[Federal Register Volume 59, Number 90 (Wednesday, May 11, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-11340]


[[Page Unknown]]

[Federal Register: May 11, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34016; International Series Release No. 663; File No. 
SR-Amex-94-05]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange, Inc. Relating to Warrants Based 
on Foreign Government Bonds

May 5, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on March 2, 
1994, 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, II, and III below, which 
Items have been prepared by the Amex. 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 Amex proposes to approve for listing and trading under Section 
106 of the Amex Company Guide warrants tied to changes in the prices of 
foreign government bonds.
    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 IV below. The self-regulatory organization 
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

    The Exchange proposes to list and trade under Section 106 of the 
Amex Company Guide warrants that can be expected to fluctuate in value 
based on changes in prices of foreign government bonds.\1\ Such issues 
may relate to a single bond issue or several bond issues of one or more 
foreign countries.\2\
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    \1\The size required for an individual government bond issue 
relating to a warrant based thereon shall not be less than the 
equivalent of U.S. $100,000,000. In addition, such warrant issues 
shall be based on only those government bonds for which prices are 
readily available from independent vendors of financial information.
    \2\For purposes of this rule change, the Exchange intends to 
limit such issues to warrants based on government bonds of the 
following countries: Australia, Austria, Canada, Denmark, Finland, 
France, Germany, Italy, Japan, the Netherlands, Spain, Sweden, 
Switzerland, and the United Kingdom. The Exchange will consult with 
Commission staff prior to listing warrants based on bonds issued by 
governments other than those specified above.
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    Warrants based on prices of foreign government bonds will conform 
to the listing guidelines under Section 106 of the Amex Company Guide 
which currently provide that:
    (1) The issuer shall have assets in excess of U.S. $100,000,000 and 
otherwise substantially exceed the size and earnings requirements of 
Section 101(A) of the Amex Company Guide;
    (2) The term of the warrants shall be for a period ranging from one 
to five years from date of issuance; and
    (3) The minimum public distribution of such issues shall be 
1,000,000 warrants together with a minimum of 400 public holders, and 
an aggregate market value of U.S. $4,000,000.
    Such warrants shall be direct obligations of their issuer subject 
to cash settlement in U.S. dollars, and exercisable throughout their 
life (i.e. American style) or exercisable only at expiration (i.e., 
European style). Upon exercise, or at the warrant expiration date (if 
not exercisable prior to such date), the holder of a warrant will be 
entitled to a cash settlement value computed in accordance with a 
formula specified in the issuer's prospectus. If ``out of the money'' 
at the time of expiration, the warrants will expire worthless.
    Warrants may be structured either to increase or decrease in value 
based on the increase or decrease in the price or yield of the 
government bond or bonds. Because all payments will be required to be 
in U.S. dollars, there would be no currency risk except to the extent 
that fluctuations in the value of the relevant currency affect the 
price or yield of the government bond(s).
    The Amex will require that member firms only sell such warrants to 
investors whose accounts have been approved for options trading 
pursuant to Amex Rule 921. The Exchange also will distribute a circular 
to its membership prior to the commencement of trading calling 
attention to the risks associated with the purchase and trading of such 
warrants.
    At this time, the Exchange anticipates the listing of a warrant 
issue based on the prices of between three and five foreign government 
issues. Holders of such warrants would be entitled to receive from the 
issuer in U.S. dollars a cash settlement value, if any, based on 
changes in the arithmetic average yield to maturity of the bonds as 
calculated by the designated Calculation Agent based on prices obtained 
from three dealers in the bonds.\3\
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    \3\The Exchange represents that it will consult with Commission 
staff prior to listing warrant issues tied to government bond(s) 
with respect to (1) the specific calculation methodology to be used 
by individual warrant issuers, and (2) the adequacy of available 
bond pricing information.
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    The Exchange believes that 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 and to promote just and 
equitable principals of trade, and is not designed to permit unfair 
discrimination between customers, issuers, brokers and dealers.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Amex believes that the proposed rule change will not impose an 
inappropriate burden on competition.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received from Members, Participants, or Others

    Written comments on the proposed rule change were neither solicited 
nor received.

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 
designate 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 self-regulatory organization consents, the Commission will:
    (a) By order approve such 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. 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 Section, 450 Fifth Street, NW., 
Washington, DC. Copies of such filing will also be available for 
inspection and copying at the principal office of the above-mentioned 
self-regulatory organization. All submissions should refer to File No. 
SR-Amex-94-05 and should be submitted by June 1, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\17 CFR 200.30-3(a)(12)(1993).
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[FR Doc. 94-11340 Filed 5-10-94; 8:45 am]
BILLING CODE 8010-01-M