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Self-Regulatory Organizations; Order Approving Proposed Rule Change and Amendment No. 1 Thereto by the American Stock Exchange LLC Relating to Its Performance Evaluation and Allocations Procedures

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Start Preamble July 7, 2003.

On December 19, 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 revise its performance evaluation and allocations procedures. On May 1, 2003 the Amex amended the proposed rule change.[3] Specifically, Amex proposes to modify Amex Rule 26 to reduce the size of the Performance Committee and related subcommittees, while also modifying the committee pool balance where specialist relations with listed companies or Exchange Traded Funds (“ETF”) sponsors are in issue. The proposed rule change also modifies Amex Rules 26(e) and 29(d) to establish deadlines for submission of materials to Amex staff to accommodate transmission of materials in connection with specialist minimum performance standard meetings.[4] Finally, the proposed rule change eliminates the Notice of Marketing Interest (“NOMI”) process in Amex Rule 27 that previously Start Printed Page 41666required equity specialists to obtain written approval prior to contacting an unlisted company.

The proposed rule change, as amended, was published for comment in the Federal Register on June 2, 2003.[5] The Commission received no comments on the proposal.

After careful review, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.[6] Specifically, the Commission finds that the proposed rule change promotes the objectives of section 6(b)(5) of the Act,[7] which requires among other things, that the rules of the Exchange be 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 regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and national market system, and in general, to protect investors and the public interest.

The Commission believes that the proposed rule change is a reasonable modification of the Exchange's performance evaluation and allocations procedures as it is intended to enable the Performance Committee to operate more flexibly and responsively, as well as to more accurately reflect the views of issuers and ETF sponsors in certain situations. Additionally, the timely disclosure of information and materials to the Performance Committee and the Market Quality Committee will ensure adequate time for review and distribution to participants. Finally, the elimination of the now outdated NOMI process will better serve to facilitate the Exchange's listing efforts by removing a process that caused the unintended result of specialist firms requesting NOMIs to contact an unlisted company without then undertaking substantial contact with them.

It is therefore ordered, pursuant to section 19(b)(2) of the Act,[8] that the amended proposed rule change (SR-AMEX-2002-112) be, and hereby is, approved.

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


3.  See Letter from William Floyd Jones, Associate General Counsel, Amex, to Nancy Sanow, Assistant Director, Division of Market Regulation (“Division”), Commission, dated April 30, 2003 (“Amendment No. 1”). In Amendment No. 1 the Exchange submitted a new Form 19b-4 which replaced the original filing in its entirety.

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4.  Persons that are the subject of performance reviews have a reasonable amount of time between delivery of the written notice and the Committee's meeting to prepare their presentation to the Committee. A mutually convenient date for the performance review is selected by the person being reviewed and the Committee. Telephone discussions between William Floyd-Jones, Assistant General Counsel, Amex, Christopher B. Stone, Special Counsel, and Mia C. Zur, Attorney, Division, Commission (January 30 and 31, 2003).

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5.  See Securities Exchange Act Release No. 47914 (May 23, 2003), 68 FR 32782 (June 2, 2003).

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6.  In approving this proposed rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

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[FR Doc. 03-17668 Filed 7-11-03; 8:45 am]