[Federal Register Volume 62, Number 44 (Thursday, March 6, 1997)]
[Notices]
[Pages 10303-10305]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-5526]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38351; File No. SR-Amex-97-06]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the American 
Stock Exchange, Inc. Relating to Audit Trail Identifiers

February 27, 1997.
    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 January 30, 1997, the American Stock Exchange, Inc. (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the self-regulatory 
organization. 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.
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    \1\ 15 U.S.C. Sec. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to implement audit trail identifiers relating 
to competing market-maker and ``short exempt'' transactions, 
substantially identical to those previously approved for use at the New 
York Stock Exchange. 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 IV 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
    Amex member firm procedures currently require that Amex clearing 
members provide comparison and clearing reports with the following 
trade details with respect to each transaction processed by them: 
security, volume, price, trade date, clearing member number and contra 
clearing member number. In addition, for each trade processed by them, 
clearing members are responsible for providing the Exchange with 
additional audit trail information, including the following account 
types: agency (market with identifier ``A''), principal (``P''), 
specialist principal (``S''), registered trader (``G'') and Amex 
options specialist or market-maker trading an Amex Paired Security 
(``V'').
    The Exchange proposes to require that the audit trail information 
provided by clearing members include the following additional account 
types:
    Oproprietary transactions for a competing market-maker that is 
affiliated with the clearing member.
    T--transactions for the account of an unaffiliated member's 
competing market-maker (that is, transactions were an Amex member is 
acting as agent for another member's competing market-maker account).

[[Page 10304]]

    R--transactions for the account of a non-member competing market-
maker.
    ``Competing market-maker'' is defined as any person acting as a 
market-maker, as defined in section 3(a)(38) \3\ of the Act, in an 
Amex-traded security. A person acting solely in the capacity of block 
positioner would not be considered to be a competing market maker. The 
Exchange believes that implementation of O, T and R identifiers will 
permit the Exchange to better assess the level of member and non-member 
competing market-maker activity on the Amex and to formulate 
appropriate rules and procedures relating to such activity in view of 
the needs of public investors and other market participants.
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    \3\ Section 3(a)(38) of the Act defines market maker as any 
specialist permitted to act as a dealer, any dealer acting in the 
capacity of block positioner, and any dealer who, with respect to a 
security, holds himself out (by entering quotations in an inter-
dealer communications system or otherwise) as being willing to buy 
and sell such security for his own account on a regular or 
continuous basis.
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    The Exchange proposes further to implement account identifiers for 
individual investor orders (``I'') and orders submitted by an Amex 
clearing member for the account of an unaffiliated Amex member or 
member organization (``W'').
    The Exchange is also proposing to expand use of the audit trail 
account type field to require designation of ``short exempt'' trades 
Four identifiers would be added to the audit trail account type field 
to identify ``short exempt'' trades for:

The proprietary account of a clearing member organization or an 
affiliated member/member organization--to be designated E
The proprietary account of an unaffiliated member/member organization--
to be designated F
An individual customer account--to be designated H
Other agency customer account--to be designated B.

    In addition, member firms would be required to identify ``short 
exempt'' trades of competing market-makers utilizing the following 
identifiers:
    L--to designate a ``short exempt'' transaction for the account of a 
competing market-maker that is a member or member organization trading 
for its own account.
    X--to designate a ``short exempt'' transaction where one member is 
acting as agent for another member's competing market-maker account.
    Z--to designate a ``short exempt'' transaction for the account of a 
non-member competing market-maker.
    ``Short exempt'' transactions are those that are exempt from the 
``tick-test'' provisions of SEC Rule 10a-1 \4\ or Amex Rule 7. The 
Exchange notes that it understands that members should mark as ``short 
exempt'' any short selling order that is exempt from the ``tick-test'' 
provisions of Rule 10a-1. Use of identifiers for ``short exempt'' 
transactions will enhance the Exchange's ability to identify violations 
of Rule 10a-1 and Amex Rule 7.
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    \4\ 17 CFR 240.10a-1(e).
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2. Statutory Basis
    The basis under the Act for the proposed rule change is the 
requirement under Section 6(b)(5) that an Exchange have rules that are 
designed to promote just and 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.

B. Self-Regulatory Organization's Statement on Burden on Competition

    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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    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, with the requirements of Section 6(b) of the Act.\5\ 
Specifically, the Commission believes the proposal is consistent with 
the Section 6(b)(5) requirements that the rules of an exchange be 
designed to promote just and equitable principles of trade, to prevent 
fraudulent and manipulative acts, and, in general, to protect investors 
and the public.\6\
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    \5\ 15 U.S.C. Sec. 78f (b).
    \6\ In approving these rule changes, the Commission has 
considered the proposed rules' impact on efficiency, competition, 
and capital formation. 15 U.S.C. Sec. 78c (f).
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    The Commission also believes that the adopted ``short exempt'' 
account identifiers are consistent with SEC Rule 10a-1, which requires 
that orders be marked ``long'' or ``short.'' In this regard, the new, 
more precise identifier codes should facilitate surveillance 
investigations and will allow the Exchange to ensure compliance with 
the exemptive provisions of Rule 10a-1(e) of the Act.
    Finally, the Commission believes that the proposed identification 
codes should prevent fraudulent and manipulative acts by improving the 
accuracy and efficiency of audit trail information used for 
surveillance purposes. In particular, more accurate audit trail 
information should increase the effectiveness of the Exchange's 
automated surveillance procedures and provide Exchange staff with a 
more comprehensive reconstruction of trading activity. In summary, the 
Commission believes that the proposed identifier codes should permit 
the Amex to perform its surveillance responsibilities under the Act 
more thoroughly and for this reason, finds the proposal consistent with 
Section 6(b)(5) of the Act.
    The Commission notes that the approval of this proposal is limited 
solely to establishing competing dealer identifier codes for audit 
trail and surveillance purposes.\7\ The proposal does not limit or 
restrict the activity of competing dealers or their access to the Amex. 
Thus, any competitive burden on competing dealers would be minimal and 
outweighed by the surveillance benefits to be obtained by the Amex.
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    \7\ This information is not available to specialists or traders 
on the floor.
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    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 in the Federal Register. This rule change will 
permit the Amex to implement the new audit trail identifiers on the 
same day that their use will be made mandatory on the New York Stock 
Exchange.\8\ Substantially similar audit trail identifiers were 
approved for use on the New York Stock Exchange in 1994 following a 
full notice period during which no comments were received.\9\ Since 
that time, the Commission has not been made aware of any concerns 
regarding the use of the audit trail identifiers and therefore believes 
that it is appropriate to approve the use of the audit trail 
identifiers on an accelerated basis.
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    \8\ The use of the new audit trail identifiers will be made 
mandatory on the NYSE on March 3, 1997. See NYSE Information Memo 
No. 96-36 (Dec. 5, 1996).
    \9\ See Securities Exchange Act Release Nos. 33662 (Feb. 23, 
1994), 59 FR 10027 (Mar. 2, 1994) (order approving File No. SR-NYSE-
91-46) and 34539 (Aug. 17, 1994), 59 FR 43605 (Aug. 24, 1994) (order 
approving File No. SR-NYSE-94-16).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and

[[Page 10305]]

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 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. Sec. 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 
Exchange. All submissions should refer to File No. SR-Amex-97-06 and 
should be submitted by March 27, 1997.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-Amex-97-06) is approved.

    \10\ 15 U.S.C. Sec. 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 C.F.R. 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-5526 Filed 3-5-97; 8:45 am]
BILLING CODE 8010-01-M