[Federal Register Volume 59, Number 237 (Monday, December 12, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-30466]
[[Page Unknown]]
[Federal Register: December 12, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35050; File No. SR-Amex-94-51]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the American Stock Exchange, Inc. Relating to the In Person
Trading Volume Requirement for Registered Option Traders
December 5, 1994.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on November
18, 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.
I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule change
The Exchange proposes to amend Rule 958 to (a) require that a
Registered Option Trader (``Trader'') execute at least 25% of his/her
options transactions and volume in person\1\ and (b) provide that if a
Trader executes at least 80% of his options transactions and volume in
person, the Trader can receive favorable capital and margin treatment
for certain opening off-floor activity. The text of the proposed rule
change is available at the Office of the Secretary, the Amex, and at
the Commission.
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\1\``In person'' means that options transactions are personally
executed by the Trader on the Amex floor and not through the use of
orders given to a floor broker or left on a specialist's book.
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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
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 the
Statutory Basis for, the Proposed Rule Change
Exchange Rule 958 sets forth the obligations of Traders when they
initiate options transactions on the floor of the Exchange for accounts
in which they have an interest. These obligations include, but are not
limited to, contributing to the maintenance of fair and orderly
markets, bidding and offering within prescribed parameters and, when
establishing or increasing an options position, initiating such
transactions on the floor of the Exchange.
The Exchange now proposes to establish an additional requirement
that at least 25% of a Trader's transactions and contract volume during
each calendar quarter be executed in person and not through the use of
orders given to a floor broker or left on a specialist's book. The
Exchange believes that establishing such a requirement will result in
better, more liquid markets because Traders will be available in
trading crowds to contribute to the maintenance of fair and orderly
markets, to make competitive bids and offers, and to trade for their
own account when there exists a lack of price continuity, a temporary
disparity between the supply of and demand for options contracts or a
temporary distortion of the price relationships between options.
While the Exchange believes an in person requirement of 25% is
appropriate at this time, it is further proposed that the Exchange be
given the authority to increase the in person requirement above 25%
should such action be deemed necessary by the Exchange.
The Exchange also proposes to extend favorable capital and margin
treatment to certain opening orders entered by Traders from off the
Exchange floor provided at least 80% of their total transactions and
contract volume is executed in person during any calendar quarter.
These off-floor orders shall also be subject to Rule 958 and may be
effected only for the purpose of hedging, reducing the risk of, or
rebalancing a Trader's open positions.
Currently, pursuant to Exchange Rule 958, only transactions
initiated on the floor of the Exchange can count as Registered Trader
transactions.\2\ Only on-floor transactions qualify for favorable
capital and margin treatment, even if such orders are entered to adjust
or hedge the risk of a Trader's positions that are the result of on-
floor market making activity. Because Traders cannot, according to the
Exchange, effectively adjust positions or engage in hedging or other
risk-limiting opening transactions from off the Exchange floor without
incurring a significant economic penalty, they must be either
physically present on the floor at all times while the market is open,
or face significant risk of adverse market movements during those times
when they must necessarily be absent from the trading floor. The
Exchange believes that the imposition of these costs on such risk-
adjusting transactions prevents Traders from effectively discharging
their market making obligations and exposes them to unacceptable levels
of risk. The Exchange believes that the proposal presents a more
appropriate and realistic treatment of Traders' transactions initiated
from off-floor than is currently provided by Exchange rules. Extending
favorable capital and margin treatment to off-floor transactions to
those Traders who satisfy an 80% in person requirement will, in the
Exchange's opinion, increase the extent to which Traders' transactions
contribute to liquidity and to the maintenance of fair and orderly
markets by providing for a greater degree of in person trading and by
enabling Traders to better manage the risk of their market making.
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\2\See Amex Rule 958, Commentary .01.
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The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act, in general, and furthers the objectives
of Section 6(b)(5) 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.
(B) Self-Regulatory Organization's Statement on Burden on Competition
The Amex does not believe that the proposed rule change will impose
any inappropriate 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
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 Amex. All
submissions should refer to File No. SR-Amex-94-51 and should be
submitted by January 3, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\3\
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\3\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-30466 Filed 12-9-94; 8:45 am]
BILLING CODE 8010-01-M
