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SECURITIES AND EXCHANGE COMMISSION
Securities and Exchange Commission
DOCUMENT ID: [Release No. 34-56901; File No. SR-Amex-2007-20]
NOTICE: NOTICES
ACTION: Self-regulatory organizations; proposed rule changes:
SUBJECT CATEGORY: Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto Related To Amending Complex Orders Procedures
DOCUMENT SUMMARY: December 5, 2007.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b4 thereunder,\2\ notice is hereby given that
on February 15, 2007, 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 substantially prepared by the
Amex. On November 28, 2007, the Exchange filed Amendment No. 1 to the
proposed rule change. The Commission is publishing this notice to
solicit comments on the proposed rule change, as amended, from interested persons.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to amend complex orders procedures to allow the adjustment of the options leg of the order if market conditions prevent the execution of the nonoption leg at the price agreed upon.
The text of the proposed rule change is available at http://www.amex.com , at the Exchange's principal office, and at the
Commission's Public Reference Room.
II. SelfRegulatory 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 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. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
1. Purpose
Amendment No. 1 makes revisions to the 19b4, as originally filed, and replaces and supersedes the original filing in its entirety.
Complex orders involving orders consisting of stock or securities
futures and option legs are effective hedging strategies that would
permit Members to initially offset the risk of price movements in an
option position, with a corresponding purchase or sale of stock
underlying the option position or securities futures. The Exchange
recently adopted language to allow for the execution of stockoption
orders and security futureoption orders.\3\ These rules currently
provide that complex orders consisting of stock or security futures and
options legs that fall within their proposed definition will be
afforded the same priorities as spread, straddle, ratio, and combination orders.\4\
\3\ See Exchange Act Release No. 53588 (April 3. 2006), 71 FR 18122 (April 10, 2006).
\4\ See Commentary .01 to Rule 950ANTE(d).
Amex Rule 953ANTE provides the execution procedures for stock
option orders and security futureoptions orders. Currently, under Amex Rule 953ANTE, if the security or security
[[Page 70626]]
futures leg of the order cannot be executed at the price(s) agreed upon
due to market conditions, a trade representing the execution of the
options leg of the transaction may be cancelled at the request of any member that is a party to that trade.
The Exchange proposes to amend Rule 953ANTE (b)(ii) to provide
that if the security or security futures leg of the order cannot be
executed at the price agreed upon due to market conditions, the price
of a trade representing the execution of the options leg of the
transaction may be adjusted to be consistent with the net debit or
credit price \5\ of the original order, if market conditions in any of
the nonExchange markets prevent the execution of the nonoption leg at the price agreed upon
\5\ The net debit or credit will remain the same. The
calculation of the net debit or credit is not subject to
interpretation.
For example, a floor broker walks into the ABC options crowd to
sell 20 November ABC calls at $2.00 against 1000 shares of ABC stock at
$50.00, the price where the stock is presently trading. The net debit
price for this transaction would be $46,000.\6\ A member/members agrees
to the trade. The broker then goes to cross the stock at $50.00, but is
unable to because of movement in the stock price, and crosses it at
$50.10. The price of the options would be adjusted and the broker would
print the options at $2.05 to maintain the net debit or credit price of the original order.\7\
\6\ The original net price for the transaction: 1000 shares at
$50.00 ($50,000) less 20 calls at $2.00 ($4,000) equals a net price of $46,000.
\7\ The adjusted net price for the transaction: 1000 shares at
$50.10 ($50,100) less 20 calls at $2.05 ($4,100) equals a net price of $46,000.
The Exchange notes that the orders are presented as crosses and the
counterparty acknowledges the adjustment. When agreeing to the trade,
the counterparty is aware that the price of the trade representing the
options leg of the transaction may be adjusted. Lastly, the Exchange
notes that the repricing of the options leg must be consistent with
the Amex's priority and parity rules.\8\ If the transaction does not
satisfy the Exchange's priority and parity rules by the end of the trading day, then the transaction would be cancelled.
\8\ See Commentary .01 and .02 to Rule 950ANTE(c). As noted in
the aforementioned example, if there was a public customer order on
the book for $2.05 at the time of the trade, the member would not be permitted to trade through the customer's order.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations under the Act applicable to a
national securities exchange and, in particular, the requirements of
section 6(b) \9\ of the Act. Specifically, the Exchange believes the
proposed rule change is consistent with the requirements of section
6(b)(5) \10\ of the Act in that it is 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.
\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
B. SelfRegulatory 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. SelfRegulatory 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 is consistent with the Act. Comments may be submitted by any of the following methods:
Electronic Comments
Paper Comments
All submissions should refer to File Number SRAmex200720. This file number should be included on the subject line if email 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, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. 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 SRAmex200720 and should be submitted on or before January 2, 2008.
\11\ 17 CFR 200.303(a)(12).
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\11\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E724032 Filed 121107; 8:45 am]
BILLING CODE 801101P
SUMMARY: American Stock Exchange LLC,
DOCUMENT BODY 2: December 5, 2007.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b4 thereunder,\2\ notice is hereby given that
on February 15, 2007, 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 substantially prepared by the
Amex. On November 28, 2007, the Exchange filed Amendment No. 1 to the
proposed rule change. The Commission is publishing this notice to
solicit comments on the proposed rule change, as amended, from interested persons.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to amend complex orders procedures to allow the adjustment of the options leg of the order if market conditions prevent the execution of the nonoption leg at the price agreed upon.
The text of the proposed rule change is available at http://www.amex.com , at the Exchange's principal office, and at the
Commission's Public Reference Room.
II. SelfRegulatory 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 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. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
1. Purpose
Amendment No. 1 makes revisions to the 19b4, as originally filed, and replaces and supersedes the original filing in its entirety.
Complex orders involving orders consisting of stock or securities
futures and option legs are effective hedging strategies that would
permit Members to initially offset the risk of price movements in an
option position, with a corresponding purchase or sale of stock
underlying the option position or securities futures. The Exchange
recently adopted language to allow for the execution of stockoption
orders and security futureoption orders.\3\ These rules currently
provide that complex orders consisting of stock or security futures and
options legs that fall within their proposed definition will be
afforded the same priorities as spread, straddle, ratio, and combination orders.\4\
\3\ See Exchange Act Release No. 53588 (April 3. 2006), 71 FR 18122 (April 10, 2006).
\4\ See Commentary .01 to Rule 950ANTE(d).
Amex Rule 953ANTE provides the execution procedures for stock
option orders and security futureoptions orders. Currently, under Amex Rule 953ANTE, if the security or security
[[Page 70626]]
futures leg of the order cannot be executed at the price(s) agreed upon
due to market conditions, a trade representing the execution of the
options leg of the transaction may be cancelled at the request of any member that is a party to that trade.
The Exchange proposes to amend Rule 953ANTE (b)(ii) to provide
that if the security or security futures leg of the order cannot be
executed at the price agreed upon due to market conditions, the price
of a trade representing the execution of the options leg of the
transaction may be adjusted to be consistent with the net debit or
credit price \5\ of the original order, if market conditions in any of
the nonExchange markets prevent the execution of the nonoption leg at the price agreed upon
\5\ The net debit or credit will remain the same. The
calculation of the net debit or credit is not subject to
interpretation.
For example, a floor broker walks into the ABC options crowd to
sell 20 November ABC calls at $2.00 against 1000 shares of ABC stock at
$50.00, the price where the stock is presently trading. The net debit
price for this transaction would be $46,000.\6\ A member/members agrees
to the trade. The broker then goes to cross the stock at $50.00, but is
unable to because of movement in the stock price, and crosses it at
$50.10. The price of the options would be adjusted and the broker would
print the options at $2.05 to maintain the net debit or credit price of the original order.\7\
\6\ The original net price for the transaction: 1000 shares at
$50.00 ($50,000) less 20 calls at $2.00 ($4,000) equals a net price of $46,000.
\7\ The adjusted net price for the transaction: 1000 shares at
$50.10 ($50,100) less 20 calls at $2.05 ($4,100) equals a net price of $46,000.
The Exchange notes that the orders are presented as crosses and the
counterparty acknowledges the adjustment. When agreeing to the trade,
the counterparty is aware that the price of the trade representing the
options leg of the transaction may be adjusted. Lastly, the Exchange
notes that the repricing of the options leg must be consistent with
the Amex's priority and parity rules.\8\ If the transaction does not
satisfy the Exchange's priority and parity rules by the end of the trading day, then the transaction would be cancelled.
\8\ See Commentary .01 and .02 to Rule 950ANTE(c). As noted in
the aforementioned example, if there was a public customer order on
the book for $2.05 at the time of the trade, the member would not be permitted to trade through the customer's order.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations under the Act applicable to a
national securities exchange and, in particular, the requirements of
section 6(b) \9\ of the Act. Specifically, the Exchange believes the
proposed rule change is consistent with the requirements of section
6(b)(5) \10\ of the Act in that it is 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.
\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
B. SelfRegulatory 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. SelfRegulatory 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 is consistent with the Act. Comments may be submitted by any of the following methods:
Electronic Comments
Paper Comments
All submissions should refer to File Number SRAmex200720. This file number should be included on the subject line if email 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, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. 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 SRAmex200720 and should be submitted on or before January 2, 2008.
\11\ 17 CFR 200.303(a)(12).
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\11\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E724032 Filed 121107; 8:45 am]
BILLING CODE 801101P
Common CFR Searches
14 CFR Part 39 40 CFR Part 52 14 CFR Part 71 33 CFR Part 165 50 CFR Part 679 47 CFR Part 73 26 CFR Part 1 40 CFR Part 180 33 CFR Part 117 50 CFR Part 17 44 CFR Part 67 50 CFR Part 648 14 CFR Part 97 40 CFR Part 63 33 CFR Part 100 50 CFR Part 622 50 CFR Part 660 26 CFR Part 301 44 CFR Part 65 39 CFR Part 111 40 CFR Part 300 6 CFR Part 5 40 CFR Part 271 47 CFR Part 64 40 CFR Parts 52 and 81 50 CFR Part 665 10 CFR Part 50 44 CFR Part 64 49 CFR Part 571 39 CFR Part 3020