[Federal Register Volume 62, Number 222 (Tuesday, November 18, 1997)]
[Notices]
[Pages 61566-61567]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-30178]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39315; File No. SR-AMEX-97-43]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the American Stock Exchange,
Inc. Relating to a Reduction in Minimum Size for Closing Transactions
in FLEX Equity Options
November 10, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19n-4 thereunder,\2\ notice is hereby given that
on November 4, 1997, the American Stock Exchange, Inc. (``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 Amex.
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 Amex proposes to amend Exchange Rule 903G to decrease from 100
contracts to 25 contracts the minimum value size of closing
transactions and quotes for Flex Equity Options. The text of the
proposed rule change is available at the Office of the Secretary, the
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 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 purpose of the proposed rule change is to reduce from 100
contracts to 25 contracts the minimum value size of closing
transactions in and exercises of FLEX Equity Options, and to make a
comparable reduction in the minimum value size of FLEX Equity Quotes in
response to a Request for Quotes.
Currently, Rule 903G(a)(4)(iii) imposes a 100 contract minimum on
all transactions in FLEX Equity Options unless the transaction is for
the entire remaining position in the account. The Exchange believes
that the current minimum value size of closing and exercise
transactions in FLEX Equity Options is too large to accommodate the
needs of certain member firms and their customers. These firms may
purchase 100 or more FLEX Equity Options in an opening transaction for
a single firm account in which more than one of the firm's clients have
an interest.\3\ If one of these clients wants to redeem its investment
in the account, the firm likely will want to engage in a closing or
exercise transaction in order to reduce the account's position in those
FLEX Equity Options by the number being redeemed. Thus, if the
redeeming client's interest is less than 100 FLEX Equity Options and
does not represent the total remaining position in the account, Rule
903G(a)(4)(iii), as it stands presently, prevents the firm from closing
or exercising positions of this size.
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\3\ The Commission notes that the minimum size for an opening
transaction in a Request for Quotes is 250 contracts for any FLEX
series in which there is no open interest, and 100 contracts in any
currently opened FLEX series. See Amex Rule 903G(a)(4)(ii) and
(iii).
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[[Page 61567]]
The Exchange believes that the proposed rule change would remedy
the situation described above, by permitting an order to close or
exercise as few as 25 FLEX Equity Option contracts. The corresponding
change to Rule 903G(a)(4)(iv), which governs the minimum size for FLEX
Equity Quotes that may be entered in response to Request for Quotes, is
necessary in order to provide the liquidity needed to facilitate the
execution of closing orders between 25 and 99 FLEX Equity Option
contracts that would be permitted by the proposed amendment to Rule
903G(a)(4)(iii).
The Exchange represents that it will issue a circular that (1)
describes the new rule; and (2) reminds all members and member firms of
their continuing responsibility to ensure that FLEX Equity Options are
utilized only by sophisticated investors with the necessary financial
resources to sustain the possible losses arising from transactions in
the requisite FLEX Equity Options class size.\4\
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\4\ The Commission's staff has reviewed the Annex's surveillance
program and believes it provides a reasonable framework in which to
monitor investor open interest to ensure that only such
sophisticated investors are utilizing this product. Nonetheless, the
Commission requests that the Exchange provide a report to the
Commission's Division of Market Regulation describing the nature of
investor participation in FLEX Equity Options for one year from the
implementation date for the rule change. The report is due on
December 31, 1998. If the Exchange determines in the interim that
the proposed rule change has resulted in a pattern of inappropriate
investor participation in FLEX Equity Options, it should notify the
Commission's Division of Market Regulation to determine if the
minimum closing transaction sizes should be modified.
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2. Statutory Basis
The Exchange believes that by providing firms and their customers
greater flexibility to trade FLEX Equity Options by lowering from 100
to 25 the minimum number of contracts required for a closing
transaction, for exercises, and for FLEX Quotes responsive to a Request
for Quotes, the proposed rule change is consistent with and furthers
the objectives of Section 6(b)(5) of the Act \5\ by removing
impediments to and perfecting the mechanism of a free and open market
in securities and otherwise serving to protect investors and the public
interest.
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\5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Amex does not believe that the proposed rule change will 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
Written comments on the proposed rule change were neither solicited
nor received.
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;
and (3) does not become operative for 30 days from November 4, 1997,
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 days prior to the filing date, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \6\ and Rule 19b-
4(e)(6) \7\ thereunder.
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\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 17 CFR 240.19b-4(e)(6).
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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 furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing. 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 U.S.C. 552, will be available for inspection and copying in the
Commission's Public Reference Room, 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-97-43 and should be submitted by December 9,
1997.
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. 97-30178 Filed 11-17-97; 8:45 am]
BILLING CODE 8010-01-M
