[Federal Register Volume 66, Number 208 (Friday, October 26, 2001)]
[Notices]
[Pages 54315-54316]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-26957]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44958; File No. SR-Amex-2001-71]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by American Stock Exchange LLC 
Relating to Priority on Multiple Price Transactions

October 19, 2001.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 
1934,\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on 
September 6, 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 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 Amex proposes to amend Exchange Rule 950 to add Commentary .05 
relating to priority on multiple price transactions. The following is 
the text of proposed Commentary .05 (all new language):
    .05  Purchase Priority. If a member purchases one or more option 
contracts of a particular series at a particular price or prices such 
member shall, at the next lower price at which a member other than an 
Exchange Broker or specialist representing a customer agency order 
entitled to priority pursuant to Rule 950(c), have priority in 
purchasing up to the equivalent number (or a reasonably large number) 
of option contracts of the same series that he purchased at the higher 
price or prices, but only if his bid is made promptly and the purchase 
so effected represents the opposite side of a transaction with the same 
order or offer as the earlier purchase or purchases. Sale Priority. If 
a member sells one or more option contracts of a particular series at a 
particular price or prices, he shall, at the next higher price at which 
a member other than a Exchange Broker or specialist representing a 
customer agency order entitled to priority pursuant to Rule 950(c), 
have priority in selling up to the equivalent number (or a reasonably 
larger number) of option contracts of the same series that he sold at 
the lower price or prices, but only if his offer is made promptly and 
the sale so effected represents the opposite side of a transaction with 
the same order or bid as the earlier sale or sales.
    Two or more members entitled to priority. If the bids or offers of 
two or more members are both entitled to priority in accordance with 
paragraph (a) or paragraph (b), it shall be afforded them insofar as 
practicable, on a pro-rate basis.

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

    In its filing with the Commission, the 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. The 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
    The Exchange proposes to amend Exchange Rule 950 by adding 
Commentary .05 to provide for multiple price priority in the execution 
of equity option transactions. The Exchange believes that the proposal 
is designed to promote price improvement in the execution of equity 
option orders and provide incentives to registered options traders 
(``ROTs'') and specialists in the execution of such orders by providing 
ROTs and specialists with priority in the execution of those orders in 
which a ROT or specialist improves upon the displayed quotation.
    In particular, proposed Commentary .05 provides for member price 
priority with respect to purchases (sales) up to an equivalent number 
of options contracts of the same series purchased at the higher price 
or prices (or sold at the lower price or prices for sales) if the bid 
(offer) is made promptly and the purchase (sale) effected represents 
the opposite side of a transaction with the same order or offer (bid) 
as the earlier purchases (sale). A floor broker or specialist 
representing a public customer order entitled to priority pursuant to 
Amex Rule 950(c) will continue to retain such priority under proposed 
Commentary .05.
    For example, application of the proposal would operate as follows: 
If the displayed quotation is 6 (bid), 6.50

[[Page 54316]]

(asked), and a market or marketable limit order to sell 100 contracts 
is received, a ROT or specialist that executes part of the 100 contract 
order at the improved price of 6.20 would be granted priority in 
executing additional contracts in a quantity up to the number of 
contracts executed at the improved price. Therefore, in this example, 
because the ROT stepped up to bid 20 contracts at a price of 6.20, he 
would be granted priority in the execution of up to 20 contracts at 6. 
In each instance, the specialist or ROT that betters the market would 
be able to receive a fill at the next lower or inferior price. 
Moreover, if two (2) or more members were entitled to priority for 
certain multiple price transactions, such priority would be provided on 
a pro rata basis to the extent practicable.
    The Exchange believes the proposal will provide incentive for both 
ROTs and specialists to improve upon displayed quotations. As a result, 
the Exchange believes the proposal will enhance competitive market 
making on the Exchange and offer additional price improvement for 
customer orders. The Exchange believes that the proposed rule is 
similar to rules that are currently in place at other options 
exchanges.\3\
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    \3\ See CBOE Rule 6.47 and PCX Rule 6.76.
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2. Statutory Basis
    The Exchange believes 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 foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, and to remove impediments to and perfect the mechanism of a 
free and open market and a national market system.
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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 does not believe that the proposed rule change will 
impose 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

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

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

    Because the foregoing rule change (1) does not significantly affect 
the protection of investors or the public interest; (2) does not impose 
any significant burden on competition; (3) does not become operative 
for 30 days from September 6, 2001, the date on which it was filed, and 
the Exchange provided the Commission with written notice of its intent 
to file the proposed rule change at least five business days prior to 
the filing date, it has become effective pursuant to section 
19(b)(3)(A) of the Act \6\ and Rule 19b-4(f)(6) thereunder.\7\ At any 
time within 60 days of the filing of such 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.
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6).
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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 submission 
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 in Washington, DC. Copies of such 
filing will also be available for inspection and copying at the 
principal office of the Amex. All submissions should refer to SR-Amex-
2001-71 and should be submitted by November 16, 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. 01-26957 Filed 10-25-01; 8:45 am]
BILLING CODE 8010-01-M