Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by American Stock Exchange, Inc. Relating to Priority of Agency Orders to Cross Blocks of 25,000 Shares or More

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-33835; File No. SR-Amex-92-41]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule

Change by American Stock Exchange, Inc. Relating to Priority of Agency

Orders to Cross Blocks of 25,000 Shares or More

March 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 November

23, 1992, 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. On March 30, 1994, the Exchange submitted to the

Commission Amendment No. 1 to the proposed rule change in order to

increase the minimum size of agency crosses that would be entitled to

priority under this proposal from 10,000 to 25,000 shares.\1\ The

Commission is publishing this notice to solicit comments on the

proposed rule change from interested persons.

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\1\See letter from Geraldine M. Brindisi, Corporate Secretary,

Amex, to Diana Luka-Hopson, Branch Chief, Division of Market

Regulation, SEC, dated March 28, 1994 (``Amendment No. 1'').

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

of the Proposed Rule Change

The Amex proposes to add Commentary .02 to Rule 126(g) to provide

for priority of agency orders to cross 25,000 shares or more; and to

amend existing Commentary .01 to Rule 126(g) (size precedence for

orders to cross 25,000 shares or more) to limit it to circumstances

where one or both sides of a cross is for the account of a member or

member organization. The text of the proposed rule change is available

at the Office of the Secretary, 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

The Exchange proposes to add new Commentary .02 to Rule 126(g), to

allow a member who has an order to buy and an order to sell 25,000

shares or more of the same security, where neither order is for the

account of a member or a member organization, to cross those orders at

a price that is at or within the prevailing quotation without the

transaction being broken up at the cross price. Thus, the member's bid

or offer would be entitled to priority at such cross price,

irrespective of pre-existing bids or offers at that price. The

proposal, therefore, is intended to facilitate execution of agency

cross transactions on the Exchange. In addition, confining the proposed

size priority threshold to block size orders of 25,000 shares or more

would limit the effects of the rule primarily to actively traded,

liquid securities.

The member would be required to follow the crossing procedures of

Rule 151 and make a public bid and offer on behalf of both sides of the

cross. However, unlike existing block cross procedures under Rule

126(g), Commentary .01,\2\ such an order would not be required to be on

parity with other orders on the Floor; that is, it would not be

required that the priority of earlier bids and offers first be removed,

by means of a sale, before effecting the cross.

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\2\See infra, note 3.

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The proposal furthers the important auction market principle of

price improvement by allowing another member to trade with either the

bid or offer side of the cross transaction to provide a price that is

better than the proposed cross price; however, the other member could

not trade with the cross bid or offer at a price which is the same as

the cross price. The member who is providing a better price to one side

of the cross transaction would be required to trade with all other

market interest having priority at that price before trading with any

part of the cross transaction. A transaction effected at the cross

price in reliance on Commentary .02 would be printed as ``stopped

stock.''

To avoid conflict with the proposed agency cross rule, Commentary

.01 of Rule 126(g) would be amended so as to afford size precedence to

orders to cross 25,000 shares or more only when members or member

organizations are involved as principal on one or both sides of the

cross. As is currently the case, such orders to cross would be entitled

to precedence only when they are on parity with other orders on the

Floor.\3\

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\3\Specifically, the Amex proposal would clarify that, in order

to claim size precedence, both sides of the cross must be

represented at the specialist's post when a sale clearing the Floor

takes place.

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2. Statutory Basis

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

in general and furthers the objective(s) of Section 6(b)(5) in

particular in that it is designed to prevent fraudulent and

manipulative acts and practices, to promote just and equitable

principles of trade, to foster cooperation and coordination with

persons engaged in regulating, clearing, settling, processing

information with respect to, and facilitating transactions in

securities, 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-92-41 and should be

submitted by April 27, 1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-8164 Filed 4-5-94; 8:45 am]

BILLING CODE 8010-01-M