[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
