[Federal Register Volume 67, Number 162 (Wednesday, August 21, 2002)]
[Notices]
[Page 54243]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-21322]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46362; File No. SR-Amex-2002-38]


Self Regulatory Organizations; American Stock Exchange LLC; Order 
Granting Approval to Proposed Rule Change and Amendment No. 1 Thereto 
To Designate the New Trading Floor on the Ground Floor of the Exchange 
as a ``Separate Trading Area''

August 15, 2002.
    On April 23, 2002, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``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 to designate the new trading floor on the ground 
floor of the Exchange (``Harry's'') as a ``separate trading area.''
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    On June 6, 2002, the Amex submitted Amendment No. 1 to the proposed 
rule change.\3\ The proposed rule change was published for comment in 
the Federal Register on July 5, 2002.\4\ The Commission received no 
comment letters on the proposal.
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    \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'').
    \4\ See Securities Exchange Act Release No. 46131 (June 27, 
2002), 67 FR 44900.
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    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange \5\ 
and, in particular, the requirements of section 6 of the Act \6\ and 
the rules and regulations thereunder. The Commission finds specifically 
that the proposed rule change is consistent with section 6(b)(5) of the 
Act \7\ because it is designed to prevent fraudulent and manipulative 
acts and practices, and promote just and equitable principles of trade.
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    \5\ In approving this proposed rule change, the Commission notes 
that it has considered its impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(5).
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    The Commission previously approved similar proposals by the Amex to 
designate the sections of its trading floor as separate trading areas 
for the purposes of stock and options trading.\8\ In these Orders, the 
Commission required that the trading of stocks and their related 
options be sufficiently separated in a manner that minimized the time 
and place advantages that could be derived from the proximity of the 
equity and options trading areas. In addition to the physical 
separation of the trading locations of equities and their related 
options, Amex Rule 958(f) prohibits jointly registered equity and 
options traders from entering options transactions on a Paired Security 
\9\ for one hour after leaving the equity floor where the underlying 
security trades. Finally, the Orders restricted the use of hand signals 
or other like means of communication between members to communicate 
between floors.
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    \8\ Securities Exchange Act Release Nos. 26147 (October 3, 
1988), 53 FR 39556 (October 7, 1988) (``1988 Order''); 34359 (July 
12, 1994), 59 FR 36799 (July 19, 1994) (``Index Order''); and 39631 
(February 9, 1998), 63 FR 8229 (February 18, 1998)(``1998 Order'') 
(collectively ``Orders'').
    \9\ Generally, a Paired Security is a security which is the 
subject of securities trading on the Exchange and options trading on 
the Exchange. See Amex Rule 900(b)(38).
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    The Commission is satisfied that these conditions are met here. 
Options on both listed and non-Amex-listed equities are traded on 
Harry's while Amex-listed equities are traded on the Main Trading 
Floor. Harry's is located in a separate area on the ground floor of the 
Exchange and is only accessible from the Exchange's other trading 
locations by escalator. Accordingly, the trading posts located on 
Harry's are not visible from the Main Trading Floor. Furthermore, 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.\10\ Further, the Commission notes that the 
Exchange's rules regarding Paired Securities would prohibit the trading 
of an equity in the same physical location as its related option.\11\
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    \10\ Telephone Conversation between Jeffrey P. Burns, Assistant 
General Counsel, Amex, and Christopher Solgan, Law Clerk, Division, 
Commission, on August 13, 2002.
    \11\ See Amex Rules 900(b)(38), (40), and (41).
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    Therefore, the Commission finds that Harry's is a separate trading 
area for purposes of trading options on Amex-listed and non-listed 
stocks. The Commission's approval is premised on the belief that the 
Amex's proposed trading locations for equities and options are 
sufficiently separated such that there is no time and place advantage 
derived from the physical proximity of Harry's to locations where the 
underlying equities trade. Accordingly, any decision by the Amex to 
change the location of the designated options relative area to the 
designated stock area or to modify the means of access between them, 
would require the submission of a proposed rule change under section 
19(b) of the Act.\12\
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    \12\ 15 U.S.C. 78s.
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    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\13\ that the proposed rule change and Amendment No. 1 thereto 
(File No. SR-Amex-2002-38) are approved.
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    \13\ 15 U.S.C. 78s(b)(2).

    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. 02-21322 Filed 8-20-02; 8:45 am]
BILLING CODE 8010-01-P