[Federal Register Volume 59, Number 237 (Monday, December 12, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-30466]


[[Page Unknown]]

[Federal Register: December 12, 1994]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-35050; File No. SR-Amex-94-51]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange, Inc. Relating to the In Person 
Trading Volume Requirement for Registered Option Traders

December 5, 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 November 
18, 1994, the American Stock Exchange, Inc. (``Amex'' 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 Amex. 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 amend Rule 958 to (a) require that a 
Registered Option Trader (``Trader'') execute at least 25% of his/her 
options transactions and volume in person\1\ and (b) provide that if a 
Trader executes at least 80% of his options transactions and volume in 
person, the Trader can receive favorable capital and margin treatment 
for certain opening off-floor activity. The text of the proposed rule 
change is available at the Office of the Secretary, the Amex, and at 
the Commission.
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    \1\``In person'' means that options transactions are personally 
executed by the Trader on the Amex floor and not through the use of 
orders given to a floor broker or left on a specialist's book.
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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 Exchange 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 Amex 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 the 
Statutory Basis for, the Proposed Rule Change

    Exchange Rule 958 sets forth the obligations of Traders when they 
initiate options transactions on the floor of the Exchange for accounts 
in which they have an interest. These obligations include, but are not 
limited to, contributing to the maintenance of fair and orderly 
markets, bidding and offering within prescribed parameters and, when 
establishing or increasing an options position, initiating such 
transactions on the floor of the Exchange.
    The Exchange now proposes to establish an additional requirement 
that at least 25% of a Trader's transactions and contract volume during 
each calendar quarter be executed in person and not through the use of 
orders given to a floor broker or left on a specialist's book. The 
Exchange believes that establishing such a requirement will result in 
better, more liquid markets because Traders will be available in 
trading crowds to contribute to the maintenance of fair and orderly 
markets, to make competitive bids and offers, and to trade for their 
own account when there exists a lack of price continuity, a temporary 
disparity between the supply of and demand for options contracts or a 
temporary distortion of the price relationships between options.
    While the Exchange believes an in person requirement of 25% is 
appropriate at this time, it is further proposed that the Exchange be 
given the authority to increase the in person requirement above 25% 
should such action be deemed necessary by the Exchange.
    The Exchange also proposes to extend favorable capital and margin 
treatment to certain opening orders entered by Traders from off the 
Exchange floor provided at least 80% of their total transactions and 
contract volume is executed in person during any calendar quarter. 
These off-floor orders shall also be subject to Rule 958 and may be 
effected only for the purpose of hedging, reducing the risk of, or 
rebalancing a Trader's open positions.
    Currently, pursuant to Exchange Rule 958, only transactions 
initiated on the floor of the Exchange can count as Registered Trader 
transactions.\2\ Only on-floor transactions qualify for favorable 
capital and margin treatment, even if such orders are entered to adjust 
or hedge the risk of a Trader's positions that are the result of on-
floor market making activity. Because Traders cannot, according to the 
Exchange, effectively adjust positions or engage in hedging or other 
risk-limiting opening transactions from off the Exchange floor without 
incurring a significant economic penalty, they must be either 
physically present on the floor at all times while the market is open, 
or face significant risk of adverse market movements during those times 
when they must necessarily be absent from the trading floor. The 
Exchange believes that the imposition of these costs on such risk-
adjusting transactions prevents Traders from effectively discharging 
their market making obligations and exposes them to unacceptable levels 
of risk. The Exchange believes that the proposal presents a more 
appropriate and realistic treatment of Traders' transactions initiated 
from off-floor than is currently provided by Exchange rules. Extending 
favorable capital and margin treatment to off-floor transactions to 
those Traders who satisfy an 80% in person requirement will, in the 
Exchange's opinion, increase the extent to which Traders' transactions 
contribute to liquidity and to the maintenance of fair and orderly 
markets by providing for a greater degree of in person trading and by 
enabling Traders to better manage the risk of their market making.
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    \2\See Amex Rule 958, Commentary .01.
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    The Exchange believes that 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, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Amex does not believe that the proposed rule change will impose 
any inappropriate 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 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 such 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, N.W., Washington, D.C. 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 in the 
Commission's Public Reference Section, 450 Fifth Street, N.W., 
Washington, D.C. 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-94-51 and should be 
submitted by January 3, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\3\
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    \3\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-30466 Filed 12-9-94; 8:45 am]
BILLING CODE 8010-01-M