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Notice

Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Odd-Lots in Nasdaq Securities

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Start Preamble June 7, 2006.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) [1] and Rule 19b-4 thereunder,[2] notice is hereby given that on May 25, 2006, the American Stock Exchange LLC (“Amex” or “Exchange”) submitted to the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by Amex. Amex filed the proposed rule change as a “non-controversial” rule change pursuant to Section 19(b)(3)(A) of the Act [3] and Rule 19b-4(f)(6) thereunder,[4] which renders it effective upon filing with the Commission. 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 extend for an additional twelve-month period ending June 30, 2007, the Exchange's pilot program for odd-lot execution procedures for Nasdaq securities traded on the Exchange pursuant to unlisted trading privileges. There is no proposed new rule text. Amex is making no changes to the pilot program as it currently operates, other than extending it through June 30, 2007.[5]

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

In its filing with the Commission, 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. 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 Commission approved, and the Exchange implemented, a pilot program for odd-lot order [6] executions in Nasdaq securities transacted on the Exchange pursuant to unlisted trading privileges.[7] Start Printed Page 34647The pilot program was originally approved on August 2, 2002, for a six-month period, was most recently extended on December 30, 2005, and is due to expire on June 30, 2006.[8] Accordingly, as a result of the numerous prior extensions and the Exchange's intention to continue the pilot program, the Exchange currently proposes a twelve-month extension.

Under the Exchange's current pilot program, after the opening of trading in Nasdaq securities, odd-lot market orders and executable odd-lot limit orders are executed at the qualified national best bid or offer [9] at the time the order is received at the trading post or through Amex Order File. Odd-lot market orders and executable odd-lot limit orders entered before the opening of trading in Nasdaq securities are executed at the price of the first round-lot or part of round-lot transaction on the Exchange. Non-executable limit orders, stop orders, stop limit orders, orders filled after the close, and non-regular way traders are executed in accordance with Amex Rules 205 A(2), A(3), A(4), C(1), and C(2), respectively. Orders to buy or sell “at the close” are filled at the price of the closing round-lot sale on the Exchange. In a locked market condition, odd-lot market orders and executable odd-lot limit orders are executed at the locked market price. In a crossed market condition, odd-lot market orders are executed at the mean of the bid and offer prices when the displayed national best bid is higher than the displayed national best offer by $.05 or less. When the displayed national best bid is higher than the displayed national best offer by more than $.05, odd-odd market orders are executed when the crossed market condition no longer exits. In addition, in a crossed market conditio, executable odd-lot limit orders are executed at the crossed market bid price (in the case of an order to sell) or at the crossed market offer price (in the case of an order to buy). For example, if the bid and offer are 20.10 and 20.00, respectively, an executable odd-lot sell limit order priced at 20.10 or less will be executed at 20.10 and an executable odd-lot buy limit order priced at 20.00 or higher will be executed at 20.00.

The Exchange believes that the existing odd-lot execution procedures have operated efficiently. Furthermore, the Exchange has received no complaints from members or the public regarding odd-lot executions. Therefore, the Exchange seeks an extension to the pilot program for an additional twelve-month period ending June 30, 2007, which will provide the Exchange time to assess further enhancements to the odd-lot execution procedures.

2. Statutory Basis

Amex believes that the proposed rule change is consistent with Section 6(b) of the Act,[10] in general, and furthers the objectives of Section 6(b)(5) of the Act,[11] in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principle of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, 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

Amex does not believes 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

Because the foregoing proposed rule change: (1) Does not significantly affect the protection of investors or the public interest; (2) does not impose any significant burden on competition; and (3) does not become operative for 30 days from the date of filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act [12] and Rule 19b-4(f)(6) thereunder.[13] As required by Rule 19b-4(f)(6)(iii), Amex provided the Commission with written notice of its intent to file the proposed rule change at least five business days prior to filing the proposal with the Commission or such shorter period as designated by the Commission.

At any time within 60 days of the filing of such proposal 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.

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. Comments may be submitted by any of the following methods:

Electronic Comments

Paper Comments

  • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Amex-2006-55. 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, please use only one method. The Commission will post all comments on the Commission's Start Printed Page 34648Internet Web site (http://www.sec.gov/​rules/​sro.html). 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 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 in the Commission's Public Reference Room. Copies of such filing will be available for inspection and copying at the principal office of the Amex. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Amex-2006-55 and should be submitted on or before July 6, 2006.

Start Signature

For the Commission, by the Division of Market Regulations, pursuant to delegated authority.14

J. Lynn Taylor,

Assistant Secretary.

End Signature End Preamble

Footnotes

5.  Telephone conversation between Sudhir Bhattacharyya, Assistant General Counsel, and Mia Zur, Special Counsel, Division of Market Regulation, Commission, on June 7, 2006.

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6.  An odd-lot order is an order for less than 100 shares.

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7.  See Commentary .05 of Amex Rule 205, which describes the manner of executing odd-lot orders in general, and which for Nasdaq securities, references Amex Rule 118(j), specifically describing the Exchange's odd-lot execution procedures for Nasdaq securities.

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8.  The pilot program originally approved on August 2, 2002, was subsequently extended on July 14 and December 24, 2003; June 14 and December 27, 2004; July 6 and January 13, 2006. See Securities Exchange Act Release Nos. 46304 (August 2, 2002), 67 FR 51903 (August 9, 2002); 48174 (July 14, 2003), 68 FR 43409 (July 22, 2003); 48995 (December 24, 2003); 68 FR 75670 (December 31, 2003); 49855 (June 14, 2004), 69 FR 35399 (June 24, 2004); 50934 (December 27, 2004), 70 FR 412 (January 4, 2005); 51975 (July 6, 2005), 70 FR 40409 (July 13, 2005); and 53116 (January 13, 2006), 71 FR (January 23, 2006).

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9.  In Amex Rule 118(j), the qualified national best bid and offer for a Nasdaq security means the highest bid and lowest offer, respectively, disseminated (A) by the Exchange or (B) by another market center participating in the Plan; provided, however, that the bid and offer in another such market center will be considered in determining the qualified national best bid or offer in a stock only if (i) the quotation conforms to the requirements of Amex Rule 127, (ii) the quotation does not result in a locked or crossed market, (iii) the market center is not experiencing operational or system problems with respect to the dissemination of quotation information, and (iv) the bid or offer is “firm,” that is, members o the market center dissemination the bid of offer are not relieved of their obligations with respect to such bid of offer under paragraph (c)(2) of Rule 602 of Regulation NMS pursuant to the “unusual market” exception of paragraph (a)(3) of Rule 602 of Regulation NMS.

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[FR Doc. 06-5418 Filed 6-14-06; 8:45 am]

BILLING CODE 8010-01-M