[Federal Register Volume 66, Number 35 (Wednesday, February 21, 2001)]
[Notices]
[Pages 11074-11075]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-4263]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43950; File No. SR-Amex-01-02]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange LLC to Amend Amex Rule 126(g), 
Commentary .02 Regarding Agency Cross Transactions

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 February 5, 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. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to amend Amex Rule 126(g), Commentary .02, to 
reduce the number of shares that may be crossed on an agency basis 
under the rule from 25,000 shares to 5,000 shares. 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 .02
    When a member has an order to buy and an order to sell an 
equivalent amount of the same security, and both orders are of 5,000 
[25,000] shares or more and are for the accounts of persons who are not 
members or member organizations, the member may ``cross'' those orders 
at a price at or within the prevailing quotation. The member's bid or 
offer shall be entitled to priority at such cross price, irrespective 
of pre-existing bids or offers at that price. The member shall follow 
the crossing procedures of Rule 151, and another member may trade with 
either the bid or offer side of the cross transaction only to provide a 
price which is better than the cross price as to all or part of such 
bid or offer. A member who is providing a better price to one side of 
the cross transaction must trade with all other market interest having 
priority at that price before trading with any part of the cross 
transaction. No member may break up the proposed cross transaction, in 
whole or in part, at the cross price. A transaction effected at the 
cross price in reliance on this Commentary .02 shall be printed as 
``stopped stock''.
* * * * *

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 
section 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
    Amex Rule 126, ``Precedence of Bids and Offers,'' sets out rules 
governing priority and precedence of bids and offers on the Exchange 
Floor, and generally provides that bids and offers are entitled to 
precedence based on time, with members bidding at the highest price 
(offering at the lowest price) entitled to be on parity and divide 
executions at their price after a previous sale removes all bids and 
offers from the Floor. Commentary .02 to Amex Rule 126(g) \3\ applies 
only to agency crosses (referred to herein as ``clean crosses'') to buy 
and sell orders of 25,000 shares or more (that is, both orders for 
accounts of non-members). This commentary provides that a member may 
cross those orders at a price at or within the prevailing quotation, 
with such orders entitled to priority at the cross price over 
previously entered bids and offers. When crossing these orders, the 
member must follow the crossing procedures of Amex Rule 151 and another 
member may trade with either the bid or offer side of the cross to 
provide improvement to all or part of the bid or offer. In addition, 
the member must trade with all other market interest having time 
priority at that price before

[[Page 11075]]

trading with any part of the cross transaction.
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    \3\ See Securities Exchange Act Release No. 34089 (May 19, 
1994), 59 FR 27301 (May 26, 1994) (SR-Amex-92-41) (approval order).
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    The Exchange implemented Commentary .02 to facilitate execution of 
block size crosses on the Amex. In implementing this exception to the 
Exchange's rules of precedence, the Exchange was responding 
competitively to regional exchanges that were attracting Amex orders 
because orders to cross are not readily broken up by other trading 
interest in those markets which may lack a trading crowd or limit 
orders on specialists' books.
    The Exchange expects that decimal pricing in minimum increments of 
$.01 will result in increased numbers of cross transactions being 
broken up because it will be less expensive to provide price 
improvement than under previous increments. The Exchange believes this 
will place the Exchange at an increased competitive disadvantage to 
other markets where crosses can be effected with little or no risk of 
interference, will deprive customer block size orders of the benefits 
of primary market pricing, and will detract from primary market 
liquidity. The Exchange, therefore, believes it is appropriate to 
reduce the size of agency orders that can be crossed under Rule 126(g), 
Commentary .02, to 5,000 shares.
    Amex clean cross procedures will continue to preserve auction 
market principles by providing the possibility of price improvement 
(because members must follow Amex Rule 151 crossing procedures), and by 
requiring that members trade with other market interest having time 
priority at that price before trading with any part of the cross 
transaction. In addition, the Exchange believes the proposal will 
enhance competition among markets in the execution of agency crosses, 
and will increase the possibility that pricing of agency crosses will 
be executed more efficiently and at better prices.
2. Statutory Basis
    The Amex believes that the proposed rule change is consistent with 
section 6(b) of the Act \4\ in general and further the objectives of 
section 6(b)(5) \5\ 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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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that 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 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.

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 
Amex. All submissions should refer to file number SR-Amex-01-02 and 
should be submitted by March 14, 2001.
    For the Commission by the Division of Market Regulations, pursuant 
to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-4263 Filed 2-20-01; 8:45 am]
BILLING CODE 8010-01-M