[Federal Register Volume 63, Number 91 (Tuesday, May 12, 1998)]
[Notices]
[Pages 26231-26233]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-12557]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39959; File No. SR-AMEX-98-16]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange, Inc., Relating to the 
Announcement of Closing Rotations in Equity Options After 4:02 p.m.

May 5, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 8, 1998, the American Stock Exchange, Inc. (``Amex'' or ``the 
Exchange''), filed with the Securities and Exchange Commission (``SEC'' 
or ``the Commission'') the proposed rule change as described in Items 
I, II, and III below, which Items have been prepared by the Amex. 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\ 17 CFR 240.19b-4.
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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 1 to permit closing

[[Page 26232]]

rotations in equity options to be announced after 4:02 p.m. Language 
proposed to be deleted is in brackets.
Hours of Business
    Rule 1  No change.
* * * Commentary
    .01 No change.
    .02 Options Trading after 4:02 p.m.--The Board has determined that 
no option series shall freely trade after 4:02 p.m. except that broad 
stock index group options shall freely trade until 4:15 p.m. each 
business day. However, one trading rotation in any class of options 
contracts may be effected even though employment of the rotations will 
result in the effecting of transactions on the Exchange after 4:02 
p.m., provided:
    (1) No change.
    (2) Such rotation was initiated due to unusual market conditions 
pursuant to Rule 918, and: (i) Notice of such rotation is publicly 
disseminated no later than the commencement of the rotation or 4:00 
p.m. (N.Y. time), whichever is earlier; or (ii) notice of such rotation 
is publicly disseminated after 4:00 p.m. [but before 4:02 p.m.], and 
the rotation does not commence until five minutes after news of such 
rotation is publicly disseminated.
    (3) No change.
If prior to 4:02 p.m., a trading rotation is in progress and a Senior 
Floor Official and a Floor Official determine that a final trading 
rotation is needed to assure a fair and orderly market, the rotation in 
progress shall be halted and such final rotation begun as promptly as 
possible after 4:02 p.m. Any trading rotation commenced after 4:02 p.m. 
must be approved by a Senior Floor Official.
    .03 through .04  No change.

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On May 14, 1997, the Exchange received approval to move the close 
of equity options trading from 4:10 p.m. to 4:02 p.m.\3\ This change 
was prompted by improvements in dissemination of closing prices in the 
underlying securities, the limited ability of public customers to reach 
as quickly as professional traders to news announcements in the last 
ten minutes of trading, and the difficulties experienced by options 
specialists and registered traders trying to make orderly options 
markets without the ability to hedge or otherwise offset market risk 
with transactions in the underlying stock. Following receipt of 
approval, Rule 1 was amended to reflect this change to 4:02 p.m. 
Inadvertently, however, the provision that permits a closing rotation 
\4\ to be initiated due to unusual market conditions, was severely 
limited when the rule was changed to require that notice of the closing 
rotation had to be publicly disseminated before 4:02 p.m. As currently 
written, the rule gives Floor Officials only two minutes to assess an 
unusual market condition, determine whether it is appropriate to have a 
closing rotation and disseminate the news of the rotation to the 
public.
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    \3\ Securities Exchange Act Release No. 38640, (May 14, 1997), 
62 FR 28081 (May 22, 1997).
    \4\ A closing rotation is a trading procedure to determine 
appropriate closing prices or quotes for each series of options on 
an underlying stock.
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    The Exchange now proposes that Rule 1 by amended to permit the 
announcement of closing rotations in equity options after 4:02 p.m. 
provided such a rotation does not begin sooner than five minutes after 
the announcement of the closing rotation is disseminated. Permitting 
the announcement of closing rotations after 4:02 p.m. will allow the 
Exchange to more effectively address unusual market conditions by 
increasing its flexibility in the timing of announcing and commencing 
closing rotations. Further, such an amendment would conform Rule 1 to 
other exchanges' rules concerning the announcement of closing 
rotations.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \5\ in general and furthers the objectives 
of Section 6(b)(5),\6\ 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 engage 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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    \5\ 15 U.S.C. 78f(b).
    \6\ 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 inappropriate 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 Amex 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, 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 Section, 450 Fifth Street, N.W., 
Washington, DC 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 the file number in the caption above and 
should be submitted by June 2, 1998.


[[Page 26233]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-12557 Filed 5-11-98; 8:45 am]
BILLING CODE 8010-01-M