[Federal Register Volume 64, Number 42 (Thursday, March 4, 1999)]
[Notices]
[Pages 10511-10512]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-5373]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41098; File No. SR-Amex-98-44]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change, as Amended, by
the American Stock Exchange LLC To Increase to Fifty, the Maximum
Permissible Number of Equity and Index Option Contracts in an Order
Executable Through AUTO-EX
February 24, 1999.
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 November 9, 1998, the American Stock Exchange LLC (``Amex'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
On December 31, 1998, the Exchange submitted Amendment No. 1 to the
proposed rule change.\3\ On February 2, 1999, the Exchange submitted
Amendment No. 2 to the proposed rule change.\4\ The Commission is
publishing this notice to solicit comment on the proposed rule change
from interested persons. For the reasons discussed below, the
Commission is granting accelerated approval of the proposed rule
change, as amended.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Letter from Scott G. Van Hatten, Legal Counsel,
Derivative Securities, Amex, to Richard Strasser, Assistant
Director, Division of Market Regulation (``Division''), SEC, dated
December 31, 1998 (``Amendment No. 1''). In Amendment No. 1, the
Amex represents that its systems capacity is sufficient to
accommodate the anticipated increased number of automatic
executions.
\4\ See Letter from Scott G. Van Hatten, Legal Counsel,
Derivative Securities, Amex, to Richard Strasser, Assistant
Director, Division, SEC, dated February 1, 1999 (Amendment No. 2).
In Amendment No. 2, the Exchange requests that the Commission find
good cause to grant accelerated approval of the proposal.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Amex proposes to increase the maximum permissible number of
equity and index option contracts in an order executable through the
AUTO-EX system to 50. 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 the statements may be examined at the places specified in item
III 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
In 1985, the Exchange implemented the AUTO-EX system, through which
public customer market and marketable limit orders are executed
automatically in options at the best bid or offer displayed at the time
the order is entered into the Amex Order File (``AOF''). There are,
however, limitations on the number of options contracts that can be
entered into or executed by these systems. AOF, which handles limit
orders routed to the specialist's book as well as orders routed to
AUTO-EX, currently allows for the entry of orders of up to 50 option
contracts. AUTO-EX, however, is only permitted to execute automatically
equity option orders of 20 contracts or less and index option orders of
30 contracts or less,\5\ thus market and marketable limit orders of
more than 20 or 30 contracts are routed by AOF to the specialist's
book.
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\5\ While the maximum permissible number of contracts in an
index option order executable through AUTO-EX is generally 30
contrcts, there are a few exceptions. (i.e., in the Major Market
Index, 50 contract orders may be automatically executed and in the
Institutional, Japan and S&P MidCap 400 Indexes, 99 contract orders
may be automatically executed.)
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The Amex is now proposing to increase the maximum permissible
number of equity and index option contracts in an order that can be
executed through the AUTO-EX system to 50 contracts. Thus, the maximum
permissible size of an option order--50 contracts--will be equivalent
for both orders entered into the specialist's book and those executed
through AUTO-EX. The Amex proposes that this increase in permissible
order size to 50 contracts for AUTO-EX be done on a case by case basis
for an individual option class, or for all option classes when two
floor governors or senior floor officials deem such an increase
appropriate. The Amex currently anticipates, however, that the ability
to execute orders of up to 50 contracts in AUTO-EX will only occur
during high volume, and/or high volatility emergency situations. At all
other times, the order size for AUTO-EX will remain at 20 contracts for
equity options, and 30 contracts for index options (or such larger size
currently in effect for certain index options).
The Amex indicates that AUTO-EX has been extremely successful in
enhancing execution and operational efficiencies during emergency
situations and during other, non-emergency situations for certain
option classes. Automatic executions of orders for up to
[[Page 10512]]
50 contracts during such high volume situations will help alleviate the
backlogging of orders in the systems and allow for the quick, efficient
execution of public customer orders. The Exchange represents that the
existing system is sufficient to implement the increase in order size.
The Amex indicates 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
improve 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 Exchange does not believe that the proposed rule change will
impose any 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 neither solicited nor received written comments on
the proposed rule change.
III. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposal is
consistent with the Act. 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 to inspection and copying at the Commission's
Public Reference Room, 450 Fifth Street, NW., Washington, DC 20549.
Copies of such filing will also be available for inspection and copying
at the principal office of the Exchange. All submissions should refer
to File No. SR-Amex-98-44 and should be submitted by March 25, 1999.
IV. Commission's Findings and Order Granting Accelerated Approval
of the Proposed Rule Change
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 and, in
particular, the requirements of Section 6 of the Act. Section 6(b)(5)
\6\ of the Act states that the rules of an exchange must be designed to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating securities transactions. These rules also must help to
remove impediments to and perfect the mechanism of a free and open
market. The Commission believes that increasing to 50 the number of
option contracts executable through the Exchange's AUTO-EX order
execution system will enable the Exchange to more effectively and
efficiently manage increased order flow in actively traded option
classes consistent with its obligations under the Act. The Commission
also believes, based on representations by the Exchange, that the
increase will not expose the Exchange's AUTO-EX system to risk of
failure or operational break-down.
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\6\ 15 U.S.C. 78f(b)(5).
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Pursuant to Section 19(b)(2),\7\ the Commission finds good cause
for approving the proposed rule change, as amended, prior to the 30th
day after the date of publication of notice thereof in the Federal
Register.\8\ The Commission believes accelerated approval is
appropriate to permit the Exchange to immediately increase the size of
orders executable through AUTO-EX to respond to the types of emergency
situations discussed above.
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\7\ 15 U.S.C. 78s(b)(2).
\8\ In approving this proposal, the Commission has considered
its impact on efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\9\ that the proposed change, as amended, (SR-Amex-98-44) is hereby
approved on an accelerated basis.
\9\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200 30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-5373 Filed 3-3-99; 8:45 am]
BILLING CODE 8010-01-M
