[Federal Register Volume 69, Number 84 (Friday, April 30, 2004)]
[Notices]
[Page 23833]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-9823]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49617; File No. SR-Amex-2001-46]


Self-Regulatory Organizations; American Stock Exchange LLC; Order 
Granting Approval to Proposed Rule Change Relating to the Adoption of a 
Facilitation Rule and Member Firm Guarantee for Index Shares

April 26, 2004.
    On July 11, 2001, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') 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 adopt a facilitation rule and a member firm 
participation guarantee for member firms facilitating transactions in 
Portfolio Depositary Receipts and Index Fund Shares (``index shares'') 
on the Exchange, and to codify the Exchange's policy prohibiting the 
use of non-public information received during the facilitation process.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    On November 7, 2001, September 24, 2003, and December 4, 2003, Amex 
filed Amendment Nos. 1, 2, and 3 to the proposed rule change, 
respectively.\3\ The proposed rule change was published for comment in 
the Federal Register on January 13, 2004.\4\ The Commission received no 
comments on the proposal.
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    \3\ See letter from Claire P. McGrath, Vice President and 
Special Counsel, Amex, to Nancy Sanow, Assistant Director, Division 
of Market Regulation (``Division''), Commission, dated November 5, 
2001 (Amendment No. 1); and letters from Claire P. McGrath, Senior 
Vice President and Deputy General Counsel, Amex, to Nancy Sanow, 
Assistant Director, Division, Commission, dated September 23, 2003 
and December 3, 2003 (Amendment Nos. 2 and 3, respectively).
    \4\ See Securities Exchange Act Release No. 49022 (January 5, 
2004), 69 FR 2015 (January 13, 2004).
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    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\5\ In 
particular, the Commission believes that the proposed rule change is 
consistent with section 6(b)(5) of the Act,\6\ which, among other 
things, requires that the Exchange's rules be designed 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. The 
Commission believes that the proposal sets forth reasonable rules and 
procedures for member firms to follow when seeking to facilitate (i.e., 
trade with) index share orders from their own public customers, and 
that these rules and procedures adequately provide for the exposure of 
the customer order to the trading crowd for the possibility of price 
improvement.
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    \5\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b)(5).
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    The proposal also would provide a member firm facilitating a public 
customer order of 25,000 index shares or more the right to trade with 
up to 50% of the order if the firm improves the price provided by the 
trading crowd, and up to 40% if it matches the trading crowd's price. 
The Commission believes that, in the context of index share trading, 
member firm guarantees of this size should not erode price competition 
to the detriment of investors. The Commission further notes that public 
customer orders on the specialist's book or represented in the trading 
crowd on the contra side of the public customer order that the member 
firm is seeking to facilitate would have priority over the member 
firm's guaranteed participation.
    In addition, the proposed rule change provides that it may be 
considered conduct inconsistent with just and equitable principles of 
trade for any member or associated person with knowledge of an imminent 
facilitation transaction to trade in index shares that are subject of 
the transaction or other related instruments before the proposed 
facilitation is disclosed. The Commission believes that this aspect of 
the proposal should help protect the integrity of the market and 
prevent disadvantage to other market participants.
    It is therefore ordered, pursuant to section 19(b)(2) of the Act 
\7\, that the proposed rule change (File No. SR-Amex-2001-46) be, and 
it hereby is, approved.
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    \7\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 04-9823 Filed 4-29-04; 8:45 am]
BILLING CODE 8010-01-P