Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by the American Stock Exchange LLC Relating to Regulation SHO, 1481-1483 [E5-20]
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Federal Register / Vol. 70, No. 5 / Friday, January 7, 2005 / Notices
take advantage of increases or decreases
in net asset value that were not yet
reflected in the price, thereby diluting
the value of outstanding fund shares.
9. Applicants submit that the recovery
of Credits as described in the
application and amended application
does not pose such a threat of dilution.
In effecting such recoveries, Principal
Life will redeem accumulation units
from the sub-accounts in which
premiums have been invested on the
basis of the net asset value determined
at the time the withdrawal to recover
the Credit is made. Under these
circumstances, in Applicants’ view, the
recovery of the Credits does not involve
dilution. Applicants also submit that the
second harm that Rule 22c–1 was
designed to address, namely speculative
trading practices calculated to take
advantage of backward pricing, will not
occur as a result of the recovery of the
Credits. Applicants argue that because
neither of the harms that Rule 22c–1
was meant to address are found in the
recovery of Credits, Rule 22c–1 and
Section 22(c) should not be construed as
applicable thereto. However, Applicants
submit that to avoid any uncertainty in
this regard, they request an exemption
from the provisions of Section 22(c) and
Rule 22c–1 to the extent deemed
necessary to permit them to recover
Credits under the Contracts and Future
Contracts as described in the
application and amended application.
10. Applicants submit that their
request for an order that applies to
Future Accounts and Future Contracts
that are substantially similar in all
material respects to the Contracts and
underwritten or distributed by Princor
or Affiliated Broker-Dealers is
appropriate in the public interest.
Applicants assert that such an order
would promote competitiveness in the
variable annuity market by eliminating
the need to file redundant exemptive
applications, thereby reducing
administrative expenses and
maximizing the efficient use of
Applicants’ resources. Applicants state
that investors will not receive any
benefit or additional protection if
Applicants are required repeatedly to
seek exemptive relief presenting no
issue under the Act that has not already
been addressed. Having Applicants file
additional applications would impair
Applicants’ ability to effectively take
advantage of business opportunities as
they arise. Applicants undertake that
Future Contracts funded by the Account
or Future Accounts which seek to rely
on the order issued pursuant to the
application will be substantially similar
in all material respects to the Contracts.
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18:03 Jan 06, 2005
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Conclusion: Section 6(c) of the Act, in
pertinent part, provides that the
Commission, by order upon application,
may conditionally or unconditionally
exempt any person, security or
transaction, or any class or classes of
persons, securities or transactions, from
any provision or provisions of the Act,
or any rule or regulation thereunder, to
the extent that such exemption is
necessary or appropriate in the public
interest and consistent with the
protection of investors and the purposes
fairly intended by the policy and
provisions of the Act. Applicants
submit, for the reasons stated above,
that their exemptive request meets the
standards set out in Section 6(c) of the
Act and that an order should, therefore,
be granted.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5–18 Filed 1–6–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–50953; File No. SR-Amex2004–104]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change and
Amendment No. 1 Thereto by the
American Stock Exchange LLC
Relating to Regulation SHO
December 30, 2004.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
13, 2004, the American Stock Exchange
LLC (‘‘Amex’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
items I and II below, which items have
been prepared by the Exchange. On
December 22, 2004, the Exchange filed
Amendment No. 1 to the proposed rule
change.3 The Amex has filed the
proposal as a ‘‘non-controversial’’ rule
change pursuant to section 19(b)(3)(A)
of the Act 4 and Rule 19b–4(f)(6)
thereunder,5 which renders the proposal
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Amendment No. 1 to the proposed rule
change (December 22, 2004). Amendment No. 1
replaced the Exchange’s original filing in its
entirety.
4 15 U.S.C. 78s(b)(3)(A).
5 17 CFR 240.19b–4(f)(6). For the purposes of
determining the effective date and calculating the
PO 00000
1 15
2 17
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1481
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
The Amex proposes to amend Rules 7,
27, 108, 111, 118, 205, 208, 590, 783,
784 and 957 and eliminate obsolete
Rules 792, 794 and 795 to conform its
rules to the requirements of Regulation
SHO 6 under the Act. The text of the
proposed rule change is available for
viewing at the places specified in item
IV below.
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
Exchange 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.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Commission has adopted
Regulation SHO under the Act, thereby
establishing new requirements relating
to short sales.7 Among other things,
Regulation SHO (i) requires brokerdealers to mark sales of all equity
securities as ‘‘long,’’ ‘‘short’’ or ‘‘short
exempt,’’ specifying the standards for
each, (ii) provides for the establishment
of a pilot program under which short
sales in specific securities will take
sixty-day period within which the Commission may
summarily abrogate the proposed rule change under
Section 19(b)(3)(C) of the Act, the Commission
considers that period to commence on December
22, 2004, the date that the Exchange filed
Amendment No. 1 to the proposed rule change. See
15 U.S.C. 78s(b)(3)(C).
6 See Securities Exchange Act Release No. 50103
(July 28, 2004), 69 FR 48008 (August 6, 2004) (the
‘‘Adopting Release’’), and accompanying orders:
Securities Exchange Act Release No. 50104 (July 28,
2004), 69 FR 48032 (August 6, 2004) (the ‘‘Pilot
Order’’), and Securities Exchange Act Release No.
50747 (November 29, 2004), 69 FR 70480
(December 6, 2004) (the ‘‘Second Pilot Order’’). The
Adopting Release, the Pilot Order and the Second
Pilot Order are hereinafter collectively referred to
as ‘‘Regulation SHO.’’
7 See the Adopting Release.
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Federal Register / Vol. 70, No. 5 / Friday, January 7, 2005 / Notices
place without application of the ‘‘tick’’
test or any other price test, (iii) requires
short sellers in all equity securities to
locate securities to borrow before
selling, and (iv) imposes additional
delivery requirements on broker-dealers
for securities in which a substantial
number of failures to deliver have
occurred.8 The Commission has
requested each SRO to review its rules
and submit rule filings where necessary
to conform its rules to the requirements
of Regulation SHO. In order to
accomplish this objective, the Exchange
proposes to amend the following rules.
The Exchange believes that these
proposed rule changes are noncontroversial and, in a number of
instances, simply consist of
incorporating by reference Regulation
SHO or certain of its provisions or
adding appropriate provisions to
address the new ‘‘short exempt’’ order
marking requirement. The operative
date of the proposed rule change will be
January 3, 2005, which is the operative
date of the applicable provisions of
Regulation SHO.
Rule 7. Short Sales
Rule 7 is the Exchange’s primary rule
that applies an Exchange-based ‘‘tick’’
test to short sales effected on the
Exchange. The Exchange proposes to
amend Rule 7 to incorporate by
reference all appropriate exceptions and
exemptions provided by the
Commission, including those under
Regulation SHO and any Commission
orders issued pursuant thereto, such as
the exemption for Exchange-listed
securities designated as part of the
Regulation SHO pilot program.9
Commentary .01 to Rule 7 currently
reproduces the complete text of the
Commission’s short sale regulation,
Rule 10a-1,10 for the convenience of
members and member organizations.
Rather than add the new text of
Regulation SHO to this already lengthy
Commentary, the Exchange proposes
simply to reference Rule 10a-1 and
Regulation SHO (including any
Commission orders issued pursuant to
Regulation SHO) in Commentary .01
and take this opportunity to condense
the Rule by deleting the text of Rule
10a-1. The Exchange believes this is
appropriate, given the opportunities that
exist today for members to access the
text of the Commission’s rules
electronically if necessary. Including the
text of the Commission’s regulation in
the Exchange’s Commentary is unusual,
and it has the additional disadvantage of
requiring the Exchange to submit a rule
filing each time there is a change in the
Commission’s rule.
Rule 27. Allocations Committee
Paragraph (f) of Rule 27 specifies
situations under which the Exchange’s
Allocation Committee shall be convened
to reallocate securities from one
specialist to another. Paragraphs (g) and
(h) of the Rule outline the procedures
for the reallocation. Rule 203(b)(3) of
Regulation SHO imposes a buy-in
requirement with respect to certain
‘‘threshold securities’’ that have
extended delivery failures, and there is
also a pre-borrowing requirement for
additional short sales of a ‘‘threshold
security’’ if the buy-in is not completed
within the time period specified in
Regulation SHO.11 These provisions of
Regulation SHO do not provide for a
specialist/market maker exception.12
Consequently, the Exchange proposes to
modify paragraphs (f) and (h) of Rule 27
to provide for a reallocation in the event
that a specialist in a stock, ETF or other
security becomes subject to a preborrowing requirement on short sales
with respect to one of its specialty
securities or, in the case of an options
specialist, with respect to the
underlying security, and for the
restoration of the security to the original
specialist if that specialist is no longer
subject to a pre-borrowing requirement.
Rule 108. Priority and Parity at
Openings
Rule 111. Commentary .04. Restrictions
on Registered Traders
Rule 118. Trading in Nasdaq National
Market Securities
Rule 205. Manner of Executing Odd-Lot
Orders
Rule 208. Bunching of Odd-Lot Orders
Rule 590. Part 1 General Rule Violations
Rule 957. Accounts, Orders and Records
of Registered Traders, Specialists and
Associated Persons
The foregoing rules all require very
minor and obvious changes to conform
to Regulation SHO. Several of these
changes involve the addition of
provisions related to ‘‘short exempt’’
orders. In the case of Rule 118, a
provision involving odd-lot orders in
Nasdaq National Market securities that
allows such orders to be marked ‘‘short’’
is being revised because it would
directly conflict with the provision of
Regulation SHO requiring orders that
are exempt from the ‘‘tick’’ test to be
Rule 783. Normal Buy-Ins
Rule 784. Mandatory Closing of Fails
Rule 783 provides the procedures for
normal buy-ins of securities traded on
the Exchange, and Rule 784 provides
the procedures for the mandatory
closing of fails for Exchange-traded
securities. The time periods and certain
other provisions in these two Rules
(such as the ability of a Floor Official to
defer the execution of a normal buy-in
under Rule 783 and the ability of the
Exchange to temporarily suspend the
mandatory closing in Rule 784 under
unusual circumstances) are
incompatible with the buy-in
requirements for ‘‘threshold securities’’
under Regulation SHO. Consequently,
the Exchange proposes to incorporate by
reference the provisions of Regulation
SHO into these two Rules where
appropriate, making it explicit that
Regulation SHO governs in the event of
a conflict.
Rule 792. Securities Transferring Out of
Town
Rule 794. ‘‘Buy-Ins’’ on Securities
Located Out of Town
Rule 795. ‘‘Buy-Ins’’ Where Securities in
Transfer
Rules 792, 794 and 795 all contain
buy-in provisions that, as with Rules
783 and 784, may be in conflict with the
buy-in provisions of Regulation SHO
under certain circumstances. However,
rather than modify each of these rules
through incorporation by reference of
the provisions of Regulation SHO, as
proposed above for Rules 783 and 784,
the Exchange has determined that these
three rules are obsolete and no longer in
use, and we instead propose that these
rules be eliminated in their entirety.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the Act 14
in general and furthers the objectives of
Section 6(b)(5) of the Act 15 in particular
in that it is designed to prevent
fraudulent and manipulative acts and
practices and to promote just and
equitable principles of trade.
13 Id.
8 Id.
9 See
the Pilot Order and the Second Pilot Order.
10 See 17 CFR 240.10a-1.
VerDate jul<14>2003
marked ‘‘short exempt.’’ 13 In the case of
Rule 957, a reference to Rule 200 of
Regulation SHO will be substituted for
a reference to Rule 3b–3 under the Act
(which is being eliminated).
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11 See
the Adopting Release.
12 Id.
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14 15
15 15
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U.S.C. 78f(b).
U.S.C. 78f(b)(5).
07JAN1
Federal Register / Vol. 70, No. 5 / Friday, January 7, 2005 / Notices
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
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
The foregoing rule change, as
amended, has been filed by the
Exchange pursuant to section
19(b)(3)(A) of the Act 16 and
subparagraph (f)(6) of Rule 19b–4
thereunder.17 The Exchange requests
that the Commission waive the 5-day
notice and 30-day pre-operative
requirements contained in Rule 19b–
4(f)(6)(iii) 18 because the proposed rule
change does not (i) significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; or (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
frame as the Commission may designate.
The Exchange believes that good cause
exists to grant such waivers because of
the importance of short sale regulation
to the protection of investors. The
Exchange will implement the proposed
rule change immediately so that they
will be in effect on the operative date of
the applicable provisions of Regulation
SHO.
The Commission believes that
waiving the 5-day notice and 30-day
pre-operative delay is consistent with
the protection of investors and the
public interest. The Commission notes
that proposed rule change being made
herein simply conforms the Exchange’s
rules to the requirements of Regulation
SHO under the Act. No new rules,
policies or procedures are being
proposed other than as required by
Regulation SHO. The Commission
believes that accelerating the operative
date of the proposed rule change does
not raise any new regulatory issues,
significantly affect the protection of
investors or the public interest, or
impose any significant burden on
competition. For these reasons, the
Commission designates the proposed
16 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
18 17 CFR 240.19b–4(f)(6)(iii).
17 17
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18:03 Jan 06, 2005
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1483
rule change as effective and operative
immediately.
At any time within 60 days of the
filing of such proposed rule change
pursuant to section 19(b)(3)(A) of the
Act, 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.
information that you wish to make
available publicly. All submissions
should refer to File Number SR–Amex–
2004–104 and should be submitted on
or before January 28, 2005.
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:
BILLING CODE 8010–01–P
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–Amex–2004–104 on the
subject line.
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change by the
Chicago Stock Exchange, Incorporated
Relating to Short Sales of Securities
For the Commission by the Division of
Market Regulation, pursuant to delegated
authority.19
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5–20 Filed 1–6–05; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–50952; File No. SR-CHX–
2004–42]
December 30, 2004.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934 (the
Paper Comments
‘‘Act’’),1 and Rule 19b–4 thereunder,2
• Send paper comments in triplicate
notice is hereby given that on December
to Jonathan G. Katz, Secretary,
21, 2004, the Chicago Stock Exchange,
Securities and Exchange Commission,
Incorporated (‘‘CHX’’ or ‘‘Exchange’’)
450 Fifth Street, NW., Washington, DC
filed with the Securities and Exchange
20549–0609.
Commission (the ‘‘Commission’’ or the
All submissions should refer to File
‘‘SEC’’) the proposed rule change as
Number SR–Amex–2004–104. This file
described in items I and II below, which
number should be included on the
subject line if e-mail is used. To help the Items have been prepared by the CHX.
The Commission is publishing this
Commission process and review your
notice to solicit comments on the
comments more efficiently, please use
only one method. The Commission will proposed rule change from interested
post all comments on the Commission’s persons.
Internet Web site (https://www.sec.gov/
I. Self-Regulatory Organization’s
rules/sro.shtml). Copies of the
Statement of the Terms of Substance of
submission, all subsequent
the Proposed Rule Change
amendments, all written statements
with respect to the proposed rule
The CHX proposes to amend its rules
change that are filed with the
to eliminate and modify provisions
Commission, and all written
relating to short sales of securities,
communications relating to the
where those provisions are inconsistent
proposed rule change between the
with, or different from, the requirements
Commission and any person, other than of Regulation SHO.3 The text of the
those that may be withheld from the
proposed rule change is available for
public in accordance with the
viewing at the places specified in item
provisions of 5 U.S.C. 552, will be
IV below.
available for inspection and copying in
the Commission’s Public Reference
Section, 450 Fifth Street, NW.,
19 17 CFR 200.30–3(a)(12).
Washington, DC 20549. Copies of such
1 15 U.S.C. 78s(b)(1).
filing also will be available for
2 17 CFR 240.19b–4.
inspection and copying at the principal
3 See Release No. 34–50103, File No. S7–23–03,
office of the Amex. All comments
69 FR 48008 (August 6, 2004) (the ‘‘Adopting
received will be posted without change; Release’’), and accompanying orders: Release No.
the Commission does not edit personal
34–50104 (July 28, 2004), 69 FR 48032 (August 6,
identifying information from
2004) and Release No. 34–50747 (November 29,
2004), 69 FR 70480 (December 6, 2004).
submissions. You should submit only
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]]>Agencies
[Federal Register Volume 70, Number 5 (Friday, January 7, 2005)]
[Notices]
[Pages 1481-1483]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-20]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-50953; File No. SR-Amex-2004-104]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by
the American Stock Exchange LLC Relating to Regulation SHO
December 30, 2004.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on December 13, 2004, the American Stock Exchange LLC (``Amex'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in items I and
II below, which items have been prepared by the Exchange. On December
22, 2004, the Exchange filed Amendment No. 1 to the proposed rule
change.\3\ The Amex has filed the proposal as a ``non-controversial''
rule change pursuant to section 19(b)(3)(A) of the Act \4\ and Rule
19b-4(f)(6) thereunder,\5\ which renders the proposal effective upon
filing with the Commission. 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).
\2\ 17 CFR 240.19b-4.
\3\ See Amendment No. 1 to the proposed rule change (December
22, 2004). Amendment No. 1 replaced the Exchange's original filing
in its entirety.
\4\ 15 U.S.C. 78s(b)(3)(A).
\5\ 17 CFR 240.19b-4(f)(6). For the purposes of determining the
effective date and calculating the sixty-day period within which the
Commission may summarily abrogate the proposed rule change under
Section 19(b)(3)(C) of the Act, the Commission considers that period
to commence on December 22, 2004, the date that the Exchange filed
Amendment No. 1 to the proposed rule change. See 15 U.S.C.
78s(b)(3)(C).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Amex proposes to amend Rules 7, 27, 108, 111, 118, 205, 208,
590, 783, 784 and 957 and eliminate obsolete Rules 792, 794 and 795 to
conform its rules to the requirements of Regulation SHO \6\ under the
Act. The text of the proposed rule change is available for viewing at
the places specified in item IV below.
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\6\ See Securities Exchange Act Release No. 50103 (July 28,
2004), 69 FR 48008 (August 6, 2004) (the ``Adopting Release''), and
accompanying orders: Securities Exchange Act Release No. 50104 (July
28, 2004), 69 FR 48032 (August 6, 2004) (the ``Pilot Order''), and
Securities Exchange Act Release No. 50747 (November 29, 2004), 69 FR
70480 (December 6, 2004) (the ``Second Pilot Order''). The Adopting
Release, the Pilot Order and the Second Pilot Order are hereinafter
collectively referred to as ``Regulation SHO.''
---------------------------------------------------------------------------
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 Exchange 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.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Commission has adopted Regulation SHO under the Act, thereby
establishing new requirements relating to short sales.\7\ Among other
things, Regulation SHO (i) requires broker-dealers to mark sales of all
equity securities as ``long,'' ``short'' or ``short exempt,''
specifying the standards for each, (ii) provides for the establishment
of a pilot program under which short sales in specific securities will
take
[[Page 1482]]
place without application of the ``tick'' test or any other price test,
(iii) requires short sellers in all equity securities to locate
securities to borrow before selling, and (iv) imposes additional
delivery requirements on broker-dealers for securities in which a
substantial number of failures to deliver have occurred.\8\ The
Commission has requested each SRO to review its rules and submit rule
filings where necessary to conform its rules to the requirements of
Regulation SHO. In order to accomplish this objective, the Exchange
proposes to amend the following rules. The Exchange believes that these
proposed rule changes are non-controversial and, in a number of
instances, simply consist of incorporating by reference Regulation SHO
or certain of its provisions or adding appropriate provisions to
address the new ``short exempt'' order marking requirement. The
operative date of the proposed rule change will be January 3, 2005,
which is the operative date of the applicable provisions of Regulation
SHO.
---------------------------------------------------------------------------
\7\ See the Adopting Release.
\8\ Id.
---------------------------------------------------------------------------
Rule 7. Short Sales
Rule 7 is the Exchange's primary rule that applies an Exchange-
based ``tick'' test to short sales effected on the Exchange. The
Exchange proposes to amend Rule 7 to incorporate by reference all
appropriate exceptions and exemptions provided by the Commission,
including those under Regulation SHO and any Commission orders issued
pursuant thereto, such as the exemption for Exchange-listed securities
designated as part of the Regulation SHO pilot program.\9\ Commentary
.01 to Rule 7 currently reproduces the complete text of the
Commission's short sale regulation, Rule 10a-1,\10\ for the convenience
of members and member organizations. Rather than add the new text of
Regulation SHO to this already lengthy Commentary, the Exchange
proposes simply to reference Rule 10a-1 and Regulation SHO (including
any Commission orders issued pursuant to Regulation SHO) in Commentary
.01 and take this opportunity to condense the Rule by deleting the text
of Rule 10a-1. The Exchange believes this is appropriate, given the
opportunities that exist today for members to access the text of the
Commission's rules electronically if necessary. Including the text of
the Commission's regulation in the Exchange's Commentary is unusual,
and it has the additional disadvantage of requiring the Exchange to
submit a rule filing each time there is a change in the Commission's
rule.
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\9\ See the Pilot Order and the Second Pilot Order.
\10\ See 17 CFR 240.10a-1.
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Rule 27. Allocations Committee
Paragraph (f) of Rule 27 specifies situations under which the
Exchange's Allocation Committee shall be convened to reallocate
securities from one specialist to another. Paragraphs (g) and (h) of
the Rule outline the procedures for the reallocation. Rule 203(b)(3) of
Regulation SHO imposes a buy-in requirement with respect to certain
``threshold securities'' that have extended delivery failures, and
there is also a pre-borrowing requirement for additional short sales of
a ``threshold security'' if the buy-in is not completed within the time
period specified in Regulation SHO.\11\ These provisions of Regulation
SHO do not provide for a specialist/market maker exception.\12\
Consequently, the Exchange proposes to modify paragraphs (f) and (h) of
Rule 27 to provide for a reallocation in the event that a specialist in
a stock, ETF or other security becomes subject to a pre-borrowing
requirement on short sales with respect to one of its specialty
securities or, in the case of an options specialist, with respect to
the underlying security, and for the restoration of the security to the
original specialist if that specialist is no longer subject to a pre-
borrowing requirement.
Rule 108. Priority and Parity at Openings
Rule 111. Commentary .04. Restrictions on Registered Traders
Rule 118. Trading in Nasdaq National Market Securities
Rule 205. Manner of Executing Odd-Lot Orders
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\11\ See the Adopting Release.
\12\ Id.
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Rule 208. Bunching of Odd-Lot Orders
Rule 590. Part 1 General Rule Violations
Rule 957. Accounts, Orders and Records of Registered Traders,
Specialists and Associated Persons
The foregoing rules all require very minor and obvious changes to
conform to Regulation SHO. Several of these changes involve the
addition of provisions related to ``short exempt'' orders. In the case
of Rule 118, a provision involving odd-lot orders in Nasdaq National
Market securities that allows such orders to be marked ``short'' is
being revised because it would directly conflict with the provision of
Regulation SHO requiring orders that are exempt from the ``tick'' test
to be marked ``short exempt.'' \13\ In the case of Rule 957, a
reference to Rule 200 of Regulation SHO will be substituted for a
reference to Rule 3b-3 under the Act (which is being eliminated).
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\13\ Id.
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Rule 783. Normal Buy-Ins
Rule 784. Mandatory Closing of Fails
Rule 783 provides the procedures for normal buy-ins of securities
traded on the Exchange, and Rule 784 provides the procedures for the
mandatory closing of fails for Exchange-traded securities. The time
periods and certain other provisions in these two Rules (such as the
ability of a Floor Official to defer the execution of a normal buy-in
under Rule 783 and the ability of the Exchange to temporarily suspend
the mandatory closing in Rule 784 under unusual circumstances) are
incompatible with the buy-in requirements for ``threshold securities''
under Regulation SHO. Consequently, the Exchange proposes to
incorporate by reference the provisions of Regulation SHO into these
two Rules where appropriate, making it explicit that Regulation SHO
governs in the event of a conflict.
Rule 792. Securities Transferring Out of Town
Rule 794. ``Buy-Ins'' on Securities Located Out of Town
Rule 795. ``Buy-Ins'' Where Securities in Transfer
Rules 792, 794 and 795 all contain buy-in provisions that, as with
Rules 783 and 784, may be in conflict with the buy-in provisions of
Regulation SHO under certain circumstances. However, rather than modify
each of these rules through incorporation by reference of the
provisions of Regulation SHO, as proposed above for Rules 783 and 784,
the Exchange has determined that these three rules are obsolete and no
longer in use, and we instead propose that these rules be eliminated in
their entirety.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the Act
\14\ in general and furthers the objectives of Section 6(b)(5) of the
Act \15\ in particular in that it is designed to prevent fraudulent and
manipulative acts and practices and to promote just and equitable
principles of trade.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
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[[Page 1483]]
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
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
The foregoing rule change, as amended, has been filed by the
Exchange pursuant to section 19(b)(3)(A) of the Act \16\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\17\ The Exchange requests
that the Commission waive the 5-day notice and 30-day pre-operative
requirements contained in Rule 19b-4(f)(6)(iii) \18\ because the
proposed rule change does not (i) significantly affect the protection
of investors or the public interest; (ii) impose any significant burden
on competition; or (iii) become operative for 30 days from the date on
which it was filed, or such shorter time frame as the Commission may
designate. The Exchange believes that good cause exists to grant such
waivers because of the importance of short sale regulation to the
protection of investors. The Exchange will implement the proposed rule
change immediately so that they will be in effect on the operative date
of the applicable provisions of Regulation SHO.
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 240.19b-4(f)(6).
\18\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiving the 5-day notice and 30-day
pre-operative delay is consistent with the protection of investors and
the public interest. The Commission notes that proposed rule change
being made herein simply conforms the Exchange's rules to the
requirements of Regulation SHO under the Act. No new rules, policies or
procedures are being proposed other than as required by Regulation SHO.
The Commission believes that accelerating the operative date of the
proposed rule change does not raise any new regulatory issues,
significantly affect the protection of investors or the public
interest, or impose any significant burden on competition. For these
reasons, the Commission designates the proposed rule change as
effective and operative immediately.
At any time within 60 days of the filing of such proposed rule
change pursuant to section 19(b)(3)(A) of the Act, 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
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-Amex-2004-104 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609.
All submissions should refer to File Number SR-Amex-2004-104. 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 Internet Web site (https://www.sec.gov/
rules/sro.shtml). 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 in 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
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-2004-104 and should be submitted on or before January 28, 2005.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-20 Filed 1-6-05; 8:45 am]
BILLING CODE 8010-01-P
