[Federal Register Volume 61, Number 125 (Thursday, June 27, 1996)]
[Notices]
[Pages 33557-33561]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-16367]


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[[Page 33558]]


SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37336; File No. SR-Amex-95-57]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change and Notice of Filing and Order Granting Accelerated Approval of 
Amendment Nos. 2 and 3 to the Proposed Rule Change by the American 
Stock Exchange, Inc., Relating to the Listing of Flexible Exchange 
Options on Specified Equity Securities

June 19, 1996.

I. Introduction

    On December 26, 1995, the American Stock Exchange, Inc. (``Amex'' 
or ``Exchange'') filed a proposed rule change with 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\ to provide for the listing and trading of 
Flexible Exchange Options (``FLEX Options'') on specified equity 
securities (``FLEX Equity Options''). The Amex submitted to the 
Commission Amendment No. 1 to its proposal on March 18, 1996.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1 to its proposed rule change, the Amex 
proposes: (1) Position and exercise limits for FLEX Equity Options 
that are three times the limits for Non-FLEX Equity Options; (2) 
crossing procedures and a guaranteed minimum right of participation 
for a Submitting Member seeking to cross a public customer FLEX 
Equity Option order; and (3) settlement of FLEX Index Options in 
designated foreign currencies, in addition to U.S. dollars as 
currently provided. See Letter from Claire McGrath, Special Counsel, 
Derivatives Securities, to Michael Walinskas, Special Counsel, 
Office of Market Supervision (``OMS''), Division of Market 
Regulation (``Market Regulation''), Commission, dated March 14, 
1996. (``Amendment No. 1'').
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    Notice of proposal, as amended, was published for comment and 
appeared in the Federal Register on April 8, 1996.\4\ The Amex 
submitted to the Commission Amendment No. 2 to its proposal on April 
15, 1996.\5\ The Amex submitted to the Commission Amendment No. 3 to 
the Commission on June 19, 1996.\6\ No comment letters were received on 
the proposed rule change. This order approves the Exchange's proposal, 
as amended.
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    \4\ See Securities Exchange Act Release No. 37053 (March 29, 
1996), 61 FR 15537.
    \5\ In Amendment No. 2, the Exchange proposes to: (1) Include a 
reference to the specific indexes approved for FLEX Options trading 
in Rules 903G(a)(2)(i) and 906G(a); (2) revise Amendment No. 1 
regarding the proposed guaranteed minimum right of participation for 
a Submitting Member seeking to cross a public customer FLEX Equity 
Option order, such that the Submitting Member will be permitted to 
execute the contra side of the trade that is the subject of the 
Request for Quotes, to the extent of at least 25% of the trade under 
specific circumstances; and (3) include subparagraph (c) to Rule 
909G so that FLEX Equity Options specialists shall comply with Rules 
171 and 950(h) regarding equity option specialist's financial 
requirements. See Letter from Claire McGrath, Special Counsel, 
Derivatives Securities, Amex, to Michael Walinskas, Special Counsel, 
OMS, Market Regulation, Commission, dated April 15, 1996 
(``Amendment No. 2'').
    \6\ In Amendment No. 3, the Amex proposes to amend Rule 
903G(a)(3) to make it clear that bids and offers responsive to FLEX 
Requests for Quotes must be stated in terms of the designated 
currency in the Request for Quotes. See Letter from Claire McGrath, 
Special Counsel, Amex, to John Ayanian, Attorney, OMS, Market 
Regulation, Commission, dated June 19, 1996 (``Amendment No. 3'').
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II. Background

    The purpose of the Exchange's proposal is to provide a framework 
for the Exchange to list and trade equity options that give investors 
the ability, within specified limits, to designate certain of the terms 
of the options. In recent years, an over-the-counter (``OTC'') market 
in customized equity options has developed which permits participants 
to designate the basic terms of the options, including size, term to 
expiration, exercise style, exercise price, and exercise settlement 
value, in order to meet their individual investment needs. Participants 
in this OTC market are typically institutional investors, who buy and 
sell options in large-size transactions through a relatively small 
number of securities dealers. To compete with this growing OTC market 
in customized equity options, the Exchange propose to expand its FLEX 
Options rules \7\ to permit the introduction of trading in FLEX Options 
on specified equity securities that satisfy the Exchange's listing 
standards for equity options. The Exchange's proposal will allow FLEX 
Equity Option market participants to designate the following contract 
terms: (1) Exercise price; (2) exercise style (i.e., American,\8\ 
European,\9\ or capped \10\); (3) expiration date; \11\ and (4) option 
type (put, call, or spread).
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    \7\ See Amex Rules 900G through 909G.
    \8\ An American-style equity option is one that may be exercised 
at any time on or before the expiration date.
    \9\ A European-style equity option is one that may be exercised 
only during a limited period of time prior to expiration of the 
option.
    \10\ A capped-style equity option is one that is exercised 
automatically prior to expiration when the cap price is less than or 
equal to the closing price of the underlying security for calls or 
when the cap price is greater than or equal to the closing price of 
the underlying security for puts.
    \11\ The proposal, however, requires that the expiration date of 
a FLEX Equity Option may not fall on a day that is on, or within two 
business days of the expiration date of a Non-FLEX Equity Option.
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    Currently, the Amex can list and trade FLEX Options on several 
broad-based market indexes composed of equity securities (``FLEX Index 
Options'').\12\ The Exchange believes that FLEX Equity Options will 
further broaden the base of institutional investors that use FLEX 
Options to manage their trading and investment risk.
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    \12\ See Securities Exchange Act Release Nos. 32781 (August 20, 
1993), 58 FR 45360 (August 27, 1993) (order approving the trading of 
FLEX Index Options on the Major Market, Institutional, and S&P 
MidCap Indexes), and 33262 (December 1, 1993), 58 FR 64622 (December 
8, 1993) (order approving the trading of FLEX Index Options on the 
Japan Index).
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    For the most part, the Exchange represents that its current rules 
governing FLEX Index Options will apply to FLEX Equity Options. Certain 
changes to the Exchange's existing FLEX Options rules, however, are 
proposed to address the special characteristics of FLEX Equity Options. 
Specifically, the Exchange proposes to add several new definitions to 
accommodate the introduction of trading in FLEX Equity Options,\13\ and 
to revise certain other rules governing FLEX Options and their trading, 
as described below.
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    \13\ In addition to the term FLEX Equity Options, the proposal 
also defines the terms ``FLEX Index Options,'' ``Non-FLEX Options,'' 
and ``Non-FLEX Equity Option.'' See Amex Rule 900G.
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    As with FLEX Index Options, The Options Clearing Corporation 
(``OCC'') will be the issuer and guarantor of all FLEX Equity Options. 
Similarly, as with FLEX Index Options, the Commission has designated 
FLEX Equity Options as standardized options for purposes of the options 
disclosure framework established under Rule 9b-1 of the Act.\14\
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    \14\ See Securities Exchange Act Release No. 31910 (February 23, 
1993), 58 FR 12056 (March 2, 1993) (``9b-1 Order''). As described in 
Section V infra, and for the same reasons stated in the 9b-1 Order, 
FLEX Equity Options are deemed ``standardized options'' for purposes 
of the Rule 9b-1 options disclosure framework.
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III. Description of the Proposal

    The Exchange proposes to revise its rules concerning the terms of 
FLEX Options to make specific reference to FLEX Equity Options.\15\ In 
particular, FLEX Option transactions will be limited to transactions in 
options on underlying securities that have been approved by the 
Exchange inaccordance with Rule 915.\16\ Additionally, FLEX Equity 
Options will have (1) a maximum term of three years, (2) a minimum size 
of 250 contracts for an opening transaction in a new series, and (3) a 
minimum size of 100 contracts for

[[Page 33559]]

an opening or closing transaction in a series in which there is already 
open interest (or any lesser amount in a closing transaction that 
represents the remaining underlying size). The minimum value size for 
FLEX Quotes \17\ in response to a Request for Quotes \18\ in FLEX 
Equity Options is the lesser of 100 contracts or the remaining 
underlying size in a closing transaction.
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    \15\ See Amex Rule 903G.
    \16\ Amex Rule 915 contains initial listing standards for a 
security to be eligible for options trading. The Exchange proposes 
to be able to trade FLEX Options on any options-eligible security 
regardless of whether standardized Non-FLEX options overlie that 
security, and regardless of whether such Non-FLEX options trade on 
the Exchange.
    \17\ See Amex Rule 900G(b)(4).
    \18\ See Amex Rule 900(b)(3).
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    The Exchange also proposes to allow exercise prices and premiums 
for FLEX Equity Options to be stated in dollar amounts or percentages, 
with premiums rounded to the nearest minimum tick and exercise prices 
rounded to the nearest one-eighth. The exercise of FLEX Equity Options 
will be by physical delivery of the underlying security, and the 
exercise-by-exception procedures of OCC will apply.\19\
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    \19\ OCC Rule 805 provides for automatic exercise of in-the-
money options at expiration without the submission of an exercise 
notice to the OCC if the price of the security underlying the option 
is at or above a certain price (for calls) or at or below a certain 
price (for puts); and the non-exercise of an option at expiration if 
the price of the security underlying the option does not satisfy 
such price levels. See OCC Rule 805.
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    The trading procedures applicable to FLEX Equity Options will be 
subject to many of the same rules that apply to equity options traded 
on the Exchange, and are similar to those that apply to FLEX index 
Options. In particular, FLEX registered specialists are obligated to 
respond to a Request for Quotes in respect of FLEX Equity Options as 
they are with FLEX Index Options. Financial requirements for FLEX 
Equity Option registered specialists, however, differ from those 
imposed upon FLEX Index Option registered specialists. FLEX Index 
Option registered specialists are required to maintain at least $1 
million net liquidating equity and/or $1 million net capital, as 
applicable.\20\ FLEX Equity Option registered specialists must maintain 
a cash or liquid asset position in the amount of $600,000 or in an 
amount sufficient to assume a position of sixty option contracts of 
each class of FLEX Equity options in which such specialist is 
registered, whichever amount is greater.\21\
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    \20\ See Amex Rule 909G(a).
    \21\ See Amex Rule 909G(c). See also Amendment No. 2, supra note 
5.
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    The Exchange represents that the rules governing priority of bids 
and offers for FLEX Equity Options are also similar to those that apply 
to FLEX Index Options, except that in the case of FLEX Equity Options, 
a guaranteed minimum right of participation is provided to an Exchange 
member that initiates a Request for Quotes and indicates an intention 
to cross or act as principal on the trade.\22\ The proposed rule change 
would provide that a member who submits a Request for Quotes in respect 
of a FLEX Equity Option and indicates an intention to cross or act as 
principal on the trade, and who matches or improves the BBO during the 
BBO Improvement Interval, has a priority right to execute the contra 
side of the trade for at least twenty-five percent (25%) of the 
trade.\23\
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    \22\ See Amex Rule 904G(e)(iii).
    \23\ See Amendment No. 1, supra note 3.
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    The Exchange is proposing position limits and exercise limits for 
FLEX Equity Options that are larger than the limits applicable to Non-
FLEX Equity Options for the same reasons that the position and exercise 
limits for FLEX Index Options are larger than those applicable to Non-
FLEX Index Options. The limits have been set at three times the limit 
applicable to Non-FLEX Equity Options. Position and exercise limits for 
FLEX Equity Options are set forth below as compared to existing limits 
for Non-FLEX Equity Options on the same underlying security.\24\
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    \24\ See Amendment No. 1, supra note 3.

------------------------------------------------------------------------
      Non-FLEX equity position limit         FLEX equity position limit 
------------------------------------------------------------------------
4,500 contracts...........................  13,500 contracts.           
7,500 contracts...........................  22,500 contracts.           
10,500 contracts..........................  31,500 contracts.           
20,000 contracts..........................  60,000 contracts.           
25,000 contracts..........................  75,000 contracts.           
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    The applicable position and exercise limit tiers for Non-FLEX 
Equity Options are based on the number of outstanding shares and 
trading volume of the underlying security.\25\ This proposal does not 
alter the applicable tier criteria set forth in the Equity Option 
Position Limit Approval Orders.
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    \25\ See Securities Exchange Act Release Nos. 36409 (October 23, 
1995), 60 FR 55399 (October 31, 1995) (File Nos. SR-NYSE-95-31; SR-
PSE-95-25; SR-Amex-95-42; and SR-Phlx-95-71); and 36371 (October 13, 
1995), 60 FR 54269 (October 20, 1995) (File No. SR-CBOE-95-42) 
(Collectively the ``Equity Option Position Limit Approval Orders'').
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    As is currently the case for FLEX Index Options, it is proposed 
that there will be no aggregation of positions or exercises in FLEX 
Equity Options with positions or exercises in Non-FLEX Equity Options 
for purposes of the limits.
    The Exchange also proposes to provide that the expiration date of a 
FLEX Equity Option may not occur on a day that falls on, or within, two 
business days of the expiration date of a Non-FLEX Equity Option. This 
is intended to eliminate the possibility that the exercise of FLEX 
Equity Options at expiration will cause any untoward pressure on the 
market for an underlying security at the same time as Non-FLEX Equity 
Options expire. The Exchange proposes that this change will also apply 
to FLEX Index Options.\26\
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    \26\ The Exchange currently provides that the expiration date of 
a FLEX Index Option may not occur during this time period. The 
proposed rule change merely clarifies this requirement.
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    The Exchange also proposes to amend FLEX Index Option rules to 
conform to certain rules currently in place at the Chicago Board 
Options Exchange, Inc. \27\ Specifically, the Exchange proposes to 
amend its rules to provide for the trading and settlement of FLEX Index 
Options in select foreign currencies. Currently, FLEX Index Options 
trade and settle in U.S. dollars only. The Exchange now proposes to 
trade and settle FLEX Index Options in Canadian Dollars, British 
Pounds, Japanese Yen, Deutsche Marks, Swiss Francs, French Francs, or 
European Currency Units. The Exchange believes that this change will 
increase the utility and, thus, the attractiveness of FLEX Index 
Options, which in turn should broaden the base of domestic and 
international institutional investors that use exchange-traded FLEX 
Index Options to manage their trading and investment risk.
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    \27\ See Securities Exchange Act Release No. 34203 (June 13, 
1994), 59 FR 31658 (June 20, 1994) (File No. SR-CBOE-93-33).
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    The Exchange believes the proposed rule change will improve the 
efficiency and transparency of the equity option markets and the 
markets in the underlying equities, and bring transactions which are 
currently subject to little or no regulatory oversight under a 
regulatory framework that is fully consistent with the regulation of 
common stock trading and reporting.

IV. Discussion

    The Commission finds that the proposals are consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange, and, in particular, the 
requirements of Sections 6(b)(5) \28\ and 11A \29\ of the Act. 
Specifically, the Commission finds that the Exchange's proposal is 
designed to provide investors with a tailored or customized product for 
eligible equity options that may be more suitable to their investment 
needs. Moreover, consistent with Section 11(a), the proposal should 
encourage fair competition among brokers and dealers and exchange 
markets, by allowing the Exchange to compete with the growing

[[Page 33560]]

OTC market in customized equity options.
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    \28\ 15 U.S.C. 78f(b)(5).
    \29\ 15 U.S.C. 78k-1.
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    The Commission believes the Exchange's proposal reasonably 
addresses its desire to meet the demands of sophisticated portfolio 
managers and other institutional investors who are increasingly using 
the OTC market in order to satisfy their hedging needs. Additionally, 
the Commission believes that the Exchange's proposal will help promote 
the maintenance of a fair and orderly market, consistent with Sections 
6(b)(5) and 11(a) of the Act, because the purpose of the proposal is to 
extend the benefits of a listed, exchange market to equity options that 
are more flexible than current listed equity options and that currently 
trade OTC. The benefits of the Exchange's options market include, but 
are not limited to, a centralized market center, an auction market with 
posted transparent market quotations and transaction reporting, 
parameters and procedures for clearance and settlement, and the 
guarantee of OCC for all contracts traded on the Exchange.
    As indicated above, the trading procedures applicable to FLEX 
Equity Options will be subject to many of the same rules that apply to 
equity options traded on the Exchange, and are similar to those that 
apply to FLEX Index Options. The Commission believes the Exchange's 
trading procedures for FLEX Equity Options are reasonably designed to 
provide some of the benefits of an Exchange auction market along with 
features of a negotiated transaction between investors. In approving 
the proposal, the Commission recognizes that the Exchange's proposed 
FLEX Equity Option trading program will allow the trading of option 
contracts of substantial value, for which continuous quotations may be 
difficult to sustain. The Commission believes that the Exchange has 
adequately addressed these concerns by establishing procedures for 
quotes upon request, which must be firm for a designated period of time 
and which will be disseminated through the Options Price Reporting 
Authority (``OPRA'').
    Additionally, the Commission believes that the Exchange's proposal 
to provide a minimum right of participation of at least 25% of the 
trade to Exchange members who initiate Requests for Quotes in respect 
of FLEX Equity Options and indicate an intention to cross or act as 
principal on the trade, is consistent with the Act. In addition, under 
Amex rules, such transactions must, in all cases, be in compliance with 
the priority, parity, and precedence requirements of Section 11(a) of 
the Act,\30\ and Rule 11al-1(T) \31\ promulgated thereunder. These 
provisions set forth, among other things, the conditions in which 
members must yield priority to public customers' bids and offers at the 
same price.
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    \30\ 15 U.S.C. 78k(a).
    \31\ 17 CFR 240.11a1-1(T).
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    The Commission believes that market impact concerns are reduced for 
FLEX Equity Options because expiration of these equity options will not 
correspond to the normal expiration of Non-FLEX Equity Options, will 
never expire on any ``Expiration Friday.'' More specifically, the 
expiration date of a FLEX Option may not occur on a day that is on, or 
within, two business days of the expiration date of a Non-FLEX Option. 
The Commission believes that this should reduce the possibility that 
the exercise of FLEX Options at expiration will cause any additional 
pressure on the market for underlying securities at the same time that 
Non-FLEX Options expire.
    Nevertheless, because the position limits for FLEX Equity Options 
are much higher than those currently existing for outstanding exchange-
traded equity options and open interest in one or more FLEX Equity 
Option series could grow to significant levels, it is possible that 
FLEX Equity Options might have an impact on the securities markets for 
the securities underlying FLEX Equity Options. The Commission expects 
the Exchange to monitor the actual effect of FLEX Equity Options once 
trading commences and take prompt action (including timely 
communication with the self-regulatory organizations responsible for 
oversight of trading in the underlying securities) should any unusual 
market effects develop.
    The Exchange represents that FLEX Equity Options will allow them to 
compete with OTC markets and help meet the demand for customized equity 
options products by institutional investors. The minimum value sizes 
for opening transactions in FLEX Equity Options are designed to appeal 
to institutional investors, and it is unlikely that most retail 
investors would be able to engage in options transactions at that size. 
Nevertheless, the FLEX Equity Options minimum size is much smaller than 
that for FLEX Index Options. Accordingly, the Commission requests that 
the Exchange monitor the comparative levels of institutional and retail 
investor open interest in FLEX Equity Options for one year from the 
commencement of its FLEX Equity Option trading program, and provide a 
report to the Commission's Division of Market Regulation with its 
findings.
    The Commission notes that effective surveillance guidelines are 
essential to ensure that the Exchange has the capacity to adequately 
monitor trading in FLEX Equity Options for potential trading abuses. 
The Commission's staff has reviewed Amex's surveillance program and 
believes it provides a reasonable framework in which to monitor the 
trading of FLEX Equity Options on its trading floor and detect as well 
as deter manipulation activity and other trading abuses.
    In order to ensure adequate systems processing capacity to 
accommodate the additional options listed in accordance with the FLEX 
Equity Options program, OPRA has concluded that the additional traffic 
generated by FLEX Equity Options traded on the Amex is within OPRA's 
capacity.\32\
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    \32\ See Letter from Joe Corrigan, Executive Director, OPRA, to 
Michael Walinskas, Special Counsel, OMS, Market Regulation, 
Commission, dated April 19, 1996 (``OPRA Capacity Letter'').
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    Finally, the Commission believes that the Amex's proposal to expand 
the list of variable FLEX Index Option contract terms to include 
certain designated foreign currencies is a reasonable response by the 
Exchange to meet the demands of sophisticated portfolio managers and 
other institutional investors. Additionally, the Commission believes 
that the Amex's proposal will help to promote the maintenance of a fair 
and orderly market because it extends the benefits of a listed exchange 
market to FLEX Index Options that trade and settle in certain 
designated foreign currencies.
    The Commission believes that investors should benefit from the 
additional flexibility by permitting them to designate quotation and 
settlement terms in various foreign currencies while continuing to 
ensure adequate investor protection the trading of these products. The 
potential risk of settling FLEX Options in foreign currencies rather 
than U.S. dollars is also disclosed in the ODD pursuant to Rule 9b-1 of 
the Act.\33\
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    \33\ See Securities Exchange Act Release No. 33582 (February, 
1994).
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    The Commission finds good cause for approving Amendment No. 2 prior 
to the thirtieth day after the date of publication of notice of filing 
thereof in the Federal Register. Specifically, this amendment proposes 
to: (1) Include a reference to the specific indexes approved for FLEX 
Options trading in Rules 903G(a)(2)(i) and 906G(a); (2) revise 
Amendment No. 1 regarding the proposed guaranteed minimum right of 
participation for a Submitting Member

[[Page 33561]]

seeking to cross a public customer FLEX Equity Option order, such that 
the Submitting Member will be permitted to execute the contra side of 
the trade that is the subject of the Request for Quotes, to the extent 
of at least 25% of the trade under specific circumstances; and (3) 
include subparagraph (c) to Rule 909G to indicate the FLEX Equity 
Options specialists must comply with Rules 171 and 950(h) regarding 
equity option specialist's financial requirements. The Commission does 
not believe that the amendments raise any new or unique regulatory 
issues. These amendments also strengthen the proposal by clarifying 
certain crossing transaction procedures and specialists financial 
requirements as described above. Accordingly, the Commission believes, 
consistent with Section 6(b)(5) of the Act, that good cause exists, to 
approve Amendment No. 2 to the proposal on an accelerated basis.
    The Commission finds good cause for approving Amendment No. 3 prior 
to the thirtieth day after the date of publication of notice of filing 
thereof in the Federal Register. Specifically, this amendment proposes 
to amend Rule 903G(a)(3) to make it clear that bids and offers 
responsive to FLEX Requests for Quotes must be stated in terms of the 
designated currency in the Request for Quotes. The Commission notes 
that the proposed amendment conforms Amex's rules to CBOE's rules 
regarding the trading and settlement of FLEX Index Options in certain 
designated foreign currencies. The Commission does not believe that the 
amendment raises any new or unique regulatory issues. Accordingly, the 
Commission believes, consistent with Section 6(b)(5) of the Act, that 
good cause exists, to approve Amendment No. 2 to the proposal on an 
accelerated basis.
    Interested persons are invited to submit written data, views and 
arguments concerning Amendment Nos. 2 and 3 to the proposed rule 
change. 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 Section, 450 Fifth Street, N.W., Washington, D.C. 20549. 
Copies of such filing will also be available for inspection and copying 
at the principal office of the Exchange. All submissions should refer 
to SR-Amex-95-57 and should be submitted by July 18, 1996.

V. Conclusion

    For the reasons discussed above, the Commission finds that the 
proposal is consistent with the Act and Sections 6 and 11(a) of the Act 
in particular. In addition, the Commission finds pursuant to Rule 9b-1 
under the Act, that FLEX Options, including FLEX Equity Options, and 
FLEX Index Options traded and settled in certain designated foreign 
currencies, are standardized options for purposes of the options 
disclosure framework established under Rule 9b-1 of the Act.\34\ Apart 
from the flexibility with respect to strike prices, expiration dates, 
exercise styles, and settlement (for FLEX Index Options), all of the 
other terms of FLEX Options are standardized pursuant to OCC and Amex 
rules. Standardized terms include matters such as exercise procedures, 
contract adjustments, time of issuance, effect of closing transactions, 
restrictions on exercise under OCC rules, margin requirements, and 
other matters pertaining to the rights and obligations of holders and 
writers.
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    \34\ 17 CFR 240.9b-1(a)(4). As part of the original approval 
process of the FLEX Options framework, the Commission delegated to 
the Director of the Division of Market Regulation the authority to 
authorize the issuance of orders designating securities as 
``standardized options'' pursuant to Rule 9b-1(a)(4) under the Act. 
See Securities Exchange Act Release No. 31911 (February 23, 1993), 
58 FR 11792 (March 1, 1993).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\35\ that the proposal (File No. SR-Amex-95-57), as amended, is 
approved.

    \35\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\36\
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    \36\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-16367 Filed 6-26-96; 8:45 am]
BILLING CODE 8010-01-M