01-10609. Self-Regulatory Organizations; Notice of Filing of a Proposed Rule Change by the American Stock Exchange LLC Relating to Members' Written Proposals to List Equity Option Classes

April 23, 2001.

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 8, 2001, 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 prepared by the Exchange. The Exchange submitted an amendment to the proposed rule change on April 17, 2001.^[3] The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Amex proposes to adopt Commentary .08 to Amex Rule 915 to provide procedures for members to submit written proposals requesting the listing for trading on the Amex of any equity option class. The text of the proposed rule change is set forth below. All language is being added.

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Rule 915 Criteria for Underlying Securities

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Commentary

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.08 Members or member organizations may submit written proposals requesting the Exchange to review listing and trading any equity option class. The written proposal should include a discussion of how the proposed option and its underlying security comply with the criteria set forth in paragraph (a) below and with the considerations set forth in paragraph (b). Written proposals received prior to 1:00 p.m. will be considered to be received on that business day and proposals received after 1:00 p.m. will be deemed to have been received on the next business day.

(a) Listing Criteria—To be eligible to be considered for listing on the Exchange, the underlying security must meet the criteria and guidelines set forth in Rule 915 and its Commentary for options on equity securities.

(b) Listing Considerations—In determining whether to list and trade an option class proposed pursuant to Commentary, the Exchange may consider any or all of the following factors:

(i) If the proposed option is already traded on another exchange, the consolidated trading volume and trends in such volume over near and long-term;

(ii) The level and nature of the share and/or trade volume for the underlying security and trends in such volume over near and long-term;

(iii) If the underlying security is listed (or is a prospective listed security) on the Amex, or an affiliated of the Amex, the views of the issuer of such security;

(iv) The price, price volatility, and spread of the underlying security, its “short interest” (i.e., the total amount of the underlying equity security that has been sold short and has not yet been repurchased to close out short positions in the security) and the ability of members and investors to borrow the underlying security;

(v) The industry the underlying security represents in order to: (i) maintain diversity among various industries and issuers selected for options trading; or (ii) provide investors with the ability to use standardized options in industry sectors with growing and developing investor interest; and

(vi) The impact the listing could have on bona fide strategies or businesses of the Exchange or any of its affiliates.

The Exchange shall review and make a determination regarding a member's listing proposal within twenty-five days of receipt of the proposal. If the determination is not to list the proposed option class or to limit or condition the listing of the option in any way, then the Exchange shall, in writing within the twenty-five day period, inform the member submitting the proposal the basis for denial of the proposal or the basis for any limitation or condition put on its acceptance. If the Exchange relies upon the impact the listing could have on bona fide strategies or businesses of the Exchange or its affiliates as a factor for denying, limiting or conditioning the proposed listing, the Exchange shall maintain a record of the bona fide business or strategic considerations supporting its decision.

These procedures will not alter or have any impact on the Exchange's rules, procedures or decisions for allocating and/or reallocating to a specialist unit those options the Exchange determines to list and trade.

In addition, the Exchange's interpretation regarding threats, harassment and retaliation set forth in Rule 16, Commentary .01 shall apply to the listing proposals made by members pursuant to this Commentary .08.

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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 statutory 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 Exchange proposes to adopt Commentary .08 to Amex Rule 915 to provide procedures for members to submit written proposals requesting the listing for trading on the Exchange of any equity option class.^[4] Commentary .08 would require the underlying security to meet the criteria and guidelines set forth in Amex Rule 915 and its Commentary before it can be considered for listing on the Exchange. The written proposal would be required to include a discussion of how the proposed listing complies with the criteria set forth in Amex Rule 915 and its Commentary and the factors set forth below. If a proposal is submitted after 1:00 p.m. on a business day, it would be considered submitted on the following business day. If the underlying security meets the eligibility criteria and guidelines, the Exchange would consider the following factors in determining to list the proposed option:

• If the proposed option is already traded on another exchange, the consolidated trading volume and trends in such volume over the near and long-term;
• The level and nature of the share and/or trade volume for the underlying security and trends in such volume over the near and long-term;
• If the underlying security is listed (or is a prospective listed security) on the Exchange, or on an affiliate of the Exchange, the views of the issuer of such security;
• The price, price volatility, and spread of the underlying security, its “short interest” (i.e., the total amount of the underlying equity security that has been sold short and has not yet been repurchased to close out short positions in the security) and the ability of members and investors to borrow the underlying security.
• The industry the underlying security represents in order to: (i) Maintain diversity among various industries and issuers selected for options trading; or (ii) provide investors with the ability to use standardized options in industry sectors with growing and developing investor interest; and
• The impact the listing could have on bona fide strategies or businesses of the Exchange or any of its affiliates. The Amex would be required to maintain a record of any bona fide business considerations it relies upon in denying or placing limitations or conditions upon a proposed listing.^[5]

The Exchange would be required to review and make a determination regarding a member's listing proposal within 25 days of receipt of the proposal. If the Exchange decides not to list the proposed option class or to limit or condition the listing of the option in any way, the Exchange would be required, in writing and within the 25 day period, to inform the member of the basis for denial of the proposal or the basis for any limitation or condition put on its acceptance.

The proposed rule change would not limit the Exchange's right on its own determination to research, identify, and propose to the Stock Selection Committee, as it does today, the listing of options on securities that meet the listing criteria set forth in Amex Rule 915 and its Commentary. The proposed procedures would not alter or have any impact on the Exchange's rules, procedures or decisions for allocating and/or reallocating to a specialist unit those options the Exchange determines to list. In addition, proposed Commentary .08 would reference the anti-harassment rule set forth in Amex Rule 16, Commentary .01, to prohibit threats, harassment, and retaliation against any person or entity making or advocating a listing proposal or beginning to make markets in any option class on any exchange or other market.

2. Statutory Basis

The Exchange believes that the proposed rule change, as amended, is consistent with section 6(b) of the Act ^[6] in general and furthers the objectives of section 6(b)(5) ^[7] in particular in that it is designed to promote just and equitable principles of trade, remove impediments to a free and open market and a national market system, and protect investors and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

The Amex does not believe that the proposed rule change, as amended, 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

The Amex did not solicit or receive written comments on 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. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 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 such filings will also be available for inspection and copying at the principal office of the Amex. All submissions should refer to the File No. SR-Amex-2001-14 and should be submitted by May 21, 2001.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.^[8]

Margaret H. McFarland,

Deputy Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  17 CFR 240.19b-4.

3.  See letter from Claire P. McGrath, Vice President and Special Counsel, Derivative Securities, Amex, to Elizabeth King, Associate Director, Division of Market Regulation, Commission, dated April 16, 2001 (“Amendment No. 1”). Amendment No. 1 revises proposed Commentary .08 to Amex Rule 915 to require the Amex to maintain a record of any bona fide business considerations it relies upon in denying or placing limitations or conditions upon a proposed listing.

4.  As part of a settlement of an enforcement action by the Commission, four of the five options exchanges, including the Amex, are required to adopt rules to codify listing procedures to be carried out when a member or member organization requests the exchange to list options not currently trading on the exchange. See Order Instituting Public Administrative Proceeding Pursuant to Section 19(h)(1) of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions, Securities Exchange Act Release No. 43268 (September 11, 2000).

5.  See Amendment No. 1, supra note 3.

6.  15 U.S.C. 78f(b).

7.  15 U.S.C. 78f(b)(5).

8.  17 CFR 200.30-3(a)(12).