In the March 19, 2002 notice regarding the Exchange's plans to trade Nasdaq stocks, it was stated that prior to the opening of trading on the effective date for Cash Dividends and Reverse Splits the Amex Service Desk will delete all open orders for Nasdaq stocks. In compliance with member firms preference, the Amex has reversed its stance on this and will now process all adjustments for Nasdaq stocks in the same manner as it processes adjustments for Amex listed stocks - including cash dividends and reverse splits.
Amex rules for cash dividends and reverse splits are as follows:
There is an adjustment to the limit price for all round-lot and odd-lot open orders to Buy, and open Stop and Stop Limit orders to Sell are reduced by the value of the dividend. Orders with the instruction "Do Not Reduce" are not adjusted, nor are open orders to Sell or Buy Stop or Buy Stop Limit orders.
The Amex Order File (AOF) calculates the new limit price for open buy orders, open sell Stop orders, and open sell Stop Limit orders according to the following formula:
Adjusted Limit Price = Original Limit Price - Cash Dividend
Special Cash Dividends
Each special cash dividend is a unique adjustment whereby the order types to be reduced by the value of the distribution may differ from one special cash dividend to another.
The order instruction "Do Not Reduce" is ignored and the reduction applied to the limit price in accordance with the special cash dividend.
AOF calculates the new limit price for the orders of the type identified according to the following formula:
Adjusted Limit Price = Original Limit Price - Special Cash Dividend
AOF does not process reverse splits. Member firms are required to individually cancel all orders in accordance with Rule 132, Comm .03 page 2459-8 of the American Stock Exchange Guide.
- There is never an adjustment to the share quantity in equities adjustment processing. When two adjustments are introduced for the same security, cash is generally applied before stock dividends.
- "Limit price" refers to the Limit Price, Stop Price or both in the case of a Stop Limit Order.
- "Do Not Reduce" (DNR) is an instruction that pertains to ordinary cash dividends only. It is not applied to any other equity adjustment.
- For equity adjustments, the limit price is rounded down to the next lower Minimum Price Variant (MPV) for the security.
- When a cash dividend is declared, the limit price is reduced by the next highest MPV increment for the security. As an example, if the MPV for an issue is $0.01, and a dividend is declared for .1225 cents, the limit price is reduced by 13 cents because it is the next highest increment of the MPV although 12 cents is closer in value.
- As is the case with Amex listed issues, any adjustments applied to orders on AOF for Nasdaq stocks, will be included on the "AOF Adjustments Report" (Autoroute 01010571).
Questions regarding the business aspects of the Amex program to trade Nasdaq listed securities may be addressed to Robert MacArthur at 212/306 -1927. Questions regarding Amex operations and trading are to be directed to William Quinn at 212/306-1719, and comparison questions to Edward Cook at 212/306-1748.