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Notice of Filing and Order Granting Accelerated Approval to Proposed Rule Change and Amendment No

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Notice of Filing and Order Granting Accelerated Approval to Proposed Rule Change and Amendment No SECURITIES AND EXCHANGE COMMISSION (Release No. 34-53191; File No. SR-Amex-2005-061) January 30, 2006 Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Order Granting Accelerated Approval to Proposed Rule Change and Amendment No. 1 Thereto Relating to the Listing and Trading of Options on Certain Russell Indexes Pursuant to Section 19(b)(1)1 of the Securities Exchange Act of 1934 (“Act”) and Rule 19b-4 thereunder,2 notice is hereby given that on June 3, 2005, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange.3 On July 14, 2005, Amex submitted Amendment No. 1 to the proposed rule change.4 The Commission is publishing this notice and order to solicit comments on the proposed rule change, as amended, from interested persons and to approve the proposal on an accelerated basis. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to list and trade on the Exchange the following cash- settled, European-style index options on the full value of the following Russell Indexes: 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 The Commission has made technical and clarifying changes to this notice with Amex’s consent. Telephone conversation between Florence Harmon, Special Counsel, Division of Market Regulation (“Division”), Commission, Angela Muehr, Attorney, Division, Commission, Kristie Diemer, Attorney, Division, Commission and Jeffrey P. Burns, Associate General Counsel, Amex on June 29, 2005. 4 In Amendment No. 1, Amex made clarifying changes to the contract specifications. (1) Russell 1000® Index; (2) Russell 1000® Growth Index; (3) Russell 1000® Value Index; (4) Russell 2000® Index; (5) Russell 2000® Growth Index; (6) Russell 2000® Value Index; (7) Russell 3000® Index; (8) Russell 3000® Growth Index; (9) Russell 3000® Value Index; (10) Russell Midcap® Index; (11) Russell Midcap® Growth Index; (12) Russell Midcap® Value Index and (13) Russell Top 50® Index (each an “Index,” and collectively, the “Russell Indexes” or “Indexes”). Additionally, the Exchange is also proposing to be able to list and trade long-term options on each of the full value Russell Indexes noted above.5 The text of the proposed rule change is available on Amex’s Web site at http://www.amex.com, at Amex’s principal office and at 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 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 III below. The Exchange 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 the Statutory Basis for, the Proposed Rule Change (1) Purpose The purpose of the proposed rule change is to permit the Exchange to list and trade cash-settled, European-style, stock index options on the Russell Indexes. Each 5 Under Amex Rule 903C(a)(iii), “Long-term Options Series,” the Exchange may list long-term options that expire twelve to sixty months from the date of issuance. 2 Russell Index is a capitalization-weighted index containing various groups of stocks drawn from the largest 3,000 companies incorporated in the U.S. and its territories. All component securities of the Russell Indexes are traded on the Amex, New York Stock Exchange, Inc. (“NYSE”), or The Nasdaq Stock Market, Inc. (“Nasdaq”). Options contracts on the Russell Indexes (except for the Russell Top 50) are currently listed and traded on the Chicago Board Options Exchange, Incorporated (“CBOE”) and the International Securities Exchange, Inc. (“ISE”).6 Index Design and Composition The Russell Indexes are designed to be a comprehensive representation of the investable U.S. equity market. These Indexes are capitalization-weighted and include only those common stocks of corporations domiciled in the U.S. and its territories and that are traded on Amex, NYSE, or Nasdaq. The component securities are weighted by their “available” market capitalization (also called “float-adjusted” market capitalization), 6 See Securities Exchange Act Release Nos. 51619 (April 27, 2005), 70 FR 22947 (May 3, 2005) (approving the listing and trading of ISE options on 21 Russell Indexes); 49388 (March 10, 2004), 69 FR 12720 (March 17, 2004) (approving listing and trading on CBOE of options, including LEAPS, on the Russell Top 200 Index, Russell Top 200 Growth Index, and the Russell Top 200 Value Index); 48591 (October 2, 2003), 68 FR 58728 (October 10, 2003) (approving listing and trading on CBOE of options, including LEAPS, on the Russell 3000 Index, Russell 3000 Value Index, Russell 3000 Growth Index, Russell 2000 Value Index, Russell 2000 Growth Index, Russell 1000 Index, Russell 1000 Value Index, Russell 1000 Growth Index, Russell MidCap Index, Russell MidCap Value Index, and Russell MidCap Growth Index); and 31382 (October 30, 1992), 57 FR 52802 (November 5, 1992) (approving listing and trading on CBOE of options, including LEAPS, on the Russell 2000 Index). Amex recently listed the Rydex Russell Top 50 ETF and options on the Rydex Russell Top 50 ETF. See http://www.amex.com. 3 which is calculated by multiplying the primary market price by the “available” shares.7 The following is a brief description of each Index:8 Russell 3000 Measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. Russell 3000 Growth Measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values. The stocks in this index are also members of either the Russell 1000 Growth or the Russell 2000 Growth indexes. Russell 3000 Value Measures the performance of those Russell 3000 Index companies with lower price-to-book ratios and lower forecasted growth values. The stocks in this index are also members of either the Russell 1000 Value or the Russell 2000 Value. Russell 2000 Measures the performance of the 2,000 smallest companies in the Russell 3000 Index, representing approximately 8% of the total market capitalization of the Russell 3000 Index. Russell 2000 Growth Measures the performance of those Russell 2000 Companies with higher price-to-book ratios and higher forecasted growth values. Russell 2000 Value Measures the performance of those Russell 2000 Companies with lower price-to-book ratios and lower 7 “Available shares” are the total shares outstanding less corporate cross-owned shares, ESOP and LESOP-owned shares comprising 10% or more of shares outstanding, unlisted share classes and shares held by an individual, a group of individuals acting together, a corporation not in the index that owns 10% or more of the shares outstanding or shares subject to IPO lock-ups. ESOP and LESOP- owned shares represent, generally, those shares of a corporation that are owned through employee stock ownership plans. 8 Additional information about the Russell Indexes can be found at http://russell.com/us/indexes/us/definitions.asp. 4 forecasted growth values. Russell 1000 Measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. Russell 1000 Growth Measures the performance of those Russell 1000 Companies with higher price-to-book ratios and higher forecasted growth values. Russell 1000 Value Measures the performance of those Russell 1000 Companies with lower price-to-book ratios and lower forecasted growth values. Russell Midcap Measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 26% of the total market capitalization of the Russell 1000 Index. Russell Midcap Growth Measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. The stocks are also members of the Russell 1000 Growth index. Russell Midcap Value Measures the performance of those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. The stocks are also members of the Russell 1000 Value index. Russell Top 50 Measures the performance of the 50 largest companies in the Russell 3000 Index, representing approximately 41% of the total market capitalization of the Russell 3000. All equity securities listed on Amex, NYSE, or Nasdaq are considered for inclusion in the universe of stocks that comprise the Russell Indexes, with the following exceptions: (1) Stocks trading less than $1.00 per share on May 31 each year; (2) non- U.S. incorporated companies; and (3) preferred and convertible preferred stock, redeemable shares, participating preferred stock, warrants and rights, trust receipts, royalty trusts, limited liability companies, Bulletin Board and Pink Sheet stocks, closed- 5 end investment companies, limited partnerships, and foreign stocks. As a special exception, Berkshire Hathaway is also excluded. The Russell 3000 Index is comprised of the top 3,000 eligible stocks ranked by available market capitalization. All of these stocks are “reported securities,” as defined in Rule 11Aa3-1(a)(4) under the Act.9 All of the Russell Indexes described above are subsets of the Russell 3000 Index. The Growth and Value versions of each of the Russell 1000, Russell 2000, Russell 3000 and Russell Midcap may contain common components, but the capitalization of those components is apportioned so that the sum of the total capitalization of the Growth and Value indexes equals the total capitalization of the respective primary index.
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