[Federal Register Volume 64, Number 121 (Thursday, June 24, 1999)]
[Notices]
[Pages 33941-33942]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-16039]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41536; File No. SR-AMEX-99-18]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the American Stock Exchange LLC Relating to an Amendment To
Amex Rule 901C
June 17, 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 May 17, 1999, 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, II and III below, which Items have been prepared by the
Exchange. Amex filed Amendment No. 1 on June 3, 1999.\3\ 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).
\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, SEC, on June 4, 1999. In
Amendment No. 1, Amex amended the proposed rule text. The amendment
is incorporated into this filing.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
Amex proposes to add Commentary .03 to Exchange Rule 901C to permit
the Exchange to split stock indices without having to file a proposed
rule change under Section 19(b) of the Act.\4\ Proposed additions are
in italics.
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\4\ 15 U.S.C. 78s(b).
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Designation of Stock Index Options
Rule 901C (a)-(c) No change.
Commentary .01-.02 No change.
.03 The Exchange may split index values from time to time in
response to prevailing market conditions upon reasonable advance
written notice to the membership. In effecting an index split, the
Exchange will increase the applicable index divisor, proportionally
increase the number of contracts outstanding and increase the index
option's applicable position and exercise limits. Upon expiration of
the furthest non-LEAP index option contract, the position and
exercise limit revision to accommodate positions outstanding prior
to the index split will revert to their then applicable limit.
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 Exchange 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 Exchange 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
The Amex proposes to add Commentary .03 to Amex Rule 901C to
establish criteria for the splitting of stock indexes. Over the past
year, the Exchange submitted, and the Commission approved, three
separate proposals to split six stock indexes with two of those indexes
split on two occasions.\5\ More recently, the Exchange submitted yet
another proposal to split the Morgan Stanley High Technology Index to
one half its current value \6\ and has received additional requests to
[[Page 33942]]
submit further proposals to the Commission to split other stock
indexes.
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\5\ See Securities Exchange Act Release Nos. 39775 (March 20,
1998), 63 FR 14741 (March 26, 1998) (Securities Broker/Dealer
index); 39941 (May 1, 1998), 63 FR 25251 (May 7, 1998) (Amex Airline
and de Jager Year 2000 indexes); 39933 (April 30, 1998), 63 FR 25249
(May 7, 1999) (Institutional index); and 41164 (March 12, 1999), 64
FR 13836 (March 22, 1999) (Amex Airline, Natural Gas, Pharmaceutical
and Securities Broker/Dealer indexes).
\6\ See Securities Exchange Act Release No., 41472 (June 2,
1999), 64 FR 31331 (June 10, 1999).
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In the previous cases, the Exchange handled each of the stock index
splits in a similar manner, splitting an index two for one by doubling
the index divisor, issuing one additional contract for each outstanding
index option contract, and dividing the strike price in half for each
series. The Exchange issued an informational circular to the membership
with details concerning the index split and the doubling of position
and exercise limits until the expiration of the furthest non-LEAP
option contract. Position and exercise limits for each index reverted
to their then applicable level.
To permit the Exchange to split broad-based and narrow-based stock
indexes without submitting a proposed rule change for review by the
Commission, the Exchange proposes to add to its trading rules criteria
regarding splitting an index.\7\ Specifically, the Exchange proposes to
add Commentary .03 Exchange Rule 901C to permit various indexes to be
split from time to time subsequent to the issuance of an Informational
Circular to the Exchange's membership. Position and exercise limits
that would be increased to accommodate any outstanding index option
positions would revert, following the expiration of the furthest non-
LEAP option contract, to their then applicable limit.
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\7\ The Commission noted in its release adopting new Rule 19b-
4(e), 17 CFR 240.19b-4(e), that if the trading rules, procedures and
listing standards for the product class include criteria regarding
splitting an index, such changes would be permitted without being
considered a material change to the derivative securities product
and without requiring the filing of a proposed rule change pursuant
to Section 19(b) of the Act. See Securities Exchange Act Release No.
40761 (December 8, 1998), 63 FR 70952 (December 22, 1998).
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The Exchange believes that the proposal is appropriate because its
procedures for handling such stock splits are well established and have
been consistently applied with prior notice given to Exchange members.
Further, the Exchange has experienced no difficulty in, and has not
received comments in opposition to, effecting such splits. The Exchange
also believes that investors are readily familiar with periodic common
stock splits, and adjustments to options overlying such stocks are
handled in much the same was as index splits and do not require
Commission review or approval. Lastly, the Exchange believes that the
proposal raises no new or novel regulatory issues for the Commission,
given its prior review and approval of various stock index splits in
the past.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the Act
\8\ in general and furthers the objectives of Section 6(b)(5) \9\ 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
remove impediments to and perfect the mechanism of a free and open
market and a national market.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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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.
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
Within 35 days of the date of 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, including whether the proposed rule
change, as amended, 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 20549-0609. 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 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-99-18 and should be submitted by July 15, 1999.
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. 99-16039 Filed 6-23-99; 8:45 am]
BILLING CODE 8010-01-M
