[Federal Register Volume 67, Number 104 (Thursday, May 30, 2002)]
[Notices]
[Pages 37882-37883]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-13480]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45975; File No. SR-Amex-2002-31]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange LLC Requesting Permanent Approval 
of Pilot Program Eliminating Position and Exercise Limits for XMI and 
XII Index Options and Related Flex Options

May 23, 2002.
    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 April 12, 2002, 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, as amended, 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 Amex seeks permanent approval of the pilot program that 
provides for the elimination of position and exercise limits for the 
Major Market (``XMI'') and Institutional (``XII'') broad-based index 
options, as well as FLEX Options on these indexes. On January 3, 2002, 
the Commission granted a six-month extension of the pilot program until 
July 3, 2002.\3\
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    \3\ See Securities Exchange Act Release No. 45234 (January 3, 
2002), 67 FR 1377 (January 10, 2002).

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[[Page 37883]]

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, 1999, the Commission approved the elimination of 
position and exercise limits for the XMI and XII index options, as well 
as FLEX options on these indexes on a two-year basis (the ``Pilot 
Program'').\4\ The Pilot Program originally ended on February 1, 2001, 
with extensions for an additional six-month period approved on July 3, 
2001 \5\ and January 3, 2002,\6\ respectively. The purpose of this 
proposed rule change is to request approval of the Pilot Program on a 
permanent basis.
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    \4\ See Securities Exchange Act Release No. 41011 (February 1, 
1999), 64 FR 6405 (February 9, 1999) (``Original Approval Order'').
    \5\ See Securities Exchange Act Release No. 44507 (July 3, 
2001), 66 FR 36348 (July 11, 2001).
    \6\ See Securities Exchange Act Release No. 45234 (January 3, 
2002), 67 FR 1377 (January 10, 2002).
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    The Original Approval Order required the Exchange to submit a 
report to the Commission regarding the status of the Pilot Program so 
that the Commission could use this information to evaluate any effects 
of the program.\7\ The Exchange submitted the required report to the 
Commission on May 22, 2001 in connection with the first six-month 
extension of the Pilot Program (Amex File No. 2001-31). The report 
indicated that from February 1, 1999 through March 30, 2001, no 
customer and/or firm accounts reached a level of 100,000 or more 
options contracts in XMI or XII options. The Amex during this review 
period did not discover any instances where an account maintained an 
unusually large unhedged position. In addition, during the period from 
April 2, 2001 through February 28, 2002, the Amex did not experience 
accounts establishing positions in excess of the standard limit 
applicable to each index at the time the Pilot Program was approved.\8\ 
Accordingly, the Amex seeks Commission approval to eliminate position 
and exercise limits for XMI and XII options, as well as related FLEX 
options, on a permanent basis based on the Amex's experience 
administering the Pilot Program.
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    \7\ In the Original Approval Order, the Commission stated:
    Furthermore, three months prior to the end of the pilot program, 
Amex will provide the Commission with a report detailing the size 
and different types of strategies employed with respect to positions 
established in those classes not subject to position limits. In 
addition, the report will note whether any problems resulted due to 
the no limit approach and any other information that may be useful 
in evaluating the effectiveness of the pilot program. The Commission 
expects that Amex will take prompt action, including timely 
communications with the Commission and other marketplace self-
regulatory organizations responsible for oversight of trading in 
component stocks, should any unanticipated adverse market effects 
develop.
    Securities Exchange Act Release No. 41011 (February 1, 1999), 64 
FR 6405 (February 9, 1999).
    \8\ Telephone call between Jeffrey P. Burns, Assistant General 
Counsel, Amex, and Susie Cho, Special Counsel, Division of Market 
Regulation, Commission, May 21, 2002. At the time the Commission 
approved the Pilot Program, the position limits for XMI and XII were 
34,000 and 200,000, respectively.
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2. Statutory Basis
    The Exchange represents 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 and a national market system, and, in general, to 
protect investors and the public interest.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Amex does not believe that the proposed rule change will 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

    The Exchange has neither solicited nor received 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, as amended, 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 at the Commission's Public Reference Room. Copies of such 
filing will also be available for inspection and copying at the 
principal office of the Exchange. All submissions should refer to the 
File No. SR-Amex-2002-31 and should be submitted by June 20, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Secretary.
[FR Doc. 02-13480 Filed 5-29-02; 8:45 am]
BILLING CODE 8010-01-P