[Federal Register Volume 70, Number 68 (Monday, April 11, 2005)]
[Notices]
[Pages 18443-18444]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-1663]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51471; File No. SR-Amex-2005-030]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by the American Stock Exchange LLC 
Relating to Specialist Liability for Failure To Send a Report to an 
Order-Providing Member

April 4, 2005.
    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 March 4, 2005, 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. On March 
30, 2005, Amex submitted Amendment No. 1 to its 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\ In Amendment No. 1, the Exchange made non-substantive 
changes to the text of the proposed rule change and clarified the 
basis of the proposal.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Amex proposes to amend its Rule 178 to limit an equity or ETF 
specialist's liability for a failure to send a report, to a member that 
provided the specialist with an order. The text of the proposed rule 
change, as amended, is set forth below. Proposed new language is in 
italics, and proposed deletions are in brackets.

Responsibility of Specialist

    Rule 178. (a) If a specialist shall fail to send a report with 
respect to an odd-lot or full lot order which he or she executed or 
should have executed and the member or member organization giving the 
specialist such order shall have made a written request to the 
specialist for a report prior to and including one-half hour before the 
opening of trading on the following business day, the specialist must 
answer such inquiry before the opening on that day. The failure of the 
specialist to meet this requirement will extend the responsibility of 
the specialist [shall be responsible] for any loss which may be 
sustained until such time as he or she answers the request.
    A written request for a report which is delivered to a specialist 
within one hour after the close regarding the execution of an order on 
that day shall be answered prior to one half-hour before the opening of 
trading on the following business day. The failure of the specialist to 
meet this requirement will extend the responsibility of the specialist 
for any loss which may be sustained until such time as he or she 
answers the request.
    The Exchange, through the Senior Supervisory Officer, or, in his or 
her absence, a Floor Governor or the Senior Officer of Market 
Operations, may change one or more of the times specified in this 
paragraph, on a temporary basis, if market conditions so warrant.
    (b) In the event a report has not been sent by a specialist with 
respect to an odd-lot or full lot order which he or she executed or 
should have executed and the member or member organization leaving the 
order with the specialist for execution makes a written request to the 
specialist for a report after one half-hour before the opening of 
trading on the following business day [but before the close on the 
business day following the day on which the order was executed or 
should have been executed, the specialist shall be responsible for one-
half of any loss which may be sustained provided the loss is 
established before the closing on the business day following the day on 
which the order was executed or should have been executed; in the event 
the loss is established after the closing on the business day following 
the day on which the order was executed or should have been executed, 
the specialist shall not, without his consent, be responsible for any 
loss sustained. The member or member organization giving the specialist 
such order shall be responsible for the remainder of such loss and for 
any further loss], the specialist is responsible for any loss which may 
be sustained up to and including the opening price on the business day 
following the day on which the order was executed or should have been 
executed. The member or member organization giving the specialist the 
order is responsible for any further loss thereafter unless such member 
or member organization received the order from another member or member 
organization, in which case the remainder of such loss and any further 
loss shall be equally divided among such members or member 
organizations.
    Commentary. 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, Amex included statements 
concerning the purpose of and basis for the proposed rule change, as 
amended, and discussed any comments it received on the proposal. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Amex represents that both it and the New York Stock Exchange 
(``NYSE'') have rules dealing with the specialist's responsibility for 
failure to send a report with respect to an order that the specialist 
executed or should have executed.\4\ These rules date back over 30 
years and have been amended from time to time to suit specific needs of 
each exchange. Amex believes that, because of the differences between 
the Amex rules and the NYSE rules on this issue, Amex equity 
specialists are currently in a more disadvantageous position than NYSE 
specialists.
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    \4\ See Amex Rule 178 and NYSE Rule 123A.32.
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    If either an Amex or an NYSE specialist fails to send a report with 
respect to an order which the specialist executed or should have 
executed, the member or member organization which gave the specialist 
the order must request a report in writing no more than one-half hour 
before the next business day's opening. If that deadline is missed

[[Page 18444]]

on the NYSE, an NYSE specialist is responsible only for any loss 
sustained up to and including the next business day's opening price. 
Currently, if that deadline is missed on Amex, however, the Amex member 
or member organization can still make a written request up to the next 
business day's close, and the Amex equity specialist will be 
responsible for one-half of any loss established before that close. (On 
both exchanges, if the member or member organization makes a written 
request by one-half hour before the next business day's opening, the 
specialist is responsible until he or she responds to the request.)
    The Exchange believes that its rule should be changed to put Amex 
equity and ETF specialists on equal footing with the NYSE specialists. 
Thus, the Exchange proposes to revise Amex Rule 178(b) to provide that, 
if a written request for a report is not made by one-half hour before 
the next business day's opening, then the Amex equity or ETF specialist 
would be responsible only for any loss sustained up to and including 
the next business day's opening price. The Exchange believes that its 
rule should have the same flexibility as the NYSE rule and is proposing 
to revise Amex Rule 178(a) to permit Amex to change the half-hour 
deadline on a temporary basis if ``market conditions so warrant.'' 
Specifically, the Exchange proposes that the Senior Supervisory Officer 
or, in his or her absence, a Floor Governor or an Executive Vice 
President responsible for Market Operations, would have the authority 
to make the decision to change the one-half hour deadline.
2. Statutory Basis
    Amex believes that the proposed rule change, as amended, is 
consistent with Section 6(b) of the Act \5\ in general and furthers the 
objectives of Section 6(b)(5) \6\ in particular, in that it is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, and, in general, to protect 
investors and the public interest.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Amex believes that the proposed rule change, as amended, would 
impose no burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange did not solicit or receive any written comments with 
respect to the proposal.

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 Exchange 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-2005-030 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-2005-030. 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. Copies of 
such filing also will be available for inspection and copying at the 
principal office of the Exchange. 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-2005-030 and should be submitted on or before May 
2, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-1663 Filed 4-8-05; 8:45 am]
BILLING CODE 8010-01-P