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Notice

Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the American Stock Exchange LLC, To Allow for $0.50 Strike Price Intervals for Options Based on the iShares 100 Index Fund

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Start Preamble November 27, 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 November 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. On November 9, 2001, the Exchange filed Amendment No. 1 to the proposed rule change.[3] The Commission is Start Printed Page 63082publishing this notice to solicit comments on the proposed rule change from interested persons.

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

The Amex proposes to allow for one-half point ($0.50) strike price intervals for options based on the iShares 100 Index Fund (“OEF”).

The text of the proposed rule change is available at the Office of the Secretary, Amex and at the Commission.

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 Exchange is proposing to establish one-half point ($0.50) strike price intervals for options on OEF,[4] an exchange-traded fund (“ETF”) that represents ownership in an open-end management company established to hold a portfolio of stocks replicating the S&P 100 Index (“Index”). OEF holds substantially all of the securities of the Index in approximately the same proportions as reflected in the Index. Currently, OEF options and OEF are listed and traded on the Chicago Board Options Exchange, Inc. (“CBOE”); however, the Amex expects in the near future to also list and trade these products.

The Exchange will list options on OEF pursuant to the criteria set forth in Interpretation .06 to Amex Rule 915.[5] However, the Amex believes that it is appropriate to amend its existing strike price intervals for ETFs [6] to permit the strike price interval for options on OEF to be set at $0.50.[7] Currently, options on ETFs at the Amex have strike price intervals of one point ($1.00). The CBOE, however, recently received approval from the Commission to introduce $0.50 strike price intervals on OEF, and accordingly, introduced the $0.50 strike price interval on or about January 31, 2001.[8]

The Amex believes that trading options contracts on OEF with one-half point fixed strike prices will benefit investors by providing greater strike price choices and fostering competition between the options exchanges.[9] The Exchange further asserts that it is appropriate to list options on the OEF with half-point strike prices to ensure that products traded on the Amex remain competitive.[10]

Although the Exchange recognizes that adding additional strike prices on OEF options for trading under the proposed rule change may result in a slight increase in message traffic, the Exchange represents that it has the necessary systems capacity to support any additional strike prices on OEF options that may be added under the proposed rule.

2. Statutory Basis

The Exchange represents that the proposed rule change is consistent with section 6(b) of the Act [11] in general, and furthers the objectives of section 6(b)(5) of the Act [12] in particular, in that it will permit trading in options based on OEF pursuant to strike intervals designed to promote just and equitable principles of trade, and thereby will provide investors with the ability to invest in options based on an additional Amex product.

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 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 either 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 foregoing proposed rule change: (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, the proposed rule change has become effective pursuant to section 19(b)(3)(A) [13] of the Act and Rule 19b-4(f)(6) [14] thereunder.[15]

A proposed rule change filed under Rule 19b-4(f)(6) may not become operative prior to 30 days after the date of filing. However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange seeks to have the proposed rule change become operative immediately as of November 7, 2001 so that the proposed $0.50 strike price intervals may be implemented immediately.

The Commission believes that it is consistent with the protection of investors and the public interest that the proposed rule change, as amended, become operative immediately as of November 7, 2001.[16] At any time within Start Printed Page 6308360 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.[17]

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 filing will also be available for inspection and copying at the principal office of the CBOE. All submissions should refer to File No. SR-Amex-2001-97 and should be submitted by December 26, 2001.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[18]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  See Letter from Jeffrey Burns, Assistant General Counsel, Legal & Regulatory Department, Amex, to Nancy Sanow, Assistant Director, Division of Market Regulation (“Division”), Commission, dated November 9, 2001 (“Amendment No. 1”). Amendment No. 1 clarified that the proposed rule change applies only to the strike prices of the iShares S&P 100 Index Fund and that the Exchange would be able to support a change in strike prices even though such a change would result in a slight increase in message traffic.

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4.  Telephone conversation between Jeffrey Burns, Assistant Counsel, Amex, and Steven Johnston, Special Counsel, Division, Commission, on November 26, 2001 (clarifying that Amex will file a separate proposed rule change and obtain approval before either: (1) Establishing any new strike price interval on an exchange-traded fund and other than OEF; or (2) establishing any new strike price interval on the OEF other than the $0.50 interval that is the subject of SR-Amex-2001-97) (“Telephone Conversation”).

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5.  Amex Rule 915 describes the criteria for underlying securities. Specifically, Commentary .04 under Amex Rule 915 indicates which securities are deemed appropriate for options trading.

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6.  The Exchange received approval to trade options on ETFs on July 1, 1998. See Securities Exchange Act Release No. 40157 (July 1, 1998) 63 FR 37426 (July 10, 1998) (Order Approving File No. SR-Amex-96-44). As noted in the Exchange's filing and the Commission's approval order, strike price intervals for both 100- and 1000-share contracts are set to bracket the ETF share at one-point intervals up to a share price of $200.

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7.  Telephone Conversation.

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8.  See Securities Exchange Act Release No. 43969 (February 15, 2001) 66 FR 11311 (February 23, 2001) (Notice of Filing and Immediate Effectiveness of File No. SR-CBOE-01-02).

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9.  Telephone Conversation.

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15.  Under Rule 19b-4(f)(6)(iii), the Exchange must give 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 the rule change, or such shorter time as designated by the Commission. As required, the Exchange has provided the Commission with written notice of its intent to file the proposed rule change.

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16.  For purposes only of accelerating the operative date of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

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17.  For purposes of calculating the 60-day abrogation date, the Commission considers the 60-day period to have commenced on November 9, 2001, the date the Amex filed Amendment No. 1.

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[FR Doc. 01-29988 Filed 12-3-01; 8:45 am]

BILLING CODE 8010-01-M