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Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing of a Proposed Rule Change by American Stock Exchange Relating to Resolving Uncompared Options Transactions

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Start Preamble January 6, 2004.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934,[1] notice is hereby given that on August 27, 2003, the American Stock Exchange LLC (“Amex”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared primarily by Amex. 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

Amex proposes to amend Amex Rule 970 (Comparison of Option Transactions Excluded From Clearance) to make the processes for resolving uncompared transactions in its intra-day options and equities comparison systems more consistent.

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.[2]

A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change

Amex Rule 970 sets forth the process by which Amex members reconcile uncompared option transactions on the business day following the trade date, or T+1.[3] Specifically, Rule 970 requires that, at a time designated by Amex on T+1, each member or member organization must review their contract sheets listing all uncompared option trades and option advisory trades. For each uncompared option trade, members must deliver to the contra-party a Rejected Option Transaction Notice (“ROTN”), which details the terms of the uncompared trade. The contra-party or an authorized representative must then accept (“OK”) or reject (“DK”) and sign the ROTN no later than one-half hour (fifteen minutes if the transaction was executed by a specialist or floor broker) prior to the opening of trading on T+1.

In July 1992, Amex introduced the Intra-day Comparison System for Options (the “IDCO”) to facilitate the intra-day comparison of option trades and the reconciliation of uncompared option trades. The IDCO provides an electronic input and correction facility for option transactions executed on Amex. Specifically, the system displays uncompared options trades and option advisory trades and delivers an electronic ROTN to the appropriate contra-party. In addition, the system allows members or member organizations to accept or reject a ROTN, to correct or delete uncompared trades, and to add new trades for comparison where necessary.

Amex proposes to amend Rule 970 by adopting a format consistent with that of Amex Rule 731, which sets forth a similar process for resolving uncompared equity transactions and the use of the Intra-Day Comparison System for Equities (“IDCE”). With login and password safeguards to protect members against unauthorized rejections and acceptances of electronic ROTNs, Amex believes that the use of the IDCO renders unnecessary the requirement that members manually sign paper ROTNs for each uncompared option transaction. With the exception of eliminating the manual signature requirement for paper ROTNs, Amex does not propose any other change to the comparison process for option transactions. For clarity and consistency, Amex proposes to supplement and preserve the current language of Rule 970 in new Commentary.

Amex believes that the proposed rule change is consistent with section 6(b) of the Act [4] in general and furthers the objectives of section 6(b)(5) of the Act [5] in particular because it is designed to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system.

B. Self-Regulatory Organization's Statement on Burden on Competition

Amex 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

No written comments were solicited or received with respect to the proposed rule change.

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

Within thirty-five days of the date of publication of this notice in the Federal Register or such longer period (i) as the Commission may delegate up to ninety days of such date if it finds such longer period to be appropriate and published its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will:

(a) By order approve such proposed rule change or

(b) Institute proceedings to determine whether the proposed rule change should be disapproved.

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. Start Printed Page 2026Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 5th Street NW., Washington, DC 20549-0069. Comments may also be submitted electronically at the following e-mail address: All comment letters should refer to File No. SR-AMEX-2003-78. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your 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 rule filing that are filed with the Commission, and all written communications relating to the rule filing between the Commission and any person, other than those that may be withheld from the public in accordance with provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room in Washington, DC. Copies of such filing will also be available for inspection and copying at Amex's principal office. All submissions should refer to File No. SR-AMEX-2003-78 and should be submitted within by February 3, 2004.

Start Signature

For the Commission by the Division of Market Regulation, pursuant to delegated authority.[6]

Jill M. Peterson,

Assistant Secretary.

End Signature End Preamble


2.  The Commission has modified the text of the summaries prepared by Amex.

Back to Citation

3.  An uncompared transaction is one in which trade data is received from one member but no corresponding data is received from a contra-member.

Back to Citation

[FR Doc. 04-619 Filed 1-12-04; 8:45 am]