Self-Regulatory Organizations; Order Granting Accelerated Approval of Proposed Rule Change and Amendment No. 1 Thereto by American Stock Exchange LLC Relating to the Amendment of Exchange Rule 153, 2433-2435 [E5-127]
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Federal Register / Vol. 70, No. 9 / Thursday, January 13, 2005 / Notices
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
Exchange 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 Exchange currently imposes
transactions charges for transactions in
equity options executed on the
Exchange by Exchange specialists and
Exchange registered options traders
(‘‘ROTs’’). The current charges for
Exchange specialist and ROTs in equity
options are $0.25 per contract side,
consisting of an options transaction fee
of $0.15, an options comparison fee of
$0.05 and an options floor brokerage fee
of $0.05. The Exchange proposes to
reduce the aggregate equity options
transaction fee for Exchange specialists
and ROTs from the current level of
$0.25 per contract side to $0.20 per
contract side effective December 2,
2004. Non-member market makers, i.e.,
market makers registered in the same
option class on another option
exchange, will continue to be charged
the current aggregate transaction fee of
$0.30 per contract side. The new
aggregate equity options transaction fee
for Exchange specialists and ROTs will
consist of an options transaction fee of
$0.10 per contract side, an options
comparison fee of $0.05 per contract
side and options floor brokerage fee of
$0.05 per contract side.
The Exchange believes that the
proposed reduction in the equity
options transaction fee will benefit the
Exchange by providing greater incentive
to Exchange specialists and ROTs to
competitively quote their markets in
comparison to the markets made by
other options exchanges. The Exchange
also believes that the reduction in the
equity options transaction fee will help
to maintain the existing floor operations
of member firms at the Amex.
2. Statutory Basis
The Exchange 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)(4)
of the Act 5 in particular, regarding the
equitable allocation of reasonable dues,
fees and other charges among exchange
4 15
5 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
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members and other persons using
exchange facilities.
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
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The proposed rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act 6 and Rule 19b–
4(f)(2) thereunder,7 because the
proposed rule change establishes or
changes a due, fee or other charge
applicable only to a member of the
Exchange. At any time within 60 days
of the filing of the proposed rule change,
the Commission may summarily
abrogate the rule change if it appears to
the Commission that the action is
necessary or appropriate in the public
interest, for the protection of investors,
or would otherwise further the purposes
of the Act.8
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 rulecomments@sec.gov. Please include File
Number SR–Amex–2004–97 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–2004–97. 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
Room, 450 Fifth Street, NW.,
Washington, DC 20549. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. 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–
2004–97 and should be submitted on or
before February 3, 2005.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.9
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5–116 Filed 1–12–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–50999; File No. SR–Amex–
2003–90]
Self-Regulatory Organizations; Order
Granting Accelerated Approval of
Proposed Rule Change and
Amendment No. 1 Thereto by
American Stock Exchange LLC
Relating to the Amendment of
Exchange Rule 153
6 15
January 7, 2005.
7 17
I. Introduction
On October 9, 2003, the American
Stock Exchange LLC (‘‘Amex’’ or
‘‘Exchange’’) filed with the Securities
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
8 For purposes of calculating the 60-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 January 6, 2005, the
date the Exchange filed Amendment No. 1 to the
proposed rule change. See 15 U.S.C. 78s(b)(3)(C).
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CFR 200.30–3(a)(12).
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Federal Register / Vol. 70, No. 9 / Thursday, January 13, 2005 / Notices
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’), 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 to
amend Amex Rule 153 relating to the
creation of an electronic order audit
trail. On December 15, 2004, the
Exchange submitted Amendment No. 1
to the proposed rule change. The
proposed rule change, as amended, was
published for comment in the Federal
Register on December 22, 2004, for a 15day comment period, which expired on
January 6, 2005.3 This order approves
the proposed rule change, and
Amendment No. 1 thereto, on an
accelerated basis.
II. Background
The proposed rule change is intended
to fulfill certain of the undertakings
contained in an order issued by the
Commission relating to the settlement of
an enforcement action against the
Amex, Chicago Board Options
Exchange, Inc., Pacific Exchange, Inc.,
and Philadelphia Stock Exchange, Inc.
(collectively ‘‘Options Exchanges’’) for
failure to comply with their own rules
and to enforce compliance with their
own rules by their members and persons
associated with their members 4 as is
required by section 19(g) of the Act.5
The Order found that the Options
Exchanges impaired the operations of
the options market by: (1) Following a
course of conduct under which they
refrained from multiple listing a large
number of options; and (2) inadequately
discharging their obligations as selfregulatory organizations by failing
adequately to enforce compliance with
(a) certain of their rules, including order
handling rules, that promote
competition as well as investor
protection, and (b) certain of the rules
prohibiting anticompetitive conduct,
such as harassment, intimidation,
refusals to deal and retaliation directed
at market participants who sought to act
competitively. In addition, the
Commission found that the Options
Exchanges failed to enforce compliance
with their trade reporting rules, which
promote transparency of the market and
facilitate surveillance and enforcement
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 50866
(December 16, 2004), 69 FR 76798.
4 See Order Instituting Public Administrative
Proceedings Pursuant to Section 19(h)(1) of the
Securities Exchange Act of 1934, Making Findings
and Imposing Sanctions, Securities Exchange Act
Release No. 43268 (September 11, 2000) and
Administrative Proceeding File 3–10282 (the
‘‘Order’’).
5 15 U.S.C. 78s(g).
2 17
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17:46 Jan 12, 2005
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of other exchange rules and the Federal
securities laws.
As part of the Order, the Options
Exchanges agreed to, and were ordered
to comply with, a variety of
undertakings. Among other things, they
agreed to, and were ordered to, design
and implement an accurate, timesequenced, consolidated options audit
trail system (‘‘COATS’’) that would
enable the Options Exchanges to
reconstruct markets promptly,
effectively surveil them, and enforce
order handling, firm quote, trading
reporting and other rules. The Options
Exchanges were required to complete
this undertaking in five phases. The
Options Exchanges have completed the
first four phases. The final phase of the
undertaking to implement COATS
requires that each exchange incorporate
into its audit trail all non-electronic
orders. This proposed rule change
addresses that aspect of the undertaking.
III. Description of Proposed Rule
Change
Amex Rule 153(b) currently requires
members and member organizations to
systematize ‘‘immediately upon receipt’’
orders, and modifications or
cancellations of orders, ‘‘that are eligible
for input into the Exchange’s electronic
order processing facilities’’ if such
orders are not already systematized in
the Exchange’s electronic order
processing facilities.6 To comply with
the COATS standard for an accurate
time sequencing of option orders,
transactions and quotations, in the
instant filing, the Exchange proposes
that members and member organizations
would be required to systematize, prior
to representation, either in BARS or in
the Order Ticket enhancement to BARS
described below, those options orders
and modifications and cancellations of
such orders that are not already
systematized in an Amex system. The
obligation to systematize orders prior to
representation would commence on
January 10, 2005.
In the case of an order that is not
systematized when it reaches the
Exchange, Amex proposes that a floor
broker or a broker’s clerk would be
required to systematize the order by: (1)
Opening an Order Entry Template
(‘‘OET’’) on the Exchange’s BARS booth
or hand held terminal; (2) entering the
order terms into the OET; and (3)
transmitting the order to the Amex
Order File (‘‘AOF’’). The first keystroke
in the OET would be captured by the
Exchange’s systems at the time of order
receipt. Brokers and their clerks also
6 See Securities Exchange Act Release No. 45794
(April 22, 2002), 67 FR 20849 (April 26, 2002).
PO 00000
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would be required to enter information
relating to any modification,
cancellation or execution of an order
into BARS. The Exchange would then
incorporate order and execution
information in the AOF into the COATS
file.
In addition to entering a non-system
order directly into BARS, the Amex has
designed an enhancement to the BARS
system (called ‘‘Order Ticket’’) to
facilitate order systemization by floor
brokers and their clerks. The Exchange
anticipates that the Order Ticket
enhancement will be available by the
end of the first quarter of 2005. The
Order Ticket enhancement would allow
floor brokers and their clerks to create
electronic, time stamped, handwritten
order tickets which would be saved by
the Exchange as JPEG files.
A broker or clerk using the proposed
BARS Order Ticket enhancement would
select a new ‘‘Order Ticket’’ button on
the booth or hand held BARS terminal,
which would create a blank image
template on a screen that exists on both
the booth and hand held BARS
terminals. Brokers and their clerks
would write on the screen with a stylus
and record order terms just as if they
were using a paper order ticket. A
person using the Order Ticket
enhancement would be required to
record the following order terms on the
ticket prior to representing the order in
the trading crowd:
• Buy/Sell;
• Symbol;
• Quantity;
• Call/Put (calls would be assumed
unless ‘‘P’’ is written);
• Expiration;
• Strike (fractions would be assumed,
e.g., ‘‘221⁄2’’ would be written as ‘‘22’’);
• Price term (a limit order would be
assumed if a price were written, e.g.,
‘‘1.20’’ would mean a 1.20 limit. Market
orders would be blank or represented by
a dash);
• Contingencies (if applicable, e.g.,
NH, AON, FOK, IOC, stock);
• Open/Close (close would be
assumed unless ‘‘O’’ is written);
• Customer/Firm/Member Market
Maker/Non-Member Market Maker
(customer would be assumed unless
‘‘F’’, ‘‘P’’ or ‘‘N’’ is written);
• Give-up.
At the first mark on the template, the
Order Ticket would be automatically
time stamped by the Exchange’s systems
to the nearest second. When the broker
or clerk finishes entering the
information on the Order Ticket, he or
she would be required to hit a ‘‘save’’
button, and the Order Ticket would be
assigned a specific sequence number.
Once the ‘‘save’’ button is hit, the Order
E:\FR\FM\13JAN1.SGM
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Federal Register / Vol. 70, No. 9 / Thursday, January 13, 2005 / Notices
Ticket could not be modified and would
be stored by the Exchange as a JPEG file.
Once the order is systematized in
Order Ticket, the member or member
organization that accepted the order
would be required to transfer the order
terms into BARS so that a record of the
order may be maintained in the
Exchange’s AOF system and any trade
information submitted to comparison. In
order to enter the order into BARS, a
floor broker or clerk would open a
BARS OET on a saved Order Ticket by
selecting a new OET button within the
image. This would cause both the time
stamp and the sequence number from
the Order Ticket to be automatically
transferred from the Order Ticket to the
OET. The transfer of the time stamp and
sequence number would be done by the
Exchange’s systems and could not be
modified by the broker or clerk. The
broker or clerk then would be required
to enter the required order terms into
the OET and transmit the order to AOF.
The broker or clerk also would be
required to enter any information
pertaining to a modification or
cancellation of an order, or the
execution of an order, directly into
BARS from where it would be
transmitted to AOF. Information
pertaining to order modifications and
cancellations would be required to be
systematized prior to representation of
the revised order in the crowd.
The Exchange further proposes that
any proprietary system approved by the
Exchange on the Exchange’s trading
floor which receives orders would be
considered an Exchange system for the
purpose of systematizing those options
orders and modifications and
cancellations of such orders that are not
already systematized in an Amex system
prior to representing the orders in the
crowd. Any proprietary system
approved by the Exchange would be
required to have the functionality to
comply with the requirements of
COATS.
Under the proposed rule change,
orders for FLEX options and
accommodation trades would not have
to be systematized prior to
representation. Information about these
orders would be required to be
submitted to the Exchange on trade date
no later than 10 minutes after the close
of trading. The Exchange would
maintain information submitted to it
pertaining to FLEX options and
accommodation trades in the COATS
format.
and the rules and regulations
thereunder applicable to a national
securities exchange.7 In particular the
Commission finds that the proposed
rule change is consistent with section
6(b)(5) of the Act,8 which requires
among other things, that the Exchange’s
rules be 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 the
rules as proposed should allow the
Exchange to comply with its obligations
under the Order in that they will result
in the creation of an audit trail that
incorporates manual orders sent to
Amex. Specifically, the proposed rule
change requires that Amex members
enter certain order details immediately
upon receipt, prior to representation of
the order, into BARS or in the Order
Ticket enhancement to BARS for later
integration into COATS, which the
Commission believes should result in an
accurate, time-sequenced record of
orders.
The Commission notes that the
Exchange has acknowledged the need
for effective and proactive surveillance
for activities such as trading ahead and
front-running in connection with the
creation of its audit trail. The Exchange
represents that it currently conducts
automated surveillance for such
activities and will incorporate a review
of order systemization as part of such
surveillance. The Exchange also states
that it intends to implement
supplementary surveillance and
examination programs related to the
systemization of orders requirement
promptly after this requirement is
instituted, which are designed to
address, among other things, trading
ahead and front-running. The
Commission views effective
surveillance as critical to the integrity of
COATS and expects that the Exchange
will inform the Commission of any
problems it encounters in conducting
effective surveillance.
The Commission finds good cause for
accelerating approval of the proposed
rule change and Amendment No. 1
thereto, prior to the thirtieth day after
the date of the publication of notice
thereof in the Federal Register. The
Commission notes that the proposed
rule change was noticed for a 15-day
IV. Discussion
After careful consideration, the
Commission finds that the proposed
rule change is consistent with the Act
7 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).
8 15 U.S.C. 78f(b)(5).
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17:46 Jan 12, 2005
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2435
comment period and no comments were
received. The Commission believes that
it is appropriate to accelerate approval
of the proposed rule change and
Amendment No. 1 thereto so that the
rule may be implemented on a timely
basis to ensure prompt compliance with
the undertakings contained in the
Commission’s Order.
V. Conclusion
For all of the aforementioned reasons,
the Commission finds that the proposed
rule change is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange.
It is therefore ordered, pursuant to
section 19(b)(2) of the Act,9 that the
proposed rule change (SR–Amex–2003–
90) and Amendment No. 1 are approved
on an accelerated basis.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.10
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5–127 Filed 1–12–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–50994; File No. SR–CBOE–
2004–90]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change by the
Chicago Board Options Exchange,
Incorporated, Relating to a Delay of the
Operative Period for Rule 6.45A(c)(iii)
January 7, 2005.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Exchange Act’’ or ‘‘Act’’) 1 notice is
hereby given that on December 28, 2004,
the Chicago Board Options Exchange,
Incorporated (‘‘CBOE’’ 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 CBOE. 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 Exchange proposes to delay
implementation of recently approved
CBOE Rule 6.45A(c)(iii). The text of the
9 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78(b)(1).
10 17
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]]>Agencies
[Federal Register Volume 70, Number 9 (Thursday, January 13, 2005)]
[Notices]
[Pages 2433-2435]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-127]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-50999; File No. SR-Amex-2003-90]
Self-Regulatory Organizations; Order Granting Accelerated
Approval of Proposed Rule Change and Amendment No. 1 Thereto by
American Stock Exchange LLC Relating to the Amendment of Exchange Rule
153
January 7, 2005.
I. Introduction
On October 9, 2003, the American Stock Exchange LLC (``Amex'' or
``Exchange'') filed with the Securities
[[Page 2434]]
and Exchange Commission (``SEC'' or ``Commission''), 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 to amend Amex Rule
153 relating to the creation of an electronic order audit trail. On
December 15, 2004, the Exchange submitted Amendment No. 1 to the
proposed rule change. The proposed rule change, as amended, was
published for comment in the Federal Register on December 22, 2004, for
a 15-day comment period, which expired on January 6, 2005.\3\ This
order approves the proposed rule change, and Amendment No. 1 thereto,
on an accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 50866 (December 16,
2004), 69 FR 76798.
---------------------------------------------------------------------------
II. Background
The proposed rule change is intended to fulfill certain of the
undertakings contained in an order issued by the Commission relating to
the settlement of an enforcement action against the Amex, Chicago Board
Options Exchange, Inc., Pacific Exchange, Inc., and Philadelphia Stock
Exchange, Inc. (collectively ``Options Exchanges'') for failure to
comply with their own rules and to enforce compliance with their own
rules by their members and persons associated with their members \4\ as
is required by section 19(g) of the Act.\5\ The Order found that the
Options Exchanges impaired the operations of the options market by: (1)
Following a course of conduct under which they refrained from multiple
listing a large number of options; and (2) inadequately discharging
their obligations as self-regulatory organizations by failing
adequately to enforce compliance with (a) certain of their rules,
including order handling rules, that promote competition as well as
investor protection, and (b) certain of the rules prohibiting
anticompetitive conduct, such as harassment, intimidation, refusals to
deal and retaliation directed at market participants who sought to act
competitively. In addition, the Commission found that the Options
Exchanges failed to enforce compliance with their trade reporting
rules, which promote transparency of the market and facilitate
surveillance and enforcement of other exchange rules and the Federal
securities laws.
---------------------------------------------------------------------------
\4\ See Order Instituting Public Administrative Proceedings
Pursuant to Section 19(h)(1) of the Securities Exchange Act of 1934,
Making Findings and Imposing Sanctions, Securities Exchange Act
Release No. 43268 (September 11, 2000) and Administrative Proceeding
File 3-10282 (the ``Order'').
\5\ 15 U.S.C. 78s(g).
---------------------------------------------------------------------------
As part of the Order, the Options Exchanges agreed to, and were
ordered to comply with, a variety of undertakings. Among other things,
they agreed to, and were ordered to, design and implement an accurate,
time-sequenced, consolidated options audit trail system (``COATS'')
that would enable the Options Exchanges to reconstruct markets
promptly, effectively surveil them, and enforce order handling, firm
quote, trading reporting and other rules. The Options Exchanges were
required to complete this undertaking in five phases. The Options
Exchanges have completed the first four phases. The final phase of the
undertaking to implement COATS requires that each exchange incorporate
into its audit trail all non-electronic orders. This proposed rule
change addresses that aspect of the undertaking.
III. Description of Proposed Rule Change
Amex Rule 153(b) currently requires members and member
organizations to systematize ``immediately upon receipt'' orders, and
modifications or cancellations of orders, ``that are eligible for input
into the Exchange's electronic order processing facilities'' if such
orders are not already systematized in the Exchange's electronic order
processing facilities.\6\ To comply with the COATS standard for an
accurate time sequencing of option orders, transactions and quotations,
in the instant filing, the Exchange proposes that members and member
organizations would be required to systematize, prior to
representation, either in BARS or in the Order Ticket enhancement to
BARS described below, those options orders and modifications and
cancellations of such orders that are not already systematized in an
Amex system. The obligation to systematize orders prior to
representation would commence on January 10, 2005.
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 45794 (April 22,
2002), 67 FR 20849 (April 26, 2002).
---------------------------------------------------------------------------
In the case of an order that is not systematized when it reaches
the Exchange, Amex proposes that a floor broker or a broker's clerk
would be required to systematize the order by: (1) Opening an Order
Entry Template (``OET'') on the Exchange's BARS booth or hand held
terminal; (2) entering the order terms into the OET; and (3)
transmitting the order to the Amex Order File (``AOF''). The first
keystroke in the OET would be captured by the Exchange's systems at the
time of order receipt. Brokers and their clerks also would be required
to enter information relating to any modification, cancellation or
execution of an order into BARS. The Exchange would then incorporate
order and execution information in the AOF into the COATS file.
In addition to entering a non-system order directly into BARS, the
Amex has designed an enhancement to the BARS system (called ``Order
Ticket'') to facilitate order systemization by floor brokers and their
clerks. The Exchange anticipates that the Order Ticket enhancement will
be available by the end of the first quarter of 2005. The Order Ticket
enhancement would allow floor brokers and their clerks to create
electronic, time stamped, handwritten order tickets which would be
saved by the Exchange as JPEG files.
A broker or clerk using the proposed BARS Order Ticket enhancement
would select a new ``Order Ticket'' button on the booth or hand held
BARS terminal, which would create a blank image template on a screen
that exists on both the booth and hand held BARS terminals. Brokers and
their clerks would write on the screen with a stylus and record order
terms just as if they were using a paper order ticket. A person using
the Order Ticket enhancement would be required to record the following
order terms on the ticket prior to representing the order in the
trading crowd:
Buy/Sell;
Symbol;
Quantity;
Call/Put (calls would be assumed unless ``P'' is written);
Expiration;
Strike (fractions would be assumed, e.g., ``22\1/2\''
would be written as ``22'');
Price term (a limit order would be assumed if a price were
written, e.g., ``1.20'' would mean a 1.20 limit. Market orders would be
blank or represented by a dash);
Contingencies (if applicable, e.g., NH, AON, FOK, IOC,
stock);
Open/Close (close would be assumed unless ``O'' is
written);
Customer/Firm/Member Market Maker/Non-Member Market Maker
(customer would be assumed unless ``F'', ``P'' or ``N'' is written);
Give-up.
At the first mark on the template, the Order Ticket would be
automatically time stamped by the Exchange's systems to the nearest
second. When the broker or clerk finishes entering the information on
the Order Ticket, he or she would be required to hit a ``save'' button,
and the Order Ticket would be assigned a specific sequence number. Once
the ``save'' button is hit, the Order
[[Page 2435]]
Ticket could not be modified and would be stored by the Exchange as a
JPEG file.
Once the order is systematized in Order Ticket, the member or
member organization that accepted the order would be required to
transfer the order terms into BARS so that a record of the order may be
maintained in the Exchange's AOF system and any trade information
submitted to comparison. In order to enter the order into BARS, a floor
broker or clerk would open a BARS OET on a saved Order Ticket by
selecting a new OET button within the image. This would cause both the
time stamp and the sequence number from the Order Ticket to be
automatically transferred from the Order Ticket to the OET. The
transfer of the time stamp and sequence number would be done by the
Exchange's systems and could not be modified by the broker or clerk.
The broker or clerk then would be required to enter the required order
terms into the OET and transmit the order to AOF. The broker or clerk
also would be required to enter any information pertaining to a
modification or cancellation of an order, or the execution of an order,
directly into BARS from where it would be transmitted to AOF.
Information pertaining to order modifications and cancellations would
be required to be systematized prior to representation of the revised
order in the crowd.
The Exchange further proposes that any proprietary system approved
by the Exchange on the Exchange's trading floor which receives orders
would be considered an Exchange system for the purpose of systematizing
those options orders and modifications and cancellations of such orders
that are not already systematized in an Amex system prior to
representing the orders in the crowd. Any proprietary system approved
by the Exchange would be required to have the functionality to comply
with the requirements of COATS.
Under the proposed rule change, orders for FLEX options and
accommodation trades would not have to be systematized prior to
representation. Information about these orders would be required to be
submitted to the Exchange on trade date no later than 10 minutes after
the close of trading. The Exchange would maintain information submitted
to it pertaining to FLEX options and accommodation trades in the COATS
format.
IV. Discussion
After careful consideration, the Commission finds that the proposed
rule change is consistent with the Act and the rules and regulations
thereunder applicable to a national securities exchange.\7\ In
particular the Commission finds that the proposed rule change is
consistent with section 6(b)(5) of the Act,\8\ which requires among
other things, that the Exchange's rules be 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.
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\7\ 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).
\8\ 15 U.S.C. 78f(b)(5).
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The Commission believes that the rules as proposed should allow the
Exchange to comply with its obligations under the Order in that they
will result in the creation of an audit trail that incorporates manual
orders sent to Amex. Specifically, the proposed rule change requires
that Amex members enter certain order details immediately upon receipt,
prior to representation of the order, into BARS or in the Order Ticket
enhancement to BARS for later integration into COATS, which the
Commission believes should result in an accurate, time-sequenced record
of orders.
The Commission notes that the Exchange has acknowledged the need
for effective and proactive surveillance for activities such as trading
ahead and front-running in connection with the creation of its audit
trail. The Exchange represents that it currently conducts automated
surveillance for such activities and will incorporate a review of order
systemization as part of such surveillance. The Exchange also states
that it intends to implement supplementary surveillance and examination
programs related to the systemization of orders requirement promptly
after this requirement is instituted, which are designed to address,
among other things, trading ahead and front-running. The Commission
views effective surveillance as critical to the integrity of COATS and
expects that the Exchange will inform the Commission of any problems it
encounters in conducting effective surveillance.
The Commission finds good cause for accelerating approval of the
proposed rule change and Amendment No. 1 thereto, prior to the
thirtieth day after the date of the publication of notice thereof in
the Federal Register. The Commission notes that the proposed rule
change was noticed for a 15-day comment period and no comments were
received. The Commission believes that it is appropriate to accelerate
approval of the proposed rule change and Amendment No. 1 thereto so
that the rule may be implemented on a timely basis to ensure prompt
compliance with the undertakings contained in the Commission's Order.
V. Conclusion
For all of the aforementioned reasons, the Commission finds that
the proposed rule change is consistent with the requirements of the Act
and the rules and regulations thereunder applicable to a national
securities exchange.
It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\9\ that the proposed rule change (SR-Amex-2003-90) and Amendment
No. 1 are approved on an accelerated basis.
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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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-127 Filed 1-12-05; 8:45 am]
BILLING CODE 8010-01-P
