[Federal Register Volume 67, Number 30 (Wednesday, February 13, 2002)]
[Notices]
[Pages 6770-6772]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-3494]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45412; File No. SR-Amex-2001-68]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange LLC To Adopt Sanctioning 
Guidelines for the Exchange's Order Handling Rules

February 7, 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 September 4, 2001, the American Stock

[[Page 6771]]

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 adoopt sanctioning guidelines for 
violation of its options order handling rules. The text of the proposed 
rule change is available at the Amex's Office of the Secretary, 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. The Exchange 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, Proposed Rule Change

(1) Purpose
    The Exchange proposes to adopt sanction guidelines for violations 
of its options rules related to firm quotes (Exchange Rule 958A), limit 
order display (Exchange Rule 958A),\3\ priority, parity, and precedence 
(Exchange Rules 111, 126, 155, 950, and 958),\4\ and trade reporting 
(Exchange Rule 992).\5\ The Exchange also proposes to adopt sanction 
guidelines for its rule regarding anti-competitive behavior and 
harassment (Exchange Rule 16).
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    \3\ The Exchange has an option limit order display rule filing 
pending with the Commission. See SR-Amex-00-27.
    \4\According to the Exchange, it does not have an explicit 
definition of its members' obligation of ``best execution'' owed to 
its customer. The Exchange states that its rules regarding firm 
quotes, limit order display, priority, parity and precedence, 
however, collectively define the obligations of members with respect 
to orders and, therefore, embody the concept of best execution.
    \5\ The Exchange filed this proposed rule change pursuant to the 
provisions of Section IV.B.i of the Commission's September 11, 2000 
Order Instituting Administrative Proceedings Pursuant to Section 
19(h)(1) of the Act, which required the Exchange to adopt rules 
establishing, or modifying existing, sanctioning guidelines such 
that they are reasonably designed to effectively enforce compliance 
with options order handling rules. See Securities Exchange Act 
Release No. 43268 (September 11, 2000), Administrative Proceeding 
File No. 3-10282 (the ``Order'').
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    The Exchange has developed the proposed sanctions guidelines for 
use by the various bodies adjudicating disciplinary matters in 
determining appropriate sanctions. These bodies include Disciplinary 
Panels, the Amex Adjudicatory Council and the Amex Board of Governors 
(``Adjudicators'').\6\ The guidelines also may be used by parties to a 
disciplinary action in entering into a stipulation of facts and consent 
to penalty.
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    \6\ The composition and function of Disciplinary Panels, the 
Amex Adjudicatory Council, and the Amex Board in disciplinary 
matters is set forth in the following rules of the Exchange: Article 
II, Section 6 of the Exchange Constitution (``Amex Adjudicatory 
Council''), Article V of the Exchange Constitution (``Discipline of 
Members''), Exchange Rule 345 (``Determinations Involving Employees 
and Prospective Employees''), and the Rules of Procedure Applicable 
to Exchange Disciplinary Proceedings. Disciplinary Panels, the 
Adjudicatory Council and the Amex Board (when it reviews 
disciplinary decisions) all function independently of the Exchange's 
regulatory staff. Adjudicators determine whether the aggregation of 
violations for purposes of determining sanctions is appropriate in 
any situation.
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    The proposed sanction guidelines contain an introductory section 
that explains the overall purpose of the guidelines and sets forth 
general principles that apply to all sanctions determinations. The 
introductory section also includes principal considerations for 
determining sanctions that may be considered as aggravating or 
mitigating factors. The proposed sanction guidelines contain Individual 
Guidelines that provide specific monetary and non-monetary sanctions 
generally applicable to the violations at issue and list additional 
principal considerations for the specific violations.
    The Exchange believes that the proposed sanction guidelines would 
provide members of Disciplinary Panels, the Amex Adjudicatory Council, 
and the Board with guidance in determining appropriate remedial 
sanctions that may be applied flexibly. Because the guidelines do not 
prescribe fixed sanctions for particular misconduct, they encourage 
Adjudicators to exercise discretion while maintaining consistency and 
uniformity in the imposition of disciplinary sanctions.\7\ For these 
reasons, the Exchange believes that the proposed sanction guidelines 
would enhance its disciplinary processes.
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    \7\ The Exchange submitted to the Commission a letter, for which 
it requested confidential treatment, proposing how its regulatory 
staff would aggregate violations of the order handling rules, where 
the violations are identified through the Exchange's automated 
surveillance system. See letter from Richard T. Chase, Executive 
Vice President, Amex, to John McCarthy, Associate Director, Office 
of Compliance, Inspections and Examinations, Commission, dated 
December 24, 2001.
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(2) Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) \8\ of the Act, in general, and furthers the 
objectives of Section 6(b),\9\ in particular, in that it provides that 
members and persons associated with members will be appropriately 
disciplined for violations of the Exchange's rules.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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

    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

[[Page 6772]]

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 filings will also be available for 
inspection and copying at the principal office of the Exchange. All 
submissions should refer to File No. SR-Amex-2001-68 and should be 
submitted by March 6, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-3494 Filed 2-12-02; 8:45 am]
BILLING CODE 8010-01-P