[Federal Register Volume 69, Number 121 (Thursday, June 24, 2004)]
[Notices]
[Pages 35401-35403]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-14286]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49868; File No. SR-Amex-2004-36]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval to a Proposed Rule Change by the American 
Stock Exchange LLC Relating to a Revision and Extension of the Trade-
Through Liability Limitation Pilot Program Under the Options 
Intermarket Linkage Plan

June 15, 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 May 17, 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 the Amex. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons, and to grant accelerated approval to the 
proposed rule change.
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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 extend through January 31, 2005, the 
current pilot program that limits an Exchange member's Trade-Through 
\3\ liability pursuant to the Linkage Plan to 10 contracts per 
Satisfaction Order \4\ for the period between five minutes prior to the 
close of trading in the underlying security and the close of trading in 
the options class (the ``Pilot Program''). In addition, in connection 
with the extension of the Pilot Program, the Exchange proposes to 
increase the limit on Trade-Through liability during the last seven 
minutes of the options trading day from 10 contracts to 25 contracts 
per Satisfaction Order.
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    \3\ A ``Trade-Through'' is defined as a transaction in an 
options series at a price that is inferior to the national best bid 
or offer in an options series calculated by a Participant. See 
Section 2(29) of the Plan for the Purpose of Creating and Operating 
an Intermarket Option Linkage (``Linkage Plan''). A ``Participant'' 
is defined as an Eligible Exchange whose participation in the 
Linkage Plan has become effective pursuant to Section 4(c) of the 
Linkage Plan. See Section 2(24) of the Linkage Plan. Currently, the 
Participants in the Linkage Plan are the International Securities 
Exchange, Inc., the Amex, the Chicago Board Options Exchange, Inc., 
the Pacific Exchange, Inc., the Philadelphia Stock Exchange, Inc. 
and the Boston Stock Exchange, Inc.
    \4\ A ``Satisfaction Order'' is defined as an order sent through 
the Options Intermarket Linkage to notify a member of another 
Participant of a Trade-Through and to seek satisfaction of the 
liability arising from that Trade-Through. See Section 2(16) of the 
Linkage Plan.
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    The text of the proposed rule change is available at the Exchange 
and at the Commission.

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 III below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

[[Page 35402]]

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 that limits Trade-Through liability during the last seven 
minutes of the options trading day. Under the current Pilot Program, an 
Exchange member's Trade-Through liability is limited to 10 contracts 
per Satisfaction Order received during the period between five minutes 
prior to the close of trading in the underlying security and the close 
of trading in the options class.
    The proposed rule change, amending Amex Rule 942(a)(2)(ii)(C), 
would implement proposed Joint Amendment No. 12 to Linkage Plan into 
the Amex Rules.\5\ If approved by the Commission, Joint Amendment No. 
12 would amend the Linkage Plan so that the Pilot Program would be 
extended through January 31, 2005. In addition, Joint Amendment No. 12 
would increase the limit on Trade-Through liability during the last 
seven minutes of the day from 10 contracts to 25 contracts per 
Satisfaction Order.
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    \5\ The Amex has separately filed Joint Amendment No. 12 to the 
Linkage Plan to implement substantially the same change to the 
Linkage Plan. See Securities Exchange Act Release No. 49692 (May 12, 
2004), 69 FR 29956 (May 19, 2004) (Notice of Joint Amendment No. 
12). The Commission previously approved the pilot to implement a 
limitation on Trade-Through liability during the last seven minutes 
of the trading day on a 120-day temporary basis on January 31, 2003. 
See Securities Exchange Act Release No. 47298, 68 FR 6524 (February 
7, 2003). On June 18, 2003, the Commission approved the pilot until 
January 31, 2004. See Securities Exchange Act Release No. 48055, 68 
FR 37869 (June 25, 2003) (Order approving Joint Amendment No. 4). 
The Commission subsequently extended the pilot until June 30, 2004. 
See Securities Exchange Act Release No. 49146 (January 29, 2004), 69 
FR 5618 (February 5, 2004) (Order approving Joint Amendment No. 8).
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    As a condition to granting permanent approval of this limitation, 
the Commission required that the Participants provide the Commission 
with a report regarding data on the use of the exemption no later than 
60 days before seeking permanent approval (the ``Report''). The 
Participants have provided the Commission with certain information 
required in the Report, and continue to discuss with Commission staff 
what additional information the staff may need to evaluate possible 
permanent approval of the Trade-Through limitation. This extension 
would allow the limitation of liability currently in effect to 
continue, with the increase in liability to 25 contracts per 
Satisfaction Order, while the Commission staff and the Participants 
continue to discuss permanent approval.
2. Statutory Basis
    The Exchange believes that 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 particular in that it is designed 
to prevent fraudulent and manipulative acts and practices, promote just 
and equitable principles of trade, remove impediments to and perfect 
the mechanisms of a free and open market and a national market system, 
and, in general, protect investors and the public interest. The 
proposed rule change would enhance the national market system for 
options by extending and revising the Pilot Program.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 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 
result in 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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. 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-2004-36 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.

    All submissions should refer to File Number SR-Amex-2004-36. 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 20549-0609. Copies of such filing also will 
be available for inspection and copying at the principal office of the 
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-2004-36 and should be submitted on or before July 15, 2004.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\8\ In 
particular, the Commission finds that the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act,\9\ 
which requires, among other things, that the rules of a national 
securities exchange be designed to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and to protect 
investors and the public interest. The Commission believes that 
extending the pilot will enable Participants to continue to compile the 
data necessary for the Commission to determine whether permanent 
approval of the proposed rule change is appropriate and in the public 
interest. The Commission further

[[Page 35403]]

believes that raising the limitation in liability for Satisfaction 
Orders during the last seven minutes of the trading day from 10 
contracts to 25 contracts for this pilot period should help to protect 
investors and promote the public interest.
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    \8\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of the 
notice thereof in the Federal Register. As noted above, the proposed 
rule change incorporates changes into the Amex Rules that correspond to 
changes made to the Linkage Plan through Joint Amendment No. 12, which 
was published for public comment in the Federal Register on May 19, 
2004.\10\ The Commission received no comments in response to 
publication of Joint Amendment No. 12. The Commission believes that no 
new issues of regulatory concern are being raised by the Amex's 
proposed rule change. The Commission believes, therefore, that granting 
accelerated approval of the proposed rule change is appropriate and 
consistent with sections 6 and 19(b) of the Act.\11\
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    \10\ See supra note 5.
    \11\ 15 U.S.C. 78f and 78s(b).
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-Amex-2004-36) is approved on 
an accelerated basis.
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    \12\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-14286 Filed 6-23-04; 8:45 am]
BILLING CODE 8010-01-P