[Federal Register Volume 63, Number 141 (Thursday, July 23, 1998)]
[Notices]
[Pages 39608-39609]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-19572]



[[Page 39608]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40201; File No. SR-AMEX-98-20]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange, Inc., Relating to the Permanent 
Approval of the Exchange's Pilot Program for Specialists in Portfolio 
Depositary Receipts, Investments Trust Securities, and Index Fund 
Shares To Participate In the After-Hours Trading Facility

July 15, 1998.
    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 June 9, 1998, the American Stock Exchange, Inc. (``Amex'' or 
``Exchange''), filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    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 Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments if received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange 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 seeks permanent approval of the pilot program 
permitting specialists in Portfolio Depository Receipts \3\ (``PDRs''), 
investment trust securities, and Index Fund Shares to participate in 
the after-hours trading (``AHT'') facility to ``clean-up'' order 
imbalances and to effect closing price coupled orders.\4\
---------------------------------------------------------------------------

    \3\ The Exchange currently lists three Portfolio Depositary 
Receipts, viz., Depositary Receipts on the Standard and Poor's 
500<Register> and MidCap<Register> Indexes, and Depositary Receipts 
on the Dow Jones Industrial Average<SUP>TM</SUP>. The Exchange also 
lists 17 Index Fund Shares which are commonly referred to as 
WEBS<SUP>sm</SUP>. WEBS are shares issued by an open-end management 
investment company that seek to provide investment results that 
correspond generally to the price and yield performance of a 
specified foreign or domestic equity market index. The Exchange 
currently lists WEBS based on the following Morgan Stanley Capital 
International (``MSCI'') indices: MSCI Australia Index, MSCI Austria 
Index, MSCI Belgium Index, MSCI Canada Index, MSCI France Index, 
MSCI Germany Index, MSCI Hong Kong Index, MSCI Italy Index, MSCI 
Japan Index, MSCI Malaysia Index, MSCI Mexico Index, MSCI 
Netherlands Index, MSCI Singapore (Free) Index, MSCI Spain Index, 
MSCI Sweden Index, MSCI Switzerland Index, and MSCI United Kingdom 
Index. (See SR-Amex-95-43.)
    \4\ The Commission originally approved the pilot program in 
Securities Exchange Act Release No. 34611 (Aug. 29, 1994), 59 FR 
45739 (Sept. 2, 1994) (``Original Pilot Approval''). The pilot was 
scheduled to expire on August 29, 1995, but was extended for three 
successive one-year periods in Securities Exchange Act Release Nos. 
36123 (Aug. 18, 1995), 60 FR 44519 (Aug. 28, 1995); 37529 (Aug. 6, 
1996), 61 FR 41814 (Aug. 12, 1996); and 38986 (Aug. 17, 1997), 62 FR 
46785 (Sept. 4, 1997). In the Original Pilot Approval and in each 
extension, the Commission requested that the Exchange submit a 
report and analysis regarding the operation of the pilot program. 
The Exchange did not submit a report until 1997, as specialists made 
little or no use of the pilot program until the period September 3, 
1996 to May 30, 1997. The 1997 report stated that during that 
period, there were two trades for a total of 600 shares of PDRs in 
the AHT session for PDRs, index trust securities, and Index Funds 
Shares. See letter dated August 5, 1997, from William Floyd-Jones, 
Jr., Assistant General Counsel, Amex, to Michael Walinskas, Senior 
Special Counsel, SEC. The 1998 report stated that during the period 
June 1, 1997 to April 30, 1998, there were 12 trades for a total of 
56,320 PDRs in the AHT session for PDRs, index fund securities, and 
Index Fund Shares. See letter dated June 8, 1998, from William 
Floyd-Jones, Jr., Assistant General Counsel, Amex, to Michael 
Walinskas, Senior Special Counsel, SEC.
---------------------------------------------------------------------------

    The Exchange believes that permanent approval of the Exchange pilot 
program to permit specialists in PDR's, investment trust securities, 
and Index Fund Shares to participate in the AHT facility in order to 
``clean-up'' order imbalances and effect closing price coupled orders 
would benefit investors by providing additional liquidity to the listed 
cash market for derivative securities based upon well-known market 
indexes. The Amex maintains that investor interest in these securities 
is rapidly increasing, and specialist participation in the AHT session 
provides necessary liquidity after the close of the regular trading 
session. In addition, the market price of these exchange-trading funds 
is based upon transactions largely effected in markets other than the 
Amex. (In the case of Index Fund Shares, the market price of these 
securities is based exclusively on transactions occurring outside the 
Amex.) The specialist in the Amex listed securities has no unique 
access to market sensitive information regarding the market for the 
underlying securities or closing index values. The Exchange, therefore, 
believes that specialist participation in the AHT facility in PDRs, 
investment trust securities and Index Fund Shares in the manner 
previously approved by the Commission on a pilot basis does not raise 
any market integrity issues. In addition, should a customer not care 
for an execution at the closing price, the rules of the Exchange's AHT 
facility permit cancellation of an order up to the close of the AHT 
session at 5:00 p.m. (Orders in the AHT facility are not executed until 
the 5:00 p.m. close of the AHT session.) A customer, therefore, has 
approximately 40 minutes to determine if an execution at the closing 
price suits its need and may cancel its order if it believes that the 
closing price does not suit its objectives.
2. Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act, \5\ in general, and furthers the objectives of 
Section 6(b)(5), \6\ in particular, in that it is designed to prevent 
fraudulent acts and practices, promote just and equitable principles of 
trade, remove impediments to and perfect the mechanism of a free and 
open market and a national market system, and, in general, protect 
investors and the public interest.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange believes that proposed permanent approval of the pilot 
program would 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. 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

[[Page 39609]]

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, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, DC 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. 552, will be available for inspection and copying in the 
Commission's Public Reference Room, 450 Fifth Street, N.W., Washington, 
DC 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 File No. SR-AMEX-98-20 and should be submitted by August 24, 
1998.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
---------------------------------------------------------------------------

    \7\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jonathan G. Katz,
Secretary.
[FR Doc. 98-19572 Filed 7-22-98; 8:45am]
BILLING CODE 8010-01-M