[Federal Register Volume 62, Number 37 (Tuesday, February 25, 1997)]
[Notices]
[Pages 8466-8467]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4604]


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SECURITIES AND EXCHANGE COMMISSION
[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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ On 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.
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    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.
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    \3\ Securities Exchange Act Release No. 37973 (November 22, 
1996), 61 FR 63884.
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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\
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    \4\ This filing only addresses trading requirements relating to 
necessary surveillance sharing procedures.
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    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\.
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    \5\15 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).
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    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

[[Page 8467]]

notes that 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 Amex. In view of the importance of 
maintaining the confidentiality of this information, the SEC believes 
that the officers and/or directors overseeing the exchange employees 
conducting the relevant market surveillance and enforcement proceedings 
would be responsible for ensuring the confidentiality of the 
information provided by the SEC pursuant to the MOU with the CONSOB and 
should take reasonable measures to ensure that the information does not 
become available to unauthorized persons. Thus, the Commission believes 
that the Exchange will undertake to maintain the confidentiality of 
such 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.
    The Commission believes that the Amex, by adopting a policy that 
provides access to information on the underlying securities for market 
surveillance and enforcement purposes, will be in a position to list 
options and other derivative products containing Italian component 
securities, provided that all other applicable product listing 
standards are met. Therefore, the Exchange's proposed rule change could 
potentially provide investors with the opportunity to invest in such 
products and hedge their exposure to the Italian securities market. 
Accordingly, the Commission believes that the proposed rule change is 
consistent with and furthers the objectives of Section 6(b)(5) of the 
Act, in that it is designed to perfect the mechanisms of a free and 
open market and to protect investors and the public interest.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (SR-AMEX-96-36) is approved, as 
amended.

    \7\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-4604 Filed 2-24-97; 8:45 am]
BILLING CODE 8010-01-M