[Federal Register Volume 70, Number 150 (Friday, August 5, 2005)]
[Notices]
[Pages 45449-45450]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-4225]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52172; File No. SR-Amex-2005-046]


Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto 
Relating to Amendments to the Exchange's Trade-Through and Locked 
Markets Rules

July 29, 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 28, 2005, the American Stock Exchange LLC (``Amex'') 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 Amex. On July 6, 2005, the Amex filed 
Amendment No. 1 to the proposed rule change.\3\ 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.
    \3\ See Form 19b-4 dated July 5, 2005 (``Amendment No. 1''). In 
Amendment No. 1, the Amex revised the rule text to use terms 
consistent with Amex's current rules and made clarifying changes in 
the purpose, statutory basis and burdens sections.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Amex proposes to amend Amex Rules 940 and 943 to amend the 
``trade-through'' and ``locked'' markets rules to allow specialists and 
registered options traders (``ROTs'') to ``trade and ship'' or ``book 
and ship'' an order. The text of the proposed rule change is available 
on the Amex's Web site (http://www.amex.com), at the Amex's Office of 
the Secretary, 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 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. The Amex 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 this proposed rule change is to implement proposed 
Amendment No. 15 to the Plan for the Purpose of Creating and Operating 
an Intermarket Option Linkage (``Plan''). Amendment No. 15, together 
with this proposed rule change, will provide that an Amex member may 
(i) trade an order at a price that is one-tick inferior to the national 
best bid or offer (``NBBO'') if the member contemporaneously transmits 
to the market(s) disseminating the NBBO, Linkage Order(s) \4\ to 
satisfy all interest at the NBBO price (``trade and ship'') and (ii) 
book an order that would lock another exchange if the member 
contemporaneously sends a Linkage Order to such other exchange to 
satisfy all interest at the lock price (``book and ship''). Under the 
trade and ship proposal, any execution the member receives from the 
NBBO market must (pursuant to agency obligations) be reassigned to any 
customer order underlying the Linkage Order that was transmitted to 
trade against the market disseminating the NBBO. Below are examples 
illustrating the application of these concepts:
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    \4\ A ``Linkage Order'' is defined in Amex Rule 940(b)(10) to 
mean an immediate or cancel order routed through the Linkage as 
permitted under the Plan. The three types of Linkage Orders are: (i) 
``Principal Acting as Agent (``P/A'') Order,'' which is an order for 
the principal account of a specialist (or equivalent entity on 
another Participant Exchange that is authorized to represent Public 
Customer orders), reflecting the terms of a related unexecuted 
Public Customer order for which the specialist is acting as agent; 
(ii) ``Principal Order,'' which is an order for the principal 
account of an Eligible Market Maker (or equivalent entity on another 
Participant Exchange) and is not a P/A Order; and (iii) 
``Satisfaction Order,'' which is an order sent through the Linkage 
to notify a Participant Exchange of a Trade-Through and to seek 
satisfaction of the liability arising from that Trade-Through.
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    Trade and Ship Example. Exchange A is disseminating an offer of 
$2.00 for 100 contracts. Exchange B is disseminating the national best 
offer of $1.95 for 10 contracts. No other market is at $1.95. Exchange 
A receives a 100-contract customer buy order to pay $2.00. Under this 
proposal, Exchange A could execute 90 contracts (or 100 contracts) of 
the customer order at $2.00 provided Exchange A simultaneously 
transmits a 10-contract P/A Order to Exchange B to pay $1.95. Assuming 
an execution is obtained from Exchange B, the customer would receive 
the 10-contract fill at $1.95 and 90 contracts at $2.00 (if the 
customer order was originally filled in its entirety at $2.00, an 
adjustment would be required to provide the customer with the $1.95 
price for 10 contracts reflecting the P/A Order execution). As 
proposed, this would not be deemed a trade-through.
    Book and Ship Example. Exchange A is disseminating a $1.85-$2.00 
market. Exchange B is disseminating a $1.80-$1.95 market. The $1.95 
offer is for 10 contracts. No other market is at $1.95. Exchange A 
receives a customer order to buy 100 contracts at $1.95. Under this 
proposal, Exchange A could book 90 contracts of the customer buy order 
at $1.95 provided Exchange A

[[Page 45450]]

simultaneously transmitted a 10-contract P/A Order to Exchange B to pay 
$1.95. Assuming an execution is obtained from Exchange B, the customer 
would receive the 10-contract fill and the rest of the customer's order 
will be displayed as a $1.95 bid on Exchange A. The national best offer 
would likely be $2.00. As proposed, this would not be deemed a 
``locked'' market for purposes of the Plan.
2. Statutory Basis
    The Amex believes that the proposed rule change is consistent with 
Section 6(b) of the Act \5\ in general and furthers the objectives of 
Section 6(b)(5) of the Act,\6\ in particular, in that the proposed rule 
change is designed to prevent fraudulent and manipulative acts and 
practices, promote just and equitable principles of trade, remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, protect investors and the 
public interest.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not 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

    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 Amex 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. 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-2005-046 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-Amex-2005-046. 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. Copies of the 
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-2005-046 and should be submitted on or before 
August 26, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-4225 Filed 8-4-05; 8:45 am]
BILLING CODE 8010-01-P