Self-Regulatory Organizations; Filing of Proposed Rule Change by American Stock Exchange, Inc. Relating to Amendments to Rule 179 Regarding Automatic Cancellation of Open Orders in Expiring Equity Securities

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34763; File No. SR-Amex-94-35]

Self-Regulatory Organizations; Filing of Proposed Rule Change by

American Stock Exchange, Inc. Relating to Amendments to Rule 179

Regarding Automatic Cancellation of Open Orders in Expiring Equity

Securities

September 30, 1994.

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

September 6, 1994, 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 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 is proposing to amend Rule 179 to expand the categories of

expiring equity securities as to which open orders are automatically

cancelled prior to commencing ``next day'' and ``cash'' trading. The

text of the proposed rule change is available at the Office of the

Secretary, the Amex, 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 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

Amex Rule 179 provides time frames during which orders in expiring

rights and warrants must be for ``next day'' delivery or for ``cash''

settlement, rather than for ``regular way'' five-day delivery. The rule

was amended last year to provide for the automatic cancellation of open

``regular way'' and ``next day'' orders in expiring rights and warrants

prior to commencing ``next day'' and ``cash'' trading in those

securities.\1\ The normal ticker notice provided by the Exchange with

respect to expiring rights and warrants provides ample notice to

members and member organizations regarding such cancellations, thereby

given them the opportunity to replace their cancelled orders if they

wish to do so. Substituted ``next day'' and ``cash'' orders are treated

as new orders and are not entitled to retain the priority on the

specialist's book of the cancelled ``regular way'' order. This

amendment has resulted in a significant reduction in ``DKs''\2\ and has

facilitated accurate clearance and settlement in these securities.

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\1\See Securities Exchange Act Release No. 32320 (May 17, 1993),

58 FR 30078 (May 25, 1993) (approving File No. SR-Amex-92-31).

\2\A ``DK'' is an uncompared securities transaction. For further

discussion of Amex procedures regarding resolution of DKs, see Amex

Rule 731.

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The Exchange is now proposing that Rule 179 be further amended to

expand the categories of expiring securities as to which open orders

are automatically cancelled prior to commencing ``next day'' and

``cash'' trading to include any expiring equity security.\3\ The

amendment would be applicable, for example, to preferred stock,\4\

Contingent Value Rights, Stock Index Return Securities, Equity Linked

Securities (``ELKS''), Yield Enhanced Equity Linked Debt Securities

(``YEELDS'') and other similar securities. These securities would

generally change to ``next day'' delivery and ``cash'' in accordance

with the time frames applicable to rights. Thus, during the five

business days preceding the final day for trading in such security,

every order therein entered on a specialist's book must be for ``next

day'' delivery, and, on final day for trading in such security, every

order therein entered on the specialist's book must be for ``cash.''

However, when appropriate, the Exchange may establish different time

frames for particular types of expiring equity securities.

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\3\The Amex has clarified that the proposed rule change would

apply to expiring securities that are not options and that are

subject to the trading rules for equity securities, as opposed to

debt securities. Telephone conversation between Stuart Diamond,

Director, Rulings Department, Amex, and Linda Tarr, Special Counsel,

Amex, and Beth Stekler, Attorney, Division of Market Regulation,

SEC, on September 27, 1994.

\4\The Amex proposal would provide for automatic cancellation of

open orders in redeemable preferred stock. Telephone conversation

between Stuart Diamond, Director, Rulings Department, Amex, and

Linda Tarr, Special Counsel, Amex, and Beth Stekler, Attorney,

Division of Market Regulation, SEC, on September 27, 1994.

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The extension of the automatic cancellation provisions of the rule

to these securities can be expected to provide comparable benefits,

i.e., a reduction in ``DKs'' and clearance and settlement errors.

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 promote just and equitable principles of

trade, to remove impediments to and perfect the mechanism of a free and

open market, and, in general, to 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 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-94-35 and should be

submitted by October 27, 1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-24792 Filed 10-5-94; 8:45 am]

BILLING CODE 8010-01-M