth as
opportunities for investors to participate in the options markets
increase and evolve. The Exchange believes that the non-pilot position
and exercise limits are restrictive, and returning to those limits will
hamper fair and effective competition between the listed options
markets and the over-the-counter markets. To date, there have been no
adverse affects on the markets as a result of the past increases in the
limits for equity options contracts.
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) \9\ 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, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposed rule change will impose no
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 by the Exchange on
this proposal.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has designated the proposed rule change as one that:
(1) Does not significantly affect the protection of investors or the
public interest; (2) does not impose any significant burden on
competition; and (3) does not become operative for 30 days from the
date of filing, or such shorter time as the Commission may designate if
consistent with the protection of investors and the public interest.
Therefore, the foregoing rule change has become effective pursuant to
Section 19(b)(3)(A) of the Act \10\ and subparagraph (f)(6) of Rule
19b-4
[[Page 12481]]
thereunder.\11\ The Exchange notes that the proposed rule change is
based on a similar proposal recently approved by the Commission.\12\
The Exchange has asked the Commission to waive the operative delay to
permit the proposed rule change to become operative prior to the 30th
day after filing.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to provide the Commission
with written notice of its intent to file the proposed rule change,
along with a brief description and text of the proposed rule change,
at least five business days prior to the date of filing of the
proposed rule change, or such shorter time as designated by the
Commission. The Exchange has fulfilled this requirement.
\12\ See Securities Exchange Act Release No. 57352 (February 19,
2008), 73 FR 10076 (February 25, 2008) (order granting accelerated
approval to SR-CBOE-2008-07).
---------------------------------------------------------------------------
The Rule 904 Pilot Program and the IWM Option Pilot Program were
scheduled to expire on March 1, 2008. The Commission believes that
waiving the 30-day operative delay of the Exchange's proposal is
consistent with the protection of investors and the public interest
because it will allow the position and exercise limits to remain at
consistent levels during the transition from the pilot programs to
permanent status.\13\ Therefore, the Commission designates the proposal
to be operative upon filing.
---------------------------------------------------------------------------
\13\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate the 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 [email protected]. Please include
File No. SR-Amex-2008-16 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-2008-16. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Room, 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 filings 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-2008-16 and should be
submitted on or before March 28, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
---------------------------------------------------------------------------
\14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-4515 Filed 3-6-08; 8:45 am]
BILLING CODE 8011-01-P