[Federal Register Volume 67, Number 21 (Thursday, January 31, 2002)]
[Notices]
[Pages 4767-4768]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-2370]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45334; File No. SR-Amex-2001-111]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the American Stock Exchange 
LLC Regarding Off-Exchange Trading in Exchange Listed Options

January 25, 2002.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on December 26, 2001, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, 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 Exchange Rule 959 to reinstate text 
inadvertently deleted that allows certain trading in Exchange listed 
options contracts to occur off the Exchange.
    The text of the proposed rule change appears below. New text is in 
italics; deletions are in brackets.
Rule 959. Accommodation Transactions
    (a) No Change.
    (b) Any member, member organization or other person who is a non-
member broker or dealer and who directly or indirectly controls, is 
controlled by, or is under common control with, a member, member 
organization (any such other person referred to as an affiliated 
person) may effect any transaction as principal in the over-the-counter 
market in any class of option contracts listed on the Exchange for a 
premium not in excess of $1.00 per contract. 

Commentary..........

    For each transaction executed by a member organization or 
affiliated person pursuant to paragraph (b), a record of such 
transaction shall be maintained by the member or member organization 
and shall be available for inspection by the Exchange for a period of 
three years. Such record shall include the circumstances under which 
the transaction was executed in conformity with this rule.

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
    On February 1, 2000, the Exchange filed with the Commission 
pursuant to Rule 19b-4 of the Act,\3\ a proposed rule change to rescind 
its off-board trading rules (Exchange Rules 5 and 6) and to make 
conforming changes to Rules 25, 317, 900 and 959.\4\ The Commission 
subsequently approved the proposed rule change on June 1, 2000.\5\ 
According to the Exchange, rather than simply deleting the reference to 
Exchange Rule 5 in paragraph (b) of Rule 959, paragraph (b) was 
inadvertently deleted in its entirety. Exchange Rule 959(b) concerned 
the ability of Exchange members to effect transactions in the over-the-
counter market in options. The provision required that options premiums 
not exceed $1.00 per contract for any class of options listed on the 
Exchange.
---------------------------------------------------------------------------

    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 42460 (February 25, 
2000), 65 FR 11618 (March 3, 2000).
    \5\ Securities Exchange Act Release No. 42888 (June 1, 2000), 65 
FR 36855 (June 12, 2000).
---------------------------------------------------------------------------

    Rule 19c-3(a) of the Act \6\ prohibits a national securities 
exchange from imposing off-board trading restrictions on equity 
securities listed after April 26, 1979. In 2000, the New York Stock 
Exchange Inc. proposed the elimination of its off-board equity trading 
restrictions by filing with the Commission to rescind NYSE Rule 390. 
Amex and the other national securities exchanges then filed proposed 
rule changes with the Commission to eliminate off-board trading 
restrictions by their members. The Commission approved these proposals 
to eliminate off-board trading restrictions. However, as indicated in 
Rule 19c-3(a) of the Act, off-board trading restrictions by members of 
the national securities exchanges may still apply to options contracts 
issued by the Options Clearing Corporation (``OCC''). Therefore, 
because listed options issued and cleared by OCC are required to be 
transacted on an Exchange,\7\ the elimination of Exchange Rule 959(b) 
to allow limited over-the-counter transaction in the market by members 
was not proper. Exchange Rule 959(b) will allow members to effect 
transactions in options contracts as principals in the over-the-counter 
market for a premium not in excess of $1.00 per contract. The 
Commentary to Exchange Rule 959 will require that for each over-the-
counter transaction, the member, member organization, or affiliated 
person, maintain a record of such transaction and keep such records 
available for Exchange inspection for three years.
---------------------------------------------------------------------------

    \6\ 17 CFR 240.19c(3)(a).
    \7\ See OCC By-Laws Article VI Section 1.
---------------------------------------------------------------------------

    Other options exchanges, such as the Chicago Board Options 
Exchange, Inc. (``CBOE''), the Pacific Stock Exchange, Inc. (``PCX'') 
and the Philadelphia Stock Exchange, Inc. (``Phlx'') permit 
transactions in the over-the-counter market under the same 
restrictions.\8\ At the time when off-board trading restrictions for 
equity securities were lifted in June 2000, the other options exchanges 
did not similarly revise their rules to delete reference to over-the-
counter transactions.
---------------------------------------------------------------------------

    \8\ See CBOE Rule 6.49, PCX Rule 6.78, and Phlx Rule 1059.
---------------------------------------------------------------------------

(2) Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act \9\ in general and furthers the objectives 
of Section 6(b)(5) \10\ 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, to 
remove impediments to and perfect the mechanism of a free and open 
market

[[Page 4768]]

and a national market system, to protect investors and the public 
interest, and is not designed to permit unfair discrimination between 
customers, issuers, brokers and dealers.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 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.

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 foregoing rule change has become effective pursuant to section 
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(3) \12\ thereunder 
because the Exchange has designated it as concerned solely with the 
administration of the Exchange. At any time within 60 days of the 
filing of such 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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19-4(f)(3).
---------------------------------------------------------------------------

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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
Amex. All submissions should refer to File No. SR-Amex-2001-111 and 
should be submitted by February 21, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-2370 Filed 1-30-02; 8:45 am]
BILLING CODE 8010-01-P