[Federal Register Volume 63, Number 45 (Monday, March 9, 1998)]
[Notices]
[Pages 11469-11470]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-5891]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39706; File No. SR-AMEX-98-07]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the American Stock Exchange,
Inc., Relating to Extension of the Permissible Maturity of FLEX Equity
Options
March 2, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on February 5, 1998, 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 Exchange. On February 20, 1998, the Exchange filed with
the Commission Amendment No. 1 to the proposed rule change.\2\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ Amendment No. 1 clarifies the Exchange's course of action
when criteria set forth in the proposed rule are met. See Letter
from Scott G. VanHatten, Legal Counsel, Derivative Securities,
Exchange, to Michael Walinskas, Senior Special Counsel, Division of
Market Regulation, Commission, dated February 19, 1998.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Amex proposes to amend Exchange Rule 903G to permit flexible
(``FLEX'') equity options to have a term of five years in certain
circumstances. 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 Amex 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 Amex 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 is proposing to allow FLEX equity options \3\ traded
on the Exchange to have a maturity beyond three years and up to five
years in certain circumstances. Currently, FLEX equity options, by
operation of Rule 903G, are limited to a maturity of three years.
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\3\ FLEX equity options are flexible exchange-traded options
contracts which overlie equity securities. In addition, Exchange
equity options provide investors with the ability to customize basic
option features including size, expiration date, exercise style, and
certain exercise prices.
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When the Exchange filed for permission to list and trade FLEX
equity options \4\ it determined to limit the maturity of these options
to three years because, unlike FLEX Index options which were already
being traded on the Exchange since August 1993 and which could have a
maturity of up to five years, the Exchange was concerned that there
would not sufficient liquidity in many equity option classes to support
services with a longer term to expiration. Since it has traded FLEX
equity options, however, the Exchange has had numerous requests from
broker-dealers to extend the maturity of FLEX equity options to five
years. Among the reasons the broker-dealer firms have been interested
in seeking an extension in the allowable maturity is that these longer
expiration FLEX equity options might be used to hedge the longer term
issuances of structured products linked to returns of a individual
stock. The rule would permit the longer term FLEX equity options to be
listed when requested by the submitting member if the Exchange
determines that sufficient liquidity exists among Equity FLEX qualified
participants. By allowing for the extension of the maturity of FLEX
equity options to five years in situations where there is demand for a
longer term expiration and where there is sufficient liquidity to
support the request, the proposed rule change will better serve the
needs of Amex's customers and the Exchange members who make a market
for such customers.
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\4\ See Exchange Act Release No. 37336 (June 19, 1996), 61 FR
33558 (June 27, 1996).
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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 objectives 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 facilitating
transactions in securities, and to remove impediments to and perfect
the mechanism of a free and open market and a national market system.
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.
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
Because the foregoing proposed rule change:
(i) does not significantly affect the protection of investors or
the public interest;
(ii) does not impose any significant burden on competition; and
(iii) does not become operative for 30 days from the date on which
it was
[[Page 11470]]
filed,\5\ or such shorter time as the Commission may designate, and the
Exchange provided the Commission with written notice of its intent to
file the proposed rule change at least five business days prior to the
filing date, it has become effective pursuant to Section 19(b)(3)(A)
\6\ of the Act and Rule 19b-4(e)(6) thereunder.\7\ The Commission finds
good cause to allow the proposed rule change to become operational on
March 6, 1998. This accelerated operational date should facilitate
faster access for Amex members and customers to the potential benefits
of extended maturity dates for FLEX equity options, consistent with the
protection of investors and the public interest. The Commission has
previously approved a substantially similar proposal by the Chicago
Board Options Exchange, Inc.\8\
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\5\ The proposed rule change filing is deemed filed as of the
date Amendment No. 1 was received by the Commission.
\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 17 CFR 240.19b-4(e)(6). In reviewing this rule, the
Commission has considered the proposed rule's impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
\8\ See Exchange Act Release No. 39524 (January 8, 1998), 63 FR
3009 (January 20, 1998).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., 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. Copies of such filing will also be
available for inspection and copying at the principal office of the
Amex. All submissions should refer to the File No. SR-AMEX-98-07 and
should be submitted by March 30, 1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.3-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 98-5891 Filed 3-6-98; 8:45 am]
BILLING CODE 8010-01-M