[Federal Register Volume 67, Number 129 (Friday, July 5, 2002)]
[Notices]
[Pages 44900-44902]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-16771]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46131; File No. SR-Amex-2002-38]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by the American Stock Exchange LLC 
Proposing To Designate the New Trading Floor on the Ground Floor of the 
Exchange as a ``Separate Trading Area''

June 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 April 23, 2002, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. On June 6, 2002, the Amex submitted Amendment No. 1 to the 
proposed rule change.\3\ The Commission is publishing this notice, as 
amended, 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\ See letter from Jeffrey P. Burns, Assistant General Counsel, 
Amex, to Nancy Sanow, Assistant Director, Division of Market 
Regulation (``Division''), Commission, dated June 5, 2002 
(``Amendment No. 1''). In Amendment No. 1, the Amex confirmed that 
it currently permits the trading of options on both listed and non-
Amex-listed stocks on the ``Harry's'' trading floor.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to designate the new trading floor on the 
ground floor of the Exchange (``Harry's'') as a ``separate trading 
area.''

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.

[[Page 44901]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange filed this proposed rule change in connection with its 
proposal to trade Nasdaq securities on an unlisted basis (``Nasdaq UTP 
Program'').\4\ This proposed rule change would designate Harry's as a 
``separate trading area.''
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    \4\ See Securities Exchange Act Release Nos. 45365 (January 30, 
2002), 67 FR 5626 (February 6, 2002) (proposing to admit trading on 
the Amex of Nasdaq National Market Securities pursuant to unlisted 
trading privileges); 45698 (April 5, 2002), 67 FR 18051 (April 12, 
2002) (approving proposal to adopt Amex Rule 28 to establish 
allocation procedures for securities admitted to dealings on an 
unlisted trading privilege basis).
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    In 1988, the Exchange received Commission approval to trade options 
on Amex-listed stocks.\5\ The approval was based upon, among other 
things, the Amex's trading floors for equities and options on those 
equities \6\ being sufficiently separated such that there could be no 
time and place advantage derived from the physical proximity of the two 
floors which could be exploited. The Amex currently has five designated 
trading locations: (1) The main trading floor (``Main Trading Floor'' 
or ``Designated Stock Area''); (2) the mezzanine trading level, which 
is located above the Main Trading Floor (``Mezzanine'') (options Amex-
listed stocks may not trade on that part of the Mezzanine visible from 
the Main Trading Floor); (3) a separate room connected by a hallway to 
the Main Trading Floor (the ``Red Room'' or ``Designated Options 
Area''); \7\ (4) the back row of the west side of the Main Trading 
Floor referred to as the west side of the Exchange Posts 12, 13 and 15 
(``Back Row''), and (5) ``Harry's''. In addition, the Main Trading 
Floor, the Red Room, the Mezzanine and the Back Row are considered 
physically separate for purposes of stocks and related options.\8\
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    \5\ Securities Exchange Act Release No. 26147 (October 3, 1988), 
53 FR 39556 (October 7, 1988) (``1988 Order'').
    \6\ For purposes of this proposal, the terms stock(s), equity 
and equities are used interchangeably.
    \7\ Amex-listed stocks, options on non-Amex-listed stocks and 
options on indices (excluding options on indices where Amex-listed 
stocks comprise more than ten percent of the index value by weight) 
trade on the Main Trading Floor. Options on indices where Amex-
listed stocks comprise more than ten percent of the index value by 
weight and options on non-Amex-listed stocks trade on the Mezzanine. 
Options on Amex-listed stocks, non-Amex-listed stocks and indices 
where Amex-listed stocks comprise more than ten percent of the index 
value by weight trade in the Red Room. See Securities Exchange Act 
Release No. 34359 (July 12, 1994), 59 FR 36799 (July 19, 1994) 
(``Index Order'').
    \8\ See 1988 Order, supra note 4; Securities Exchange Act 
Release No. 39631 (February 9, 1998), 63 FR 8229 (February 18, 1998) 
(``1998 Order'').
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    In 2001, the Exchange opened its new trading facility, Harry's, 
located in a separate area on the ground floor of the Exchange. Harry's 
is on a separate level of the Amex and may only be accessed from the 
Exchange's other trading locations by an escalator. Accordingly, 
Harry's is physically separate from the other trading areas at the 
Exchange, and therefore, is not visible from the Exchange's other 
trading locations. The Exchange submits that Harry's is a ``separate 
trading area.''\9\
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    \9\ The Exchange currently permits the trading of options on 
both listed and non-Amex-listed stocks on Harry's.
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    In the 1998 Order, the Commission granted approval to permit 
options trading on Amex-listed stocks in two locations of the Exchange 
in addition to the Red Room: (1) The Mezzanine and (2) the Back 
Row.\10\ Since the 1998 approval was granted, the trading of options on 
Amex-listed securities has continued to occur on the Exchange at 
locations that are deemed physically separate from locations where the 
trading of Amex-listed securities occurs. The Exchange maintains that 
Harry's is a physically separate trading location, and therefore, 
trading of options on Amex-listed stocks is permissible based on the 
1988 and 1998 Orders. In addition, the absence of a ``line of sight'' 
with respect to options trading on Harry's and any underlying stock of 
such option reinforces the Exchange's belief that Harry's is a separate 
trading area and, therefore, no time or place advantage exists.\11\ The 
Exchange believes that it is consistent with both the 1988 and 1998 
Orders, as well as the Index Order, to permit the trading of options on 
both Amex-listed and non-Amex-listed stocks on Harry's.\12\ The 
Exchange believes that the Commission should approve the designation of 
Harry's as a ``separate trading area.''
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    \10\ See 1998 Order, supra note 7.
    \11\ The Exchange represents that it maintains adequate 
surveillance systems designed to prevent trading abuses and 
manipulation as well as to ensure compliance with the relevant 
Exchange rules consistent with the 1988, 1998 and Index Orders. 
Telephone Conversation between Jeffrey P. Burns, Assistant General 
Counsel, Amex, and Christopher Solgan, Law Clerk, Division, 
Commission, on May 17, 2002.
    \12\ The Exchange notes that it has filed a companion proposal 
to expand designated trading locations to permit the ability to 
trade an Amex-listed stock and its underlying options on Harry's 
provided that an intervening post or physical structure sufficient 
to block a ``line of sight'' between the appropriate trading crowds 
existed. See File No. SR-Amex-2002-37. Accordingly, if approved, the 
Exchange may determine to trade Amex-listed stocks on Harry's 
provided a ``line of sight'' does not exist between the trading 
crowds of the underlying stock and its related option. Telephone 
Conversation between Jeffrey P. Burns, Assistant General Counsel, 
Amex, and, Kelly Riley, Senior Special Counsel, Division, 
Commission, on June 6, 2002. See also Amendment No. 1, supra note 3.
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2. Statutory Basis
    The Exchange believes the basis for the proposed rule change is the 
requirement under section 6(b)(5) of the Act \13\ that an exchange have 
rules that are 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 are not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \13\ 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, as amended, is consistent with the Act. Persons making written 
submissions should file six copies thereof with the Secretary, 
Securities

[[Page 44902]]

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 filings will also be 
available for inspection and copying at the principal office of the 
Exchange. All submissions should refer to File No. SR-Amex-2002-38 and 
should be submitted by July 26, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-16771 Filed 7-3-02; 8:45 am]
BILLING CODE 8010-01-P