[Federal Register Volume 65, Number 236 (Thursday, December 7, 2000)]
[Notices]
[Pages 76686-76687]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-31138]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43643; File No. SR-Amex-00-59]


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

November 29, 2000.
    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 November 29, 2000, the American Stock Exchange LLC ( ``Amex'' 
or ``Exchange'' ) field 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 inequity options.\4\ The pilot program 
entities a floor broker to, under certain conditions, 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 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 was 
subsequently extended for an additional 90 days, ending November 29, 
2000. See Securities Exchange Act Release No. 43229 (August 30, 
2000), 65 FR 54572 (September 8, 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 crowed 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 market--and the crowd then wants to 
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 the 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 floor practices provided 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 six months since the pilot program began, the 
Exchange has found it to be generally successful. The Exchange seeks to 
extend the pilot

[[Page 76687]]

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 November 29, 2000, 
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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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-00-59 and 
should be submitted by December 28, 2000.

IV. Commission Findings and Order Granting Accelerated Approval of 
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 November 29, 2000, 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 February 27, 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).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-31138 Filed 12-6-00; 8:45 am]
BILLING CODE 8010-01-M