[Federal Register Volume 67, Number 71 (Friday, April 12, 2002)]
[Notices]
[Pages 18051-18052]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-8932]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45698; File No. SR-Amex-2001-107]


Self-Regulatory Organizations; American Stock Exchange LLC; Order 
Granting Accelerated Approval to a Proposed Rule Change and Amendment 
No. 1 Thereto and Notice of Filing and Order Granting Accelerated 
Approval to Amendment No. 2 Thereto Relating to the Allocation to 
Specialists of Securities Admitted to Dealings on an Unlisted Trading 
Privileges Basis

April 5, 2002.

I. Introduction and Description of the Proposal

    On December 17, 2001, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') pursuant to section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change regarding the allocation of 
securities admitted to dealings on an unlisted trading privileges 
(``UTP'') basis to Amex specialists. On February 1, 2002, the Amex 
filed Amendment No. 1 to the proposed rule change.\3\ The proposed rule 
change, as amended by Amendment No. 1, was published in the Federal 
Register on March 7, 2002.\4\ The Commission received no comments on 
the proposed rule change. On April 4, 2002, the Amex filed Amendment 
No. 2 to the proposed rule change.\5\ This order approves the proposed 
rule change, as amended, on an accelerated basis through April 5, 2003. 
In addition, the Commission is publishing notice to solicit comment on 
and is simultaneously approving, on an accelerated basis, Amendment No. 
2 to the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Geraldine Brindisi, Vice President and 
Corporate Secretary, Amex, to Nancy J. Sanow, Assistant Director, 
Division of Market Regulation (``Division''), Commission, dated 
January 30, 2002 (``Amendment No. 1'').
    \4\ Exchange Act Release No. 45488 (February 28, 2002), 67 FR 
10460.
    \5\ See letter from Bill Floyd-Jones, Assistant General Counsel, 
Amex, to Kelly McCormick-Riley, Assistant Director, Division, 
Commission, dated April 3, 2002 (``Amendment No. 2''). In Amendment 
No. 2, the Exchange deleted paragraph (e) to proposed Rule 28 
because it was no longer necessary in light of Amex filing SR-Amex-
2002-21, which proposes to amend Amex Rule 175(c) to permit 
specialists in UTP stocks to be affiliated with specialists in 
options overlying the same UTP stock, so long as information 
barriers are established and maintained between the stock and 
options specialist units. The Commission notes that Amex Rule 175(c) 
currently prohibits Amex specialists from acting as a specialist or 
market maker in an option overlying the stock in which the 
specialist is registered.
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II. Discussion

    The Commission finds that the proposed rule change, as amended, is 
consistent with the Act and the rules and regulations promulgated 
thereunder applicable to a national securities exchange, and, in 
particular, with the requirements of Section 6(b).\6\ Specifically, the 
Commission finds that approval of the proposed rule change is 
consistent with section 6(b)(5) \7\ of the Act because it is designed 
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.
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    \6\ 15 U.S.C. 78f(b). In approving this proposal, the Commission 
has considered the proposed rule's impact on efficiency, competition 
and capital formation. 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(5).
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    Specialists play a crucial role in providing stability, liquidity, 
and continuity to the trading of securities. Among the obligations 
imposed upon specialists by the Exchange, and by the Act and the rules 
thereunder, is the maintenance of fair and orderly markets in their 
designated securities.\8\ To ensure that specialists fulfill these 
obligations, it is important that the Exchange develop and maintain 
stock allocation procedures and policies that provide specialists with 
an initiative to strive for optimal performance. The Exchange now 
proposes to amend its rules to account for the allocation of securities 
traded pursuant to UTP.\9\
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    \8\ See 17 CFR 240.11b-1.
    \9\ The Commission notes that Amex has filed a proposed rule 
change relating to specialists' performance evaluation and 
reallocation procedures for securities admitted to dealings on an 
unlisted basis. See File No. Amex-2002-19.
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    The Commission notes that the Exchange proposes to establish a 
special committee to allocate securities traded on a UTP basis. The 
special committee will consist of the Chief Executive Officer of the 
Exchange who shall serve as Chairman of the Committee, three members 
(selected from among Exchange Officials, Senior Floor Officials and 
Floor Governors), and three members of the Exchange's senior management 
as designated by the Chief Executive Officer of the Exchange. The 
Committee shall make its decisions by majority vote. The Chairman of 
the Committee may only vote to create or break a tie. The Commission 
believes that it is appropriate to establish a new allocation committee 
for securities admitted to dealings pursuant to UTP because of the 
unique characteristics of these securities, which should be considered 
in the allocation process. Further the Commission believes that the 
factors the allocation committee will consider in making allocation 
decisions should ensure that qualified firms are selected to act as 
specialists for securities traded pursuant to UTP.
    Because the proposed rule change, as amended, institutes a new 
process for allocating securities that will trade pursuant to UTP to 
Amex specialist units and because the Commission is adopting the 
proposal on an accelerated basis, the Commission believes that the 
proposal should be approved on a pilot basis, for a one-year period 
ending on April 5, 2003, to ensure that the process is effective and 
fair. The Commission expects the Amex to report to the Commission about 
its experience with the new allocation process in any future proposal 
it files to extend the effectiveness of the proposed rule or approve it 
on a permanent basis.
    The Commission, pursuant to section 19(b)(2) of the Act,\10\ finds 
good cause for approving the proposed rule change, as amended, on a 
one-year pilot basis through April 5, 2003, prior to the thirtieth day 
after the date of

[[Page 18052]]

publication of notice thereof in the Federal Register. The Commission 
notes that granting accelerated approval to this proposal will allow 
the Amex to immediately implement a process for allocating securities 
that will trade pursuant to UTP to specialist units. It is necessary to 
allocate the UTP securities to specialist units as soon as possible so 
that the specialists so appointed will have ample time to prepare for 
Amex's upcoming trading of securities on a UTP basis.
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    \10\ 15 U.S.C. 78s(b)(2).
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III. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning Amendment No. 2, including whether Amendment No. 2 
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 No. SR-Amex-2001-107 and should be 
submitted by May 3, 2002.

IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-Amex-2001-107), as amended, 
is hereby approved on an accelerated basis through April 5, 2003.
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    \11\ Id.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-2(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 02-8932 Filed 4-11-02; 8:45 am]
BILLING CODE 8010-01-P