[Federal Register Volume 69, Number 113 (Monday, June 14, 2004)]
[Notices]
[Pages 33088-33090]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-13278]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49813; File No. SR-Amex-2004-45]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by 
the American Stock Exchange LLC to Extend a Pilot Program Under Which 
It Lists Options on Selected Stocks Trading Below $20 at One-Point 
Intervals Until June 5, 2005

June 4, 2004.
    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 June 4, 2004, 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 and 
II below, which Items have been prepared by Amex. 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

    Amex proposes to extend its pilot program under which it lists 
options on selected stocks trading below $20 at $1 strike price 
intervals (``Pilot Program'') until June 5, 2005.\3\ The text of the 
proposed rule change is available at the Office of the Secretary, Amex, 
and the Commission.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 48024 (June 12, 
2003), 68 FR 36617 (June 18, 2003)(``Pilot Program Approval 
Order'').
---------------------------------------------------------------------------

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

    In its filing with the Commission, 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. Amex has prepared

[[Page 33089]]

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 purpose of the proposed rule change is to extend the Pilot 
Program for a one-year period through June 5, 2005. The Pilot Program 
permits the Amex to select a total of five (5) individual stocks on 
which options series may be listed at $1 strike price intervals. To be 
eligible for the Pilot Program, an underlying stock must close below 
$20 in its primary market on the previous trading day. If selected, the 
Amex may list $1 strike prices at $1 intervals from $3 to $20, however, 
a $1 strike price may not be listed that is greater than $5 from the 
underlying stock's closing price in the primary market on the previous 
day. The Amex may also list $1 strikes on any other option class 
designated by another options exchange that employs a similar Pilot 
Program approved by the Commission. The Pilot Program prohibits the 
Amex from listing $1 strikes on any series of individual equity option 
classes that have greater than nine (9) months until expiration. In 
addition, the Exchange is also restricted from listing any series that 
would result in strike prices being $0.50 apart.
    To date, the Amex believes that the Pilot Program has been 
beneficial to investors and the options market by providing investors 
with greater flexibility in the trading of equity options that overlie 
stocks trading below $20. In this manner, options investors are able to 
better tailor their strategies through the availability of $1 strikes. 
Amex has conducted a study into the impact that $1 strikes has made on 
the participating Pilot Program classes (``Report'').\4\ The Report 
provides data regarding the Pilot Program as required in the Pilot 
Program Approval.\5\ As the data indicates, the $1 strikes exhibited 
higher volume and open interest than the ``standard'' strike intervals. 
Specifically, the four (4) option classes selected by the Amex for $1 
strikes had a trading volume of 582,927 contracts, while the 
``standard'' strikes for the same option classes had a trading volume 
of 520,364 contracts. Of even greater significance, is the difference 
in open interest between the $1 strikes and ``standard'' strikes. As of 
May 18, 2004, $1 strikes open interest totaled 581,444 versus 282,713 
for ``standard'' strikes. Given the limited nature of the Pilot 
Program, the Amex submits that the impact on systems has been minimal.
---------------------------------------------------------------------------

    \4\ Amex attached the Pilot Program Report as an exhibit to this 
proposed rule change. Copies of the Pilot Program Report are 
available at Amex and the Commission's Public Reference Room.
    \5\ See Pilot Program Approval Order, supra note 3.
---------------------------------------------------------------------------

2. Statutory Basis
    Amex believes the proposed rule change is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \7\ in that it is designed to promote just and 
equitable principles of trade and to remove impediments to and perfect 
the mechanisms of a free and open market.
---------------------------------------------------------------------------

    \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

    Amex 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) of the Act \8\ and subparagraph (f)(6) of Rule 19b-4 \9\ 
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 Amex 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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    Under Rule 19b-4(f)(6)(iii) of the Act,\10\ 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 and Amex is required to 
give the Commission written notice of its intention to file the 
proposed rule change at least five business days prior to filing. Amex 
has requested that the Commission accelerate the 30-day operative date 
to June 5, 2004, so that the Pilot Program may continue without 
interruption after it would have otherwise expired on June 5, 2004. The 
Commission, consistent with the protection of investors and the public 
interest, has determined to accelerate the 30-day operative date to 
June 5, 2004,\11\ and, therefore, the proposal is effective and 
operative on that date.\12\
---------------------------------------------------------------------------

    \10\ 17 CFR 240.19b-4(f)(6)(iii).
    \11\ For purposes only of accelerating the 30-day operative 
period for this proposal, the Commission has considered the proposed 
rule's impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
    \12\ In the event that Amex proposes to extend the Pilot Program 
beyond June 5, 2005, expand the number of options eligible for 
inclusion in the Pilot Program, or seek permanent approval of the 
Pilot Program, it should submit a Pilot Program report to the 
Commission along with the filing of such proposal. The report must 
cover the entire time the Pilot Program was in effect, and must 
include: (1) Data and written analysis on the open interest and 
trading volume for options (at all strike price intervals) selected 
for the Pilot Program; (2) delisted options series (for all strike 
price intervals) for all options selected for the Pilot Program; (3) 
an assessment of the appropriateness of $1 strike price intervals 
for the options the Amex selected for the Pilot Program; (4) an 
assessment of the impact of the Pilot Program on the capacity of the 
Amex's, OPRA's, and vendors' automated systems; (5) any capacity 
problems or other problems that arose during the operation of the 
Pilot Program and how the Amex addressed them; (6) any complaints 
that the Amex received during the operation of the Pilot Program and 
how the Amex addressed them; and (7) any additional information that 
would help to assess the operation of the Pilot Program. The 
Commission expects the Amex to submit a proposed rule change at 
least 60 days before the expiration of the Pilot Program in the 
event the Amex wishes to extend, expand, or seek permanent approval 
of the Pilot Program.
---------------------------------------------------------------------------

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 Number SR-Amex-2004-45 on the subject line.
Paper Comments:
     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission,

[[Page 33090]]

450 Fifth Street, NW., Washington, DC 20549-0609.
    All submissions should refer to File Number SR-Amex-2004-45. 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, 450 Fifth 
Street, NW., Washington, DC 20549. Copies of such filing also will be 
available for inspection and copying at the principal office of Amex. 
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-2004-45 
and should be submitted on or before July 6, 2004.

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

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

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 04-13278 Filed 6-10-04; 8:45 am]
BILLING CODE 8010-01-P