[Federal Register Volume 69, Number 121 (Thursday, June 24, 2004)]
[Notices]
[Pages 35399-35401]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-14282]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49855; File No. SR-Amex-2004-30]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by 
the American Stock Exchange LLC to Extend on a Six-Month Pilot Basis 
the Exchange's Odd-Lot Execution Procedures Applicable To Trading in 
Nasdaq Securities

June 14, 2004.
    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 5, 2004, 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 and 
II below, which Items have been prepared by the Exchange. On May 10, 
2004, the Amex amended the proposed rule change.\3\ The Exchange filed 
the proposal pursuant to Section 19(b)(3)(A) of the Act,\4\ and Rule 
19b-4(f)(6) thereunder,\5\ which renders the proposal effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, 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 Eric Van Allen, Assistant General Counsel, 
Amex, to Katherine A. England, Assistant Director, Division of 
Market Regulation, Commission, dated May 7, 2004, replacing Form 
19b-4 in its entirety (``Amendment No. 1'').
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Amex proposes to amend paragraph (j) of Amex Rule 118 
(``Trading in Nasdaq National Market Securities'') and Commentary .05 
of Amex Rule 205 (``Manner of Executing Odd-Lot Orders'') that were 
implemented on a pilot program basis and to extend the pilot program 
for an additional six-month period ending on December 27, 2004. The 
text of the proposed rule change is set forth below. Proposed new 
language is in italics.
* * * * *

Trading in Nasdaq National Market Securities

Rule 118. (a) through (i) No change.
    (j) Odd-Lot Orders--Odd lot orders in Nasdaq National Market 
securities shall be executed in the following manner:
    (i) Market and Executable Limit Orders--A market or executable 
limit order shall be executed, unless otherwise provided herein, at the 
price of the qualified national best offer (in the case of an order to 
buy) or qualified national best bid (in the case of an order to sell) 
in the security at the time the order has been received at the trading 
post or through the Amex Order File. An order entered through the Amex 
Order File shall receive automatic execution at such price.
    All market odd-lot orders entered prior to the opening of trading 
of Nasdaq National Market securities on the Exchange shall receive 
automatic execution at the price of the first round-lot or Part of 
Round Lot (PRL) transaction on the Exchange. Executable limit odd-lot 
orders entered prior to the opening of trading of Nasdaq National 
Market securities on the Exchange shall be executed manually at the 
price of the first round-lot or PRL transaction on the Exchange.
    For purposes of this subparagraph (j)(i), the qualified national 
best bid or offer for a Nasdaq National Market security shall mean the 
highest bid and lowest offer, respectively, disseminated (A) by the 
Exchange or (B) by another market center participating in the Joint 
Self-Regulatory Organization Plan Governing the Collection, 
Consolidation and Dissemination of Quotation and Transaction 
Information for Nasdaq Listed Securities Traded on Exchanges on an 
Unlisted Trading Privileges Basis (``Plan''); provided, however, that 
the bid and offer in another such market center will be considered in 
determining the qualified national best bid or offer in a stock only if 
(i) the quotation conforms to the requirements of Rule 127 (``Minimum 
Price Variations''), (ii) the quotation does not result in a locked or 
crossed market, (iii) the market center is not experiencing operational 
or system problems with respect to the dissemination of quotation 
information, and (iv) the bid or offer is ``firm,'' that is, members of 
the market center disseminating the bid or offer are not relieved of 
their obligations with respect to such bid or offer under paragraph 
(c)(2) of Rule 11Ac1-1 pursuant to the ``unusual market'' exception of 
paragraph (b)(3) of Rule 11Ac1-1.
    (ii) Limit Orders; Stop Orders; Stop-Limit Orders; Other Order 
Types--Unless otherwise provided herein, non-executable limit, stop, 
and stop limit orders shall be executed in accordance with Rule 205, 
Parts A(2), A(3), and A(4), respectively. Orders to buy or sell ``at 
the close'' shall be filled at the price of the closing round-lot sale 
on the Exchange. An odd-lot order received prior to the close but not 
filled either before the close or on the close may be filled after the 
close in accordance with the provisions of Rule 205, Part C (1).
    (iii) Non-Regular Way Trades--Non-regular way trades shall be 
effected in accordance with the provisions of Rule 205, Part C (2).
    (iv) Locked and Crossed Market Conditions
    (a) For market and executable limit orders entered after the 
opening, when the national best bid and offer is in a locked market 
condition (i.e., the bid and offer are the same), odd-lot buy and sell 
orders will be executed at that locked market price.
    (b) Crossed Market Condition--When a crossed market condition 
exists (i.e., bid higher than offer) and the national best displayed 
bid is higher than the national best displayed offer by $.05 or less, 
market orders will receive automatic execution at the mean of the bid 
and offer prices. If the mean is in a subpenny increment, the price of 
execution would be rounded up to the nearest $.01. When the national 
best displayed bid is higher than the offer by more than $.05, an odd-
lot market order will not receive automatic execution and is to be 
executed manually at the time a crossed market condition no longer 
exists, in accordance either with subparagraph (i) or (iv)(a) of this 
paragraph (j), as appropriate. An executable limit order will receive 
automatic execution at the crossed market national best displayed bid 
(in the case of an order to sell) or at the crossed market national 
best displayed offer (in the case of an order to buy).
    (v) No odd-lot differential may be charged on any odd-lot orders, 
except for non-regular way trades effected under Rule 118 (j)(iii).
    (vi) Odd-lot orders in Nasdaq National Market securities are 
permitted to be marked (``short'') and are acceptable for all order 
types, and Rule 7, Commentary .02 shall apply to such orders.

[[Page 35400]]

    (k) No change.
* * * * *
Manner of Executing Odd-Lot Orders
Rule 205
    Commentary
    .01 through .04--No Change.
    .05 Odd-lot orders in Nasdaq National Market securities shall be 
executed in accordance with Rule 118(j).
* * * * *

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
    The Commission originally approved, and the Exchange implemented, a 
pilot program for odd-lot order \6\ executions in Nasdaq securities 
transacted on the Exchange pursuant to unlisted trading privileges.\7\ 
Paragraph (j) of Amex Rule 118 describes the Exchange's odd-lot 
execution procedures for Nasdaq securities, and Commentary .05 to Amex 
Rule 205 references the odd-lot procedures described in Amex Rule 
118(j).
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    \6\ An odd-lot order is an order for less than 100 shares.
    \7\ See Securities Exchange Act Release Nos. 46304 (August 2, 
2002), 67 FR 51903 (August 9, 2002) (SR-Amex-2002-56); 48174 (July 
14, 2003), 68 FR 43409 (July 22, 2003) (SR-Amex-2003-56); and 48995 
(December 24, 2003), 68 FR 75670 (December 31, 2003) (SR-Amex-2003-
102).
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    The pilot program was originally approved on August 2, 2002, for a 
six-month period, and was thereafter extended twice. It is currently 
set to expire on June 27, 2004.\8\ The Exchange proposes to extend the 
pilot program for an additional six months to expire on December 27, 
2004.
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    \8\ Id.
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    Under the Exchange's pilot program, after the opening of trading in 
Nasdaq securities, odd-lot market orders and executable odd-lot limit 
orders would be executed at the qualified national best bid or offer as 
defined under proposed Amex Rule 118(j)(i) at the time the order is 
received at the trading post or through Amex Order File. Odd-lot market 
orders and executable odd-lot limit orders entered before the opening 
of trading in Nasdaq securities would be executed at the price of the 
first round-lot or part of round-lot transaction on the Exchange. Non-
executable limit orders, stop orders, stop limit orders, orders filled 
after the close and non-regular way trades would be executed in 
accordance with Amex Rule 205, Parts A(2), A(3), A(4), C(1) and C(2), 
respectively. Orders to buy or sell ``at the close'' would be filled at 
the price of the closing round-lot sale on the Exchange. In a locked 
market condition, odd-lot market orders and executable odd-lot limit 
orders would be executed at the locked market price. In a crossed 
market condition, odd-lot market orders would be executed at the mean 
of the bid and offer prices when the displayed national best bid is 
higher than the displayed national best offer by $.05 or less. When the 
displayed national best bid is higher than the displayed national best 
offer by more than $.05, odd-lot market orders would be executed when 
the crossed market condition no longer exists. In addition, in a 
crossed market condition, executable odd-lot limit orders would be 
executed at the crossed market bid price (in the case of an order to 
sell) or at the crossed market offer price (in the case of an order to 
buy). For example, if the bid and offer were 20.10 and 20.00, 
respectively, an executable odd-lot sell limit order priced at 20.10 or 
less would be executed at 20.10, and an executable odd-lot buy limit 
order priced at 20.00 or higher would be executed at 20.00.
    The Exchange believes that the existing odd-lot execution 
procedures have operated efficiently. Furthermore, the Exchange has 
received no complaints from members or the public regarding odd-lot 
executions. Therefore, the Exchange seeks an extension to the pilot 
program for an additional six-month period ending on December 27, 2004, 
which would provide the Exchange with time to assess further 
enhancements to the odd-lot execution procedures.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \9\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \10\ 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, 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 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, as 
amended, will impose any 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, as amended.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change, as amended, does not: 
(i) Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act,\11\ and Rule 19b-
4(f)(6) thereunder.\12\ At any time within 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.\13\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). The Commission notes that the 
Exchange provided 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 or such shorter period as designated by 
the Commission.
    \13\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change, as 
amended, under Section 19(b)(3)(C) of the Act, the Commission 
considers the period to commence on May 10, 2004, the date on which 
the Amex filed Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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    The Amex has requested that the Commission waive the 30-day 
operative delay since the proposed rule change only seeks to extend the 
Exchange's

[[Page 35401]]

pilot program for odd-lot executions in Nasdaq securities for an 
additional six months and does not seek to alter the current rules of 
the pilot program in any manner. Furthermore, the Exchange represents 
that it has experienced no operational problems relating to such 
executions, and has not received any adverse comments from Amex members 
regarding the pilot program.
    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Acceleration of the operative date will allow the Exchange to continue 
its pilot odd-lot execution procedures applicable to trading in Nasdaq 
securities without interruption for an additional six months, expiring 
on December 27, 2004. For these reasons, the Commission designates the 
proposal, as amended, to be effective and operative upon filing with 
the Commission.\14\
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    \14\ For purposes of accelerating the operative date of this 
proposal, as amended, 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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    In addition, the Commission requests that the Exchange report any 
problems or complaints from members and the public regarding odd-lot 
execution procedures applicable to trading Nasdaq securities, and that 
the Amex submit any proposal to extend, or permanently approve, the 
pilot at least two months before the expiration of the six-month pilot.

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. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-Amex-2004-30 on the subject line.

Paper Comments

    Send paper comments in triplicate to Jonathan G. Katz, Secretary, 
Securities and Exchange Commission, 450 Fifth Street, NW., Washington, 
DC 20549-0609. All submissions should refer to File Number SR-Amex-
2004-30. This file number should be included on the subject line if e-
mail is used. To help the Commission process and review your comments 
more efficiently, please use only one method. The Commission will post 
all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 the 
filing also will be available for inspection and copying at the 
principal office of the Amex. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-Amex-2004-30 and should be submitted on or before July 
15, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-14282 Filed 6-23-04; 8:45 am]
BILLING CODE 8010-01-P