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Self-Regulatory Organizations; the American Stock Exchange LLC; Order Granting Approval to Proposed Rule Change To Amend Commentary .02 to Amex Rule 126(g) “Precedence of Bids and Offers”

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Information about this document as published in the Federal Register.

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Start Preamble March 28, 2001.

I. Introduction and Background

On February 5, 2001, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) a proposed rule change pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) [1] and Rule 19b-4 therunder.[2] The proposed rule change would amend Commentary .02 to Amex Rule 126(g) “Precedence of Bids and Offers” to reduce the number of shares that may be crossed on an agency basis from 25,000 shares to 5,000 shares. Notice of the proposed rule change was published in the Federal Register on February 21, Start Printed Page 181252001.[3] The Commission received no comments on the proposal. This order approves the proposed rule change.

II. Description of the Proposal

The Exchange proposes to amend Commentary .02 to Amex Rule 126(g) “Precedence of Bids and Offers” to reduce the number of shares that may be crossed on an agency basis from 25,000 shares to 5,000 shares. Amex Rule 126 delineates priority and precedence of bids and offers on the Exchange floor, and generally provides that bids and offers are entitled to precedence based on time, with members bidding at the highest price (offering at the lowest price) entitled to be on parity and divide executions at their price after a previous sale removes all bids and offers from the floor. Commentary .02 to Amex Rule 126(g) applies only to agency crosses (“clean crosses”) to buy and sell orders of 25,000 shares or more (that is, both orders of accounts of non-members). This commentary provides that a member may cross those orders at a price at or within the prevailing quotation, with such orders entitled to priority at the cross price over previously entered bids and offers. When crossing these orders, the member must follow the crossing procedures of Amex Rule 151 “On Order' Transactions” and another member may trade with either the bid or offer side of the cross to provide price improvement to all or part of the bid or offer. In addition, the member must trade with all other market interest having time priority at that price before trading with any part of the cross transaction.

III. Discussion

The Commission has reviewed carefully the proposed rule change and finds that it is consistent with the Act and the rules and regulations promulgated thereunder applicable to a national securities exchange. The Commission finds that the proposal is consistent with the requirements of Section 6(b) of the Act [4] in general, and particularly furthers the objectives of Section 6(b)(5) of the Act,[5] in that it is designed to promote just and equitable principles of trade and further the protection of investors and the public interest. The Commission believes that reducing the number of shares that may be crossed on an agency basis from 25,000 shares to 5,000 shares is reasonable, and that such a reduction may help to facilitate the transition from pricing equities in fractions to pricing in decimals. Additionally, the Commission believes such a reduction may enhance competition among markets in the execution of agency crosses, resulting in better efficiency and prices for investors.

IV. Conclusion

For the above reasons, the Commission find that the proposed rule change is consistent with the provisions of the Act, in general, and with Section 6(b)(5) [6] in particular.

It is therefore ordered, pursuant to Section 19(b)(2) of the Act,[7] that the proposed rule change SR-Amex-01-02) be, and hereby is, approved.[8]

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[9]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  Securities Exchange Act Release No. 43950 (February 12, 2001), 66 FR 11074.

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8.  In approving the proposal, the Commission has considered the rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

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[FR Doc. 01-8348 Filed 4-4-01; 8:45 am]

BILLING CODE 8010-01-M