[Federal Register Volume 61, Number 55 (Wednesday, March 20, 1996)]
[Notices]
[Pages 11451-11452]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6644]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36956; File No. SR-Amex-96-05]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange, Inc. Relating to Assurances of 
Delivery for Short Sales of Derivative Securities into an Underwriting 
Syndicate's Stabilizing Bid

March 11, 1996
    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 
January 31, 1996, 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 Amex proposes to amend its policy to require that members 
trading derivative securities as Registered Options Traders pursuant to 
Amex Rule 958 make prior arrangements either to borrow the necessary 
securities or to obtain other assurances that delivery can be made on 
settlement date prior to effecting a short sale into an underwriting 
syndicate's stabilizing bid.
    The text of the proposed rule change is available at the Office of 
the Secretary, 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 Amex 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Since 1989, the Exchange has required members and member 
organizations effecting short sales for both customer and proprietary 
accounts either to make prior arrangements to borrow the securities or 
to obtain acceptable assurances that delivery can be made on settlement 
date.\1\ Such assurances include knowledge that the security is 
available for borrowing, conversion privileges, rights exercises or 
other similar situations so long as the security needed for delivery 
can be timely obtained. Short sales by specialists, market makers and 
odd-lot dealers in fulfilling their market making responsibilities are 
excepted from this requirement. Arbitrageurs and other traders may not 
rely upon this ``market maker'' exception.
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    \1\ See Securities Exchange Act Release No. 27542 (Dec. 15, 
1989).
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    In 1992, the Exchange amended its rules to permit regular members 
to register as Registered Options Traders (``ROTs'') in order to trade 
index warrants for their own account subject to Amex Rule 958.\2\ The 
Exchange deemed it desirable to enable members to trade these equity 
derivative securities \3\ subject to Rule 958 (which affords specialist 
``good faith'' margin treatment and an exemption from stabilization 
requirements) instead of the more restrictive provisions of Rules 111 
and 114 applicable to Registered Equity Market Makers because the 
Exchange believed that application of Rules 111 and 114 to index 
warrants would make it unlikely that members would trade such 
securities. However, the 1992 rule change also had the effect of 
exempting members trading as ROTs from the short sale policy given 
their market making activities in index warrants.
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    \2\ See Securities Exchange Act Release No. 24277 (June 8, 
1992). The SEC has recently approved an Amex proposal to allow 
regular members to trade currency warrants for their own account 
subject to the provisions of Amex Rule 958. See Securities Exchange 
Act Release No. 36852 (Feb. 15, 1996).
    \3\ The term ``equity derivative security'' refers to an 
underwritten security the value of which is determined by reference 
to another security, or to a currency, commodity, interest rate or 
index of the foregoing. Such securities are commonly listed pursuant 
to Exchange Company Guide Sections 106, 107, 118 or Amex rule 1102.
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    The Exchange now proposes a narrow modification to its short sale 
policy which would require members who register as ROTs and trade 
equity derivatives pursuant to Rule 958 to make prior arrangements to 
borrow these securities or obtain other acceptable assurances that 
delivery can be made on settlement date when selling short into the 
stabilizing bid of an underwriting syndicate. Implementation of the 
modified short sale policy is expected to provide increased stability 
to the market for listed Amex equity derivative securities

[[Page 11452]]

during a stabilized distribution by reducing the number of ``fails'', 
i.e., when a short seller is unable to effect delivery of the security 
to the purchaser, and resulting ``buy-ins'', i.e., when a purchaser 
buys the security for the account of the short seller due to the 
failure of the short seller to effect delivery in accordance with the 
procedures of the clearing corporation.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) that an exchange have rules that are 
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 regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the proposed rule change will impose no 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from members or other interested 
parties.

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 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 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, 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 Amex. All 
submissions should refer to File No. SR-Amex-96-05 and should be 
submitted by April 10, 1996.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-6644 Filed 3-19-96; 8:45 am]
BILLING CODE 8010-01-M