[Federal Register Volume 60, Number 111 (Friday, June 9, 1995)]
[Notices]
[Pages 30612-30614]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14120]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35797; File No. SR-Amex-95-15]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change and Amendment No. 1 to Proposed Rule Change by the American
Stock Exchange, Inc. Relating to the Solicitation of Options
Transactions
June 1, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on March 22, 1995, the
American Stock Exchange, Inc. (``Amex'' or ``Exchange'') filed with the
Securities and Exchange Commission (``Commission'') the
[[Page 30613]] proposed rule change as described in Items I, II, and
III below, which Items have been prepared by the Amex. The Exchange
filed Amendment No. 1 to the proposed rule change on May 30, 1995.\2\
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
\1\ 15 U.S.C. 78s(b)(1) (1988).
\2\ Amendment No. 1 concerns the priority of non-solicited
market participants and floor brokers in the trading crowd over
solicited parties or solicited orders. In addition, Amendment No. 1
makes certain minor technical and clarifying modifications to the
proposed changes to Amex Rule 950(d), Commentary .03. See letter
from Claire P. McGrath, Managing Director and Special Counsel,
Derivative Securities, Amex, to Michael Walinskas, Branch Chief,
Division of Market Regulation, Commission, dated May 26, 1995
(``Amendment No. 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 its Rule 950(d), Commentary .03, to
modify the manner in which members solicit other members to participate
in options transactions.
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
In 1989, the Exchange adopted its solicitation rule \3\ to govern
the manner in which members may solicit other members and non-member
broker dealers to participate in options transactions. Generally,
members solicit participation in large size orders and orders that
might contain complex terms and conditions, including orders involving
both stock and options. Currently, if the solicited party is a broker
dealer other than a registered trader, the rule permits the
solicitation of such a broker dealer to participate in trades without
first attempting to determine whether the trading crowd wishes to
participate. The rule had sought to reconcile the growing practice of
soliciting participation in orders outside of trading crowds with the
rules and practices of the auction market. Since its adoption, the rule
has operated successfully and has helped in giving fair and equal
access to information regarding solicited transactions to participants
in trading crowds and has resulted in more competitive markets and
executions for customers at the best available prices.
\3\ Securities Exchange Act Release No. 26947 (June 19, 1989),
54 FR 26869 (approving Amex Rule 950(d), Commentary .03).
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Specifically, the rule permits the solicitation of on-floor and
off-floor members outside of a trading crowd to participate as the
contra-side of an order only if the trading crowd is given (1) the same
information about the options order as is given to the solicited party;
and (2) a reasonable opportunity to accept the bid or offer before the
solicited party participates in the transaction. However, with respect
to the solicitation of a registered options trader, the soliciting
member must also disclose to the trading crowd, prior to the
solicitation, the same terms and conditions as will be disclosed to the
solicited registered options trader.
The Exchange now seeks to modify the rule to eliminate the
difference in how the rule is applied to the solicitation of registered
options traders. Members who are engaged in the practice of soliciting
orders indicate that it is difficult, at times, to determine prior to
the solicitation whether the solicited party is a registered options
trader. Such a determination is important for a soliciting member
seeking to adhere to the rule requirement that the trading crowd be
notified of the terms of an order prior to solicitation of a registered
options trader. Rather than chance violating the Exchange's rule, these
members advise that in the case of multiple traded options, they
frequently seek to trade at another options exchange whose solicitation
rule does not differentiate between broker dealers other than
registered traders, and registered traders.
Therefore, the Exchange seeks to eliminate the requirement that a
soliciting member first disclose to a trading crowd the terms and
conditions of the order prior to the solicitation of a registered
trader. The Exchange believes that if trading crowds are given a
reasonable opportunity to accept the bid or offer,\4\ after the terms
and conditions of the order are announced, then it is not necessary for
the soliciting member to disclose those terms and conditions to the
trading crowd prior to soliciting a registered options trader. Once
other market participants are given a reasonable opportunity to accept
the bid or offer, the solicited party may accept all or any remaining
part of such order, or the member may cross all or any remaining part
of the originating order with the solicited party at such bid or offer
by announcing that the member is crossing the orders and stating the
quantity and price.
\4\ Since the size and complexity of orders for options can vary
widely, the phrase ``reasonable opportunity to accept the bid and
offer'' has not been specifically defined. However, the Exchange has
determined that the following factors should be considered when
deciding whether a reasonable opportunity has been given: (1) size
and complexity of the order; (2) ease of executing hedging
transactions in the underlying stock; and (3) effect of the options
order on the positions held by participants in the trading crowd.
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The Exchange also proposed to add language to its solicitations
rule to make it clear that non-solicited market participants and floor
brokers holding non-solicited discretionary orders in the trading crowd
will have priority over the solicited party or the solicited order to
trade with the original order at the best bid or offer price subject to
the precedence rules set forth in Rule 155.\5\
\5\ See Amendment No. 1, supra note 2. Amex Rule 155 generally
provides that a specialist shall give precedence to orders entrusted
to him as an agent in any stock in which he is registered before
executing at the same price any purchase or sale in the same stock
for an account in which he has an interest.
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Finally, the Exchange proposes to codify its policy that its
solicitation rule also applies to the solicitation of non-member broker
dealers.
The Exchange believes 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
remove 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 Amex believes that the proposed rule change will not impose any
burden on competition.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received from Members, Participants, or Others
Written comments on the proposed rule change were neither solicited
nor received. [[Page 30614]]
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 such 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. 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 Section, 450 Fifth Street, N.W.,
Washington, D.C. Copies of such filing will also be available for
inspection and copying at the principal office of the above-mentioned
self-regulatory organization. All submissions should refer to File No.
SR-Amex-95-15 and should be submitted by June 30, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
\6\ 17 CFR 200.30-3(a)(12) (1994).
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Jonathan G. Katz,
Secretary.
[FR Doc. 95-14120 Filed 6-8-95; 8:45 am]
BILLING CODE 8010-01-M
