[Federal Register Volume 68, Number 161 (Wednesday, August 20, 2003)]
[Notices]
[Pages 50200-50203]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-21254]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48334; File No. SR-Amex-2003-10]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by the American Stock Exchange LLC, 
Relating to Its After-Hours Trading Facility

August 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 February 24, 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. On June 
11, 2003, the Exchange filed Amendment No. 1 to the proposed rule 
change.\3\ 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.
    \3\ See letter from Geraldine Brindisi, Vice President and 
Corporate Secretary, Amex, to Nancy J. Sanow, Assistant Director, 
Division of Market Regulation, Commission, dated June 10, 2003.
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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 Rules 1300, 1301 and 1302 relating 
to the operation of its After Hours Trading Facility. Below is the text 
of the proposed rule change. Proposed new language is italicized. 
Proposed deletions are in [brackets].
* * * * *

After Hours Trading

    Rule 1300 (a) The Rules in this 1300 Series (Rules 1300 through 
1306) shall apply to (i) all Exchange contracts made on the Exchange 
through its ``After-Hours Trading Facility'' (as this Rule defines that 
term) and (ii) the handling of orders, and the conduct of accounts and 
other matters, relating to trading through that facility. [Only 
specialists registered in Portfolio Depositary

[[Page 50201]]

Receipts (``PDRs''), Index Fund Shares or in investment trust 
securities listed on the Exchange pursuant to Section 118B of the 
Exchange's Listed Standards, Policies and Requirements may participate 
in the After-Hours Trading Facility for their dealer account in such 
securities. Any reference in this 1300 Series to specialist 
transactions in the After-Hours Trading Facility is limited to 
transactions by specialists in PDRs, Index Fund Shares or investment 
trust securities in which they are registered.]
    (b) through (d) No change.
    (e) As used in this 1300 series of Rules and other Rules in their 
application to After-Hours Trading, the following terms shall have the 
meanings specified below:
    (i) The term ``closing price'' means the price established by the 
last ``regular way'' sale on the American Stock Exchange in a security 
prior to the official closing of the 9:30 a.m. to 4:00 p.m. trading 
session, as determined by the Exchange. In the case of a Portfolio 
Depositary Receipt, Index Fund Share, or an investment trust security 
listed pursuant to Section 118B of the Exchange's [Listing Standards, 
Policies and Requirements] Company Guide, the term ``closing price'' 
means the price established by the last ``regular way'' sale on the 
American Stock Exchange prior to the official closing of the 9:30 a.m. 
to 4:15 p.m. trading session, as determined by the Exchange.
    (ii) through (iv) No change.

Rule 1301 Securities to be Traded

    Only such equity securities as the Exchange may specify shall be 
dealt in through the After-Hours Trading Facility. Any such security 
must be listed or admitted to unlisted trading privileges on the 
Exchange. Orders in Nasdaq securities traded on the Exchange pursuant 
to unlisted trading privileges are not eligible for entry into the 
After-Hours Trading Facility.

    Rule 1302 (a) Entry of Orders

    (i) Closing-Price Orders--Subject to Rule 1306 (Impact of Trading 
Halts on After-Hours Trading), a member or member organization may 
enter into the After-Hours Trading Facility a closing-price order at 
such times as the Exchange may specify. A specialist registered in a 
stock or other security traded pursuant to the Exchange's equity 
trading rules (``equity-traded security''), (including, without 
limitation, Portfolio Depositary Receipts (``PDRssm''), 
Index Fund Shares, Trust Issued Receipts (``TIRs''), rights, warrants, 
and securities listed pursuant to Sections 106, 107 or 118B of the 
Exchange Company Guide [Portfolio Depositary Receipt, Index Fund Share 
or in an investment trust security listed on the Exchange pursuant to 
section 118B of the Exchange's Listing Standards, Policies and 
Requirements] may enter a closing price order for his or her dealer 
account in such security into the After-Hours Trading Facility if there 
is an imbalance of either buy or sell orders in the [f]Facility 
immediately prior to the close of the Facility in order to eliminate 
all or any part of such order imbalance. In the event that, in any 
stock or any equity-traded security, other than PDRs, Index Fund 
Shares, TIRs, or an investment trust security listed under Section 118B 
of the Exchange Company Guide (``Section 118B security''), an open 
agency order to buy (sell) on the specialist's book limited to the 
closing price remains unexecuted after the specialist buys (sells) at 
its price in the After-Hours Trading Facility, then the specialist 
shall offer that execution to the open order prior to the opening of 
trading on the next business day. In the event that there is more than 
one such open agency order, then the specialist shall offer the 
execution to each order in time priority until either the execution is 
accepted or until all such orders have rejected the execution. Such 
acceptance must be made within a reasonable time of the offer or the 
offer will be deemed to have been rejected.
    (ii) Closing-Price Coupled Orders--Subject to Rule 1306, a member 
or member organization may enter into the After-Hours Trading Facility 
a closing-price order to buy coupled with a closing-price order to sell 
the same quantity of the same security for execution against each 
other. However, subject to paragraph (ii)(2) of this rule, a member or 
member organization may not so enter such coupled orders if both such 
orders are for an account in which any member or member organization 
has a direct or indirect interest.
    1. A specialist registered in a [Portfolio Depositary Receipt] PDR, 
Index Fund Share, TIR or [in an investment trust security listed on the 
Exchange pursuant to Section 118B of the Exchange's Listing Standards, 
Policies and Requirements] section 118B security may agree prior to 
4:15 p.m. to take the contra side of an order in such security 
represented in the crowd by entering a coupled order in the After-Hours 
Trading Facility.
    2. A specialist registered in any stock or any equity-traded 
security other than a PDR, Index Fund Share, TIR or section 118B 
security may agree prior to the close of the Facility to take the buy 
(sell) side of a coupled order in such security only after determining 
no buy (sell) orders in the After-Hours Trading Facility will remain 
unexecuted. In addition, a member or member organization may enter a 
closing-price order to buy (sell) any stock or any equity-traded 
security other than a PDR, Index Fund Share, TIR or Section 118B 
security for the account of the specialist registered in such security 
coupled with a closing price order to sell (buy) for the account of any 
member or member organization which has agreed to offset all or part of 
any market-on-close imbalance that existed in the security prior to the 
official closing of the trading session in such security. However, in 
the event that an open agency order in any stock or any equity-traded 
security other than a PDR, Index Fund Share, TIR or section 118B 
security to buy (sell) on the specialist's book limited to the closing 
price remains unexecuted after the specialist buys (sells) at its price 
in the After-Hours Trading Facility, then the specialist shall offer 
that execution to the open order prior to the opening of trading on the 
next business day. In the event that there is more than one such open 
agency order, then the specialist shall offer the execution to each 
order in time priority until either the execution is accepted or until 
all such orders have rejected the execution. Such acceptance must be 
made within a reasonable time of the offer or the offer will be deemed 
to have been rejected.
    (iii) No change.
    (b) Migration of Orders--Subject to Rule 1306, a ``regular way'' 
good 'til cancelled order that is designated as After-Hours eligible, 
that is on the specialist's limit order book and that is executable at 
the closing price or better shall migrate from the specialist's limit 
order book to the After-Hours Trading Program, except that any order 
for an account in which the specialist member organization or any 
associated party has a direct or indirect interest shall not so 
migrate, and provided further that any order for a [Portfolio 
Depositary Receipt] PDR, Index Fund Share, TIR or [an investment trust 
security listed on the Exchange pursuant to Section 118B of the 
Exchange's Listing Standards, Policies and Requirements] section 118B 
security shall not so migrate.
    (c) through (g) No change.
* * * * *

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

[[Page 50202]]

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 parts of 
such statements.

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

1. Purpose
    Rule 1300(a), which relates to operation of the Exchange After-
Hours Trading Facility (``AHT Facility'' or ``Facility'') (governed by 
Rules 1300 through 1306), currently provides that only specialists 
registered in specified securities--Portfolio Depositary Receipts, 
Index Fund Shares or unit investment trusts listed pursuant to section 
118B of the Amex Company Guide--may participate in the AHT Facility for 
their dealer account in these securities. In order to help reduce 
volatility on the close, and to afford Amex specialists flexibility 
comparable to that of New York Stock Exchange (``NYSE'') specialists 
who participate in NYSE's after-hours crossing session, while 
maintaining the protection of customer orders, the Exchange believes 
that specialists should be permitted to participate for their dealer 
accounts in stocks or in securities traded as equity securities on the 
Exchange (``equity-traded securities''). These ``equity-traded 
securities'' include, without limitation, rights; warrants; securities 
listed under Sections 106 (Currency and Index Warrants), 107 (Other 
Securities) and 118B (Investment Trusts) of the Company Guide; 
Portfolio Depositary Receipts ( PDRs\TM\); Index Fund Shares; and Trust 
Issued Receipts ( TIRs ). Rule 1302(a)(i), therefore, would provide 
that a specialist in a stock or other equity-traded security may enter 
a closing price order in the AHT Facility for the specialist's dealer 
account to offset an imbalance of buy or sell orders in the Facility 
immediately prior to the 5 p.m. after hours trading session.
    Rule 1300(e) (Definitions) would be amended to add Index Fund 
Shares to the securities for which the ``closing price'' is the last 
regular way sale on the Exchange prior to the official closing of the 
9:30 a.m. to 4:15 p.m. trading session. This is because Index Fund 
Shares may also trade until 4:15 p.m. Rule 1301 (Securities to be 
Traded) would be amended to state that orders in Nasdaq stocks traded 
on the Exchange pursuant to unlisted trading privileges are not 
eligible for entry in the AHT Facility.
    Under proposed amendments to Rule 1302(a)(i), if an open agency 
order to buy (sell) on the specialist's book limited to the closing 
price remains unexecuted after the specialist buys (sells) the security 
at its price in the AHT Facility, then the specialist would have to 
offer that execution to the open order before the opening of trading 
the next business day. This restriction would not apply to PDRs, Index 
Fund Shares, TIRs and securities listed under sections 106, 107 or 118B 
of the Company Guide. If there are multiple open agency orders, the 
specialist will have to offer the execution to each order in time 
priority until either the execution is accepted or until all such 
orders have rejected the execution. This restriction protects the 
interest of investors in having their orders on the book executed, if 
the investor so wishes, if the specialist has previously bought or sold 
the security in the AHT Facility for his or her own account.
    PDRs, Index Fund Shares, TIRs and other derivatively-priced equity-
traded securities would not be subject to this restriction in so far as 
PDRs, Index Fund Shares and section 118B securities are not currently 
subject to these restrictions in connection with AHT transactions. 
Moreover, because such securities are derivatively-priced, they may 
change in value based on price changes in the underlying index or 
portfolio securities. The Exchange believes it would be inappropriate 
to subject the specialist to risk of a market move from the AHT session 
until the opening of trading the next trading day at 9:30 a.m. for 
unexecuted customer orders remaining on the specialist's book.
    Under current Rule 1302(a)(ii), a member or member organization may 
enter into the AHT Facility a closing-price order to buy coupled with a 
closing-price order to sell the same amount of the same security for 
execution against each other. However, both such orders cannot be for 
the accounts of members or member organizations. The provision in Rule 
1302(a)(ii) that the specialist in PDRs, Index Fund Shares and section 
118B securities may agree before 4:15 p.m. to take the contra side on a 
crowd order by entering a coupled order in the AHT Facility would be 
amended to add TIRs to the securities eligible for such treatment, and 
to separate this provision as paragraph (ii)(1) of Rule 1302(a). New 
paragraph (ii)(2) would be added to provide that a specialist in an 
Amex-listed stock or equity traded security could also take one side of 
a coupled order transaction after determining that no buy or sell 
orders in the Facility will remain unexecuted. In order to further an 
important purpose of the proposed rule to help reduce volatility at the 
close, both sides of a coupled order could be for the accounts of 
members or member organizations, including the specialist. However, for 
any unexecuted open agency order on the specialist's book in any stock 
or equity traded security other than a PDR, Index Fund Share, TIR or 
section 118B security, after the specialist buys or sells the security 
at its price in the AHT Facility, the specialist must offer that 
execution to the open order before the opening of trading on the next 
business day. If there is more than one open agency order, then the 
specialist must offer the execution to each order in time priority 
either until the execution is accepted or until all such orders have 
rejected the execution. Acceptance must be made within a reasonable 
time of the offer or the offer will be deemed rejected. These 
procedures are comparable to those proposed for closing price orders 
and are intended to provide comparable investor protections. PDRs, 
Index Fund Shares, TIRs and section 118B securities would be exempted 
from this restriction for the reasons described above for closing price 
orders.
    In addition, Rule 1302(b) would be amended to add TIRs to the 
securities for which specialist proprietary orders are not permitted to 
migrate from the specialist's book to the AHT Facility. Securities 
currently so restricted include PDRs, Index Fund Shares and section 
118B securities.
2. Statutory Basis
    The proposed rule change is consistent with section 6(b) \4\ of the 
Act in general and furthers the objectives of section 6(b)(5) \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 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 discrimination between customers, 
issuers, brokers, or dealers.
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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.

[[Page 50203]]

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 self-regulatory organization 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 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-2003-10 and 
should be submitted by September 10, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-21254 Filed 8-19-03; 8:45 am]
BILLING CODE 8010-01-P