[Federal Register Volume 63, Number 50 (Monday, March 16, 1998)]
[Notices]
[Pages 12846-12847]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-6663]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39734; File No. SR-Amex-97-41]


Self-Regulatory Organizations; American Stock Exchange, Inc.; 
Order Granting Approval to Proposed Rule Change Relating to Trading 
Differentials for Option Contracts

March 9, 1998.
    On November 3, 1997, the American Stock Exchange, Inc. (``Amex'' or 
``Exchange'') submitted to the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities and 
Exchange Act of 1935 (``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to allow the Exchange to 
establish, upon the filing of a rule change proposal pursuant to 
Section 19(b)(3)(A) of the Exchange Act, the trading differentials for 
option contracts traded on the Exchange.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The proposed rule change was published for comment in the Federal 
Register on December 1, 1997.\3\ No comments were received on the 
proposal. This order approves the proposal.
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    \3\ See Exchange Act Release No. 39347 (November 21, 1997), 62 
FR 63576 (December 1, 1997).
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    Exchange Rule 952 currently provides that the minimum fractional 
change for stock options trading at $3.00 or higher shall be one-eighth 
and for stock options trading under $3.00 shall be one-sixteenth. 
Additionally, Rule 951C provides that the minimum fractional change for 
stock index options shall be one-eighth for stock index options trading 
at a premium greater than $300.00 and stock index options less than 
$300.00 shall be one-sixteenth. The Exchange now proposes to amend 
Rules 952 and 951C to give the Board of Governors the authority to 
establish the minimum fractional changes for options. Until such time 
as the Board determines to use its authority to change the minimum 
fractional changes, the current rules described above will apply. The 
Exchange believes that the proposal will allow the Exchange to revise 
its minimum fractional changes quickly in response to changes adopted 
in the underlying stock markets and at the other options exchanges. 
When the Board of Governors determines to change the minimum trading 
increments, the Exchange will designate such a change as a stated 
policy, practice, or interpretation with respect to the administration 
of Rules 952 and 951C within the meaning of subparagraph (3)(A) of 
subsection 19(b) of the Exchange Act and will file a rule change for 
immediate effectiveness upon filing with the Commission.
    As derivatives securities, the prices of options are determined in 
references to the prices of the underlying securities. Consequently, 
the Exchange believes that where practicable, the Exchange should have 
minimum increments comparable to those applicable to the securities 
underlying its options.\4\
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    \4\ See Exchange Act Release No. 38571 (May 5, 1997), 62 FR 
25682 (May 9, 1997) (Commission order approving a change in the 
minimum increment to \1/16\th for equity securities listed on the 
American Stock Exchange); Exchange Act Release No. 38678 (May 27, 
1997), 62 FR 30363 (June 3, 1997), (Commission order approving a 
change in the minimum increment to \1/16\th for Nasdaq-listed equity 
securities); and Exchange Act Release No. 38897 (Aug. 1, 1997), 62 
FR 42847 (Aug. 8, 1997) (Commission order approving a change in the 
minimum increment to \1/16\th for NYSE-listed equity securities).
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    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and rules and regulations thereunder 
applicable to a national securities exchange, and, in particular, with 
the requirements of Sections 6 and 11A of the Act.\5\ Specifically, the 
Commission believes that permitting the Exchange to establish trading 
differentials for option contracts upon the filing of a proposal under 
Section 19(b)(3)(A) of the Act will help to facilitate securities 
transactions, to remove impediments to and perfect the mechanism of a 
free and open market, to foster competition and coordination with 
persons engaged in regulating securities, and to promote just an 
equitable principles of trade.
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    \5\ See 15 U.S.C. 78f(b) and 78k-1. In approving this rule 
change, the Commission notes that it has considered the proposal's 
impact on efficiency, competition, and capital formation, consistent 
with Section 3 of the Act. Id. at 78c(f).
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    The Commission previously has approved a rule proposal that allows 
the Exchange to establish trading increments for equity securities.\6\ 
The

[[Page 12847]]

Commission believes that permitting the Exchange to establish trading 
differentials for option contracts upon the filing of a proposal under 
Section 19(b)(3)(A) of the Act will provide flexibility to the Exchange 
and thereby enhance the quality of the market for affected Amex-listed 
options. Allowing the Amex to quote in finer increments will facilitate 
quote competition. This should help produce more accurate pricing of 
options and should result in tighter quotations. Furthermore, if the 
quoted markets are improved by reducing the minimum increment, the 
change could result in added benefits to the markets such as reduced 
transaction costs.
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    \6\ See Exchange Act Release No 38571 (May 5, 1997), 62 FR 25682 
(May 9, 1997) (Commission order approving a change in the minimum 
increment to \1/16\th for equity securities listed on the American 
Stock Exchange); Exchange Act Release No. 38678 (May 27, 1997), 62 
FR 30363 (June 3, 1997), (Commission order approving a change in the 
minimum increment to \1/16\th for Nasdaq-listed equity securities); 
and Exchange Act Release No. 38897 (Aug. 1, 1997), 62 FR 42847 (Aug. 
8, 1997) (Commission order approving a change in the minimum 
increment to \1/16\th for NYSE-listed equity securities).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (SR-Amex-97-41) is approved.

    \7\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-6663 Filed 3-13-98; 8:45 am]
BILLING CODE 8010-01-M