[Federal Register Volume 65, Number 124 (Tuesday, June 27, 2000)]
[Notices]
[Pages 39638-39639]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-16206]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42966; File No. SR-Amex-00-03]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange LLC Relating to the Reporting of 
Options Transactions

June 20, 2000.
    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 February 22, 2000, the American Stock Exchange LLC (``Amex'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change relating to the 
reporting of options transactions. The Amex filed Amendment 1 to this 
proposal on June 12, 2000.\3\ The proposed rule change, as amended, is 
described in Items I, II and III below, which Items have been prepared 
by the Exchange. 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 Claire P. McGrath, Vice President and 
Special Counsel, Derivative Securities, Amex to Nancy Sanow, 
Assistant Director, Division of Market Regulation (``Division''), 
Commission, dated June 9, 2000. (``Amendment No. 1''). In Amendment 
No. 1, the Exchange clarified the proposed rule text and confirmed 
that a member's failure to report an options transaction within 90 
seconds would be considered a violation of proposed Amex Rule 992.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange has filed with the Commission a proposed rule change 
adopting a new rule, Amex Rule 992, to require the reporting of options 
transactions within 90 seconds. The text of the proposed rule change, 
as amended, is set forth below. Additions are in italics.

Trade Reporting Rules

Section 9. Miscellaneous Provisions Applicable to Options

Rule 992.

    (a) A member or member organization initiating an options 
transaction, whether acting as principal or agent, must report or 
ensure the transaction is reported within 90 seconds of the execution 
to the Amex Options Market Data System for dissemination to the Options 
Price Reporting Authority.
    (b) Transactions not reported within 90 seconds after execution 
shall be designated as late. A pattern or practice of late reporting 
without exception circumstances may be considered conduct inconsistent 
with just and equitable principles of trade.

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 Amex 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 Amex 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 proposes to adopt a new rule, Amex Rule 992, to 
require options transactions reporting within 90 seconds. The Amex 
represents that it is Exchange policy that any member initiating an 
options transaction on the floor of the Exchange, whether acting as 
principal or agent, must ensure that the trade is properly reported or 
``printed on the tape.'' \4\
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    \4\ The Exchange represents that this is currently an informal 
policy of the Exchange, which Amex is seeking to codify by adopting 
Amex Rule 992, as proposed in this filing. Voice Mail Message from 
Scott G. Van Hatten, Legal Counsel, Derivative Securities, Amex, to 
Melinda R. Diller, Attorney, Division, Commisison, on March 28, 
2000.
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    The reporting of options transactions is currently handled by the 
Amex Options Display Book (``AODB'').\5\ The AODB handles the execution 
processing of orders routed to it both electronically and manually. 
Orders routed electronically are either executed automatically by the 
Exchange's Auto-Ex system or executed by the specialist through the 
AODB. These options transactions are immediately reported to the Amex 
Option Market Data System, which processes all Amex trades, and the 
Options Price Reporting Authority, which disseminates trade information 
to the Amex's members and the investing public through vendors. Orders 
manually routed to the Exchange through a floor broker and executed in 
the trading crowd are reported to the specialist or his clerk for entry 
into the AODB and processed in the same manner as electronically routed 
and executed trades.\6\
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    \5\ According to the Exchange, the AODB is an electronic order 
book and execution-processing system that was adopted to replace and 
improve upon what was once a paper-based specialist's book.
    \6\ An example of such a trade is one that does not include 
either the specialist or a customer limit order as a party to the 
trade.
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    Although Amex estimates that 60-70% of options transactions are 
electronically routed and executed orders that are immediately reported 
and printed on the tape, the Exchange believes that the adoption of a 
specific options trade reporting rule is appropriate, particularly for 
those orders routed and executed manually. Under the proposed rule, 
transactions not reported within 90 seconds after execution will be 
designated as late. Patterns or practices of late reporting without 
exceptional circumstances may be considered conduct inconsistent with 
just and equitable principles of trade.\7\
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    \7\ In Amendment No. 1, the Amex clarified that a failure to 
report a single options transaction within 90 seconds would be 
considered a violation of the proposed options rule. See Amendment 
No. 1, supra note 3.
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2. Statutory Purpose
    The Exchange believes that 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 change, 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.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).

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[[Page 39639]]

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 not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants, or Others

    The Exchange neither solicited nor received written comments 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 
adequate 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 Amex 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 submissions, 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 persons, 
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 Amex. All submissions should refer to File No. 
SR-Amex-00-03 and should be submitted by July 18, 2000.

    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. 00-16206 Filed 6-26-00; 8:45 am]
BILLING CODE 8010-01-M