67582 Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3 17 CFR 240.19b–4(f)(6).

4See Securities Exchange Act Release No. 44449

(June 19, 2001), 66FR 33724 (June 25, 2001)(‘‘June

Release’’), approving File No. SR–Amex–2001–29.

supervisory responsibility for the

general management and investment of

each Portfolio’s securities portfolio, and

subject to review and approval by the

Board, will (a) set the Portfolio’s overall

investment strategies; (b) evaluate,

select, and recommend Managers to

manage all or part of a Portfolios assets;

(c) when appropriate, allocate and

reallocate a Portfolio’s assets among

multiple Managers; (d) monitor and

evaluate the performance of Managers;

and (e) implement procedures

reasonably designed to ensure that the

Managers comply with the relevant

Portfolio’s investment objectives,

policies, and restrictions.

6. Each Portfolio relying on the

requested relief will disclose in its

prospectus the existence, substance, and

effect of any order granted pursuant to

the application. In addition, any such

Portfolio will hold itself out as

employing the Adviser/Manager

structure described in the application.

The prospectus will prominently

disclose that the Adviser has ultimate

responsibility to oversee the Managers

and recommend their hiring,

termination and replacement.

7. No Director or officer of the Funds

or officer or director of the Adviser will

own directly or indirectly (other than

through a pooled investment vehicle

that is not controlled by that director or

officer) any interest in a Manager except

for (a) ownership of interests in the

Adviser or any entity that controls, is

controlled by, or is under common

control with the Adviser; or (b)

ownership of less than 1% of the

outstanding securities of any class of

equity or debt of a publicly-traded

company that is either a Manager or an

entity that controls, is controlled by or

is under common control with a

Manager.

8. Within 90 days of the hiring of any

new Manager, the Adviser will furnish

shareholders (or, if the Portfolio serves

as a funding medium for any subaccount of a registered separate account,

the Adviser will furnish the unitholders

of the sub-account) with respect to the

appropriate Portfolio all information

about the new Manager that would be

included in a proxy statement. Such

information will include any changes

caused by an addition of a new

Manager. To meet this condition, the

Adviser will provide shareholders (or, if

the Portfolio serves as a funding

medium for any sub-account) with an

information statement meeting the

requirements of Regulation 14C,

Schedule 14C, and Item 22 of Schedule

14A under the Securities Exchange Act

of 1934.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–32076 Filed 12–28–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–45176; File No. SR–Amex–

2001–105]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

American Stock Exchange LLC,

Relating to a Six-Month Extension of

Automatic Execution for Exchange

Traded Funds

December 20, 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 December

13, 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 the Amex. The

proposed rule change has been filed by

the Amex as a ‘‘non-controversial’’ rule

change under rule 19b–4(f)(6)3 under

the Act. The Commission is publishing

this notice to solicit comments on the

proposed rule change from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Amex seeks a six-month

extension of Amex Rule 128A to

continue its pilot program for the

automatic execution of orders for

Exchange Traded Funds (‘‘ETFs’’). The

text of the proposed rule change is

available at the Office of the Secretary,

the 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 IV below. The 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

On June 19, 2001, the Commission

approved the Exchange’s proposal,

adopted as Amex Rule 128A, to permit

the automatic execution of orders for

Exchange Traded Funds (‘‘ETFs’’) on a

six-month pilot program basis.4 The

Exchange now seeks to extend the pilot

program for another six months.

Since 1986, the Exchange has had an

automatic order execution feature

(‘‘Auto-Ex’’) for eligible orders in listed

options. The Chicago Board Options

Exchange, Philadelphia Stock Exchange,

and Pacific Exchange established

similar automatic option order

execution features at about the same

time as the Amex, and the newest

options exchange, the International

Securities Exchange, also features

automatic order execution. Auto-Ex,

accordingly, has been a standard feature

of the options markets for a number of

years.

In 1993, the Amex commenced

trading Standard and Poor’s Depositary

Receipts (‘‘SPDRs’’), the first ETF to

be listed and traded on the Exchange.

ETFs are individual securities that

represent a fractional, undivided

interest in a portfolio of securities.

Currently, approximately 100 ETFs are

listed on the Amex. Like an option, an

ETF is a derivative security, and,

according to the Amex, its price is a

function of the value of the portfolio of

securities underlying the ETF. Thus, as

is the case with options, the Exchange

asserts that it is not the price discovery

market for ETFs, and that the price

discovery market is the market or

markets where the underlying securities

trade.

The Exchange is now proposing to

extend its current Auto-Ex technology to

ETFs listed under Amex Rules 1002,

1002A, and 1202 for an additional six

months. The Amex represents that this

will provide investors that send eligible

orders to the Exchange with faster

executions than they otherwise would

receive. The Exchange believes that

many investors desire rapid executions

in trading securities that are priced

derivative since the value of the

underlying instruments may fluctuate

during order processing. The Amex,

Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices 67583

5The term ‘‘establish’’ as used in this context of

Amex Rule 128A means that the APQ is currently

at the NBBO, regardless of whether or not the Amex

was the first exchange to be at that price. See June

Release.

6The number of trading increments designated

for price improvement when the Amex establishes

the NBBO may be different than the number of

increments designated for price improvement when

the Amex does not establish the NBBO. Id.

7Once an order that is Auto-Ex eligible is sent to

the Exchange, the person that initiated the order has

no control over its execution. This is the case

regardless of whether the order is executed by AutoEx or is executed by the specialist because AutoEx is unavailable. If the order is routed to the

specialist for handling because Auto-Ex is

unavailable, the specialist does not know if the

order is for the account of a broker-dealer or for the

account of a customer. This information is in the

Exchange’s order processing system and is

unavailable to the specialist.

moreover, will continue under the pilot

extension to incorporate a price

improvement algorithm into Auto-Ex for

ETFs, and thus to provide investors

with better execution prices on their

orders. The price improvement

algorithm works in the following

manner:

When the Amex establishes the

National Best Bid or Offer (‘‘NBBO’’),5

Auto-Ex is programmed to execute

eligible incoming ETF orders at the

Amex Published Quote (‘‘APQ’’) plus a

programmable number of trading

increments with respect to the Amex

bid, and less a programmable number of

trading increments in the case of the

Amex offer. For example, if the APQ

were 90.10 to 90.20, and the APQ

constituted the NBBO, incoming sell

orders might be automatically executed

at 90.12 (the Amex bid plus two ticks)

and incoming buy orders might be

executed at 90.18 (the Amex offer less

two ticks).

If the Amex does not establish the

NBBO, Auto-Ex is programmed to

execute eligible incoming ETF orders at

or better than the NBBO up to a

specified number of trading increments

relative to the APQ.6 Auto-Ex executes

an eligible order at the improved price

relative to the APQ unless such

execution would result in a tradethrough with respect to the price of an

away market that is a participant in the

Intermarket Trading System (‘‘ITS’’). If a

trade-through would result, the order is

routed to the specialist for electronic

processing through the Amex Point of

Sale (‘‘POS’’) Book.7

For example, assume that Auto-Ex is

programmed to execute the order at the

Amex bid plus two ticks. If the Amex

bid were 90, and an away ITS market

were bidding 90.01, an incoming sell

order would be automatically executed

on the Amex at 90.02. Continuing with

this example, if the away market were

bidding 90.02, an incoming sell order

would be automatically executed on the

Amex at 90.02 (matching the away

market). If the away market were

bidding 90.03, the incoming sell order

would not be automatically executed.

Instead, it would be routed to the

specialist for electronic processing

through the Amex POS Book.

The amount of price improvement

that the system provides—both when

the Amex establishes the NBBO and

when it does not—is determined by the

Auto-Ex Enhancements Committee

(‘‘Committee’’) upon the request of a

specialist, and may differ among ETFs.

The Committee consists of the

Exchange’s four Floor Governors and

the Chairmen (or their designees) of the

Specialists Association, Options Market

Makers Association and the Floor

Brokers Association, respectively. The

Exchange anticipates that the amount of

price improvement will vary among

securities based upon such factors as the

width of the spread, the volatility of the

basket of securities underlying the ETF,

and liquidity of available hedging

vehicles. The amount of price

improvements may be adjusted intraday by the Committee.

As detailed in Amex Rule 128A,

Auto-Ex for ETFs with price

improvement is unavailable when the

spread is at a specified minimum and

maximum variation, which may be

adjusted security to security. The

Committee will determine, upon the

request of a specialist, the minimum

and maximum spreads at which AutoEx is unavailable. As further provided

in the rule, Auto-Ex is also unavailable

with respect to incoming sell orders

when the Amex bid is for 100 shares,

and similarly unavailable with respect

to incoming buy orders when the Amex

offer is for 100 shares.

Orders that are otherwise Auto-Ex

eligible orders are also routed to the

specialist, and not automatically

executed, in situations where the

specialist in conjunction with a Floor

Governor or two Floor Officials

determine that quotes are not reliable

and the Exchange is experiencing

communications or systems problems,

‘‘fast markets,’’ or delays in the

dissemination of quotes. Members and

member organizations are notified when

the Exchange has determined that

quotes are not reliable prior to

disengaging Auto-Ex.

Specialists and Registered Options

Traders (‘‘ROTS’’) that sign onto the

system are automatically allocated the

contra side of Auto-Ex trades for ETFs.

Due to the automatic price improvement

feature, the specialist and ROTs that

sign onto Auto-Ex for ETFs are deemed

to be on parity for purposes of allocating

the contra side of ETF Auto-Ex trades.

Amex Rule 128A incorporates the

following methodology for the

allocation of the contra side to Auto-Ex

ETF trades:

Number of ROTs

signed on to

Auto-Ex in a

crowd

Approximate

number of

trades allocated to the

specialist

throughout

the day

(‘‘target

ratio’’)

(percent)

Approximate

number of

trades allocated to

ROTs

signed on to

Auto-Ex

throughout

the day

(‘‘target

ratio’’)

(percent)

1 ........................ 60 40

2–4 .................... 40 60

5–7 .................... 30 70

8–15 .................. 25 75

16 or more ........ 20 80

At the start of each trading day, the

sequence in which trades are to be

allocated to the specialist and ROTs

signed onto Auto-Ex is randomly

determined. Auto-Ex trades then are

automatically allocated in sequence on

a rotating basis to the specialist and to

the ROTs that have signed onto the

system so that the specialist and the

crowd achieve their ‘‘target ratios’’ over

the course of a trading session. If an

Auto-Ex eligible order is greater than

100 shares, Auto-Ex divides the trade

into lots of 100 shares each. Each lot is

considered a separate trade for purposes

of determining target ratios and

allocating trades within Auto-Ex.

Round lot orders delivered to the post

electronically for 2,000 shares or less are

eligible for Auto-Ex for ETFs. Orders for

an account in which a market maker in

ETFs registered as such on another

market has an interest are ineligible for

Auto-Ex for ETFs. If orders for such

market makers were eligible for Auto-Ex

with price improvements, the Exchange

represents, Amex specialists and ROTs

would be unable to make markets with

the proposed liquidity for other

investors. (Orders fro Amex Registered

Trade are ineligible for Auto-Ex for

ETFs pursuant to Commentaries .04 and

.05 to Rule 111 and Amex Rule 950(c).)

Amex Rule 128A also stipulates that

Auto-Ex eligible orders for any account

in which the same person is directly or

indirectly interested may be entered

only at intervals of 30 seconds or more

between the entry of each such order in

an ETF. The Exchange indicates that

Amex specialists and ROTs are willing

to provide Auto-Ex with price

improvement for orders of a certain size.

If persons were allowed to enter more

than one Auto-Ex eligible order for an

account in which they had a direct or

indirect interest at intervals of less than

67584 Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices

8The Commission has granted Amex’s request to

designate a time period shorter than five days prior

to filing for notice of its intent to file.

9 15 U.S.C. 78s(b)(3)(A).

10 17 CFR 240.19b–4(f)(6).

11For 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. 15

U.S.C. 78c(f).

12 17 CFR 240.19b–4(f)(6).

30 seconds, according to the Exchange,

Amex specialists and ROTs would be

unable to make markets with the

proposed liquidity for all investors.

Under Rule 128A, members and

member organizations are responsible

for establishing procedures to prevent

orders for any account in which the

same person is directly or indirectly

interested from being entered at

intervals of less than 30 seconds with

respect to an ETF.

The specialist may request the

Exchange to increase the maximum size

of Auto-Ex eligible orders. Under Amex

Rule 128A, such requests are reviewed

by the Committee, which approves,

disapproves, or conditionally approves

such requests. The rule directs the

Committee to balance the interests of

investors, the specialist, ROTs in the

crowd, and the Exchange in determining

whether to grant a request to increase

the size of Auto-Ex eligible orders.

The Committee also may consider

requests from the specialist or ROTs to

reduce the size of Auto-Ex eligible

orders, balancing the same interests that

it would consider in reviewing a request

to increase the size of Auto-Ex eligible

orders. The Committee is not permitted,

however, to reduce the size of Auto-Ex

eligible orders below 2,000 shares.

In addition, under Rule 128A the

Committee may delegate its authority to

one or more Floor Governors. The rule

provides, however, that the Committee

must meet promptly to review a Floor

Governor’s decision in the event that a

Floor Governor acts pursuant to

delegated authority.

Amex Rule 128A further provides that

in the event of system problems or

unusual market conditions, a Floor

Governor is permitted to reduce the size

of Auto-Ex eligible orders below 2,000

shares or increase the size of Auto-Ex

eligible orders up to 5,000 shares. Any

such change is temporary and lasts only

until the end of the unusual market

condition or the correction of the system

problem. Members and member

organizations will be notified when the

size of Auto-Ex eligible orders is

adjusted due to the system problems or

unusual market conditions.

Rule 128A also provides that the

Chairman and Vice Chairman of the

Exchange, acting jointly, determine

which ETFs are eligible for Auto-Ex.

2. Statutory Basis

The Exchange believes that the

proposed rule change is consistent with

the provisions of section 6(b) of the Act

in general and furthers the objectives of

section 6(b)(5) of the Act in particular,

in that it is designed to prevent

fraudulent and manipulative acts and

practices, to promote just and equitable

principles of trade, to foster cooperation

and coordination with persons engage

in regulating, clearing, settling,

processing information with respect to

and facilitating transactions in

securities, 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; and is

not designed to permit unfair

discrimination between customers,

issuers, brokers and dealers.

The proposed rule change will allow

the Auto-Ex for ETFs pilot program to

continue for an additional six months.

The proposal also facilitates the

comparison and settlement of trades

since Auto-Ex transactions result in

‘‘locked-in’’ trades. Auto-Ex for ETFs,

moreover, automatically provides

investors with price improvement on

their orders.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

That Exchange believes that the

proposed rule change will impose no

burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act. The

Exchange believes the proposal, if fact,

will enhance competition among

markets and market makers and thereby

benefit investors by allowing the

Exchange to continue to provide AutoEx for ETFs with price improvement.

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

The foregoing proposed rule change

(1) does not significantly affect the

protection of investors or the public

interest; (2) does not impose any

significant burden on competition; and

(3) by its terms does not become

operative until 30 days from the date on

which it was filed, or such shorter time

as the Commission may designate. In

addition, the Amex provided the

Commission with notice of its intent to

file the proposed rule change within a

time designated by the Commission.8

The proposed rule change has therefore

become effective pursuant to section

19(b)(3)(A) of the Act 9 and rule 19b–

4(f)(6) thereunder. 10

The Amex has requested that the

Commission waive the usual preoperative waiting period. The

Commission believes the pilot program

provides beneficial services to investors,

and finds it consistent with the

protection of investors and the public

interest to accelerate the operative date

so that the pilot can continue

uninterrupted and those benefits do not

lapse. Thus, the Commission designates

December 20, 2001, as the operative

date of the proposed rule change. 11 The

pilot extension will expire June 19,

2002.

At any time within 60 days of the

filing of this proposal rule change, the

Commission may summarily abrogate

the rule change if it appears to the

Commission that such action is

necessary or appropriate in the public

interest, for the protecton of investors,

or otherwise in furtherance of the

purposes of the Act. 12

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether it 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 Amex. All

submissions should refer to File No.

SR–Amex–2001–105, and should be

submitted by January 22, 2002.

Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices 67585

13 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3The proposal was originally filed pursuant to

Section 19(b)(3)(A) of the Act, 15 U.S.C.

78s(b)(3)(A) and Rule 19b–4(f)(5) thereunder, 17

CFR 240.19b–4(f)(5). Amendment No. 1 converted

the filing to a proposal submitted pursuant to

Section 19(b)(2) under the Act, 15 U.S.C. 78s(b)(2).

Amendment No. 2 made various clarifying changes

to the proposal that are incorporated in the

description herein.

4A rotational wheel is necessary because the

allocation of the contracts in a trade exactly

according to the percentages set forth in the

accompanying table is not always possible, as in the

case, for example, where the percentages would

yield a fractional value for each trader. Telephone

conversation between Claire P. McGrath, Vice

President and Special Counsel, Amex, and Ira L.

Brandriss, Special Counsel, Division of Market

Regulation (‘‘Division’’), Commission, on October

17, 2001.

5As indicated above, the specialist would have

the ability to determine on a trade-by-trade basis

whether to use QT or to allocate the contracts

manually. However, once QT was turned on, it

would be assumed to remain on, and would be used

to allocate contracts in all four of the functions

designated below unless the specialist informed the

crowd that he was turning it off. Telephone

conversation between Claire P. McGrath, Amex, and

Ira L. Brandriss, Division, Commission, on

November 21, 2001.

For the Commission, by the Division

of Market Regulation, pursuant to

delegated authority.13

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–32082 Filed 12–28–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–45180; File No. SR–Amex–

2001–65]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the American Stock Exchange LLC

Relating to the Implementation of

Quick Trade

December 20, 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 August

22, 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 the Exchange.

On October 19, 2001, and December 4,

2001, respectively, the Amex filed

Amendment Nos. 1 and 2 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.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Amex proposes to implement

Quick Trade, an enhancement to the

Amex Order File and Amex Options

Display Book.

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 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

Currently, for orders executed through

the specialist’s book (known as the

Amex Order Display Book or AODB) in

which registered options traders are

some or all of the contra-parties, the

specialist or his clerk must manually

allocate the contracts to those

participating registered options traders.

For option classes with large trading

crowds, this can be a very time

consuming process that can delay the

processing of trades. As the Exchange

continues to develop a number of

competitive initiatives to further

enhance the processing of customer

option orders, it is now proposing to

develop and implement Quick Trade, an

enhancement to the Amex Order File

(AOF) and AODB that will automate the

process of allocating trades to

participating registered options traders.

Quick Trade would provide for the

efficient allocation of executed contracts

as set forth below. Registered options

traders would be able to log onto the

Quick Trade (‘‘QT’’) wheel through

AOF. While registered options would

not be required to participate in QT,

they would be encouraged to sign on

and remain on QT throughout the

trading day. Each registered options

trader signed on to QT would have the

ability to advise the specialist prior to

the usage of QT on any given trade that

he does not want to receive an

allocation through QT. In such a

situation and in the situation where a

registered options trader not signed on

to QT wishes to participate in a given

trade, the specialist would be unable to

use QT to allocate the trade and the

allocation would occur using the same

manual process used today.

At the opening and throughout the

trading day the QT wheel 4 would be

activated to allocate contracts among

registered options traders and the

specialist in accordance with specific

ratios set forth below.

ALLOCATION RATIO

Number of traders on Quick

Trade

Approximate

number of

contracts allocated to

the specialist

(In percent)

Approximate

number of

contracts allocated to

the traders

(as a group)

(In percent)

1 ........................ 60 40

2–4 .................... 40 60

5–7 .................... 30 70

8–15 .................. 25 75

16 or more ........ 20 80

The QT wheel would provide for the

automatic allocation of contracts to the

specialist and registered options traders

at various times during the trading day

when QT is used for the following four

AODB features. Registered options

traders who have signed on to QT

would be allocated trades whenever QT

is used for any of these four AODB

functions: 5

• Quick Opening for pre-opening

quantity allocations by class;

• Block Window for post-opening

quantity allocations by series;

• The Auto-Match feature for

executions when there is an imbalance;

and

• Sweep of the Book allocation of

contracts from multiple order

executions.

Quick Openings

A specialist opens trading in each

option series by establishing an opening

price for that series and executing all

market and marketable limit orders at

this price. If after all opening orders

have been executed an imbalance exists,

QT would automatically allocate the

imbalance of executed contracts to the

specialist and the registered options

traders signed on to QT in accordance

with the ratios set forth above.

Block Window

The Block Window permits a

specialist, in situations when there are

limit orders on the book at various

prices, to execute such limit orders at a

single price. For example, the specialist

has limit orders on the book to sell at