Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC,

[Federal Register: July 13, 2005 (Volume 70, Number 133)]

[Notices]

[Page 40409-40410]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr13jy05-140]

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51975; File No. SR-Amex-2005-065]

Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Relating to Odd-Lots in Nasdaq Securities

July 6, 2005.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on June 16, 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 and II below, which Items have been prepared by Amex.\3\ On June 28, 2005, Amex filed Amendment No. 1 to the proposed rule change.\4\ The Exchange filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act \5\ and Rule 19b-4(f)(6) thereunder,\6\ which renders the proposed rule change effective upon filing with the Commission.\7\ The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons.

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

\2\ 17 CFR 240.19b-4.

\3\ The Commission has made minor technical changes to this notice with Amex's consent. Telephone conversation between Jan Woo, Attorney, Division of Market Regulation, Commission, and Laura Clare, Assistant General Counsel, Amex, dated July 5, 2005.

\4\ Amendment No. 1 made technical and clarifying changes to the proposed rule change.

\5\ 15 U.S.C. 78s(b)(3)(A).

\6\ 17 CFR 240.19b-4(f)(6).

\7\ The Exchange provided the Commission with written notice of its intention to file the proposed rule change on June 14, 2005. The Commission received the Exchange's submission, and asked the Exchange to file the instant proposed rule change, pursuant to Rule 19b-4(f)(6) under the Act. 17 CFR 240.19-4(f)(6).

1. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

   Amex proposes to extend for an additional six-month period ending December 30, 2005, the Exchange's pilot program for odd-lot execution procedures for Nasdaq securities traded on the Exchange pursuant to unlisted trading privileges. There is no proposed rule text. Amex is making no changes to the pilot program as it currently operates, other than extending it through December 30, 2005.

2. 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

   The Commission approved, and the Exchange implemented, a pilot program for odd-lot order \8\ executions in Nasdaq securities transacted on the Exchange pursuant to unlisted trading privileges. Paragraph (j) of Amex Rule 118 (``Trading in Nasdaq National Market Securities'') describes the Exchange's odd-lot execution procedures for Nasdaq securities, and Commentary .05 of Amex Rule 205 (``Manner of Executing Odd-Lot Orders'') references Amex Rule 118(j) odd-lot procedures. The pilot program was originally approved on August 2, 2002 for a six-month period,\9\ and was extended four times, with the most recent extension due to expire on June 30, 2005.\10\

   \8\ An odd-lot order is an order for less than 100 shares.

   \9\ See Securities Exchange Act Release No. 46304 (August 2, 2002), 67 FR 51903 (August 9, 2002)(SR-Amex-2002-56).

   \10\ See Securities Exchange Act Release Nos. 48174 (July 14, 2003), 68 FR 43409 (July 22, 2003)(SR-Amex-2003-56)(extending the pilot until December 27, 2003); 48995 (December 24, 2003), 68 FR 75670 (December 31, 2003)(SR-Amex-2003-102) (extending the pilot until June 27, 2004); 49855 (June 14, 2004), 69 FR 35399 (June 24, 2004)(SR-Amex-2004-30)(extending the pilot until December 27, 2004); and 50934 (December 27, 2004), 70 FR 412 (January 4, 2005)(SR-Amex- 2004-108)(extending the pilot until June 30, 2005).

   Under the Exchange's current pilot program, after the opening of trading in Nasdaq securities, odd-lot market orders and executable odd- lot limit orders are executed at the qualified national best bid or offer \11\ at the time the order is received at the trading post or through Amex Order File. Odd-lot market orders and executable odd-lot limit orders entered before the opening of trading in Nasdaq securities are executed at the price of the first round-lot or part of round-lot transaction on the Exchange. Non-executable limit orders, stop orders, stop limit orders, orders filled after the close and non-regular way trades are executed in accordance with Amex Rule 205 A(2), A(3), A(4), C(1) and C(2), respectively. Orders to buy or sell ``at the close'' are filled at the price of the closing round-lot sale on the Exchange. In a locked market condition, odd-lot market orders and executable odd-lot limit orders are executed at the locked market price. In a crossed market condition, odd-lot market orders are

   [[Page 40410]]

   executed at the mean of the bid and offer prices when the displayed national best bid is higher than the displayed national best offer by $.05 or less. When the displayed national best bid is higher than the displayed national best offer by more than $.05, odd-lot market orders are executed when the crossed market condition no longer exists. In addition, in a crossed market condition, executable odd-lot limit orders are executed at the crossed market bid price (in the case of an order to sell) or at the crossed market offer price (in the case of an order to buy). For example, if the bid and offer are 20.10 and 20.00, respectively, an executable odd-lot sell limit order priced at 20.10 or less will be executed at 20.10 and an executable odd-lot buy limit order priced at 20.00 or higher will be executed at 20.00.

   \11\ In Amex Rule 118(j), the qualified national best bid and offer are defined as the highest bid and lowest offer, respectively, disseminated (A) by the Exchange or (B) by another market center participating in the Joint Self-Regulatory Organization Plan Governing the Collection, Consolidation and Dissemination of Quotation and Transaction Information for Nasdaq Listed Securities Traded on Exchanges on an Unlisted Trading Privileges Basis (``Plan''); provided, however, that the bid and offer in another such market center will be considered in determining the qualified national best bid or offer in a stock only if (i) the quotation conforms to the requirements of Amex Rule 127 (``Minimum Price Variations''), (ii) the quotation does not result in a locked or crossed market, (iii) the market center is not experiencing operational or system problems with respect to the dissemination of quotation information, and (iv) the bid or offer is ``firm,'' that is, members of the market center disseminating the bid or offer are not relieved of their obligations with respect to such bid or offer under paragraph (c)(2) of Rule 11Ac1-1 pursuant to the ``unusual market'' exception of paragraph (b)(3) of Rule 11Ac1-1 under the Act. 17 CFR 240.11Ac1-1.

   The Exchange believes that the existing odd-lot execution procedures have operated efficiently. Furthermore, the Exchange has received no complaints from members or the public regarding odd-lot executions. Therefore, the Exchange seeks an extension to the pilot program for an additional six-month period ending December 30, 2005, providing the Exchange time to assess further enhancements to the odd- lot execution procedures. 2. Statutory Basis

   The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act \12\ in general and furthers the objectives of Section 6(b)(5) \13\ 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 engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, to protect investors and the public interest and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers.

   \12\ 15 U.S.C. 78f(b).

   \13\ 15 U.S.C. 78f(b)(5).

   B. Self-Regulatory Organization's Statement on Burden on Competition

   The Exchange does not believe that the proposed rule change will impose any 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.

3. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

   Because 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 for 30 days after the date of this filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) \14\ of the Act and Rule 19b-4(f)(6) thereunder.\15\

   \14\ 15 U.S.C. 78s(b)(3)(A).

   \15\ 17 CFR 240.19b-4(f)(6).

   The Exchange requests that the Commission waive the 30-day operative delay, as specified in Rule 19b-4(f)(6)(iii),\16\ and designate the proposed rule change to become operative immediately. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because such waiver would prevent the Amex's pilot program from expiring.\17\

   \16\ 17 CFR 240.19b-4(f)(6)(iii).

   \17\ For purposes only of waiving the operative delay for this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f).

   At any time within 60 days of the filing of the amended 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.\18\

   \18\ The effective date of the original proposed rule is June 16, 2005. The effective date of Amendment No. 1 is June 28, 2005. For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposed rule change under Section 19(b)(3)(C) of the Act, the Commission considers the period to commence on June 28, 2005, the date on which Amex submitted Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).

4. 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 No. SR-Amex-2005-065 on the subject line.

   Paper Comments

   Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-9303.

   All submissions should refer to File Number SR-Amex-2005-065. 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 Commissions Internet Web site (http://www.sec.gov/rules/sro.shtml ). 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 also will be available for inspection and copying at the principal office of Amex. 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-NASD-2005-065 and should be submitted by August 3, 2005.

   For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\19\

   \19\ 17 CFR 200.30-3(a)(12).

   J. Lynn Taylor, Assistant Secretary.

   [FR Doc. E5-3712 Filed 7-12-05; 8:45 am]

   BILLING CODE 8010-01-P