[Federal Register Volume 59, Number 132 (Tuesday, July 12, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16746]


[[Page Unknown]]

[Federal Register: July 12, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34316; File No. SR-Amex-93-15]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange, Inc. Relating to Specialist 
Participation in the After-Hours Trading Facility in Portfolio 
Depositary Receipts and Investment Trust Securities Based on Stock 
Indexes

July 5, 1994.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 21, 1993, the American Stock Exchange, Inc. (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I, II and III below, which Items have been prepared by the self-
regulatory organization. The filing requested: (1) Permanent approval 
of the After-Hours Trading (``AHT'') Facility; and (2) approval on a 
pilot basis for specialists in investment trust securities based on 
stock indexes to participate in the AHT Facility. The Commission 
approved the portion of the filing that requested permanent approval of 
the AHT Facility in Securities Exchange Act Release No. 33993.\3\ On 
August 3, 1993, the Exchange amended the filing to request that 
specialists in Portfolio Depository Receipts (``PDRs'') also be 
permitted to participate in the AHT Facility.\4\ On July 5, 1994, the 
Exchange amended the proposed rule change to eliminate the migration of 
limit orders for PDRs and investment trust securities from the 
specialist's limit order book to the AHT Facility.\5\ The Commission is 
publishing this notice to solicit comments from interested persons on 
specialist participation in the AHT Facility in Portfolio Depository 
Receipts and investment trust securities based on Stock Indexes.
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    \1\15 U.S.C. 78s(b)(1) (1988).
    \2\17 CFR 240.19b-4 (1994).
    \3\As originally filed, File No. SR-Amex-93-15 requested 
permanent approval of Amex's pilot After-Hours Trading facility. On 
January 4, 1994, the Amex amended the filing to request a three-
month extension of the pilot until April 30, 1994. On May 2, 1994, 
the Commission granted permanent approval to that portion of File 
No. SR-Amex-93-15 concerning the Amex's After-Hours Trading 
facility, not including the specialist participation request. See 
Securities Exchange Act Release No. 33993 (May 2, 1994), 59 FR 23902 
(May 9, 1994).
    \4\See letter from William Floyd-Jones, Jr., Assistant General 
Counsel, Amex, to Diana Luka-Hopson, SEC, dated August 3, 1993.
    \5\See letter from William Floyd-Jones, Jr., Assistant General 
Counsel, Amex, to Sandra Sciole, Special Counsel, SEC, dated July 1, 
1994.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to permit specialists in Portfolio Depositary 
Receipts and investment trust securities to participate in the 
Exchange's After-Hours Trading (``AHT'') facility for a one year pilot 
period.

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 Exchange requests Commission approval for specialists in 
Portfolio Depositary Receipts (``PDRs'') and investment trust 
securities listed pursuant to Section 118B of the Exchange's Listing 
Guidelines\6\ to participate in the AHT facility to ``clean-up'' order 
imbalances in the AHT facility by entering an order for the 
specialist's account. For example, if there were single sided orders to 
buy 10,000 and sell 20,000 SPDRs immediately prior to the 5:00 p.m. 
close of the AHT facility, the specialist would be permitted under the 
Exchange's proposed rule amendments to enter an order for its account 
to buy up to 10,000 SPDRs in order to eliminate the sell side order 
imbalance.
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    \6\The Exchange currently lists one Portfolio Depositary 
Receipt, viz., Standard and Poor's Depositary Receipts (``SPDRs''); 
and two investment trust securities pursuant to Section 118B of the 
Exchange's Listing Guidelines: LOR Index Trust SuperUnits and LOR 
Money Market SuperUnits.
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    The Exchange also seeks Commission approval for specialists in PDRs 
and investment trust securities to participate in a coupled closing 
price order so long as the other side of the order is not for an 
account in which a member or member organization has a direct or 
indirect interest. For example, under the Exchange's proposal, the 
specialist in SPDRs would be permitted to agree prior to the 4:15 close 
of the regular trading session for such securities to take the other 
side of a customer order to buy or sell SPDRs for execution in the AHT 
facility as a closing price coupled order. Such a capability would 
conform the trading of PDRs and investment trust securities to the 
practices of the ``basket'' market for equities where it is customary 
for a dealer to agree prior to the close of the regular trading session 
to take the contra side of a customer basket order and the closing 
index value. Specialists on the New York Stock Exchange, Inc. 
(``NYSE'') currently are permitted to take the contra side of a 
customer order to buy or sell a particular equity security and enter 
such order into the NYSE's Off-Hours Trading facility as a closing 
price coupled order. The Exchange seeks a similar capability for 
specialists in PDRs and investment trust securities to conform the 
trading of these listed instruments to the practices of the basket 
market.
    The Exchange believes that permitting specialists in PDRs and 
investment trust securities to participate in the AHT facility in order 
to ``clean-up'' order imbalances and effect closing price coupled 
orders would benefit investors by providing additional liquidity to the 
listed cash market for derivative securities based upon well known 
market indexes, such as those described above. The market price of 
these securities is based upon transactions largely effected in markets 
other than the Amex. The specialist in such securities has no unique 
access to market sensitive information regarding the market for the 
underlying securities or closing index values. The Exchange, therefore, 
believes that specialist participation in the AHT facility in PDRs and 
investment trust securities in the manner described above does not 
raise any market integrity issues. In addition, should a customer not 
care for an execution at the closing price, the rules of the Exchange's 
AHT facility permit cancellation of an order up to the close of the AHT 
session at 5:00 p.m. (orders in the AHT facility are not executed until 
the 5:00 p.m. close of the after-hours session.) A customer, therefore, 
will have approximately 40 minutes to determine if an execution at the 
closing price suits its needs, and may cancel its order if it believes 
that the closing price does not suit its objectives.
    The Exchange also proposes to eliminate the migration of limit 
orders for PDRs and investment trust securities from the specialist's 
limit order book to the AHT facility to eliminate any concern with the 
handling of such orders.
    The Exchange proposes that the Commission approve the Exchange's 
application to permit specialist participation in the AHT facility for 
PDRs and investment trust securities on a pilot basis, during which 
time the Exchange will study the operation of the facility to determine 
if there are any additional issues that need to be addressed.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the Act 
in general and furthers the objectives of Section 6(b)(5) in particular 
in that it is designed to prevent fraudulent and manipulative acts and 
practices, promote just and equitable principles of trade, remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, protect investors and the 
public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    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

    No written comments were solicited or received with respect of the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer 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 Room, 450 Fifth Street, NW., Washington, 
DC 20549. Copies of the filing will also be available for inspection 
and copying at the principal office of the Amex. All submissions should 
refer to File No. SR-Amex-93-15 and should be submitted by August 2, 
1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\17 CFR 200.30-3(a)(12) (1991).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-16746 Filed 7-11-94; 8:45 am]
BILLING CODE 8010-01-M