[Federal Register Volume 66, Number 50 (Wednesday, March 14, 2001)]
[Notices]
[Pages 14947-14949]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-6323]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-44049; File No. SR-Amex-01-13]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the American Stock Exchange
LLC To Extend the eQPriority Pilot Program for Six Months
March 7, 2001.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 \2\ thereunder, notice is hereby given
that on March 6, 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, II,
and III below, which Items have been prepared by Amex. The Commission
is publishing this notice to solicit comments on the proposed rule from
interested persons.
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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 Exchange proposes to extend for an additional six months
Commentary .03 to Amex Rule 126 to continue a pilot program for
processing electronically transmitted orders for the common stock of
business corporations admitted to dealings on the Exchange
(``eQPriority\sm\''). The text of the proposed rule change appears
below. New text is in italics; deleted text is in brackets:
Rule 126, Commentary
* * * * *
.03. Orders Delivered Electronically to the Specialist. At all
times other than an opening or a reopening (Rule 108) or a block sold
at a ``clean-up'' price (Rule 155), a round lot, regular way order for
the common stock of a business corporation admitted to dealings on the
Exchange that is sent to the specialist electronically and is
executable according to its terms in whole or in part shall be handled
in the following manner. Upon receipt of the electronic order by the
specialist's order book, the specialist shall announce the order to the
crowd, and the order shall establish priority with respect to all other
bids and offers except with respect to bids and offers that already had
established priority before the electronic order was represented in the
crowd. Once the specialist has announced the order, members who have
bids or offers incorporated in the Amex Published Quote (``APQ'') shall
not be permitted to withdraw or modify their interest except to provide
price improvement (i.e., an execution between the APQ) to the incoming
order. Following the announcement of the order, the specialist and
members in the crowd shall have a brief opportunity to provide price
improvement to the incoming order. In the event that the incoming order
is price improved but not entirely filled at the improved price, the
sale shall not remove all bids and offers, and the incoming order shall
retain priority over other bids and offers up to the full size of the
APQ that was displayed at the time of the announcement of the order
less any interest that provided price improvement to the order. In the
event that the incoming order is larger than the size displayed in the
APQ, the order shall be executed according to these procedures and any
unfilled balance of the order shall be handled according to the
Exchange's customary auction market processes.
This Commentary .03 will expire on September 12, 2001. [six months
from
[[Page 14948]]
the date of SEC approval. The SEC approved this rule change on
September 12, 2000.]
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 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. 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
On September 12, 2000, the Commission approved the Exchange's
eQPriority initiative on a six-month pilot basis.\3\ eQPriority is
intended to encourage persons to route marketable electronic orders to
the Exchange by assuring them that orders sent to the specialist
electronically will be filled either (i) at the Amex Published Quote
(``APQ'') up to the displayed size at the time the order is announced,
or (ii) at an improved price. Amex believes that the program provides
orders for stocks sent to the floor electronically with the optimal
combination of speed, certainty of execution, and price improvement
opportunities. eQPriority applies only to orders for common stock
admitted to dealings; it is not available for orders for options,
Exchange Traded Funds, or other Amex-listed securities. It also does
not apply to openings and reopenings or to block trades executed at a
``clean-up'' price pursuant to Amex Rule 155. The eQPriority pilot
program is scheduled to expire on March 12, 2001.
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\3\ See Securities Exchange Act Release No. 43284 (September 12,
2000), 65 FR 57410 (September 22, 2000).
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eQPriority works in the following manner. Once the specialist
announces the electronic order, members may not withdraw or modify bids
and offers incorporated into the APQ on the opposite side of the market
from the incoming order except to provide price improvement. When an
eQPriority order is executed in part at an improved price, the
remainder of the order is executed at the APQ up to the number of
shares then available (i.e., the size of the APQ at the time the order
was announced, less any shares that provided price improvement). The
eQPriority order does not have to match with any other trading interest
on the same side of the market. In the event that an eQPriority order
is larger than the APQ at the time the order is announced, the order is
filled up to the size of the APQ according to the eQPriority
procedures, and the unexecuted balance is filled according to the
Exchange's customary auction market processes.
The purpose of eQPriority is to provide incoming electronic orders
with an execution at the displayed offer (or lower) in the case of an
electronic buy order, or at the displayed bid (or higher) in the case
of an electronic sell order. eQPriority is not intended to allow an
incoming electronic order to obtain priority over orders that already
have established priority in the market. The Exchange, therefore, is
proposing a clarifying revision to the text of Commentary .03 to Ames
Rule 126 to provide that an eQPriority order does not have priority
over bids and offers that were announced prior to the time that the
eQPriority order is represented. This clarification would apply only to
situations where the market is quoted at the minimum price variation
and is best illustrated by an example. Assume the market is quoted
20.00 to 20.01, 5000 x 5000, and the bid represents a limit order on
the book. Further, assume that the specialist announces an eQPriority
order to buy 1000, and that a broker in the crowd is willing to sell
1000 at 20. In this example, the limit order to buy on the book had
established a bid of 20 prior to the representation of the eQPriority
order. The booked limit order, consequently, would be filled by the
1000 shares sold by the broker at 20, and the eQPriority order would be
filled at 20.01.
Amex is proposing to extend the eQPriority pilot program for
another six months so that it can better assess the program.
2. Statutory Basis
Amex states that the proposed rule change is consistent with
Section 6(b) of the Act \4\ in general and furthers the objectives of
Section 6(b)(5) \5\ in particular in that it is designed to prevent
fraudulent and manipulative acts and practices; to promote just and
equitable principles of trade; 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. Amex also
states that the proposed rule change is not designed to permit unfair
discrimination between customers, issuers, brokers, and dealers,
consistent with Section 6(b)(5).
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
Amex states 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. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Amex has stated that, because the proposed rule change does not (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; or (iii)
become operative for 30 days from the date on which it was filed (or
such shorter time as the Commission may designate) it has become
effective pursuant to Section 19(b)(3)(A) of the Act \6\ and Rule 19b-
4(f)(6) \7\ thereunder. Amex provided the Commission with written
notice of its intent to file the proposed rule change, along with a
description and text of the proposed rule change, at least five
business days prior to the date of filing of the proposed rule
change.\8\ 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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\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 17 CFR 240.19b-4(f)(6).
\8\ The Commission deems the filing of SR-Amex-01-09, which was
withdrawn and replaced by the present submission (SR-Amex-01-13), to
fulfill the five-day notice requirement.
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Amex requested that the Commission waive the requirement that the
proposed rule change not become operative for 30 days after the date of
filing. Pursuant to Rule 19b-4(f)(6)(iii) under the Act,\9\ the
Commission may designate a shorter time period by which a proposed rule
change filed under Rule 19b-4(f)(6) may become operative, if such
action is consistent with the protection of investors and the public
interest. The Commission finds that waiving the 30-day pre-operative
period is consistent with the protection of investors and the
[[Page 14949]]
public interest. The Commission believes that the existing eQPriority
pilot provides beneficial services to investors. Acceleration of the
operative date will allow the pilot to continue without interruption
and ensure that those benefits do not lapse. Accordingly, the
Commission waives the 30-day pre-operative period, and the proposed
rule change has become operative immediately.\10\
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\9\ 17 CFR 240.19b-4(f)(6)(iii).
\10\ For purposes only of accelerating the operative date of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. See 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. 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 such filing will also be
available for inspection and copying at the principal office of the
Exchange. All submissions should refer to File No. SR-Amex-01-13 and
should be submitted by April 4, 2001.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-6323 Filed 3-13-01; 8:45 am]
BILLING CODE 8010-01-M