[Federal Register Volume 67, Number 154 (Friday, August 9, 2002)]
[Notices]
[Pages 51902-51903]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-20180]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46309; File No. SR-Amex-2002-58]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the American Stock Exchange 
LLC Relating to a Pilot Program Involving Crossing Transactions in 
Nasdaq Securities

August 5, 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 July 18, 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.
---------------------------------------------------------------------------

    \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 on June 25, 2002. The 
Amex has 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).
---------------------------------------------------------------------------

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

    The Amex proposes to add Commentary .06 to Amex Rule 126(g) 
relating to crossing procedures on the Amex in Nasdaq National Market 
securities. The text of the proposed rule change is below. Proposed new 
language is in italics.
Precedence of Bids and Offers
Rule 126
    (a)-(f) No change.
    (g) No change.
    Commentary
    .01 through .03  No change.
    .04  Reserved
    .05  Reserved
    0.6  If prior to presenting a cross transaction in a Nasdaq 
National Market security involving 5,000 shares or more, a broker 
requests that the specialist and market makers at the post quote their 
current market for the subject security, the broker may execute a cross 
transaction at a price between the quoted market without interference 
by a specialist or market maker.
    In no event shall an agency order in the book, having time 
priority, remain unexecuted after any other order at its price has been 
effected pursuant to this rule or otherwise.
* * * * *

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 Amex filed SR-Amex-2001-106 \6\ to accommodate trading in 
Nasdaq National Market (``NNM'') securities. The Exchange now proposes 
to adopt crossing procedures under Amex Rule 126(g) to provide 
additional flexibility to permit brokers to effect crosses of orders of 
5,000 shares or more in NNM securities. Under Amex Rule 126(g), 
Commentary .01, orders to cross 5,000 shares or more (where one or both 
sides is for the account of a member or member organization) can 
establish size precedence if the orders are represented at the 
specialist's post when a sale removing all bids and offers from the 
Floor takes place. Commentary .01 has been approved on a pilot basis 
until September 27, 2002.\7\
---------------------------------------------------------------------------

    \6\ Securities Exchange Act Release No. 45365 (January 30, 
2002), 67 FR 5626 (February 6, 2002).
    \7\ See Securities Exchange Act Release No. 45658 (March 27, 
2002), 67 FR 15842 (April 3, 2002) (SR-Amex-2002-22).
---------------------------------------------------------------------------

    Amex Rule 126(g), Commentary .02 provides that orders of 5,000 
shares or more for the accounts of non-members or member organizations 
can be crossed at a price at or within the prevailing quotation. The 
member's bid or offer is entitled to priority at the cross price, 
irrespective of pre-existing bids or offers at that price. Under either 
Commentaries .01 or .02, a cross can be ``broken-up'' by the specialist 
or another Floor member that is willing to provide price improvement to 
all or a portion of one side of the proposed cross. With the advent of 
decimal pricing, such price improvement could be as small as $.01. This 
may result in frequent interference with crosses being effected, and 
with minimal price betterment, notwithstanding the choice of a broker's 
customers that a cross be effected and the broker's assessment that 
such cross is in the customer's best interest. In connection with 
trading in Nasdaq securities, this can place the Amex and its members 
at a competitive disadvantage to other markets that may have crossing 
procedures that are less restrictive than those of the Amex. The Amex, 
therefore, proposes to provide additional flexibility to brokers 
proposing to effect crosses in Nasdaq securities.
    Proposed Amex Rule 126(g), Commentary .06 provides that a floor 
broker would be permitted to effect cross transactions in NNM 
securities involving 5,000 shares or more without interference by the 
specialist or market makers if, prior to presenting the cross 
transaction, the floor broker requests a quote for the subject 
security. These requests will place the specialist and market makers on 
notice that the floor broker intends to cross within the bid-offer 
spread. The Amex believes this arrangement will ensure that a 
specialist or market maker retains the opportunity to better the cross 
price by updating their quote, but will preclude the specialist or 
market maker from breaking up a cross transaction after the cross 
transaction is presented. The floor broker will retain the ability to 
present both sides of the order at the post if the customers so desire.
    The proposed rule change will be implemented on a pilot basis 
through September 30, 2002. The Exchange notes that it has filed a 
separate

[[Page 51903]]

proposed rule change relating to cross transactions in Nasdaq 
securities.\8\ In the event SR-Amex-2002-26 is approved by the 
Commission prior to September 30, 2002, the pilot program for 
Commentary .06 would terminate.
---------------------------------------------------------------------------

    \8\ See SR-Amex-2002-26.
---------------------------------------------------------------------------

2. Statutory Basis
    The Amex believes the proposed rule change is consistent with 
Section 6(b) of the Act \9\ in general, and furthers the objectives of 
Section 6(b)(5) \10\ 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, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 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 \11\ and 
Rule 19b-4(f)(6) thereunder.\12\ 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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    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 (i) permit the Amex 
to have these revised crossing procedures in place by the time the Amex 
begins trading Nasdaq securities on the Amex; and (2) provide the Amex 
with sufficient time to notify its members of the new crossing 
procedures before trading Nasdaq securities begins on the Amex. For 
these reasons, the Commission designates the proposal to be effective 
and operative upon filing with the Commission.\13\
---------------------------------------------------------------------------

    \13\ 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).
---------------------------------------------------------------------------

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-2002-58 and should be 
submitted by August 30, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-20180 Filed 8-8-02; 8:45 am]
BILLING CODE 8010-01-P