[Federal Register Volume 63, Number 62 (Wednesday, April 1, 1998)]
[Notices]
[Pages 15905-15906]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8533]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39805; File No. SR-AMEX-98-13]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the American Stock Exchange,
Inc. Relating to the Distribution of Amendments to Characteristics and
Risks of Standardized Options
March 25, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1935
(``Act''),\1\ notice is hereby given that on March 19, 1998, 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 Exchange. 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).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Amex proposes to amend Exchange Rule 926 to permit members and
member organizations to distribute amendments to the current Options
Disclosure Document\2\ only to those account holders affected by the
amendment.
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\2\Amex Rule 926 defines current Options Disclosure Document as
the most recent edition of such Document which meets the
requirements of Rule 9b-1 promulgated under the Securities Exchange
Act of 1934.
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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
From the commencement of options trading until 1982, Federal
securities laws required that a current prospectus of the issuer, The
Options Clearing Corporation (``OCC''), be delivered to prospective
options investors. In 1982, the Commission recognized that the
prospectus, which included detailed information about OCC in order to
meet the registration requirements of the Securities Act of 1933, had
become a complicated and lengthy document and in response, adopted Rule
9b-1 under the Act.\3\ Thereafter, on April 30, 1986, the Exchange
received Commission approval to consolidate its then existing multiple
options disclosure documents into a single document entitled
Characteristics and Risks of Standardized Options (the ``Options
Disclosure Document'') for distribution to each options customer as
required by Rule 9b-1 of the Act\4\ and Exchange Rule 926. Rule 926
requires that the Options Disclosure Document be delivered to each
customer at or prior to the time such customer's account is approved
for options trading. Recognizing that the Options Disclosure Document
would be amended from time to time, the Rule also requires that the
amended Options Disclosure Document be distributed to individuals
continuing to engage in options transactions.
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\3\Securities Exchange Act Release No. 19055 (September 16,
1982), 47 FR 41950 (September 23, 1982).
\4\Securities Exchange Act Release No. 23189 (April 30, 1986),
51 FR 17120.
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The Exchange now proposes to amend Rule 926 to permit members and
member organizations to distribute amendments to the Options Disclosure
Document only to those customers who engage in transactions in the
products discussed in the amendment. For example, in October 1996 the
Options Disclosure Document was amended to accommodate the introduction
of flexibly structured stock options (known as E-FLEX options). Prior
to the consolidation of options disclosure documents in 1986, such an
amendment would be distributed only to those investors affected by the
change (i.e., those accounts approved for E-FLEX options transactions).
However, under current Rule 926, the entire amended Options Disclosure
Document was required to be distributed to every customer having an
account approved for options trading (regardless of whether the account
had been approved for E-FLEX transactions) or, in the alternative,
distributed not later than the time a confirmation of an options
transaction was delivered to each customer. Thus, the Options
Disclosure Document was required to be distributed not only to
customers who had participated in an E-FLEX option transaction, but to
all customers including those who had not participated in E-FLEX option
transactions and did not need the additional information discussed in
the amendment. The Exchange believes such unnecessary distribution, in
addition to being an expensive burden to the member firms, may cause
confusion among customers.
The Exchange proposes to amend Rule 926 to prevent the unnecessary
distribution of the amended Options Disclosure Document to customers
who have not engaged in a transaction in the category of options to
which the
[[Page 15906]]
amendment pertains. The proposed rule change will continue to require
that members and member organizations provide customers engaged in
options transactions with all necessary risk disclosure documentation
in compliance with the requirements of Rule 9b-1 of the Act.\5\
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\5\The Commission notes that the proposed rule is substantively
similar to the rules of other exchanges regarding the distribution
of amendments to an Options Disclosure Document. See CBOE Rule
9.15(a); PHLX Rule 1029(a).
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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, to promote just and equitable principles of trade, and is
not designed to permit unfair discrimination between customers,
issuers, and brokers or dealers.
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. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Because the foregoing proposed rule change:
(i) Does not significantly affect the protection of investors or
the public interest;
(ii) Does not impose any significant burden on competition; and
(iii) Does not became operative for 30 days from March 19, 1998,
the date on which it was filed, or such shorter time as the Commission
may designate, and the Exchange provided the Commission with written
notice of its intent to file the proposed rule change at least five
business days prior to the filing date, it has become effective
pursuant to Section 19(b)(3)(A)\6\ of the Act and Rule 19b-4(e)(6)
thereunder.\7\
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\6\15 U.S.C. 78s(b)(3)(A).
\7\CFR 240.19b-4(e)(6). In reviewing this rule, the Commission
has considered the proposed rule's impact on efficiency,
competition, and capital formation. 15 U.S.C. Sec. 78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. 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. 552, will be available for inspection and copying in the
Commission's Public Reference Room. Copies of such filing will also be
available for inspection and copying at the principal office of the
Amex. All submissions should refer to the File No. SR-AMEX-98-13 and
should be submitted by April 23, 1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-8533 Filed 3-31-98; 8:45am]
BILLING CODE 8010-01-M
