[Federal Register Volume 62, Number 220 (Friday, November 14, 1997)]
[Notices]
[Pages 61154-61156]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-29931]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39306; File No. SR-AMEX-97-37]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange, Inc., Relating to Its Designated 
Options Area

November 6, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on October 
14, 1997, the American Stock Exchange, Inc. (the ``Amex'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Item 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.

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Amex proposes to amend its policy to include additional 
physically separate locations on the Exchange's trading floor where 
options on Amex-listed stocks may trade. The information will be found 
in an upcoming information circular of the Exchange.

II. Self-Regulatory Organization's

    Statement of the Purpose of, and Statutory 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 the 
Statutory Basis for, the Proposed Rule Change

(1) Purpose
    In 1988, the Exchange received Commission approval to trade options 
on Amex-listed stocks.\1\ The approval was based upon the Amex's 
trading floor for equities and options on those equities being 
sufficiently separated such that there could be no time and

[[Page 61155]]

place advantage derived from the physical proximity of the two floors 
which could be exploited.
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    \1\ Securities Exchange Act Release No. 26147 (October 3, 1988), 
53 FR 39556 (October 7, 1988).
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    Since the 1988 approval was granted, the trading of options on 
Amex-listed securities has continued to occur on the Exchange at 
locations that are physically separate from the locations where the 
trading of Amex-listed stocks occurs. The Exchange contains additional 
locations that are also physically separate from the locations where 
Amex-listed stocks trade that have yet to be designated as areas for 
the trading of options on Amex-listed stocks. The Exchange now proposes 
to amend its policy to include those additional physically separate 
locations as areas where the trading of options on Amex-listed stocks 
may occur (the ``Designated Options Area'').
    While the number of options on Amex-listed stocks has increased 
slowly, to approximately 45 classes since 1988, the overall number of 
option classes traded on the Exchange has increased over 350% since 
that time. As a result of this increase in classes of options traded at 
Amex, the Exchange currently lacks flexibility in moving trading units 
around its trading floors. Those specialist units currently trading 
options on Amex-listed stocks are forced to remain in the current 
Designated Options Area, even though they have outgrown their space, or 
face giving up those classes to move to larger quarters. Moreover, 
specialist units that currently do not trade any options on Amex-listed 
stocks are unable to do so because there is no room left in the current 
Designated Options Area. The increase in classes of options traded on 
the Exchange and the Exchange's need for flexibility in moving the 
various trading units around the Exchange's trading floors has made it 
necessary for the Exchange to find additional physically separate 
locations to include in the Designated Options Area.
    To address the above concerns, the Exchange proposes to include in 
its Designated Options Area the mezzanine trading level located above 
the Exchange's main equity trading floor area (the ``Mezzanine'') and 
that area of the Exchange consisting of the back row of the west side 
of the Exchange's main trading floor also referred to as the west side 
of Exchange Post 12, 13, and 15 (the ``Back Row''). The Commission 
recognized in 1994 that the Mezzanine is a physically separate trading 
location when it approved the inclusion of Amex-listed stocks in stock 
industry index groups provided the index traded separate from the 
Exchange's Designated Stock Area.\2\ Consistent with the Commission's 
approval of that proposal, the Mezzanine and the Back Row are 
physically separate from the Designated Stock Area so as to avoid 
direct sight lines and communication by means of hand signals between 
either the Mezzanine or the Back Row and the Designated Stock Area.
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    \2\ Securities Exchange Act Release No. 34359 (July 12, 1994), 
59 FR 36799 (July 19, 1994).
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    The proposed rule change will not increase the potential for 
trading abuse or manipulation as there is no line of sight between the 
Mezzanine and the Back Row and the Designated Stock Area, thus no time 
or place advantage results from the proposed rule change. Although the 
proposed rule change will not increase the potential for trading abuse 
or manipulation, the Exchange does currently have in place various 
safeguards to detect and prevent any such abuse or manipulation. These 
safeguards include Amex Rule 175, which prohibits any specialist from 
acting as an options specialist or functioning in any capacity 
involving marketmaking responsibilities in any option as to which the 
underlying security is a stock in which the specialist is registered as 
such.
    In addition to the safeguards contained in Amex Rules 175, the 
Exchange prohibits, under Amex Rule 958, any equity specialist, odd-lot 
dealer or Nasdaq market maker from acting as a registered trader in a 
class of stock options on a stock in which he is registered in the 
primary market place. This Rule also prohibits any member, while acting 
as a Registered Options Trader, if he is also registered as a 
Registered Equity Trader or Registered Equity Marketmaker, from 
executing a proprietary Exchange option transaction on an Amex-listed 
stock if during the preceding 60 minutes, he has been in the Designated 
Stock Area where the Amex-listed stock is traded.
    To insure compliance with the above safeguards, the Exchange has in 
place various surveillance procedures. The Exchange's surveillance 
procedures, which are set forth at Section XI, C of the Amex Trading 
Analysis Options Surveillance Manual Concerning Paired Security Review, 
including, among other items, the preparation of daily activity reports 
on Registered Options Trader's (``ROT'') trading activity in Amex-
listed stocks and options. These reports are than used to analyzed ROT 
trading activity to insure compliance with Amex Rule 958.
(2) Basis
    The proposed rule change is consistent with Section 6(b) of the Act 
\3\ in general and furthers the objectives of Section 6(b)(5) \4\ 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.
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    \3\ 15 U.S.C. Sec. 78f(b).
    \4\ 15 U.S.C. Sec. 78f(b)(5).
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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.

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. 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 Exchange 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 filled 
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

[[Page 61156]]

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. 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 
SR-AMEX-97-37 and should be submitted by December 5, 1997.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \17\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-29931 Filed 11-13-97; 8:45 am]
BILLING CODE 8010-01-M