[Federal Register Volume 70, Number 122 (Monday, June 27, 2005)]
[Notices]
[Pages 36973-36977]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3331]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51884; File No. SR-Amex-2005-038]


Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change Relating to the Listing and Trading of Options, Including 
LEAPS, on Full and Reduced Values of the Nasdaq 100 Index

June 20, 2005.
    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 7, 2005, 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 and II 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 and to approve the 
proposal on an accelerated basis.
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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 states that it proposes to correct an omission in its 
rules to trade regular and long-term options on both the full and 
reduced values of the Nasdaq 100 Index (``Index''). Options on the 
Index are cash-settled and have European-style exercise provisions. The 
text of the proposed rule change is available on the Amex's Web site 
(http://www.amex.com), at the Amex's principal office, and at the 
Commission's Public Reference Room.

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.

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

1. Purpose
    The Exchange states that it proposes to correct an omission in its 
rules to trade regular and long-term options on both the full and 
reduced values of the Nasdaq 100 Index.\3\ The Exchange commenced 
trading of options based on the full and reduced values of the Nasdaq 
100 Index in October 2001. However, the Exchange failed to submit a 
proposal to list and trade such options.\4\ As a result, the Exchange 
proposes to amend its rules to provide for the listing and trading of 
these options on the Exchange. Specifically, the Exchange seeks to 
amend its rules to provide for the listing of options based upon the 
full value of the Nasdaq 100 Index (``Full-size Nasdaq 100 Index'' or 
``NDX'') and one-tenth of the value of the Nasdaq 100 Index (``Mini 
Nasdaq 100 Index'' or ``MNX''),\5\ including long-term options based 
upon the full value of the Nasdaq 100 Index (``NDX LEAPS'') and one-
tenth of the value of the Nasdaq 100 Index (``MNX LEAPS'').\6\ These 
index options are cash-settled, European-style options based on the 
full and reduced values of the Nasdaq 100 Index, a stock index 
calculated and maintained by The Nasdaq Stock Market, Inc. 
(``Nasdaq'').\7\
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    \3\ Options on NDX and MNX are currently listed and trading on 
the Exchange, the Chicago Board Options Exchange, Inc. (``CBOE'') 
and the International Securities Exchange, Inc. (``ISE''). See 
Securities Exchange Act Release Nos. 33166 (November 8, 1993), 58 FR 
60710 (November 17, 1993) (SR-CBOE-93-42) and 51121 (February 1, 
2005), 70 FR 6476 (February 7, 2005) (SR-ISE-2005-01).
    \4\ See Securities Exchange Act Release No. 45163 (December 18, 
2001), 66 FR 66958 (December 27, 2001) (SR-Amex-2001-101) (notice of 
filing and immediate effectiveness disclosing license fees in 
connection with NDX and MNX).
    \5\ Options on NDX and MNX are currently listed for trading on 
the CBOE. Options on NDX and MNX listed on the Exchange would be 
identical to the NDX and MNX options listed on CBOE.
    \6\ Under Amex Rule 903, the Exchange may list long-term options 
that expire up to 60 months from the date of issuance.
    \7\ A description of the Index is available on Nasdaq's Web site 
at http://dynamic.nasdaq.com/dynamic/nasdaq100_activity.stm.
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Index Design and Composition

    The Nasdaq 100 Index, launched in January 1985, represents the 
largest non-financial domestic and international issues listed on 
Nasdaq based on market capitalization. The Index reflects companies 
across major industry groups, including computer hardware and software, 
telecommunications, retail/wholesale trade, and biotechnology.
    The Index is calculated using a modified capitalization-weighted 
methodology. The value of the Index equals the aggregate value of the 
Index share weights, also known as the Depository Receipt Multiplier, 
of each of the component securities multiplied by each security's 
respective last sale price on Nasdaq or the Nasdaq Official Closing 
Price (``NOCP''), divided by Adjusted Base Period Market Value 
(``ABPMV''), and multiplied by the base value. The ABPMV serves the 
purpose of scaling such aggregate value (otherwise in the trillions) to 
a lower order of magnitude that is more desirable for Index reporting 
purposes. If trading in an Index security is halted while the market is 
open, the last Nasdaq traded price for that security is used for all 
index computations until trading resumes. If trading is halted before 
the market is open, the previous day's NOCP is used. Additionally, the 
Index is calculated without regard to any dividends on component 
securities. The methodology is expected to retain, in general, the 
economic attributes of capitalization weighting, while providing 
enhanced diversification. To accomplish this, Nasdaq reviews the 
composition of the Index on a quarterly basis and adjusts the weighting 
of Index components using a proprietary algorithm, if certain pre-
established weight distribution requirements are not met.
    Nasdaq has certain eligibility requirements for inclusion in the 
Index.\8\ For example, to be eligible for inclusion in the Index, a 
component security must be exclusively listed on the Nasdaq National 
Market, or dually listed on a national securities exchange prior to 
January 1, 2004.\9\ Only one class

[[Page 36974]]

of security per issuer is considered for inclusion in the Index.
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    \8\ The initial eligibility criteria and continued eligibility 
criteria are available on Nasdaq's Web site at http://dynamic.nasdaq.com/dynamic/nasdaq100_activity.stm.
    \9\ In the case of spin-offs, the operating history of the spin-
off would be considered. Additionally, if a component security would 
otherwise qualify to be in the top 25% of securities included in the 
Index by market capitalization for the six prior consecutive months, 
it would be eligible if it had been listed for one year.
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    Additionally, the issuer of a component security cannot be a 
financial or investment company and cannot currently be involved in 
bankruptcy proceedings. Criteria for inclusion also require the average 
daily trading volume of a component security to be at least 200,000 
shares on Nasdaq. If a component security is of a foreign issuer, based 
on its country of incorporation, it must have listed options or be 
eligible for listed-options trading. In addition, the issuer of a 
component security must not have entered into any definitive agreement 
or other arrangement that would result in the security no longer being 
eligible for inclusion in the Index within the next six months. An 
issuer of a component security also must not have annual financial 
statements with an audit opinion where the auditor or the issuer has 
indicated that the audit opinion cannot be currently relied upon.
    As of March 31, 2005, the following were characteristics of the 
Index:
     The total capitalization of all components of the Index 
was approximately $1.75 trillion;
     Regarding component capitalization, (a) the highest 
capitalization of a component was $262.7 billion (Microsoft Corp.), (b) 
the lowest capitalization of a component was $1.4 billion (Level 3 
Communications, Inc.), (c) the mean capitalization of the components 
was $17.64 billion, and (d) the median capitalization of the components 
was $7.17 billion;
     Regarding component price per share, (a) the highest price 
per share of a component was $133.17 (Sears Holdings Corp.), (b) the 
lowest price per share of a component was $1.67 (JDS Uniphase Corp.), 
(c) the mean price per share of the components was $36.82, and (d) the 
median price per share of the components was $33.30;
     Regarding component weightings, (a) the highest weighting 
of a component was 14.89% (Microsoft Corp.), (b) the lowest weighting 
of a component was 0.08% (Level 3 Communications, Inc.), (c) the mean 
weighting of the components was 1.00%, (d) the median weighting of the 
components was 0.41%, and (e) the total weighting of the top five 
highest weighted components was 39.08% (Microsoft Corp., Intel 
Corporation, Cisco Systems, Inc., Dell Inc. and Amgen Inc.);
     Regarding component available shares, (a) the most 
available shares of a component was 10.87 billion shares (Microsoft 
Corp.), (b) the least available shares of a component was 51.67 million 
shares (Invitrogen Corporation), (c) the mean available shares of the 
components was 699.9 million shares, and (d) the median available 
shares of the components was 250.3 million shares;
     Regarding the six-month average daily volumes of the 
components, (a) the highest six-month average daily volume of a 
component was 92.1 million shares (Sirius Satellite Radio Inc.), (b) 
the lowest six-month average daily volume of a component was 408,000 
shares (Sigma-Aldrich Corporation), (c) the mean six-month average 
daily volume of the components was 8.9 million shares, (d) the median 
six-month average daily volume of the components was 3.3 million 
shares, (e) the average of six month average daily volumes of the five 
most heavily traded components was 67.83 million shares (Sirius 
Satellite Radio Inc, Microsoft Corp., Intel Corp., Cisco Systems, Inc. 
and Oracle Corp.), and (f) 100% of the components had a six month 
average daily volume of at least 50,000; and
     Regarding option eligibility, (a) 100% of the components 
were options eligible, as measured by weighting, and (b) 100% of the 
components were options eligible, as measured by number.

Index Calculation and Index Maintenance

    In recent years, the value of the Full-size Nasdaq 100 Index has 
increased significantly, such that the value of the Index was 1482.53 
on March 31, 2005. As a result, the premium for the Full-size Nasdaq 
100 Index options also has increased. The Exchange believes that this 
has caused Full-size Nasdaq 100 Index options to trade at a level that 
may be uncomfortably high for retail investors. The Exchange believes 
that listing options on reduced values attracts a greater source of 
customer business than if the options were based only on the full value 
of the Index. The Exchange further believes that listing options on 
reduced values provides an opportunity for investors to hedge, or 
speculate on, the market risk associated with the stocks comprising the 
Index. Additionally, by reducing the values of the Index, investors are 
able to use this trading vehicle while extending a smaller outlay of 
capital. The Exchange believes that this attracts additional investors 
and, in turn, creates a more active and liquid trading environment.\10\
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    \10\ The Exchange believes that options trading on MNX have 
generated considerable interest from investors.
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    The Full-size Nasdaq 100 Index and the Mini Nasdaq 100 Index levels 
are calculated continuously, using the last sale price for each 
component stock in the Index, and are disseminated every 15 seconds 
throughout the trading day.\11\ The Full-size Nasdaq-100 Index level 
equals the current market value of component stocks multiplied by 125 
and then divided by the stocks' market value of the adjusted base 
period. The adjusted base period market value is determined by 
multiplying the current market value after adjustments times the 
previous base period market value and then dividing that result by the 
current market value before adjustments. To calculate the value of the 
Mini Nasdaq 100 Index, the full value of the Index is divided by ten. 
To maintain continuity for the Index's value, the divisor is adjusted 
periodically to reflect events such as changes in the number of common 
shares outstanding for component stocks, company additions or 
deletions, corporate restructurings, or other capitalization changes.
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    \11\ Full-size Nasdaq 100 Index and Mini Nasdaq 100 Index levels 
are disseminated through the Nasdaq Index Dissemination Services 
(``NIDS'') during normal Nasdaq trading hours (9:30 a.m. to 4 p.m. 
ET). The Index is calculated using Nasdaq prices (not consolidated) 
during the day and the NOCP for the close. The closing value of the 
Index may change until 5:15 p.m. ET due to corrections to the NOCP 
of the component securities. In addition, the Index is published 
daily on Nasdaq's Web site and through major quotation vendors such 
as Bloomberg, Reuters, and Thomson's ILX.
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    The settlement values for purposes of settling both Full-size 
Nasdaq 100 Index (``Full-size Settlement Value'') and Mini Nasdaq 100 
Index (``Mini Settlement Value'') are calculated based on a volume-
weighted average of prices reported in the first five minutes of 
trading for each of the component securities on the last business day 
before the expiration date (``Settlement Day'').\12\ The Settlement Day 
is normally the Friday preceding ``Expiration Saturday.''\13\ If a 
component security in the Index does not trade on Settlement Day, the 
closing price from the previous trading day would be used to calculate 
both the Full-size Settlement Value and Mini Settlement Value.\14\ 
Accordingly, trading in options on the Index will normally cease on the 
Thursday preceding an Expiration Saturday.
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    \12\ The aggregate exercise value of the option contract is 
calculated by multiplying the Index value by the Index multiplier, 
which is 100.
    \13\ For any given expiration month, options on the Nasdaq 100 
Index will expire on the third Saturday of the month.
    \14\ Full-size Settlement Values and Mini Settlement Values are 
disseminated by CBOE.
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    Nasdaq monitors and maintains the Index. Nasdaq is responsible for 
making all necessary adjustments to the Index to

[[Page 36975]]

reflect component deletions; share changes; stock splits; stock 
dividends; stock price adjustments due to restructuring, mergers, or 
spin-offs involving the underlying components; and other corporate 
actions. Some corporate actions, such as stock splits and stock 
dividends, require simple changes to the available shares outstanding 
and the stock prices of the underlying components.
    The component securities are evaluated on an annual basis, except 
under extraordinary circumstances that may result in an interim 
evaluation, as follows: Securities listed on Nasdaq that meet its 
eligibility criteria are ranked by market value using closing prices as 
of the end of October and publicly available total shares outstanding 
as of the end of November. Eligible component securities that are 
already in the Index and ranked in the top 100 (based on market value) 
are retained in the Index. Component securities that are ranked from 
101 to 150 are also retained provided that each such component security 
was ranked in the top 100 during the previous ranking review. 
Components that do not meet the criteria are replaced. The replacement 
securities chosen are those Index-eligible securities that have the 
largest market capitalization and are not currently in the Index.
    The list of annual additions and deletions to the Index is publicly 
announced in early December. Changes to the Index are made effective 
after the close of trading on the third Friday in December. If at any 
time during the year a component security no longer trades on Nasdaq, 
or is otherwise determined by Nasdaq to become ineligible for inclusion 
in the Index, that component security would be replaced with the 
largest market capitalization component not currently in the Index that 
met the eligibility criteria described earlier.
    Although the Exchange is not involved in the maintenance of the 
Index, the Exchange represents that it will monitor the Index on a 
quarterly basis and file a proposed rule change with the Commission 
pursuant to Rule 19b-4 if: (i) The number of securities in the Index 
drops by one-third or more; (ii) 10% or more of the weight of the Index 
is represented by component securities having a market value of less 
than $75 million; (iii) less than 80% of the weight of the Index is 
represented by component securities that are eligible for options 
trading pursuant to Amex Rule 915; (iv) 10% or more of the weight of 
the Index is represented by component securities trading less than 
20,000 shares per day; or (v) the largest component security accounts 
for more than 25% of the weight of the Index or the largest five 
components in the aggregate account for more than 50% of the weight of 
the Index.
    The Exchange will further notify the Commission's Division of 
Market Regulation if Nasdaq determines to cease maintaining and 
calculating the Index, or if the Index values are not disseminated 
every 15 seconds by a widely available source. The Amex has represented 
that, if the Index ceases to be maintained or calculated, or if the 
Index values are not disseminated every 15 seconds by a widely 
available source, it would not list any additional series for trading 
and would limit all transactions in such options to closing 
transactions only for the purpose of maintaining a fair and orderly 
market and protecting investors.

Contract Specifications

    The contract specifications for options on the Index are set forth 
as an Exhibit to the proposed rule change. The contract specifications 
are identical to the contract specifications of NDX and MNX options 
that also trade on CBOE and ISE. The Index is a broad-based index, as 
defined in Amex Rule 900C(b)(1). Options on the Nasdaq 100 Index are 
European-style and A.M. cash-settled.\15\ The Exchange's standard 
trading hours for index options (9:30 a.m. to 4:15 p.m. ET), as set 
forth in Commentary .02 to Amex Rule 1, apply to options on the Nasdaq 
100 Index. Exchange rules that are applicable to the trading of options 
on broad-based indexes also apply to both NDX and MNX.\16\ 
Specifically, the trading of NDX and MNX options would be subject to, 
among others, Exchange rules governing margin requirements and trading 
halt procedures for index options.
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    \15\ Amex intends for the contract specifications, which the 
Exchange submitted as an exhibit, to include the phrase ``A.M. cash 
settled'' in the ``Settlement Type'' section. Phone conversation 
between Angela Muehr, Attorney, Division of Market Regulation, 
Commission, and Jeff Burns, Associate General Counsel, Amex, on May 
4, 2005.
    \16\ See Amex Rules 900C et al.
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    For NDX, the Exchange proposes to establish aggregate position and 
exercise limits at 75,000 contracts on the same side of the market. The 
Full-size Nasdaq Index contracts would be aggregated with Mini Nasdaq 
100 Index contracts, where ten Mini Nasdaq 100 Index contracts equal 
one Full-size Nasdaq 100 Index contract.\17\ Commentary .01(c) to Rule 
904C provides that position limits for hedged index options may not 
exceed twice the established position limits for broad stock index 
groups. A hedge exemption of 150,000 contracts and 1,500,000 contracts 
is available for NDX and MNX, respectively.\18\
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    \17\ The position limits proposed by the Exchange for Nasdaq 100 
Index options are identical to those established by CBOE and ISE.
    \18\ The same limits that apply to position limits would apply 
to exercise limits for these products. Furthermore, Amex intends for 
the contract specifications, which the Exchange submitted as an 
exhibit, to include the hedge exemption in the ``Position and 
Exercise Limits'' section. Phone conversation between Angela Muehr, 
Attorney, Division of Market Regulation, Commission, and Jeff Burns, 
Associate General Counsel, Amex, on May 4, 2005.
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    The Exchange proposes to apply broad-based index margin 
requirements for the purchase and sale of options on the Index. 
Accordingly, purchases of put or call options with nine months or less 
until expiration must be paid for in full. Writers of uncovered put or 
call options would be required to deposit or maintain 100% of the 
option proceeds, plus 15% of the aggregate contract value (current 
index level x $100), less any out-of-the-money amount, subject to a 
minimum of the option proceeds plus 10% of the aggregate contract value 
for call options and a minimum of the option proceeds plus 10% of the 
aggregate exercise price amount for put options.
    The Exchange proposes to set strike price intervals at 2\1/2\ 
points for certain near-the-money series in near-term expiration months 
when the Full-size Nasdaq 100 Index or Mini Nasdaq 100 Index is at a 
level below 200, and 5 point strike price intervals for other options 
series with expirations up to one year, and at least 10 point strike 
price intervals for longer-term options.\19\ The minimum tick size for 
series trading below $3 is $0.05, and for series trading at or above $3 
is $0.10. Based on the current index levels, the Exchange plans to set 
strike price intervals of 5 points and 2\1/2\ points for NDX and MNX, 
respectively.
    The Exchange proposes to list options on both the Full-size Nasdaq 
100 Index and the Mini Nasdaq 100 Index in the three consecutive near-
term expiration months plus up to three successive expiration months in 
the March cycle.\20\ For example, consecutive expirations of January, 
February, March, plus June, September, and December expirations would 
be listed.\21\ In addition, long-term

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option series having up to 60 months to expiration may be traded.\22\ 
The trading of any long-term Nasdaq 100 Index options would be subject 
to the same rules that govern the trading of all the Exchange's index 
options, including sales practice rules, margin requirements, and 
trading rules.
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    \19\ See e.g. Securities Exchange Act Release No. 34129 (May 27, 
1994), 59 FR 28905 (June 3, 1994) (SR-Amex-91-31).
    \20\ Amex intends for the contract specifications, which the 
Exchange submitted as an exhibit, to include the phrase, ``LEAPS may 
also be available,'' in the ``Expiration Cycle'' section. Phone 
conversation between Angela Muehr, Attorney, Division of Market 
Regulation, Commission, and Jeff Burns, Associate General Counsel, 
Amex, on May 4, 2005.
    \21\ See Amex Rule 903C.
    \22\ See Amex Rule 903C(a).
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Surveillance and Capacity

    The Exchange represents that it has an adequate surveillance 
program in place for options traded on the Index and applies the same 
program procedures that it applies to the Exchange's other index 
options. Additionally, the Exchange is a member of the Intermarket 
Surveillance Group (``ISG'') under the Intermarket Surveillance Group 
Agreement, dated June 20, 1994. The members of the ISG include all of 
the U.S. registered stock and options markets: Amex, the Boston Stock 
Exchange, CBOE, the Chicago Stock Exchange, ISE, the National Stock 
Exchange, NASD, the New York Stock Exchange, the Pacific Stock 
Exchange, and the Philadelphia Stock Exchange. The ISG members work 
together to coordinate surveillance and investigative information 
sharing in the stock and options markets. In addition, the major 
futures exchanges are affiliated members of the ISG, which allows for 
the sharing of surveillance information for potential intermarket 
trading abuses.
    The Exchange has represented that it has the necessary systems 
capacity to support options series resulting from options on the NDX 
and MNX, including NDX LEAPS, and MNX LEAPS.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Act \23\ in general, and with Section 6(b)(5) in 
particular,\24\ 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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    \23\ 15 U.S.C. 78f.
    \24\ 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 would 
impose any inappropriate 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. 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 Comment

     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-2005-038 on the subject line.

Paper Comments:

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.
    All submissions should refer to File Number SR-Amex-2005-038. 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, Station 
Place, 100 F Street, NE, Washington, DC 20549. Copies of this 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-2005-038 and should be submitted on or before July 18, 2005.

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.\25\ In 
particular, the Commission believes that the proposal is consistent 
with Section 6(b)(5) of the Act,\26\ which requires that the rules of 
an exchange be designed to prevent fraudulent and manipulative acts and 
practices, 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 in general to protect investors and the 
public interest. The Commission notes that it previously approved the 
listing and trading of options on the Nasdaq 100 Index on both the CBOE 
and the ISE.\27\ The Commission presently is not aware of any 
regulatory issue that should cause it to revisit that earlier finding 
or preclude the trading of such options on the Amex.
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    \25\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. See 15 
U.S.C. 78c(f).
    \26\ 15 U.S.C. 78f(b)(5).
    \27\ See supra note 3.
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    In approving this proposal, the Commission has specifically relied 
on the following representations made by the Exchange:
    1. The Exchange will notify the Commission's Division of Market 
Regulation immediately if Nasdaq determines to cease maintaining and 
calculating the Nasdaq 100 Index, or if the Nasdaq 100 Index values are 
not disseminated every 15 seconds by a widely available source. If the 
Index ceases to be maintained or calculated, or if the Index values are 
not disseminated every 15 seconds by a widely available source, the 
Exchange will not list any additional series for trading and limit all 
transactions in such options to closing transactions only for the 
purpose of maintaining a fair and orderly market and protecting 
investors.
    2. The Exchange has an adequate surveillance program in place for 
options traded on the Nasdaq 100 Index.
    3. The additional quote and message traffic that will be generated 
by listing and trading NDX, MNX, NDX LEAPS, and MNX LEAPS will not 
exceed the Exchange's current message capacity allocated by the 
Independent System Capacity Advisor.

[[Page 36977]]

    The Commission further notes that in approving this proposal, it 
relied on the Exchange's discussion of how Nasdaq currently calculates 
the Index. If the manner in which Nasdaq calculates the Index were to 
change substantially, this approval order might no longer be effective.
    In addition, the Commission believes that the position limits for 
these new options, and the hedge exemption from such position limits, 
are reasonable and consistent with the Act. The Commission previously 
has found identical provisions for NDX and MNX options to be consistent 
with the Act.\28\
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    \28\ See Securities Exchange Act Release No. 44156 (April 6, 
2001), 66 FR 19261 (April 13, 2001) (SR-CBOE-00-14) (order approving 
a proposed rule change by CBOE to increase position and exercise 
limits for Nasdaq 100 Index options, expand the Index hedge 
exemption, and eliminate the near-term position limit restriction).
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    The Commission finds good cause for approving this proposal before 
the thirtieth day after the publication of notice thereof in the 
Federal Register. Because options on the Nasdaq 100 Index already trade 
already trade on the Amex, accelerating approval of the Amex's proposal 
should benefit investors by updating the Exchange's rules to reflect 
the updates that should have been made when the Amex began trading the 
options in October 2001.\29\
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    \29\ The Commission notes that, for purposes of inspection and 
compliance, this approval is not retroactive.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\30\ that theproposed rule change (SR-Amex-2005-38), is hereby 
approved.
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    \30\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-3331 Filed 6-24-05; 8:45 am]
BILLING CODE 8010-01-P