[Federal Register Volume 59, Number 223 (Monday, November 21, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-28674]
[[Page Unknown]]
[Federal Register: November 21, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34971; File No. SR-Amex-94-42]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the American Stock Exchange, Inc. Relating to Short Sales of
Nasdaq/NM Securities of Companies Involved in Mergers or Acquisitions
November 14, 1994.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on October 14, 1994, 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 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) (1982).
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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 Rule 957 regarding the designation of
certain Nasdaq National Market securities (``NM securities'') by
specialists and registered options traders as exempt from the bid test
imposed under the NASD Rules of Fair Practice.
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 self-regulatory organization
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 self-regulatory organization
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
On September 6, 1994, the NASD put into effect a rule prohibiting
the execution of a short sale in NM securities at or below the current
inside bid when that inside bid is below the previous inside bid.\2\ In
part, the NASD's rule provides an exemption for qualified Amex options
specialists and Registered Options Traders (``Traders'') for which the
Exchange has also established rules to provide for this exemption for
those members.\3\ The Exchange now seeks to extend the exemption to
certain short sales of a company that is involved in a publicly
announced merger or acquisition with the issuer of a stock underlying
an option that is eligible for the exemption pursuant to Amex Rule 957
and the NASD's short sale rule.
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\2\See Securities Exchange Act Release No. 34277 (June 29,
1994), 59 FR 34885.
\3\See Securities Exchange Act Release No. 34632 (September 2,
1994), 59 FR 46999.
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The Exchange's proposal recognizes that when an NM security becomes
involved in a merger or acquisition, specialists and traders may need
to hedge positions in options on the NM security by buying or selling
shares of stock of the other company involved in the merger or
acquisition, whether or not the other company's stock has listed
overlying options. Indeed, where there are no options on that stock,
buying or selling the stock itself may at times be the only feasible
way for a specialist or trader to hedge a position in options on the NM
security, given the risk arbitrage relationship that is likely to exist
between the two stocks. The proposed rule change will facilitate
hedging by options specialists and traders by allowing them to sell
short shares of the ``other'' company involved in the merger for
hedging purposes and designate those short sales as exempt from the
NASD's short sale rule. The Exchange believes that its proposed rule
change will enhance the ability of specialists and traders to perform
their market-making functions, which will contribute to the liquidity
of the market for options, as well as the market for stocks of both
companies.
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act. Specifically, the Exchange believes that
its proposal is consistent with the objectives of Section 6(b)(5) 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.
(B) Self-Regulatory Organization's Statement on Burden on Competition
The Amex believes that the proposed rule change will not impose any
burden on competition.
(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
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 self-regulatory organization 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. 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 Section, 450 Fifth Street, N.W.,
Washington, D.C. Copies of such filing will also be available for
inspection and copying at the principal office of the above-mentioned
self-regulatory organization. All submissions should refer to File No.
SR-Amex-94-42 and should be submitted by December 12, 1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\4\
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\4\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-28674 Filed 11-18-94; 8:45 am]
BILLING CODE 8010-01-M
