[Federal Register Volume 68, Number 84 (Thursday, May 1, 2003)]
[Notices]
[Pages 23339-23340]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-10787]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47737; File No. SR-Amex-2003-31]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by American Stock Exchange LLC 
Relating to the Rules Implementing the Options Linkage Plan

April 25, 2003.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on April 22, 2003, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the self-regulatory organization. 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 Exchange is proposing to amend Amex Rule 941(e) to clarify that 
in those cases where a Linkage Order is not eligible for automatic 
execution, the specialist must address the order within 15 seconds to 
provide an execution for at least the Firm Customer Quote Size or Firm 
Principal Quote Size. Current Amex Rule 941(e) incorrectly references 
Commentary .01(d) to Amex Rule 933 instead of paragraph (f)(i) of Amex 
Rule 933 for those situations where the Exchange's Auto-Ex system may 
not operate.
    The text of the proposed rule change is available at the Office of 
the Secretary, Amex, and at the Commission.

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 self-regulatory organization 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
    The Exchange is proposing to amend Amex Rule 941(e) \3\ in order to 
accurately reflect the manner in which Linkage Orders \4\ received by 
the Exchange will be executed when an order is not eligible for 
automatic execution through the Auto-Ex system (``Auto-Ex'').\5\ The 
Exchange adopted Amex Rule 941(e) as part of its rules for implementing 
The Plan for the Purpose of Creating and Operating an Intermarket 
Options Market Linkage (the ``Linkage Plan'' or ``Plan'').\6\ The 
Exchange, along with the other options exchanges, launched Phase I of 
the Linkage on January 31, 2003. Phase II is expected to commence on 
April 25, 2003. Phase I is limited to automatic executions while Phase 
II of the Linkage will include manual handling of Linkage Orders and 
satisfaction liability.
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    \3\ Amex Rule 941(e) entitled ``Receipt of Linkage Orders,'' 
sets forth the manner in which Linkage Orders will be executed given 
the Exchange's disseminated quotation and the size of the particular 
order.
    \4\ ``Linkage Order'' means an order routed through the Linkage 
as permitted under the Linkage Plan. There are three types of 
Linkage Orders: (i) ``Principal Acting as Agent (``P/A'') Order,'' 
which is an order for the principal account of a specialist (or 
equivalent entity on another Participant Exchange that is authorized 
to represent Public Customer orders), reflecting the terms of a 
related unexecuted Public Customer order for which the specialist is 
acting as agent; (ii) ``Principal Order,'' which is an order for the 
principal account of an Eligible Market Maker (or equivalent entity 
on another Participant Exchange) and is not a P/A Order; and (iii) 
``Satisfaction Order,'' which is an order sent through the Linkage 
to notify a Participant Exchange of a Trade-Through and to seek 
satisfaction of the liability arising from that Trade-Through.
    \5\ Amex Rule 933(f)(i) sets forth the situations in which Auto-
Ex may be disengaged or operated in a manner other than the normal 
manner. The circumstances of Auto-Ex disengagement outlined in the 
Rule include market data delays, unusual markets, unusual market 
conditions, system malfunctions, influx of order executions and for 
certain market activity such as book bids or offers and locked or 
crossed markets.
    \6\ See Securities Exchange Act Release No. 47297 (January 31, 
2003), 68 FR 6526 (February 7, 2003).
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    The reference in Amex Rule 941(e) to Commentary .01(d) to Amex Rule 
933 does not accurately portray the manner in which option orders may 
be ineligible for automatic execution through the Exchange's Auto-Ex 
system.\7\ Rather, the Exchange believes that Amex Rule 933(f)(i) is 
the proper rule to cross-reference in Amex Rule 941(e) to identify 
those situations in which Auto-Ex may not be available. For example, 
Amex Rule 933(f)(i)(F) provides for a by-pass of Auto-Ex during the 
following situations: (i) Whenever the bid or offer in a specific 
option series represents a limit order on the specialist's book; (ii) 
whenever a crossed or locked market causes an inversion in the quote; 
or (iii) whenever a better bid or offer is being disseminated by 
another options exchange and the order is not eligible for automatic 
price matching as set forth in Commentary .01(b). Accordingly, the Amex 
believes that the reference in Amex Rule 941(e) to Commentary .01(d) to 
Amex Rule 933 should be replaced with Amex Rule 933(f)(i).
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    \7\ Commentary .01(d) to Amex Rule 933 describes the situations 
in which orders for automatic price matching series or automatic 
price improvement series will be routed to the specialist and not 
automatically executed.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the Act 
\8\ in general and furthers the objectives of Section 6(b)(5) \9\ 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 facilitating transactions in securities, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, to protect investors and the public interest 
and is not designed to permit unfair

[[Page 23340]]

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 been filed by the Exchange as a 
``non-controversial'' rule change pursuant to Section 19(b)(3)(A)(i) of 
the Act \10\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\11\ 
Consequently, because the foregoing rule change: (i) Does not 
significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) by its terms, does not become operative for 30 days after the 
date of the filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest,\12\ it has become effective pursuant to Section 19(b)(3)(A) 
of the Act and Rule 19b-4 thereunder.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(i).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ The Commission has waived the requirement that the Exchange 
provide written notice of its intent to file the proposed rule 
change, along with a brief description and text of the proposed rule 
change, at least five business days prior to the date of filing of 
the proposed rule change.
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    A proposed rule change filed under Rule 19b-4(f)(6) may not become 
operative prior to thirty (30) days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange has requested that the Commission 
waive the thirty (30) day waiting period in order for this proposed 
rule change to be effective and operative immediately thereby 
permitting the Exchange to operate Phase II of the Linkage (expected to 
commence on April 25, 2003) in a manner consistent with the Linkage 
Plan.
    The Commission, consistent with the protection of investors and the 
public interest, has determined to make the proposed rule change 
operative as of the date of this order.\13\ The Commission notes that 
this proposed rule change will provide clarity in the Amex Rules 
regarding how the options routed through the Linkage to the Amex will 
be handled upon commencement of Phase II.
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    \13\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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    At any time within sixty (60) days of the filing of the 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.

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 in Washington, DC. 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-2003-31 and should be submitted by May 22, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30(a)(12).
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Margaret H. McFarland
Deputy Secretary
[FR Doc. 03-10787 Filed 4-30-03; 8:45 am]
BILLING CODE 8010-01-U