[Federal Register Volume 64, Number 184 (Thursday, September 23, 1999)]
[Notices]
[Pages 51566-51568]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-24802]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41877; File No. SR-Amex-99-32]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the American Stock Exchange
LLC Amending MOC and LOC Order Entry and Cancellation Procedures During
Regulatory Halts
September 14, 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 August 13, 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 Amex.
On September 13, 1999, the Exchange submitted Amendment No. 1.\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\ Letter from Michael Cavalier, Associate General Counsel,
Legal & Regulatory Policy, Amex, to Richard Strasser, Assistant
Director, Division of Market Regulation, SEC, dated September 9,
1999 (``Amendment No. 1''). In Amendment No. 1, the Exchange
clarified the purpose of the proposed rule change and provided a
definition of regulatory trading halt.
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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 its market-on-close (``MOC'') and limit-
on-close (``LOC'') order entry and cancellation procedures in the event
of a regulatory trading halt and procedures relating to the publication
of order imbalances following any type of trading halt.\4\ The text of
the proposed rule change is available at the Office of the Secretary,
the Amex and at the Commission.
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\4\ The changes proposed in this filing are identical to those
the Commission recently approved for the New York Stock Exchange.
See Exchange Act Release No. 41497 (June 9, 1999), 64 FR 32595 (June
17, 1999) (SR-NYSE-99-42).
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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
[[Page 51567]]
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
The Exchange's current MOC/LOC procedures require that MOC/LOC
orders in all common stocks, other than those that trade in units of
less than 100 shares be entered by 3:40 p.m. (New York time).\5\ After
3:40 p.m., MOC and LOC orders are accepted only to offset published
imbalances. In addition, after 3:40 p.m. MOC/LOC orders are irrevocable
except to correct an error.
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\5\ The Commission approved this policy in Exchange Act Release
No. 40123 (June 24, 1998), 63 FR 36280 (June 2, 1998) (SR-Amex-98-
10). This policy, which is also described in Amex Information
Circular 98-761 (June 26, 1998), as well as the policy changes
proposed herein, do not apply to any security the pricing of which
is based on another security or an index, such as derivatives,
warrants and convertible securities.
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Order imbalances must be published on the tape as soon as
practicable after 3:40 p.m. If there is an imbalance of 5,000 shares or
more. An order imbalance below 25,000 shares may also be published by a
specialist, with the concurrence of a Floor Official, if the specialist
anticipates that the execution prices of MOC or LOC orders on the book
will exceed the price change parameters of Amex Rule 154, Commentary
.08,\6\ or if the specialist believes that an order imbalance should
otherwise be published.
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\6\ Rule 154, Commentary .08 provides that no transaction in a
stock at a price of $20 or more a share may be made at two points or
more away from the last previous sale, no transaction in a stock at
a price of $10 or more (but less than $20) a share may be made at
one point or more away from the last previous sale, and no
transaction in a stock at a price of less than $10 a share maybe
made at \1/2\ point or more away from the last previous sale,
without the prior approval of a Floor Official.
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The exchange proposes to modify existing procedures relating to the
handling of MOC and LOC orders and the publication of order imbalances
in connection with trading halts, as described herein.
a. MOC/LOC Order Cancellation Procedures
The Exchanges proposes to modify MOC/LOC order cancellation
procedures if a regulatory halt \7\ is in effect at or after 3:40 p.m.
Current procedures prohibit cancellation of MOC/LOC orders under these
circumstances.
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\7\ A regulatory halt may be instituted in a security if the
Exchange determines that matters relating to the security or its
issuer have not been adequately disclosed to the public, or if there
are regulatory problems relating to such security that should be
clarified before trading is permitted to continue. The Exchange
follows the procedures set forth in Section XI(a) of the
Consolidated Tape Association (``CTA'') Plan when instituting
regulatory halts. See Exchange Act Release No. 10787 (May 10, 1974),
39 FR 17799; and Exchange Act Release No. 16983 (July 16, 1980), 45
FR 49414 (July 24, 1980).
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A stock may reopen following a regulatory halt at a price
significantly away from the last sale at the time such regulatory halt
took effect, which could potentially subject market participants to
significant market risk if they are unable to cancel previously entered
MOC or LOC orders. The Exchange believes it is appropriate, if a
regulatory halt is in effect at 3:40 p.m. or later, to permit Exchange
members to cancel MOC/LOC orders until 3:50 p.m. or the reopening of
the stock, whichever occurs first. The Exchange believes that the
proposed rule change will permit market participants to respond to
information not available before 3:40 p.m. This policy, however, does
not apply to non-regulatory (e.g., order imbalance or equipment
changeover) halts and cancellation of MOC/LOC orders after 3:40 p.m.
will not be permitted under such circumstances except to correct an
error.
b. MOC/LOC Order Entry Procedures
If a regulatory halt is in effect at 3:40 p.m. or occurs after that
time, the Exchange proposes to permit members to enter buy or sell MOC/
LOC orders until 3:50 p.m. or until the security reopens, whichever
occurs first. If an order imbalance is published following a regulatory
halt, entry of MOC/LOC orders would be permitted only to offset the
published imbalance.\8\ The proposed procedure addresses the situation
where a regulatory halt is in effect at or after 3:40 p.m., and market
conditions change significantly after the regulatory halt is imposed.
As with the proposed cancellation procedures, the Exchange believes
that these proposed entry procedures should reduce unnecessary market
risk which market participants are currently subject to as a result of
their inability to enter MOC/LOC orders after 3:40 p.m.
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\8\ Amex specialists are required to disseminate indications on
Tape B prior to reopening trading following a trading halt. A
minimum time period of ten minutes (five minutes in the case of an
equipment changeover halt) between the first indication and the
opening or reopening of a stock is required. For purposes of the
mandatory indications policy, the Exchange defines ``Regulatory
Halt'' as having the meaning assigned to it in the CTA Plan. See
Exchange Act Release No. 38549 (April 28, 1997), 62 FR 24519 (May 5,
1997) (SR-Amex-97-13).
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c. Order Imbalance Publication Procedures
The Exchange proposes to require specialists to publish order
imbalances of 25,000 shares or more, if practicable, in the event a
security reopens after 3:50 p.m. following a trading halt of any type.
Imbalances of less than 25,000 shares may be published, with the
concurrence of a Floor Official, if the specialist anticipates that the
execution of MOC/LOC orders on the book will exceed the price change
parameters of Amex Rule 154, Commentary .08,\9\ or if the specialist
believes that an order imbalance should otherwise be published.
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\9\ See supra note 6.
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Trading would not reopen in the event a trading halt in a stock
occurs after 3:50 p.m., or 3:55 p.m. in the case of an equipment
changeover halt, and MOC/LOC orders will not be executed. As a
practical matter, trading cannot reopen by 4:00 p.m. after these times
because as noted above (see supra note 8), a minimum time period of ten
minutes is required between the first indication disseminated after a
trading halt, or five minutes for an equipment changeover halt, and the
opening or reopening.
The Exchange will issue an Information Circular to members and
member organizations discussing these changes.
2. Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) \10\ of the Act, in general, and furthers the
objectives of Section 6(b)(5),\11\ in particular, because 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 system.
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\10\ 15 U.S.C. 78f(b).
\11\ 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 the proposed rule change will impose
any burden on competition that is not necessary or appropriate in
furtherance of the Act.
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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: (1) does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
(3) does not become operative for 30 days from August 13, 1999, the
date on which it is filed, and because 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) \12\ of the Act and
Rule 19b-4(b)(6) \13\ thereunder.\14\ At any time within 60 days of the
filing of the proposed rule change, the Commission may summarily
abrogate such rule change if it appears to the Commission that such
action is necessary or appropriate in the public interest, for the
protection of investors, or otherwise in the furtherance of the
purposes of Act.\15\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6).
\14\ The Commission notes that it recently approved identical
procedures for the New York Stock Exchange. See supra note 4.
\15\ 15 U.S.C. 78s(b)(3)(C).
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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 20549-0609.
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 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 File No. SR-Amex-99-32 and should
be submitted by October 14, 1999.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-24802 Filed 9-22-99; 8:45 am]
BILLING CODE 8010-01-M