[Federal Register Volume 67, Number 117 (Tuesday, June 18, 2002)]
[Notices]
[Pages 41547-41550]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-15254]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46061; File No. SR-Amex-2002-54]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the American Stock Exchange 
LLC To Amend Amex Rules 26 and 27 To Allow Upstairs Member Firm 
Representatives To Participate in Meetings of the Performance Committee 
by Telephone, and To Reduce the Number of Specialists on the List From 
Which Listed Companies May Select Their Specialist

June 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 June 5, 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 
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\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ The Exchange provided the Commission with notice of its 
intention to file the proposed rule change by letter dated May 29, 
2002 from Bill Floyd-Jones, Assistant General Counsel, Amex, to 
Katherine England, Assistant Director, Division of Market 
Regulation, Commission. Rule 19b-4(f)(6) under the Act requires five 
business days notice, however. The Commission has decided to waive 
the 5-day pre-filing notice requirement. The Amex asked the 
Commission to waive the 30-day operative delay. See Rule 19b-
4(f)(6)(iii). 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Amex proposes to amend Amex Rule 26 to allow upstairs member 
firm representatives to participate in meetings of the Performance 
Committee (``Committee'') by telephone, and to amend Amex Rule 27 to 
reduce to five the number of specialists on the list from which listed 
companies may select their specialist. The text of the proposed rule 
change is below. Proposed additions are in italics; proposed deletions 
are in brackets.

[[Page 41548]]

Performance Committee

    Rule 26. (a) The Committee on Floor Member Performance (the 
``Performance Committee'') shall consist of 16 persons comprised as 
follows: four representatives of upstairs member firms and twelve Floor 
members divided as equally as possible among specialists, registered 
traders and brokers. The Performance Committee shall be drawn from a 
roster of not less than 32 persons representing upstairs member firms, 
specialists, registered traders and brokers. The minimum quorum for the 
transaction of business by the Performance Committee shall be nine 
persons including at least one representative of an upstairs member 
firm. The Performance Committee shall be chaired by a Floor Governor 
who may not vote except to make or break a tie. In the event that no 
Floor Governor is able to chair the Committee, a Senior Floor Official 
may chair the Committee. Upstairs member firm representatives may 
attend meetings by telephone.
    The Performance Committee may delegate any or all of its 
responsibilities to one or more subcommittees consisting of six persons 
including at least one representative of an upstairs member firm, 
provided, however, that a subcommittee only may take the following 
actions: (1) Send admonitory letters, (2) refer matters to the Minor 
Floor Violation Disciplinary Committee for possible action pursuant to 
Exchange Rule 590, (3) assign performance ratings, (4) refer matters to 
the full Performance Committee with or without a recommendation, (5) 
prohibit registered option traders from effecting opening transactions 
for specific periods of time for failing to meet zone requirements, or 
(6) counsel members on how to improve their performance. The minimum 
quorum for the transaction of business by a subcommittee shall be four 
persons including one representative of an upstairs member firm. 
Upstairs member firm representatives may attend meetings by telephone.
    (b) through end. No change.

Allocations Committee

    Rule 27. (a) through (d). No change.
    (e) If the issuer of a listed equity security chooses to 
participate in the allocation process, the Allocations Committee shall 
prepare a list of qualified specialists based on the criteria set forth 
in paragraph (b). In the case of an equity security, the list shall 
consist of five [six] specialists. In the case of an Exchange Traded 
Fund or Structured Product, the list shall consist of five specialists. 
The issuer may request that one or more specialists be placed on the 
list of eligible specialists. The Allocations Committee, however, is 
not obligated to honor such requests. Specialists that are subject to a 
preclusion on new allocations as a result of a disciplinary proceeding 
or action by the Performance Committee only are eligible for 
allocations of ``related securities'' as described in Commentary .05 of 
this Rule. The issuer may ask to meet with representatives of the 
specialists units on the list.
    The issuer shall select its specialist from the list within five 
business days of receiving the list by providing the Exchange with a 
letter signed by person of Secretary rank or higher indicating the 
issuer's choice of specialist. In the case of an Exchange Traded Fund 
or Structured Product, the selection may be made by a senior officer of 
the sponsor or issuer who has been authorized to make such selection. 
If the issuer does not make its selection in a timely manner, the 
Allocation Committee may select the specialist as provided in paragraph 
(b) of this Rule.
    The security shall remain with its initial specialist for at least 
120 days. After that time, but during the first 12 months after 
listing, the issuer or sponsor may request that the security be 
reallocated should it become dissatisfied with its specialist. This is 
the case whether or not the issuer or sponsor has participated in the 
selection process. The issuer or sponsor is expected to furnish an 
explanation for the basis for its dissatisfaction, and if after 
counseling the issuer or sponsor and the specialist such change is 
still desired, the Exchange shall reallocate the security within 30 
days. In any such reallocation, the Exchange shall follow the 
allocation procedures described in this paragraph (e) unless the issuer 
or sponsor requests the Allocations Committee to select the specialist 
without any issuer or sponsor input under the procedures described in 
paragraph (b) of this Rule.
    (f) through (i). No change.

Commentary

    .01 No change.
    .02 Contacts with Unlisted Companies. Specialists and other members 
must submit a ``Notice of Marketing Interest'' (``NOMI'') (1) prior to 
contacting an unlisted company, or (2) within five business days of any 
unanticipated contact with an unlisted company where discussions 
regarding listing occur or are contemplated by the specialist or other 
member. The NOMI must identify the company that the specialist or other 
member would like to contact and is valid for no more than 12 months 
after Amex staff has given written approval to the request (the 
``contact period''). Amex staff may decline to approve a specialist's 
or other member's request to contact an unlisted company where it is 
felt that such activity could hinder the Exchange's overall listing 
efforts. For example, a request to contact an unlisted company 
generally will not be granted where Amex staff have begun discussions 
with the company.
    A specialist or other member may request one extension of the 
contact period. The request must be in writing and must describe the 
specific activities that the specialist or other member has undertaken 
which it believes will result in a favorable listing decision. If the 
request is deemed sufficient by Amex staff, the contact period may be 
extended up to an additional six months. After the expiration of the 
contact period and any extension, a specialist or other member may not 
request permission to again contact the company until six months have 
elapsed from the expiration of the contact period or extension as 
applicable. Amex staff may contact an unlisted company as to which 
there is an approved NOMI provided the staff notify the subject 
specialist or other member prior to contacting the company.
    Only one NOMI can be on file for any company. A designated senior 
officer of the Exchange, however, may approve a second NOMI with 
respect to a particular company when (1) sufficient evidence warrants a 
determination that the second NOMI would assist the Exchange's listing 
program, and (2) the second NOMI includes the written consent of the 
first specialist or other member to the approval of the second NOMI.
    Once an unlisted company has requested a listing qualification 
review, specialists and other members are prohibited from making any 
direct or indirect contact with the company for the purpose of 
influencing its decision in the choice of a specialist. This 
prohibition includes the company's investment bankers or other 
advisors, or any other person in a position to influence the company's 
management.
    The Allocations Committee only will be advised of a company's 
preference for a particular specialist where a specialist's or member's 
efforts actually have been instrumental in securing the listing as 
evidenced by the company filing a written preference with the Exchange 
for the specialist within two weeks of the Exchange initiating a 
listing qualification review. The Allocations Committee, however, is 
not obligated to honor such requests.

[[Page 41549]]

    Once the Allocations Committee has prepared the list of five [six] 
specialists to be submitted to the new listing candidate, specialists 
and other members may not initiate any direct or indirect 
communications with management, the company's investment banker or 
other advisors, or any person in a position to influence the company. 
If the company wishes to interview individual specialists, the Exchange 
will arrange for such interviews. The Chief Executive Officer of the 
Exchange or his or her designee may require a member of the Exchange 
staff to attend such interviews to ensure that any statements by 
specialists and their representatives are consistent with the 
Exchange's policies on communications with unlisted companies. 
Inappropriate communications include, but are not limited to, apparent 
misrepresentations as to market making capabilities or promises 
unrelated to the specialist's role in making a market in the issuer's 
stock. Specialists and their representatives also may not supply 
information concerning another specialist either orally or in writing, 
except they may refer to overall floor-wide statistics.
    .03 to end. No change
* * * * *

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
    The Committee on Floor Member Performance (``Committee'') reviews 
specialist performance and may take remedial action up to terminating a 
specialist's registration as such or reallocating securities when it 
identifies inadequate performance. The Committee protects both the 
interests of investors (by taking remedial actions to correct poor 
performance) and the institutional interests of the Exchange (by 
ensuring that the Amex is as competitive as possible with other 
markets).
    The Exchange recently amended its rules to include representatives 
of upstairs member firms on the Committee. Amex staff, however, has 
encountered reluctance among potential upstairs member firm 
representatives to travel to downtown Manhattan to participate in 
Committee meetings. Management, therefore, is proposing to allow 
upstairs member firm representatives to participate by telephone at 
Committee meetings. This would conform Committee procedures to those of 
the Amex Board, the Committee on Programs and Policies, the Allocations 
Committee and other Amex Committees that generally allow participation 
by telephone.\6\ Representatives of upstairs member firms that 
participate in meetings of the Committee by telephone would receive all 
materials that are provided to other Committee members so that they can 
fully participate in Committee activities.
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    \6\ See, Article II, Section 5(d) of the Amex Constitution, 
``Committee Procedures.''
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    Since the late 1980s, the Exchange has had two procedures for 
allocating equity securities: the ``issuer choice'' program under which 
the company selects its specialist from a list of the most qualified 
units prepared by the Allocations Committee, and the traditional 
allocation procedure under which the Allocations Committee, exercising 
its professional judgment, selects the specialist unit for the company.
    When the Exchange first implemented the issuer choice program, 
there were more than 20 equity specialist units on the Amex, and the 
issuer received a list of seven units. In recognition of the fact that 
there has been a reduction in the number of equity specialist firms on 
the Exchange since the initiation of the issuer choice program, the 
Exchange is proposing to reduce to five the number of eligible 
specialists on the list given to newly listed companies.\7\
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    \7\ The Exchange notes that New York Stock Exchange ``issuer 
choice'' procedures call for a list of three to five specialists to 
be given to a newly listed company. See, NYSE Information Memo 00-18 
(July 17, 2000).
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \8\ in general, and furthers the objectives of Section 
6(b)(5) \9\ in particular in that it is designed to promote just and 
equitable principles of trade, and to protect investors and the public 
interest by encouraging good performance and competition among 
specialists.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes 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

    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 \10\ and 
Rule 19b-4(f)(6) thereunder.\11\ 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.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    The Amex has requested that the Commission waive the 30-day 
operative delay. The Commission believes waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest. Acceleration of the operative date will permit Committee 
members to participate by telephone immediately. For these reasons, the 
Commission designates the proposal to be effective and operative upon 
filing with the Commission.\12\
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    \12\ 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).
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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

[[Page 41550]]

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-2002-54 and should be 
submitted by July 9, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-15254 Filed 6-17-02; 8:45 am]
BILLING CODE 8010-01-P