[Federal Register Volume 61, Number 114 (Wednesday, June 12, 1996)]
[Notices]
[Pages 29776-29777]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14906]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37281; File No. SR-Amex-96-14]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change by the American Stock Exchange, Inc. Relating to the Exchange 
Board of Governors

June 6, 1996.

I. Introduction

    On April 18, 1996, the American Stock Exchange, Inc. (``Amex'' or 
``Exchange'') submitted to the Securities and Exchange Commission 
(``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 amend Articles II, III and XII of the Exchange 
Constitution relating to the Board of Governors (``Board''). The 
proposed amendments would permit the appointment of a second Vice-
Chairman, allow for the inclusion of the second highest ranking 
Exchange executive officer on the Board, and permit certain Governors 
to be eligible for nomination to a third term. Notice of the proposed 
rule change appeared in the Federal Register on April 29, 1996.\3\ No 
comment letters were received on the proposed rule change. This order 
approves the Amex's proposal.
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    \1\ 15 U.S.C. Sec. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 37138 (April 23, 
1996), 61 FR 18765 (April 29, 1996).
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II. Description of Proposal

A. Board Position Amendments

    Article II, Section 2 of the Exchange Constitution currently calls 
for the appointment of one Vice-Chairman from among the Exchange 
members serving on the Board, and it has been customary over the years 
to alternate between the trading floor and ``upstairs'' communities as 
the source of that Vice-Chairman. Given the importance of both these 
communities to the Exchange, the Amex believes that it is desirable to 
be able to have one Vice-Chairman from each constituency. Accordingly, 
the proposed amendments will permit (but not require the appointment of 
two member Vice-Chairmen, and will specify that if there are two Vice-
Chairmen, one must come from the trading floor and one from 
upstairs.\4\
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    \4\ Proposed Article II, Section 2 provides that the Board shall 
elect ``one or more'' Vice-Chairmen of the Board. The Amex believes 
that when read together with Article II, Section 3(b), it is clear 
that there may be only two Vice-Chairmen. Indeed, this approval 
order only permits the appointment of a maximum of two Vice-
Chairmen. The Exchange, however, has represented that it will revise 
Article II, Section 2 to clarify that a maximum of two Vice-Chairmen 
may be appointed. See Letter from Claudia Crowley, Special Counsel, 
Legal & Regulatory Policy, Amex, to Glen Barrentine, Division of 
Market Regulation, Commission, dated April 26, 1996.
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    The Exchange would also like to create a new position of Executive 
Vice-Chairman, who will be the second highest ranking officer of the 
Exchange and who will serve as a member of the Board of Governors. The 
Executive Vice-Chairman would be appointed by the Chairman of the 
Board, subject to approval by the affirmative vote of a majority of the 
entire Board. If the Executive Vice-Chairman position is not filled and 
the Exchange has a President, then the President will serve on the 
Board. If at any time neither of those offices are filled, then the 
Chief Executive would be the only non-elected \5\ member of the Board.
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    \5\ The term ``non-elected'' in this context means not elected 
by the membership. The Chief Executive, or Chairman of the Board, is 
elected by the Board of Governors. See Amex Constitution, Article 
II, Section 2.
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B. Third Term Amendment

    It has become apparent to the Exchange that at times the special 
limitations in the Constitution relating to which kind of Governors can 
serve third terms at any given time could be a limitation on having the 
best possible slate of public Governor candidates. Accordingly, it is 
proposed that the Exchange increase from two to three the maximum 
number of third term Governors who can be representatives of the 
public. There is no change to the overall limitation that no more than 
four third-term Governors may be serving at one time.

C. Committee Amendments

    The Exchange is also proposing to amend Article XII, Section 2 of 
the Exchange Constitution, Composition of the Emergency Committee. This 
Section currently provides that the Emergency Committee is to be 
composed of the Chairman of the Board of Governors, the Vice-Chairman 
of the Board, and the three senior members of the Board who are 
regular, options principal, associate or allied members of the 
Exchange. The proposed amendment would change the composition of the 
Committee such that any Executive Vice-Chairman or President would be 
on the Committee. Moreover, if there are two Vice-Chairmen, both would 
serve on this Committee.
    Finally, the Exchange is proposing to amend Article II, Section 
4(a) of the Constitution, Executive Committee, to ensure that if there 
are two Vice-Chairmen, both are included on the Executive Committee.

[[Page 29777]]

III. Discussion

    The Commission finds that the proposed rule changes are consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange and, 
specifically, with the requirements of Section 6(b).\6\ In particular, 
the Commission believes that the proposal is consistent with Sections 
6(b)(3) and 6(b)(5) of the Act, respectively, in that is assures fair 
representation of exchange members in the selection of its directors 
and administration of its affairs,\7\ and is consistent with the 
protection of investors and the public and with the maintenance of fair 
and orderly markets.\8\
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    \6\ 15 U.S.C. Sec. 78f(b).
    \7\ 15 U.S.C. Sec. 78f(b)(3). Section 6(b)(3) of the Act also 
provides that one or more directors be representative of issuers and 
investors and not associated with a member of the exchange or a 
broker-dealer. Article II, Section 1(a)(2) of the Amex Constitution 
provides that at least 12 Board members must be representatives of 
the public. This rule proposal does not change this requirement in 
the Exchange Constitution.
    \8\ 15 U.S.C. Sec. 78f(b)(5).
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    More specifically, the Commission finds that the Amex's proposal to 
permit the appointment of two member Vice-Chairmen, one from the 
trading floor and one from the upstairs community, serves to codify the 
Exchange's custom of equal representation between upstairs members and 
floor members and is, therefore, consistent with the fair 
representation requirement of Section 6(b)(3).
    Regarding the creation of the Executive Vice-Chairman position, the 
Commission believes that this should permit the Exchange to improve the 
administration of its affairs, and is thus consistent with Section 
6(b)(3).
    With respect to increasing from two to three the maximum number of 
third term Governors who can be representatives of the public, the 
Commission believes that the proposal appropriately balances the 
Exchange's competing interests of needing to retain certain governors 
with special levels of expertise on its Board, while at the same time 
continuing to promote diversity of Board representation among the 
different categories of member firms and, more importantly, the public. 
The Commission notes that the Exchange will continue to have a 
prohibition against more than four governors serving a third term and 
that this should ensure continued diversity of viewpoints on the 
Exchange's Board, while giving the Exchange the flexibility to extend 
the number of terms of its public Board members for sound business 
reasons.
    Finally, the Commission believes that the changes to the Emergency 
Committee and the Executive Committee are appropriate in light of the 
creation of the Executive Vice-Chairman and additional Vice-Chairman 
positions. In this regard, the Commission believes that these changes 
do not substantially alter the composition of these Committees. 
Accordingly, the Commission believes that the proposal is consistent 
with the requirements of Sections 6(b)(3) and 6(b)(5) of the Act.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-Amex-96-14) is approved.

    \9\ 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.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-14906 Filed 6-11-96; 8:45 am]
BILLING CODE 8010-01-M