[Federal Register Volume 59, Number 132 (Tuesday, July 12, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16746]
[[Page Unknown]]
[Federal Register: July 12, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34316; File No. SR-Amex-93-15]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the American Stock Exchange, Inc. Relating to Specialist
Participation in the After-Hours Trading Facility in Portfolio
Depositary Receipts and Investment Trust Securities Based on Stock
Indexes
July 5, 1994.
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 April 21, 1993, the American Stock Exchange, Inc. (``Amex'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') the proposed rule change as described in
Items I, II and III below, which Items have been prepared by the self-
regulatory organization. The filing requested: (1) Permanent approval
of the After-Hours Trading (``AHT'') Facility; and (2) approval on a
pilot basis for specialists in investment trust securities based on
stock indexes to participate in the AHT Facility. The Commission
approved the portion of the filing that requested permanent approval of
the AHT Facility in Securities Exchange Act Release No. 33993.\3\ On
August 3, 1993, the Exchange amended the filing to request that
specialists in Portfolio Depository Receipts (``PDRs'') also be
permitted to participate in the AHT Facility.\4\ On July 5, 1994, the
Exchange amended the proposed rule change to eliminate the migration of
limit orders for PDRs and investment trust securities from the
specialist's limit order book to the AHT Facility.\5\ The Commission is
publishing this notice to solicit comments from interested persons on
specialist participation in the AHT Facility in Portfolio Depository
Receipts and investment trust securities based on Stock Indexes.
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\1\15 U.S.C. 78s(b)(1) (1988).
\2\17 CFR 240.19b-4 (1994).
\3\As originally filed, File No. SR-Amex-93-15 requested
permanent approval of Amex's pilot After-Hours Trading facility. On
January 4, 1994, the Amex amended the filing to request a three-
month extension of the pilot until April 30, 1994. On May 2, 1994,
the Commission granted permanent approval to that portion of File
No. SR-Amex-93-15 concerning the Amex's After-Hours Trading
facility, not including the specialist participation request. See
Securities Exchange Act Release No. 33993 (May 2, 1994), 59 FR 23902
(May 9, 1994).
\4\See letter from William Floyd-Jones, Jr., Assistant General
Counsel, Amex, to Diana Luka-Hopson, SEC, dated August 3, 1993.
\5\See letter from William Floyd-Jones, Jr., Assistant General
Counsel, Amex, to Sandra Sciole, Special Counsel, SEC, dated July 1,
1994.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to permit specialists in Portfolio Depositary
Receipts and investment trust securities to participate in the
Exchange's After-Hours Trading (``AHT'') facility for a one year pilot
period.
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
The Exchange requests Commission approval for specialists in
Portfolio Depositary Receipts (``PDRs'') and investment trust
securities listed pursuant to Section 118B of the Exchange's Listing
Guidelines\6\ to participate in the AHT facility to ``clean-up'' order
imbalances in the AHT facility by entering an order for the
specialist's account. For example, if there were single sided orders to
buy 10,000 and sell 20,000 SPDRs immediately prior to the 5:00 p.m.
close of the AHT facility, the specialist would be permitted under the
Exchange's proposed rule amendments to enter an order for its account
to buy up to 10,000 SPDRs in order to eliminate the sell side order
imbalance.
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\6\The Exchange currently lists one Portfolio Depositary
Receipt, viz., Standard and Poor's Depositary Receipts (``SPDRs'');
and two investment trust securities pursuant to Section 118B of the
Exchange's Listing Guidelines: LOR Index Trust SuperUnits and LOR
Money Market SuperUnits.
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The Exchange also seeks Commission approval for specialists in PDRs
and investment trust securities to participate in a coupled closing
price order so long as the other side of the order is not for an
account in which a member or member organization has a direct or
indirect interest. For example, under the Exchange's proposal, the
specialist in SPDRs would be permitted to agree prior to the 4:15 close
of the regular trading session for such securities to take the other
side of a customer order to buy or sell SPDRs for execution in the AHT
facility as a closing price coupled order. Such a capability would
conform the trading of PDRs and investment trust securities to the
practices of the ``basket'' market for equities where it is customary
for a dealer to agree prior to the close of the regular trading session
to take the contra side of a customer basket order and the closing
index value. Specialists on the New York Stock Exchange, Inc.
(``NYSE'') currently are permitted to take the contra side of a
customer order to buy or sell a particular equity security and enter
such order into the NYSE's Off-Hours Trading facility as a closing
price coupled order. The Exchange seeks a similar capability for
specialists in PDRs and investment trust securities to conform the
trading of these listed instruments to the practices of the basket
market.
The Exchange believes that permitting specialists in PDRs and
investment trust securities to participate in the AHT facility in order
to ``clean-up'' order imbalances and effect closing price coupled
orders would benefit investors by providing additional liquidity to the
listed cash market for derivative securities based upon well known
market indexes, such as those described above. The market price of
these securities is based upon transactions largely effected in markets
other than the Amex. The specialist in such securities has no unique
access to market sensitive information regarding the market for the
underlying securities or closing index values. The Exchange, therefore,
believes that specialist participation in the AHT facility in PDRs and
investment trust securities in the manner described above does not
raise any market integrity issues. In addition, should a customer not
care for an execution at the closing price, the rules of the Exchange's
AHT facility permit cancellation of an order up to the close of the AHT
session at 5:00 p.m. (orders in the AHT facility are not executed until
the 5:00 p.m. close of the after-hours session.) A customer, therefore,
will have approximately 40 minutes to determine if an execution at the
closing price suits its needs, and may cancel its order if it believes
that the closing price does not suit its objectives.
The Exchange also proposes to eliminate the migration of limit
orders for PDRs and investment trust securities from the specialist's
limit order book to the AHT facility to eliminate any concern with the
handling of such orders.
The Exchange proposes that the Commission approve the Exchange's
application to permit specialist participation in the AHT facility for
PDRs and investment trust securities on a pilot basis, during which
time the Exchange will study the operation of the facility to determine
if there are any additional issues that need to be addressed.
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, promote just and equitable principles of trade, remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general, 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 of 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. 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 for inspection and copying at the
Commission's Public Reference Room, 450 Fifth Street, NW., Washington,
DC 20549. Copies of the filing will also be available for inspection
and copying at the principal office of the Amex. All submissions should
refer to File No. SR-Amex-93-15 and should be submitted by August 2,
1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\7\
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\7\17 CFR 200.30-3(a)(12) (1991).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-16746 Filed 7-11-94; 8:45 am]
BILLING CODE 8010-01-M
