Self-Regulatory Organizations; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change by the American Stock Exchange, Inc. Relating to Amendments to Rule 170 Pertaining to Specialists' Liquidating Transactions

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-35635; File No. SR-Amex-95-11]

Self-Regulatory Organizations; Notice of Filing and Order

Granting Accelerated Approval of Proposed Rule Change by the American

Stock Exchange, Inc. Relating to Amendments to Rule 170 Pertaining to

Specialists' Liquidating Transactions

April 21, 1995.

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 March 6,

1995, the American Stock Exchange, Inc. (``Amex'' or ``Exchange'')

filed with the Securities and Exchange Commission (``Commission'') the

proposed rule change as described in Items I and II 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 requests a three-month extension of a pilot program that

amended Exchange Rule 170 to permit a specialist to effect a

liquidating transaction on a zero minus tick, in the case of a ``long''

position, or a zero plus tick, when covering a ``short'' position,

without Floor Official approval. The pilot program also amended Rule

170 to set forth the affirmative action that specialists are required

to take subsequent to effecting various types of liquidating

transactions.\1\

\1\The Commission approved the pilot program in Securities

Exchange Act Release No. 33957 (April 22, 1994), 59 FR 22188 (April

29, 1994) (``1994 Approval Order'').

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The Exchange requests accelerated approval of the proposed rule

change to enable the pilot, which would otherwise expire on April 22,

1995, to continue on an uninterrupted basis.

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 III 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

On April 22, 1994, the Commission approved, on a one-year pilot

basis, amendments to Exchange Rule 170 to permit a specialist to effect

a liquidating transaction on a zero minus tick, in the case of a

``long'' position, or a zero plus tick, when covering a ``short''

position, without Floor Official approval.\2\ The amendments also set

forth the affirmative action that specialists are required to take

subsequent to effecting various types of liquidating transactions.

\2\See 1994 Approval Order, supra note 1.

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During the course of the pilot program, the Exchange has monitored

compliance with the requirements of the Rule and is in the process of

preparing a report summarizing the results of its surveillance. In

order to permit the pilot program to continue without interruption

while the Exchange completes its report, it is proposing that the pilot

program be extended for three months.

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, remove impediments to and perfect the mechanism of

a free and open market, and, in general, protect investors and the

public interest. The proposed rule change also is consistent with

Section 11(b) of the Act which allows exchanges to promulgate rules

relating to specialists in order to maintain fair and orderly markets.

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. 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

[[Page 20781]] 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-95-11 and

should be submitted by May 18, 1995.

IV. Commission's Findings and Order Granting Accelerated Approval of

Proposed Rule Change

The Commission finds that the proposed rule change is consistent

with the requirements of the Act and the rules and regulations

thereunder applicable to a national securities exchange, and, in

particular, with sections 6(b)(5) and 11 of the Act.\3\ The Commission

believes the proposal is consistent with the Section 6(b)(5)

requirements that the rules of an exchange be designed to promote just

and equitable principles of trade, remove impediments to and perfect

the mechanism of a free and open market, and, in general, protect

investors and the public interest. The Commission also believes that

the proposal is consistent with section 11(b) of the Act and Rule 11b-1

thereunder,\4\ which allow exchanges to promulgate rules relating to

specialists in order to maintain fair and orderly markets.\5\

\3\15 U.S.C. 78f and 78k (1988).

\4\17 CFR 240.11b-1 (1994).

\5\See 1994 Approval Order, supra note 1, for a description of

Amex Rule 170 procedures and the Commission's rationale for

approving those procedures on a pilot basis. The discussion in the

aforementioned order is incorporated by reference into this order.

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Under the current pilot program, a specialist may liquidate a

position by selling stock on a direct minus tick or by purchasing stock

on a direct plus tick only if such transactions are reasonably

necessary for the maintenance of a fair and orderly market and only if

the specialist has obtained the prior approval of a Floor Official.

Liquidations on a zero minus or a zero plus tick, which previously

required Floor Official approval, can be effected under the pilot

procedures without a Floor Official's approval, but continue to be

subject to the restriction that they be effected only when reasonably

necessary to maintain a fair and orderly market. In addition, the

specialist must maintain a fair and orderly market during the

liquidation.

After the liquidation, a specialist is required to re-enter the

market on the opposite side of the market from the liquidating

transaction to offset any imbalances between supply and demand. During

any period of volatile or unusual market conditions resulting in a

significant price movement in a specialist's specialty stock, the

specialist's re-entry into the market must reflect, at a minimum, his

or her usual level of dealer participation in the specialty stock. In

addition, during such periods of volatile market conditions or unusual

price movements, re-entry into the market following a series of

transactions must reflect a significant level of dealer participation.

In our 1994 Approval Order,\6\ the Commission asked the Amex to

submit a report setting forth the criteria developed by the Exchange to

determine whether liquidating transactions effected by specialists

pursuant to the pilot were necessary and appropriate in connection with

fair and orderly markets. The Commission also asked the Amex to provide

information regarding the Exchange's monitoring of liquidating

transactions effected by specialists on any destabilizing tick. In

addition, the Commission asked the Amex to provide the following

information in its report: (1) A review of all liquidating transactions

effected by specialists on any destabilizing ticks; (2) a review of

liquidating transactions by specialists to determine that the required

Floor Official approval was obtained where necessary; and (3) a review

of liquidating transactions in light of dealer participation levels and

re-entry into the market in terms of timing and support.\7\

\6\See supra note 1.

\7\In the 1994 Approval Order, supra note 1, the Commission

requested that the Amex submit the report in January 1995. Pursuant

to the three-month extension of the pilot being approved herein, the

Commission now requests that the Amex submit the report in May 1995.

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During the three month extension of the pilot, the Amex will

prepare the report discussed above and submit the data to the

Commission for its consideration of whether the pilot program should be

granted permanent approval. The Commission expects the Amex to continue

to monitor compliance with the pilot program procedures during the

three month extension and report any non-compliance with the rule and

the action the Amex has taken as a result of such non-compliance.

The Commission finds good cause for approving the proposed rule

change prior to the thirtieth day after the date of publication of

notice of filing thereof. This will permit the pilot program to

continue on an uninterrupted basis. In addition, the Exchange proposes

to continue using the identical procedures contained in the pilot

program. The rule change that implemented the pilot program was

published in the Federal Register for the full comment period,\8\ and

no comments were received. Furthermore, the Commission approved a

similar rule change for the NYSE also without receiving comments on the

proposal.\9\

\8\See Securities Exchange Act Release No. (August 25, 1993), 58

FR 45926 (August 31, 1993).

\9\See Securities Exchange Act Release No. 31797 (January 29,

1993), 58 FR 7277 (February 5, 1993).

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It Therefore is Ordered, pursuant to Section 19(b)(2) of the

Act,\10\ that the proposed rule change is approved for a three month

period ending on July 21, 1995.

\10\15 U.S.C. 78s(b)(2) (1988).

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For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95-10331 Filed 4-26-95; 8:45 am]

BILLING CODE 8010-01-M