[Federal Register Volume 59, Number 167 (Tuesday, August 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21340]
[[Page Unknown]]
[Federal Register: August 30, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34591; File No. SR-Amex-94-15]
Self-Regulatory Organizations; American Stock Exchange, Inc.;
Order Granting Approval to Proposed Rule Change Amending Rule 205 (Odd-
Lot Orders)
August 24, 1994.
On May 12, 1994 the American Stock Exchange, Inc. (``Amex'' or
``Exchange'') submitted to the Securities 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 205 (Manner of
Executing Odd-Lot Orders).
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\1\15 U.S.C. 78s(b)(1) (1988).
\2\17 CFR 240.19b-4 (1991).
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The proposed rule change was published for comment in Securities
Exchange Act Release No. 34416 (July 21, 1994), 59 FR 38217 (July 27,
1994). No comments were received on the proposal.
The Amex is amending Rule 205: (1) To provide that no differential
shall be charged on odd-lot order transactions except for non-regular
way trades; (2) to revise the definition of the effective transaction
that triggers the execution of an odd-lot order with respect to certain
odd-lot limited orders; and (3) to delete, reposition, or re-number
various provisions relating to specific types of odd-lot orders.
Under the current provisions of Rule 205, all standard odd-lot
market orders, as well as marketable odd-lot limited orders, are
executed with no differential charged.\3\ However, a differential may
be charged in connection with executions of odd-lot limit orders,
market orders to sell marked ``short,'' stop orders, and other types of
orders as specified in Rule 205(B) and (C).\4\
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\3\Procedures for executing odd-lot market orders and marketable
limit orders are currently being implemented on a pilot basis,
extended until November 8, 1994. See Securities Exchange Act Release
No. 34496 (August 8, 1994), 59 FR 41807 (August 15, 1994).
\4\See Amex Rule 205(B) and (C). Currently, the Rules permits
differentials to be charged in connection with buying on the offer
and selling on the bid, limited orders ``with or without sale,''
buying or selling ``or on close,'' buying or selling ``at the
close,'' orders filled after the close, ``seller's option'' trades,
and cash trades.
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Under the amendments to Rule 205, the Exchange intends to require
the execution of all odd-lot market or limit orders, except for non-
regular way executions, without a differential. Non-regular way trades
will include (1) a ``seller's option'' trade for delivery not less than
six business days nor more than sixty days following the day of the
contract; (2) an odd-lot order for cash or ``next day'' delivery, and
(3) any order for additional settlement periods as may be provided
under Rule 124 (Types of Bids and Offers). All other odd-lot orders
will be executed without a differential.
Odd-lot limited orders must be executed on the first eligible
effective transaction. Under the current odd-lot pricing procedures,
the effective transaction for a limited order to buy is the first round
lot transaction below the specified limit by the amount of the
differential or by a greater amount. Further, the effective
transactions for a limited order to sell marked ``long'' is the first
round lot transaction above the specified limit by the amount of the
differential or by a greater amount. Finally, the effective transaction
for a limited order to sell marked ``short'' is the first round lot
transaction which is above the specified limit by the amount of the
differential or by a greater amount, and which is also higher than the
last different round lot transaction price.
Under the amendments to Rule 205, the effective transaction that
will trigger the execution of an odd-lot limited order is a transaction
``at or lower'' than the specified limit for a buy limited order, or
``at or higher'' than the specified limit for sell limited orders. In
addition, for sell limited orders marked ``short,'' the triggering
transaction must also be higher than the last different round lot
transaction (a ``plus'' or ``zero-plus'' tick).
Further, under the amendments, marketable limited orders will
continue to be executed in accordance with the procedures outlined in
Rule 205 applicable to market orders. Currently, any order entered as a
limited order, which is marketable at the time it is entered, is
treated exactly as though it were entered as a market order.\5\ Thus,
this provision in the amendments is merely a codification of current
Exchange practice.
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\5\Conversation between Michael Cavalier, Assistant General
Counsel, American Stock Exchange, and Amy Bilbija, Commission, on
August 19, 1994.
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In addition, the amendments delete provisions relating to orders
that are infrequently or never entered. These include (1) limited
orders to buy on the offer, sell on the bid, and those marked
``immediate or cancel''; and (2) limited orders to buy or sell marked
``or on close.''\6\ By deleting these provisions, the Amex is
discontinuing their eligibility for order entry.
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\6\See Amex Rule 205(B) (1) and (3).
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Finally, current provisions relating to ``seller's option'' or cash
trades will be deleted and subsumed by new Section C(2) entitled ``Non-
Regular Way Trades.'' A differential will be permitted on such
executions.
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, and, in
particular, with the requirements of Section 6(b).\7\ In particular,
the Commission believes the proposal is consistent with the Section
6(b)(5) requirements that the rules of an exchange be designed to
promote just and equitable principles of trade, to prevent fraudulent
and manipulative acts, and, in general, to protect investors and the
public. The Commission believes that the proposal's goal, which is to
eliminate odd-lot differentials on all but non-regular way trades and
adjust the pricing mechanism accordingly, should increase the quality
of execution and accurate reporting of customer odd-lot market and
limited orders. The Commission also believes that the proposal should
further the Commission objective of ensuring that customers receive the
best execution of such orders. As a result of the proposal, the price
charged for the execution of systematized odd-lot orders will reflect
the market's price without additional transaction charges.
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\7\15 U.S.C. 78f(b) (1988).
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It Is Therefore Ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (SR-Amex-94-15) is approved.
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\8\15 U.S.C. 78s(b)(2) (1988).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\17 CFR 200.30-3(a)(12) (1991).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-21340 Filed 8-29-94; 8:45 am]
BILLING CODE 8010-01-M