[Federal Register Volume 67, Number 47 (Monday, March 11, 2002)]
[Notices]
[Pages 10941-10942]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-5815]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45505; File No. SR-Amex-2002-13]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the American Stock Exchange 
LLC To Amend the Original Listing Criteria for Underlying Securities 
Contained in Amex Rule 915

March 5,2002.
    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 March 1, 2002, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission (the 
``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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to provide an alternative original listing 
criteria for individual equity options that otherwise meet the 
standards in Commentary .01 to Rule 915 except for the requirement that 
the underlying security be at least $7.50.
    The text of the proposed rule change appears below. New text is in 
italics; deletions are in brackets.

Rule 915. Criteria for Underlying Securities

    (a) No Change.
    (b) No Change.

Commentary ...............
    .01  The Board of Governors has established guidelines to be 
considered by the Exchange in evaluating potential underlying 
securities for Exchange option transactions. Absent exceptional 
circumstances with respect to items 1, 2, 3 or 4 listed below, at the 
time the Exchange selects an underlying security for Exchange options 
transactions, the following guidelines with respect to the issuer shall 
be met:
    1. There are a minimum of 7,000,000 shares of the underlying 
security which are owned by persons other than those required to report 
their security holdings under Section 16(a) of the Securities Exchange 
Act of 1934.
    2. There are a minimum of 2,000 holders of the underlying security.
    3. Trading volume (in all markets in which the underlying security 
is traded) has been at least 2,400,000 shares in the preceding twelve 
months.
    4. Either (i) [T]the market price per share of the underlying 
security has been at least $7.50 for the majority of business days 
during the three calendar months preceding the date of selection, as 
measured by the lowest closing price reported in any market in which 
the underlying security traded on each of the subject days or (ii)(a) 
the underlying security meets the guidelines for continued listing in 
Rule 916; (b) options on such underlying security are traded on at 
least one other registered national securities exchange; and (c) the 
average daily trading volume for such options over the last three (3) 
calendar months preceding the date of selection has been at least 5,000 
contracts.
    5. The issuer is in compliance with any applicable requirements of 
the Securities Exchange Act of 1934.

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
    Commentary. 01 to Amex Rule 915 sets forth the guidelines that an 
underlying individual equity security must meet before the Exchange may 
initially list options on that security. The Exchange states that these 
guidelines or requirements are uniform among four (4) out of the five 
(5) options exchanges. The exception is the International Securities 
Exchange LLC (``ISE''), because of recent Commission approval that 
eliminated the $7.50 standard for an underlying security when such 
option is otherwise listed and traded on another options exchange and 
has an average daily trading volume (``ADTV'') over the last three (3) 
calendar months of at least 5,000 contracts.\3\
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    \3\ See Securities Exchange Act Release No. 45220 (December 31, 
2002), 67 FR 760 January 7, 2002) (SR-ISE-2001-33).
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    The Exchange notes that its requirements for listing additional 
series of an existing listed option (the ``maintenance listing 
standards'') are less stringent. In particular, additional series may 
be added pursuant to Commentary .02 to Rule 916 if the underlying 
security is at least $3 in the primary market. The Exchange believes 
that this less stringent maintenance listing standard is permitted, in 
part, because the Exchange's other guidelines assure that options would 
be listed and traded on securities of companies that are financially 
sound and subject to adequate minimum standards. Therefore, according 
to the Exchange, the continued application of the Exchange's other 
guidelines provide that: (1) The underlying security consists of a 
large number of outstanding shares held by non-affiliates of the 
issuer; (2) the underlying security is actively-traded; (3) there are a 
large number of holders of the underlying security; and (4) the 
underlying security continues to be listed on a national securities 
exchange or traded through the facilities of a national securities 
association.
    The Exchange believes that although the continued listing 
requirements are generally uniform among the options exchanges, with 
the exception of the ISE, the application of these standards in the 
current market environment have had an anticompetitive effect. 
Specifically, the Exchange states that on several occasions during the 
past year, it was unable to list options classes because the price of 
the underlying security had fallen below the initial listing 
requirement since the time such options were first listed on another 
exchange. Because the underlying security would continue to meet the 
lower maintenance listing standards, the other options exchange(s) may 
continue to trade such options--and list additional series--while the 
Amex may not list any options on such underlying security.
    To address this situation, the Exchange proposes an alternative 
original listing requirement applicable to the underlying security's 
price during the three calendar months preceding an options listing. 
Specifically, Commentary .01 to Amex Rule 915 currently provides that 
the market price per share of the underlying security must have been at 
least $7.50 for the majority of business days during the

[[Page 10942]]

three calendar months preceding the date of selection for listing. The 
Exchange proposes to amend Commentary .01 to provide that, for 
underlying securities that satisfy all of the initial listing 
requirements other than the $7.50 per share price requirement, the 
Exchange would be permitted to list options on the securities so long 
as: (1) The underlying security meets the guidelines for continued 
approval contained in Amex Rule 916; (2) options on such underlying 
security are traded on at least one other registered national 
securities exchange; and (3) the ADTV for such options over the last 
three calendar months preceding the date of selection has been at least 
5,000 contracts.
    The Exchange believes that this proposal is narrowly drafted to 
address the circumstances where an actively-traded options class is 
currently ineligible for listing on the Amex while at the same time, 
such option is trading on another options exchange. The Exchange notes 
that when an underlying security meets the maintenance listing 
standards and at least one other exchange trades options on the 
underlying security, the options already are available to the investing 
public. Therefore, the Exchange notes that the current proposal would 
not introduce any additional listed options classes.
    The Exchange also believes the proposed alternative original 
listing criteria's limitation to options that are actively-traded 
(i.e., options with an ADTV of at least 5,000 contracts over the least 
three calendar months) should serve to allay any concerns regarding the 
listing of options that may be inappropriate. Therefore, the Exchange 
maintains that the proposed alternative listing standard would be 
limited to those options with active trading, indicating that there is 
widespread investor interest. Because these options are actively-traded 
in other markets, the Exchange further believes that there would be no 
investor protection concerns with listing such options on the Exchange. 
In addition, the Exchange believes that listing these options on the 
Amex would enhance competition and benefit investors.
(2) Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act \4\ in general and furthers the objectives 
of section 6(b)(5) \5\ in particular in that an exchange have rules 
that are designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, and, in 
general, to protect investors and the public interest.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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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

    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) of the Act \6\ and paragraph (f)(6) of Rule 19b-4 \7\ 
thereunder because it does not: (i) Significantly affect the protection 
of investors or the public interest; (ii) impose any significant burden 
on competition; (iii) become operative for 30 days from the date on 
which it was filed, or such shorter time as the Commission may 
designate; and the Exchange has given the Commission written notice of 
its intention to file the proposed rule change at least five business 
days prior to filing. 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.
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6).
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    The Commission notes that under Rule 19b-4(f)(6)(iii), the proposal 
does not become operative for 30 days after the date of its filing, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest. The Exchange has 
requested that the Commission waive the 30-day operative date. The 
Exchange contends that acceleration of the operative date is consistent 
with the protection of investors and the public interest because the 
language of this proposed rule is substantially similar to rule 
language that was put out for notice and comment when ISE submitted its 
proposed rule change. For this reason, consistent with section 19(b)(2) 
of the Act,\8\ the Commission finds good cause to waive the 30-day 
operative period.\9\
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    \8\ 15 U.S.C. 78s(b)(2).
    \9\ For purposes only of accelerating the operative date of this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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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-2002-13 and 
should be submitted by April 1, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 02-5815 Filed 3-8-02; 8:45 am]
BILLING CODE 8010-01-P