[Federal Register Volume 67, Number 204 (Tuesday, October 22, 2002)]
[Notices]
[Pages 64940-64943]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-26782]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46655; File No. SR-Amex-2001-06]


Self-Regulatory Organizations; Notice of Filing of a Proposed 
Rule Change and Amendment Nos. 1, 2 and 3 Thereto by the American Stock 
Exchange LLC Relating to Relief and Temporary Specialists

October 11, 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 February 14, 2001, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'')

[[Page 64941]]

the proposed rule change as described in Items I, II and III below, 
which Items have been prepared by the Exchange. On August 20, 2001, the 
Exchange submitted Amendment No. 1 to the proposed rule change.\3\ On 
October 1, 2002, the Exchange submitted Amendment No. 2 to the proposed 
rule change.\4\ On October 8, 2002, the Exchange submitted Amendment 
No. 3 to the proposed rule change.\5\ 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 William Floyd-Jones, Jr., Assistant General 
Counsel, Amex, to Nancy Sanow, Assistant Director, Division of 
Market Regulation (``Division''), Commission, dated August 17, 2001 
(``Amendment No. 1'') (replacing the original filing in its 
entirety). Amendment No. 1: (1) Makes minor technical changes to the 
proposed rule text; (2) notes in the purpose section of the proposal 
that the Committee on Floor Member Performance (``Performance 
Committee'') will review and approve the registration of relief 
specialists; and (3) provides a citation for further details on the 
Interim Seat Allocation Program.
    \4\ See letter from William Floyd-Jones, Jr., Assistant General 
Counsel, Amex, to Nancy Sanow, Assistant Director, Division, 
Commission, dated September 30, 2002 (``Amendment No. 2'') 
(replacing the original filing in its entirety). Amendment No. 2, 
among other things: (1) Amends the proposed rule text to provide 
that relief and temporary specialists are expected to assume the 
same obligations and responsibilities of regular specialists for the 
maintenance and stabilization of the market; (2) clarifies in the 
proposed rule text that the Performance Committee will review and 
approve the registration of relief specialists; and (3) provides in 
the proposed rule text that there are no financial requirements for 
temporary specialists.
    \5\ See letter from William Floyd-Jones, Jr., Assistant General 
Counsel, Amex, to Nancy Sanow, Assistant Director, Division, 
Commission, dated October 7, 2002 (``Amendment No. 3'') (replacing 
the original filing in its entirety). Amendment No. 3, in part: (1) 
Corrects technical errors in the proposed rule text and purpose 
section of the proposed rule change; (2) clarifies that temporary 
specialists have no financial requirements; and (3) clarifies the 
appeals process from decisions of the Performance Committee.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Amex Rules 172 (``Temporary 
Specialists'') and 173 (``Responsibility of Temporary Specialist'') to 
require specialists units consisting of fewer than three members to 
arrange for the registration of one or more relief specialists. The 
Exchange also proposes to specify the financial requirements for relief 
specialists and to revise the Exchange's rules regarding the 
appointment of temporary specialists. Below is the text of the proposed 
rule change. Proposed new language is italicized; proposed deletions 
are in brackets.
* * * * *
Relief and Temporary Specialists
    Rule 172. (a) Relief Specialists.--Any member registered as a 
regular specialist must either (1) be associated with other members 
also registered as regular specialists in the same securities, either 
through a partnership, limited liability company, member corporation or 
a joint account, and arrange for at least one member of the group to be 
in attendance during the hours when the Exchange is open for business, 
or (2) arrange for the registration by at least one other member as 
relief specialist, who would always be available, in the regular 
specialist's absence, to take over the ``book'' and to service the 
market, so that there would be no interruption of the continuity of 
service during the hours when the Exchange is open for business.
    The same obligations and responsibilities for the maintenance and 
stabilization of the market which rest upon regular specialists, rest 
also upon relief specialists while in possession of the ``book.''
    A member registered as a specialist will be permitted to register 
as a relief specialist for only one particular specialist or specialist 
group. The Committee on Floor Member Performance will approve the 
registration of a regular specialist as a relief specialist provided 
that the surrounding circumstances are such as to permit the member to 
act in such relief capacity, and at the same time insure the adequate 
servicing of the securities in which the member is registered as a 
regular specialist and the proper performance of the member's 
specialist functions therein.
    (b) Temporary Specialists.--In the event of an emergency, such as 
the absence of the regular and relief specialists, or when the volume 
of business in the particular stock or stocks is so great that it 
cannot be handled by the regular and relief specialists without 
assistance, a Floor Official may authorize a member of the Exchange who 
is not registered as a specialist or relief specialist in such stock or 
stocks, to act as temporary specialist for that day only.
    A member who acts as a temporary specialist by such authority is 
required to file with Trading Analysis, at the end of the day, a report 
showing (a) the name of the security or securities in which the member 
so acted, (b) the name of the regular specialist, (c) the time of day 
when the member so acted, and (d) the name of the Floor Official who 
authorized the arrangement.
    The Floor Official will not give such authority for the purpose of 
permitting a member not registered as specialist or relief specialist 
habitually to relieve a regular specialist at lunch periods, etc.
    If a temporary specialist substitutes for a regular specialist, and 
if no regular or relief specialist is present, the temporary specialist 
is expected to assume the obligations and responsibilities of regular 
specialists for the maintenance and stabilization of the market. 
[Notwithstanding the provisions of Rule 170, a regular member, although 
not himself registered as a specialist, may with the prior approval of 
a Floor Official Act temporarily for a registered specialist. A member 
registered as a specialist may, without prior approval of a Floor 
Official, assist another member acting as a specialist at the same 
post.]
[Responsibility of Temporary Specialist] Relief and Temporary 
Specialist Financial Requirements
    Rule 173. (a) A full time relief specialist, i.e., one who may be 
called upon to act as a relief specialist for an entire business day, 
shall have no financial requirement so long as his or her dealings 
while relieving the regular specialist are effected for the account of 
the regular specialist. A full time relief specialist must satisfy the 
financial requirements of Rule 171 with respect to the securities in 
which he or she is acting as a relief specialist if the relief 
specialist, or the specialist unit providing the relief specialist, 
participates in the profit and loss of the dealings by the relief 
specialist.
    (b) There is no financial requirement with respect to a member 
registered as a part-time relief specialist, i.e., one who may be 
called upon to act as a relief specialist for less than the entire 
business day, usually for lunch periods, etc. Dealings effected by a 
part-time relief specialist while relieving the regular specialist must 
be made for the account of the regular specialist being relieved.
    (c) There is no financial requirement for a temporary specialist 
acting pursuant to Rule 172(b).
    [When a member takes temporarily the book of a specialist, he 
shall, while in possession of that book and for the balance of that 
particular day, stand in the same relationship to the book as the 
registered specialist for whom he acts.]
* * * * *

[[Page 64942]]

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.

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

1. Purpose
    Commentary .03 to Amex Rule 171 formerly required specialist units 
on the Exchange to consist of at least three members. In 1997, the 
Exchange eliminated this rule as part of a package of changes intended 
to update Amex rules.\6\ The Exchange believes that repealing the 
``three member'' requirement for specialist units has encouraged 
qualified new firms to enter the specializing business on the Amex by 
eliminating the entry cost of acquiring or leasing three regular 
memberships. The Exchange, however, is concerned that units consisting 
of less than three members may lack sufficient personnel resources to 
deal with heavy volume and absences from the Floor (notwithstanding the 
recently approved interim member program).\7\ Consequently, the 
Exchange believes that units with fewer than three members should have 
formal back-up arrangements. The Amex also believes that the Exchange's 
current ``Temporary Specialists'' Rule only provides for emergency, 
rather than planned, support and is otherwise dated and in need of 
revision.
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    \6\ See Securities Exchange Act Release No. 38238 (February 4, 
1997), 65 FR 6591 (February 12, 1997) (approving SR-Amex-96-39, 
which, amongst other things, removed the prohibition against 
specialist units of less than three natural persons).
    \7\ See Securities Exchange Act Release No. 43016 (July 7, 
2000), 65 FR 44552 (July 18, 2000) (approving SR-Amex-00-19, an 
Interim Seat Allocation Program, which allows an active member to 
temporarily allocate its membership to an interim member when the 
active member is absent from the trading floor).
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    To address these concerns, the Exchange is proposing to adopt the 
New York Stock Exchange, Inc.'s (``NYSE'') policies with respect to 
relief and temporary specialists.\8\ The Exchange proposes that 
specialist units consisting of fewer than three persons would be 
required to identify at least one relief specialist that would be 
available to step-in for the regular specialist when required.\9\ 
Relief specialists would be registered as such pursuant to Amex Rule 
170(a).\10\ The Exchange will permit the registration of a relief 
specialist when it believes that the relief specialist will be able to 
perform his or her responsibilities as a relief specialist while 
assuring adequate performance in the securities in which he or she is 
registered as a regular specialist. The Exchange proposes that a relief 
specialist be subject to the same responsibilities for the maintenance 
and stabilization of the market as the regular registered specialist in 
a security, and that a member only would be permitted to register as a 
relief specialist for one unit.
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    \8\ See NYSE Rules 104.15, 104.17 and 104.24.
    \9\ The Exchange notes that specialists units with more than 
three persons may also arrange for relief specialists pursuant to 
this proposed rule. Telephone conversation among William Floyd-
Jones, Assistant General Counsel, Amex, Terri Evans, Assistant 
Director, and Lisa N. Jones, Attorney, Division, Commission, dated 
May 30, 2002.
    \10\ Amex Rule 170(a) states: ``No member shall act as a 
specialist in any security unless such member is registered as a 
specialist in such security by the Exchange and such registration 
may be revoked or suspended at any time by the Exchange.''
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    The Exchange proposes to register both ``part-time'' relief 
specialists and ``full-time'' relief specialists. A part-time relief 
specialist is a member who may be called upon to act as a relief 
specialist for less than an entire business day, e.g., during lunch 
periods. The Exchange proposes that dealings effected by a part-time 
relief specialist while relieving the regular specialist must be made 
for the account of the regular specialist who is being relieved. The 
Exchange also proposes that there is no separate financial requirement 
for a part-time relief specialist. A full-time relief specialist is a 
member who may be called upon to act as a relief specialist for an 
entire business day or more. The Exchange proposes that a full-time 
relief specialist has no separate capital requirement if his or her 
dealings are effected for the account of the regular specialist being 
relieved. If, however, dealings by the full-time relief specialist are 
for an account in which the relief specialist has an interest, then the 
Exchange proposes that the full-time relief specialist must satisfy 
applicable financial requirements.\11\
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    \11\ See Amex Rule 171 (``Specialist Financial Requirements'').
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    All arrangements for relief specialists would be subject to review 
and approval by the Exchange's Committee on Floor Member 
Performance.\12\ The Exchange also proposes that specialist units with 
less than three persons have six months or such longer time as the 
Chief Executive Officer of the Exchange may determine is appropriate 
from the date of SEC approval of the proposed rule change to obtain 
Exchange approval for their relief specialist arrangements.
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    \12\ The Exchange's Committee on Floor Member Performance 
(``Performance Committee'') is responsible for reviewing the 
performance of specialists and other Floor members and providing 
non-disciplinary remediation with respect to poor performance. 
Members may appeal decision of the Performance Committee to the Amex 
Adjudicatory Council. See Amex Rule 26.
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    The proposed temporary specialist provision would allow a Floor 
Official to appoint a temporary specialist in the event of an 
emergency, or other unusual situations where existing regular and 
relief specialists are unable to adequately manage the volume of 
business in the particular stock or stocks. The proposed temporary 
specialist rule provides that a temporary specialist is expected to 
assume the responsibilities of a regular specialist for the maintenance 
and stabilization of the market, and has no separate financial 
requirement. The proposed rules also requires that a temporary 
specialist report his or her appointment to the Exchange's Trading 
Analysis Division at the end of the trading session.
2. Statutory Basis
    The proposed rule change is consistent with section 6(b) of the Act 
\13\ in general, and furthers the objectives of Section 6(b)(5) \14\ in 
particular, in that the Exchange's proposed rules are designed to 
promote just and equitable principles of trade and protect investors 
and the public interest by ensuring adequate professional staffing on 
the Exchange Floor at all times.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 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 not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

[[Page 64943]]

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 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-2001-06 and should 
be submitted by November 12, 2002.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-26782 Filed 10-21-02; 8:45 am]
BILLING CODE 8010-01-P