[Federal Register Volume 67, Number 52 (Monday, March 18, 2002)]
[Notices]
[Pages 12065-12067]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-6451]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45536; File No. SR-Amex-2002-14]


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 11, 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 March 4, 2002, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the

[[Page 12066]]

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. Amex has designed the proposed rule change as 
``non-controversial'' under Rule 19b-4(f)(6),\3\ thus rendering it 
immediately effective. 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.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    Amex 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 is available at the 
Office of the Secretary of the Exchange and from the Commission's 
Public Reference Room.

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 Amex's eQPriority 
initiative on a six-month pilot basis.\4\ The pilot program was 
extended for six months in March 2001\5\ and again in August 2001.\6\ 
Amex now seeks to extend the pilot for an additional six-month period.
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    \4\ See Securities Exchange Act Release No. 43284 (September 12, 
2000), 65 FR 57410 (September 22, 2000).
    \5\ See Securities Exchange Act Release No. 44049 (March 7, 
2001), 66 FR 14947 (March 14, 2001).
    \6\ See Securities Exchange Act Release No. 44702 (August 15, 
2001), 66 FR 43925 (August 21, 2001).
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    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 and to block trades 
executed at a ``clean-up'' price pursuant to Amex Rule 155. The 
eQPriority pilot is scheduled to expire on March 12, 2002.
    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. Thus, 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 arises only in 
situations where the market is quoted at the minimum fractional 
variation and is best illustrated by an example. Assume the market is 
quoted 20.00 to 20.01, 5,000  x  5,000, and the bid represents a limit 
order on the book. Further assume that the specialist announces an 
eQPriority order to buy 1,000 and that a broker in the crowd is willing 
to sell 1,000 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 buy the 
1,000 shares sold by the broker at 20, and the eQPriority order would 
be filled at 20.01.
2. Statutory Basis
    Amex believes that the proposed rule change is consistent with 
section 6(b) of the Act \7\ in general and furthers the objectives of 
section 6(b)(5) \8\ 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 
believes that the proposed rule change is not designed to permit unfair 
discrimination between customers, issuers, brokers, and dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Amex has stated that the proposed rule change would 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; and (iii) 
become operative for 30 days from the date on which it was filed (or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest), it has become 
effective pursuant to section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    Amex has requested that the Commission waive the 30-day pre-
operative period under Rule 19b-4(f)(6)(iii). The Commission finds that 
waiving the pre-operative period is consistent with the protection of 
investors and the public interest. The

[[Page 12067]]

Commission believes that the existing eQPriority pilot provides 
beneficial services to investors. Acceleration of the operative date 
will allow the pilot program to continue without interruption and 
ensure that the benefits of the program do not lapse. Accordingly, the 
Commission waives the 30-day pre-operative period, and the proposed 
rule change may become operative immediately.\11\
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    \11\ 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).
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    Rule 19b-4(f)(6) also requires the self-regulatory organization to 
provide the Commission written notice of its intent to file the 
proposed rule change at least five business days before doing so (or 
such shorter time as designated by the Commission). Amex also has 
requested that the Commission waive this five-day pre-filing 
requirement. For the same reasons that it is waiving the 30-day pre-
operative period, the Commission also waives the five-day pre-filing 
period.
    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.

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-2002-14 and 
should be submitted by April 8, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-6451 Filed 3-15-02; 8:45 am]
BILLING CODE 8010-01-P