Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the American Stock Exchange, Inc. Relating to Specialist Participation in the After-Hours Trading Facility in Portfolio Depositary Receipts and Investment Trust Securities Based on Stock Indexes

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34316; File No. SR-Amex-93-15]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule

Change by the American Stock Exchange, Inc. Relating to Specialist

Participation in the After-Hours Trading Facility in Portfolio

Depositary Receipts and Investment Trust Securities Based on Stock

Indexes

July 5, 1994.

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 April 21, 1993, 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 self-

regulatory organization. The filing requested: (1) Permanent approval

of the After-Hours Trading (``AHT'') Facility; and (2) approval on a

pilot basis for specialists in investment trust securities based on

stock indexes to participate in the AHT Facility. The Commission

approved the portion of the filing that requested permanent approval of

the AHT Facility in Securities Exchange Act Release No. 33993.\3\ On

August 3, 1993, the Exchange amended the filing to request that

specialists in Portfolio Depository Receipts (``PDRs'') also be

permitted to participate in the AHT Facility.\4\ On July 5, 1994, the

Exchange amended the proposed rule change to eliminate the migration of

limit orders for PDRs and investment trust securities from the

specialist's limit order book to the AHT Facility.\5\ The Commission is

publishing this notice to solicit comments from interested persons on

specialist participation in the AHT Facility in Portfolio Depository

Receipts and investment trust securities based on Stock Indexes.

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\1\15 U.S.C. 78s(b)(1) (1988).

\2\17 CFR 240.19b-4 (1994).

\3\As originally filed, File No. SR-Amex-93-15 requested

permanent approval of Amex's pilot After-Hours Trading facility. On

January 4, 1994, the Amex amended the filing to request a three-

month extension of the pilot until April 30, 1994. On May 2, 1994,

the Commission granted permanent approval to that portion of File

No. SR-Amex-93-15 concerning the Amex's After-Hours Trading

facility, not including the specialist participation request. See

Securities Exchange Act Release No. 33993 (May 2, 1994), 59 FR 23902

(May 9, 1994).

\4\See letter from William Floyd-Jones, Jr., Assistant General

Counsel, Amex, to Diana Luka-Hopson, SEC, dated August 3, 1993.

\5\See letter from William Floyd-Jones, Jr., Assistant General

Counsel, Amex, to Sandra Sciole, Special Counsel, SEC, dated July 1,

1994.

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

of the Proposed Rule Change

The Exchange proposes to permit specialists in Portfolio Depositary

Receipts and investment trust securities to participate in the

Exchange's After-Hours Trading (``AHT'') facility for a one year pilot

period.

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

The Exchange requests Commission approval for specialists in

Portfolio Depositary Receipts (``PDRs'') and investment trust

securities listed pursuant to Section 118B of the Exchange's Listing

Guidelines\6\ to participate in the AHT facility to ``clean-up'' order

imbalances in the AHT facility by entering an order for the

specialist's account. For example, if there were single sided orders to

buy 10,000 and sell 20,000 SPDRs immediately prior to the 5:00 p.m.

close of the AHT facility, the specialist would be permitted under the

Exchange's proposed rule amendments to enter an order for its account

to buy up to 10,000 SPDRs in order to eliminate the sell side order

imbalance.

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\6\The Exchange currently lists one Portfolio Depositary

Receipt, viz., Standard and Poor's Depositary Receipts (``SPDRs'');

and two investment trust securities pursuant to Section 118B of the

Exchange's Listing Guidelines: LOR Index Trust SuperUnits and LOR

Money Market SuperUnits.

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The Exchange also seeks Commission approval for specialists in PDRs

and investment trust securities to participate in a coupled closing

price order so long as the other side of the order is not for an

account in which a member or member organization has a direct or

indirect interest. For example, under the Exchange's proposal, the

specialist in SPDRs would be permitted to agree prior to the 4:15 close

of the regular trading session for such securities to take the other

side of a customer order to buy or sell SPDRs for execution in the AHT

facility as a closing price coupled order. Such a capability would

conform the trading of PDRs and investment trust securities to the

practices of the ``basket'' market for equities where it is customary

for a dealer to agree prior to the close of the regular trading session

to take the contra side of a customer basket order and the closing

index value. Specialists on the New York Stock Exchange, Inc.

(``NYSE'') currently are permitted to take the contra side of a

customer order to buy or sell a particular equity security and enter

such order into the NYSE's Off-Hours Trading facility as a closing

price coupled order. The Exchange seeks a similar capability for

specialists in PDRs and investment trust securities to conform the

trading of these listed instruments to the practices of the basket

market.

The Exchange believes that permitting specialists in PDRs and

investment trust securities 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, such as those described above. The market price of

these securities is based upon transactions largely effected in markets

other than the Amex. The specialist in such 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 and

investment trust securities in the manner described above 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 after-hours session.) A customer, therefore,

will have approximately 40 minutes to determine if an execution at the

closing price suits its needs, and may cancel its order if it believes

that the closing price does not suit its objectives.

The Exchange also proposes to eliminate the migration of limit

orders for PDRs and investment trust securities from the specialist's

limit order book to the AHT facility to eliminate any concern with the

handling of such orders.

The Exchange proposes that the Commission approve the Exchange's

application to permit specialist participation in the AHT facility for

PDRs and investment trust securities on a pilot basis, during which

time the Exchange will study the operation of the facility to determine

if there are any additional issues that need to be addressed.

2. Statutory Basis

The proposed rule change is consistent with Section 6(b) of the Act

in general and furthers the objectives of Section 6(b)(5) in particular

in that it is designed to prevent fraudulent and manipulative 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.

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

The proposed rule change will 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 of 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 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 Room, 450 Fifth Street, NW., Washington,

DC 20549. Copies of the 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-93-15 and should be submitted by August 2,

1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.\7\

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\7\17 CFR 200.30-3(a)(12) (1991).

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Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-16746 Filed 7-11-94; 8:45 am]

BILLING CODE 8010-01-M