Federal prosecutors are looking at the relationship between the

American Stock Exchange

and the Chicago Board Options Exchange, the

NASD

disclosed Tuesday in its most recent annual report.

The civil antitrust investigation by the Department of Justice is focusing on an alleged "product allocation agreement" between the two options trading markets, according to the report. The NASD is the Amex's parent company.

Both the Amex and CBOE issued statements saying the exchanges are cooperating with the investigation and the government's recent request for documents. The CBOE and the Amex are the nation's second- and third-biggest markets for trading options.

An option is a right to buy or sell a security at a future time for a specified price.

The NASD annual report provided scant details on the scope of the investigation. But the report strongly denied that the Amex had done anything wrong.

"AMEX believes no product allocation agreement between AMEX and CBOE has ever existed and that the subject of the investigation is without foundation,'' the report said.

Meanwhile, Lynne Howard-Reed, a CBOE spokeswoman, said the Chicago options market "believes its conduct has been appropriate and lawful."