[Federal Register Volume 66, Number 45 (Wednesday, March 7, 2001)]
[Notices]
[Pages 13819-13820]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-5543]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-44019; File No. SR-Amex-01-10]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval to Proposed Rule Change by the American
Stock Exchange LLC to Extend for an Additional 90 Days Its Pilot
Program Relating to Facilitation Cross Transactions
February 28, 2001.
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 February 27, 2001, 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. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons. For the reasons discussed
below, the Commission is granting accelerated approval of the proposed
rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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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 90 days its pilot
program relating to facilitation cross transactions, described in
detail in Part II.A. below. The text of the proposed rule change is
available at the Office of the Secretary, Amex, and at the Commission.
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 received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item III 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 Exchange proposes to extend for an additional 90 days its pilot
program relating to member firm facilitation cross transactions
approved by the Commission on June 2, 2000.\3\ Revised Commentary
.02(d) to Amex Rule 950(d) establishes a pilot program to allow
facilitation cross transactions in equity options.\4\ The pilot program
entitles a floor broker, under certain conditions, to cross a specified
percentage of a customer order with a member firm's proprietary account
before market makers in the crowd can participate in the transaction.
The provision generally applies to orders of 400 contracts or more.
However, the Exchange is permitted to establish smaller eligible order
sizes, on a class by class basis, provided that the eligible order size
is not for fewer than 50 contracts.
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\3\ See Securities Exchange Act Release No. 42894 (June 2,
2000), 65 FR 36850 (June 12, 2000). The pilot program has since been
extended twice. See Securities Exchange Act Release Nos. 43229
(August 30, 2000), 65 FR 54572 (September 8, 2000); and 43643
(November 29, 2000), 65 FR 76686 (December 7, 2000).
\4\ Facilitation cross transactions occur when a floor broker
representing the order of a public customer of a member firm crosses
that order with a contra side order from the firm's proprietary
account.
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Under the current program, when a trade takes place at the market
provided by the crowd, all public customer orders on the specialist's
book or represented in the trading crowd at the time the market was
established must be satisfied first. Following satisfaction of any
customer orders on the specialist's book, the floor broker is entitled
to facilitate up to 20% of the contracts remaining in the customer
order. When a floor broker proposes to execute a facilitation cross at
a price between the best bid and offer provided by the crowd in
response to his initial request for a market--and the crowd then wants
to take part or all of the order at the improved price--the floor
broker is entitled to priority over the crowd to facilitate up to 40%
of the contracts. If the floor broker has proposed the cross at a price
between the best bid and offer provided by he crowd in response to his
initial request for a market, and the trading crowd subsequently
improves the floor broker's price, and the facilitation cross is
executed at that improved price, the floor broker would only be
entitled to priority to facilitate up to 20% of the contracts.
The program also provides that if the facilitation transaction
takes place at the specialist's quoted bid or offer, any participation
allocated to the specialist pursuant to Amex trading floor practices
would apply only to the number of contracts remaining after all public
customer orders have been filled and the member firm's crossing rights
have been exercised.\5\ However, in no case could the total number of
contracts guaranteed to the member firm and the specialist exceed 40%
of the facilitation transaction.
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\5\ Amex trading practices provide specialists with a greater
than equal participation in trades that take place at a price at
which the specialist is on parity with registered options traders in
the crowd. These practices are subject to a separate filing that
seeks to codify specialist allocation practices. See Securities
Exchange act Release No. 42964 (June 20, 2000), 65 FR 39972 (June
28, 2000).
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In the almost nine months since the pilot program began, the
Exchange has found it to be generally successful. The Exchange seeks to
extend the pilot program for an additional 90 days, pending
consideration of a related proposed rule change it has filed with
Commission \6\ concerning revisions to the program that the Amex
believes will provide further incentive for price improvement by using
different procedures to determine specialist and registered option
trader participation. The related proposal would also make the program
permanent.
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\6\ See File No. SR-Amex-00-49, available for inspection at the
Commission's Public Reference Room.
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Because the pilot program is due to expire on February 27, 2001,
the Amex has requested that the Commission expedite review of, and
grant accelerated approval to, the proposal to extend it, pursuant to
section 19(b)(2) of the Act.\7\
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\7\ 15 U.S.C. 78s(b)(2).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act \8\ in general and furthers the objectives
of section 6(b)(5) of the act \9\ in particular in that it is designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, and is not designed to permit
unfair discrimination between customers, issuers, brokers or dealers.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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[[Page 13820]]
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposed rule change will impose no
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. 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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609.
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 will also be
available for inspection and copying at the principal offices of the
Exchange. All submissions should refer to File No. SR-Amex-01-10 and
should be submitted by March 28, 2001.
IV. Commission Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange.\10\ In its
original approval of the pilot program,\11\ the Commission detailed its
reasons for finding its substantive features consistent with the Act,
and, in particular, the requirements of sections 6(b)(5) and 6(b)(8) of
the Act.\12\ The Commission has previously approved rules on other
exchanges that establish substantially similar programs on a permanent
basis,\13\ and the extension of the pilot program on the Amex--pending
review of its related proposal to revise the program and make it
permanent--raises no new regulatory issues for consideration by the
Commission.
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\10\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
\11\ See supra, note 3.
\12\ 15 U.S.C. 78f(b)(5) and (b)(8).
\13\ See, e.g., Securities Exchange Act Release Nos. 42835 (May
26, 2000), 65 FR 35683 (June 5, 2000), and 42848 (May 26, 2000), 65
FR 36206 (June 7, 2000).
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The Commission finds good cause, consistent with sections 6(b) and
19(b)(2) of the Act, for approving the proposed rule change prior to
the thirtieth day after the date of publication of the notice of filing
thereof in the Federal Register. The proposal will allow the pilot
program, otherwise due to expire on February 27, 2001, to remain
effective and in place uninterrupted while revisions are being
considered, and does not raise any new regulatory issues.
It is therefore ordered, pursuant to section 19(b)(2) of the Act,
that the proposed rule change be, and hereby is, approved on an
accelerated basis as a pilot program through May 28, 2001.
For the Commission, by the Division of Market Regulation, pursuant to
delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-5543 Filed 3-6-01; 8:45 am]
BILLING CODE 8010-01-M