[Federal Register Volume 67, Number 163 (Thursday, August 22, 2002)]
[Notices]
[Pages 54507-54508]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-21429]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46364; File No. SR-Amex-2002-62]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by 
the American Stock Exchange LLC Amending Amex Rule 174 To Provide for 
Dissemination of a Depth Indication

August 15, 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 19, 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 Amex. 
On August 2, 2002, the Amex filed an amendment to the proposal.\3\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, 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 Claire P. McGrath, Senior Vice President and 
Deputy General Counsel, Amex, to Nancy Sanow, Assistant Director, 
Division of Market Regulation (``Division''), Commission, dated 
August 1, 2002 (``Amendment No. 1''). In Amendment No. 1, the 
Exchange corrected typographical errors in the text of the proposed 
rule language and requested that the Commission waive the 30-day 
pre-operative period required under Rule 19b-4(f)(6), 17 CFR 
240.19b-4(f)(6). For purposes of calculating the 60-day abrogation 
period, the Commission considers the period to have commenced on 
August 2, 2002.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to add Commentary .03 to Amex Rule 174, 
Disclosures by Specialists,\4\ to provide for dissemination of a depth 
indication by Exchange specialists. The text of the proposed rule 
change is below. Proposed new language is in italics; proposed 
deletions are in brackets.
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    \4\ Prior to this filing, the title of Amex Rule 174 was 
``Disclosures by Specialists Prohibited,'' but the rule title will 
be referred to hereafter in this filing as ``Disclosures by 
Specialists.''
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Rule 174  Disclosures by Specialists [Prohibited]
* * * * *

Commentary .03

    (a) On a best efforts basis, the specialist may disseminate a depth 
indication in any security. Such depth indication may be disseminated 
for the purpose of indicating that there is additional market interest 
to buy below the current published bid, or additional market interest 
to sell above the current published offer, as described in paragraph 
(b) below. The depth indication shall be disseminated by means of an 
appropriate symbolic designation, appended to the current published bid 
and/or offer, as appropriate, but the depth indication shall not itself 
be deemed to constitute a ``firm quotation'' for purposes of this Rule 
or Rule 11Ac1-1 under the Securities Exchange Act of 1934.
    (b) The depth indication may be disseminated only when there is 
market interest, consisting of the specialist's proprietary interest as 
well as interest reflected by orders represented by the specialist as 
agent (including percentage orders), aggregating such minimum number of 
shares and range of prices below the published bid or above the 
published offer as the Exchange deems appropriate and communicates to 
its membership.
* * * * *

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 Amex included statements 
concerning the purpose of, and the 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 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 Exchange proposes to add Commentary .03 to Amex Rule 174, 
Disclosures by Specialists, to permit Amex specialists to disseminate a 
depth indication, indicating that there is additional market interest 
in a security to buy below the current displayed bid or interest to 
sell above the current displayed offer. The Amex believes this change 
will enhance market transparency and thereby facilitate execution of 
orders at the best available price. The depth indication of additional 
market interest would include specialist proprietary interest, orders 
on the specialist's book, and other orders, including percentage 
orders, that the specialist is representing

[[Page 54508]]

as agent. A specialist would disseminate a depth indication on a ``best 
efforts basis,'' exercising professional judgment based on current 
market conditions.
    The depth indication would not include the actual number of shares 
available at better prices, but would provide information that a 
minimum aggregate number of shares is available within a specified 
variation from the current bid or offer. The Exchange would establish 
and communicate the parameters to specialists and other members and 
member organizations, as well as any change to those parameters based 
on the Exchange's experience. At the start-up of dissemination of the 
depth indication, the indication would signify that there is additional 
market interest aggregating 20,000 shares within $0.15 below the 
published bid or above the published offer or both. Any change to these 
parameters will be filed with the Commission pursuant to Section 19(b) 
of the Act.\5\ The depth indication would be disseminated over the 
Consolidated Quotation System (``CQS''). The depth indication would be 
for informational purposes only and would not constitute a firm 
quotation for purposes of Amex rules or the SEC's Firm Quote Rule.\6\ 
The Exchange has determined to implement these procedures on a Floor-
wide basis to all equities, including Exchange-Traded Funds.
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    \5\ 15 U.S.C. 78s(b).
    \6\ Rule 11Ac1-1 under the Act, 17 CFR 240.11Ac1-1.
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    The proposed depth indication procedures and share/price parameters 
relating to the depth indication are similar to those filed and 
implemented by the New York Stock Exchange, Inc. (``NYSE'').\7\ The 
Amex's proposal differs from the NYSE's in that, in addition to the 
depth indication, the NYSE proposed to implement a ``depth condition,'' 
which would be disseminated via the NYSE's proprietary distribution 
network, and which would show the actual number of shares of additional 
market interest at a particular price below the published bid or above 
the published offer, with no specified minimum number of shares or 
range of prices below (above) the bid (offer). The Amex is not 
proposing to implement a depth condition at this time.
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    \7\ See Securities Exchange Act Release No. 44084 (March 16, 
2001), 66 FR 16307 (March 23, 2001) (SR-NYSE-2001-06).
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    The Exchange is also amending the captioned title for Amex Rule 174 
to delete the word ``prohibited.'' Amex believes this amendment is 
appropriate because Amex Rule 174 currently deals principally with 
information that a specialist is permitted to disclose rather than 
information prohibited to be disclosed.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\8\ in general, and the provisions of 
Section 6(b)(5) of the Act,\9\ in particular, which requires, among 
other things, that the rules of an exchange be 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; and are 
not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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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 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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) \11\ thereunder 
because the proposal: (1) Does not significantly affect the protection 
of investors or the public interest; (2) does not impose any 
significant burden on competition; and (3) does not become operative 
for 30 days from the date of filing, or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest; provided that the Exchange has given the 
Commission written notice of its intent to file the proposed rule 
change at least five business days prior to the filing date of the 
proposed rule change.\12\ At any time within 60 days of the filing of 
such 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.\13\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ As required under Rule 19b-4(f)(6)(iii), 17 CFR 240.19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change at least five 
business days prior to the filing date. See letter from Michael 
Cavalier, Associate General Counsel, Amex, to Nancy Sanow, Assistant 
Director, Division, Commission, dated June 18, 2002.
    \13\ See Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C).
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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 should provide immediate 
additional market transparency regarding interest within specified size 
and price parameters. For these reasons, the Commission designates the 
proposal to be effective and operative upon filing with the Commission.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change 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 
Exchange. All submissions should refer to File No. SR-Amex-2002-62 and 
should be submitted by September 12, 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. 02-21429 Filed 8-21-02; 8:45 am]
BILLING CODE 8010-01-P