[Federal Register Volume 64, Number 121 (Thursday, June 24, 1999)]
[Notices]
[Pages 33941-33942]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-16039]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41536; File No. SR-AMEX-99-18]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange LLC Relating to an Amendment To 
Amex Rule 901C

June 17, 1999.
    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 May 17, 1999, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items, I, II and III below, which Items have been prepared by the 
Exchange. Amex filed Amendment No. 1 on June 3, 1999.\3\ 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.
    \3\ See letter from Scott G. Van Hatten, Legal Counsel, 
Derivative Securities, Amex, to Richard Strasser, Assistant 
Director, Division of Market Regulation, SEC, on June 4, 1999. In 
Amendment No. 1, Amex amended the proposed rule text. The amendment 
is incorporated into this filing.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    Amex proposes to add Commentary .03 to Exchange Rule 901C to permit 
the Exchange to split stock indices without having to file a proposed 
rule change under Section 19(b) of the Act.\4\ Proposed additions are 
in italics.
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    \4\ 15 U.S.C. 78s(b).
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Designation of Stock Index Options

    Rule 901C (a)-(c)  No change.
    Commentary .01-.02  No change.
    .03  The Exchange may split index values from time to time in 
response to prevailing market conditions upon reasonable advance 
written notice to the membership. In effecting an index split, the 
Exchange will increase the applicable index divisor, proportionally 
increase the number of contracts outstanding and increase the index 
option's applicable position and exercise limits. Upon expiration of 
the furthest non-LEAP index option contract, the position and 
exercise limit revision to accommodate positions outstanding prior 
to the index split will revert to their then applicable limit.

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 Exchange 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 Exchange 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 Amex proposes to add Commentary .03 to Amex Rule 901C to 
establish criteria for the splitting of stock indexes. Over the past 
year, the Exchange submitted, and the Commission approved, three 
separate proposals to split six stock indexes with two of those indexes 
split on two occasions.\5\ More recently, the Exchange submitted yet 
another proposal to split the Morgan Stanley High Technology Index to 
one half its current value \6\ and has received additional requests to

[[Page 33942]]

submit further proposals to the Commission to split other stock 
indexes.
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    \5\ See Securities Exchange Act Release Nos. 39775 (March 20, 
1998), 63 FR 14741 (March 26, 1998) (Securities Broker/Dealer 
index); 39941 (May 1, 1998), 63 FR 25251 (May 7, 1998) (Amex Airline 
and de Jager Year 2000 indexes); 39933 (April 30, 1998), 63 FR 25249 
(May 7, 1999) (Institutional index); and 41164 (March 12, 1999), 64 
FR 13836 (March 22, 1999) (Amex Airline, Natural Gas, Pharmaceutical 
and Securities Broker/Dealer indexes).
    \6\ See Securities Exchange Act Release No., 41472 (June 2, 
1999), 64 FR 31331 (June 10, 1999).
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    In the previous cases, the Exchange handled each of the stock index 
splits in a similar manner, splitting an index two for one by doubling 
the index divisor, issuing one additional contract for each outstanding 
index option contract, and dividing the strike price in half for each 
series. The Exchange issued an informational circular to the membership 
with details concerning the index split and the doubling of position 
and exercise limits until the expiration of the furthest non-LEAP 
option contract. Position and exercise limits for each index reverted 
to their then applicable level.
    To permit the Exchange to split broad-based and narrow-based stock 
indexes without submitting a proposed rule change for review by the 
Commission, the Exchange proposes to add to its trading rules criteria 
regarding splitting an index.\7\ Specifically, the Exchange proposes to 
add Commentary .03 Exchange Rule 901C to permit various indexes to be 
split from time to time subsequent to the issuance of an Informational 
Circular to the Exchange's membership. Position and exercise limits 
that would be increased to accommodate any outstanding index option 
positions would revert, following the expiration of the furthest non-
LEAP option contract, to their then applicable limit.
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    \7\ The Commission noted in its release adopting new Rule 19b-
4(e), 17 CFR 240.19b-4(e), that if the trading rules, procedures and 
listing standards for the product class include criteria regarding 
splitting an index, such changes would be permitted without being 
considered a material change to the derivative securities product 
and without requiring the filing of a proposed rule change pursuant 
to Section 19(b) of the Act. See Securities Exchange Act Release No. 
40761 (December 8, 1998), 63 FR 70952 (December 22, 1998).
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    The Exchange believes that the proposal is appropriate because its 
procedures for handling such stock splits are well established and have 
been consistently applied with prior notice given to Exchange members. 
Further, the Exchange has experienced no difficulty in, and has not 
received comments in opposition to, effecting such splits. The Exchange 
also believes that investors are readily familiar with periodic common 
stock splits, and adjustments to options overlying such stocks are 
handled in much the same was as index splits and do not require 
Commission review or approval. Lastly, the Exchange believes that the 
proposal raises no new or novel regulatory issues for the Commission, 
given its prior review and approval of various stock index splits in 
the past.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the Act 
\8\ in general and furthers the objectives of Section 6(b)(5) \9\ 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.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 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 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 self-regulatory organization consents, the Commission will:
    (A) By order approve the 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, as amended, 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 20549-0609. 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 at the Commission's Public Reference Room. Copies of such 
filing will also be available for inspection and copying at the 
principal office of the Exchange. All submissions should refer to File 
No. SR-AMEX-99-18 and should be submitted by July 15, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(A)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-16039 Filed 6-23-99; 8:45 am]
BILLING CODE 8010-01-M