[Federal Register Volume 69, Number 146 (Friday, July 30, 2004)]
[Notices]
[Pages 45856-45858]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-17388]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50081; File No. SR-Amex-2004-51]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange LLC To Apply the Current Member 
Firm Guarantee for Equity Options to Index Options

July 26, 2004.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934

[[Page 45857]]

(``Act'')\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 30, 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, 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 amend Commentary .02(d) to Amex Rule 
950(d) to apply the current member firm guarantee for equity options to 
index options traded on the Exchange. The text of the proposed rule 
change is available at the Office of the Secretary, Amex, 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 had 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
    The purpose of the proposed rule change is to extend the Exchange's 
current participation or member firm guarantee to index options. As 
further discussed below, the member firm guarantee provides that a 
floor broker representing a member firm seeking to facilitate its own 
customer's order is entitled to a participation guarantee of 20% if the 
order is traded at the best bid or best offer (the ``BBO'') provided by 
the trading crowd, or 40% if the order is traded at a price that 
improves the trading crowd's market, i.e., at a price between the BBO. 
Amex is proposing to amend Commentary .02(d) to Amex Rule 950(d), which 
sets forth the current member firm guarantee for equity options, to 
extend its application to index options traded on the Exchange.
    In April 2003,\3\ the Exchange received permanent approval of its 
pilot program relating to the member firm guarantee initially approved 
by the Commission on June 2, 2000.\4\ Commentary .02(d) to Amex Rule 
950(d) governs the applicability of member firm guarantees in 
facilitation cross transactions in equity options and sets forth the 
member firm guarantee percentages.\5\
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    \3\ See Securities Exchange Act Release No. 47643 (April 7, 
2003), 68 FR 17970 (April 14, 2003).
    \4\ See Securities Exchange Act Release No. 42894 (June 2, 
2000), 65 FR 36850 (June 12, 2000).
    \5\ Facilitation cross transactions occur when a floor broker 
representing the order of a public customer of a member firm crosses 
that order with a contra side order from the firm's proprietary 
account.
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    The rule provides a floor broker, under certain conditions, the 
ability to cross a specified percentage of the customer order on behalf 
of a member firm before the specialist and/or registered options 
traders in the crowd can participate in the transaction, i.e., the 
member firm guarantee. The provision generally applies to orders of 400 
contracts or more. The Exchange, however, is permitted to establish 
smaller eligible order sizes, on a class-by-class basis, provided that 
the size is not for fewer than 50 contracts.
    The amount of the guaranteed participation percentage depends upon 
a comparison of the original market quoted by the trading crowd in 
response to a request from the floor broker and the price at which the 
order is traded. If the order is traded at the BBO provided by the 
trading crowd in response to the floor broker's initial request for a 
market, then the floor broker is entitled to cross 20% of the order. If 
the order is traded at a price that improves the market provided by the 
trading crowd in response to the floor broker's initial request for a 
market, then the floor broker is entitled to cross 40% of the order. In 
addition, the facilitating member firm may participate in the executed 
contracts only after public customer orders on the specialist's book or 
represented by a floor broker in the crowd have been filled.
    Currently, the member firm guarantee applies only to orders in 
equity options. The instant proposal would extend the member firm 
guarantee to index options. Thus, for index option orders, floor 
brokers similarly would be guaranteed a participation of 20% if the 
order is traded at the BBO, or 40% if the order improves the market. 
All other rules concerning the member firm guarantee that currently 
apply to equity options would also apply to index options. The Exchange 
believes that the proposed expansion of the member firm guarantee to 
index options will provide greater incentive for order flow providers 
to bring order flow to the Exchange.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
section 6 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, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, and to remove impediments to and perfect the mechanism of a 
free and open market and a national market system.
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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 believes that the proposed rule change will impose no 
burden on competition that is not necessary or appropriate in 
furtherance 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. 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 is consistent with the Act. Comments may be submitted by any of 
the following methods:

[[Page 45858]]

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-2004-51 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-2004-51. 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 Section, 450 Fifth 
Street, NW., Washington, DC 20549. 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 
publicly available. All submissions should refer to File Number SR-
Amex-2004-51 and should be submitted on or before August 20, 2004. 

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-17388 Filed 7-29-04; 8:45 am]
BILLING CODE 8010-01-P