[Federal Register Volume 64, Number 218 (Friday, November 12, 1999)]
[Notices]
[Pages 61675-61676]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29535]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-42094; File No. SR-Amex 99-43]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the American Stock Exchange
LLC Relating to the Maximum Permissible Number of Equity and Index
Option Contracts Executable Through AUTO-EX
November 3, 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 October 28, 1999, the American Stock Exchange LLC (``Amex'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange.\3\ The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 USC 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ The initial filing of SR-Amex-99-43 received by the
Commission on October 21, 1999 serves as the required five day pre-
filing notice set forth in Rule 19b-4(f)(6)(iii) under the Act, 17
CFR 240.19B-4(f)(6)(iii). Thus, the filing date of SR-Amex-99-43 is
October 28, 1999. See Letter from Scott G. Van Hatten, Legal Counsel
for Amex, dated October 27, 1999.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange proposes to permit, on a case by case basis, the
execution of up to fifty option contracts through AUTO-EX. The text
ofthe proposed rule change is available at the Amex Office of the
Secretary and at the Commission.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for the Proposed Rule Change
1. Purpose
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
Item 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
I. Purpose
In 1985, the Exchange implemented the AUTO-EX system, which
automatically executes public customer market and marketable limit
orders in options at the best bid or offer displayed at the time the
order is entered into the Amex Order File (``AOF''). There are,
however, limitations on the number of option contracts that can be
entered into or executed by these systems. AOF, which handles limit
orders routed to the specialist's book as well as orders routed to
AUTO-EX, was recently increased to allow for the entry of orders of up
to 250 option contracts. AUTO-EX, however, is only permitted to
automatically execute equity option orders of 20 contracts or less
(except in emergency situations, in which case up to 50 contracts may
be executed) and
[[Page 61676]]
index option orders of 30 contracts or less.\4\ Therefore, market and
marketable limit orders of more than 20 or 30 contracts are routed by
AOF to the specialist's book.
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\4\ While the maximum permissible number of contracts in an
index option order executable through AUTO-EX is generally 30
contracts, there are a few exceptions: the Major Market Index allows
for 50 contract orders and the Institutional, Japan and S&P MidCap
400 Indexes allows contract orders.
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The Exchange now proposes to allow for the automatic execution of
orders of up to 50 contracts on a case-by-case basis, regardless of
whether an emergency condition exists. The Exchange is seeking the
flexibility to increase AUTO-EX parameters to better enable it to
compete in option classes that are also traded at other exchanges that
already have in place similar provisions concerning their respective
automatic execution systems.\5\ The Exchange represents that its
systems capacity is sufficient to accommodate the increased number of
automatic executions anticipated as a result of the implementation of
the proposed.
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\5\ The Pacific Exchange (``PCX'') and the Chicago Board Options
Exchange (``CBOE'') have already received Commission approval to
raise the number of options contracts handled by their auto-
execution systems to fifty. See Securities Exchange Act Release Nos.
41823 (September 1, 1999), 64 FR 49265 (September 10, 1999) and
41821 (September 1, 1999), 64 FR 50313 (September 16, 1999)
respectively.
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The Exchange proposes increasing AUTO-EX in permissible order size
to 50 contracts on a case-by-case basis, for an individual option class
or for all option classes, when two floor governors or senior floor
officials deem such an increase appropriate. At all other times, the
permissible order size for AUTO-EX will remain at the current levels.
AUTO-EX has been successful in enhancing execution and operational
efficiencies during emergency situations and during other nonemergency
situations for certain option classes. The Exchange believes automatic
executions of orders for up to 50 contracts will better allow for the
quick, efficient execution of public customer orders.
2. Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) of the Act \6\ in general and furthers the objectives of
Section 6(b)(5) \7\ 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 mechanism of a free and open
market and a national market system.\8\
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\6\ 15 USC 78f(b).
\7\ 15 USC 78f(b)(5).
\8\ In reviewing this proposal, the Commission has considered
its impact on efficiency, competition and capital formation. 15 USC
78c(f).
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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. Data of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
This proposed rule filing has been filed by the Exchange as a
``non-controversial'' rule change pursuant to Section 19(b)(3)(A)(i) of
the Act \9\ and subparagraph (f)(6) of rule 19b-4 thereunder.\10\
Consequently, because the foregoing proposed rule change:
\9\ 15 USC 78s(b)(3)(A)(i).
\10\ 17 CFR 240.19b-4(f)(6).
(i) Does not significantly affect the protection of investors or
the public interest;
(ii) does not impose any significant burden on competition; and
(iii) by its terms, does not become operative for 30 days after
the date of the filing, or such shorter time as the Commission may
designate if consistent with the protection of investors and the
public interest; provided that the self-regulatory organization has
given the Commission written notice of its intent to file the
proposed rule change, along with a brief description and text of the
proposed rule change, at least five business days prior to the date
of filing of the proposed rule change, or such shorter time as
designated by the Commission.
In this regard the Amex has agreed that the proposal need not
become operative for 30 days. In addition, the Amex provided the
Commission with written notice of its intent to file the proposed rule
change, along with a brief description and text of the proposed rule
change, more than five business days prior to the date of filing of the
proposed rule change.
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 the Act.\11\
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\11\ Although the Commission has a degree of comfort with
respect to the proposed increase, we note that any proposed
increases over fifty contracts may raise additional issues,
including such matters as market maker financial exposure, price
improvement, and quote dissemination. Because of these concerns, the
Commission welcomes the opportunity to review the Exchange's
experience with any increase in the maximum order size to fifty
contracts. If, in the future, exchanges seek to increase order size
levels above fifty contracts, this examination will help us assess
whether any such increases are appropriate and, if so,whether we
should seek addition assurance regarding such increases.
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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
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 filings will also be available
for inspection and copying at the principal office of the Amex. All
submissions should refer to file number SR-99-43 and should be
submitted by December 3, 1999.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-29535 Filed 11-10-99; 8:45 am]
BILLING CODE 8010-01-M
