[Federal Register Volume 59, Number 193 (Thursday, October 6, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24792]


[[Page Unknown]]

[Federal Register: October 6, 1994]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34763; File No. SR-Amex-94-35]

 

Self-Regulatory Organizations; Filing of Proposed Rule Change by 
American Stock Exchange, Inc. Relating to Amendments to Rule 179 
Regarding Automatic Cancellation of Open Orders in Expiring Equity 
Securities

September 30, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on 
September 6, 1994, 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 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 is proposing to amend Rule 179 to expand the categories of 
expiring equity securities as to which open orders are automatically 
cancelled prior to commencing ``next day'' and ``cash'' trading. The 
text of the proposed rule change is available at the Office of the 
Secretary, the Amex, and at the Commission.

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
    Amex Rule 179 provides time frames during which orders in expiring 
rights and warrants must be for ``next day'' delivery or for ``cash'' 
settlement, rather than for ``regular way'' five-day delivery. The rule 
was amended last year to provide for the automatic cancellation of open 
``regular way'' and ``next day'' orders in expiring rights and warrants 
prior to commencing ``next day'' and ``cash'' trading in those 
securities.\1\ The normal ticker notice provided by the Exchange with 
respect to expiring rights and warrants provides ample notice to 
members and member organizations regarding such cancellations, thereby 
given them the opportunity to replace their cancelled orders if they 
wish to do so. Substituted ``next day'' and ``cash'' orders are treated 
as new orders and are not entitled to retain the priority on the 
specialist's book of the cancelled ``regular way'' order. This 
amendment has resulted in a significant reduction in ``DKs''\2\ and has 
facilitated accurate clearance and settlement in these securities.
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    \1\See Securities Exchange Act Release No. 32320 (May 17, 1993), 
58 FR 30078 (May 25, 1993) (approving File No. SR-Amex-92-31).
    \2\A ``DK'' is an uncompared securities transaction. For further 
discussion of Amex procedures regarding resolution of DKs, see Amex 
Rule 731.
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    The Exchange is now proposing that Rule 179 be further amended to 
expand the categories of expiring securities as to which open orders 
are automatically cancelled prior to commencing ``next day'' and 
``cash'' trading to include any expiring equity security.\3\ The 
amendment would be applicable, for example, to preferred stock,\4\ 
Contingent Value Rights, Stock Index Return Securities, Equity Linked 
Securities (``ELKS''), Yield Enhanced Equity Linked Debt Securities 
(``YEELDS'') and other similar securities. These securities would 
generally change to ``next day'' delivery and ``cash'' in accordance 
with the time frames applicable to rights. Thus, during the five 
business days preceding the final day for trading in such security, 
every order therein entered on a specialist's book must be for ``next 
day'' delivery, and, on final day for trading in such security, every 
order therein entered on the specialist's book must be for ``cash.'' 
However, when appropriate, the Exchange may establish different time 
frames for particular types of expiring equity securities.
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    \3\The Amex has clarified that the proposed rule change would 
apply to expiring securities that are not options and that are 
subject to the trading rules for equity securities, as opposed to 
debt securities. Telephone conversation between Stuart Diamond, 
Director, Rulings Department, Amex, and Linda Tarr, Special Counsel, 
Amex, and Beth Stekler, Attorney, Division of Market Regulation, 
SEC, on September 27, 1994.
    \4\The Amex proposal would provide for automatic cancellation of 
open orders in redeemable preferred stock. Telephone conversation 
between Stuart Diamond, Director, Rulings Department, Amex, and 
Linda Tarr, Special Counsel, Amex, and Beth Stekler, Attorney, 
Division of Market Regulation, SEC, on September 27, 1994.
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    The extension of the automatic cancellation provisions of the rule 
to these securities can be expected to provide comparable benefits, 
i.e., a reduction in ``DKs'' and clearance and settlement errors.
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 promote just and equitable principles of 
trade, to remove impediments to and perfect the mechanism of a free and 
open market, and, in general, to 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 to the 
proposed rule change.

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

    Within 35 days of the publication of this notice in the Federal 
Register or within such other 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 Section, 450 Fifth Street, NW., 
Washington, DC 20549. Copies of such 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-94-35 and should be 
submitted by October 27, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-24792 Filed 10-5-94; 8:45 am]
BILLING CODE 8010-01-M