[Federal Register Volume 60, Number 81 (Thursday, April 27, 1995)]
[Unknown Section]
[Pages 20780-20781]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-10331]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-35635; File No. SR-Amex-95-11]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the American 
Stock Exchange, Inc. Relating to Amendments to Rule 170 Pertaining to 
Specialists' Liquidating Transactions

April 21, 1995.
    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 March 6, 
1995, 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 and II 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 requests a three-month extension of a pilot program that 
amended Exchange Rule 170 to permit a specialist to effect a 
liquidating transaction on a zero minus tick, in the case of a ``long'' 
position, or a zero plus tick, when covering a ``short'' position, 
without Floor Official approval. The pilot program also amended Rule 
170 to set forth the affirmative action that specialists are required 
to take subsequent to effecting various types of liquidating 
transactions.\1\

    \1\The Commission approved the pilot program in Securities 
Exchange Act Release No. 33957 (April 22, 1994), 59 FR 22188 (April 
29, 1994) (``1994 Approval Order'').
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    The Exchange requests accelerated approval of the proposed rule 
change to enable the pilot, which would otherwise expire on April 22, 
1995, to continue on an uninterrupted basis.

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 III 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
    On April 22, 1994, the Commission approved, on a one-year pilot 
basis, amendments to Exchange Rule 170 to permit a specialist to effect 
a liquidating transaction on a zero minus tick, in the case of a 
``long'' position, or a zero plus tick, when covering a ``short'' 
position, without Floor Official approval.\2\ The amendments also set 
forth the affirmative action that specialists are required to take 
subsequent to effecting various types of liquidating transactions.

    \2\See 1994 Approval Order, supra note 1.
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    During the course of the pilot program, the Exchange has monitored 
compliance with the requirements of the Rule and is in the process of 
preparing a report summarizing the results of its surveillance. In 
order to permit the pilot program to continue without interruption 
while the Exchange completes its report, it is proposing that the pilot 
program be extended for three months.
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, remove impediments to and perfect the mechanism of 
a free and open market, and, in general, protect investors and the 
public interest. The proposed rule change also is consistent with 
Section 11(b) of the Act which allows exchanges to promulgate rules 
relating to specialists in order to maintain fair and orderly markets.

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. 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 
[[Page 20781]] 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-95-11 and 
should be submitted by May 18, 1995.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    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 sections 6(b)(5) and 11 of the Act.\3\ 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, remove impediments to and perfect 
the mechanism of a free and open market, and, in general, protect 
investors and the public interest. The Commission also believes that 
the proposal is consistent with section 11(b) of the Act and Rule 11b-1 
thereunder,\4\ which allow exchanges to promulgate rules relating to 
specialists in order to maintain fair and orderly markets.\5\

    \3\15 U.S.C. 78f and 78k (1988).
    \4\17 CFR 240.11b-1 (1994).
    \5\See 1994 Approval Order, supra note 1, for a description of 
Amex Rule 170 procedures and the Commission's rationale for 
approving those procedures on a pilot basis. The discussion in the 
aforementioned order is incorporated by reference into this order.
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    Under the current pilot program, a specialist may liquidate a 
position by selling stock on a direct minus tick or by purchasing stock 
on a direct plus tick only if such transactions are reasonably 
necessary for the maintenance of a fair and orderly market and only if 
the specialist has obtained the prior approval of a Floor Official. 
Liquidations on a zero minus or a zero plus tick, which previously 
required Floor Official approval, can be effected under the pilot 
procedures without a Floor Official's approval, but continue to be 
subject to the restriction that they be effected only when reasonably 
necessary to maintain a fair and orderly market. In addition, the 
specialist must maintain a fair and orderly market during the 
liquidation.
    After the liquidation, a specialist is required to re-enter the 
market on the opposite side of the market from the liquidating 
transaction to offset any imbalances between supply and demand. During 
any period of volatile or unusual market conditions resulting in a 
significant price movement in a specialist's specialty stock, the 
specialist's re-entry into the market must reflect, at a minimum, his 
or her usual level of dealer participation in the specialty stock. In 
addition, during such periods of volatile market conditions or unusual 
price movements, re-entry into the market following a series of 
transactions must reflect a significant level of dealer participation.
    In our 1994 Approval Order,\6\ the Commission asked the Amex to 
submit a report setting forth the criteria developed by the Exchange to 
determine whether liquidating transactions effected by specialists 
pursuant to the pilot were necessary and appropriate in connection with 
fair and orderly markets. The Commission also asked the Amex to provide 
information regarding the Exchange's monitoring of liquidating 
transactions effected by specialists on any destabilizing tick. In 
addition, the Commission asked the Amex to provide the following 
information in its report: (1) A review of all liquidating transactions 
effected by specialists on any destabilizing ticks; (2) a review of 
liquidating transactions by specialists to determine that the required 
Floor Official approval was obtained where necessary; and (3) a review 
of liquidating transactions in light of dealer participation levels and 
re-entry into the market in terms of timing and support.\7\

    \6\See supra note 1.
    \7\In the 1994 Approval Order, supra note 1, the Commission 
requested that the Amex submit the report in January 1995. Pursuant 
to the three-month extension of the pilot being approved herein, the 
Commission now requests that the Amex submit the report in May 1995.
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    During the three month extension of the pilot, the Amex will 
prepare the report discussed above and submit the data to the 
Commission for its consideration of whether the pilot program should be 
granted permanent approval. The Commission expects the Amex to continue 
to monitor compliance with the pilot program procedures during the 
three month extension and report any non-compliance with the rule and 
the action the Amex has taken as a result of such non-compliance.
    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice of filing thereof. This will permit the pilot program to 
continue on an uninterrupted basis. In addition, the Exchange proposes 
to continue using the identical procedures contained in the pilot 
program. The rule change that implemented the pilot program was 
published in the Federal Register for the full comment period,\8\ and 
no comments were received. Furthermore, the Commission approved a 
similar rule change for the NYSE also without receiving comments on the 
proposal.\9\

    \8\See Securities Exchange Act Release No. (August 25, 1993), 58 
FR 45926 (August 31, 1993).
    \9\See Securities Exchange Act Release No. 31797 (January 29, 
1993), 58 FR 7277 (February 5, 1993).
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    It Therefore is Ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change is approved for a three month 
period ending on July 21, 1995.

    \10\15 U.S.C. 78s(b)(2) (1988).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-10331 Filed 4-26-95; 8:45 am]
BILLING CODE 8010-01-M