[Federal Register Volume 67, Number 26 (Thursday, February 7, 2002)]
[Notices]
[Pages 5860-5861]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-2934]


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

SECURITIES AND EXCHANGE COMMISSION

(Release No. 34-45373; File No. SR-Amex-2002-03)


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change and Amendment No. 2 Thereto by 
the American Stock Exchange LLC Relating to an Extension of the Interim 
Intermarket Linkage Program

January 31, 2002.
    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 15, 2002, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Amex. The Exchange submitted Amendment 
No. 1 to the proposed rule change on January 18, 2002.\3\ The Exchange 
submitted Amendment No. 2 to the proposed rule change on January 30, 
2002.\4\ The Exchange filed the proposed rule change pursuant to 
section 19(b)(3)(A) of the Act,\5\ and Rule 19b-4(f)(6) thereunder,\6\ 
which renders the proposal effective upon filing with the Commission. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter to Nancy Sanow, Assistant Director, Division of 
Market Regulation (``Division''), Commission, from Jeffrey P. Burns, 
Assistant General Counsel, Amex, dated January 17, 2002 (``Amendment 
No. 1'').
    \4\ In Amendment No. 2, Amex clarified that it was filing the 
proposed rule change pursuant to Section 19(b)(3)(A) of the Act and 
Rule 19b-4(f)(6) thereunder, rather than Rule 19b-4(f)(3) as set 
forth in Amendment No. 1. See letter to Nancy Sanow, Assistant 
Director, Division, Commission, from Jeffrey P. Burns, Assistant 
General Counsel, Amex, dated January 29, 2002 (``Amendment No. 2''). 
Amendment No. 2 replaces Amendment No. 1 in full.
    \5\ 15 U.S.C. 78s(b)(3)(A).
    \6\ 17 CFR 240.19b-4(f)(6). The Amex requests that the 
Commission waive the 30-day operative delay. The Amex provided the 
Commission with notice of its intention to file this proposal on 
January 15, 2002.
---------------------------------------------------------------------------

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

    The Amex proposes to extend until December 31, 2002 the pilot 
program providing for the implementation of ``interim linkages'' with 
the other option exchanges.

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 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 purpose of this proposed rule change is to request an extension 
of the ``interim'' intermarket options linkage.\7\ Currently, the 
Exchange is operating the interim linkage on a pilot basis pursuant to 
Amex Rule 940. The interim linkage utilizes the Exchange's existing 
systems to facilitate the sending and receiving of order flow 
betweenAmex specialists and their counterparts on the other option 
exchanges as an interim step towards development of a permanent linkage 
in the options market.\8\ The Exchange now proposes that the interim 
linkage remain in effect on a pilot basis until December 31, 2002.
---------------------------------------------------------------------------

    \7\ On May 7, 2001, the Commission issued a notice of filing and 
immediate effectiveness of a pilot program submitted by the Amex 
authorizing the implementation of an interim linkage. See Securities 
Exchange Act Release No. 44271 (May 7, 2001), 66 FR 26887 (May 15, 
2001) (File No. SR-Amex-2001-20).
    \8\ The Commission approved the Plan for the Purpose of Creating 
and Operating an Intermarket Options Linkage in July 2000. See 
Securities Exchange Act Release No. 43086 (July 28, 2000), 65 FR 
48023 (August 4, 2000).
---------------------------------------------------------------------------

    The Commission previously approved, on an interim basis, options 
intermarket linkage plans for all options exchanges.\9\ Although the 
options exchanges have made ``progress'' toward the implementation of a 
permanent linkage, significant work still exists in order for the 
linkage to be operational. Accordingly, the Amex believes that an 
extension of the interim linkage is necessary for the options exchanges 
to complete implementation of the permanent linkage.
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release Nos. 43904 (January 30, 
2001), 66 FR 9112 (February 6, 2001) (File Nos. SR-ISE-00-15 and SR-
CBOE-00-58); 43986 (February 20, 2001), 66 FR 12578 (February 27, 
2001) (File No. SR-PCX-2001-10); 44271 (May 7, 2001), 66 FR 26887 
(May 15, 2001) (File No. SR-Amex-2001-20); and 44311 (May 16, 2001), 
66 FR 28768 (May 24, 2001) (File No. SR-Phlx-2001-52).
---------------------------------------------------------------------------

    The key component of the interim linkage is for the participating 
exchanges to open their automated customer execution systems, on a 
limited basis, to market maker orders. Specifically, market makers are 
able to designate certain orders as ``customer'' orders, and thereby 
receive automatic execution of those orders on participating 
exchanges.\10\
---------------------------------------------------------------------------

    \10\ As with other orders that are executed under the automatic 
execution parameters of the Exchange, when a limit order constitutes 
the Exchange's best bid or offer, the specialist executes the 
incoming order against that order.
---------------------------------------------------------------------------

    The interim linkage authorizes the Amex to implement bilateral or 
multilateral interim arrangements with the other exchange providing 
equal access between market makers on the respective exchanges. 
Currently, the interim linkage pilot program allows Amex specialists 
and their equivalents on the other exchanges, when holding customer 
orders, to send those orders to the other market for execution when the 
other market has a better quote. Such orders are limited in size to the 
lesser of the size of the two markets' automatic execution size for 
customer orders. The interim linkage may in the future be expanded to 
include limited access principal orders (i.e., when the market maker is 
not holding a customer order), for orders of no more than 10 contracts.
    Consistent with the interim linkage pilot program, all interim 
linkage orders must be ``immediate or cancel'' (i.e., they cannot be 
placed on an exchange's limit order book), and a market maker may send 
a linkage order only when the other (receiving) market is displaying 
the national best bid or offer and the sending market is displaying an 
inferior price. This allows an Amex specialist to access the better 
price for its customer. If the interim linkage is expanded to include 
principal orders, such action would allow market makers to attempt to 
``clear'' another market displaying a superior quote.
    Specialist participation in the interim linkage is voluntary. Only 
when a specialist and its equivalent on another exchange believe that 
this form of mutual access would be advantageous will the exchanges 
employ the interim linkage procedures. The Amex believes that the 
interim linkage will benefit investors and will provide useful 
experience that will help the exchanges

[[Page 5861]]

in implementing the full linkage. For these reasons, the Amex requests 
an extension of the pilot program until December 31, 2002.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
section 6(b) of the Act,\11\ in general, and furthers the objectives of 
section 6(b)(5),\12\ in particular, because it should prevent 
fraudulent and manipulative acts and practices, promote just and 
equitable principles of trade, remove impediments to and perfect the 
mechanisms of a free and open market and a national market system, and, 
in general, protect investors and the public interest.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Amex does not believe that the proposed rule change will impose 
any burden on competition 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

    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

    Because the foregoing proposed 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 the date of filing, or 
such shorter date as the Commission may designate, if consistent with 
the protection of investors and the public interest; and (4) the 
Exchange provided the Commission with notice of its intent to file the 
proposed rule change at least five days prior to the filing date, the 
proposed rule change has become effective pursuant to section 
19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6)\14\ thereunder.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6)\15\ does not 
become operative prior to 30 days after the date of filing or such 
shorter time as the Commission may designate if such action is 
consistent with the protection of investors and the public interest. 
The Amex has requested, in order to permit the uninterrupted operation 
of the interim linkage, that the Commission accelerate the 
implementation of the proposed rule change so that it may take effect 
prior to the 30 days specified in Rule 19b-4(f)(6)(iii).\16\ The 
Commission finds that the proposed rule change is consistent with the 
protection of investors and the public interest and, therefore, has 
determined to make the proposed rule change operative as of the date of 
this notice.\17\
---------------------------------------------------------------------------

    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ For purposes of accelerating the implementation of the 
proposed rule change only, the Commission notes that it has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    At any time within sixty (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, as amended, 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-2002-03 and should be submitted by February 28, 2002.

    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-2934 Filed 2-6-02; 8:45 am]
BILLING CODE 8010-01-P