Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the American Stock Exchange, Inc. Relating to the Implementation of a Wireless Data Communications Infrastructure

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-37161; File No. SR-Amex-96-10]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule

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

Implementation of a Wireless Data Communications Infrastructure

May 2, 1996.

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

27, 1996, 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 American Stock Exchange, Inc. proposes to amend Exchange Rules

60 and 220 and to adopt a policy regarding the use of wireless data

communications devices at the Exchange (``Wireless Communications

Policy'').

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 has undertaken the development of an infrastructure

(``Infrastructure'') to accommodate the use of wireless data

communications devices on the Trading Floor. In connection with the

implementation of the Infrastructure, the Exchange seeks to amend Rule

220 to explicitly provide that the Exchange may regulate communications

between points on the Floor. The Exchange also seeks to adopt a

detailed policy (``Wireless Communications Policy'') regarding the use

of wireless data communications devices at the Exchange. The Wireless

Communications Policy will address the following issues:

1. The ability of the Exchange to administer wireless data

communications on a real time basis (e.g., the implementation of a

protocol for prioritizing and/or managing message traffic during

periods of extraordinary use);

2. Surveillance of wireless data communications;

3. Member, member firm and Exchange preservation of records of

orders and trades;

4. Security with respect to confidential wireless transmissions and

access to the Infrastructure;

5. Review and approval of member and member firm applications to

use wireless data communications devices;

6. The fair allocation of a finite resource (i.e., radio frequency

bandwidth);

7. Exchange fees and allocation of expenses associated with the

implementation, operation of, and enhancements to, the Infrastructure;

8. Sanctions for violations of the Exchange's Wireless

Communications Policy;

9. Inspection and oversight of wireless data communications

technology; and

10. The design and implementation of the Infrastructure.

The Wireless Communications Policy furthers the policy in Article

IV, Section 1(e) of the Exchange Constitution which currently provides

that the Exchange shall not be liable for any damages sustained by a

member or member organization growing out of the use or enjoyment by

such member or member organization of the facilities afforded by the

Exchange to members for the conduct of their business. This provision,

as well as similar provisions at other exchanges, reflect the common

understanding that exchanges should not bear the risk of liability

associated with member firm use of their systems. Accordingly, the

Exchange will not be liable to member firms with respect to their use

of the Infrastructure.

In addition, the Exchange proposes to adopt new Commentary .03 to

Rule 60 which will provide that, in connection with member or member

organization use of any electronic system, service, or facility

provided by the Exchange to members for the conduct of their business

on the Exchange: (i) the Exchange may expressly provide in the contract

with any vendor providing all or part of such electronic system,

[[Page 20872]]

service, or facility to the Exchange, that such vendor and its

subcontractors shall not be liable to members or member organizations

for any damages sustained by a member or member organization growing

out of the use or enjoyment of such electronic system, service, or

facility by the member or member organization, and (ii) members and

member organizations shall indemnify the Exchange and any vendor and

subcontractor covered by subsection (i) above with regard to any third

party claims relating to the member or member organization's use of

such electronic system, service or facility. This will provide needed

protection for both the Exchange and vendors that may be retained by

the Exchange to provide various services for use by member firms. If

the Exchange does not have the flexibility to negotiate such liability

protection, it will become increasingly difficult to find vendors

willing to provide the Exchange with the essential services that it

needs.

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) in that it is

designed to prevent fraudulent acts and practices, promote just and

equitable principles of trade, remove impediments to and perfect the

mechanisms of a free and open market, and, in general, protect

investors and the public interest.

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

The Exchange does not believe that the proposed rule change will

impose any burden on competition that is not necessary or appropriate

in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed

Rule Change Received from Members, Participants or Others

The Exchange has not solicited written comments on the proposed

rule change. The Exchange, however, received three written responses to

a letter dated February 29, 1996, addressed to all members and member

firms regarding the implementation of the Infrastructure and

anticipated user fees for wireless data communications devices on the

Floor. The three responses to the Exchange's letter concerned

objections to the proposed fee structure. Upon further consideration

and analysis, the Exchange decided that the specifics of the per device

fee will not be determined until the fall of 1997, giving the Exchange

a period of time to observe the Infrastructure in operation. A per

device fee will not be imposed prior to that time. In addition, once

imposed, the monthly fee will be capped at $250 per device.

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 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, 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 Amex. All

submissions should refer to File No. SR-Amex-96-10 and should be

submitted by May 29, 1996.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96-11449 Filed 5-7-96; 8:45 am]

BILLING CODE 8010-01-M