Self-Regulatory Organizations; Order Granting Accelerated Approval of Proposed Rule Change by the American Stock Exchange, Inc. Relating to Dissemination of Indications in Connection With Circuit Breaker Trading Halts Under Rule 117

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-37460; File No. SR-Amex-96-21]

Self-Regulatory Organizations; Order Granting Accelerated

Approval of Proposed Rule Change by the American Stock Exchange, Inc.

Relating to Dissemination of Indications in Connection With Circuit

Breaker Trading Halts Under Rule 117

July 19, 1996.

I. Introduction

On June 17, 1996, the American Stock Exchange, Inc. (``Amex'' or

``Exchange'') submitted to the Securities and Exchange Commission

(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4

thereunder,\2\ a proposed rule change to implement guidelines for

dissemination of indications to the consolidated tape in connection

with the resumption of trading following a ``circuit breaker'' trading

halt pursuant to the Amex's Rule 117.

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

\2\ 17 CFR 240.19b-4.

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The proposed rule change was published for comment in Securities

Exchange Act Release No. 37356 (June 24, 1996), 61 FR 33786 (June 28,

1996). No comments were received on the proposals.\3\

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\3\ The Commission notes that the comment period ends on July

19, 1996, and that as of yet, no comments have been received.

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II. Description of the Proposal

The Exchange proposes to implement guidelines for the mandatory

dissemination of indications to the consolidated tape in connection

with the resumption of trading following a ``circuit breaker'' halt

pursuant to its Rule 117.\4\ The purpose of the proposed criteria is to

provide guidance to the Exchange's specialists as to the specific

[[Page 39170]]

circumstances under which they are required to disseminate indications

if a significant decline in the price of a stock from the previous last

sale on the Exchange is anticipated when trading resumes following a

circuit breaker halt.

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\4\ The Commission notes that Rule 117--the Exchange's ``circuit

breaker'' rule--provides that trading in securities on the Exchange

shall halt (a ``Rule 117 halt'') and not reopen for one hour if the

Dow Jones Industrial Average (``DJIA'') falls 250 points or more

below its closing value on the previous trading day. The rule

provides further that trading on the Exchange shall halt for two

hours if the DJIA falls 400 points or more on that same day. Rule

117 was approved by the Commission on a pilot basis on October 17,

1988 and has been extended annually since then. See Securities

Exchange Act Release No. 36414 (Oct. 25, 1995), 60 FR 55630 (Nov. 1,

1995) (Commission's most recent order extending temporary approval

of Rule 117).

The Amex has filed a proposal to amend Rule 117 to reduce from

one hour to thirty minutes the time period during which trading is

halted due to a decline in the DJIA of 250 points below its closing

value on the previous trading day, and to reduce from two hours to

one hour the time period for a halt due to a 400 points decline in

the DJIA. See Securities Exchange Act Release No. 37146 (April 26,

1996), 61 FR 19650 May 2, 1996).

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The Exchange proposed to implement the following guidelines:

Dissemination of an indication shall be mandatory prior to

the reopening of trading if such reopening will result in a price

change constituting the lesser of 10% or three points from the last

sale reported on the Amex, or five points if the previous reported last

sale in $100 or higher. No indications would be required if the price

change is less than one point.\5\

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\5\ For example, if the last sale price of a stock was $6, and

the stock would reopen at a price change of \7/8\, no indication

would be required even though the price change was greater than 10%

of the last sale price because the price change was less than one

point.

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If, on any day that a Rule 117 halt is in effect, trading

in a security has not reopened by one-half hour after the resumption of

trading on the Exchange, the matter should be treated as a delayed

opening, and would require an indication as well as a Floor Official's

supervision.

According to the Exchange, it has existing procedures which require

dissemination of indications prior to delayed openings and reopening

following regulatory or non-regulatory halts in individual securities.

The Exchange will continue to require dissemination of indications in

those situations.\6\

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\6\ The Exchange noted that the proposed criteria are identical

to those currently in place at the New York Stock Exchange

(``NYSE'') in connection with circuit breaker halts under NYSE Rule

80B. See Securities Exchange Act Release No. 26419 (January 5,

1989), 54 FR 1041 (January 11, 1989).

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III. Discussion

After careful consideration of the Amex's proposal to implement

guidelines for dissemination of indications to the consolidated tape in

connection with the resumption of trading following a ``circuit

breaker'' trading halt pursuant to the Amex's Rule 117, the Commission

finds that the proposal is consistent with the requirements of Section

6 \7\ of the Act and the rules and regulations thereunder applicable to

a national securities exchange. In particular, the Commission believes

the proposal is consistent with Section 6(b)(5) of the Act, which

requires, among other things, that the rules of an exchange be designed

to promote just and equitable principles of trade, and to remove

impediments to and perfect the mechanism of a free and open market and

a national market system, and, in general, to protect investors and the

public interest. The proposal will implement more specific guidelines

for the dissemination of indications of interest for a resumption of

trading following a ``circuit breaker'' halt. This will provide more

clarity as to the reopening procedures in these circumstances.

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\7\ 15 U.S.C. 78f(b)(5).

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The Commission finds good cause for approving the Exchange's

proposed rule change prior to the thirtieth day after the date of

publication of notice of filing thereof in the Federal Register. The

proposal is virtually identical to procedures that have been in place

for several years at the NYSE. In addition, clarification of

dissemination procedures will help provide more certainty to the Amex

procedures, which is important in the maintenance of fair and orderly

markets. Therefore, the Commission believes that granting accelerated

approval of the proposed rule change is appropriate and consistent with

Sections 6 and 19(b)(2) of the Act.

It is therefore ordered, pursuant to Section 19(b)(2) of the

Act,\8\ that the proposed rule change (SR-Amex-96-21) is approved.

\8\ 15 U.S.C. 78s(b)(2).

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For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.\9\

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\9\ 17 CFR 200.30-3(a)(12).

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Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96-19037 Filed 7-25-96; 8:45 am]

BILLING CODE 8010-01-M