[Federal Register Volume 69, Number 184 (Thursday, September 23, 2004)]
[Notices]
[Pages 57110-57111]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2352]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50394; File No. SR-Amex-2004-63]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change, and Amendment No. 1 Thereto, by the American Stock Exchange LLC 
Relating to the Handling of Linkage Orders

September 16, 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 August 3, 2004, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') submitted to 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 Amex. On September 
10, 2004, the Amex submitted Amendment No. 1 to the proposed rule 
change.\3\ 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 Jeffery P. Burns, Associate General Counsel, 
Amex, to Nancy Sanow, Assistant Director, Division of Market 
Regulation (``Division''), Commission, dated September 9, 2004 
(``Amendment No. 1''). In Amendment No. 1, the Amex amended the 
proposed rule text to reflect a technical change.
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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 its rules to conform to Joint Amendment 
No. 13 to the Plan for the Purpose of Creating and Operating an 
Intermarket Option Linkage (``Linkage Plan'').
    The text of the proposed rule change, as amended, is below. 
Proposed additions are in italics.
* * * * *

Rule 940. Options Intermarket Linkage

    (a) (No Change).
    (b) Definitions--The following terms shall have the meaning 
specified in this Rule solely for the purpose of this Section 4:
    (1) through (6) (No Change).
    (7) ``Firm Customer Quote Size'' with respect to a P/A Order means 
the lesser of: (a) the number of option contracts that the Participant 
Exchange sending a P/A Order guarantees it will automatically execute 
at its disseminated quotation in a series of an Eligible Option Class 
for Public Customer orders entered directly for execution in that 
market; or (b) the number of option contracts that the Participant 
Exchange receiving a P/A Order guarantees it will automatically execute 
at its disseminated quotation in a series of an Eligible Option Class 
for Public Customer orders entered directly for execution in that 
market. The number shall be at least 10 unless the receiving 
Participant Exchange is disseminating a quotation of less than 10 
contracts, in which case this number may equal such quotation size.
    (8) ``Firm Principal Quote Size'' means the number of options 
contracts that a Participant Exchange guarantees it will execute at its 
disseminated quotation for incoming Principal Orders in an Eligible 
Option Class. This number shall be at least 10, however if the 
Participant Exchange is disseminating a quotation size of less than 10 
contracts, this number may equal such quotation size.
    (9) through (20) (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 had received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
item IV below. The Amex 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 purpose of this filing is to conform Amex's Linkage rules to 
proposed Joint Amendment No. 13 to the Linkage Plan, which would 
accommodate ``natural size'' of quotations.\4\ Specifically, the 
Linkage Plan and Amex rules currently require that the Exchange be firm 
for both Principal Acting as Agent (``P/A'') and Principal Orders for 
at least 10 contracts (the ``10-up'' requirement). The proposed rule 
change would permit

[[Page 57111]]

Amex members to be firm for the actual size of their quotation, even if 
this amount is less than 10 contracts.
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    \4\ The participants in the Linkage Plan (``Participants'') have 
filed an amendment to the Linkage Plan to change the definitions of 
``Firm Customer Quote Size'' (``FCQS'') and ``Firm Principal Quote 
Size'' (``FPQS'') (Joint Amendment No. 13). See Securities Exchange 
Act Release No. 50211 (August 18, 2004), 69 FR 52050 (August 26, 
2004) (File No. 4-429).
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    The Participants adopted the 10-up requirement for the Linkage Plan 
at a time when all the exchanges had rules requiring that their 
quotations be firm for customer orders for at least 10 contracts.\5\ 
The Amex recently amended Exchange Rule 958A to permit the 
dissemination of customer limit orders representing the best bid or 
offer in sizes of less than ten (10) contracts.\6\ Accordingly, the 
Amex now seeks to conform its quotation requirements for incoming 
Principal and P/A Orders with the quotation requirements for non-
Linkage orders.
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    \5\ See Securities Exchange Act Release No. 44383 (June 1, 
2001), 66 FR 30959 (June 8, 2001) (SR-Amex-2001-18; SR-CBOE-2001-15; 
SR-ISE-2001-07; SR-PCX-2001-18; and SR-Phlx-2001-37).
    \6\ See Securities Exchange Act Release No. 48957 (December 18, 
2003), 68 FR 75294 (December 30, 2003) (SR-Amex-2003-24).
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    The proposed rule change would amend the definitions of both FCQS 
and FPQS. While Amex's Linkage rules would maintain a general 
requirement that the FCQS and FPQS be at least 10 contracts, that 
minimum would not apply if the Amex were disseminating a quotation of 
fewer than 10 contracts. In that case, the Exchange may establish a 
FQCS or FPQS equal to its disseminated size.
    As with Principal and P/A Orders today, if the order is of a size 
eligible for automatic execution (``auto-ex''),\7\ the receiving 
exchange must provide for auto-ex of the order. If this is not the case 
(for example, the receiving exchange's auto-ex system is not engaged), 
the receiving exchange still must provide a manual execution for at 
least the FCQS or FPQS, as appropriate (in this case, the size of its 
disseminated quotation of less than 10 contracts).
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    \7\ At the request of the Amex, Commission staff removed an 
extraneous reference provided in the original filing regarding the 
automatic execution size at exchanges sending and receiving 
Principal Orders. Telephone conversation between Jeff Burns, 
Associate General Counsel, Amex, and Tim Fox, Attorney, Division, 
Commission, on August 31, 2004.
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2. Statutory Basis
    The Amex believes that the proposed rule is consistent with section 
6(b) of the Act,\8\ in general, and furthers the objectives of section 
6(b)(5) \9\ in particular in that it should promote just and equitable 
principles of trade, serve to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and 
protect investors and the public interest.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Amex does not believe that the proposed rule change 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.

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 Amex consents, the Commission will:
    (A) By order approve such proposed rule change, as amended; or
    (B) Institute proceedings to determine whether the proposed rule 
change, as amended, 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. 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-2004-63 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-2004-63. 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 Section, 450 Fifth Street, NW., Washington, DC 20549. Copies 
of such 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-2004-63 and should be submitted on or before 
October 14, 2004.

    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E4-2352 Filed 9-22-04; 8:45 am]
BILLING CODE 8010-01-P