[Federal Register Volume 70, Number 167 (Tuesday, August 30, 2005)]
[Notices]
[Pages 51392-51394]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-4727]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52325; File No. SR-Amex-2005-052]


Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto 
Relating to the Integration of Regulatory Staff Into Floor Official 
Rulings and the Review of Floor Official Rulings and Expediting the 
Process for Appealing Floor Official Rulings

August 23, 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 May 11, 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 Amex. On August 
12, 2005, the Exchange 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\ In Amendment No. 1 Amex made minor revisions to the proposed 
rule text and clarified certain details of its proposal. Amendment 
No. 1 replaced and superseded Amex's original filing in its 
entirety. The Commission made clarifications to the description in 
Item II, pursuant to telephone conversations with Amex, as noted 
herein. Telephone conversations between Nyieri Nazarian, Assistant 
General Counsel, Amex, and Rahman Harrison, Attorney, Commission, on 
August 23, 2005.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to (1) amend Amex Rules 22(c), 115, 958A(d), 
958A-ANTE(d), 118(n), 135A and Amex Rule 155, Commentary .05 to 
integrate regulatory staff into Floor Official rulings and the review 
of Floor Official rulings; and (2) amend Amex Rule 22(d) to expedite 
the process for appealing a Floor Official's ruling.
    The text of the proposed rule change, as amended, is available on 
the Amex's Web site at http://www.amex.com, the Office of the 
Secretary, the Amex, and at the Commission's Public Reference Room.

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 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
Incorporation of Regulatory Staff into Floor Official Rulings
    Floor Officials are officers of the Exchange,\4\ who are authorized 
to (1) make rulings on behalf of the Exchange with respect to certain 
matters that require a decision by the Exchange, and (2) resolve 
trading disputes submitted to them by members. Floor Official decisions 
are currently subject to same day, on-floor appeal at the request of an 
aggrieved member, first by an Exchange Official, then by a Governor and 
finally by a panel of three Governors.\5\ The Exchange proposes to 
integrate regulatory staff into specified categories of Floor Official 
rulings and the review of Floor Official rulings (``Covered Rulings and 
Reviews'') on an advisory, i.e., non-approving, basis. The Exchange 
believes that incorporation of regulatory staff in Covered Rulings and 
Reviews will contribute to a more consistent application of Exchange 
rules, and better ensure that proper documentation is completed.
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    \4\ There are three levels of Floor Officials on the floor, each 
with ascending levels of responsibility: Floor Officials, Exchange 
Officials and Senior Floor Officials. All are considered to be Floor 
Officials. Article II, Section 3 of the Amex Constitution provides 
that the Chairman of the Board of Governors may appoint members of 
the Exchange and individuals employed by, or associated with, a 
member organization in a senior capacity as Exchange Officials to 
serve on committees of the Board. Amex Rule 21 provides for the 
appointment of Senior Floor Officials and Floor Officials.
    \5\ Telephone conversation between Nyieri Nazarian, Assistant 
General Counsel, Amex, and Rahman Harrison, Attorney, Commission, on 
August 23, 2005.
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    The proposed rules would require a member of the regulatory staff 
to be present during a Floor Official's ruling on an advisory basis. 
This member of the regulatory staff would give his or her

[[Page 51393]]

opinion on the matter and, although the Floor Official would be 
required to take this opinion into consideration, the Floor Official 
would not be required to rule according to the regulatory staff 
member's opinion. Once the Floor Official's decision is documented by 
the Floor Official, the participating regulatory staff member will also 
sign the form, indicating whether he or she agrees or disagrees with 
the ruling.\6\ The regulatory staff member will be responsible for 
maintaining the documentation related to Covered Rulings and Reviews, 
and will forward such documentation, as appropriate, to the NASD Amex 
Regulation Division.\7\
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    \6\ Commentary .02 to Amex Rule 22 requires that a written 
record of all Floor Official decisions or rulings be documented on a 
form and prepared as soon as practicable after the decision or 
ruling is made.
    \7\ The NASD Amex Regulation Division will utilize documentation 
of such rulings, as appropriate, in order to verify that an 
appropriate ruling was obtained as required by applicable Amex 
rules, as well as to enable review of situations in which a Floor 
Official may have issued an improper ruling contrary to the advice 
of the regulatory staff.
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    Amex Rule 22(c) currently provides Floor Officials with the 
authority to make rulings in the following areas:
     Trading halts;
     Indications and reopenings;
     Non-regular way trades;
     Unusual market exception to the Commission's Firm Quote 
Rule;
     Turning Auto-Ex off;
     ITS disputes;
     Member disputes;
     Cancellations or revisions to trades;
     Voluntary publication of imbalances;
     Enforcing standards of floor decorum.
    The Exchange proposes to amend Amex Rule 22(c) to require that a 
member of the regulatory staff participate in an advisory capacity in 
the following categories of Floor Official rulings:
     Unusual market exception to the Commission's Firm Quote 
Rule;
     ITS disputes;
     Member disputes;
     Cancellations or revisions to trades.
    Corresponding amendments are also proposed to Amex Rules 115, 
958A(d), 958A-ANTE(d), 118(n), 135A and 155, Commentary .05, which are 
the existing rules governing the application of the unusual market 
exceptions to the Commission's Firm Quote Rule and the Amex rules 
governing cancellation or revisions to trades. Amex Rules 936, 936C, 
936-ANTE, 936C-ANTE, governing the cancellation and adjustment to 
equity and index option transactions, are not being amended because 
regulatory staff is already required to participate in such rulings. At 
the present time, regulatory staff would not be required to participate 
in Floor Official rulings relating to trading halts, indications and 
reopenings, non-regular way trades, turning Auto-Ex off, voluntary 
publication of imbalances, and enforcing standards of floor decorum.

Amex Rule 22(d)

    The Amex also is proposing to amend Amex Rule 22(d) in two 
respects. Amex Rule 22(d) currently provides for three on-Floor tiers 
of review in the appeal of a Floor Official's initial ruling. First, 
any member wishing prompt on-Floor review of a Floor Official's market 
decision may present the matter to an Exchange Official, who may 
confirm, amend or overrule the decision. Second, an Exchange Official's 
decision may be promptly appealed to a Governor. Finally, a Governor's 
decision may be appealed to a panel of three Governors. A decision by a 
panel of three Governors is binding on members, with the option that at 
any point after establishing a loss or profit and complying with the 
highest decision made in a matter, either party to the matter may 
submit it to arbitration.\8\ The Exchange is proposing to amend Amex 
Rule 22(d) to clarify that Senior Floor Officials have the same 
authority as Governors with respect to matters arising on the Floor 
that require review or action by Governors.\9\ The amendment will 
replace each reference to ``Governor'' with ``Senior Floor Official.'' 
\10\
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    \8\ A decision to cancel or revise an option trade may also be 
appealed to the Board of Governors. See Amex Rules 936, 936C, 936 
ANTE and 936C ANTE.
    \9\ Telephone conversation between Nyieri Nazarian, Assistant 
General Counsel, Amex, and Rahman Harrison, Attorney, Commission, on 
August 23, 2005. The Commission recently approved an amendment to 
Amex Rule 21 which provides that: ``An Exchange Official who has 
been appointed as a Senior Floor Official has the same authority and 
responsibilities as a Floor Governor with respect to matters that 
arise on the Floor and require review or action by a Floor Governor 
or Senior Floor Official.'' Securities Exchange Act Release No. 
51503 (April 7, 2005), 70 FR 19534 (April 13, 2005).
    \10\ Based on the recent amendment to Amex Rule 21 (see supra 
note 9), the Exchange also proposes to make conforming changes to 
Amex Rule 118(n)(iii) (Trading in Nasdaq National Market Securities) 
and Amex 135A(c) (Cancellations of, and Revisions in, Transactions 
Where Both the Buying and Selling Members Do Not Agree to the 
Cancellation or Revision) to replace ``Governor'' and ``Floor 
Governor,'' as applicable, with ``Senior Floor Official.'' Amex 
Rules 118(n)(iii) and 135A(c) address the process for review of 
transactions, and the ability of a Floor Governor to declare a 
transaction null or void, in the event of an operational malfunction 
or ``extraordinary market conditions.'' Telephone conversation 
between Nyieri Nazarian, Assistant General Counsel, Amex, and Rahman 
Harrison, Attorney, Commission, on August 23, 2005.
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    Second, the Exchange proposes to amend Amex Rule 22(d) to eliminate 
the second tier in the current review process, i.e., review of an 
Exchange Official's decision by a Governor. The proposed rule will 
provide that a Floor Official's initial decision will be reviewable by 
an Exchange Official and then a three Senior Floor Official panel. The 
Exchange believes that two levels of on-Floor review following a Floor 
Official's original decision are sufficient to assure a fair and 
impartial review and that three levels of on-Floor review may 
unnecessarily delay the resolution of disputed matters. The Exchange 
notes that under the proposal, regulatory staff would advise and 
participate in each level of a review of a Floor Official decision or 
ruling that required the advice and participation of a member of the 
regulatory staff in the initial Floor Official ruling. The increased 
involvement of regulatory staff should help ensure that rulings are in 
accordance with applicable rules.
2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with Section 6(b) of the Act \11\ in general, and furthers 
the objectives of Section 6(b)(5) \12\ 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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    \11\ 15 U.S.C. 78f(b).
    \12\ 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, would impose any 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

    Written comments were neither solicited nor received.

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

[[Page 51394]]

(ii) as to which the Amex consents, the Commission will:
    A. By order approve such proposed rule change; or
    B. Institute proceedings to determine whether the proposed rule 
change 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-2005-052 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.
    All submissions should refer to File Number SR-Amex-2005-052. 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 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 publicly available. All submissions should refer to 
File Number SR-Amex-2005-052 and should be submitted on or before 
September 20, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-4727 Filed 8-29-05; 8:45 am]
BILLING CODE 8010-01-P