[Federal Register Volume 60, Number 203 (Friday, October 20, 1995)]
[Notices]
[Pages 54266-54268]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25959]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-36353; File No. SR-Amex-95-35]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 to the Proposed Rule Change by the American 
Stock Exchange, Inc., Relating to the Amex's Enforcement Authority Over 
Members' Transactions Effected on Other Options Exchanges

October 10, 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 August 
25, 1995, the American Stock Exchange, Inc. (``Amex'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization.\1\ The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.

    \1\ The Amex clarified that it will apply the interpretations 
and policies of another exchange when applying that exchange's 
position and exercise limit rules to an Amex's members transactions 
on that exchange. In addition, the Amex indicated that the Amex will 
follow its own rules when taking a disciplinary action against an 
Amex member who violates the position and exercise limits of another 
exchange. See Letter from Claire P. McGrath, Managing Director and 
Special Counsel, Derivative Securities, Amex, to Michael Walinskas, 
Branch Chief, Derivatives Regulation, Office of Self-Regulatory 
Oversight, Division of Market Regulation, Commission, dated 
September 19, 1995 (``Amendment No. 1'').
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Amex proposes to amend (1) Amex Rule 900(a), ``Applicability,'' 
to confirm the Exchange's enforcement authority over Amex members' 
options transactions effected on another options exchange; and (2) Amex 
Rules 904, ``Position Limits,'' and 905, ``Exercise Limits,'' to 
clarify the Exchange's enforcement authority with respect to the 
enforcement of the Amex's position and exercise limit rules.\2\

    \2\ The Amex will apply the interpretations and policies of 
another exchange when applying that exchange's position and exercise 
limit rules to an Amex's members transactions on that exchange. See 
Amendment No. 1, supra note 1.
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    The text of the proposal is available at the Office of the 
Secretary, Amex, and at the Commission.

[[Page 54267]]


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

    (a) Purpose.
    In August 1994, the Commission set aside an Exchange disciplinary 
action taken against a registered representative of an Amex member firm 
who had been found guilty by an Exchange disciplinary panel of 
violating the Exchange's options suitability and discretionary trading 
rules (Amex Rules 923, ``Suitability,'' and 924 ``Discretionary 
Accounts,'') in connection with the trading on the Philadelphia Stock 
Exchange (``PHLX'') of Swiss Franc options listed on the PHLX.\3\ The 
Commission stated that under Amex rules, as presently written, options 
trading rules, including options suitability and discretionary trading 
rules, could only be applied to options transactions effected on the 
Amex, not to options transactions effected on another options exchange. 
The Commission also rejected the Exchange's subsequent request for 
reconsideration of that decision.\4\ In its Order Denying 
Reconsideration, the Commission suggested that the Exchange submit a 
rule amendment to clarify its authority in this regard. Accordingly, 
the Amex proposes to amend Amex Rule 900(a) to confirm and clearly 
specify the Exchange's enforcement authority over options transactions 
effected by Amex members on another exchange.\5\

    \3\ See Securities Exchange Act Release No. 34622 (August 31, 
1995), 57 SEC Docket 1254.
    \4\ See Securities Exchange Act Release No. 35658 (May 2, 1995), 
59 SEC Docket 0620 (``Order Denying Reconsideration'').
    \5\ Amex Rule 900(a) as amended, will provide: ``The Rules in 
this Part V shall be applicable to (i) The trading on the Exchange 
of option contracts issued by the Options Clearing Corporation, (ii) 
the terms and conditions and the exercise and settlement of option 
contracts so traded, and (iii) the handling of orders, and the 
conduct of accounts and other matters, relating to option contracts 
dealt in by any member or member organization on any exchange.''
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    Another issue concerning the Exchange's enforcement authority has 
arisen with respect to the enforcement of the Exchange's position limit 
and exercise limit rules. Specifically, Amex Rule 904 prohibits Amex 
members from effecting, for any account in which the member has an 
interest or for any customer account, transactions in options contracts 
dealt in on the Exchange that would exceed its established position 
limits. Similarly, Amex Rule 905 prohibits members from exercising, for 
any account in which the member has an interest or for any customer 
account, a long position in option contracts dealt in on the Exchange 
that exceeds its established exercise limits. As presently written, 
Amex Rules 904 and 905 apply only to option classes traded on the Amex 
and not to opening transactions or exercises in option classes traded 
on another options exchange. The Amex notes that since each option 
exchange only has jurisdiction over its own members, a jurisdictional 
loophole exists where, for example, an Amex member exceeds position or 
exercise limits on another options exchange of which it is not a member 
in an option class not listed on the Amex. In such situations, the Amex 
cannot take disciplinary action against its member for violating the 
position and exercise limit rules in an option class traded on another 
options exchange. Similarly, the other options exchange where the 
option class is traded cannot bring an action since it does not have 
jurisdiction over a non-member.
    Therefore, the Amex proposes to amend Exchange Rules 904 and 905 to 
close this jurisdictional loophole. According to the Amex, the proposed 
amendments will allow the Amex to extend its disciplinary jurisdiction 
over its members when they violate position and exercise limits in 
option contracts dealt in on any options exchange, not just the Amex. 
This extension of jurisdiction will apply only when the Amex member is 
not a member of the other options exchange. In addition, the Amex will 
apply the applicable position and exercise limit rules of the other 
exchange, as well as the interpretations and policies of that 
exchange,\6\ not the Amex.

    \6\ See Amendment No. 1, supra note 1.
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    (b) Basis.
    The Amex 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 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 may designate 
up to 90 days of such date if it finds such longer period to be 
appropriate and publishes its reason 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 NW., 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 at the 
Commission's Public Reference Section, 450 Fifth Street NW., 
Washington, D.C. Copies of such filing will also be available for 
inspection and copying at the principal office of the 

[[Page 54268]]
above-mentioned self-regulatory organization. All submissions should 
refer to the file number in the caption above and should be submitted 
by November 10, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\

    \7\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-25959 Filed 10-19-95; 8:45 am]
BILLING CODE 8010-01-M