[Federal Register Volume 68, Number 54 (Thursday, March 20, 2003)]
[Notices]
[Pages 13743-13745]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-6698]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47493; File No. SR-Amex-2002-108]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange LLC To Amend Amex Rule 152 To 
Provide That a Member That Fails To Execute an Order May Be Compelled 
To Take or Supply the Securities Named in the Order

March 13, 2003.
    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 December 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 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Amex proposes to amend Amex Rule 152 to provide that a member 
that fails to execute an order may be compelled to take or supply the 
securities named in the order. The text of the proposed rule change is 
below. Text in brackets indicates material to be deleted, and text in 
italics indicates material to be added.
* * * * *

Taking or Supplying Stock to Fill Customer's Order

    Rule 152. (a) No member or member organization shall take or supply 
for any account in which the member, member organization or any other 
member, officer or approved person therein has any direct or indirect 
interest, of which the member knows or should have known, the 
securities named in a sell or buy order accepted for execution by the 
member or member organization except as follows:

Error

    (1) A member who neglects to execute an order may be compelled to 
take or supply for his own account or that of his member organization 
the securities named in the order. [A member or member organization 
which through

[[Page 13744]]

error or neglect has failed to execute an order may, with the consent 
of the customer, take or supply for the account of the member or member 
organization the securities named in the order.]

Filling Customer's Order

    (2) A member or member organization may take or supply the 
securities for the purpose of filling a customer's order only if:
    (i) In connection with taking the securities named in a sell order, 
the member or member organization shall have offered the securities in 
the open market at a price which is higher than the bid of such member 
or member organization by the minimum fraction of trading permitted in 
such securities;
    (ii) In connection with supplying the securities named in a buy 
order, the member or member organization shall have bid for the 
securities in the open market at a price which is lower than the offer 
of such member or member organization by the minimum fraction of 
trading permitted in such securities;
    (iii) The price in each case is justified by the condition of the 
market;
    (iv) In the case of an order received from a non-member customer of 
the member or member organization, the member or member organization 
either (A) prior to effecting the transaction shall have obtained from 
the customer the customer's consent or, except as otherwise provided by 
law, (B) as promptly as possible following execution of the order shall 
have disclosed to the customer that the securities have been taken or 
supplied for an account in which the member, member organization, or 
any member, officer or approved person therein has an interest, and the 
customer accepts the trade;
    (v) In the case of an order received from another member or member 
organization, the member or member organization receiving the order, 
promptly after effecting the transaction notifies such other member or 
member organization that the member or member organization receiving 
the order took or supplied the securities named in the order for the 
account of the member, member organization or a member, officer or 
approved person therein and such other member or member organization 
accepts the trade; and
    (vi) Such transaction is made in accordance with any other 
applicable rules of the Exchange.
    (b) In the event that a member or member organization having 
executed a sell or buy order accepted for execution as a broker finds 
that inadvertently the securities sold or purchased in such execution 
were taken or supplied for an account in which the member, member 
organization or any member, officer or approved person therein has a 
direct or indirect interest, such member or member organization shall 
report that fact to his or its principal who may accept or reject the 
trade.
    (c) A specialist acting as principal in the course of his 
specializing function is prohibited from charging a commission for the 
execution of an order entrusted to him, as agent, by a member.

Commentary

    01. When in the ordinary course of business, priority of bids and 
offers has established the market in a security and the specialist in 
the security has publicized the full size of his bids and offers, the 
provisions of clauses (i) and (ii) of Rule 152(a)(2) do not apply to 
his transactions as principal in the proper performance of his function 
to assist in the maintenance of a fair and orderly market and he may as 
principal take or supply the securities named in an order on his book 
provided he complies with the other requirements of Rule 152.
* * * * *

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 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
    Amex Rule 152 currently provides that a member that has failed to 
execute an order may, with the consent of the customer, take or supply 
for the account of the member or member organization, the securities 
named in the order. The Exchange believes that the current rule does 
not clearly state that the member may be compelled to take or supply 
the security in issue. The Exchange also believes that the rule is 
unclear whether ``customer'' refers to the ultimate buyer or seller or 
whether it refers to the person that placed the order with the member. 
To eliminate possible ambiguity, the Exchange is proposing to amend 
Amex Rule 152 to provide that a member that fails to execute an order 
may be compelled to take or supply the securities named in the 
order.\3\ The Exchange believes that this rewording protects the order 
by clearly stating that a member may be compelled to take or supply the 
securities in issue if the member fails to execute an order.
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    \3\ The Exchange notes that the consent provisions in Amex Rule 
152(a)(2) would continue to apply to the error transactions 
conducted under Amex Rule 152(a)(1). Telephone conversation between 
William Floyd-Jones, Jr., Assistant General Counsel, Amex, and Terri 
Evans, Assistant Director, and Cyndi Rodriguez, Special Counsel, 
Division of Market Regulation, Commission, on March 4, 2003.
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2. Statutory Basis
    The proposed rule change is consistent with section 6(b) of the Act 
\4\ in general, and furthers the objectives of section 6(b)(5) of the 
Act \5\ 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 regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, 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.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 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

    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

    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

[[Page 13745]]

    (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 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 No. SR-Amex-2002-108 and 
should be submitted by April 10, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
Margaret H. McFarland,
Deputy Secretary.
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    \6\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 03-6698 Filed 3-19-03; 8:45 am]
BILLING CODE 8010-01-P