[Federal Register Volume 60, Number 88 (Monday, May 8, 1995)]
[Notices]
[Pages 22591-22592]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11229]



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[[Page 22592]]

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-35660; File No. SR-Amex-95-09]


Self-Regulatory Organizations; American Stock Exchange, Inc.; 
Order Granting Approval to Proposed Rule Change Relating to the Entry 
of Market-at-the Close Orders

May 2, 1995.
    On February 22, 1995, 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\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to adopt new Commentary .02 to 
Exchange Rule 109 to require members entering market-at-the-close 
(``MOC'') orders through the Exchange's order routing systems, Post 
Execution Reporting (``PER'') or Amex Options Switching (``AMOS''),\3\ 
to do so by no later than 3:50 p.m.

    \1\15 U.S.C. 78s(b)(1) (1988).
    \2\17 CFR 240.19b-4 (1994).
    \3\Although there is no specific Amex rule describing the types 
of orders that AMOS may accept, it has been the practice of the 
Exchange to allow AMOS to accept MOC options orders. Telephone 
conservation with Stuart Diamond, Director, Rulings Department, 
Amex, and Linda Tarr, Special Counsel, Amex, and Jennifer Choi, 
Attorney, SEC, on May 1, 1995.
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    The proposed rule change was published for comment in Securities 
Exchange Act Release No. 35492 (Mar. 15, 1995), 60 FR 14985 (Mar. 21, 
1995). No comments were received on the proposal.
    The Amex Rule 109(d) sets forth the procedures for executing MOC 
orders.\4\ Under Rule 109, a member must execute MOC orders in a stock 
where the member is holding simultaneously both buy and sell MOC orders 
in accordance with certain procedures. Where there is an imbalance 
between the buy and sell MOC orders, a member at the close of trading 
must execute the imbalance of buy orders against the offer and 
imbalance of sell orders against the bid. The member must then stop the 
remaining buy and sell orders against each other and pair them off at 
the price of the immediately preceding sale. The member must report the 
paired off transactions to the consolidated last sale reporting system 
as ``stopped stock.''

    \4\A market-at-the-close order is a market order that is to be 
executed at or as near to the close as practicable. See American 
Stock Exchange Guide, Rule 131(e), (CCH) 9281.
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    In situations where there is no imbalance between the buy and sell 
MOC orders, the buy and sell orders are stopped against each other and 
paired off at the price of the last sale on the Exchange just before 
the close of trading in that stock on that day. The transaction must be 
reported to the consolidated reporting system as stopped stock.
    At the present time, members may enter MOC orders until 4:00 p.m. 
when trading closes. Members may enter MOC orders through the 
Exchange's order routing systems, PER and AMOS, or manually through a 
floor broker to the specialists.
    The Exchange proposes to amend Amex Rule 109 by adopting new 
Commentary .02, which would impose a 3:50 p.m. deadline for the entry, 
cancellation, or reduction of all MOC orders through the PER or AMOS 
systems. Thereafter, a member may only enter, modify, and cancel MOC 
orders through other means than the Exchange's order routing systems.
    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\ The 
Commission believes that 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 interest.

    \5\15 U.S.C. 78f(b) (1988 & Supp. v. 1993).
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    The Commission has been aware for several years that the use of 
composite-asset trading techniques and strategies has increased 
substantially, which has prompted the need to establish greater price 
certainty at the close.\6\ The Commission believes that the Exchange's 
proposed rule change will assist specialists in ascertaining the 
closing price\7\ of a security in a timely manner by providing 
specialists with a reasonable period to assess whether there is an 
imbalance of MOC orders, and to pair off MOC buy and sell orders, 
entered through the Exchange's automated routing systems. Unlike other 
orders, MOC orders do not appear on the specialist's electronic book 
and specialists must process the orders manually.\8\ Therefore, on days 
where there is heavy volume of MOC orders, the execution of MOC orders 
and, in turn, the determination of the closing price, may be delayed 
under the current practice. The Commission believes that the extra time 
allotted under the proposal should allow specialists to effectuate an 
orderly closing in stocks by alleviating the problem of MOC orders 
being entered through the Amex automated systems so close to the 4:00 
p.m. deadline that the specialists cannot execute the MOC transactions 
and determine the closing price until after the close.\9\

    \6\See Securities Exchange Act Release No. 31610 (Dec. 16, 
1992), 57 FR 61131 (Dec. 23, 1992) (File No. SR-Amex-92-34) 
(permanently approving procedures to execute MOC orders on every 
trading day).
    \7\The closing price is the price at which the MOC orders were 
executed. telephone conversation with Stuart Diamond, Director, 
Rulings Department, Amex, and Linda Tarr, Special Counsel, Amex, and 
Glen Barrentine and Jennifer Choi, SEC, on March 7, 1995.
    \8\Telephone conversation with Stuart Diamond, Director, Rulings 
Department, Amex, and Jennifer S. Choi, SEC, on April 19, 1995.
    \9\Under the proposed rule change, members may continue to 
enter, cancel, or modify MOC orders manually until 4:00 p.m. MOC 
orders that are manually brought to the specialist post by a floor 
broker are less likely to delay the specialist's processing of the 
MOC orders because a floor broker has the discretion not to place a 
MOC order when an imbalance of buy and sell MOC orders has affected 
the price of a stock. Under the proposed rule change, a specialist 
would be able to process MOC orders entered through the Exchange's 
automated routing system soon after the 3:50 deadline and negotiate 
with a floor broker when there is an imbalance between the MOC buy 
and sell orders.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-Amex-95-09) is approved.

    \10\15 U.S.C. 78s(b)(2) (1988).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\

    \11\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-11229 Filed 5-5-95; 8:45 am]
BILLING CODE 8010-01-M