[Federal Register: April 5, 2001 (Volume 66, Number 66)]
[Notices]               
[Page 18125-18126]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05ap01-111]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44122; File No. SR-Amex-01-01]

 
Self-Regulatory Organizations; the American Stock Exchange LLC; 
Order Granting Approval of Proposed Rule Change and Amendment No. 1 
Relating to Amendments to Commentary .01 to Amex Rule 126(g) 
``Precedence of Bids and Offers''

March 28, 2001.

I. Introduction

    On January 18, 2001, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC''), 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 that would amend Commentary .01 
to Amex Rule 126(g) ``Precedence of Bids and Offers'' to reduce from 
25,000 shares to 5,000 shares the minimum size block cross that will be 
permitted to establish size precedence. On January 23, 2001, the Amex 
amended the proposal at the Commission's request to implement the 
proposed rule change on a one-year pilot program basis.\3\ Notice of 
the proposed rule change, as amended, was published for comment in the 
Federal Register on February 21, 2001.\4\ The Commission received no 
comments on the proposal. This order approves the proposed rule change, 
as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See January 23, 2001 letter from Michael Cavalier, Associate 
General Counsel, Legal and Regulatory, Amex, to Nancy Sanow, 
Assistant Director, Division of Market Regulation, SEC.
    \4\ Securities Exchange Act Release No. 43954 (February 12, 
2001), 66 FR 11073.
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II. Description of the Proposal

    In 1989, the Commission approved Commentary .01 to Amex Rule 126(g) 
``Precedence of Bids and Offers,'' which provides that orders to cross 
25,00 shares or more will be permitted to establish precedence over 
other bids and offers.\5\ Procedures under Amex Rule 126(g), Commentary 
.01 permits size precedence for crosses of 25,000 shares or more to be 
established when no other order has price or time priority. When an 
order has time priority, a sale removing all bids and offers from the 
floor must occur before parity is established, and the order to cross 
can be accorded precedence based on size. Thus, to obtain precedence, 
orders to cross 25,000 shares or more must have been presented at the 
specialists' post when the sale removing all bids and offers from the 
floor had taken place. Once size precedence has been established, the 
broker handling the cross must then bid and offer the security in 
accordance with Amex Rule 152 ``Taking or Supplying Stock to Fill 
Customer's Order.''
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    \5\ See Securities Exchange Act Release No. 26550 (February 15, 
1989), 54 FR 7655 (February 22, 1989) (SR-Amex-88-30).
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    The Exchange proposes to reduce from 25,000 shares to 5,000 shares 
the minimum size block cross that will be permitted to establish size 
precedence. According to the Amex, the block cross procedures under 
Amex Rule 126(g) have facilitated executions of large orders on the 
Amex as one transaction at a single price without such orders losing 
shares to other orders in the trading crowd or on the specialist's book 
due to Exchange parity rules. The Amex believes the proposed rule 
change will reduce member firms' incentive to route such orders to 
regional exchanges or the third market in order to avoid losing an 
excessive number of shares to other orders under existing Amex parity 
rules. Additionally, the Exchange believes that, with the expansion of 
decimal pricing in equities, and with a minimum price variation of one 
penny, it will be less expensive for members to break up

[[Page 18126]]

proposed block crosses on the Amex floor, which may result in such 
crosses being routed to markets in which size precedence is not 
addressed in the manner required by Amex rules.

III. Discussion

    The Commission has reviewed carefully the proposed rule change, as 
amended, and finds that it is consistent with the Act and the rules and 
regulations promulgated thereunder applicable to a national securities 
exchange and, in particular, with the requirements of Section 6(b).\6\ 
Specifically, the Commission finds that approval of the proposed rule 
change is consistent with Section 6(b)(5) \7\ in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
and to perfect the mechanism of a free and open market and a national 
market system, and in general, to protect investors and the public 
interest. The Commission believes that a reduction from 25,000 shares 
to 5,000 shares in the minimum size block cross that will be permitted 
to establish size precedence is reasonable, in view of the reduction in 
the minimum price variation resulting from the transition from 
fractional to decimal pricing. The Commission notes that the provision 
that the broker handling the cross must bid and offer for the customer 
side of the proposed transaction under Amex Rule 152 ensures that the 
customer does not lose an opportunity for price improvement.
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    \6\ 15 U.S.C. 78f(b). In approving this proposal, the Commission 
has considered the proposed rule's impact on efficiency, competition 
and capital formation. 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    For the above reasons, the Commission finds that the proposed rule 
change, as amended, is consistent with the provisions of the Act, in 
general, and with Section 6(b)(5) \8\ in particular.
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    \8\ 15 U.S.C. 78f(b)(5).
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    It is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-AMEX-01-01), as amended, be 
and hereby is approved on a pilot basis through March 28, 2002.
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    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-8350 Filed 4-4-01; 8:45 am]
BILLING CODE 8010-01-M