[Federal Register Volume 59, Number 116 (Friday, June 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-14739]


[[Page Unknown]]

[Federal Register: June 17, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34198; International Series Release No. 672; File No. 
SR-Amex-94-19]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 to Proposed Rule Change by the American 
Stock Exchange, Inc. Relating to the Listing and Trading of Options on 
the Nikkei Stock Index 300

June 10, 1994.
    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 May 31, 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. On June 10, 
1994, the Amex filed Amendment No. 1 to the proposed rule change.\3\ 
The `Commission is publishing this notice to solicit comments on the 
proposed rule change and Amendment No. 1 from interested persons.
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    \1\15 U.S.C. section 78s(b)(1) (1988).
    \2\17 CFR Sec. 240.19b-4 (1993).
    \3\In Amendment No. 1, the Amex amended its proposal to provide 
that: (1) The exercise settlement value for all of the Nikkei Stock 
Index 300 expiring option contracts will be the special opening 
quotation, which is calculated based upon the opening prices of each 
of the component securities on the Tokyo Stock Exchange on the last 
business day prior to expiration; (2) the position and exercise 
limits for Nikkei Stock Index 300 option contracts in the series 
with the nearest expiration month will be 30,000 contracts; (3) the 
trading unit for Nikkei Stock Index 300 options is the Index value 
multiplied by $100; (4) for valuation purposes, one Nikkei Stock 
Index 300 unit (1.0) is assigned a fixed value of one U.S. dollar; 
and (5) the Tokyo Stock Exchange has recently requested that a new 
comprehensive surveillance sharing agreement be entered into for 
options on the Nikkei Stock Index 300, which agreement will cover 
the sharing of surveillance information regarding the index's 
component securities. See Letter from Claire P. McGrath, Managing 
Director and Special Counsel for Derivative Securities, Amex, to 
Michael Walinskas, Branch Chief, Derivatives Regulation, Division of 
Market Regulation, Commission, dated June 10, 1994.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to trade standardized options on the 
Nikkei Stock Index 300 (``Index''). In addition, the Amex proposes to 
amend Amex Rule 904C(b) to provide for a position limit for the Index 
of 50,000 contracts on the same side of the market, provided that no 
more than 30,000 of such contracts are in series in the nearest 
expiration month.
    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 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

    The Exchange is proposing to trade standardized options on the 
Index. The Index is comprised of 30 stocks which are representative of 
the first section of the Tokyo Stock Exchange (``TSE'').
    The Index was designed and is maintained by Nihon Keizai Shimbun, 
Inc. (``Nihon''). The Index's component securities were selected for 
their high market capitalizations and high degree of liquidity, and are 
representative of the relative distribution of industries within the 
broader Japanese equity market.
    The median capitalization of the companies in the Index on March 
31, 1994, was 340.1 billion yen (US $3.3 billion at the exchange rate 
of 102.75 yen per dollar prevailing on March 31, 1994). The average 
market capitalization of these companies was US $7.5 billion on the 
same date and using the same rate of exchange. The individual market 
capitalizations of these companies ranged from a low of US $875 million 
to a high of US $76.5 billion on March 31, 1994. The largest stock 
accounted for 3.41 percent of the total weighting of the Index, while 
the smallest accounted for 0.04 percent.
    The Index is a capitalization-weighted index and is calculated by 
multiplying the price of each component security (in Japanese yen) by 
its number of shares outstanding, adding those sums and dividing by the 
current Index divisor. The Index divisor was determined initially to 
yield a benchmark value of 100 on October 1, 1982. The Index's closing 
value on April 13, 1994, was 296.35. The Index multiplier is 100, and, 
for valuation purposes, one Index unit (1.0) is assigned a fixed value 
of one U.S. dollar.
    The Index will be maintained by Nihon. To maintain the continuity 
of the Index, the divisor will be adjusted to reflect certain events 
relating to the component securities. These events include, but are not 
limited to, changes in the number of shares outstanding, spinoffs, 
certain rights issuances, and mergers and acquisitions. The composition 
of the Index will be reviewed periodically by Nihon.
    The proposed options on the Index are to be European-style (i.e., 
exercises are permitted at expiration only), and cash-settled. Trading 
hours for the Index options will be 9 a.m. to 4:15 p.m. (New York 
time). Options on the Index will expire on the Saturday following the 
third Friday of the expiration month (``Expiration Friday''). The last 
trading day in an option series normally will be the business day 
immediately preceding Expiration Friday of each expiration month 
(normally a Thursday) and trading in expiring options will cease at the 
close of trading on such day. The exercise settlement value for all of 
the Index's expiring options will be the special opening quotation, 
which is calculated based upon the opening price of each of the 
component securities on the TSE on the last business day prior to 
expiration. If a stock fails to open for trading, the last available 
price of the stock will be used to calculate the Index's settlement 
value. When an option expiration is moved in accordance with an 
Exchange holiday, the last trading day for the expiring Index options 
will be Wednesday, and the exercise settlement value of the Index 
options will be determined at the opening of the regular Thursday 
trading session on the TSE, even if the TSE is open on Friday. If the 
TSE will be closed on the Friday before expiration but the Amex is not, 
the last trading day for expiring Index options will be on Wednesday.
    The Exchange plans to list options series with expirations in the 
three near-term calendar months and in the three additional calendar 
months in the March cycle. In addition, longer-term options series 
having up to 36 months to expiration may be traded. In lieu of such 
long-term options on a full-value Index level, the Exchange may list 
long-term, reduced-value put and call options based on one-tenth (\1/
10\th) of the Index's full value. The current and closing Index value 
of any such reduced-value long-term option will be rounded to the 
nearest one-hundredth (\1/100\th) after the initial computation. In 
either event, the interval between expiration months for either a full-
value or reduced-value long-term option will not be less than six 
months.
    Amex Rules 900C through 980C will apply to the trading of 
standardized and long-term option contracts based on the Index. These 
rules cover issues such as sales practices, margin requirements, 
exercise prices, position and exercise limits, and floor trading 
procedures. Surveillance procedures currently used to monitor trading 
in each of the Exchange's other index options also will be used to 
monitor trading in options on the Index. The Exchange represents that 
the TSE has requested that a new comprehensive surveillance sharing 
agreement be executed with respect to options on the Index. This 
agreement will cover the sharing of surveillance information regarding 
the Index's component securities.
    The Exchange believes that the Index is a Stock Index Option under 
Amex Rule 901C(a) and a Broad Stock Index Group under Amex Rule 
900C(b)(1). With respect to Amex Rule 903C(b), the Exchange proposes to 
list near-the-money (i.e., Within ten points above or below the current 
index value) option series on the Index at 2\1/2\ point strike 
(exercise) price intervals when the value of the Index is below 200 
points. In addition, the Exchange proposes to establish, pursuant to 
Amex Rule 904C(b), a position limit of 50,000 contracts on the same 
side of the market, provided no more than 30,000 of such contracts are 
in series in the nearest expiration month.
    In anticipation of substantial customer activity in the options on 
this Index (including institutional activity), the Exchange seeks to 
have the ability to utilize its Auto-Ex system for orders in the Index 
options of up to 50 contracts. Auto-Ex is the Exchange's automated 
execution system which provides for the automatic execution of market 
and marketable limit orders at the best bid or offer at the time the 
order is entered. The Exchange believes that the ability to use Auto-Ex 
for orders of up to 50 contracts will provide customers with deep, 
liquid markets, as well as expeditious executions.
    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, 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 Amex 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

    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 also will be available for 
inspection and copying at the principal office of the Amex. All 
submissions should refer to File No. SR-Amex-94-19 and should be 
submitted by July 8, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\17 CFR Sec. 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-14739 Filed 6-16-94; 8:45 am]
BILLING CODE 8010-01-M