[Federal Register Volume 60, Number 138 (Wednesday, July 19, 1995)]
[Notices]
[Pages 37112-37113]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17729]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35963; File No. SR-Amex-95-24]
Self-Regulatory Organizations; Filing of Proposed Rule Change by
the American Stock Exchange, Inc. Relating to the Execution of Odd-Lot
Market Orders
July 12, 1995.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on June 16, 1995, the
American Stock Exchange, Inc. (``Amex'' or ``Exchange'') 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 by the self-regulatory organization. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Exchange Rule 205 to provide for the
execution of odd-lot market orders \2\ at the Intermarket Trading
System (``ITS'') best bid or offer, subject to certain conditions set
forth in proposed Rule 205, Commentary .04. The text of the proposed
rule change is available at the Commission and the Exchange.
\2\ An odd-lot market order is an order of less than a unit of
trading to buy, sell, or sell short, that carries no further
qualifying notations. The normal trading unit, or round-lot, is 100
shares.
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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 self-regulatory organization
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 self-regulatory organization
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 has approved, on a pilot basis extending to February
8, 1996, amendments to Exchange Rule 205 to require execution of odd-
lot
[[Page 37113]]
market orders at the prevailing Amex quote with no odd-lot
differential.\3\ Under the pilot procedures that were initially
approved by the Commission in 1989,\4\ market orders with no qualifying
notations are executed at the Amex quotation at the time the order is
represented in the market either by being received at the trading post
or through the Exchange's Post Execution Reporting system (``PER'').\5\
Enhancements to the PER system have been implemented to provide for the
automatic execution of odd-lot market orders entered through PER. For
the purposes of the pilot program, limit orders that are immediately
executable based on the Amex quote at the time the order is received at
the trading post or through PER are executed in the same manner as
market orders.
\3\ Securities Exchange Act Release No. 35344 (Feb. 8, 1995), 60
FR 8430.
\4\ Prior to the 1989 pilot program, odd-lot market orders were
routed to a specialist and held in accumulation in the system or by
the specialist until a round-lot execution in that security took
place on the Exchange. Subsequent to the round-lot execution, the
odd-lot order received the same price as the electing round-lot
transaction, plus or minus an odd-lot dealer differential.
\5\ Securities Exchange Act Release No. 26445 (Jan. 10, 1989),
54 FR 2248. The PER system provides member firms with the means to
electronically transmit equity orders, up to volume limits specified
by the Exchange, directly to the specialist's post on the trading
floor of the Exchange. Securities Exchange Act Release No. 34869
(Oct. 20, 1994), 59 FR 54016.
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In approving extensions to the Exchange's odd-lot pilot program,
the Commission has expressed interest in the feasibility of the
Exchange utilizing the ITS best bid or offer, rather than the Amex bid
or offer, for the purposes of the Exchange's odd-lot pricing system.\6\
In its most recent request for an extension of the pilot program, the
Exchange stated that it decided to proceed with systems modifications,
which it anticipates will be completed within a twelve month period, to
provide for the execution of odd-lot market orders at the ITS best bid
or offer.\7\
\6\ See Securities Exchange Act Release No. 35344 (Feb. 8,
1995), 60 FR 8430 (raising concern over the fact that customers may
not always receive the best available price under the current pilot
program).
\7\ Id.
The Exchange proposes to amend Rule 205 to accommodate the
prospective modifications to the Exchange's odd-lot pricing system.
Specifically, amended Rule 205 would provide that odd-lot market orders
to buy or sell would be filled at the ``adjusted ITS offer'' or
``adjusted ITS bid,'' respectively, which are defined in proposed Rule
205, Commentary .04, as the lowest offer and highest bid disseminated
by the Amex or by another ITS participant market. Where quotation
information is not available (e.g., when quotation collection or
dissemination facilities are inoperable) odd-lot market orders would be
executed at the prevailing Amex bid or offer or at a price deemed
appropriate under prevailing market conditions. These procedures also
will apply to odd-lot executable limit orders.
In determining the adjusted ITS bid and offer, the bid and offer in
another ITS market center will be considered only if: (1) The stock is
included in ITS in that market center, (2) the size of the quotation is
greater that 100 shares, (3) the bid or offer is no more than one-
quarter dollar away from the bid or offer, respectively, disseminated
by the Exchange, (4) the quotation conforms to the requirements of Rule
127 (``Minimum Fractional Changes''), (5) the quotation does not result
in a locked market, as the term is defined in Rule 236, (6) the market
center is not experiencing operational or system problems with respect
to the dissemination of quotation information, and (7) the bid or offer
is ``firm,'' that is, members of the market center disseminating the
bid or offer are not relieved of their obligations with respect to such
bid or offer under paragraph (c)(2) of Rule 11Ac1-1 pursuant to the
``unusual market'' exception of paragraph (b)(3) of Rule 11Ac1-1.
The Exchange will implement the proposed rule changes upon
completion of necessary systems enhancements by the Exchange and the
Securities Information Automation Corporation. The Exchange will notify
the Commission, as well as Exchange members and member organizations,
upon implementation of the amended rules.
2. Statutory Basis
The proposed rule change is consistent with section 6(b) \8\ of the
Act in general and furthers the objectives of section 6(b)(5) \9\ in
particular in that it facilitates the economically efficient execution
of odd-lot transactions and is intended to result in improved execution
of customer orders.
\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes the proposed rule change will impose no
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
Within 35 days of the publication of this notice in the Federal
Register or within such other period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve the 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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549.
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 Section, 450 Fifth Street, NW.,
Washington, DC 20549. Copies of such filing also will be available for
inspection and copying at the principal office of the American Stock
Exchange. All submissions should refer to File No. SR-Amex-95-24 and
should be submitted by August 9, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
\10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-17729 Filed 7-18-95; 8:45 am]
BILLING CODE 8010-01-M
