[Federal Register Volume 62, Number 220 (Friday, November 14, 1997)]
[Notices]
[Pages 61154-61156]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-29931]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39306; File No. SR-AMEX-97-37]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the American Stock Exchange, Inc., Relating to Its Designated
Options Area
November 6, 1997.
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 October
14, 1997, the American Stock Exchange, Inc. (the ``Amex'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Item I, II,
and III below, which Items have been prepared by the Exchange. 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 include additional
physically separate locations on the Exchange's trading floor where
options on Amex-listed stocks may trade. The information will be found
in an upcoming information circular of the Exchange.
II. Self-Regulatory Organization's
Statement of the Purpose of, and Statutory 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 the
Statutory Basis for, the Proposed Rule Change
(1) Purpose
In 1988, the Exchange received Commission approval to trade options
on Amex-listed stocks.\1\ The approval was based upon the Amex's
trading floor for equities and options on those equities being
sufficiently separated such that there could be no time and
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place advantage derived from the physical proximity of the two floors
which could be exploited.
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\1\ Securities Exchange Act Release No. 26147 (October 3, 1988),
53 FR 39556 (October 7, 1988).
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Since the 1988 approval was granted, the trading of options on
Amex-listed securities has continued to occur on the Exchange at
locations that are physically separate from the locations where the
trading of Amex-listed stocks occurs. The Exchange contains additional
locations that are also physically separate from the locations where
Amex-listed stocks trade that have yet to be designated as areas for
the trading of options on Amex-listed stocks. The Exchange now proposes
to amend its policy to include those additional physically separate
locations as areas where the trading of options on Amex-listed stocks
may occur (the ``Designated Options Area'').
While the number of options on Amex-listed stocks has increased
slowly, to approximately 45 classes since 1988, the overall number of
option classes traded on the Exchange has increased over 350% since
that time. As a result of this increase in classes of options traded at
Amex, the Exchange currently lacks flexibility in moving trading units
around its trading floors. Those specialist units currently trading
options on Amex-listed stocks are forced to remain in the current
Designated Options Area, even though they have outgrown their space, or
face giving up those classes to move to larger quarters. Moreover,
specialist units that currently do not trade any options on Amex-listed
stocks are unable to do so because there is no room left in the current
Designated Options Area. The increase in classes of options traded on
the Exchange and the Exchange's need for flexibility in moving the
various trading units around the Exchange's trading floors has made it
necessary for the Exchange to find additional physically separate
locations to include in the Designated Options Area.
To address the above concerns, the Exchange proposes to include in
its Designated Options Area the mezzanine trading level located above
the Exchange's main equity trading floor area (the ``Mezzanine'') and
that area of the Exchange consisting of the back row of the west side
of the Exchange's main trading floor also referred to as the west side
of Exchange Post 12, 13, and 15 (the ``Back Row''). The Commission
recognized in 1994 that the Mezzanine is a physically separate trading
location when it approved the inclusion of Amex-listed stocks in stock
industry index groups provided the index traded separate from the
Exchange's Designated Stock Area.\2\ Consistent with the Commission's
approval of that proposal, the Mezzanine and the Back Row are
physically separate from the Designated Stock Area so as to avoid
direct sight lines and communication by means of hand signals between
either the Mezzanine or the Back Row and the Designated Stock Area.
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\2\ Securities Exchange Act Release No. 34359 (July 12, 1994),
59 FR 36799 (July 19, 1994).
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The proposed rule change will not increase the potential for
trading abuse or manipulation as there is no line of sight between the
Mezzanine and the Back Row and the Designated Stock Area, thus no time
or place advantage results from the proposed rule change. Although the
proposed rule change will not increase the potential for trading abuse
or manipulation, the Exchange does currently have in place various
safeguards to detect and prevent any such abuse or manipulation. These
safeguards include Amex Rule 175, which prohibits any specialist from
acting as an options specialist or functioning in any capacity
involving marketmaking responsibilities in any option as to which the
underlying security is a stock in which the specialist is registered as
such.
In addition to the safeguards contained in Amex Rules 175, the
Exchange prohibits, under Amex Rule 958, any equity specialist, odd-lot
dealer or Nasdaq market maker from acting as a registered trader in a
class of stock options on a stock in which he is registered in the
primary market place. This Rule also prohibits any member, while acting
as a Registered Options Trader, if he is also registered as a
Registered Equity Trader or Registered Equity Marketmaker, from
executing a proprietary Exchange option transaction on an Amex-listed
stock if during the preceding 60 minutes, he has been in the Designated
Stock Area where the Amex-listed stock is traded.
To insure compliance with the above safeguards, the Exchange has in
place various surveillance procedures. The Exchange's surveillance
procedures, which are set forth at Section XI, C of the Amex Trading
Analysis Options Surveillance Manual Concerning Paired Security Review,
including, among other items, the preparation of daily activity reports
on Registered Options Trader's (``ROT'') trading activity in Amex-
listed stocks and options. These reports are than used to analyzed ROT
trading activity to insure compliance with Amex Rule 958.
(2) Basis
The proposed rule change is consistent with Section 6(b) of the Act
\3\ in general and furthers the objectives of Section 6(b)(5) \4\ 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.
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\3\ 15 U.S.C. Sec. 78f(b).
\4\ 15 U.S.C. Sec. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on competition
The Exchange 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 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 Exchange 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, 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 filled
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
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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 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
SR-AMEX-97-37 and should be submitted by December 5, 1997.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\5\
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\17\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-29931 Filed 11-13-97; 8:45 am]
BILLING CODE 8010-01-M