[Federal Register Volume 60, Number 145 (Friday, July 28, 1995)]
[Notices]
[Pages 38869-38870]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-18603]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-36010; File No. SR-Amex-95-27]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the American 
Stock Exchange, Inc. Relating to a Three Month Extension of Its Pilot 
Program That Amended Rule 109 to Permit Specialists to Grant Stops in a 
Minimum Fractional Change Market

July 21, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. Sec. 78s(b)(1), notice is hereby given that on 
July 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, 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 Exchange requests a three month extension of a pilot program 
that amended Exchange Rule 109 to permit a specialist, upon request, to 
grant stops in a minimum fractional change market.\1\

    \1\ The Amex received approval to amend Rule 109, on a pilot 
basis, in Securities Exchange Act Release No. 30603 (Apr. 17, 1992), 
57 FR 15340 (Apr. 27, 1992) (File No. SR-Amex-91-05) (``1992 
Approval Order''). The Commission subsequently extended the Amex's 
pilot program in Securities Exchange Act Release Nos. 32185 (Apr. 21 
1993), 58 FR 25681 (Apr. 27, 1993) (File No. SR-Amex-93-10) (``April 
1993 Approval Order``); 32664 (July 21, 1993), 58 FR 40171 (July 27, 
1993) (File No. SR-Amex-93-22) (``July 1993 Approval Order''); 33791 
(Mar. 21, 1994), 59 FR 14432 (Mar. 28 1994) (File No. SR-Amex-93-47) 
(``1994 Approval Order''); and 35310 (Jan. 31, 1995), 60 FR 7236 
(Feb. 7, 1995) (File No. SR-Amex-95-01) (``January 1995 Approval 
Order'').
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    The text of the proposed rule change is available at 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 statement 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 aspect of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On January 31, 1995, the Commission extended its pilot approval of 
amendments to Exchange Rule 109 until July 21, 1995.\2\ The amendments 
permit a specialist, upon request, to grant a stop \3\ in a minimum 
fractional change market \4\ for any order of 2,000 shares or less, up 
to a total of 5,000 shares for all stopped orders, provided there is an 
order imbalance, without obtaining prior Floor Official approval. A 
Floor Official, however, must authorize a greater order size of 
aggregate share threshold.

    \2\ See January 1995 Approval Order, supra, note 1.
    \3\ An agreement to ``stop'' stock at a specified price 
constitutes a guarantee by the member who grants the stop that the 
order of the member who accepts the stop will be executed at the 
stop price or better. See Amex Rule 109(a).
    \4\ Amex Rule 127 sets forth the minimum fractional changes for 
securities traded on the Exchange.
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    During the course of the pilot program, the Exchange has closely 
monitored compliance with the rule's requirements, analyzed the impact 
on orders on the specialist's book resulting from the execution of 
stopped orders at a price that is better than the stop price, and 
reviewed market depth in a stock when a stop is granted in a minimum 
fractional change market. The Exchange believes that the amendments to 
Rule 109 have provided a benefit to investors by providing an 
opportunity for price improvement, while increasing market depth and 
continuity without adversely affecting orders on the specialist's book. 
The Exchange is therefore proposing a three month extension of the 
pilot program that amended Exchange Rule 109.
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 mechanisms of a free 
and open market, and, in general, to protect investors and the public 
interest. The Exchange believes that the proposed amendments to Rule 
109 are consistent with these objectives in that they are designed to 
allow stops, in minimum fractional change market, under limited 
circumstances that provide for the possibility of price improvement to 
customers whose orders are granted stops.
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, 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. Sec. 552, will be available for inspection and copying at 
the Commission's Public Reference Section, 450 Fifth Street, N.W., 
Washington, D.C. 20549. Copies of such filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
submissions should refer to File No. SR-Amex-95-27 and should be 
submitted by August 18, 1995.

[[Page 38870]]


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 Section 6(b)(5) \5\ and Section 11(b) \6\ of the Act. 
The Commission believes that the amendments to rule 109 should further 
the objectives of Section 6(b)(5) and Section 11(b) through pilot 
program procedures designed to allow stops, in minimum fractional 
change markets, under limited circumstances that provide the 
possibility of price improvement to customers whose orders are granted 
stops.

    \5\ 15 U.S.C. 78f (1988 & Suppl. V 1993).
    \6\ 15 U.S.C. 78k (1988).
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    In the orders approving the pilot procedures,\7\ the Commission 
asked the Amex to study the effects of stopping stock in a minimum 
fractional change market. The Exchange has submitted to the Commission 
several monitoring reports regarding the amendments to Rule 109. The 
Commission believes that the monitoring reports, especially the latest 
report, provide useful information regarding the effectiveness of the 
program during the pilot period. The Commission, however, finds that 
additional time is necessary to evaluate carefully and comprehensively 
the information provided by the Exchange and the Amex's use of its 
pilot procedures. Accordingly, the Commission believes that it is 
reasonable to extend the pilot program until October 21, 1995, to avoid 
compromising the benefit that investors might receive under Rule 109, 
as amended, while the Commission is considering whether to permanently 
approve the pilot program.\8\

    \7\ See supra, note 1.
    \8\ See Securities Exchange Act Release No. 35909 (June 28, 
1995), 60 FR 34562 (July 3, 1995) (notice of filing of proposed rule 
change relating to permanent approval of Amex's pilot program for 
stopping stock in a minimum fractional change market).
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    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of the 
notice of filing thereof. This will permit the pilot program to 
continue on an uninterrupted basis. In addition, the procedures the 
Exchange proposes to continue using are the identical procedures that 
were published in the Federal Register for the full comment period and 
were approved by the Commission. No comments were received at that 
time.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-Amex-95-27) is hereby 
approved on a pilot basis until October 21, 1995.

    \9\ 15 U.S.C. 78s(b)(2) (1988).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\

    \10\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-18603 Filed 7-27-95; 8:45 am]
BILLING CODE 8010-10-M