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Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the American Stock Exchange LLC Relating to Amendment of Exchange Rule 933

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Start Preamble February 7, 2002.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) [1] and Rule 19b-4 [2] thereunder, notice is hereby given that on August 17, 2000, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Start Printed Page 6957Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

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

The Amex proposes to amend Exchange Rule 933 to add new Commentary .01. Below is the text of the proposed rule change. Proposed new language is italicized.

.01 If a member or member organization grants a non-member electronic access to the Exchange's order routing or executions systems through the member's or member organization's order routing systems, and if the non-member uses that access to violate Exchange rules or other applicable regulations, including, but not limited to, the Exchange's “unbundling” prohibition, the member or member organization is in violation of Exchange rules if it has either knowingly facilitated the violation or has failed to establish procedures reasonably designed to prevent access to the member or member organization's order routing systems from being used to effect such violation.

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 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. 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 Exchange represents that it established the Auto-Ex system to provide small customer orders with an immediate single price execution. In 1996, the Exchange adopted Rule 933 to prohibit the “unbundling” (i.e., the splitting or dividing-up) of customer option orders to make them fit within the size parameters of the Exchange's Auto-Ex system.[3]

The new Commentary would make explicit the existing implicit obligations of members and member organizations under Rule 933. Thus, members and member organizations that provide their customers with electronic access to the Exchange's order routing and execution systems would be explicitly required to take reasonable steps to ensure that their customers do not unbundle their orders to satisfy Auto-Ex eligibility criteria and to otherwise comply with the Exchange's rules and other applicable regulations. The new Commentary would further provide that members and member organizations may not knowingly facilitate a violation of the Exchange rules (including the unbundling rule) and other applicable regulations by non-members that have electronic access to the Trading Floor through the member organization's order routing systems. The Exchange represents that the Chicago Board Options Exchange (“CBOE”) has already adopted a similar rule,[4] and the Exchange believes that the proposed clarification of Rule 933 will assist members and member organizations in understanding their compliance responsibilities.

2. Statutory Basis

The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act [5] in general, and furthers the objectives of Section 6(b)(5) [6] in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest; and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers.

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

Written comments were neither solicited nor received.

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

Because the foregoing rule change constitutes a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule of the Exchange, it has become effective pursuant to section 19(b)(3)(A)(i) of the Act [7] and subparagraph (f)(1) of Rule 19b-4 thereunder.[8] Although at any time within 60 days of the filing of the 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,[9] the Commission notes that the abrogation period for this proposed rule change has expired. The Commission also notes that concurrently with this notice, it is publishing an order granting accelerated approval to a proposed rule change by the Amex that, among other things, deletes the Commentary that is proposed herein.[10]

IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change 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. 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 Start Printed Page 6958available for inspection and copying at the principal office of the Exchange.

All submissions should refer to the File No. SR-Amex-00-47 and should be submitted by March 7, 2002.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[11]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


3.  See Securities Exchange Act Release No. 37429 (July 12, 1996), 61 FR 37782 (July 19, 1996) (SR-Amex-96-26).

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4.  See Securities Exchange Act Release No. 38974 (August 26, 1997), 62 FR 46528 (September 3, 1997) (SR-CBOE-97-32). See also CBOE Regulatory Bulletin 00-27, “Access to Retail Automatic Execution Systems (‘RAES’),” (January 27, 2000).

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7.   15 U.S.C. 78s(b)(3)(A)(i).

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10.  See Securities Exchange Act Release No. 45418 (February 7, 2002) (SR-Amex-2001-96).

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[FR Doc. 02-3570 Filed 2-13-02; 8:45 am]