[Federal Register Volume 63, Number 62 (Wednesday, April 1, 1998)]
[Notices]
[Pages 15905-15906]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8533]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39805; File No. SR-AMEX-98-13]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the American Stock Exchange, 
Inc. Relating to the Distribution of Amendments to Characteristics and 
Risks of Standardized Options

March 25, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1935 
(``Act''),\1\ notice is hereby given that on March 19, 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, 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.
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    \1\15 U.S.C. 78s(b)(1).
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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 926 to permit members and 
member organizations to distribute amendments to the current Options 
Disclosure Document\2\ only to those account holders affected by the 
amendment.
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    \2\Amex Rule 926 defines current Options Disclosure Document as 
the most recent edition of such Document which meets the 
requirements of Rule 9b-1 promulgated under the Securities Exchange 
Act of 1934.
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    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
    From the commencement of options trading until 1982, Federal 
securities laws required that a current prospectus of the issuer, The 
Options Clearing Corporation (``OCC''), be delivered to prospective 
options investors. In 1982, the Commission recognized that the 
prospectus, which included detailed information about OCC in order to 
meet the registration requirements of the Securities Act of 1933, had 
become a complicated and lengthy document and in response, adopted Rule 
9b-1 under the Act.\3\ Thereafter, on April 30, 1986, the Exchange 
received Commission approval to consolidate its then existing multiple 
options disclosure documents into a single document entitled 
Characteristics and Risks of Standardized Options (the ``Options 
Disclosure Document'') for distribution to each options customer as 
required by Rule 9b-1 of the Act\4\ and Exchange Rule 926. Rule 926 
requires that the Options Disclosure Document be delivered to each 
customer at or prior to the time such customer's account is approved 
for options trading. Recognizing that the Options Disclosure Document 
would be amended from time to time, the Rule also requires that the 
amended Options Disclosure Document be distributed to individuals 
continuing to engage in options transactions.
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    \3\Securities Exchange Act Release No. 19055 (September 16, 
1982), 47 FR 41950 (September 23, 1982).
    \4\Securities Exchange Act Release No. 23189 (April 30, 1986), 
51 FR 17120.
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    The Exchange now proposes to amend Rule 926 to permit members and 
member organizations to distribute amendments to the Options Disclosure 
Document only to those customers who engage in transactions in the 
products discussed in the amendment. For example, in October 1996 the 
Options Disclosure Document was amended to accommodate the introduction 
of flexibly structured stock options (known as E-FLEX options). Prior 
to the consolidation of options disclosure documents in 1986, such an 
amendment would be distributed only to those investors affected by the 
change (i.e., those accounts approved for E-FLEX options transactions). 
However, under current Rule 926, the entire amended Options Disclosure 
Document was required to be distributed to every customer having an 
account approved for options trading (regardless of whether the account 
had been approved for E-FLEX transactions) or, in the alternative, 
distributed not later than the time a confirmation of an options 
transaction was delivered to each customer. Thus, the Options 
Disclosure Document was required to be distributed not only to 
customers who had participated in an E-FLEX option transaction, but to 
all customers including those who had not participated in E-FLEX option 
transactions and did not need the additional information discussed in 
the amendment. The Exchange believes such unnecessary distribution, in 
addition to being an expensive burden to the member firms, may cause 
confusion among customers.
    The Exchange proposes to amend Rule 926 to prevent the unnecessary 
distribution of the amended Options Disclosure Document to customers 
who have not engaged in a transaction in the category of options to 
which the

[[Page 15906]]

amendment pertains. The proposed rule change will continue to require 
that members and member organizations provide customers engaged in 
options transactions with all necessary risk disclosure documentation 
in compliance with the requirements of Rule 9b-1 of the Act.\5\
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    \5\The Commission notes that the proposed rule is substantively 
similar to the rules of other exchanges regarding the distribution 
of amendments to an Options Disclosure Document. See CBOE Rule 
9.15(a); PHLX Rule 1029(a).
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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, and is 
not designed to permit unfair discrimination between customers, 
issuers, and brokers or dealers.

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

    The proposed rule change will impose no 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 became operative for 30 days from March 19, 1998, 
the date on which it was filed, 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\
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    \6\15 U.S.C. 78s(b)(3)(A).
    \7\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. Sec. 78c(f).
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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 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, D.C. 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-98-13 and 
should be submitted by April 23, 1998.

    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. 98-8533 Filed 3-31-98; 8:45am]
BILLING CODE 8010-01-M