[Federal Register Volume 61, Number 55 (Wednesday, March 20, 1996)]
[Notices]
[Pages 11451-11452]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6644]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36956; File No. SR-Amex-96-05]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the American Stock Exchange, Inc. Relating to Assurances of
Delivery for Short Sales of Derivative Securities into an Underwriting
Syndicate's Stabilizing Bid
March 11, 1996
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. Sec. 78s(b)(1), notice is hereby given that on
January 31, 1996, 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 self-regulatory
organization. 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 Amex proposes to amend its policy to require that members
trading derivative securities as Registered Options Traders pursuant to
Amex Rule 958 make prior arrangements either to borrow the necessary
securities or to obtain other assurances that delivery can be made on
settlement date prior to effecting a short sale into an underwriting
syndicate's stabilizing bid.
The text of the proposed rule change is available at the Office of
the Secretary, 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
Since 1989, the Exchange has required members and member
organizations effecting short sales for both customer and proprietary
accounts either to make prior arrangements to borrow the securities or
to obtain acceptable assurances that delivery can be made on settlement
date.\1\ Such assurances include knowledge that the security is
available for borrowing, conversion privileges, rights exercises or
other similar situations so long as the security needed for delivery
can be timely obtained. Short sales by specialists, market makers and
odd-lot dealers in fulfilling their market making responsibilities are
excepted from this requirement. Arbitrageurs and other traders may not
rely upon this ``market maker'' exception.
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\1\ See Securities Exchange Act Release No. 27542 (Dec. 15,
1989).
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In 1992, the Exchange amended its rules to permit regular members
to register as Registered Options Traders (``ROTs'') in order to trade
index warrants for their own account subject to Amex Rule 958.\2\ The
Exchange deemed it desirable to enable members to trade these equity
derivative securities \3\ subject to Rule 958 (which affords specialist
``good faith'' margin treatment and an exemption from stabilization
requirements) instead of the more restrictive provisions of Rules 111
and 114 applicable to Registered Equity Market Makers because the
Exchange believed that application of Rules 111 and 114 to index
warrants would make it unlikely that members would trade such
securities. However, the 1992 rule change also had the effect of
exempting members trading as ROTs from the short sale policy given
their market making activities in index warrants.
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\2\ See Securities Exchange Act Release No. 24277 (June 8,
1992). The SEC has recently approved an Amex proposal to allow
regular members to trade currency warrants for their own account
subject to the provisions of Amex Rule 958. See Securities Exchange
Act Release No. 36852 (Feb. 15, 1996).
\3\ The term ``equity derivative security'' refers to an
underwritten security the value of which is determined by reference
to another security, or to a currency, commodity, interest rate or
index of the foregoing. Such securities are commonly listed pursuant
to Exchange Company Guide Sections 106, 107, 118 or Amex rule 1102.
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The Exchange now proposes a narrow modification to its short sale
policy which would require members who register as ROTs and trade
equity derivatives pursuant to Rule 958 to make prior arrangements to
borrow these securities or obtain other acceptable assurances that
delivery can be made on settlement date when selling short into the
stabilizing bid of an underwriting syndicate. Implementation of the
modified short sale policy is expected to provide increased stability
to the market for listed Amex equity derivative securities
[[Page 11452]]
during a stabilized distribution by reducing the number of ``fails'',
i.e., when a short seller is unable to effect delivery of the security
to the purchaser, and resulting ``buy-ins'', i.e., when a purchaser
buys the security for the account of the short seller due to the
failure of the short seller to effect delivery in accordance with the
procedures of the clearing corporation.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) that an exchange have rules that are
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 regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes the proposed rule change will impose no
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
The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from members or other interested
parties.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the 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 the 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. Sec. 552, will be available for inspection and copying at
the Commission's Public Reference Section, 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-96-05 and should be
submitted by April 10, 1996.
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) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-6644 Filed 3-19-96; 8:45 am]
BILLING CODE 8010-01-M
