[Federal Register Volume 63, Number 39 (Friday, February 27, 1998)]
[Notices]
[Pages 10054-10055]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-5066]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39689; File No. SR-Amex-98-09]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange, Inc. Relating to Amendments to 
Amex Rule 117 (Circuit Breakers)

February 20, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on February 17, 1998, the American Stock Exchange, 
Inc. (``Amex'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') 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.
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    \1\ 15 U.S.C. 78s(b)(1) (1982).
    \2\ 17 CFR 240.19b-4 (1991).
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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 procedures relating to circuit breaker 
trading halts. 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 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

1. Purpose
    Amex Rule 117 provides for temporary halts in the trading of all 
securities on the Exchange for one-half hour if the Dow Jones 
Industrial AverageSM (DJIA'') \3\ declines 350 points or more from the 
previous day's closing value and for one hour if the DJIA declines 550 
points from the previous day's close. The Commission recently approved 
amendments to Rule 117 (and comparable rules of other self-regulatory 
organizations) relating to the timing and duration of trading halts 
under the rule.\4\ If the DJIA declines 350 points prior to 3:00 p.m. 
(Eastern time), trading will halt for one-half hour; at or after 3:00 
p.m., trading will not halt unless the DJIA declines 550 points. If the 
DJIA falls 550 points prior to 2:00 p.m., trading will halt for one 
hour; and, at or after 2:00 p.m., trading will halt for 30 minutes 
instead of one hour. If the 550 point trigger is reached at or after 
3:00 p.m., trading on the Exchange will halt for the remainder of the 
day. These procedures have been approved on a pilot basis until April 
30, 1998.
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    \3\ ``Dow Jones Industrial Average'' is a service mark of Dow 
Jones & Company, Inc.
    \4\ See Exchange Act Release No. 39582 (January 26, 1998), 63 FR 
5408 (February 2, 1998).
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    The Exchange proposes to amend Rule 117 to provide for circuit 
breakers to be triggered at 10 percent, 20 percent and 30 percent 
threshold levels. The specific threshold level would be adjusted 
quarterly, rounded to the nearest 50 points, based on the closing DJIA 
calculation for each trading day in the month preceding the beginning 
of the quarter.
    Under the proposed amendments, a 10 percent decline before 2:00 
p.m. (all times are in Eastern time) will result in a one-hour halt 
and, such a decline at or after 2:00 p.m. but before 2:30 p.m. will 
result in a 30-minute halt. At or after 2:30 p.m., the 10 percent 
threshold would be removed and, therefore, trading would continue 
unless the 20 percent threshold is reached, in which case, trading 
would halt for the remainder of the day. Generally, a 20 percent 
decline before 1:00 p.m. will result in a two-hour halt. If the 20 
percent threshold is reached at or after 1:00 p.m. but before 2:00 
p.m., there will be a one-hour halt. If the 20 percent threshold is 
reached at or after 2:00 p.m., trading will halt for the remainder of 
the day. A third circuit breaker, triggered at a 30 percent decline, 
will

[[Page 10055]]

close the market for the day regardless of when hit.
    The Exchange has continued to discuss changes to circuit breaker 
parameters with the Commission and other self-regulatory organizations, 
particularly following the first triggering of circuit breakers on 
October 27, 1997, when the 350 and 550 point parameters represented 
moves in the DJIA of about 4.5 percent and 7.2 percent, respectively. 
These trigger levels represented market declines that were, in 
percentage terms, far less than the 250 and 400 point triggers 
implemented by all markets in October 1988, when they represented moves 
in the DJIA of about 12 percent and 19 percent, respectively. 
Therefore, a number of industry participants have expressed the view 
that the October 27, 1997 halt was unnecessary, and that circuit 
breaker parameters should be triggered only during periods of 
extraordinary market volatility. In addition, the Amex and other 
options exchanges have recognized the importance of maximizing the 
opportunity to allow the markets to have a normal end of the day close, 
particularly on Expiration Fridays. The proposed amendments to Rule 117 
are responsive to these views, and provide the advantage of regular 
adjustments to circuit breaker thresholds to account for DJIA 
fluctuations.
    The adoption of the proposed amendments to Exchange Rule 117 would 
be contingent upon the adoption of amended rules or procedures 
substantively identical to Rule 117 by:
    (1) All United States securities exchanges and the National 
Association of Securities Dealers with respect to the trading of 
stocks, stock options and stock index options; and
    (2) All United States futures exchanges with respect to the trading 
of stock index futures and options on such futures.
2. Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) \5\ of the Act, in general, and Section 6(b)(5) \6\ of the Act, in 
particular, in that it is designed to remove impediments to and perfect 
the mechanism of a free and open market, to promote just and equitable 
principles of trade and, in general, to protect investors and the 
public interest.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 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 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

    Written comments on the proposed rule change were neither solicited 
nor received.

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 self-regulatory organization consents, the Commission will:
    (A) by order approve such 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, 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, located at the above address. 
Copies of such filing will also be available for inspection and copying 
at the principal office of the self-regulatory organization. All 
submissions should refer to File No. SR-Amex-98-09 and should be 
submitted by March 20, 1998.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-5066 Filed 2-26-98; 8:45 am]
BILLING CODE 8010-01-M