Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC,
[Federal Register: January 26, 2004 (Volume 69, Number 16)]
[Notices]
[Page 3622-3623]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26ja04-84]
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-49087; File No. SR-Amex-2002-116]
Self-Regulatory Organizations; Order Approving a Proposed Rule Change and Amendment Nos. 1, 2, 3, and 4, and Notice of Filing and Order Granting Accelerated Approval of Amendment No. 5 to the Proposed Rule Change by the American Stock Exchange LLC Relating to Specialist Stabilization Requirements for Portfolio Depository Receipts, Index Fund Shares, and Trust Issued Receipts
January 15, 2004.
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Introduction
On December 27, 2002, the American Stock Exchange LLC (``Amex'' or ``Exchange'') filed with the Securities and Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to amend Amex Rules 170, 1000(a), and 1000A(a) to: (1) Eliminate certain specialist stabilization requirements and other technical requirements for Portfolio Depository Receipts, Index Fund Shares, and Trust Issued Receipts (collectively referred to as ``Exchange Traded Funds'' or ``ETFs''), and (2) correct erroneous cross references in the Exchange's rules to the definition of the term ``derivative product.''
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
The Exchange filed Amendment Nos. 1, 2, 3, and 4 to the proposed rule change on April 23, 2003, June 3, 2003, October 3, 2003, and October 22, 2003, respectively.\3\ The proposed rule change, as amended, was published in the Federal Register on November 25, 2003.\4\ The Commission received no comments on the proposed rule change. On December 22, 2003, the Exchange submitted Amendment No. 5 to the proposed rule change.\5\ This order approves the proposed rule change, as amended, publishes notice of Amendment No. 5 and grants accelerated approval to Amendment No. 5.
\3\ See letters from William Floyd-Jones, Associate General Counsel, Amex, to Nancy Sanow, Assistant Director, Division of Market Regulation (``Division''), Commission, dated April 22, 2003 (``Amendment No. 1''), June 2, 2003 (``Amendment No. 2''), October 2, 2003 (``Amendment No. 3''), and October 21, 2003 (``Amendment No. 4'').
\4\ Securities Exchange Act Release No. 48800 (November 17, 2003), 68 FR 66144. (``Notice'').
\5\ See letter from William Floyd-Jones, Associate General Counsel, Amex, to Nancy Sanow, Assistant Director, Division, Commission, dated December 19, 2003 (``Amendment No. 5''). Amendment No. 5 clarifies in the proposed rule text that the proposal to eliminate the specialist stabilization requirements and other technical requirements under Amex Rule 170 would apply to only Exchange Traded Funds rather than all ``derivative products.''
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Discussion
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.\6\ Specifically, the Commission believes that the proposal is consistent with Section 6(b)(5) of the Act,\7\ which requires, among other things, that the Exchange's procedures be 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.
\6\ In approving this proposal, the Commission has considered its impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
\7\ 15 U.S.C. 78f(b)(5).
The Exchange proposes to eliminate the current restriction on the ability of specialists to buy on plus ticks or sell on minus ticks without Floor Official approval for transactions in ETFs, along with other requirements. The Commission previously approved a similar proposal that eliminated these requirements of Amex Rule 170 for transactions in options traded on the Exchange.\8\ The Commission notes that ETFs, similar to options, are priced derivatively, based on the value of an underlying basket of securities. Thus, the Commission believes that because ETFs are priced derivatively, an Exchange specialist would not be able to manipulate the pricing of an ETF. Accordingly, the Commission believes that it is appropriate to eliminate this restriction for Exchange Traded Funds. The Commission notes, however, that Exchange specialists must continue to engage in a course of dealings for their own account to assist in the maintenance of a fair and orderly market.\9\
\8\ See Securities Exchange Act Release No. 27235 (September 11, 1989), 54 FR 38580 (September 19, 1989). The Exchange adopted maximum quote spread rules applicable to registered options traders in 1975 and formally extended them to options specialists in 1989. See Id. In its proposal, the Exchange asserted that ETFs should not be subject to these maximum quote spread rules because the Exchange believes that none of the registered exchanges, ATSs, third market dealers, or Nasdaq that currently trade ETFs establish, or are subject to, maximum quote spread differentials. See Notice supra note 4. Further, the Exchange represents that there is no restriction on the trading of ETFs in multiple market centers and most ETFs are multiply traded. Telephone conversation between William Floyd Jones, Associate General Counsel, Amex, and Lisa N. Jones, Special Counsel, Division, Commission, dated November 10, 2003. As a result, the Commission does not believe that such a requirement is necessary at this time.
\9\ See Amex Rule 170 and Rule 11b-1 under the Act, 17 CFR 240.11b-1.
The Exchange also proposes to eliminate Commentary .06 to Amex Rule 170 regarding short sales for ETFs to the extent that the Commission has granted no action relief or has otherwise exempted ETFs from the short sale rule.\10\ In this regard, the Commission notes that Exchange rules regarding short sales would continue to apply to transactions in an ETF unless the Commission has granted ``no action'' relief or otherwise exempted such ETF from the short sale rule.
\10\ See Rule 101 under the Act, 17 CFR 240.10a-1.
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Accelerated Approval of Amendment No. 5
Pursuant to Section 19(b)(2) of the Act,\11\ the Commission may not approve any proposed rule change, or amendment thereto, prior to the 30th day after the date of publication of notice of the filing thereof, unless the Commission finds good cause for so doing and publishes its reasons for so finding. The Commission hereby finds good cause for approving Amendment No. 5 to the proposal, prior to the 30th day after publishing notice of Amendment No. 5 in the Federal Register.
\11\ 15 U.S.C. 78s(b)(2).
The Commission notes that Amendment No. 5 merely clarifies that
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the proposal to eliminate the specialist stabilization requirements and other technical requirements would apply to only Exchange Traded Funds rather than all ``derivative products.'' The Commission believes that this technical modification more closely mirrors the intent of the proposed rule change. The Commission therefore finds that the approval of Amendment No. 5 on an accelerated basis is appropriate because this technical revision does not raise new regulatory issues.
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Solicitation of Comments
Interested persons are invited to submit written data, views, and arguments concerning Amendment No. 5, including whether the proposed amendment 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. Comments may also be submitted electronically at the following e-mail address: rule-comments@sec.gov. All comment letters should refer to File No. SR-Amex-2002-116. This file number should be included on the subject line if e-mail is used. To help the Commission process and review comments more efficiently, comments should be sent in hardcopy or by e-mail but not by both methods. 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 at 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 be submitted by February 17, 2004.
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Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the Act,\12\ that the proposed rule change (SR-AMEX-2002-116), as amended, is approved and Amendment No. 5 to the proposed rule change is hereby granted accelerated approval.
\12\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\13\
\13\ 17 CFR 200.30-2(a)(12).
Margaret H. McFarland, Deputy Secretary.
[FR Doc. 04-1506 Filed 1-23-04; 8:45 am]
BILLING CODE 8010-01-P
