[Federal Register Volume 62, Number 33 (Wednesday, February 19, 1997)]
[Notices]
[Pages 7483-7485]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4051]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38266; File No. SR-Amex-97-08]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the American 
Stock Exchange, Inc. Relating to a Pilot Program for Execution of Odd-
Lot Orders

February 11, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on February 10, 1997, the 
American Stock Exchange, Inc. (``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 by the self-regulatory organization. The Commission publishing 
this notice to solicit comments on the proposed rule change from 
interested persons and to grant accelerated approval to the proposed 
rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend for three months its existing pilot 
program under Amex Rule 205 requiring execution of odd-lot market 
orders at the prevailing Amex quote with no differential charge.\2\
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    \2\ The Exchange seeks accelerated approval of the proposed rule 
change in order to allow the pilot program, which expires on 
February 10, 1997, to continue with interruption.
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    The text of the proposed rule change is available for the Office of 
the Secretary, the 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 self-regulatory organization 
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 self-regulatory 
organization 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 Commission previously approved, on a pilot basis extending to 
February 10, 1997, amendments to Amex Rule 205 to require execution of 
odd-lot market orders at the Amex quote with no odd-lot differential 
charged.\3\ The procedures were not initially approved by the 
Commission in 1989\4\ and were most recently extended in December 
1996.\5\
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    \3\ Securities Exchange Act Release No. 38024 (Dec. 6, 1996), 61 
FR 65623 (approving File No. SR-Amex-96-47).
    \4\ Securities Exchange Act Release No. 26445 (Jan. 10, 1989), 
54 FR 2248 (approving File No. SR-Amex-88-23).
    \5\ Securities Exchange Act Release No. 38024 (Dec. 6, 1996), 61 
FR 65623 (approving File No. SR-Amex-96-47). Prior to that release, 
the Commission had extended this pilot program thirteen times. See 
Securities Exchange Act Release Nos. 37462 (July 19, 1996), 61 FR 
39170 (approving File No. SR-Amex-96-25); 36821 (Feb. 8, 1996), 61 
FR 6050 (approving File No. SR-Amex-96-06); 35344 (Feb. 8, 1995), 60 
FR 8430 (approving File No. SR-Amex-95-03); 34949 (Nov. 8, 1994), 59 
FR 58863 (approving File No. SR-Amex-94-47); 34496 (Aug. 8, 1994), 
59 FR 41807 (approving File No. SR-Amex-94-28); 33584 (Feb. 7, 
1994), 59 FR 6983 (Approving File No. SR-Amex-93-45); 32726 (Aug. 9, 
1993), 58 FR 43394 (approving File No. SR-Amex-93-24); 31828 (Feb. 
5, 1993), 59 FR 8434 (approving File No. SR-Amex-93-06); 30305 (Jan. 
20, 1992), 57 FR 4653 (approving File No. SR-Amex-92-04); 29922 
(Nov. 8, 1991), 56 FR 58409 (approving File No. SR-Amex-91-30); 
29186 (May 19, 1991), 56 FR 22488 (approving File No. SR-Amex-91-
09); 28758 (Jan. 10, 1991), 56 FR 1656 (approving File No. SR-Amex-
90-39; and 27590 (Jan. 5, 1990), 55 FR 1123 (approving File No. SR-
Amex-89-31).

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[[Page 7484]]

    In approving prior extensions to the Exchange's odd-lot pilot 
program, the Commission has expressed interest in the feasibility of 
the Exchange utilizing the Intermarket Trading System (``ITS'') best 
bid or offer, rather than the Amex bid or offer, for purposes of the 
Exchange's odd-lot pricing system. In File No. SR-Amex-95-03, 
requesting a further extension of the pilot program, the Exchange 
stated that it had determined to proceed with systems modifications to 
provide for execution of odd-lot market orders at the ITS best bid or 
offer.\6\
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    \6\ See Securities Exchange Act Release No. 35344 (Feb. 8, 
1995), 60 FR 8430 (approving File No. SR-Amex-95-03).
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    The Commission has approved amendments to Amex Rule 205 to 
accommodate the prospective modifications to the Exchange's odd-lot 
pricing system.\7\ Specifically, amended Amex Rule 205 would provide 
that odd-lot market orders to buy or sell would be filled at the 
``adjusted ITS offer'' or ``adjusted ITS bid,'' respectively, which 
would be defined in Amex Rule 205, Commentary .04, as the lowest offer 
and highest bid disseminated by the Amex or by another ITS participant 
market.\8\ Where quotation information is not available (e.g., when 
quotation collection of dissemination facilities are inoperable) odd-
lot market orders would be executed at the prevailing Amex bid or 
offer, or at a price deemed appropriate under prevailing market 
conditions. These procedures also will apply to odd-lot limit orders 
that were immediately executable based on the Amex quote at the time 
the order is received at the trading post or through Post Execution 
Reporting (``PER'') system.
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    \7\See Securities Exchange Act Release No. 36181 (Sept. 1, 
1995), 60 FR 47194 (approving File No. SR-Amex-95-24).
    \8\In order to protect against the inclusion of incorrect or 
stale quotations when determining the highest bid and lowest offer, 
Amex Rule 205, Commentary .04, contains seven criteria that must be 
met before a quotation in a stock from another ITS market center 
will be considered. If the ITS quotation fails to meet one of the 
specified criteria, the best bid or offer disseminated by the 
Exchange will be used. See Securities Exchange Act Release No. 36181 
(Sept. 1, 1995), 60 FR 47194 (approving File No. SR-Amex-95-24).
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    As the Exchange noted in SR-Amex-95-24, it will implement these 
amendments upon completion of the necessary systems enhancements by the 
Exchange and the Securities Information Automation Corporation 
(``SIAC''). Upon implementation of the amended rule, the Exchange will 
notify the Commission, as well as Exchange members and member 
organizations. In order to provide the additional time necessary to 
implement these systems enhancements, the Exchange proposes to extend 
the existing pilot program procedures under Amex Rule 205 for three 
months.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) \9\ of the Act in general and furthers the objectives of 
Section 6(b)(5) \10\ and Section 11A(a)(1) \11\ in particular in that 
it is designed to facilitate the economically efficient execution of 
odd-lot transactions and to improve the execution of customers' orders.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 15 U.S.C. 78k-1(a)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the proposed rule change will impose no 
burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received written comments 
with respect to the proposed rule change.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 
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 at the 
Commission's Public Reference Section, 450 Fifth Street NW., 
Washington, DC 20549. Also, copies of such filing will be available for 
inspection and copying at the principal office of the Amex. All 
submissions should refer to File No. SR-Amex-97-08 and should be 
submitted by March 12, 1997.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    The Commission finds that the Exchange's proposal to extend its 
pilot program concerning the execution of odd-lot orders through May 
12, 1997, is consistent with the requirements of the Act and the rules 
and regulations thereunder applicable to a national securities 
exchange. Specifically, the Commission believes the proposal is 
consistent with Section 6(b)(5) and Section 11A(a)(1) of the Act \12\ 
because the Exchange's proposed pricing procedures are designed to 
facilitate transactions in odd-lot orders, to help ensure the 
economically efficient execution of these transactions, and, in 
general, to protect investors and the public interest. The Commission 
further believes the revised procedures should provide investors with 
more timely executions of their odd-lot orders and should produce 
execution prices that more accurately reflect market conditions than 
would otherwise be the case under the pre-pilot pricing procedures.\13\
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    \12\ 15 U.S.C. 78f(b)(5) and 78K-1(a)(1).
    \13\ Prior to the 1989 pilot program, odd-lot market orders were 
routed to a specialist and held in accumulation in the PER system or 
by the specialist until a round-lot execution in that security took 
place on the Exchange. Subsequent to the round-lot execution, the 
odd-lot order received the same price as the last Exchange round-lot 
transaction, plus or minus an odd-lot dealer differential. See 
Securities Exchange Act Release No. 26445 (Jan. 10, 1989), 54 FR 
2248 (approving File No. SR-Amex-88-23).
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    Nevertheless, the Commission is concerned that the Exchange has 
been unable to implement the new odd-lot pricing procedures as planned. 
Under the current pilot pricing procedures, which only use the Amex 
quote in establishing the execution price, some odd-lot orders may not 
be receiving the best available price.\14\ Therefore, the Commission 
expects the Exchange to complete the systems modifications upon which 
implementation of the new odd-lot pricing procedures depend before the 
May 12, 1997 deadline.\15\ To ensure that the Commission is adequately 
informed of the Exchange's

[[Page 7485]]

progress towards such completion, the Commission again requests that 
the Exchange provide the Commission with a status report regarding this 
project on the first day of every month until the necessary system 
modifications are completed. Finally, upon completion of the systems 
modifications, the Exchange should give advance notice to the 
Commission of the date when the new odd-lot pricing procedures are to 
be implemented.\16\
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    \14\ See Securities Exchange Act Release No. 35344 (Feb. 8, 
1995), 60 FR 8430 (noting that the Exchange's current pricing 
formula does not include quotations from other markets).
    \15\ As noted above, the new procedures provide for odd-lot 
market orders to be filled at the ``adjusted ITS best bid or 
offer.''
    \16\ The Commission expects the Amex to implement the new odd-
lot pricing procedures no later than the May 12, 1997 expiration of 
this pilot extension.
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    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice thereof in the Federal Register. This will permit the pilot 
program to continue on an uninterrupted basis while the Amex works to 
implement the new procedures. In addition, the procedures the Exchange 
proposes to continue using are identical to the procedures that were 
published previously in the Federal Register for the full comment 
period and were approved by the Commission.\17\
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    \17\ See Securities Exchange Act Release No. 35344 (Feb. 8, 
1995), 60 FR 8430; Securities Exchange Act Release No. 36821 (Feb. 
8, 1996), 61 FR 6050; Securities Exchange Act Release No. 37462 
(July 19, 1996), 61 FR 39170; and Securities Exchange Act Release 
No. 38024 (Dec. 6, 1996), 61 FR 65623 (approving File No. SR-Amex-
96-47).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\18\ that the proposed rule change (SR-Amex-97-08) is approved on a 
pilot basis for a three-month period ending on May 12, 1997.

    \18\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\19\
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    \19\ 17 C.F.R. 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-4051 Filed 2-18-97; 8:45 am]
BILLING CODE 8010-01-M