[Federal Register Volume 66, Number 194 (Friday, October 5, 2001)]
[Notices]
[Pages 51077-51078]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-24975]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44861; File No. SR-Amex-2001-59]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the American Stock Exchange 
LLC Relating to Proposed Rule 324

September 27, 2001.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act 1934 
(``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on August 7, 2001, the American Stock Exchange LLC 
(``Amex'' or ``Exchange '') filed with the Securities and Exchange 
Commission (``SEC'' or ``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 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-Regualtory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Amex proposes to adopt Exchange Rule 324 to require each member 
not associated with a member organization and each member organization 
primarily engaged as an agent in executing transactions on the Floor to 
maintain a detailed, written record of each type of compensation 
arrangement that it enters into with other members as well as 
customers.
    The text of the proposed rule change is available at 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 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. 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, 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is implementing examination procedures similar to 
those previously adopted by the NYSE to review Floor broker activity to 
determine if a broker is sharing in the profits generated in customer 
accounts. In connection with these new examination procedures, the Amex 
is proposing to adopt a rule, similar to NYSE Rule 440I, that would 
require each member not associated with a member organization and each 
member organization primarily engaged as an agent in executing 
transactions on the Floor, to maintain a detailed, written record of 
each type of compensation arrangement that it enters into with other 
members as well as all other customers. The Exchange's financial 
examiners will use these records in conducting reviews to determine if 
there were possible violations of Section 11(a) of the Act \3\ or 
Exchange rules.
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    \3\ 15 U.S.C. 78k(a).
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    The proposed rule would apply to members and member organizations 
primarily engaged as agents in executing transactions on the Floor of 
the Exchange. It would specify a type of record, i.e., a record of 
compensation arrangements, in addition to records to be maintained 
under Exchange Act Rules 17a-3 and 17a-4.\4\ The proposed rule would 
exclude the following compensation arrangements from the requirement to 
maintain a written record:
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    \4\ 17 CFR 240.17a-3 and 17 CFR 240.17a-4.
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    (1) Arrangements involving gross compensation of less than $5,000 
per year, and
    (2) Arrangements involving order transmitted solely through the 
Exchange's electronic order routing system.

[[Page 51078]]

    The Exchange is proposing to exclude orders transmitted solely 
through the Exchange's electronic order routing system because the 
Exchange believes that the audit trail capabilities of this system 
prevent trading improprieties by independent Floor brokers. The 
Exchange also is proposing to exclude ``upstairs'' (i.e., off the 
Floor) members and member organizations from the requirement to keep 
records of compensation arrangements. Independent brokers do not 
generally have the independent supervisory structures and the 
formalized internal supervisory oversight that upstairs organizations 
have since many independent brokers act as sole proprietors with 
limited customer and product base.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) of the Act,\5\ in general, and 
furthers the objectives of Section 6(b)(5),\6\ 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, and is not designed to permit unfair discrimination 
between customers, issuers, brokers and dealers.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.

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 on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Pursuant to Section 19(b)(3)(A) of the Act \7\ and Rule 19b-4(f)(6) 
thereunder,\8\ the proposed rule change has become effective upon 
filing as its effects a change that: (1) Does not significantly affect 
the protection of investors or the public interest; (2) does not impose 
any significant burden on competition; and (3) by its terms, does not 
become operative for 30 days from the date of filing, and the Exchange 
provided the Commission with written notice of its intent to file the 
proposed rule change at least five business days before the filing 
date.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
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    At any tine 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.

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 No. SR-Amex-2001-59 and 
should be submitted by October 26, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-24975 Filed 10-4-01; 8:45 am]
BILLING CODE 8010-01-M