

[Federal Register: July 25, 2007 (Volume 72, Number 142)]
[Notices]               
[Page 40907-40908]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25jy07-100]                         


[[Page 40907]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56090; File No. SR-Amex-2007-73]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to Extension of the iShares[supreg] Russell 2000[supreg] Index 
Fund Option Pilot Program Until January 18, 2008

July 18, 2007.
    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 July 11, 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 and 
II below, which Items have been substantially prepared by Amex. The 
Exchange has filed the proposal pursuant to Section 19(b)(3)(A) of the 
Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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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 the existing pilot program that 
increases the position and exercise limits for options on the 
iShares[supreg]Russell 2000[supreg]Index Fund (``IWM'') traded on the 
Exchange (``IWM Pilot Program''). The text of the proposed rule change 
is available at Amex, the Commission's Public Reference Room, and 
http://www.amex.com.


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

    In its filing with the Commission, 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. 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 Exchange proposes to extend the IWM Pilot Program and to make 
non-substantive changes to simplify the rule text describing the IWM 
Pilot Program. The IWM Pilot Program will allow position and exercise 
limits for options on IWM to remain at 500,000 contracts on a pilot 
basis, for an additional six-month period through January 18, 2008.\5\
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    \5\ January 18, 2008 is the third Friday of the month (or 
expiration Friday), which is the day on which the January 2008 IWM 
options will expire.
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    The Exchange established the IWM Pilot Program in January 2007.\6\ 
As noted in that filing, in June 2005, as a result of a 2-for-1 stock 
split, the position limit for IWM options was temporarily increased 
from 250,000 contracts (covering 25,000,000 shares) to 500,000 
contracts (covering 50,000,000 shares). At the time of the split, the 
furthest IWM option expiration date was January 2007. Therefore, the 
temporary increase of the IWM position limit would have reverted to the 
pre-split level (as provided for in connection with the Rule 904 Pilot 
Program) of 250,000 contracts after expiration in January 2007, or on 
January 22, 2007.\7\
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    \6\ See Securities Exchange Act Release No. 55163 (January 24, 
2007), 72 FR 4547 (January 31, 2007).
    \7 \ See Amex Information Circular 05-0397.
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    The Exchange continues to believe that a position limit of 250,000 
contracts is too low and may be a deterrent to the successful trading 
of IWM options. Importantly, options on IWM are \1/10\th the size of 
options on the Russell 2000[supreg]Index (``RUT''), which have a 
position limit of 50,000 contracts.\8\ Traders who trade IWM options to 
hedge positions in RUT options are likely to find a position limit of 
250,000 contracts in IWM options too restrictive and insufficient to 
properly hedge. For example, if a trader held 50,000 RUT options and 
wanted to hedge that position with IWM options, the trader would need--
at a minimum--500,000 IWM options to properly hedge the position. 
Therefore, the Exchange continues to believe that a position limit of 
250,000 contracts is too low and may adversely affect market 
participants' ability to provide liquidity in this product.
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    \8\ See Amex Rule 904C; see also Securities Exchange Act Release 
Nos. 45236 (January 2, 2002), 67 FR 1378 (January 10, 2002) 
(increase of position and exercise limits to 300,000 for QQQ 
options); and 51043 (January 14, 2005), 70 FR 3402 (January 24, 
2005) (accelerated approval granted to increase position and 
exercise limits for options on Standard and Poor's Depositary 
Receipts[supreg]from 75,000 to 300,000).
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    As the Exchange also described in the proposal that established the 
IWM Pilot Program, IWM options have grown to become one of the largest 
options contracts in terms of trading volume. For example, through July 
9, 2007, year-to-date industry volume in IWM options has averaged over 
513,344 contracts per day, for a total of 61,167,982 million contracts. 
In addition, through July 9, 2007, Amex volume in IWM options has 
averaged 25,852 contracts per day for a total of 3,231,466 contracts.
    As a result, the Exchange proposes that options on IWM continue to 
be subject to position and exercise limits of 500,000 contracts on a 
pilot basis to run through January 18, 2008.\9\ The Exchange believes 
that maintaining the increased position and exercise limits for IWM 
options will lead to a more liquid and more competitive market 
environment for IWM options that will benefit customers interested in 
this product.
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    \9\ Pursuant to Amex Rule 905, the exercise limit established 
for IWM options shall be equivalent to the position limit prescribed 
for IWM options in Commentary .07 to Amex Rule 904. The increased 
exercise limits would only be in effect during the pilot period, to 
run from June 22, 2007 through January 18, 2008.
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    The Exchange will require that each member or member organization 
that maintains a position on the same side of the market in excess of 
10,000 contracts in the IWM option class, for its own account or for 
the account of a customer report certain information.\10\ This data 
would include, but would not be limited to, the option position, 
whether such position is hedged and if so, a description of the hedge 
and if applicable, the collateral used to carry the position. Exchange 
Registered Options Traders and specialists would continue to be exempt 
from this reporting requirement as market-maker information can be 
accessed through the Exchange's market surveillance systems. In 
addition, the general reporting requirement for customer accounts that 
maintain a position in excess of 200 contracts will remain at this 
level for IWM options.\11\
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    \10\ See Amex Rule 906(b).
    \11\ See Amex Rule 906(a).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with and furthers the objectives of Section 6(b)(5) of the Act,\12\ in 
that it is designed to promote just and equitable principles of trade, 
to remove impediments to and perfect the mechanism of a free and

[[Page 40908]]

open market and a national market system, and, in general, to protect 
investors and the public interest.
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    \12\ 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 
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
    Because the forgoing rule change does not: (1) Significantly affect 
the protection of investors or the public interest; (2) impose any 
significant burden on competition; and (3) become operative for 30 days 
after the date of this filing, or such shorter time as the Commission 
may designate, it has become effective pursuant to Section 19(b)(3)(A) 
of the Act\13\ and Rule 19b-4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date of filing.\15\ 
However, Rule 19b-4(f)(6)(iii) \16\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because such waiver 
would permit position and exercise limits for options on IWM to 
continue at 500,000 option contracts for a six-month pilot period. For 
this reason, the Commission designates the proposed rule change to be 
operative upon filing with the Commission.\17\
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    \15\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to 
the Commission written notice of its intent to file the proposed 
rule change, along with a brief description and text of the proposed 
rule change, at least five business days prior to the date of filing 
of the proposed rule change, or such shorter time as designated by 
the Commission. The Exchange has satisfied the five-day pre-filing 
notice requirement.
    \16\ Id.
    \17\ For the purposes only of waiving the 30-day operative 
delay, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of such proposed rule 
change the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors or otherwise in 
furtherance of the purposes of the Act.

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

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File Number SR-Amex-2007-73 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-Amex-2007-73. 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, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of 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-2007-73 and should be 
submitted on or before August 15, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-14312 Filed 7-24-07; 8:45 am]

BILLING CODE 8010-01-P
