[Federal Register Volume 59, Number 26 (Tuesday, February 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-2771]
[[Page Unknown]]
[Federal Register: February 8, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33561; File No. SR-Amex-93-15]
Self-Regulatory Organizations; Filing and Order Granting Partial
Accelerated Approval of Proposed Rule Change by the American Stock
Exchange, Inc. Relating to an Extension of Its Pilot After-Hours
Trading Facility
February 1, 1994.
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 April 21, 1993, 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 and
II below, which Items have been prepared by the self-regulatory
organization. On January 4, 1994, the Amex amended the filing to
request that the pilot program for its After-Hours Trading facility be
extended for a three-month period, until April 30, 1994, while the
Commission considers the Exchange's request for permanent approval of
the pilot program.\3\ 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) (1988).
\2\17 CFR 240.19b-4 (1991).
\3\As originally filed, File No. SR-Amex-93-15 requested
permanent approval of Amex's pilot After-Hours Trading facility. On
January 4, 1994, the Amex amended the filing with an additional
request for a three-month extension of the pilot in order to give
the Commission adequate time to consider the request for permanent
approval and requested that the extension be granted accelerated
approval. See letter from William Floyd-Jones, Jr., Amex, to Sandra
Sciole, Special Counsel, Commission, dated December 23, 1993.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to extend its pilot After-Hours Trading
(``AHT'') facility through April 30, 1994. The current pilot program
was scheduled to expire on January 31, 1994.
The Exchange requests accelerated approval of the proposed rule
change. The Exchange believes that accelerated effectiveness is
appropriate since it would permit the Exchange's existing AHT facility
to continue operating while the Commission considers permanent approval
of the facility. The proposal to extend the AHT pilot, therefore, does
not raise any new questions for the commission's consideration.
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 III 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
1. Purpose
In August 1991, the Commission partially approved the Exchange's
AHT facility on a temporary basis.\4\ This facility permits the
execution of coupled and single-sided closing price orders after the
close of the 9:30 a.m. to 4 p.m. trading session. Commencing at 4:15
p.m., single-sided round lot orders for equity securities can be
entered through the Exchange's PER system or left with the specialist
or the specialist's authorized representative for matching and
execution at 5 p.m. at the Exchange's last closing regular way price.
Coupled buy and sell round lot, odd lot and partial round lot orders
also can be entered through the PER system, or left with the specialist
for execution at 5 p.m. against each other at the Exchange's last
regular way price. Members are permitted to designate good `til
cancelled (``GTC'') limit orders entered during the regular trading
session as eligible for execution in the AHT session. Such orders are
marked ``GTX'' and migrate to the AHT facility for possible
execution.\5\
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\4\See Securities Exchange Act Release No. 29515 (August 2,
1991), 56 FR 37736 (August 8, 1991) (order approving File No. SR-
Amex-91-15) (Amex AHT Approval Order).
\5\The Commission notes that the Amex's AHT facility enables
members, not including specialists, to enter both proprietary and
agency orders in any Exchange traded equity security, including
stocks, rights, warrants, primes and scores, ADRs, and non-option
equity derivative products, for execution at the Exchange's last
closing regular way price.
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The Commission stated in its order approving the AHT facility that
it would review the operation of the facility during the temporary
approval period. In this regard, the Commission asked the Exchange to
assemble data on the operation of the facility which the Exchange
submitted under separate cover. It is the Exchange's opinion that the
system has functioned well during the temporary approval period and
that the operation of the system has not had any adverse effects upon
the development of the national market system. The Exchange, therefore,
seeks a three month extension for its AHT facility.\6\
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\6\File No. SR-Amex-93-15 also requested Commission approval for
specialist participation in the AHT facility for investment trust
securities listed pursuant to Section 118B of the Exchange's Listing
Guidelines. This order approves on an accelerated basis until April
30, 1994, only that portion of File No. SR-Amex-93-15 which
establishes the AHT facility and which allows members, not including
specialists, to enter proprietary and agency orders in Exchange-
traded equities. The Commission is not approving the portion of the
proposed rule change which allows specialists to participate in any
way for their own accounts in the AHT facility. See File No. SR-
Amex-93-15. See also letter amendment dated December 23, 1993, supra
note 3.
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2. Statutory Basis
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, promote just and equitable principles of trade, remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general, protect investors and the
public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change will impose no 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 of the
proposed rule change.
III. 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, NW., Washington, DC 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 at the
Commission's Public Reference Room, 450 Fifth Street, NW., Washington,
DC 20549. Copies of the 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-93-15 and should be submitted by March 1,
1994.
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
For the reasons set forth below, the Commission finds that approval
of the Exchange's proposed rule change, for a temporary period ending
on April 30, 1994, is consistent with the Act and the rules and
regulations thereunder applicable to a national securities exchange,
and, in particular, with the requirements of sections 6 and 11A of the
Act.\7\ The Commission believes that the Amex proposal is reasonably
designed to promote just and equitable principles of trade, perfect the
mechanism of a free and open market and a national market system, and,
in general, further investor protection and the public interest in fair
and orderly markets on national securities exchanges, as well as
facilitate the linking of qualified markets through appropriate
communications systems and execution of investors' orders in the best
market.
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\7\ 14 U.S.C. Secs. 78f and 78k-1 (1988). See Amex AHT Approval
Order, supra note 4, for a complete description of the AHT
procedures and the Commission's rationale for approving the proposal
on a pilot basis. The discussion in that order is incorporated by
reference into this order.
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In the Commission's release approving the New York Stock Exchange's
(``NYSE'') Off-Hours Trading (``OHT'') facility, the Commission noted
the benefits that would accrue to investors through the development of
an after-hours trading session.\8\ By allowing Amex members to enter
single-sided and coupled orders into an after-hours facility, as well
as permitting the migration of certain limit orders (GTX orders) from
the regular 9:30 a.m. to 4 p.m. trading session for possible execution
in the AHT facility, the Amex is providing a mechanism for maintaining
its own individual marketplace on a competitive level with the NYSE and
the regional exchanges.\9\ Accordingly, the Commission believes that
the proposed rule change which enables members to enter both
proprietary and agency orders in Exchange-traded equity securities,
including stocks, rights, warrants, primes and scores, ADRs, and non-
option equity derivative products, for execution at the Exchange's last
closing regular way price should be extended until April 30, 1994.
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\8\ See Securities Exchange Act Release No. 29237 (May 24,
1991), 56 FR 24853 (May 31, 1991) (approving File Nos. SR-NYSE-90-52
and SR-NYSE-90-53).
\9\ Concurrently with this order, the Commission is also
approving proposals submitted by the NYSE, the Boston Stock
Exchange, Inc. (``BSE''), the Chicago Stock Exchange, Inc.
(``CHX''), the Philadelphia Stock Exchange, Inc. (``Phlx'') and the
Pacific Stock Exchange, Inc. (``PSE''), to extend, through April 30,
1994, the respective pilot programs in place on those exchanges
which provide for executions of securities during after-hours
trading sessions. See Securities Exchange Act Release Nos. 32362
(May 25, 1993) (order approving File No. SR-NYSE-93-23); 32365 (May
25, 1993) (order approving File No. SR-BSE-93-10); 32368 (May 25,
1993) (order approving File No. SR-MSE-93-06); 32364 (May 25, 1993)
(order approving File No. SR-Phlx-93-16); and 32367 (May 25, 1993)
(order approving File No. SR-PSE-93-6).
In 1991, the Commission approved proposals submitted by the BSE,
CHX, Phlx, and PSE which require their specialists to provide
primary market protection to limit orders, designated as executable
after the close of the regular trading session, based on volume that
prints in the primary market's after-hours session. See Securities
Exchange Act Release Nos. 29301 (June 13, 1991) 56 FR 28182
(granting temporary accelerated approval to File No. SR-BSE-91-04;
29297 (June 13, 1991), 56 FR 28191 (granting temporary accelerated
approval to File No. MSE-91-11); 29300 (June 13, 1991), 56 FR 28212
(granting temporary partial approval to File No. SR-Phlx-91-26) and
29749 (September 27, 1991), 56 FR 50405 (order granting temporary
accelerated approval to File No. SR-Phlx-91-32); 29305 June 13,
1991), 56 FR 28208 (granting partial temporary accelerated approval
to File No. SR-PSE-91-21); and 29543 (August 9, 1991), 56 FR 40929
(order granting accelerated approval to File No. SR-PSE-28). On May
25, 1993, the Commission approved extensions of the Amex, NYSE, CHX,
BSE, PSE, and Phlx pilots until January 31, 1994. See Securities
Exchange Act Release No. 32365 (May 25, 1993), 58 FR 31560 (June 3,
1993) (order granting accelerated approval to File No. SR-BSE-93-
10); Securities Exchange Act Release No. 32363 (May 25, 1993), 58 FR
31558 (June 3, 1993) (order granting accelerated approval to File
No. SR-Amex-93-19); Securities Exchange Act Release No. 32368 (May
25, 1993), 58 FR 31563 (June 3, 1993) (order granting accelerated
approval to File No. SR-MSE-93-6); Securities Exchange Act Release
No. 32367 (May 25, 1993), 58 FR 31570 (June 3, 1993) (order granting
accelerated approval to File No. SR-PSE-93-6); Securities Exchange
Act Release No. 32364 (May 25, 1993), 58 FR 31574 (June 3, 1993)
(order granting accelerated approval to File No. SR-Phlx-93-16) and
Securities Exchange Act Release No. 32362 (May 25, 1993), 58 FR
31565 (June 3, 1993) (order granting accelerated approval to File
No. SR-NYSE-93-23). All of the after-hours pilot programs were
scheduled to expire January 31, 1994.
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In its orders approving and extending the Amex AHT pilot program,
the Commission requested that the Amex provide the Commission with
specific data and a report regarding the operation of the Amex's AHT
pilot.\10\
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\10\ Among other things,the Commission requested that the Amex
monitor and report on GTX, single-sided and coupled order executions
in its trading floor to ensure that Amex specialists are not taking
unfair advantage of information derived regarding which orders on
their books are designated GTX and the priority among those orders.
In addition, the Commission requested that the following information
(broken down by month) be included in the Amex report: trading
volume (trades and number of shares) in after-hours session; the
number, if any, of (1) single-sided orders; (2) coupled buy and sell
orders; and (3) GTX orders executed in the after-hours session; the
number, if any, of single-sided and coupled orders comprised of
primes and scores or comprised of equity derivative products that
are executed in the after-hours session; the number, if any, of (1)
single-sided orders; and (2) single-sided GTX orders that remained
unexecuted at the end of the after-hours session; the number and
percentage of GTC orders on the book that were designated ``GTX'';
the number of member firms participating in the after-hours session;
whether the Amex marketplace has experienced any increased
volatility during the last hour of the 9:30 a.m. to 4 p.m. trading
session after the initiation of the after-hours session; whether
there were greater (wider) quote spreads during the last hour of the
9:30 a.m. to 4 p.m. trading session after the initiation of the
after-hours session; whether there was a diminution in the number of
block transactions during the last hour after the initiation of the
after-hours session; and the degree to which transactions were
entered in the after-hours session to avoid the restrictions of the
short sale rule in the 9:30 a.m. to 4 p.m. trading session.
Furthermore, the Amex's report should also indicate: (1) How its
after-hours facility could link with the NYSE's OHT facility and any
other systems approved during the 16-month period; (2) how orders
entered on the other marketplaces could interact with orders in the
Amex's after-hours facility; and (3) how the intermarket issues
discussed in the Commission's order approving the AHT pilot would be
addressed. In this connection, however, the Commission underscored
its strong belief that resolution of intermarket issues would not be
solely a responsibility of the Amex, but would fall equally upon all
self-regulatory organizations proposing after-hours sessions.
In addition, the Commission stated that it expects the Amex,
through use of its surveillance procedures, to monitor for, and
report to the Commission any patterns of manipulation or trading
abuses or unusual trading activity resulting from the new rule.
Specifically, the Commission requested that the Amex monitor closely
the trading of primes and scores and equity derivative products in
the AHT facility to ensure that trading in these issues is not
subject to any patterns of manipulation or trading abuses or unusual
trading activity. Finally, the Commission requested that the Amex
keep the Commission apprised of any technical problems which may
arise regarding the operation of the pilot program, such as
difficulties in order execution or order cancellation.
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The Amex has reported to the Commission, on a monthly basis, the
number of trade and share volume of orders executed after the close
pursuant to the pilot procedures. In addition, on May 21, 1993, and
September 30, 1993, the Exchange filed with the Commission reports
which address the Exchange's experience with the AHT pilot through
September 1, 1993.\11\ The Commission expects the Exchange to submit to
the Commission by March 15, 1994, an updated report concerning pilot
activity through February 28, 1994.\12\
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\11\See letter from William Floyd-Jones, Jr., Assistant General
Counsel, Amex, to Diana Luka-Hopson, Esq., Branch Chief, Commission,
dated May 21, 1993, and letter from William Floyd-Jones, Jr.,
Assistant General Counsel, Legal & Regulatory Policy Division, Amex,
to Diana-Luka-Hopson, Branch Chief, Commission, dated September 30,
1993.
\12\See supra note 10 for the information required to be
provided in the updated reports.
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The Commission believes that it is reasonable to extend the pilot
program in order to provide the Amex and Commission with additional
time to review the pilot program. The pilot extension also will provide
the Commission with an opportunity to study the reports supplied by the
Amex. During the pilot extension, the Commission expects that the Amex
will continue to monitor the operation of the AHT pilot program. In
addition, the Commission continues to request that the Exchange keep
the Commission apprised of any technical problems or patterns of
manipulation or trading abuses which may arise regarding the operation
of the new rule.
The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of publication of
notice of filing thereof in the Federal Register. The Commission
believes that accelerated approval of the proposal is appropriate in
order to allow the Amex procedures to remain in place on an
uninterrupted basis. This will permit the Amex to continue to compete
with the NYSE's OHT facility, which in turn should benefit investors
and promote competition among markets.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act\13\ that a portion of the proposed rule change (Amex-93-15), as
discussed above, is hereby approved on a pilot basis through April 30,
1994.
\13\15. U.S.C. 78s(b)(2) (1988).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\14\
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\14\17 CFR 200.30-3(a)(12) (1991).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-2771 Filed 2-7-94; 8:45 am]
BILLING CODE 8010-01-M
