[Federal Register Volume 64, Number 204 (Friday, October 22, 1999)]
[Notices]
[Pages 57167-57168]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-27603]
[[Page 57167]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-42010; File No. SR-Amex-99-35]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the American Stock Exchange LLC to Rescind Exchange Rule 106
October 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 September 1, 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. 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.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange proposes to rescind Exchange Rule 106, ``Substitute
Principal,'' in its entirety. The Exchange believes that Rule 106 no
longer serves any purpose and may allow parties to Exchange contracts
to break trades without appropriate justification. The text of the
proposed rule change is available at the Exchange 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 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
Items 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Exchange Rule 106 currently provides that: ``No party to a contract
shall be compelled to accept a substitute principal unless the name
proposed to be substituted was declared in, and as part of, the bid or
offer giving rise to the contract.'' Although the Exchange traces Rule
106 back to the 1921 Constitution of the New York Curb Market,\3\ a
predecessor of the Exchange, the Exchange could not determine the
original purposes of Rule 106. While the original rationale underlying
Rule 106 is unknown, an exchange member recently invoked Rule 106 to
attempt to renege on a contract when the member's counterparty
initially provided an incorrect give-up, and later sought to correct
the error by substituting the name of the correct clearing member.
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\3\ Section 7 of Article XXIV of the 1921 Constitution of the
New York Curb Market stated: ``No party to a contract shall be
compelled to accept a substitute principal, unless the name proposed
to be substituted shall be declared in making the offer and as a
party thereof.''
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The Exchange believes that Rule 106 is an artifact of another era
and no longer serves any useful purpose in view of modern comparison
and settlement facilities. The Exchange further believes that the
substitution of the National Securities Clearing Corporation as the
contraside to every compared trade and the clearing corporation
guarantee obviate any former need that Exchange members may have had to
maintain control overtrading counterparties. Because Rule 106 may have
the pernicious effect of permitting parties to Exchange contracts to
break trades without appropriate justification, the Exchange believes
that Rule 106 should be deleted in its entirety.
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; 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; remove impediments to and perfect the mechanism of a free
and open market and a national market system; protect investors and the
public interest; and is not designed to permit unfair discrimination
between customers, issuers, brokers, or dealers.
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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 Exchange believes that the proposed rule change will not impose
any 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
The Exchange has neither solicited nor received written comments on
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 Exchange consents, the Commission will:
(A) by order approve such 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 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-
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 Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549-0609. 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-Annex-99-35 and
should be submitted by November 12, 1999.
[[Page 57168]]
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 99-27603 Filed 10-21-99 8:45 am]
BILLING CODE 8010-01-M
