[Federal Register Volume 67, Number 168 (Thursday, August 29, 2002)]
[Notices]
[Pages 55440-55441]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-22094]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 46409]


Securities Exchange Act of 1934; In the Matter of Petition for 
Review by Knight Trading Group, Inc. of Division of Market Regulation 
Approval by Delegated Authority of File No. SR-Amex-2001-106; Order 
Denying Petition for Review

August 23, 2002.
    Pursuant to Rule 431(b)(2) of the Rules of Practice,\1\ it is 
ordered that the petition \2\ of Knight Trading Group, Inc. 
(``Knight'') for review of the Division of Market Regulation's 
(``Division'') approval by delegated authority of SR-Amex-2001-106 \3\ 
is hereby denied and

[[Page 55441]]

it is further ordered that the automatic stay of delegated action 
pursuant to Rule 431(e) of the Rules of Practice \4\ is hereby lifted.
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    \1\ 17 CFR 201.431(b)(2).
    \2\ Letter to Jonathan G. Katz, Secretary, Commission, from John 
J.D. McFerrin-Clancy, Schlam Stone & Dolan, dated August 15, 2002 
(``Knight Petition'').
    \3\ Securities Exchange Act Release No. 46205 (August 2, 2002), 
67 FR 51609 (August 8, 2002).
    \4\ 17 CFR 201.431(e).
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    In considering whether to accept or reject the Knight Petition, 
Rule 411(b)(2) of the Rules of Practice \5\ requires that the 
Commission determine whether:
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    \5\ 17 CFR 201.411(b)(2).
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    (i) A prejudicial error was committed by the Division in the 
conduct of the proceeding; or
    (ii) The Division's decision embodies:
    (A) a finding or conclusion of material fact that is clearly 
erroneous; or
    (B) a conclusion of law that is erroneous; or
    (C) an exercise of discretion or decision of law or policy that is 
important and that the Commission should review.
    The Knight Petition does not allege that any prejudicial error was 
committed by the Division in the conduct of the proceedings, and the 
Commission finds that no such prejudicial error occurred. Moreover, the 
Commission finds that the Division's decision does not embody a finding 
of material fact that is clearly erroneous or a conclusion of law that 
is erroneous.
    In so finding, the Commission notes that it previously has approved 
of securities being traded pursuant to unlisted trading privileges 
(``UTP'') and such approval applies generally to floor based exchanges 
without automatic execution of orders that engage in UTP trading.\6\ As 
the Knight Petition makes clear, Knight's principal dispute is not with 
the Division's approval by delegated authority of the American Stock 
Exchange LLC's (``Amex'') proposed trading rules setting auction market 
structure. Rather, Knight seeks review of the Commission granting 
permission to auction markets without automatic execution of orders to 
trade securities pursuant to UTP generally.\7\
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    \6\ See Securities Exchange Act Release Nos. 34371 (July 13, 
1994), 59 FR 37103 (July 20, 1994); 35221 (January 11, 1995), 60 FR 
3886 (January 19, 1995); 36102 (August 14, 1995), 60 FR 43626 
(August 22, 1995); 36226 (September 13, 1995), 60 FR 49029 
(September 21, 1995); 36368 (October 13, 1995), 60 FR 54091 (October 
19, 1995); 36481 (November 13, 1995), 60 FR 58119 (November 24, 
1995); 36589 (December 13, 1995), 60 FR 65696 (December 20, 1995); 
36650 (December 28, 1995), 61 FR 358 (January 4, 1996); 36934 (March 
6, 1996), 61 FR 10408 (March 13, 1996); 36985 (March 18, 1996), 61 
FR 12122 (March 25, 1996); 37689 (September 16, 1996), 61 FR 50058 
(September 24, 1996); 37772 (October 1, 1996), 61 FR 52980 (October 
9, 1996); 38457 (March 31, 1997), 62 FR 16880 (April 8, 1997); 38794 
(June 30, 1997) 62 FR 36586 (July 8, 1997); 39505 (December 31, 
1997) 63 FR 1515 (January 9, 1998); 40151 (July 1, 1998) 63 FR 36979 
(July 8, 1998); 40896 (December 31, 1998), 64 FR 1834 (January 12, 
1999); 41392 (May 12, 1999), 64 FR 27839 (May 21, 1999); 42268 
(December 23, 1999), 65 FR 1202 (January 6, 2000); 43005 (June 30, 
2000), 65 FR 42411 (July 10, 2000); 44099 (March 23, 2001), 66 FR 
17457 (March 30, 2001); 44348 (May 24, 2001), 66 FR 29610 (May 31, 
2001); 44552 (July 13, 2001), 66 FR 37712 (July 19, 2001); 44694 
(August 14, 2001), 66 FR 43598 (August 20, 2001); 44804 (September 
17, 2001), 66 FR 48299 (September 19, 2001); 45081 (November 19, 
2001), 66 FR 59273 (November 27, 2001).
    \7\ Markets engaged in the trading of securities pursuant to UTP 
are parties to the Joint Self-Regulatory Organization Plan Governing 
the Collection, Consolidation and Dissemination of Quotation and 
Transaction Information for Nasdaq-Listed Securities Traded on 
Exchanges on an Unlisted Trading Privilege Basis (``OTC/UTP Plan'').
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    In other words, Knight does not challenge the Amex's proposed rules 
that are the subject of the Division's approval order, but rather 
objects to the manner in which Amex's market will interact with other 
markets also trading Nasdaq securities pursuant to UTP. Such concerns 
are not properly cognizable in the context of the rule filing process 
for the Amex's trading rules. Rather, the proper venue for Knight's 
arguments was the notice and approval process for the 12th Amendment to 
OTC/UTP Plan,\8\ in which amendment the extension of UTP to the Amex 
was approved under section 12(f) of the Securities Exchange Act of 
1934.\9\ The time for such arguments has lapsed.
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    \8\ See Securities Exchange Act Release Nos. 44822 (September 
20, 2001), 66 FR 50226 (October 2, 2001) (12th Amendment Notice); 
45081 (November 19, 2001); 66 FR 59273 (November 27, 2001) (12th 
Amendment Approval).
    \9\ 15 U.S.C. 78l(f).
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    To the extent that Knight does object to the Amex trading rules 
that were the subject of the Division's order, their objection is that 
Amex does not provide for automatic executions. As the Division 
correctly points out in its order, the standards applicable to the Amex 
proposal do not require that Amex provide automatic execution. We 
specifically so find and conclude ourselves. The Division considered 
all comments on the proposed Amex rules including Knight's, addressed 
them, and correctly applied the applicable standard.
    Finally, because these rules--unlike the grant of UTP--do not raise 
any important issues, the Commission also finds that the Division's 
decision does not embody an exercise of discretion or a decision of law 
or policy that is important and that the Commission should review.

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-22094 Filed 8-28-02; 8:45 am]
BILLING CODE 8010-01-P