[Federal Register Volume 60, Number 145 (Friday, July 28, 1995)]
[Notices]
[Pages 38870-38872]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-18600]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36014; File No. SR-Amex-95-19]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Temporary Approval of Proposed Rule Change by the
American Stock Exchange, Inc. Relating to Amendments to Rule 170
Pertaining to Specialists' Liquidating Transactions
July 21, 1995.
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 24, 1995, 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.
\1\ 15 U.S.C. 78s(b)(1) (1988).
\2\ 17 CFR 240.19b-4 (1994).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Amex requests permanent approval of a pilot program that amends
Exchange Rule 170 to permit a specialist to effect a liquidating
transaction on a zero minus tick, in the case of a ``long'' positions,
or zero plus tick, when covering a ``short'' position, without Floor
Official approval. The pilot program also amends Rule 170 to set forth
the affirmative action that specialists are required to take subsequent
to effecting various types of liquidating transactions. In the
alternative, the Exchange is proposing a one year extension of the
pilot program.
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 III 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
On April 22, 1994, the Commission approved, on a one year pilot
basis, amendments to Exchange Rule 170 to permit a specialist to effect
a liquidating transaction on a zero minus tick, in the case of a
``long'' position, or a zero plus tick, when covering a ``short''
position, without Floor Official approval.\3\ The amendments also set
forth the affirmative action that specialists are required to take
subsequent to effecting various types of liquidating transactions.
\3\ The Commission approved the pilot program in Securities
Exchange Act Release No. 33957 (April 22, 1994), 59 FR 22188 (April
29, 1994) (``1994 Approval Order''). On April 21, 1995, the
Commission granted a three month extension to the pilot program,
ending on July 21, 1995. Securities Exchange Release No. 35635
(April 21, 1995), 60 FR 20780 (April 27, 1995).
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During the course of the pilot program, the Exchange has monitored
compliance with the requirements of the Rule, and our findings in this
regard have been forwarded to the Commission under separate cover. We
believe that the amendments have provided specialists with flexibility
in liquidating specialty stock positions in order to facilitate their
ability to maintain fair and orderly markets, particularly during
unusual market conditions. In addition, the specialist's concomitant
obligation to participate as dealer on the opposite side of the market
after a liquidating transaction has been strengthened.
The Exchange is therefore proposing approval of the amendments to
Rule 170. In the alternative, the Exchange is requesting an extension
of the pilot program for an additional one year period, if the
Commission feels that further study and monitoring of the effects of
the pilot program are necessary.
[[Page 38871]]
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the Act
in general and further the objectives of Section 6(b)(5) in particular
in that it is designed to promote just and equitable principles of
trade, remove impediments to and perfect the mechanism of a free and
open market, and, in general, protect investors and the public
interest. The proposed rule change is also consistent with Section
11(b) of the Act which allows exchanges to promulgate rules relating to
specialists in order to maintain fair and orderly markets.
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. 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. Sec. 552, will be available for inspection and copying at
the Commission's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such 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-95-19 and should be
submitted by August 18, 1995.
IV. 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 Sections 6(b)(5) and 11 of the Act.\4\ 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, remove impediments to and perfect
the mechanism of a free and open market, and, in general, protect
investors and the public interest. The Commission also believes that
the proposal is consistent with Section 11(b) of the Act and Rule 11b-1
thereunder,\5\ which allow exchanges to promulgate rules relating to
specialists in order to maintain fair and orderly markets.
\4\ 15 U.S.C. 78f and 78k (1988).
\5\ 17 CFR 240.11b-1 (1994).
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Under the pilot program, a specialist may liquidate a position by
selling stock on a direct minus tick or by purchasing stock on a direct
plus tick only if such transactions are reasonably necessary for the
maintenance of a fair and orderly market and only if the specialist has
obtained the prior approval of a Floor Official. Liquidations on a zero
minus or a zero plus tick, which previously required Floor Official
approval, can be effected under the pilot procedures without a Floor
Official's approval, but continue to be subject to the restriction that
they be effected only when reasonably necessary to maintain a fair and
orderly market. In addition, the specialist must maintain a fair and
orderly market during the liquidation.
After the liquidation, a specialist is required to re-enter the
market on the opposite side of the market from the liquidating
transaction to offset any imbalances between supply and demand. During
any period of volatile or unusual market conditions resulting in a
significant price movement in a specialist's specialty stock, the
specialist's re-entry into the market must reflect, at a minimum, his
or her usual level of dealer participation in the specialty stock. In
addition, during such periods of volatile market conditions or unusual
price movements, re-entry into the market following a series of
transactions must reflect a significant level of dealer participation.
In our 1994 Approval Order,\6\ the Commission asked the Amex to
submit a report setting forth the criteria developed by the Exchange to
determine whether liquidating transactions effected by specialists
pursuant to the pilot were necessary and appropriate in connection with
fair and orderly markets. The Commission also asked the Amex to provide
information regarding the Exchange's monitoring of liquidating
transactions effected by specialists on any destabilizing tick. In
addition, the Commission asked the Amex to provide the following
information in its report: (1) a review of all liquidating transactions
effected by specialists on any destabilizing ticks; (2) a review of
liquidating transactions by specialists to determine that the required
Floor Official approval was obtained where necessary; and (3) a review
of liquidating transactions in light of dealer participation levels and
re-entry into the market in terms of timing and support.
\6\ See supra note 3.
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In April 1995, the Commission extended the pilot program for three
months to give the Exchange additional time to prepare the report
discussed above and submit the data to the Commission for its
consideration of whether the pilot program should be granted permanent
approval.\7\ The Exchange submitted the report in May 1995. After
reviewing the data, the Commission agrees with the Exchange that the
pilot generally is working well. In particular, the Commission believes
the report indicates that specialist generally are entering the
aftermarket after effecting liquifying transactions when appropriate
and that the Exchange has developed surveillance procedures that enable
it to monitor specialists' reliquifying activity.
\7\ See supra note 3.
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The Commission believes, however, that further monitoring of the
pilot is necessary before permanent approval can be granted. In this
regard, the Exchange should continue to emphasize the requirements of
the rule, including the necessity for floor official approval of
specialists' purchases and sales on direct plus or minus ticks, and
that such transactions can only be effected if reasonably necessary for
the maintenance of fair and orderly markets. In addition, where proper
procedures are not followed, the Amex should take appropriate
disciplinary action.
The Commission has therefore decided to extend the pilot program
for one year. During the one year extension, the Commission expects the
Amex to continue to monitor compliance with the pilot program
procedures and report any non-compliance with the rule and the action
the Amex has taken as a result of such non-compliance. The Amex should
prepare an additional report as described above and submit the data to
the Commission for its consideration of whether the pilot
[[Page 38872]]
program should be granted permanent approval.\8\
\8\ The Commission requests that this report be submitted by
April 1996, along with any requests for extension or permanent
approval of the pilot.
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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. This will permit the pilot program to
continue on an uninterrupted basis. In addition, the Exchange proposes
to continue using the identical procedures contained in the pilot
program. The rule change that implemented the pilot program was
published in the Federal Register for the full comment period,\9\ and
no comments were received. Furthermore, the Commission approved a
similar rule change for the NYSE also without receiving comments on the
proposal.\10\
\9\ See Securities Exchange Act Release No. (August 25, 1993),
58 FR 45926 (August 31, 1993).
\10\ See Securities Exchange Act Release No. 31797 (January 29,
1993), 58 FR 7277 (February 5, 1993).
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It therefore is ordered, pursuant to Section 19(b)(2) of the
Act,\11\ that the proposed rule change is approved on an accelerated
basis for a one year period ending on July 21, 1996.
\11\ 15 U.S.C. 78s(b)(2) (1988).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-18600 Filed 7-27-95; 8:45 am]
BILLING CODE 8010-01-M
