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Self-Regulatory Organizations; Order Approving a Proposed Rule Change by the American Stock Exchange LLC Relating to Floor Official Rulings

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Information about this document as published in the Federal Register.

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Start Preamble June 13, 2000.

I. Introduction

On February 22, 2000, the American Stock Exchange LLC (“Amex” or “Exchange”) submitted to the Securities and Exchange Commission (“SEC” or “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 require a written record of all floor official rulings. The proposed rule change was published in the Federal Register on April 25, 2000. [3] The Commission did not receive any comments on the proposed rule change. This order approves the proposed rule change.

II. Description of the Proposed Rule Change

The Amex proposes to revise its Rule 22 to require a written record of all floor official rulings, including rulings involving complaints of harassment, intimidation or other activities in violation of Exchange rules by either specialists or traders. Currently, floor officials are not required to make a written record of their rulings unless specifically requested by a member to do so.

The Exchange proposes to develop a form to be used by floor officials on which they will be able to record their rulings. Floor officials will be required to prepare the completed rulings form as soon as practicable after the decision is made and to submit their rulings on the Exchange form at the end of each trading day. Floor officials who fail to complete the written rulings form may be removed from their position or may become ineligible for reappointment.

III. 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. [4] In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act [5] because 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 and to remove impediments to and perfect the mechanism of a free and open market and a national market system. Further, the Commission finds that the proposal is consistent with the requirements of section 6(b)(7) of the Act [6] because it provides a fair procedure for disciplining members of the Exchange.

The Amex has proposed to modify its procedures for rulings made by floor officials. Rather than relying solely on verbal rulings made on the floor, Amex proposes to require floor officials to reduce their rulings to writing and to require floor officials to submit such written rulings to the Exchange. The Commission believes that requiring written rulings will assist in fostering a fair disciplinary procedure on the floor of the Exchange. A written ruling provides an official record of member conduct and the events that led to the floor official's decision. Members will be able to review the rulings and therefore, should be better able to conform their conduct to the requirements of the Exchange's rules. Further, members will have the floor official's written findings regarding the member's conduct and the basis upon which the floor official relied to make his or her decision. Members will continue to be able to appeal floor official decisions as is currently provided in Amex Rule 22. The Commission believes that a written record of the decision will enhance the fairness and efficiency of the appeals process.

Further, the Exchange will have a written record of the alleged conduct, upon which it may base investigations or other inquiries. The proposal requires floor officials to make their written rulings as soon as practicable after the decision is made. This should lead to a more complete and full description of the conduct and the floor official's basis for his or her ruling because floor officials should complete their written rulings while the details are fresh in their memories. A written record should provide the Exchange with an enhanced mechanism by which to prevent violations of its rules as well as the violations of the Act. The Exchange will review all floor official rulings and determine if further investigation or inquiry is warranted. This should enable the Exchange to enforce its rules in a more fair and efficient manner, and provide the Exchange with a means to prevent fraudulent and manipulative acts on its floor.

Finally, the proposal provides that if a floor official fails to submit his or her written findings to the Exchange at the end of each trading day, the floor official may be subject to removal or become ineligible for reappointment as a floor official. The Commission believes that this provision is appropriate because it seeks to enforce floor official compliance with the proposed rule change.

IV. Conclusion

It is Therefore Ordered, pursuant to Section 19(b)(2) of the Act.[7] that the proposed rule change (SR-Amex-00-11) is approved.

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Start Printed Page 38615

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[8]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


3.  Securities Exchange Act Release No. 42697 (April 18, 2000), 65 FR 24234.

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4.  In approving this proposal, the Commission has considered its impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

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[FR Doc. 00-15613 Filed 6-20-00; 8:45 am]