[Federal Register Volume 62, Number 171 (Thursday, September 4, 1997)]
[Notices]
[Pages 46785-46787]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-23392]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38986; File No. SR-Amex-97-28]


Self-Regulatory Organizations, Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by American Stock 
Exchange, Inc. Relating to the Extension of the Exchange's Pilot 
Program for Specialists in Portfolio Depositary Receipts and Index Fund 
Shares To Participate in the After-Hours Trading Facility

August 27, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934, 15 U.S.C. 78s(b)(1), notice is hereby given that on August 6, 
1997, the American Stock Exchange, Inc. (``Amex'' or ``Exchange'') 
filed with the Securities and Exchange 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 and to grant accelerated approval to the 
proposed rule change.

[[Page 46786]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The text of the proposed rule change is available at the Office of 
the Secretary, 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 statements may be examined at 
the places specified in Item III below. The self-regulatory 
organizations 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

(1) Purpose
    The Exchange seeks to continue the pilot program permitting 
specialists in Portfolio Depositary Receipts (``PDRs''), investments 
trust securities and Index Fund Shares \1\ to participate in the after-
hours trading (``AHT'') facility to ``clean-up'' order imbalances and 
to effect closing price coupled orders.\2\
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    \1\ The Exchange currently lists two Portfolio Depositary 
Receipts, viz., Standard and Poor's Depositary Receipts on the S&P 
500 and MidCap Indexes (``SPDRs''). The Exchange currently lists 17 
Index Fund Shares which are commonly referred to as 
WEBSsm. WEBS are shares issued by an open-end management 
investment company that seek to provide investment results that 
correspond generally to the price and yield performance of a 
specified foreign or domestic equity market index. The Exchange 
currently lists WEBS based on the following Morgan Stanley Capital 
International (``MSCI'') indices: MSCI Australia Index; MSCI Austria 
Index; MSCI Belgium Index; MSCI Canada Index; MSCI France Index; 
MSCI Germany Index; MSCI Hong Kong Index; MSCI Italy Index; MSCI 
Japan Index; MSCI Malaysia Index; MSCI Mexico Index; MSCI 
Netherlands Index; NSCI Singapore (Free) Index; MSCI Spain Index; 
MSCI Sweden Index; MSCI Switzerland Index; and MSCI United Kingdom 
Index (See SR-AMEX-95-43).
    \2\ According to the Exchange, there was very limited trading 
volume in the AHT for SPDRs, investment trust securities and Index 
Fund Shares during August 1, 1996 to May 30, 1997. The Exchange, 
nevertheless, is optimistic that there could be increased after 
hours trading activity in these securities given their increasing 
popularity.
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    The Exchange believes that extension of the Exchange's pilot 
program to permit specialists in PDRs, investment trust securities and 
Index Fund Shares to participate in the AHT facility in order to 
``clean-up'' order imbalances and effect closing price coupled orders 
would benefit investors by providing additional liquidity to the listed 
cash market for derivative securities based upon well known market 
indexes. The market price of these securities is based upon 
transactions largely effected in markets other than the Amex. (In the 
case of Index Fund Shares, the market price of these securities is 
based exclusively on transactions occurring outside the Amex.) The 
specialist in the Amex listed derivatives has no unique access to 
market sensitive information regarding the market for the underlying 
securities or closing index values. The Exchange, therefore, believes 
that specialist participation in the AHT facility in PDRs, investment 
trust securities and Index Fund Shares in the manner previously 
approved by the Commission does not raise any market integrity issues. 
In addition, should a customer not care for an execution at the closing 
price, the rules of the Exchange's AHT facility permit cancellation of 
an order up to the close of the AHT session at 5 p.m. (Order in the AHT 
facility are not executed until the 5 p.m. close of the After-Hours 
session.) A customer, therefore, has approximately 40 minutes to 
determine if an execution at the closing price suits its needs, and may 
cancel its order if it believes that the closing price does not suit 
its objectives.
(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) in particular in 
that it is designed to prevent fraudulent manipulative acts and 
practices, promote just and equitable principles of trade, remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, protect investors and the 
public interest.

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

    Amex does not believe the proposed extension of the pilot program 
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. 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 provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Room, 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 PCX. All submissions should 
refer to File No. SR-Amex-97-28 and should be submitted by September 
25, 1997.

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

    The Commission has carefully reviewed PCX's proposed rule change 
and believes, for the reasons set forth below, the proposal is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange, 
and in particular, the requirements of Sections 6(b)(5) in that it is 
designed to prevent fraudulent, manipulative acts and practices and to 
promote just and equitable principles of trade, and to remove 
impediments to and protect the mechanism of a free and open market and 
to protect investors and the public interest.\3\
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    \3\ In approving this rule, the Commission notes that it has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
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    Under the pilot program, specialists in PDRs, investment trust 
securities, and Index Fund Shares may participate in the AHT facility 
to clean up order imbalances by entering an order for their own 
account. The pilot program also allows specialists in PDRs, investment 
trust securities, and Index Fund Shares to participate in a coupled 
closing price order as long as the other side of the order is not for 
an account in which a member or member organization has a direct or 
indirect interest. Moreover, the pilot program eliminates the 
mitigation of limit orders for PDRs, investment trust securities and 
Index Fund Shares from the specialists' limit order book to the AHT

[[Page 46787]]

facility to prevent the potential for manipulation or misuse of 
specialists' information regarding which limit orders are eligible for 
execution in the AHT facility.
    In the original approval order, the Commission observed that the 
pilot program should assist specialists in their obligation to minimize 
temporary disparity between supply and demand. Moreover, the Commission 
agreed with the Exchange that the pilot program should benefit 
investors by providing additional liquidity to the listed cash market 
for derivative securities based upon well-known market indexes. The 
Commission also noted that the proposed rule change struck a reasonable 
balance between the Exchange's need to accommodate the needs of 
investors by providing additional liquidity to the listed cash market 
for derivative securities based on market indexes, and the need to 
prevent the potential for manipulation or misuses of information.
    The Commission initially approved the pilot program for one year. 
The pilot program has been extended several times to allow the Exchange 
and the Commission to evaluate further whether there were additional 
issues that needed to be addressed. At the Commission's request, the 
Exchange submitted a report with this rule filing describing the 
Exchange's experience with the pilot program. According to the report, 
there was very limited trading volume in the AHT for SPDRs, investment 
trust securities and Index Fund Shares during August 1, 1996 to May 30, 
1997. Given the experience Amex has gained through extended operation 
and renewal of the pilot program, the Commission expects the Amex to 
determine, at least two months prior to expiration of the current 
pilot, whether to seek permanent approval of, or discontinue, the 
pilot. Should the Exchange decide to seek permanent approval of the 
pilot program, it should submit another report to the Commission by May 
1, 1998, describing its experiences with the pilot program.
    The Commission believes that there is good cause for approving the 
proposed rule change prior to the thirtieth day after the date of 
publication of notice thereof in the Federal Register. This will permit 
the pilot program to continue on an uninterrupted basis for another 
year, until August 29, 1998. The Exchange proposes to continue using 
the identical procedures contained in the pilot program as originally 
approved. In addition, the rule change that implemented the pilot 
program was published in the Federal Register for the full comment 
period and no comments were received. Accordingly, the Commission 
believes that it is consistent with Sections 6 and 19(b) of the Act \4\ 
to accelerate approval of the proposal rule change.
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    \4\ 15 U.S.C. 78f and 78s(b)(2).
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    It is therefore, ordered, pursuant to Section 19(b)(2) of the 
Act,\5\ that the proposed rule change (SR-Amex-97-28) is hereby 
approved on an accelerated basis.
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    \5\ 15 U.S.C. 78s(b)(2).
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    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\6\

    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-23392 Filed 9-3-97; 8:45 am]
BILLING CODE 8010-01-M