[Federal Register Volume 63, Number 145 (Wednesday, July 29, 1998)]
[Notices]
[Pages 40573-40574]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20188]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40240; File No. SR-Amex-98-16]
Self-Regulatory Organizations; American Stock Exchange, Inc.;
Order Approving Proposed Rule Change and Notice of Filing and Order
Granting Accelerated Approval to Amendment No. 1 to the Proposed Rule
Change Relating to the Announcement of Closing Rotations in Equity and
Narrow-Based Index Options After 4:02 p.m.
July 21, 1998.
I. Introduction
On April 8, 1998, the American Stock Exchange, Inc. (``Amex'' or
``The Exchange''), filed with the Securities and Exchange Commission
(``SEC'' or ``the Commission'') a proposed rule change pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\
and Rule 19b-4 \2\ thereunder to permit a closing rotation in equity
options to be announced after 4:02 p.m. The proposed rule change was
published for comment in the Federal Register on May 12, 1998.\3\ No
comments were received.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 39959 (May 5, 1998), 63
FR 26231.
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On July 9, 1998, the Amex submitted Amendment No. 1 to the proposed
rule change.\4\ This order approves the proposal and approves Amendment
No. 1 on an accelerated basis.
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\4\ See Letter from Scott Van Hatten, Legal Counsel, Amex, to
Michael Walinskas, Deputy Associate Director, SEC, dated July 9,
1998 (``Amendment No. 1''). Amendment No. 1 clarified that the
Exchange had received approval to move the close of narrow-based
index options trading from 4:10 p.m. to 4:02 p.m., as set forth in
Securities Exchange Act Release No. 38640 (May 14, 1997), 62 FR
28081 (May 22, 1997). Amendment No. 1 also amended the filing to
permit the announcement of closing rotations in narrow-based index
options, in addition to equity options, after 4:02 p.m.
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II. Description of the Proposal
On May 14, 1997, the Exchange received approval to move the close
of equity and narrow-based index options trading from 4:10 p.m. to 4:02
p.m.\5\ This change was prompted by improvements in dissemination of
closing prices in the underlying securities, the limited ability of
public customers to react as quickly as professional traders to news
announcements in the last ten minutes of trading, and the difficulties
experienced by options specialists and registered traders trying to
make orderly options markets without the ability to hedge or otherwise
offset market risk with transactions in the underlying stock. Following
receipt of approval, Rule 1 was amended to reflect this change to 4:02
p.m. The Amex states that the provision that permits a closing rotation
\6\ to be initiated due to unusual market conditions was severely
limited inadvertently when the rule was changed to require that notice
of the closing rotation had to be publicly disseminated before 4:02
p.m. As currently written, the rule gives Floor Officials only two
minutes to assess an unusual market condition, determine whether it is
appropriate to have a closing rotation, and disseminate the news of the
rotation to the public.
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\5\ Securities Exchange Act Release No. 38640 (May 14, 1997), 62
FR 28081 (May 22, 1997).
\6\ A closing rotation is a trading procedure to determine
appropriate closing prices or quotes for each series of options on
an underlying stock.
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The Amex proposes to amend Exchange Rule 1 to permit a closing
rotation in equity and narrow-based index options to be announced after
4:02 p.m., provided such a rotation does not begin sooner than five
minutes after it is announced.
III. Discussion
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, Section 6(b)(5).\7\ Section 6(b)(5) requires, among other
things, that the rules of an exchange be designed to promote just and
equitable principles of trade, to perfect the mechanism of a free and
open market, and in general, to further investor protection and the
public interest.
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\7\ 15 U.S.C. 78f(b)(5).
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The Commission believes that it is reasonable for the Exchange to
amend its rules to provide Floor Officials with more than two minutes
to assess an unusual market condition, determine whether it is
appropriate to have a closing rotation, and disseminate the news of the
rotation to the public.\8\ The Commission notes that the Chicago Board
Options Exchange (``CBOE''), the Pacific Exchange (``PCX''), and the
Philadelphia Stock Exchange (``PHLX'') permit trading rotation notice
to be given after the close of trading.\9\
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\8\ In approving this rule, the Commission notes that it has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
\9\ See CBOE Rule 6.2, Interpretations and Policies .02; PCX
Rule 6.64, Commentary .01; and PHLX Rule 1047, Commentary .03.
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The Commission also finds good cause for approving proposed
Amendment No. 1 prior to the thirtieth day after the date of
publication of notice of filing thereof in the Federal Register. The
Amendment clarified the filing's description of a prior rule change and
the scope of the proposed rule change. For these reasons, the
Commission finds good cause for approving Amendment No. 1 on an
accelerated basis.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning Amendment No. 1, including whether it 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. Copies of the
submission, all subsequent amendments, all written statements with
respect to the proposed rule change that are filed with the
[[Page 40574]]
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, NW.,
Washington, DC 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 the SR-Amex-98-16 and should be submitted
by August 19, 1998.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-Amex-98-16) is approved.
\10\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-20188 Filed 7-28-98; 8:45 am]
BILLING CODE 8010-01-M
