[Federal Register Volume 66, Number 50 (Wednesday, March 14, 2001)]
[Notices]
[Pages 14947-14949]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-6323]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44049; File No. SR-Amex-01-13]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the American Stock Exchange 
LLC To Extend the eQPriority Pilot Program for Six Months

March 7, 2001.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on March 6, 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 Amex. The Commission 
is publishing this notice to solicit comments on the proposed rule from 
interested persons.
---------------------------------------------------------------------------

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

I. Self Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to extend for an additional six months 
Commentary .03 to Amex Rule 126 to continue a pilot program for 
processing electronically transmitted orders for the common stock of 
business corporations admitted to dealings on the Exchange 
(``eQPriority\sm\''). The text of the proposed rule change appears 
below. New text is in italics; deleted text is in brackets:
Rule 126, Commentary
* * * * *
    .03. Orders Delivered Electronically to the Specialist. At all 
times other than an opening or a reopening (Rule 108) or a block sold 
at a ``clean-up'' price (Rule 155), a round lot, regular way order for 
the common stock of a business corporation admitted to dealings on the 
Exchange that is sent to the specialist electronically and is 
executable according to its terms in whole or in part shall be handled 
in the following manner. Upon receipt of the electronic order by the 
specialist's order book, the specialist shall announce the order to the 
crowd, and the order shall establish priority with respect to all other 
bids and offers except with respect to bids and offers that already had 
established priority before the electronic order was represented in the 
crowd. Once the specialist has announced the order, members who have 
bids or offers incorporated in the Amex Published Quote (``APQ'') shall 
not be permitted to withdraw or modify their interest except to provide 
price improvement (i.e., an execution between the APQ) to the incoming 
order. Following the announcement of the order, the specialist and 
members in the crowd shall have a brief opportunity to provide price 
improvement to the incoming order. In the event that the incoming order 
is price improved but not entirely filled at the improved price, the 
sale shall not remove all bids and offers, and the incoming order shall 
retain priority over other bids and offers up to the full size of the 
APQ that was displayed at the time of the announcement of the order 
less any interest that provided price improvement to the order. In the 
event that the incoming order is larger than the size displayed in the 
APQ, the order shall be executed according to these procedures and any 
unfilled balance of the order shall be handled according to the 
Exchange's customary auction market processes.
    This Commentary .03 will expire on September 12, 2001. [six months 
from

[[Page 14948]]

the date of SEC approval. The SEC approved this rule change on 
September 12, 2000.]

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, Amex 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. Amex 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
    On September 12, 2000, the Commission approved the Exchange's 
eQPriority initiative on a six-month pilot basis.\3\ eQPriority is 
intended to encourage persons to route marketable electronic orders to 
the Exchange by assuring them that orders sent to the specialist 
electronically will be filled either (i) at the Amex Published Quote 
(``APQ'') up to the displayed size at the time the order is announced, 
or (ii) at an improved price. Amex believes that the program provides 
orders for stocks sent to the floor electronically with the optimal 
combination of speed, certainty of execution, and price improvement 
opportunities. eQPriority applies only to orders for common stock 
admitted to dealings; it is not available for orders for options, 
Exchange Traded Funds, or other Amex-listed securities. It also does 
not apply to openings and reopenings or to block trades executed at a 
``clean-up'' price pursuant to Amex Rule 155. The eQPriority pilot 
program is scheduled to expire on March 12, 2001.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 43284 (September 12, 
2000), 65 FR 57410 (September 22, 2000).
---------------------------------------------------------------------------

    eQPriority works in the following manner. Once the specialist 
announces the electronic order, members may not withdraw or modify bids 
and offers incorporated into the APQ on the opposite side of the market 
from the incoming order except to provide price improvement. When an 
eQPriority order is executed in part at an improved price, the 
remainder of the order is executed at the APQ up to the number of 
shares then available (i.e., the size of the APQ at the time the order 
was announced, less any shares that provided price improvement). The 
eQPriority order does not have to match with any other trading interest 
on the same side of the market. In the event that an eQPriority order 
is larger than the APQ at the time the order is announced, the order is 
filled up to the size of the APQ according to the eQPriority 
procedures, and the unexecuted balance is filled according to the 
Exchange's customary auction market processes.
    The purpose of eQPriority is to provide incoming electronic orders 
with an execution at the displayed offer (or lower) in the case of an 
electronic buy order, or at the displayed bid (or higher) in the case 
of an electronic sell order. eQPriority is not intended to allow an 
incoming electronic order to obtain priority over orders that already 
have established priority in the market. The Exchange, therefore, is 
proposing a clarifying revision to the text of Commentary .03 to Ames 
Rule 126 to provide that an eQPriority order does not have priority 
over bids and offers that were announced prior to the time that the 
eQPriority order is represented. This clarification would apply only to 
situations where the market is quoted at the minimum price variation 
and is best illustrated by an example. Assume the market is quoted 
20.00 to 20.01, 5000  x  5000, and the bid represents a limit order on 
the book. Further, assume that the specialist announces an eQPriority 
order to buy 1000, and that a broker in the crowd is willing to sell 
1000 at 20. In this example, the limit order to buy on the book had 
established a bid of 20 prior to the representation of the eQPriority 
order. The booked limit order, consequently, would be filled by the 
1000 shares sold by the broker at 20, and the eQPriority order would be 
filled at 20.01.
    Amex is proposing to extend the eQPriority pilot program for 
another six months so that it can better assess the program.
2. Statutory Basis
    Amex states that the proposed rule change is consistent with 
Section 6(b) of the Act \4\ in general and furthers the objectives of 
Section 6(b)(5) \5\ in particular in that it is designed to prevent 
fraudulent and manipulative acts and practices; 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. Amex also 
states that the proposed rule change is not designed to permit unfair 
discrimination between customers, issuers, brokers, and dealers, 
consistent with Section 6(b)(5).
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    Amex states 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

    Amex has stated that, because the proposed rule change does not (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; or (iii) 
become operative for 30 days from the date on which it was filed (or 
such shorter time as the Commission may designate) it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \6\ and Rule 19b-
4(f)(6) \7\ thereunder. Amex provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
description and text of the proposed rule change, at least five 
business days prior to the date of filing of the proposed rule 
change.\8\ At any time within 60 days of the filing of the proposed 
rule change, the Commission may summarily abrogate such rule change if 
it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6).
    \8\ The Commission deems the filing of SR-Amex-01-09, which was 
withdrawn and replaced by the present submission (SR-Amex-01-13), to 
fulfill the five-day notice requirement.
---------------------------------------------------------------------------

    Amex requested that the Commission waive the requirement that the 
proposed rule change not become operative for 30 days after the date of 
filing. Pursuant to Rule 19b-4(f)(6)(iii) under the Act,\9\ the 
Commission may designate a shorter time period by which a proposed rule 
change filed under Rule 19b-4(f)(6) may become operative, if such 
action is consistent with the protection of investors and the public 
interest. The Commission finds that waiving the 30-day pre-operative 
period is consistent with the protection of investors and the

[[Page 14949]]

public interest. The Commission believes that the existing eQPriority 
pilot provides beneficial services to investors. Acceleration of the 
operative date will allow the pilot to continue without interruption 
and ensure that those benefits do not lapse. Accordingly, the 
Commission waives the 30-day pre-operative period, and the proposed 
rule change has become operative immediately.\10\
---------------------------------------------------------------------------

    \9\ 17 CFR 240.19b-4(f)(6)(iii).
    \10\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. See 15 
U.S.C. 78c(f).
---------------------------------------------------------------------------

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 No. SR-Amex-01-13 and 
should be submitted by April 4, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-6323 Filed 3-13-01; 8:45 am]
BILLING CODE 8010-01-M