[Federal Register Volume 63, Number 204 (Thursday, October 22, 1998)]
[Notices]
[Pages 56668-56669]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-28318]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40559; File No. SR-Amex-98-35]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the American Stock Exchange,
Inc. Relating to Opening Transactions in Flexible Equity Options
October 15, 1998.
Pursuant to Section 19(b)(1) of the Securities and Exchange Act of
1934\1\ notice is hereby given that on September 28, 1998, the American
Stock Exchange, Inc. (``Amex'' or ``Exchange'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I, II, and III below, which Items have
been prepared by the Exchange. 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).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Amex proposes to change the required minimum value size for
opening transactions in FLEX Equity Options series that have no open
interest, so that the minimum value size will be the lesser of 250
contracts or the number of contracts overlying $1 million of the
underlying securities. The text of the proposed rule change is
available at the Office of the Secretary, Amex and at the Commission.
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 statutory 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
Statutory Basis for, the Proposed Rule Change
(1) Purpose
The Exchange is proposing to change the minimum value size for
opening transactions (other than FLEX Quotes responsive to FLEX Request
for Quotes) in any FLEX Equity Option series in which there is no open
interest at the time the Request for Quotes is submitted. Currently,
Rule 903G states that the minimum value size for these opening
transactions shall be 250 contracts. The Exchange is proposing to
change this rule such that the minimum value size for these
transactions shall be the lesser of 250 contracts or the number of
contracts overlying $1 million of the underlying securities.
The Exchange is proposing this change because it believes the
current rule is overly restrictive. The rule was originally put in
place to limit participation in FLEX Equity options to sophisticated,
high end worth individuals. However, the Exchange believes that this
limit tied to the number of contracts alone hurts the liquidity and
trading interest in FLEX Equity Options for higher priced equities. The
Exchange believes the value of the securities underlying FLEX Equity
Options is just as valid a restraint as one tied solely to the number
of contracts and if set at the right limit can prevent the
participation of investors who do not have adequate resources. In fact,
the limitation on the minimum value size for opening transactions in
FLEX Index Options is tied to the same type of standard, the Underlying
Equivalent Value. The Exchange believes the number of contracts
overlying $1 million in underlying securities is adequate to provide
the right amount of investor protection. An opening transaction in a
FLEX Equity series on a stock priced at more than $40 would reach this
limit before it would reach the contract size limit i.e., 250 contracts
times the multiplier (100) times the stock price ($40) equals $1
million in underlying value. It should also be noted that the minimum
value size in FLEX Equity series overlying low priced stocks may
currently be permitted although the transaction may overlie a much
smaller value. For example, FLEX Equity Options overlying a $10 stock
would be permitted although the underlying value for Options may be
$250,000 i.e., 250 times 100 (multiplier) times $10 (stock price).
(2) Basis
The Amex believes that the proposed rule change is consistent with
Section 6(b) of the Act,\2\ in general, and furthers the objectives of
Section 6(b)(5),\3\ 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 mechanisms of a free and open
market and a national market system.
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\2\ 15 U.S.C. 78f(b).
\2\ 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
Because the foregoing proposed rule change is based on
substantively identical rules relating to the minimum opening
transaction size in FLEX Equity Options at the Chicago Board Options
Exchange, Inc.\4\ and: (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 September 28, 1998, the date on which it was filed, and 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) of
the Act \5\ and Rule 19b-4(e)(6) \6\ thereunder.\7\ 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 furtherance of the
purposes of the Act.
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\4\ See Securities Exchange Act Release No. 40451 (September 18,
1998), 63 FR 51393 9September 25, 1998).
\5\ 15 U.S.C. 78s(b)(3)(A).
\6\ 17 CFR 240.19b-4(e)(6).
\7\ In reviewing this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing,
[[Page 56669]]
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,
N.W., Washington, D.C. 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 US.C. 552, will be
available for inspection and copying in the Commission's Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549.
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-98-35 should be submitted by November 12, 1998.
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. 98-28318 Filed 10-21-98; 8:45 am]
BILLING CODE 8010-01-M
