[Federal Register Volume 67, Number 64 (Wednesday, April 3, 2002)]
[Notices]
[Pages 15842-15844]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-8010]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45658; File No. SR-Amex-2002-22]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the American Stock Exchange 
LLC To Extend a Pilot Program Relating to Amex Rule 126 (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 
Exchange filed the proposal pursuant to Section 19(b)(3)(A) of the 
Act,\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission.\5\ The Commission is

[[Page 15843]]

publishing this notice to solicit comments on the proposed rule change 
from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ The Exchange asked the Commission to waive the 5-day pre-
filing notice requirement and the 30-day operative delay. See Rule 
19b-4(f)(6)(iii). 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

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

    The Amex proposes a six-month extension of 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 current 
pilot is scheduled to expire on March 28, 2002. The proposed rule 
change would extend the pilot through September 27, 2002. No other 
changes to the pilot are proposed at this time. The text of the 
proposed rule change is available at the Amex 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 its proposal and discussed any 
comments it received regarding the proposal. 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
    On March 28, 2001, the Commission approved on a one-year pilot 
basis the Exchange proposal to reduce from 25,000 to 5,000 shares the 
minimum size block cross that will be permitted to establish size 
precedence.\6\ 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 pilot 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.
---------------------------------------------------------------------------

    \6\ Securities Exchange Act Release No. 44122 (March 28, 2001), 
66 FR 18125 (April 5, 2001)(SR-Amex-2001-01).
---------------------------------------------------------------------------

    The Exchange believes the reduction in size parameters continues to 
have the potential to enhance primary market liquidity and that it is 
appropriate to extend the pilot for an additional six months to permit 
the Commission to consider the Exchange's separate filing under Rule 
19b-4 requesting permanent approval of Amex Rule 126(g), Commentary .01 
(SR-Amex-2001-23). 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 
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 Exchange believes that the proposal 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 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.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    Because the foregoing 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, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act\9\ and Rule 
19b-4(f)(6) thereunder.\10\ 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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    The Amex has requested that the Commission waive the 5-day pre-
filing notice requirement and the 30-day operative delay. The 
Commission finds good cause to waive the 5-day pre-filing notice 
requirement and the 30-day operative delay, because such designation is 
consistent with the protection of investors and the public interest. 
Acceleration of the operative date will allow the pilot to continue 
uninterrupted for an additional six months, while the Amex seeks 
comment on a separate proposal to make permanent the pilot program. For 
these reasons, the Commission finds good cause to waive both the 5-day 
pre-filing requirement and the 30-day operative waiting period.\11\
---------------------------------------------------------------------------

    \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. 15 U.S.C. 
78c(f).

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

[[Page 15844]]

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposal 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-2002-22 and should be 
submitted by April 24, 2002.
    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.
---------------------------------------------------------------------------

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

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-8010 Filed 4-2-02; 8:45 am]
BILLING CODE 8010-01-P