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Notice

Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the American Stock Exchange LLC Relating to the Reporting of Options Transactions

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Start Preamble June 20, 2000.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),[1] and Rule 19b-4 thereunder,[2] notice is hereby given that on February 22, 2000, the American Stock Exchange LLC (“Amex” or the “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change relating to the reporting of options transactions. The Amex filed Amendment 1 to this proposal on June 12, 2000.[3] The proposed rule change, as amended, is described in Items I, II and III below, which Items have been prepared by the Exchange. 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 Exchange has filed with the Commission a proposed rule change adopting a new rule, Amex Rule 992, to require the reporting of options transactions within 90 seconds. The text of the proposed rule change, as amended, is set forth below. Additions are in italics.

Trade Reporting Rules

Section 9. Miscellaneous Provisions Applicable to Options

Rule 992.

(a) A member or member organization initiating an options transaction, whether acting as principal or agent, must report or ensure the transaction is reported within 90 seconds of the execution to the Amex Options Market Data System for dissemination to the Options Price Reporting Authority.

(b) Transactions not reported within 90 seconds after execution shall be designated as late. A pattern or practice of late reporting without exception circumstances may be considered conduct inconsistent with just and equitable principles of trade.

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 proposes to adopt a new rule, Amex Rule 992, to require options transactions reporting within 90 seconds. The Amex represents that it is Exchange policy that any member initiating an options transaction on the floor of the Exchange, whether acting as principal or agent, must ensure that the trade is properly reported or “printed on the tape.” [4]

The reporting of options transactions is currently handled by the Amex Options Display Book (“AODB”).[5] The AODB handles the execution processing of orders routed to it both electronically and manually. Orders routed electronically are either executed automatically by the Exchange's Auto-Ex system or executed by the specialist through the AODB. These options transactions are immediately reported to the Amex Option Market Data System, which processes all Amex trades, and the Options Price Reporting Authority, which disseminates trade information to the Amex's members and the investing public through vendors. Orders manually routed to the Exchange through a floor broker and executed in the trading crowd are reported to the specialist or his clerk for entry into the AODB and processed in the same manner as electronically routed and executed trades.[6]

Although Amex estimates that 60-70% of options transactions are electronically routed and executed orders that are immediately reported and printed on the tape, the Exchange believes that the adoption of a specific options trade reporting rule is appropriate, particularly for those orders routed and executed manually. Under the proposed rule, transactions not reported within 90 seconds after execution will be designated as late. Patterns or practices of late reporting without exceptional circumstances may be considered conduct inconsistent with just and equitable principles of trade.[7]

2. Statutory Purpose

The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,[8] in general and furthers the objectives of Section 6(b)(5),[9] in particular in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of change, 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.

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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 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 neither solicited nor received written comments with respect to the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may adequate 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 Amex 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, including whether the proposed rule change, as amended, is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. Copies of the submissions, 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 persons, 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 at 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 File No. SR-Amex-00-03 and should be submitted by July 18, 2000.

Start Signature
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[10]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  See Letter from Claire P. McGrath, Vice President and Special Counsel, Derivative Securities, Amex to Nancy Sanow, Assistant Director, Division of Market Regulation (“Division”), Commission, dated June 9, 2000. (“Amendment No. 1”). In Amendment No. 1, the Exchange clarified the proposed rule text and confirmed that a member's failure to report an options transaction within 90 seconds would be considered a violation of proposed Amex Rule 992.

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4.  The Exchange represents that this is currently an informal policy of the Exchange, which Amex is seeking to codify by adopting Amex Rule 992, as proposed in this filing. Voice Mail Message from Scott G. Van Hatten, Legal Counsel, Derivative Securities, Amex, to Melinda R. Diller, Attorney, Division, Commisison, on March 28, 2000.

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5.  According to the Exchange, the AODB is an electronic order book and execution-processing system that was adopted to replace and improve upon what was once a paper-based specialist's book.

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6.  An example of such a trade is one that does not include either the specialist or a customer limit order as a party to the trade.

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7.  In Amendment No. 1, the Amex clarified that a failure to report a single options transaction within 90 seconds would be considered a violation of the proposed options rule. See Amendment No. 1, supra note 3.

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[FR Doc. 00-16206 Filed 6-26-00; 8:45 am]

BILLING CODE 8010-01-M