8464 Federal Register / Vol. 62, No. 37 / Tuesday, February 25, 1997 / Notices

1 15 U.S.C. 78s(b)(1).

2See letter from Claudia Crowley, Special

Counsel, Amex, to Anthony P. Pecora, Attorney,

Division of Market Regulation, SEC, dated February

14, 1997 (‘‘Amendment No. 1’’). Amendment No. 1

modified the proposed rule change by granting the

Commission the authority to extend the specialist

liquidating pilot program for up to three weeks as

an alternative to permanent approval of the pilot

program.

3A zero minus tick is a price equal to the last sale

where the last preceding transaction at a different

price was at a higher price.

4A zero plus tick is a price equal to the last sale

where the last preceding transaction at a different

price was at a lower price.

5Securities Exchange Act Release No. 37958

(Nov. 15, 1996), 61 FR 59476 (approving File No.

SR–Amex–96–42) (‘‘November 1996 Approval

Order’’).

6 15 U.S.C. 78f(b).

7 15 U.S.C. 78f(b)(15).

8 15 U.S.C. 78k(b).

3. Consideration of Inspector General

Functions.

4. Briefing on Customer Perfect!

5. Briefing on Procurement Policies.

6. Tentative Agenda for the April 7–

8, 1997, meeting in New Orleans,

Louisiana.

Wednesday, March 5 – 8:00 a.m.

(Closed)

1. Continuation of Monday’s Closed

Agenda.

CONTACT PERSON FOR MORE INFORMATION:

Thomas J. Koerber, Secretary of the

Board, U.S. Postal Service, 475 L’Enfant

Plaza, S.W., Washington, D.C. 20260–

1000. Telephone (202) 268–4800.

Thomas J. Koerber,

Secretary.

[FR Doc. 97–4782 Filed 2–21–97; 2:01 pm]

BILLING CODE 7710–12–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–38299; File No. SR–Amex–

97–01]

Self-Regulatory Organizations; Notice

of Filing of, and Order Granting

Accelerated Approval to, Proposed

Rule Change by the American Stock

Exchange, Inc. Relating to a Pilot

Program for Execution of Specialists’

Liquidating Transactions

February 18, 1997.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

January 13, 1997, the American Stock

Exchange, Inc. (‘‘Amex’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’)

the proposed rule change as described

in Items I and II below, which Items

have been prepared by the selfregulatory organization. The Exchange

submitted Amendment No. 1 on

February 14, 1997.2 The Commission is

publishing this notice to solicit

comments on the proposed rule change

from interested persons and to grant

accelerated approval to the proposed

rule change.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Amex is proposing permanent

approval of the pilot program that

amended Exchange Rule 170 to permit

a specialist to effect a liquidating

transaction on a zero minus tick,3 in the

case of a ‘‘long’’ position, or a zero plus

tick,4 when covering a ‘‘short’’ position,

without Floor Official approval. The

pilot program also amended 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 requesting a

three-week extension of the pilot

program.

The text of the proposed rule change

is available at the Office of the

Secretary, the Amex, and at the

Commission.

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 November 15, 1996, the

Commission approved an extension

until February 14, 1997 of a pilot

program that amended 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.5 The amendments also set

forth the affirmative action that

specialists are required to take

subsequent to effecting various types of

liquidating transactions.

During the course of the pilot

program, the Exchange has monitored

compliance with the requirements of the

Rule, and its findings in this regard have

been forwarded to the Commission

under separate cover. The Amex

believes 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 a dealer on the opposite

side of the market after a liquidating

transaction has been strengthened.

The Exchange is therefore proposing

permanent approval of the amendments

to Rule 170 or, in the alternative, a

three-week extension of the pilot

program.

2. Statutory Basis

The Exchange believes the proposed

rule change is consistent with Section

6(b) of the Act 6 in general and furthers

the objectives of Section 6(b)(5) 7 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

Exchange also believes the proposed

rule change is consistent with Section

11(b) of the Act 8 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 Exchange believes 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

The Exchange has neither solicited

nor received written comments 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
Federal Register / Vol. 62, No. 37 / Tuesday, February 25, 1997 / Notices 8465

9 15 U.S.C. 78f(b)(5).

10 15 U.S.C. 78k(b).

11 17 CFR 240.11b–1.

12See Securities Exchange Act Release No. 33957

(Apr. 22, 1994), 59 FR 22188 (‘‘April 1994 Approval

Order’’) (approving File No. SR–Amex–92–26). See

also Securities Exchange Act Release No. 35635

(Apr. 21), 1995), 60 FR 20780 (approving File No.

SR–Amex–95–11); Securities Exchange Act Release

No. 36014 (July 21, 1995), 60 FR 38870 (approving

File No. SR–Amex–95–19); Securities Exchange Act

Release No. 37448 (July 17, 1996), 61 FR 38487

(approving File No. SR–Amex–96–19); Securities

Exchange Act Release No. 37704 (Sept. 19, 1996),

61 FR 50525 (approving File No. SR–Amex–96–33);

November 1996 Approval Order, supra note 5.

13See 1994 Approval Order, supra note 12.

14See supra note 12.

15All ‘‘nonsubstantive’’ violations of this rule

(e.g., failure to obtain the required Floor Official

approval when such approval, if sought, would

have been granted) should be referred to the Minor

Floor Violation Disciplinary Committee, as required

by Amex Rule 590. Also, as the Amex has indicated

previously, all ‘‘substantive’’ violations of this rule

(e.g., failure to properly reenter the market or failure

to obtain the required Floor Official approval when

such approval, if sought, would not have been

granted) will be dealt with according to the

Exchange’s formal disciplinary procedures.

16See supra note 12 and November 1996

Approval Order supra note 5.

17See Securities Exchange Act Release No. 31797

(Jan. 29, 1993), 58 FR 7277 (approving File No. SR–

NYSE–92–20).

18 15 U.S.C. 78s(b)(2).

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

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Also, copies of

such filing will be available for

inspection and copying at the principal

office of the Amex. All submissions

should refer to File No. SR–Amex–97–

01 and should be submitted by [insert

date 21 days from date of publication].

IV. Commission’s Findings and Order

Granting Accelerated Approval to the

Proposed Rule Change

The Commission finds that the

Exchange’s proposal to extend its pilot

program concerning the execution of

specialists’ liquidating transactions

until March 7, 1997, is consistent with

the requirements of the Act and the

rules and regulations thereunder

applicable to a national securities

exchange. Specifically, the Commission

believes the proposal is consistent with

the Section 6(b)(5) 9 requirements that

the rules of an exchange be designed to

promote just the equitable principles of

trade, to remove impediments to and

perfect the mechanism of a free and

open market, and, in general, to protect

investors and the public interest. The

Commission also believes the proposal

is consistent with Section 11(b) of the

Act 10 and Rule. 11b–1 11 thereunder,

which allow exchanges to promulgate

rules relating to specialists in order to

maintain fair and orderly markets.

The Exchange originally proposed to

amend Amex Rule 170 in File No. SR–

Amex–92–26.12 The proposed rule

change, filed as a one-year pilot

program, amended Amex Rule 170 to

permit specialists to ‘‘reliquidate’’ a

dealer position by selling stock on a

direct minus tick or by purchasing stock

on a direct plus tick, but 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. Under the pilot program, a

specialist, also may sell ‘‘long’’ on a zero

minus tick, or by purchasing on a zero

plus tick to cover a ‘‘short’’ position,

without Floor Official approval.

Although liquidations on a zero minus

or on a zero plus tick can be effected

under the pilot procedures without a

Floor Official’s prior approval, such

liquidations are still 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, the 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 significant price movement in a

specialist’s specialty stock, the

specialist’s re-entry into the market

must reflect, a minimum, his or her

usual level of dealer participation in the

speciality stock. In addition, during

such periods of volatile or unusual price

movements, re-entry into the market

following a series of transactions must

reflect a significant level of dealer

participation.

In the April 1994 Approval Order, the

Commission requested that the Amex

Submit a report setting forth the criteria

developed by the Exchange to determine

whether any reliquidation by specialist

were necessary and appropriate in

connection with fair and orderly

markets.13 The Commission also asked,

among other things, that the Exchange

provide information regarding the

Exchange’s monitoring of liquidation

transactions effected by specialists on

any destabilizing tick. In all of the

approval orders, the Commission

requested that the Amex continue to

monitor the pilot and update its report

where appropriate.14 In particular, the

Commission asked the Amex to report

any noncompliance with the Rule and

the action the Amex took as a result of

such noncompliance.

The Amex submitted its reports

concerning the pilot program to the

Commission in May 1995, April 1996,

and January 1997. As noted above, the

Amex believes the pilot procedures

appear to be working well in enabling

specialists to reliquidate appropriately

to meet the needs of the market. After

reviewing the data, the Commission

agrees with the Exchange that the pilot

program generally is working well. In

particular, the Commission believes the

report indicates that specialists

generally are entering the aftermarket

after effecting liquidating transactions

when appropriate.

Nevertheless, the Commission

believes certain issues concerning the

pilot program need to be revisited before

permanent approval can be granted. In

this regard, the Exchange should

continue to emphasize the requirements

of Amex Rule 170, 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.15

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. These

procedures have been published in the

Federal Register on several occasions

for the full comment period,16 and no

comments have been received.

Furthermore, the Commission approved

a similar rule change for the NYSE also

without receiving comments on the

proposal.17 For these reasons, the

Commission finds that accelerating

approval of the proposed rule change is

consistent with Section 19(b)(2) of the

Act.18 Any requests to modify this pilot

program, to extend its effectiveness, or

to seek permanent approval for the pilot

program also should include an update

on the disciplinary actions taken for

violations of these procedures.
8466 Federal Register / Vol. 62, No. 37 / Tuesday, February 25, 1997 / Notices

19 Id.

20 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2On November 12, 1996, Amex submitted

Amendment No. 1 to its proposed rule filing,

making several clarifications to the original filing.

See Letter from Claire P. McGrath, Managing

Director and Special Counsel, Amex, to Michael

Walinskas, Senior Special Counsel, Division,

Commission, dated November 7, 1996.

3Securities Exchange Act Release No. 37973

(November 22, 1996), 61 FR 63884.

4This filing only addresses trading requirements

relating to necessary surveillance sharing

procedures.

515 U.S.C. 78f(b) and 78f(b)(5).

6 In approving the rule, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f).

V. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,19 that the

proposed rule change (SR–Amex–97–

01), as amended, is approved for a pilot

period ending on March 7, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.20

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–4527 Filed 2–24–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38310; International Series

Release No. 1054; File No. SR–AMEX–96–

36]

Self-Regulatory Organizations;

American Stock Exchange, Inc.; Order

Granting Approval to Proposed Rule

Change and Amendment No. 1 Thereto

Relating to the Policy of the Amex

Regarding Information Obtained

Pursuant to the SEC’s Memorandum of

Understanding With the CONSOB

February 19, 1997.

I. Introduction

On October 2, 1996, the American

Stock Exchange, Inc. (‘‘Amex’’ or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’), pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’),1 a proposed rule

change to adopt an official Exchange

policy concerning the circumstances

and conditions under which the

Exchange, in order to carry out its

market surveillance and enforcement

functions for derivative products

containing Italian component securities,

may obtain access to information

regarding activity on the Italian

securities markets obtained by the SEC

pursuant to the Commission’s

Memorandum of Understanding

(‘‘MOU’’) with the Commissione

Nazionale per le Societa e la Borsa

(‘‘CONSOB’’). Amex submitted

Amendment No. 1 to the filing on

November 12, 1996,2 which made

several clarifications to the original

filing.

The proposed rule change was

published for comment in the Federal

Register on December 2, 1996.3 No

comments were received on the

proposal. This order approves the

proposal, as amended.

II. Description of the Proposal

The Amex does not have a

surveillance sharing agreement with the

Milan exchange, which is an

unincorporated association and is not

able under Italian law to enter into such

an arrangement. Therefore, Amex

submitted this rule filing to enable the

Exchange to carry out its market

surveillance and enforcement functions

for derivative products containing

Italian component securities by seeking

the necessary information about activity

on the Italian securities markets from

the SEC pursuant to the SEC’s MOU

with CONSOB. The Exchange’s

proposed policy details the

circumstances and conditions under

which the Exchange may obtain access

to such information from the SEC. By

adopting this policy, therefore, the

Exchange believes it will be in a

position to list derivative products

containing Italian component securities

because it will be able to have access to

information on the underlying securities

which it may need for enforcement or

market surveillance purposes.4

The Exchange’s proposed policy

provides that the Exchange will advise

the SEC of information it needs

regarding activity on the Italian

securities markets for market

surveillance and enforcement purposes.

The SEC, in turn, may request the

CONSOB’s assistance, pursuant to the

MOU, in gaining access to such

information. The Exchange will use

such information it may receive from

the SEC only for the purposes of

conducting market surveillance and

enforcement proceedings. The Exchange

will limit distribution of such

information to officers and directors of

the Exchange and other employees

directly responsible for conducting

market surveillance and enforcement

proceedings relating to the matter in

connection with which the SEC

provided the information to the

Exchange. The Exchange also will

undertake to maintain the

confidentiality of the information and to

take appropriate disciplinary action in

the event it learns of a breach of such

confidentiality, including referral to the

SEC for any action the SEC deems

necessary or appropriate.

By adopting a policy that provides

access to information on the underlying

securities for market surveillance and

enforcement purposes, the Exchange

will be able to list options and other

derivative products containing Italian

component securities, provided that all

other applicable product listing

standards are met. Therefore, the

Exchange believes that the proposed

rule change could potentially provide

investors with the opportunity to invest

in such products and hedge their

exposure to the Italian securities market.

III. Discussion

After careful review, the Commission

finds that the proposed rule hang is

consistent with the requirements of the

Act, and the rules and regulations

thereunder applicable to a national

securities exchange. In particular, the

Commission believes that the proposal

is consistent with Section 6(b) of the

Act, in general, and Section 6(b)(5),5 in

particular, as it is designed to facilitate

transactions in securities, to promote

just and equitable principles of trade,

and to protect investors and the public

interest.6.

Specifically, the Commission believes

that, since the Amex does not and

cannot have a surveillance sharing

agreement with the Milan Exchange, the

Amex’s adoption of the proposed policy

will enable the Exchange to carry out its

market surveillance and enforcement

functions for derivative products

containing Italian component securities

by seeking the necessary information

about activity on the Italian securities

markets from the SEC per the latter’s

MOU with the CONSOB. The

Commission believes that the

Exchange’s proposed policy adequately

details the circumstances and

conditions under which the Exchange

may obtain access to such information

from the SEC.

The Commission believes that, under

the Exchange’s proposed policy, the

Exchange will advise the SEC of

information it needs regarding activity

on the Italian securities markets for

market surveillance and enforcement

purposes. The Commission, in turn,

may request the CONSOB’s assistance,

pursuant to the MOU, in gaining access

to such information. The Commission

notes that the Exchange will use such

information it may receive from the SEC

only for the purposes of conducting

market surveillance and enforcement

proceedings. The Commission also