[Federal Register Volume 67, Number 64 (Wednesday, April 3, 2002)]
[Notices]
[Pages 15841-15842]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-8009]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45660; File No. SR-Amex-2002-23]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange LLC To Make Permanent a Pilot 
Program Under Amex Rule 126(g), Commentary .01 Relating to Size 
Precedence

March 27, 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 22, 2002, the American Stock 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 make permanent the existing pilot program 
under Amex Rule 126(g), Commentary .01 regarding a 5,000 share minimum 
block cross size to establish size precedence. The text of the proposed 
rule change is below. There are no changes proposed to the existing 
rule, other than to make permanent the pilot program.

Rule 126  Precedence of Bids and Offers

    * * *
(g)  No change.
Commentary .01
    Orders to cross 5,000, shares or more, where one or both sides of 
such cross is for the account of a member or member organization, will 
be permitted to establish precedence based on size so long as the 
orders are represented at the post when a sale removing all bids and 
offers from the Floor takes place. Once the precedence of such orders 
of 5,000 shares or more has been established, the broker handling the 
cross must then bid and offer the security in accordance with Rule 152.
* * * * *

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, the Proposed Rule Change

1. Purpose
    On March 28, 2001, the Commission approved on a one-year pilot 
basis the Exchange's proposal to reduce from 25,000 to 5,000 shares the 
minimum size block cross that will be permitted

[[Page 15842]]

to establish size precedence.\3\ In SR-Amex-2002-22, the Exchange 
proposes to extend the pilot program for an additional six months, 
through September 27, 2002.
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    \3\ Securities Exchange Act Release No. 44122 (March 28, 2001), 
66 FR 18125 (April 5, 2001)(SR-Amex-2001-01).
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    In the instant filing, the Amex proposes that the pilot program be 
approved on a permanent basis. The block cross procedures under Amex 
Rule 126(g) have facilitated executions of large size orders on the 
Amex as one transaction at a single price, without such orders losing 
shares to other orders in the trading crowd or on the specialist's book 
due to Exchange parity rules. In addition, by facilitating the 
execution of large blocks on the Amex, the rule reduces the incentive 
of member firms to route such orders to regional exchanges or the third 
market in order to avoid losing an excessive number of shares to other 
orders under existing Amex parity rules. With start-up of decimal 
quoting in equities, with a minimum price variation of one cent, it has 
become less expensive for members to break up proposed block crosses on 
the Amex Floor, which may result in such crosses being routed to 
markets in which size precedence is not taken into account in the 
manner required by Amex rules.
    The Exchange believes the reduction in size parameters continues to 
have the potential to enhance primary market liquidity and that 
permanent approval of Amex Rule 126(g) Commentary .01 is appropriate. 
The Exchange believes that the size reduction to 5,000 shares from 
25,000 shares in establishing precedence has the potential to alleviate 
some of the competitive burden associated with current Exchange 
priority and precedence rules that are stricter than those applied in 
other markets with respect to crosses in block size. Under the previous 
25,000 share size parameter, such crosses would have been more 
difficult to effect without being broken up, particularly in view of 
the start of decimal pricing. The revised size parameter may facilitate 
greater liquidity in the primary market by reducing routing of block 
cross transactions to other markets. The Exchange believes this fosters 
improved price discovery and execution of investor orders at more 
favorable prices. The Exchange notes that the broker handling the cross 
is required to bid and offer the security in accordance with Amex Rule 
152, and, therefore, that it is still possible for all or a portion of 
at least one side of a proposed block cross to be effected at a price 
better than the proposed cross price. In addition, confining the 
Exchange's size precedence threshold to 5,000 shares will continue to 
limit the effects of the rule primarily to active, liquid issues.
2. Statutory Basis
    The Amex 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, to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system, to protect investors and the 
public interest, and is not designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers.
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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.

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 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-2002-23 and 
should be submitted April 24, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ CFR 200.30-(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-8009 Filed 4-2-02; 8:45 am]
BILLING CODE 8010-01-P