[Federal Register Volume 59, Number 166 (Monday, August 29, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21235]


[[Page Unknown]]

[Federal Register: August 29, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34572; File No. SR-Amex-94-17]

 

Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change and Amendment No. 
1 to the Proposed Rule Change by the American Stock Exchange, Inc., 
Relating to the Dissemination of the Value of the Basket Underlying 
Stock Upside Note Securities (``SUNS'')

August 22, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on May 25, 1994, the American 
Stock Exchange, Inc. (``Amex'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Amex. On August 17, 1994, the Exchange filed 
Amendment No. 1 to the proposed rule change.\2\ The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\15 U.S.C. Sec. 78s(b)(1) (1988).
    \2\In Amendment No. 1, the Exchange proposes to provide for the 
dissemination of the value of the Lehman Brothers Global 
Telecommunications Basket at 12:45 p.m. Eastern Standard Time 
(``E.S.T.''), instead of at 1:00 p.m. E.S.T. as originally proposed. 
See Letter from William Floyd-Jones, Assistant General Counsel, 
Legal and Regulatory Policy Division, Amex, to Brad Ritter, 
Attorney, Office of Market Supervision (``OMS''), Division of Market 
Regulation (``Division''), Commission, dated August 17, 1994 
(``Amendment No. 1'').
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Amex proposes to disseminate the value of the Lehman Brothers 
Global Emerging Telecommunications Basket (``Telecommunications 
Basket'' or ``Basket'')\3\ one additional time each day in order to 
provide additional information to investors and holders of 
Telecommunications Basket Stock Upside Note Securities (``SUNS'').\4\ 
The text of the proposed rule change is available at the Office of the 
Secretary, Amex, and at the Commission.
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    \3\The Telecommunications Basket is a static portfolio 
consisting of 24 equity securities in the telecommunications 
industry which are listed as: (1) common shares outside of the U.S. 
in the countries having the greatest exchange trading volume for the 
shares; (2) common shares in the U.S.; or (3) as American Depositary 
Receipts in the U.S. The securities that comprise the 
Telecommunications Basket are securities issued by corporations 
formed under the laws of Argentina, Brazil, Canada, Chile, France, 
Hong Kong, Israel, Italy, Malaysia, Mexico, New Zealand, the 
Philippines, Spain, Sweden, Thailand, the United States, and the 
United Kingdom.
    \4\``Stock Upside Note Securities'' and ``SUNS'' are service 
marks of Lehman Brothers Holdings, Inc. (``Lehman Brothers'').
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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 the 
Statutory Basis for, the Proposed Rule Change

    On January 19, 1994, the Commission approved an Amex proposal to 
list and trade SUNS, the return on which is based on the 
Telecommunications Basket.\5\ SUNS are non-callable senior hybrid 
securities issued by Lehman Brothers. SUNS have a six-year term and pay 
an annual coupon based on the year-to-year appreciation of the 
Telecommunications Basket. At maturity, holders of SUNS will receive 
the entire principal amount of the note.
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    \5\See Securities Exchange Act Release No. 233495 (January 19, 
1994), 59 FR 3883 (January 27, 1994) (``SUNS Approval Order'')
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    The value of the Telecommunications Basket is presently calculated 
by Lehman Brothers once a day, based upon values for the component 
securities as of 4:30 p.m. E.S.T., and is disseminated over Network B 
at 5 p.m. E.S.T.\6\ Pursuant to the current proposal, Lehman Brothers 
would calculate the value of the Telecommunications Basket one 
additional time each day, using the market prices of the component 
securities as of 12:30 p.m. E.S.T., and the Exchange would disseminate 
this value at 12:45 p.m. E.S.T. The Exchange represents that the 
proposed additional calculation and dissemination of the value of the 
Telecommunications Basket will not in any way affect the determination 
of payments made to SUNS holders by the issuer (i.e., payments will 
still be based on the value of the Telecommunications Basket using the 
market prices of the component securities as of 4:30 p.m. E.S.T.). The 
Exchange represents that the sole purpose of the proposal is to provide 
investors and holders of Telecommunications Basket SUNS with additional 
market information regarding the value of the Telecommunications 
Basket.
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    \6\Id.
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    The Amex 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) of the Act in particular in that it is designed to 
prevent fraudulent and manipulative acts and practices and to promote 
just and equitable principles of trade, and is not designed to permit 
unfair discrimination between customers, issuers, brokers, or dealers.

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

    The Amex does not believe that the proposed rule change will impose 
a 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 respect to the 
proposed rule change.

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

    The Exchange has requested that the proposed rule change be given 
accelerated effectiveness pursuant to Section 19(b)(2) of the Act.
    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange 
and, in particular, the requirements of Section 6(b)(5).\7\ 
Specifically, the Commission finds that the Amex proposal to calculate 
and disseminate the value of the Telecommunications Basket one 
additional time each day is consistent with the furthers the 
Commission's goal that real-time dissemination of the value of the 
securities underlying new derivative products should be provided to all 
investors.\8\ Although the value of the Basket that will be 
disseminated daily at 12:45 p.m. E.S.T. is based on the value of the 
components at 12:30 p.m. E.S.T., the Commission believes that providing 
investors with an intra-day indication of the value of the Basket may 
serve to add liquidity to the market for SUNS and, therefore, may be 
beneficial to investors.
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    \7\15 U.S.C. Sec. 78f(b)(5) (1988).
    \8\See SUNS Approval Order, supra note 4.
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    Although the Commission, in approving the original Amex proposal to 
list and trade Telecommunications Basket SUNS, permitted the product to 
trade without real-time dissemination, the Commission also stated in 
the SUNS Approval Order that ``it is useful and beneficial for all 
investors and market participants to have access to the value of the 
[Telecommunications Basket] on a real-time basis and encourages the 
Amex and Lehman Brothers to further explore the possibilities in this 
area.''\9\ Accordingly, the Commission believes that the additional 
calculation and dissemination of the value of the Telecommunications 
Basket as proposed, even though the value to be disseminated is not a 
real-time value, should prove useful and beneficial to investors by 
providing additional intra-day information on the value of the Basket, 
and is therefore consistent with the Act. The Commission, however, 
continues to believe that it is extremely important and beneficial for 
all investors and market participants to have access to the value of 
the Basket on a real-time basis and encourages the Amex and Lehman 
Brothers to further explore the possibility of both narrowing the 15 
minute gap between the values of the components used to calculate the 
Basket value and the time that the value is disseminated at 12:45 p.m. 
E.S.T., as well as calculating and disseminating additional intra-day 
real-time values of the Basket.
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    \9\Id. at note 26.
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    The Commission believes that the proposed rule change will not 
increase the potential for manipulation of the market for the SUNS or 
the Basket components. Lehman Brothers has represented that it has 
implemented procedures regarding information about the value of the 
Basket to ensure that individuals trading the SUNS or any of the 
components of the Basket on behalf of the pricing agent,\10\ will only 
be able to receive such information through public means and not prior 
to its release to the public.\11\ Furthermore, the Amex has represented 
that in addition to its regular surveillance procedures, it will review 
trading activity around the 12:45 p.m. E.S.T. dissemination time in 
order to detect and deter potential manipulation in the market for SUNS 
as a result of the 15-minute gap between the values of the Basket 
components used in the calculation and the time that the value of the 
Basket is disseminated.\12\ The Amex shall also distribute a circular 
notifying members of the intra-day dissemination of the value of the 
Basket and of the 15-minute time gap.\13\
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    \10\The pricing agent is defined as an affiliate of Lehman 
Brothers or an independent third party selected by Lehman Brothers 
to compute the value of the Basket. See SUNS Approval Order, supra 
note 4.
    \11\Id. at note 36.
    \12\Telephone conversation among William Floyd-Jones, Assistant 
General Counsel, Legal and Regulatory Policy Division, Amex, Sharon 
Lawson, Assistant Director, OMS, Division, Commission, and Brad 
Ritter, Attorney, OMS, Division, Commission, on June 17, 1994.
    \13\Telephone conversation among William Floyd-Jones, Assistant 
General Counsel, Legal and Regulatory Policy Division, Amex, Sharon 
Lawson, Assistant Director, OMS, Division, Commission, and Brad 
Ritter, Attorney, OMS, Division, Commission, on August 22, 1994.
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    The Commission finds good cause for approving the proposed rule 
change and Amendment No. 1 to the proposed rule change prior to the 
thirtieth day after the date of publication of notice of filing thereof 
in the Federal Register in order to permit the Exchange to begin 
disseminating the additional calculation of the value of the 
Telecommunications Basket as soon as possible. For the reasons stated 
above and because the proposed rule change will not alter the 
determination of payments made to SUNS holders by the issuer, the 
Commission believes it is consistent with Sections 6(b)(5) and 19(b)(2) 
of the Act to approve the proposed rule change on an accelerated basis.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the proposed rule change and Amendment No. 1 to 
the proposed rule change. 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 Amex. All submissions should refer to File No. 
SR-Amex-94-17 and should be submitted by [insert date 21 days from the 
date of publication].
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act\14\ that the proposed rule change (SR-Amex-94-17), as amended, is 
hereby approved.

    \14\15 U.S.C. Sec. 78s(b)(2) (1988).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-21235 Filed 8-26-94; 8:45 am]
BILLING CODE 8010-01-M