[Federal Register Volume 66, Number 35 (Wednesday, February 21, 2001)]
[Notices]
[Pages 11073-11074]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-4261]



[[Page 11073]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43954; File No. SR-AMEX 01-01]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 by the American Stock Exchange LLC Relating 
to Amendments to Rule 126(g) and Precedence Based on Size

February 12, 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 January 18, 2001, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I, II and III below, which Items have been prepared by the 
Exchange. On February 5, 2001, the Amex amended the proposal.\3\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See January 23, 2001 letter from Michael Cavalier, Associate 
General Counsel, Legal and Regulatory, Amex, to Nancy Sanow, 
Assistant Director, Division of Market Regulation, SEC (``Amendment 
No. 1''). At the Commission's request, the Amex filed Amendment No. 
1, which asks that the proposal be implemented on a one-year pilot 
program basis.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Amex proposes to amend Amex Rule 126(g), Commentary .01, to 
reduce from 25,000 to 5,000 shares the minimum size block cross that 
will be permitted to establish size precedence. The text of the 
proposed rule change is below. Proposed new language is in italics. 
Proposed deletions are in brackets.

Rule 126  Precedence of Bids and Offers

Commentary .01

    Order to cross 5,000 [25,000], shares or more, where one or both 
sides of such cross is for the account of a member or member 
organization, will be permitted to establish precedence based on size 
so long as the orders are represented at the post when a sale removing 
all bids and offers from the Floor takes place. Once the precedence of 
such orders of 5,000 [25,000] shares or more has been established, the 
broker handling the cross must then bid and offer the security in 
accordance with Rule 152.
* * * * *

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 IV 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    In 1989, the Commission approved on a permanent basis Amex Rule 
126(g), Commentary .01, which provides that orders to cross 25,000 
shares or more will be permitted to establish precedence over other 
bids and offers.\4\ Procedures under Rule 126(g), Commentary .01 permit 
size precedence for crosses of 25,000 shares or more to be established 
when no other order has price or time priority. When an order has time 
priority, a sale removing all bids and offers from the floor must occur 
before parity is established, and the order to cross can be accorded 
precedence based on size. Thus, in order to obtain precedence, orders 
to cross 25,000 shares or more must have been presented at the 
specialist's post when the sale removing all bids and offers from the 
floor had taken place. Once size precedence has been established, the 
broker handling the cross must then bid and offer the security in 
accordance with Amex Rule 152.\5\
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    \4\ See Securities Exchange Act Release No. 26550 (February 15, 
1989), 54 FR 7655 (February 22, 1989) (SR-Amex-88-30).
    \5\ Id.
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    The Exchange is proposing to reduce from 25,000 to 5,000 shares the 
minimum size block cross that will be permitted to establish size 
precedence. The block cross procedures under Amex Rule 126(g) have 
facilitated executions of large size orders on the Amex as one 
transaction at a single price, without such orders losing shares to 
other orders in the trading crowd or on the specialist's book due to 
Exchange parity rules. In addition, by facilitating the execution of 
large blocks on the Amex, the proposed rule change will reduce member 
firms' incentive to route such orders to regional exchanges or the 
third market in order to avoid losing an excessive number of shares to 
other orders under existing Amex parity rules. The Exchange notes that, 
with the start-up of decimal pricing in equities, with a minimum price 
variation of one cent, it will be less expensive for members to break 
up proposed block crosses on the Amex Floor, which may result in such 
crosses being routed to markets in which size precedence is not taken 
into account in the manner required by Amex rules.
    The Exchange believes it is appropriate to permit block size orders 
of 5,000 shares to establish size precedence. The proposal will bring 
Amex rules more in line with the New York Stock Exchange (``NYSE'') 
size precedence rules (e.g., NYSE Rule 72), but Amex rules will 
continue to be more conservative than NYSE rules in that size 
precedence will be accorded only to crosses, and only when such orders 
involve 5,000 shares or more. In addition, confining the Exchange's 
size precedence threshold to 5,000 shares will continue to limit the 
effects of the rule primarily to active, liquid issues.
2. Statutory Basis
    The Amex believes the proposed rule change 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, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general to protect investors and the public interest.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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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

    No written comments were solicited or received with respect to 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

[[Page 11074]]

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 Exchange 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.
    The Amex has requested accelerated approval of the proposed rule 
change. While the Commission will not grant accelerated approval at 
this time, the Commission will consider granting accelerated approval 
of the proposal at the close of an abbreviated comment period of 15 
days from the date of publication of the proposal in the Federal 
Register.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change 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 
Exchange. All submissions should refer to file number SR-Amex-01-01 and 
should be submitted by March 8, 2001.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-4261 Filed 2-20-01; 8:45 am]
BILLING CODE 8010-01-M