
[Federal Register: March 18, 2008 (Volume 73, Number 53)]
[Notices]               
[Page 14512-14513]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18mr08-124]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57483; File No. SR-Amex-2008-22]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Widen the Spread Tolerances and Eliminate the Momentum Tolerances 
Built Into the AEMI System

March 12, 2008.
    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 March 11, 2008, 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 prepared substantially by the Amex. The 
Amex has submitted the proposed rule change under 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 Amex proposes to amend Amex Rules 1A--AEMI, ``Applicability, 
Definitions, References and Phase-In,'' and 128A--AEMI, ``Automatic 
Execution,'' to reflect the widening of the spread tolerances and the 
elimination of the momentum tolerances built into the AEMI system. The 
Amex believes that these changes are necessary to enable the automated 
execution of orders and quotes (``Auto-Ex'') to occur more continuously 
on the Exchange, without unnecessary interruption.
    The text of the proposed rule change is available at http://
www.amex.com, the principal office of the Amex, and 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 III 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
    Spread and momentum tolerances are built into AEMI whereby if the 
difference in price of any two consecutive executions (spread) or 
velocity of price changes over a specific time window (momentum) in any 
particular security exceed certain thresholds--a ``breach''--Auto-Ex is 
disabled in that security.\5\ Upon a breach, an Amex specialist would 
conduct an intra-day pair-off before Auto-Ex is restored. The Amex now 
believes that the tolerances, in their current form, are no longer 
essential to the proper functioning of an automated market, given that 
Regulation NMS \6\ ensures price protection for automated quotations in 
other market centers that are priced better than the Amex top of book. 
Further, the Amex believes that the tolerances in their current form 
have not necessarily been effective in dampening price volatility (in 
contrast to Amex specialists' obligations to maintain reasonable depth 
with price continuity). The Amex also notes that its competitors, 
Nasdaq and NYSE Arca, do not impose such limitations on Auto-Ex in 
their markets.\7\ Accordingly, the Amex believes that the time has come 
to modify its systems so that Auto-Ex can occur more continuously, 
without

[[Page 14513]]

unnecessary interruptions by breaches, and believes that market quality 
will not be compromised by such changes.
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    \5\ See Rule 128A--AEMI(f)(i)-(ii).
    \6\ 17 CFR 242.600 et seq.
    \7\ The Amex states that New York Stock Exchange Rule 
1000(a)(iv) specifies that Auto-Ex will disable when a ``liquidity 
replenishment point'' is reached. According to the Amex, a liquidity 
replenishment point is a type of spread tolerance. The Amex states, 
further, that the NYSE does not have anything equivalent to a 
momentum tolerance.
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    The proposed changes would double the existing spread tolerances, 
and eliminate the momentum tolerances,\8\ so that the automatic 
execution of trades by AEMI could occur more continuously during the 
trading day. The Amex states that Auto-Ex would be shut down only if: 
(i) There were a breach of a Tolerance (as re-defined by the proposal 
in Rule 128A--AEMI(g)); (ii) a systems, regulatory, or order imbalance 
issue required a halt to automatic trading, whereupon Auto-Ex would be 
re-enabled by the specialist via auction pair-off or re-opening pair-
off, as per current practice; or (iii) if all liquidity on either side 
of the market in a particular security were momentarily exhausted, 
whereupon a non-firm stabilizing quote would be maintained until the 
specialist updated his firm quote, as per current practice.\9\
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    \8\ The Amex states that the ``elimination'' of the momentum 
tolerance (Rule 128A--AEMI(f)(ii)) will be accomplished systemically 
by re-setting the parameters programmed into AEMI at extreme values 
that should never be encountered, rather than eliminating the 
concept itself from AEMI, which would be a substantially more 
difficult system change.
    \9\ See Rule 1A--AEMI (defining stabilizing quote).
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2. Statutory Basis
    The Amex believes that the proposed rule change is designed to be 
consistent with Regulation NMS, as well as Section 6(b) of the Act,\10\ 
in general, and furthers the objectives of Section 6(b)(5) of the 
Act,\11\ in particular, 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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Amex believes that 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.

II. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Amex has designated the proposed rule change as one that: (1) 
Does not significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) does not become operative for 30 days from the date of filing, 
or such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest. Therefore, the 
proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Amex to provide the Commission with written notice of 
its intention to file the proposed rule change, along with a brief 
description of the text of the proposed rule change, at least five 
business days prior to filing the proposal with the Commission, or 
such shorter time as designated by the Commission. The Commission 
has determined to waive the five-day period in this case.
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    The Amex has requested that the Commission waive the 30-day 
operative delay. The Commission hereby grants the Amex's request.\14\ 
The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because other exchanges already operate in a manner proposed herein for 
AEMI, and the Amex's proposal does not appear to present any novel 
regulatory issues.
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    \14\ For purposes of waiving the 30-day operative delay, the 
Commission has considered the proposal'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 the 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.

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 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-2008-22 on the subject line.

Paper Comments

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

    All submissions should refer to File Number SR-Amex-2008-22. 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 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-2008-22 and should be 
submitted on or before April 8, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-5427 Filed 3-17-08; 8:45 am]

BILLING CODE 8011-01-P
