8432 Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Notices

11See footnote 9 of Securities Exchange Act

Release No. 29922 (November 8, 1991), 56 FR

58409.

12No comments were received in connection with

the proposed rule changes that implemented these

procedures. See supra, notes 3–4.

13 15 U.S.C. 78s(b)(2) (1988).

14 17 CFR 200.30–3(a)(12) (1991).

1See Securities Exchange Act Release No. 31118

(August 28, 1992), 57 FR 40484 (September 3,

1992).

2The Amex estimates that the rule change will

increase the number of securities traded in

sixteenths from 362 securities (approximately 37%

of Amex-listed securities) to 589 securities

(approximately 60% of Amex-listed securities).

These estimates were made by the Exchange as of

February 3, 1995.

3 Division of Market Regulation, SEC, Market

2000: An Examination of Current Equity Market

Developments (January 1994), at 18 (‘‘Market 2000

Study’’).

4 ITS is a subsystem of the National Market

System approved by the Commission pursuant to

Section 11A of the Act, 15 U.S.C. 78k–1 (1988). ITS

facilitates intermarket trading in exchange-listed

equity securities based on the current quotation

information emanating from the linked markets. For

a discussion of ITS, see Market 2000 Study, supra

note 3, at Appendix II.

5Participants to the ITS Plan include the Amex,

the Boston Stock Exchange, the Chicago Board

Options Exchange, the Chicago Stock Exchange, the

Cincinnati Stock Exchange, the New York Stock

Exchange, the Pacific Stock Exchange, the

Philadelphia Stock Exchange, and the National

Association of Securities Dealers.

6SIAC is a jointly owned subsidiary of the New

York Stock Exchange and the Amex, which does,

among other things, the automated processing for

ITS.

number of odd-lot market orders on the

Amex 11 and the benefits to customers

under the pilot procedures as compared

to the former pricing procedures, which

priced odd-lot orders based on

subsequent round-lot transactions and

which raised concerns regarding

timeliness of execution, the Commission

finds that it is appropriate to extend the

pilot program for an additional twelve

months. This will enable the pilot

program to continue without

interruption during the system

modifications.

The Commission finds good cause for

granting approval of 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

procedures the Exchange proposes to

continue using are substantially

identical to the procedures that were

published in the Federal Register for

the full comment period and were

approved by the Commission.12

It is therefore ordered, pursuant to

Section 19(b)(2) 13 of the Act, that the

proposed rule change (SR–Amex–95–

03) is approved for a twelve month

period ending on February 8, 1996.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–3617 Filed 2–13–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35338; File No. SR–Amex–

95–02]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

American Stock Exchange, Inc.

Relating to Minimum Fractional

Changes

February 7, 1995.

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

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on January 31, 1994,

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, II and III

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.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Amex proposes to amend Amex

Rule 127 to increase from $5 to $10 the

price level below which equity

securities are traded in sixteenths.

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

In August 1992, the Commission

approved amendments to Amex Rule

127 to provide that securities selling

under $5 and above $.25 may be traded

in fractions of 1⁄16 of $1.00 per share.1

Prior to the amendment, Rule 127

provided for trading in sixteenths for

securities selling under $1 and above

$.25, whereas trading in securities

selling above $1 were subject to a

minimum trading fraction of one-eighth

of $1. In expanding the number of

securities eligible for trading in

sixteenths, the Exchange intended to

promote greater liquidity in lower

priced stocks by allowing quotations

between the then-current one-eighth

minimum trading fraction, thereby

providing possible improved pricing of

orders to the benefit of both public

customers and market professionals.

The Exchange proposes to increase

significantly the number of Amex-listed

securities traded in sixteenths by

amending Rule 127 to provide for

sixteenths trading in securities selling

under $10.2 The Exchange believes that

trading in sixteenths will improve the

market for securities trading under $10

by promoting greater liquidity and

providing for superior executions of

retail and professional orders. In

addition, the proposal is responsible to

the recommendations of the Division of

Market Regulation, in its Market 2000

Study,3 that the exchanges and Nasdaq

convert to a minimum variation of onesixteenth as soon as possible.

The proposed amendments to Rule

127 do not pertain to bond issues,

which will continue to be dealt in at

one-eighth of $1. In addition, the

Exchange will retain its authority to fix

different minimum fractional changes

where appropriate.

Prior to implementing expanded

sixteenths trading in 1992, the Amex

discussed the need for systems

enhancements to the Intermarket

Trading System (‘‘ITS’’) 4 with all ITS

participants 5 in order to permit the

transmittal of commitments to trade

Amex securities priced under $5 via ITS

in fractions of one-sixteenth, which

enhancements were implemented by the

Securities Industry Automation

Corporation (‘‘SIAC’’).6 Prior to the

proposed expansion of trading in

sixteenths, the Amex will consult with

all ITS participants to permit them to

make any required modifications to

their individual systems to

accommodate trading through ITS in

Amex securities priced under $10.

2. Statutory Basis

Thr proposed rule change is

consistent with Section 6(b) of the Act

in general and furthers the objectives of

Section 6(b) in particular in that it is

intended to promote just and equitable

principles of trade, to facilitate
Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Notices 8433

transactions in securities, and to protect

investors and the public.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The proposed rule change will

remove or lessen existing burdens on

competition in that it will enhance the

liquidity of and provide for greater price

competition in Amex securities trading

under $10.

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 publication of

this notice in the Federal Register or

within such other period (i) as the

Commission may designate up to 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 self-regulatory organization

consents, the Commission will:

(A) By order approve the 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.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

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 at

the Commission’s Public Reference

Section, 450 Fifth Street, NW.,

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–95–

02 and should be submitted by March

7, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–3568 Filed 2–13–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35345; File No. SR–CBOE–

94–54]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Board Options Exchange

Relating to Firm Quote

Responsibilities

February 8, 1995.

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

Securities Exchange Act of 1934, 15

U.S.C. 78(b)(1), notice is hereby given

that on January 4, 1995, the Chicago

Board Options Exchange, Incorporated

(‘‘CBOE’’ or ‘‘Exchange’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change as described in Items I, II, and

III below, which Items have been

prepared by the CBOE. The Commission

is publishing this notice to solicit

comments on the proposed rule change

from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange proposes to expand the

applicability of the firm quote rule to

include two-part orders in equity

options, in which the component series

are on opposite sides of the market and

in a one-to-one ratio. The text of the

proposed rule change is available at the

Office of the Secretary, CBOE 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 it 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 parts of such

statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

The purpose of the proposed rule

change is to expand the applicability of

Rule 8.51 to certain two part equity

orders and thus, to attempt to ensure the

ability of public customers to execute

defined risk strategies, such as spreads

and straddles, at the disseminated

market quotes.

CBOE Rule 8.51 places the

responsibility on the trading crowd to

ensure that non-broker-dealer customer

orders are sold or bought, up to ten

contracts, at the quoted offer or bid,

respectively. This ‘‘firm quote’’ or ‘‘tenup’’ requirement is meant to provide

confidence that the displayed quotes

may be relied upon by the investing

public and to ensure that public

customer orders will be executed at

those quotes.

From its inception the rule was

intended to apply to, and has been

interpreted to apply only to, single part

orders, i.e., either a buy order or a sell

order for a particular option series. The

Exchange has determined, however, that

public customers would be served better

if the interpretation were expanded to

included a requirement to provide a tenup market in two-part equity option

orders in which the components of the

order are on opposite sides of the

market and in a one-to-one ration to

each other. The expansion in the

interpretation of this rule would make it

possible for public customers to execute

both sides of a defined risk strategy,

such as a spread or a straddle, at the

disseminated prices. This rule change,

then, should help the Exchange compete

more effectively for public customer

order flow and trading activity.

The Exchange does not believe this

rule change would be burdensome to

market-makers because, under the

current interpretation, the marketmakers would be required to satisfy the

ten-up requirement as to each leg of a

spread or straddle if each was placed as

a separate order. This rule change

would merely ensure that these two

components may be done at the same

time, as one order, and at the same

prevailing market quotes. The Exchange

believes, however, that it is

inappropriate, under any circumstances,

to extend the firm-quote treatment to

multi-part orders with all parts on the

same side of the market as this would

effectively impose the burden on

options market-makers of making

markets in the underlying security. For

example, a position in a long call and

a short put is economically equivalent

to being long the underlying stock; and

thus, requiring a trading crowd to

provide firm quote treatment to an order

for this position would essentially be

requiring the option market-makers to

act as market-makers in the underlying

security.