[Federal Register Volume 62, Number 55 (Friday, March 21, 1997)]
[Notices]
[Pages 13728-13729]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-7192]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38409; File No. SR-Amex-97-02]
Self-Regulatory Organizations; Order Granting Approval to
Proposed Rule Change by American Stock Exchange, Inc., Relating to
Amendments to Rules 103 and 950 Regarding Intra-day Trading
March 14, 1997.
I. Introduction
On January 22, 1997, the American Stock Exchange, Inc. (``Amex'' or
``Exchange'') submitted to the Securities and Exchange Commission
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to adopt provisions restricting
intro-day trading.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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The proposed rule change was published for comment in the Federal
Register on February 12, 1997.\3\ No comments were received on the
proposal. This order approves the proposal.
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\3\ Securities Exchange Act Release No. 38243 (February 5,
1997), 62 FR 6590.
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II. Description of the Proposal
Presently, Rule 103(c) prohibits an Amex Floor member, with certain
exceptions, from exercising discretion with respect to the choice of
security to be bought or sold, the total amount of the security to be
bought or sold, or whether the transaction shall be a purchase or sale.
Currently, there are no provisions in Rule 103(c), or otherwise,
specifically governing the practice of intra-day trading. The term
``intra-day trading'' refers to the practice whereby a customer places
orders on both sides of the market and attempts to profit by buying at
the bid and selling at the offer.
The Exchange proposed to amend Rule 103 to add new intra-day
trading provisions. These provisions will apply only when a Floor
member simultaneously represents, for the same customer's account,\4\
market or limit orders on both sides of a minimum variation market.
Under the proposal, if a Floor member acquires a position on behalf of
an intra-day trader's account, Rule 103(c)(2) will place certain
restrictions on how the member can liquidate or cover that position
during the same trading session. Specifically, the member will be
required to obtain a new liquidating order (i.e., one entered
subsequent to the acquisition of the contra-side position) from his or
her customer. The new order must be time-recorded both upstairs and
upon receipt on the Trading Floor.
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\4\ For purposes of this Rule, an ``account'' would be deemed to
be any account in which the same person or persons is directly or
indirectly interested.
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Proposed Rule 103(c)(3) will require the Floor member to execute
the liquidating order entered pursuant to Rule 103(c)(2) before he or
she can execute any other order for the same account on the same side
of the market as that liquidating order. Pursuant to proposed
Commentary .01 to Rule 103, the new provisions will not apply, however,
to the execution of: an order to liquidate or cover a position carried
over from a previous trading session; a position assumed as part of a
strategy relating to bona fide arbitrage; or a position assumed in
reliance on the exemption for block positioners.
Proposed Commentary .02 sets forth examples of how the provisions
of Rule 103(c)(2) and (3) will operate, while proposed Commentary .03
details the types of orders that a Floor member may handle
simultaneously, without violating Rule 103's prohibition against a
member choosing whether a transaction will be a purchase or sale.
III. Discussion
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange.
Specifically, the Commission believe the proposal is consistent with
the requirements of Section 6(b)(5) of the Act.\5\
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\5\ 15 U.S.C. 78f(b)(5).
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[[Page 13729]]
The Commission believes the proposal is consistent with Section
6(b)(5) \6\ because it is designed to promote just and equitable
principles of trade and to help perfect the mechanism of a free and
open market. As described above, these new changes are intended to
address trading situations where a Floor member, representing at the
same time buy and sell orders at the minimum variation for the same
customer, may be perceived as having a time and place advantage over
other market participants in that he or she may be able to trade for
the same customer without leaving the Trading Crowd. By requiring the
entry of a new liquidating order, the Commission believes the proposed
rule will minimize any such perceived advantage.
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\6\ Id.
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In addition, the proposed rule change will conform the Exchange's
rules to the rules of another exchange, which also restricts intra-day
trading.\7\
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\7\ See New York Stock Exchange (``NYSE'') Rule 95; Securities
Exchange Act Release No. 34363 (July 13, 1994), 59 FR 36808 (July
19, 1994) (order approving the NYSE's amendments to Rule 95 which
added intra-day trading provisions). The Commission incorporates by
reference the discussion and analysis contained in the July 1994
Release.
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (SR-Amex-97-02) is approved.
\8\ 15 U.S.C. 78s(b)(2).
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For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 97-7192 Filed 3-20-97; 8:45 am]
BILLING CODE 8010-01-M
