[Federal Register Volume 64, Number 4 (Thursday, January 7, 1999)]
[Notices]
[Pages 1037-1039]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-312]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40836; File No. SR-Amex-98-40]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change and Amendment No. 
1 Thereto by American Stock Exchange, LLC Relating to Mandatory Year 
2000 Testing

December 28, 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 October 14, 1998, as amended on December 21, 1998,\3\ the American 
Stock Exchange LLC (``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 Amex. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons and to approve the 
proposal and Amendment No. 1 thereto on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter from Geraldine M. Brindisi, Vice President and 
Corporate Secretary, Amex, to Michael Walinskas, Deputy Associate 
Director, Division of Market Regulation, Commission, dated December 
18, 1998. The original filing was not noticed in the Federal 
Register.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    Amex proposes to adopt new Rule 430, Mandatory Participation in 
Year 2000 Testing, that would require member firms to participate in 
computer system testing designed to prepare for the Year 2000 and to 
file reports with the Amex.
    The text of the proposed rule change is below. Proposed new 
language is italicized.
* * * * *

Rule 430

Mandatory participation in Year 2000 Testing

    Rule 430. Each member and member organization shall participate in 
industry testing of computer systems

[[Page 1038]]

designed to prepare for Year 2000, in a manner and frequency prescribed 
by the Exchange, and shall provide to the Exchange reports related to 
such testing as requested by the Exchange.
    Each member and member organization that clears securities 
transactions on behalf of other broker-dealers must take reasonable 
measures to ensure that each broker-dealer for which it clears 
securities transactions conducts testing with such member and member 
organization.

Commentary

    01. The Exchange may exempt a member or member organization from 
this requirement if that member or member organization cannot be 
accommodated in the testing schedule by the organization conducting the 
test or if the member or member organization does not employ computers 
in its business or for other good reasons.
    02. A member or member organization that is subject to the rule and 
fails to participate in the tests or fails to file any required reports 
may be subject to disciplinary action pursuant to the Exchange's rules.

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
    The securities industry has been considering proper systems 
preparation in order to avoid potential computer problems associated 
with the approach of the Year 2000. The primary concern is that 
computer systems may incorrectly read the date ``01/01/00'' as being 
the Year 1900 or another incorrect date.
    This concern has been addressed by the Exchange in stages, which 
have included assessment of the problem, implementation of corrective 
measures, internal testing, and ``BETA'' testing. The next stage 
involves industry-wide testing of computer systems. Test participants 
are scheduled to include, among others, exchanges, registered clearing 
corporations and depositories, data processors and broker-dealers.
    Testing by and among a broad range of securities industry 
participants will be of critical importance to ensure that the markets 
continue to operate efficiently after January 1, 2000. To facilitate 
testing on an integrated, industry-wide basis, the Securities Industry 
Association (SIA) has undertaken to coordinate these efforts. The first 
test is scheduled for March 6, 1999.
    Rule 430 is proposed to specifically authorize the Exchange to 
require that members and member organizations participate in such 
industry testing of computer systems in a manner and frequency as may 
be prescribed by the Exchange. Among other things, this testing may 
include the industry-wide test being coordinated by the SIA, all 
prerequisite testing for the integrated industry-wide test, point-to-
point testing and such other testing as the Exchange deems necessary 
and appropriate. Members and member organizations that clear securities 
transactions on behalf of other broker-dealers will be expected to take 
reasonable measures to ensure that each broker-dealer for which they 
clear securities transactions will conduct testing with such members 
and member organizations. Members and member organizations will also be 
required to provide, as requested by the Exchange, reports including, 
but not limited to, reports about preparation for testing and test 
results. The rule contemplates that the Exchange can exempt a member or 
member organization from this requirement if that member or member 
organization cannot be accommodated in the testing schedule by the 
organization conducting the test or if the member or member 
organization does not employ computers in its business or for other 
good reasons.
    A member or member organization that is subject to the rule and 
fails to participate in the tests or fails to file any required reports 
may be subject to disciplinary action pursuant to the Exchange's rules.
    Similar rule changes have been filed by the New York Stock Exchange 
and the National Association of Securities Dealers.
(2) Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \4\ in general, and furthers the 
objectives of Section 6(b)(5) \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 regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Amex believes that the proposed rule change will impose no 
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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Commission's Findings and Order Granting Accelerated Approval 
of Proposed Rule Change

    After careful consideration, the Commission has concluded, for the 
reasons set forth below, that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder. Mandating Year 2000 testing and reporting is consistent 
with Section 6(b)(95) of the Act, which, among other aspects, requires 
that the rules of an exchange promote just and equitable principles of 
trade, foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, and remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system. The Commission believes that the proposed rule change 
will facilitate the Amex's and member firms' efforts to ensure the 
securities markets' continued smooth operation during the period 
leading up to and beyond January 1, 2000.
    The Exchange has requested that the Commission approve the proposed 
rule change prior to the thirtieth day after publication of the 
proposal in the Federal Register, because members and member 
organizations need to promptly

[[Page 1039]]

begin preparing for industry-wide testing. The Commission finds good 
cause for approving the proposed rule change, including Amendment No. 1 
thereto, prior to the 30th day after the date of publication of notice 
of the filing in the Federal Register. It is vital that SROs such as 
the Amex have the authority to mandate that their member firms 
participate in year 2000 testing and that they report test results (and 
other Year 2000 information) to their SROs. The proposed rule change 
will help the Amex participate in coordinating Year 2000 testing, 
including industry-wide testing, and in remediating any potential Year 
2000 problems. This, in turn, will help ensure that the industry-wide 
tests and the Amex's Year 2000 efforts are successful. The proposed 
rule change will also help the Amex work with its member firms, the 
SIA, and other SROs to minimize any possible disruptions the Year 2000 
may cause.

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, 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 in Washington, DC. Copies of such 
filing will also be available for inspection and copying at the 
principal office of the Amex. All submissions should refer to File No. 
SR-Amex-98-40 and should be submitted by January 28, 1999.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\6\ that the proposed rule change and Amendment No. 1 thereto is hereby 
approved on an accelerated basis.\7\
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    \6\ 15 U.S.C. 78s(b)(2).
    \7\ In approving the proposal, the Commission has considered the 
rule's impact on efficiency, competition and capital formation. 15 
U.S.C. 78c(f).

    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. 99-312 Filed 1-6-99; 8:45 am]
BILLING CODE 8010-01-M