[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]


=======================================================================
-----------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \9\ See supra note 6.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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.

[[Page 51568]]

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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-24802 Filed 9-22-99; 8:45 am]
BILLING CODE 8010-01-M