[Federal Register Volume 59, Number 138 (Wednesday, July 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17665]


[[Page Unknown]]

[Federal Register: July 20, 1994]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34365; International Series Release No. 684; File No. 
SR-Amex-94-24]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange, Inc., Relating to the Listing 
and Trading of Warrants on the Nikkei Stock Index 300

July 13, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on June 17, 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.
---------------------------------------------------------------------------

    \1\15 U.S.C. 78s(b)(1) (1982).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to list and trade under Section 106 of 
the Amex Company Guide warrants based on the Nikkei Stock Index 300 
(``Index'').
    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

    Under Section 106 (Currency and Index Warrants) of the Amex Company 
Guide, the Exchange may approve for listing warrants based on 
established foreign and domestic indexes. The Exchange is proposing to 
list warrants based on the Nikkei 300 Index.\2\ The Nikkei 300 Index is 
comprised of 300 stocks which are representative of the first section 
of the Tokyo Stock Exchange (``TSE'').
---------------------------------------------------------------------------

    \2\The Exchange also has proposed to list and trade options on 
the Nikkei 300 Index. See Securities Exchange Act Release No. 34198 
(June 10, 1994), 59 FR 31282 (June 17, 1994).
---------------------------------------------------------------------------

    The Index was designed and is maintained by Nihon Keizai Shimbun, 
Inc. (``NKS''). The Index's component securities were selected for 
their high market capitalization and high degree of liquidity, and are 
representaitve of the relative distribution of industries within the 
broader Japanese equity market.
    The median capitalization of the companies in the Nikkei 300 Index 
on March 31, 1994 was 340.1 billion ($3.3 billion at the exchange 
rate of 102.75 per US$1.00 prevailing on March 31, 1994). The 
average market capitalization of these companies was $7.5 billion on 
the same date and using the same rate of exchange. The individual 
market capitalization of these companies ranged from $875 million to 
$75.5 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 products, and dividing 
by the current Index divisor. The Index divisor initially was 
determined to yield a benchmark value of 100 on October 1, 1982. The 
divisor is adjusted for certain changes described below. The Index's 
closing value on July 8, 1994 was 301.48. For valuation purposes, one 
Nikkei 300 Index unit (1.0) is assigned a fixed value of US$1.00.
    The Index will be maintained by NKS. To maintain 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, spin-offs, certain 
rights issuances, and mergers and acquisitions. The competition of the 
Index will be reviewed periodically by NKS.
    Warrant issues on the Index will conform to the listing guidelines 
under Amex Company Guide Section 106, which provide that (1) the issuer 
shall have assets in excess of $100,000,000 and otherwise substantially 
exceed the size and earnings requirements of Section 101(a); (2) the 
term of warrants shall be for a period ranging from one to five years 
from the 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 a minimum aggregate market value of $4,000,000.
    Nikkei 300 Index warrants will be direct obligations of their 
issuer subject to cash settlement in dollars, and either exercisable 
throughout their life (i.e., American style) or exercisable only on 
their expiration date (i.e., European style). Upon exercise, or at the 
warrant expiration date (if not exercisable prior to such date), the 
holder of a warrant structured as a ``put'' would receive payment in 
U.S. dollars to the extent that the Nikkei 300 Index has declined below 
a pre-stated cash settlement value. Conversely, holders of a warrant 
structured as a ``call,'' upon exercise or at expiration, would receive 
payment in U.S. dollars to the extent that the Index has increased 
above the pre-stated cash settlement value. If ``out-of-the-money'' at 
the time of expiration, the warrants likely would expire worthless.
    The Amex has adopted suitability standards applicable to 
recommendations to customers of index warrants and transactions in 
customer accounts. Amex Rule 421, Commentary .02, requires a Senior 
Registered Options Principal or a Registered Options Principal to 
approve and initial a discretionary order in index warrants on the day 
entered. In addition, the Exchange, prior to the commencement of 
trading, will distribute a circular to its membership calling attention 
to specific risks associated with warrants on the Index.
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act\3\ 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, promote just and 
equitable principles of change, foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, and 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
---------------------------------------------------------------------------

    \3\15 U.S.C. 78f(b) (1988).
---------------------------------------------------------------------------

(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-94-24 and should be 
submitted by August 10, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\4\
---------------------------------------------------------------------------

    \4\17 CFR 200.30-3(a)(12) (1993).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-17665 Filed 7-19-94; 8:45 am]
BILLING CODE 8010-01-M