[Federal Register Volume 59, Number 167 (Tuesday, August 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21340]


[[Page Unknown]]

[Federal Register: August 30, 1994]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34591; File No. SR-Amex-94-15]

 

Self-Regulatory Organizations; American Stock Exchange, Inc.; 
Order Granting Approval to Proposed Rule Change Amending Rule 205 (Odd-
Lot Orders)

August 24, 1994.
    On May 12, 1994 the American Stock Exchange, Inc. (``Amex'' or 
``Exchange'') submitted to the Securities and Exchange Commission 
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'')\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend Amex Rule 205 (Manner of 
Executing Odd-Lot Orders).
---------------------------------------------------------------------------

    \1\15 U.S.C. 78s(b)(1) (1988).
    \2\17 CFR 240.19b-4 (1991).
---------------------------------------------------------------------------

    The proposed rule change was published for comment in Securities 
Exchange Act Release No. 34416 (July 21, 1994), 59 FR 38217 (July 27, 
1994). No comments were received on the proposal.
    The Amex is amending Rule 205: (1) To provide that no differential 
shall be charged on odd-lot order transactions except for non-regular 
way trades; (2) to revise the definition of the effective transaction 
that triggers the execution of an odd-lot order with respect to certain 
odd-lot limited orders; and (3) to delete, reposition, or re-number 
various provisions relating to specific types of odd-lot orders.
    Under the current provisions of Rule 205, all standard odd-lot 
market orders, as well as marketable odd-lot limited orders, are 
executed with no differential charged.\3\ However, a differential may 
be charged in connection with executions of odd-lot limit orders, 
market orders to sell marked ``short,'' stop orders, and other types of 
orders as specified in Rule 205(B) and (C).\4\
---------------------------------------------------------------------------

    \3\Procedures for executing odd-lot market orders and marketable 
limit orders are currently being implemented on a pilot basis, 
extended until November 8, 1994. See Securities Exchange Act Release 
No. 34496 (August 8, 1994), 59 FR 41807 (August 15, 1994).
    \4\See Amex Rule 205(B) and (C). Currently, the Rules permits 
differentials to be charged in connection with buying on the offer 
and selling on the bid, limited orders ``with or without sale,'' 
buying or selling ``or on close,'' buying or selling ``at the 
close,'' orders filled after the close, ``seller's option'' trades, 
and cash trades.
---------------------------------------------------------------------------

    Under the amendments to Rule 205, the Exchange intends to require 
the execution of all odd-lot market or limit orders, except for non-
regular way executions, without a differential. Non-regular way trades 
will include (1) a ``seller's option'' trade for delivery not less than 
six business days nor more than sixty days following the day of the 
contract; (2) an odd-lot order for cash or ``next day'' delivery, and 
(3) any order for additional settlement periods as may be provided 
under Rule 124 (Types of Bids and Offers). All other odd-lot orders 
will be executed without a differential.
    Odd-lot limited orders must be executed on the first eligible 
effective transaction. Under the current odd-lot pricing procedures, 
the effective transaction for a limited order to buy is the first round 
lot transaction below the specified limit by the amount of the 
differential or by a greater amount. Further, the effective 
transactions for a limited order to sell marked ``long'' is the first 
round lot transaction above the specified limit by the amount of the 
differential or by a greater amount. Finally, the effective transaction 
for a limited order to sell marked ``short'' is the first round lot 
transaction which is above the specified limit by the amount of the 
differential or by a greater amount, and which is also higher than the 
last different round lot transaction price.
    Under the amendments to Rule 205, the effective transaction that 
will trigger the execution of an odd-lot limited order is a transaction 
``at or lower'' than the specified limit for a buy limited order, or 
``at or higher'' than the specified limit for sell limited orders. In 
addition, for sell limited orders marked ``short,'' the triggering 
transaction must also be higher than the last different round lot 
transaction (a ``plus'' or ``zero-plus'' tick).
    Further, under the amendments, marketable limited orders will 
continue to be executed in accordance with the procedures outlined in 
Rule 205 applicable to market orders. Currently, any order entered as a 
limited order, which is marketable at the time it is entered, is 
treated exactly as though it were entered as a market order.\5\ Thus, 
this provision in the amendments is merely a codification of current 
Exchange practice.
---------------------------------------------------------------------------

    \5\Conversation between Michael Cavalier, Assistant General 
Counsel, American Stock Exchange, and Amy Bilbija, Commission, on 
August 19, 1994.
---------------------------------------------------------------------------

    In addition, the amendments delete provisions relating to orders 
that are infrequently or never entered. These include (1) limited 
orders to buy on the offer, sell on the bid, and those marked 
``immediate or cancel''; and (2) limited orders to buy or sell marked 
``or on close.''\6\ By deleting these provisions, the Amex is 
discontinuing their eligibility for order entry.
---------------------------------------------------------------------------

    \6\See Amex Rule 205(B) (1) and (3).
---------------------------------------------------------------------------

    Finally, current provisions relating to ``seller's option'' or cash 
trades will be deleted and subsumed by new Section C(2) entitled ``Non-
Regular Way Trades.'' A differential will be permitted on such 
executions.
    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange, and, in 
particular, with the requirements of Section 6(b).\7\ In particular, 
the Commission believes the proposal is consistent with the Section 
6(b)(5) requirements that the rules of an exchange be designed to 
promote just and equitable principles of trade, to prevent fraudulent 
and manipulative acts, and, in general, to protect investors and the 
public. The Commission believes that the proposal's goal, which is to 
eliminate odd-lot differentials on all but non-regular way trades and 
adjust the pricing mechanism accordingly, should increase the quality 
of execution and accurate reporting of customer odd-lot market and 
limited orders. The Commission also believes that the proposal should 
further the Commission objective of ensuring that customers receive the 
best execution of such orders. As a result of the proposal, the price 
charged for the execution of systematized odd-lot orders will reflect 
the market's price without additional transaction charges.
---------------------------------------------------------------------------

    \7\15 U.S.C. 78f(b) (1988).
---------------------------------------------------------------------------

    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-Amex-94-15) is approved.
---------------------------------------------------------------------------

    \8\15 U.S.C. 78s(b)(2) (1988).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
---------------------------------------------------------------------------

    \9\17 CFR 200.30-3(a)(12) (1991).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-21340 Filed 8-29-94; 8:45 am]
BILLING CODE 8010-01-M