[Federal Register Volume 62, Number 44 (Thursday, March 6, 1997)]
[Notices]
[Pages 10303-10305]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-5526]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38351; File No. SR-Amex-97-06]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change by the American
Stock Exchange, Inc. Relating to Audit Trail Identifiers
February 27, 1997.
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 January 30, 1997, 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. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons and to
grant accelerated approval to the proposed rule change.
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\1\ 15 U.S.C. Sec. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to implement audit trail identifiers relating
to competing market-maker and ``short exempt'' transactions,
substantially identical to those previously approved for use at the New
York Stock Exchange. The text of the proposed rule change is available
at the Office of the Secretary, the 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 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 IV 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
Amex member firm procedures currently require that Amex clearing
members provide comparison and clearing reports with the following
trade details with respect to each transaction processed by them:
security, volume, price, trade date, clearing member number and contra
clearing member number. In addition, for each trade processed by them,
clearing members are responsible for providing the Exchange with
additional audit trail information, including the following account
types: agency (market with identifier ``A''), principal (``P''),
specialist principal (``S''), registered trader (``G'') and Amex
options specialist or market-maker trading an Amex Paired Security
(``V'').
The Exchange proposes to require that the audit trail information
provided by clearing members include the following additional account
types:
Oproprietary transactions for a competing market-maker that is
affiliated with the clearing member.
T--transactions for the account of an unaffiliated member's
competing market-maker (that is, transactions were an Amex member is
acting as agent for another member's competing market-maker account).
[[Page 10304]]
R--transactions for the account of a non-member competing market-
maker.
``Competing market-maker'' is defined as any person acting as a
market-maker, as defined in section 3(a)(38) \3\ of the Act, in an
Amex-traded security. A person acting solely in the capacity of block
positioner would not be considered to be a competing market maker. The
Exchange believes that implementation of O, T and R identifiers will
permit the Exchange to better assess the level of member and non-member
competing market-maker activity on the Amex and to formulate
appropriate rules and procedures relating to such activity in view of
the needs of public investors and other market participants.
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\3\ Section 3(a)(38) of the Act defines market maker as any
specialist permitted to act as a dealer, any dealer acting in the
capacity of block positioner, and any dealer who, with respect to a
security, holds himself out (by entering quotations in an inter-
dealer communications system or otherwise) as being willing to buy
and sell such security for his own account on a regular or
continuous basis.
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The Exchange proposes further to implement account identifiers for
individual investor orders (``I'') and orders submitted by an Amex
clearing member for the account of an unaffiliated Amex member or
member organization (``W'').
The Exchange is also proposing to expand use of the audit trail
account type field to require designation of ``short exempt'' trades
Four identifiers would be added to the audit trail account type field
to identify ``short exempt'' trades for:
The proprietary account of a clearing member organization or an
affiliated member/member organization--to be designated E
The proprietary account of an unaffiliated member/member organization--
to be designated F
An individual customer account--to be designated H
Other agency customer account--to be designated B.
In addition, member firms would be required to identify ``short
exempt'' trades of competing market-makers utilizing the following
identifiers:
L--to designate a ``short exempt'' transaction for the account of a
competing market-maker that is a member or member organization trading
for its own account.
X--to designate a ``short exempt'' transaction where one member is
acting as agent for another member's competing market-maker account.
Z--to designate a ``short exempt'' transaction for the account of a
non-member competing market-maker.
``Short exempt'' transactions are those that are exempt from the
``tick-test'' provisions of SEC Rule 10a-1 \4\ or Amex Rule 7. The
Exchange notes that it understands that members should mark as ``short
exempt'' any short selling order that is exempt from the ``tick-test''
provisions of Rule 10a-1. Use of identifiers for ``short exempt''
transactions will enhance the Exchange's ability to identify violations
of Rule 10a-1 and Amex Rule 7.
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\4\ 17 CFR 240.10a-1(e).
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2. Statutory Basis
The basis under the Act for the proposed rule change is the
requirement under Section 6(b)(5) that an Exchange have rules that are
designed to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to 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 to the
proposed rule change.
III. Commission's Findings and Order Granting Accelerated Approval of
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, with the requirements of Section 6(b) of the Act.\5\
Specifically, the Commission believes the proposal is consistent with
the Section 6(b)(5) requirements that the rules of an exchange be
designed to promote just and equitable principles of trade, to prevent
fraudulent and manipulative acts, and, in general, to protect investors
and the public.\6\
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\5\ 15 U.S.C. Sec. 78f (b).
\6\ In approving these rule changes, the Commission has
considered the proposed rules' impact on efficiency, competition,
and capital formation. 15 U.S.C. Sec. 78c (f).
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The Commission also believes that the adopted ``short exempt''
account identifiers are consistent with SEC Rule 10a-1, which requires
that orders be marked ``long'' or ``short.'' In this regard, the new,
more precise identifier codes should facilitate surveillance
investigations and will allow the Exchange to ensure compliance with
the exemptive provisions of Rule 10a-1(e) of the Act.
Finally, the Commission believes that the proposed identification
codes should prevent fraudulent and manipulative acts by improving the
accuracy and efficiency of audit trail information used for
surveillance purposes. In particular, more accurate audit trail
information should increase the effectiveness of the Exchange's
automated surveillance procedures and provide Exchange staff with a
more comprehensive reconstruction of trading activity. In summary, the
Commission believes that the proposed identifier codes should permit
the Amex to perform its surveillance responsibilities under the Act
more thoroughly and for this reason, finds the proposal consistent with
Section 6(b)(5) of the Act.
The Commission notes that the approval of this proposal is limited
solely to establishing competing dealer identifier codes for audit
trail and surveillance purposes.\7\ The proposal does not limit or
restrict the activity of competing dealers or their access to the Amex.
Thus, any competitive burden on competing dealers would be minimal and
outweighed by the surveillance benefits to be obtained by the Amex.
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\7\ This information is not available to specialists or traders
on the floor.
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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. This rule change will
permit the Amex to implement the new audit trail identifiers on the
same day that their use will be made mandatory on the New York Stock
Exchange.\8\ Substantially similar audit trail identifiers were
approved for use on the New York Stock Exchange in 1994 following a
full notice period during which no comments were received.\9\ Since
that time, the Commission has not been made aware of any concerns
regarding the use of the audit trail identifiers and therefore believes
that it is appropriate to approve the use of the audit trail
identifiers on an accelerated basis.
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\8\ The use of the new audit trail identifiers will be made
mandatory on the NYSE on March 3, 1997. See NYSE Information Memo
No. 96-36 (Dec. 5, 1996).
\9\ See Securities Exchange Act Release Nos. 33662 (Feb. 23,
1994), 59 FR 10027 (Mar. 2, 1994) (order approving File No. SR-NYSE-
91-46) and 34539 (Aug. 17, 1994), 59 FR 43605 (Aug. 24, 1994) (order
approving File No. SR-NYSE-94-16).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
[[Page 10305]]
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 Room. 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-97-06 and
should be submitted by March 27, 1997.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-Amex-97-06) is approved.
\10\ 15 U.S.C. Sec. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 C.F.R. 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-5526 Filed 3-5-97; 8:45 am]
BILLING CODE 8010-01-M
