[Federal Register Volume 69, Number 52 (Wednesday, March 17, 2004)]
[Notices]
[Pages 12719-12720]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-5986]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49396; File No. SR-Amex-2002-35]


Self-Regulatory Organizations; Order Granting Approval to 
Proposed Rule Change and Amendment Nos. 1, 2, 3, 4, and 5 Thereto by 
the American Stock Exchange LLC To Amend Rules 128A, 1000, and 1000A 
With Respect to the Participation in Exchange Traded Fund Trades 
Executed on the Exchange by Registered Traders and Specialists and the 
Allocation of Those Trades to the Appropriate Party

March 11, 2004.
    On April 22, 2002, the American Stock Exchange LLC (``Amex'') filed 
with the Securities and Exchange Commission (``Commission''), pursuant 
to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') 
\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to amend Amex 
Rules 128A, 1000, and 1000A regarding the participation in Exchange 
Traded Fund (``ETF'') trades executed on the Exchange by registered 
traders and specialists and the allocation by the specialist of those 
trades to the appropriate party. On February 13, 2003, September 8, 
2003, November 3, 2003, and December 10, 2003, respectively, the Amex 
filed Amendment Nos. 1, 2, 3, and 4 to the proposed rule change.\3\ The 
proposed rule change, as amended, was published for comment in the 
Federal Register on January 20, 2004.\4\ The Commission received no 
comments on the proposal. On January 12, 2004, the Exchange filed 
Amendment No. 5 to the proposed rule change.\5\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letters from Claire P. McGrath, Senior Vice President 
and Deputy General Counsel, Amex, to Nancy Sanow, Assistant 
Director, Division of Market Regulation (``Division''), Commission, 
dated February 12, 2003 (``Amendment No. 1''); September 5, 2003 
(``Amendment No. 2''); October 30, 2003 (``Amendment No. 3''); and 
December 9, 2003 (``Amendment No. 4'').
    \4\ See Securities Exchange Act Release No. 49058 (January 12, 
2004), 69 FR 2754 (``Notice'').
    \5\ See letter from Claire P. McGrath, Senior Vice President and 
Deputy General Counsel, Amex, to Nancy Sanow, Assistant Director, 
Division, Commission, dated January 9, 2004 (``Amendment No. 5''). 
Amendment No. 5 made technical corrections that were already 
included in the Notice and that the Exchange had committed to 
formally submit by filing an amendment.
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    After careful review, the Commission finds that the proposed rule 
change, as amended, is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\6\ In particular, the Commission believes that the 
proposal is consistent with Section 6(b)(5) of the Act,\7\ which 
requires, among other things, that the Amex's rules be designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, 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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    \6\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(5).
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    The proposed rule change provides that when participation in ETF 
trades is being allocated, the specialist will receive a greater than 
equal share when on parity with registered traders. Under the proposed 
rule change, an ETF

[[Page 12720]]

Trading Committee created by the Exchange will determine the percentage 
of the specialist's participation for each ETF on a case-by-case basis, 
depending on the liquidity of the product, the type of orders sent to 
the Exchange and its competitors, and the type of order flow the 
Exchange seeks to attract.\8\ The Commission believes that the proposed 
rule change should provide for a reasonable participation allocation in 
ETFs between specialists and registered traders based on their 
respective responsibilities and obligations. The Commission notes that 
the proposed rule change sets forth a method to be used by the 
specialist in allocating shares to registered traders and provides an 
articulated sequence for allocating an ETF trade in a situation where a 
customer order is on parity with the specialist and registered traders. 
The Commission also notes that these methods are similar to the methods 
that the Commission has approved for the allocation of contracts among 
registered traders in options trading on the Exchange.\9\
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    \8\ Under the proposal, the ETF Trading Committee will also 
determine the specialist participation in trades executed by the 
Exchange's automatic execution (``Auto-Ex'') system, in lieu of the 
table of percentages set forth in the current rule.
    \9\ See Securities Exchange Act Release No. 47729 (April 24, 
2003), 68 FR 23344 (May 1, 2003).
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    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\10\ that the proposed rule change, as amended, (File No. SR-Amex-
2002-35) be, and it hereby is, approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 04-5986 Filed 3-16-04; 8:45 am]
BILLING CODE 8010-01-P