Document ID: SEC-2006-0437-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2006-04-04T04:00Z

[Federal Register: April 4, 2006 (Volume 71, Number 64)]
[Notices]               
[Page 16841-16845]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04ap06-76]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53561; File No. SR-Amex-2005-103]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change and Amendment Nos. 1, 2, 3 and 
4 Thereto Allowing Issuers of Listed Equity Securities, Structured 
Products, and Exchange Traded Funds a Right To Request a New Specialist

March 29, 2006.
    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 October 13, 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 Amex. On January 26, 
2006, Amex filed Amendment No. 1 to the proposed rule change.\3\ On 
January 30, 2006, Amex filed Amendment No. 2 to the proposed rule 
change.\4\ On February 17, 2006, Amex filed Amendment No. 3 to the 
proposed rule change.\5\ On March 6, 2006, Amex filed Amendment No. 4 
to

[[Page 16842]]

the proposed rule change.\6\ 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, the Exchange proposed further changes to 
Amex Rule 27(e) and (f) and made revisions to the purpose section of 
the proposed rule change.
    \4\ In Amendment No. 2, the Exchange made revisions to the 
purpose section of the proposed rule change to discuss changes to 
the text of Amex Rule 27(f) made in Amendment No. 1.
    \5\ In Amendment No. 3, the Exchange proposed further changes to 
Amex Rule 27(e) and (f) and made revisions to the purpose section of 
the proposed rule change.
    \6\ In Amendment No. 4, the Exchange proposed minor technical 
changes to the text of Amex Rule 27(e) and (f).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Amex Rule 27 to give issuers of 
listed equity securities and structured products, as well as exchange 
traded fund (``ETF'') sponsors, a right to request a new specialist.
    The text of the proposed rule change is available on the Amex's Web 
site (http://www.amex.com), the Office of the Secretary, Amex, and at 

the Commission's Public Reference Room. The text of the proposed rule 
change also appears below. Proposed new language is italicized; 
proposed deletions are in [brackets].
Rule 27. Allocations Committee
    (a)-(d) No change.
    (e) (i) If the issuer of an [listed] equity security to be 
initially listed on the Exchange chooses to participate in the 
allocation process, the Allocations Committee shall prepare a list of 
qualified specialists based on the criteria set forth in paragraph (b). 
In the case of an equity security, Exchange Traded Fund or Structured 
Product, the list shall consist of five specialists. [In the case of an 
Exchange Traded Fund or Structured Product, the list shall consist of 
five specialists.] The issuer may request that one or more specialists 
be placed on the list of eligible specialists. The Allocations 
Committee, however, is not obligated to honor such requests. 
Specialists that are subject to a preclusion on new allocations as a 
result of a disciplinary proceeding or action by the Performance 
Committee only are eligible for allocations of ``related securities'' 
as described in Commentary .05 of this Rule. The issuer may ask to meet 
with representatives of the specialists units on the list.
    The issuer shall select its specialist from the list within five 
business days of receiving the list by providing the Exchange with a 
letter signed by person of Secretary rank or higher indicating the 
issuer's choice of specialist. In the case of an Exchange Traded Fund 
or Structured Product, the selection may be made by a senior officer of 
the sponsor or issuer who has been authorized to make such selection. 
If the issuer does not make its selection in a timely manner, the 
Allocation Committee may select the specialist as provided in paragraph 
(b) of this Rule. This procedure only applies to issuers of equity 
securities, and sponsors of Exchange Traded Funds and Structured 
Products that initially list on the Exchange.
    [The security shall remain with its initial specialist for at least 
120 days. After that time, but during the first 12 months after 
listing, the issuer or sponsor may request that the security be 
reallocated should it become dissatisfied with its specialist. This is 
the case whether or not the issuer or sponsor has participated in the 
selection process. The issuer or sponsor is expected to furnish an 
explanation for the basis for its dissatisfaction, and if after 
counseling the issuer or sponsor and the specialist such change is 
still desired, the Exchange shall reallocate the security within 30 
days. In any such reallocation, the Exchange shall follow the 
allocation procedures described in this paragraph (e) unless the issuer 
or sponsor requests the Allocations Committee to select the specialist 
without any issuer or sponsor input under the procedures described in 
paragraph (b) of this Rule.]
    (ii) (a) The issuer of any listed equity security or Structured 
Product or the Exchange Traded Fund sponsor, may, at any time after 120 
days from the start of trading on the Exchange, file a written notice 
(``Notice'') with the officer in charge of Equities Administration or 
the officer in charge of the Exchange Traded Fund Marketplace, as 
applicable, signed by the issuer's or sponsor's chief executive 
officer, requesting a change of specialist unit for ``good cause,'' as 
defined below. The issuer or sponsor is afforded one opportunity to do 
so. The Notice shall indicate the specific issues prompting this 
request, and what steps, if any, have been taken to try to address them 
before the filing of the Notice. The officer in charge of Equities 
Administration or the officer in charge of the Exchange Traded Fund 
Marketplace, as applicable, shall provide copies of the Notice to the 
Chief Regulatory Officer (``CRO'') and the Committee on Floor Member 
Performance.
    (b) ``Good cause,'' for the purposes of (e)(ii)(a), shall consist 
of the failure of the specialist to make competitive markets; the 
failure of the specialist unit to risk capital commensurate with the 
type of security; the failure of the specialist unit to assign 
competent personnel to the stock; or any statements made publicly by 
the specialist unit that substantially denigrate the security. The 
Committee on Floor Member Performance shall make any determination that 
``good cause'' does not exist, as defined herein. Such a determination 
shall be made prior to the commencement of an Issuer or Sponsor Change 
of Specialist Mediation (``Mediation''). In this circumstance the 
issuer or sponsor may appeal the decision of the Committee on Floor 
Member Performance to the Amex Adjudicatory Council. If the decision of 
the Committee on Floor Member Performance is upheld, there shall be no 
Mediation, and the security shall not be reallocated.
    (iii) The officer in charge of Equities Administration or the 
officer in charge of the Exchange Traded Fund Marketplace, as 
applicable, shall notify the subject specialist unit that Mediation is 
being commenced pursuant to this provision, and shall provide the 
specialist with a copy of the Notice. Within two weeks, the specialist 
unit may submit a written response to either the officer in charge of 
Equities Administration or the officer in charge of the Exchange Traded 
Fund Marketplace, as applicable. The officer in charge of Equities 
Administration or the officer in charge of the Exchange Traded Fund 
Marketplace, as applicable, shall provide copies of any such written 
response to the CRO, and the Committee on Floor Member Performance. The 
date the specialist submits a response shall be referred to herein as 
the ``Specialist Response Date.'' If the specialist does not submit a 
response, there shall be no Mediation, and the Allocation Committee 
shall be convened to reallocate securities pursuant to paragraph (b) of 
this Rule.
    (iv) The CRO shall review the Notice and any specialist response, 
and may request a review of the matter by the Regulatory Oversight 
Committee (``ROC'') of the Exchange's Board of Directors. In addition, 
the Committee on Floor Member Performance shall review the Notice and 
any specialist response. The Mediation process described hereunder may 
continue during the CRO's reviews, however, where a review by the ROC 
has been requested, no change of specialist unit may occur until the 
ROC makes a final determination that it is appropriate to permit such 
change. In making such determination, the ROC may consider all relevant 
regulatory issues, including without limitation whether the requested 
change appears to be in aid or furtherance of conduct that is illegal 
or violates Exchange rules, or is in retaliation for a refusal by a 
specialist to engage in conduct that is illegal or violates Exchange 
rules. The ROC may request a statement from the issuer or

[[Page 16843]]

sponsor confirming that the request does not stem in whole or in part 
from the specialists' refusal or failure to engage in any wrongful 
action. Notwithstanding the CRO, ROC and/or Committee on Floor Member 
Performance reviews of any matter raised during the process described 
herein, the Amex Division of Regulation and Compliance (including 
Listing Qualifications) and/or the NASD Amex Division may at any time 
take any regulatory action that it may determine to be warranted.
    (v) The Exchange shall facilitate a mediation of the issues that 
have arisen between the issuer or sponsor and the specialist unit. The 
Exchange shall appoint a committee consisting of at least one floor 
broker, one senior floor official, one upstairs governor, and two 
independent governors for each Mediation (``the Mediation Committee'').
    (vi) As soon as practicable after the Specialist Response Date, the 
Mediation Committee shall commence to meet with representatives of the 
issuer or sponsor and the specialist unit in an attempt to mediate the 
matters indicated in the Notice.
    (vii) Any time after the filing of the Notice, the issuer or 
sponsor may file with the officer in charge of Equities Administration 
or the officer in charge of the Exchange Traded Fund Marketplace, as 
applicable, a written notice, signed by the issuer's or sponsor's chief 
executive officer, that it is concluding the Mediation because it 
wishes to continue with the same specialist unit.
    (viii) After the expiration of one month from the Specialist 
Response Date, subject to the conclusion of any review by the CRO and 
ROC, the issuer and sponsor may file with the officer in charge of 
Equities Administration or the officer in charge of the Exchange Traded 
Fund Marketplace a written notice, signed by the issuer's or sponsor's 
chief executive officer, that it wishes to proceed with the change of 
specialist unit. Subject to paragraph (c) above, as soon as practicable 
thereafter, the security shall be put up for allocation following the 
procedures described in paragraph (b) of this Rule.
    (f) The Allocations Committee shall be convened to reallocate 
securities when (1) the Committee on Floor Member Performance directs 
reallocation, (2) a specialist requests to be relieved of a particular 
security for good cause, (3) an issuer or sponsor files a written 
notice requesting a change of specialist unit and the Mediation 
Committee orders reallocation pursuant to paragraph (e)(viii) of this 
Rule, or an issuer or sponsor files a written notice requesting a 
change of specialist unit and the specialist unit does not submit a 
response, or [(3)] (4) a specialist's registration in a security is 
canceled due to disciplinary action. Whenever the Allocations Committee 
reallocates a security for the reasons stated in (1) through [(3)] (4) 
of this paragraph, the Allocations Committee shall follow the 
procedures described in paragraph (b) of this Rule. The Allocations 
Committee also shall be convened to reallocate securities when [(4)] 
(5) a specialist dissolves or recombines, [(5)] (6) a specialist has 
been determined to be in such financial or operating condition that it 
cannot be permitted to continue to specialize in one or more of its 
specialty securities with safety to investors, its creditors or other 
members, or [(6)] (7) a specialist has become subject to the pre-
borrowing requirement of Rule 203(b)(3) of Regulation SHO under the 
Securities Exchange Act of 1934 with respect to one of its specialty 
securities or, in the case of an options specialist, with respect to 
the underlying security. The Allocations Committee shall follow the 
procedures described in paragraphs (g) or (h) of this Rule, as 
appropriate, whenever it reallocates securities for the reasons stated 
in [(4)] (5) through [(6)] (7) of this paragraph.
    (g)-(i) No change.
* * * Commentary
    No change.

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, as 
amended, and discussed any comments it received on the proposed rule 
change, as amended. 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

1. Purpose
    The Amex proposes to set forth procedures in Amex Rule 27, whereby 
issuers of equity securities, structured products and ETF sponsors may 
request a new specialist.

Current Amex Rule 27

    Amex Rule 27(e) currently gives the issuer of an equity security or 
a structured product and the sponsor of an ETF a one-time right to 
request a reallocation to a different specialist unit within one (1) 
year from the original listing. The Exchange believes that the one-year 
restriction on this right does not provide an adequate amount of time 
for issuers to reach an informed opinion regarding a specialist. 
Moreover, the one-year limit does not address dissatisfaction linked to 
fundamental changes in a specialist unit due to transfers of specialist 
books or changes in a unit.

Proposed Amex Rule 27

    Amex proposes in Amex Rule 27(e)(ii) that at any time after 120 
days from the start of trading of an issue, an issuer or sponsor may 
request a specialist reassignment by filing a written notice 
(``Notice'') with the officer in charge of Equities Administration or 
the officer in charge of the ETF Marketplace, as applicable, indicating 
the specific issues prompting the request and the steps previously 
taken to attempt to address them. The issuer or sponsor may make this 
request for ``good cause.'' Amex proposes to define ``good cause'' as 
the failure of the specialist to make competitive markets; the failure 
of the specialist unit to risk capital commensurate with the type of 
security; the failure of the specialist unit to assign competent 
personnel to the securities; or any statements made publicly by the 
specialist unit that substantially denigrate the security.
    Further, the Amex proposes that the officer in charge of Equities 
Administration or the officer in charge of the ETF Marketplace, as 
applicable, will provide copies of the Notice to the Chief Regulatory 
Officer of the Exchange (``CRO'') and to the Committee on Floor Member 
Performance. In addition, the officer in charge of Equities 
Administration or the officer in charge of the ETF Marketplace, as 
applicable, will notify the subject specialist unit that mediation is 
being commenced with respect to the request for reassignment, and will 
provide the specialist with a copy of the Notice. The specialist unit 
may submit a written response to the officer in charge of Equities 
Administration or the officer in charge of the ETF Marketplace within 
two (2) weeks, which response will be provided to the CRO and the 
Committee on Floor Member Performance. If the specialist unit does not 
submit a response during this two-week time period, however, there will 
be no

[[Page 16844]]

further assessment by the CRO or Committee on Floor Member Performance, 
and ultimately no mediation. The Allocations Committee will be convened 
to reallocate securities pursuant to Amex Rule 27(b).
    The Exchange proposes in Amex Rule 27(e)(iv) that the CRO will 
review the Notice and any specialist response, and may request a review 
of the matter by the Regulatory Oversight Committee (``ROC'') of the 
Exchange's Board of Governors. In addition, the Committee on Floor 
Member Performance will review the Notice and any specialist response. 
The Committee on Floor Member Performance will make any determination 
that ``good cause,'' as proposed to be defined in Amex Rule 
27(e)(ii)(b), does not exist prior to the commencement of the 
mediation. A Committee on Floor Member Performance determination that 
``good cause'' does not exist will preclude the commencement of 
mediation. In this circumstance, the security will not be reallocated 
and the issuer or sponsor may request an appeal of the decision of the 
Committee on Floor Member Performance to be heard by the Amex 
Adjudicatory Council.\7\ If the Committee on Floor Member Performance 
decision is upheld, then the security will not be reallocated.
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    \7\ See Article II, Section 7(a) of the Amex Constitution.
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    Proposed Amex Rule 27(e)(v) provides that the Exchange will 
facilitate mediation of the issues that have arisen between the issuer 
or sponsor and the specialist unit, which may be conducted pending the 
outcome of the CRO's and, if applicable, the ROC's review of the 
request. However, as set forth in proposed Amex Rule 27(e)(iv), where a 
review by the ROC has been requested, no change of specialist unit may 
occur until the ROC makes a final determination that it is appropriate 
to permit such change. In making such determination, the ROC may 
consider all relevant regulatory issues, including without limitation 
whether the requested change appears to be in aid or furtherance of 
conduct that is illegal or violates Exchange rules, or in retaliation 
for a refusal by a specialist to engage in conduct that is illegal or 
violates Exchange rules. Moreover, the Amex proposes that, 
notwithstanding review by the CRO, ROC and/or Committee on Floor Member 
Performance of any matter raised during the process described herein, 
the Amex Division of Regulation and Compliance (including Listing 
Qualifications) and/or the NASD Amex Division may at any time take any 
regulatory action that it may determine to be warranted. The Amex 
represents that reassignment may not occur without prior notice that 
the CRO has decided not to refer the matter to the ROC or that the ROC 
has determined that the change is appropriate.
    The Exchange proposes a committee consisting of at least one (1) 
floor broker, one (1) senior floor official, one (1) upstairs governor, 
and two (2) independent governors for each mediation (``the Mediation 
Committee''). The Mediation Committee will meet with representatives of 
the issuer or sponsor and the specialist unit in an attempt to mediate 
the matters indicated in the Notice. During the course of the 
mediation, the issuer or sponsor may conclude the mediation if it 
determines that it wishes to continue with the same specialist unit. In 
the alternative, after the expiration of one month from the time of the 
specialist's response, subject to the conclusion of any review by the 
CRO and ROC, the issuer or sponsor may file written notice with the 
officer in charge of Equities Administration or the officer in charge 
of the ETF Marketplace, as applicable, signed by the issuer's or 
sponsor's chief executive officer, that it wishes to proceed with the 
change of specialist unit. The new specialist unit will be selected by 
the Allocations Committee pursuant to Amex Rule 27(b).
    Finally, the Exchange proposes to amend Amex Rule 27(f) to provide 
that, in addition to the circumstances provided for in the existing 
rule, the Allocations Committee will be convened to reallocate 
securities when an issuer or sponsor files a written notice requesting 
a change of specialist unit and the Mediation Committee orders 
reallocation pursuant to proposed paragraph (e)(viii) of Amex Rule 27, 
or an issuer or sponsor files a written notice requesting a change of 
specialist unit and the specialist unit does not submit a response.
2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with the provisions of Section 6(b) of the Act,\8\ in 
general, and with 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, in 
general, to protect investors and the public interest.
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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 does not believe that the proposed rule change, as 
amended, will 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

    The Exchange did not receive any written comments on the proposed 
rule change.

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 (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve such proposed rule change, as amended; or
    B. Institute proceedings to determine whether the proposed rule 
change, as amended, 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 rule-comments@sec.gov. Please include 

File Number SR-Amex-2005-103 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.
    All submissions should refer to File Number SR-Amex-2005-103. 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

[[Page 16845]]

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 available publicly. All 
submissions should refer to File Number SR-Amex-2005-103 and should be 
submitted on or before April 25, 2006.
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    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
Nancy M. Morris,
Secretary.
[FR Doc. E6-4829 Filed 4-3-06; 8:45 am]

BILLING CODE 8010-01-P