[Federal Register Volume 63, Number 45 (Monday, March 9, 1998)]
[Notices]
[Pages 11469-11470]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-5891]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39706; File No. SR-AMEX-98-07]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the American Stock Exchange, 
Inc., Relating to Extension of the Permissible Maturity of FLEX Equity 
Options

March 2, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on February 5, 1998, 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 and II below, which Items have been 
prepared by the Exchange. On February 20, 1998, the Exchange filed with 
the Commission Amendment No. 1 to the proposed rule change.\2\ 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).
    \2\ Amendment No. 1 clarifies the Exchange's course of action 
when criteria set forth in the proposed rule are met. See Letter 
from Scott G. VanHatten, Legal Counsel, Derivative Securities, 
Exchange, to Michael Walinskas, Senior Special Counsel, Division of 
Market Regulation, Commission, dated February 19, 1998.
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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 Exchange Rule 903G to permit flexible 
(``FLEX'') equity options to have a term of five years in certain 
circumstances. 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
    The Exchange is proposing to allow FLEX equity options \3\ traded 
on the Exchange to have a maturity beyond three years and up to five 
years in certain circumstances. Currently, FLEX equity options, by 
operation of Rule 903G, are limited to a maturity of three years.
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    \3\ FLEX equity options are flexible exchange-traded options 
contracts which overlie equity securities. In addition, Exchange 
equity options provide investors with the ability to customize basic 
option features including size, expiration date, exercise style, and 
certain exercise prices.
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    When the Exchange filed for permission to list and trade FLEX 
equity options \4\ it determined to limit the maturity of these options 
to three years because, unlike FLEX Index options which were already 
being traded on the Exchange since August 1993 and which could have a 
maturity of up to five years, the Exchange was concerned that there 
would not sufficient liquidity in many equity option classes to support 
services with a longer term to expiration. Since it has traded FLEX 
equity options, however, the Exchange has had numerous requests from 
broker-dealers to extend the maturity of FLEX equity options to five 
years. Among the reasons the broker-dealer firms have been interested 
in seeking an extension in the allowable maturity is that these longer 
expiration FLEX equity options might be used to hedge the longer term 
issuances of structured products linked to returns of a individual 
stock. The rule would permit the longer term FLEX equity options to be 
listed when requested by the submitting member if the Exchange 
determines that sufficient liquidity exists among Equity FLEX qualified 
participants. By allowing for the extension of the maturity of FLEX 
equity options to five years in situations where there is demand for a 
longer term expiration and where there is sufficient liquidity to 
support the request, the proposed rule change will better serve the 
needs of Amex's customers and the Exchange members who make a market 
for such customers.
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    \4\ See Exchange Act Release No. 37336 (June 19, 1996), 61 FR 
33558 (June 27, 1996).
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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)(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 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

    Because the foregoing proposed rule change:
    (i) does not significantly affect the protection of investors or 
the public interest;
    (ii) does not impose any significant burden on competition; and
    (iii) does not become operative for 30 days from the date on which 
it was

[[Page 11470]]

filed,\5\ or such shorter time as the Commission may designate, and the 
Exchange provided the Commission with written notice of its intent to 
file the proposed rule change at least five business days prior to the 
filing date, it has become effective pursuant to Section 19(b)(3)(A) 
\6\ of the Act and Rule 19b-4(e)(6) thereunder.\7\ The Commission finds 
good cause to allow the proposed rule change to become operational on 
March 6, 1998. This accelerated operational date should facilitate 
faster access for Amex members and customers to the potential benefits 
of extended maturity dates for FLEX equity options, consistent with the 
protection of investors and the public interest. The Commission has 
previously approved a substantially similar proposal by the Chicago 
Board Options Exchange, Inc.\8\
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    \5\ The proposed rule change filing is deemed filed as of the 
date Amendment No. 1 was received by the Commission.
    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(e)(6). In reviewing this rule, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \8\ See Exchange Act Release No. 39524 (January 8, 1998), 63 FR 
3009 (January 20, 1998).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., 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. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
Amex. All submissions should refer to the File No. SR-AMEX-98-07 and 
should be submitted by March 30, 1998.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.3-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 98-5891 Filed 3-6-98; 8:45 am]
BILLING CODE 8010-01-M