[Federal Register Volume 68, Number 150 (Tuesday, August 5, 2003)]
[Notices]
[Pages 46254-46255]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-19823]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48244; File No. SR-Amex-2003-47]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange LLC To Amend Commentary .02 of 
Amex Rule 126(g) to Restrict the Crossing of Agency Orders of 5,000 
Shares or More To Orders for the Accounts of Persons Who Are Not 
Brokers or Dealers

July 29, 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 May 19, 2003, 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 Exchange proposes to amend Commentary. 02 to Amex Rule 126(g) 
(``Special Rules'' under ``Precedence of Bids and Offers'')\3\ to 
restrict the crossing of agency orders of 5,000 shares or more to 
orders for the accounts of persons who are not brokers or dealers. 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.
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    \3\ The Exchange made a typographical correction to the 
reference of Arnex Rule 126. Telephone conversation between Michael 
Cavalier, Associate General Counsel, Amex, and Andy Shipe, Special 
Counsel, Division of Market Regulation, Commission, on July 16, 
2003.
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* * * * *

Rule 126(g)

Commentary
    .02 When a member has an order to buy and an order to sell an 
equivalent amount of the same security, and both orders are of 5,000 
shares or more and are for the accounts of persons who are not [members 
or member organizations] brokers or dealers (including, all U.S. 
registered and foreign registered brokers or dealers), the member may 
``cross'' those orders at a price at or within the prevailing 
quotation. The member's bid or offer shall be entitled to priority at 
such cross price, irrespective of pre-existing bids or offers at that 
price. The member shall follow the crossing procedures of Rule 151, and 
another member may trade with either the bid or offer side of the cross 
transaction only to provide a price which is better than the cross 
price as to all or part of such bid or offer. A member who is providing 
a better price to one side of the cross transaction must trade with all 
other market interest having priority at that price before trading with 
any part of the cross transaction. No member may break up the proposed 
cross transaction, in whole or in part, at the cross price. No 
specialist or registered trader may effect a proprietary transaction to 
provide price improvement to one side or the other of a cross 
transaction effected pursuant to this Commentary .02. A transaction 
effected at the cross price in reliance on this Commentary .02 shall be 
printed as ``stopped stock''.
* * * * *

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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Amex Rule 126(g), Commentary .02 provides that a member may cross 
an order to buy and an order to sell an equivalent amount of the same 
security at or within the prevailing quotation if both orders are for 
5,000 shares or more, and if they are for the accounts of non-members 
or member organizations. These are referred to as ``clean agency 
crosses'' or ``agency cross transactions.'' A member is not permitted 
to break up a proposed clean agency cross at the cross price, but may 
trade with the bid or offer side to provide price improvement to all or 
part of the bid or offer. The purpose of the rule is to permit more 
crosses to take place on the Exchange without risk of being ``broken 
up'' at the cross price and to reduce the amount of crossing activity 
lost to regional exchanges or the third market.
    In addition, because these crosses are required under Amex Rule 151 
to be effected at the minimum price variation, since the advent of 
decimal pricing, it is possible for members to interfere with a cross 
while providing price improvement of only $.01 to a portion of the 
cross. The Commission approved an amendment to Amex Rule 126(g), 
Commentary .02 to provide that orders of 5,000 shares or more for the 
account of a non-member organization may be crossed at a price at or 
within the bid or offer without being broken up by a specialist or 
Registered Trader acting as

[[Page 46255]]

principal.\4\ However, the Exchange believes that this recent change to 
Commentary .02 of Amex Rule 126(g) continues to put orders for the 
accounts of non-member brokers and dealers in a more advantageous 
position than Amex specialists and Registered Traders, but, more 
importantly, continues to put orders for the accounts of non-member 
brokers and dealers in a more advantageous position than public 
customer orders represented in the trading crowd and on the 
specialist's book at the clean agency cross price. This is because such 
non-member broker-dealer orders always have priority over public 
customer (non-broker or dealer) orders at the clean agency cross price. 
In addition, such orders can participate in a clean agency cross even 
though an Amex specialist or Registered Trader is prohibited from 
interacting with a clean agency cross to provide price improvement
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    \4\ See Securities Exchange Act Release No. 47345 (February 11, 
2003), 68 FR 8316 (February 20, 2003).
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    The Exchange believes it is appropriate to amend Amex Rule 126(g), 
Commentary .02 to limit the advantages offered by this rule to public 
customer orders only, and not to orders for the accounts of brokers or 
dealers. This change will prohibit orders for the accounts of brokers 
and dealers (including all U.S. and foreign registered brokers or 
dealers) from having priority over existing bids and offers and from 
engaging in crosses without risk of being broken up by a specialist 
and/or Registered Trader who wishes to trade at an improved price with 
one side or the other of the cross. The Exchange believes this change 
will facilitate the efficient crossing of public customer orders by 
placing non-member brokers and dealers in the same position as member 
brokers and dealers with respect to crossing procedures under 
Commentary .02 of Amex Rule 126(g).
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \5\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \6\ in particular, because 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, and, 
in general, to protect investors and the public interest, and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change will impose no 
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
    (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, as 
amended, that are filed with the Commission, and all written 
communications relating to the proposed rule change, as amended, 
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 number SR-Amex-2003-47 and should be 
submitted by August 26, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-19823 Filed 8-4-03; 8:45 am]
BILLING CODE 8010-01-U