Self-Regulatory Organizations, Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change by American Stock Exchange, Inc. Relating to the Extension of the Exchange's Pilot Program for Specialists in Portfolio Depositary Receipts and Index Fund Shares To Participate in the After-Hours Trading Facility

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38986; File No. SR-Amex-97-28]

Self-Regulatory Organizations, Notice of Filing and Order

Granting Accelerated Approval of Proposed Rule Change by American Stock

Exchange, Inc. Relating to the Extension of the Exchange's Pilot

Program for Specialists in Portfolio Depositary Receipts and Index Fund

Shares To Participate in the After-Hours Trading Facility

August 27, 1997.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of

1934, 15 U.S.C. 78s(b)(1), notice is hereby given that on August 6,

1997, the American Stock Exchange, Inc. (``Amex'' or ``Exchange'')

filed with the Securities and Exchange Commission 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 and to grant accelerated approval to the

proposed rule change.

[[Page 46786]]

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

of the Proposed Rule Change

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 III below. The self-regulatory

organizations 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 the

Statutory Basis for, the Proposed Rule Change

(1) Purpose

The Exchange seeks to continue the pilot program permitting

specialists in Portfolio Depositary Receipts (``PDRs''), investments

trust securities and Index Fund Shares \1\ to participate in the after-

hours trading (``AHT'') facility to ``clean-up'' order imbalances and

to effect closing price coupled orders.\2\

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\1\ The Exchange currently lists two Portfolio Depositary

Receipts, viz., Standard and Poor's Depositary Receipts on the S&P

500 and MidCap Indexes (``SPDRs''). The Exchange currently lists 17

Index Fund Shares which are commonly referred to as

WEBSsm. WEBS are shares issued by an open-end management

investment company that seek to provide investment results that

correspond generally to the price and yield performance of a

specified foreign or domestic equity market index. The Exchange

currently lists WEBS based on the following Morgan Stanley Capital

International (``MSCI'') indices: MSCI Australia Index; MSCI Austria

Index; MSCI Belgium Index; MSCI Canada Index; MSCI France Index;

MSCI Germany Index; MSCI Hong Kong Index; MSCI Italy Index; MSCI

Japan Index; MSCI Malaysia Index; MSCI Mexico Index; MSCI

Netherlands Index; NSCI Singapore (Free) Index; MSCI Spain Index;

MSCI Sweden Index; MSCI Switzerland Index; and MSCI United Kingdom

Index (See SR-AMEX-95-43).

\2\ According to the Exchange, there was very limited trading

volume in the AHT for SPDRs, investment trust securities and Index

Fund Shares during August 1, 1996 to May 30, 1997. The Exchange,

nevertheless, is optimistic that there could be increased after

hours trading activity in these securities given their increasing

popularity.

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The Exchange believes that extension of the Exchange's pilot

program to permit specialists in PDRs, investment trust securities and

Index Fund Shares to participate in the AHT facility in order to

``clean-up'' order imbalances and effect closing price coupled orders

would benefit investors by providing additional liquidity to the listed

cash market for derivative securities based upon well known market

indexes. The market price of these securities is based upon

transactions largely effected in markets other than the Amex. (In the

case of Index Fund Shares, the market price of these securities is

based exclusively on transactions occurring outside the Amex.) The

specialist in the Amex listed derivatives has no unique access to

market sensitive information regarding the market for the underlying

securities or closing index values. The Exchange, therefore, believes

that specialist participation in the AHT facility in PDRs, investment

trust securities and Index Fund Shares in the manner previously

approved by the Commission does not raise any market integrity issues.

In addition, should a customer not care for an execution at the closing

price, the rules of the Exchange's AHT facility permit cancellation of

an order up to the close of the AHT session at 5 p.m. (Order in the AHT

facility are not executed until the 5 p.m. close of the After-Hours

session.) A customer, therefore, has approximately 40 minutes to

determine if an execution at the closing price suits its needs, and may

cancel its order if it believes that the closing price does not suit

its objectives.

(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 particular in

that it is designed to prevent fraudulent manipulative acts and

practices, promote just and equitable principles of trade, remove

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

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

public interest.

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

Amex does not believe the proposed extension of the pilot program

will impose any 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 provisions

of 5 U.S.C. 552, will be available for inspection and copying in the

Commission's Public Reference Room, 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 PCX. All submissions should

refer to File No. SR-Amex-97-28 and should be submitted by September

25, 1997.

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

Proposed Rule Change

The Commission has carefully reviewed PCX's proposed rule change

and believes, for the reasons set forth below, the proposal is

consistent with the requirements of the Act and the rules and

regulations thereunder applicable to a national securities exchange,

and in particular, the requirements of Sections 6(b)(5) in that it is

designed to prevent fraudulent, manipulative acts and practices and to

promote just and equitable principles of trade, and to remove

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

to protect investors and the public interest.\3\

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\3\ In approving this rule, the Commission notes that it has

considered the proposed rule's impact on efficiency, competition,

and capital formation. 15 U.S.C. 78c(f).

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Under the pilot program, specialists in PDRs, investment trust

securities, and Index Fund Shares may participate in the AHT facility

to clean up order imbalances by entering an order for their own

account. The pilot program also allows specialists in PDRs, investment

trust securities, and Index Fund Shares to participate in a coupled

closing price order as long as the other side of the order is not for

an account in which a member or member organization has a direct or

indirect interest. Moreover, the pilot program eliminates the

mitigation of limit orders for PDRs, investment trust securities and

Index Fund Shares from the specialists' limit order book to the AHT

[[Page 46787]]

facility to prevent the potential for manipulation or misuse of

specialists' information regarding which limit orders are eligible for

execution in the AHT facility.

In the original approval order, the Commission observed that the

pilot program should assist specialists in their obligation to minimize

temporary disparity between supply and demand. Moreover, the Commission

agreed with the Exchange that the pilot program should benefit

investors by providing additional liquidity to the listed cash market

for derivative securities based upon well-known market indexes. The

Commission also noted that the proposed rule change struck a reasonable

balance between the Exchange's need to accommodate the needs of

investors by providing additional liquidity to the listed cash market

for derivative securities based on market indexes, and the need to

prevent the potential for manipulation or misuses of information.

The Commission initially approved the pilot program for one year.

The pilot program has been extended several times to allow the Exchange

and the Commission to evaluate further whether there were additional

issues that needed to be addressed. At the Commission's request, the

Exchange submitted a report with this rule filing describing the

Exchange's experience with the pilot program. According to the report,

there was very limited trading volume in the AHT for SPDRs, investment

trust securities and Index Fund Shares during August 1, 1996 to May 30,

1997. Given the experience Amex has gained through extended operation

and renewal of the pilot program, the Commission expects the Amex to

determine, at least two months prior to expiration of the current

pilot, whether to seek permanent approval of, or discontinue, the

pilot. Should the Exchange decide to seek permanent approval of the

pilot program, it should submit another report to the Commission by May

1, 1998, describing its experiences with the pilot program.

The Commission believes that there is good cause for approving the

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

publication of notice thereof in the Federal Register. This will permit

the pilot program to continue on an uninterrupted basis for another

year, until August 29, 1998. The Exchange proposes to continue using

the identical procedures contained in the pilot program as originally

approved. In addition, the rule change that implemented the pilot

program was published in the Federal Register for the full comment

period and no comments were received. Accordingly, the Commission

believes that it is consistent with Sections 6 and 19(b) of the Act \4\

to accelerate approval of the proposal rule change.

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\4\ 15 U.S.C. 78f and 78s(b)(2).

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

Act,\5\ that the proposed rule change (SR-Amex-97-28) is hereby

approved on an accelerated basis.

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\5\ 15 U.S.C. 78s(b)(2).

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For the Commission by the Division of Market Regulation,

pursuant to delegated authority.\6\

\6\ 17 CFR 200.30-3(a)(12).

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Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97-23392 Filed 9-3-97; 8:45 am]

BILLING CODE 8010-01-M