[Federal Register Volume 70, Number 2 (Tuesday, January 4, 2005)]
[Notices]
[Pages 412-414]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-79]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50934; File No. SR-Amex-2004-108]


Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Odd-Lots in Nasdaq Securities

December 27, 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 December 22, 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, II, 
and III below, which items have been prepared by the Exchange. The 
Exchange filed the proposal pursuant to Section 19(b)(3)(A) of the Act 
\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. 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\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 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 extend for an additional six-month period 
ending June 30, 2005, the Exchange's pilot program for odd-lot 
execution procedures for Nasdaq securities traded on the Exchange 
pursuant to unlisted trading privileges.

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 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Commission approved, and the Exchange implemented, a pilot 
program for odd-lot order \5\ executions in Nasdaq securities 
transacted on the Exchange pursuant to unlisted trading privileges. 
Paragraph (j) of Rule 118 (``Trading in Nasdaq National market 
Securities'') describes the Exchange's odd-lot execution procedures for 
Nasdaq securities, and Commentary .05 of Amex Rule 205 (``Manner of 
Executing Odd-Lot Orders'') references rule 118(j) odd-lot procedures. 
The pilot program was originally approved on august 2, 2002, for a six-
month period, and was reestablished on July 14, 2003, for an additional 
six-month period ending December 27, 2003.\6\ On November 20, 2003, the 
Commission provided notice of the Exchange's proposed rule change to 
amend paragraph (j) of Amex Rule 118 and to extend the pilot program 
through June 27, 2004,\7\ and on June 14, 2004, the Commission provided 
notice of a further extension of the pilot program through December 27, 
2004.\8\
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    \5\ An odd-lot order is an order for less than 100 shares.
    \6\ See Securities Exchange Act Release No. 46304 (August 2, 
2002) 67 FR 51903 (August 9, 2002) approving SR-Amex-2002-56, and 
Securities Exchange Act Release No. 48174 (July 14, 2003) 68 FR 
43409 (July 22, 2003) (SR-Amex-2003-56).
    \7\ See Securities Exchange Act Release No. 48995 (December 24, 
2003) 68 FR 75670 (December 31, 2003) (SR-Amex-2003-102).
    \8\ See Securities Exchange Act Release No. 49855 (June 14, 
2004) 69 FR 35399 (June 24, 2004) (SR-Amex-2004-30).
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    Under the Exchange's current pilot program, after the opening of 
trading in Nasdaq securities, odd-lot market orders and executable odd-
lot limit orders are executed at the qualified national best bid or 
offer \9\ at the time the order is

[[Page 413]]

received at the trading post or through the Amex Order File. Odd-lot 
market orders and executable odd-lot limit orders entered before the 
opening of trading in Nasdaq securities are 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 are executed in 
accordance with Amex Rule 205 A(2), A(3), A(4), C(1) and C(2), 
respectively. Orders to buy or sell ``at the close'' are 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 
are executed at the locked market price. In a crossed market condition, 
odd-lot market orders are 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 are executed when the crossed 
market condition no longer exists. In addition, in a crossed market 
condition, executable odd-lot limit orders are 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 $10.10 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.
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    \9\ In Amex Rule 118(j), the qualified national best bid and 
offer are defined as 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; 
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 Amex 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 Amex 
Rule 11 Ac1-1 pursuant to the ``unusual market'' exception of 
paragraph (b)(3) of Rule 11 Ac1-1.
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    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 June 30, 2005, which 
would provide the Exchange with time to asses 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 \10\ in general and furthers the 
objectives of section 6(b)(5) \11\ 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 regulating, clearing, in 
settling, processing information with respect to, and 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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    \10\ 15 U.S.C. 78f(b).
    \11\ 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.

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

    Because the foregoing proposed rule change 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 \12\ 
and Rule 19b-4(f)(6) thereunder.\13\ 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.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). The Commission notes that Amex 
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.
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    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest because acceleration of the operative date will allow 
the Amex to continue its pilot odd-lot execution procedures applicable 
to trading in Nasdaq securities without interruption. For this reason, 
the Commission designates the proposal to be effective and operative 
upon filing with the Commission.\14\ In addition, the Commission 
requests that the Exchange report any problems 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.
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    \14\ For purposes only of waiving the 30-day operative delay of 
the proposed rule change, the Commission considered the proposed 
rule's impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
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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. 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-2004-108 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-2004-108. 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 sit (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

[[Page 414]]

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 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 
submission should refer to File Number SR-Amex-2004-108 and should be 
submitted on or before January 21, 2005.

    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. 05-79 Filed 1-3-05; 8:45 am]
BILLING CODE 8010-01-M