[Federal Register Volume 59, Number 191 (Tuesday, October 4, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24515]
[[Page Unknown]]
[Federal Register: October 4, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34723; File No. SR-Amex-94-39]
Self-Regulatory Organization; Notice of Filing of Proposed Rule
Change by the American Stock Exchange, Inc. Relating to the Listing and
Trading of Indexed Term Notes Based on a Portfolio of Banking Industry
Securities
September 27, 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
September 22, 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 Exchange proposes to approve for listing and trading under
Section 107A of the Amex Company Guide (``Guide''), Indexed Term Notes
(``Notes''), the return on which is based in whole or in part on
changes in the value of a static portfolio of twenty banking industry
securities (``Index'').\1\ The text of the proposed rule change is
available at the Office of the Secretary, the Amex, and at the
Commission.
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\1\The components of the Index are: Bancorp Hawaii, Inc.;
Barnett Banks, Inc.; Baybanks, Inc.; City National Corp.; Corestates
Financial; Crestar Financial Corp.; First American Corp.; First
Chicago Corp.; Hibernia Corp.; Mercantile Bancorp.; Michigan
National; Midlantic Corp.; North Fork Bancorp; Provident Bankshares;
Summit Bancorp; U.S. Bancorp; UJB Financial Corp.; Union Planters
Corp.; UST Corp.; and Vermont Financial Services.
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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 Exchange 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
Under Section 107 of the Guide, the Exchange may approve for
listing and trading securities which cannot be readily categorized
under the listing criteria for common and preferred stocks, bonds,
debentures, or warrants.\2\ The Amex now proposes to list for trading,
under Section 107A of the Guide, Notes whose value is based in whole or
in part on the Index.
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\2\See Securities Exchange Act Release No. 27753 (March 1,
1990), 55 FR 8626 (March 8, 1990).
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The Notes will be non-convertible debt securities and will conform
to the listing guidelines under Section 107A of the Guide.\3\ Although
the specific maturity date will not be established until immediately
prior to the time of the offering, the Notes will provide for maturity
within a period of not less than one nor more than seven years from the
date of issue. The Notes may provide for periodic payments and/or
payments at maturity based in whole or in part on changes in the value
of the Index.\4\ In addition, the Notes may feature a ``cap'' on the
maximum amount and/or a ``floor'' on the minimum amount to be paid
periodically. Additionally, the Notes shall provide that at maturity,
holders will receive not less than 90% of the initial issue price of
the Notes. Prior to the commencement of listing and trading of the
Notes, the Exchange shall distribute a circular to its membership
providing guidance with regard to member firm compliance
responsibilities, including appropriate suitability criteria and/or
guidelines.
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\3\Specifically, the Notes must have: (1) A minimum public
distribution of one million trading units; (2) a minimum of 400
holders; (3) an aggregate market value of at least $20 million; and
(4) a term of at least one year. Additionally, the issuer of the
Nortes, Lehman Brothers, Inc., must have assets of at least $100
million, stockholders' equity of at least $10 million, and pre-tax
income of at least $750,000 in the last fiscal year or in two of the
three prior fiscal years. As an alternative to these financial
criteria, the issuer may have either: (1) Assets in excess of $200
million and stockholders' equity in excess of $10 million; or (2)
assets in excess of $100 million and stockholders' equity in excess
of $20 million. The Exchange has filed a proposed rule change that
would, among other things, reduce securities under Section 107A of
the Guide from $20 million to $4 million. See File No. SR-Amex-94-
36.
\4\The Commission notes that the value of the Index at maturity
shall not be adjusted to account for ordinary cash dividends paid on
the component securities during the term of the Notes.
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Eligibility Standards for Index Components
The Components of the Index shall meet the following criteria at
the time of issuance of the Notes: (1) A minimum market capitalization
of $75 million, except that up to 10% of the component securities may
have a market capitalization of not less than $50 million; (2) trading
volume in each of the six months prior to the offering of the Notes of
not less than one million shares, except that up to 10% of the
component securities may have a trading volume in each of the six
months prior to the offering of not less than 500,000 shares; (3) at
least 90% of the weight of the Index and at least 80% of the total
number of components will meet the then current criteria for
standardized options trading set forth in Exchange Rule 915; (4) all
components of the Index will be listed on the Amex or the New York
Stock Exchange, or will be National market securities traded through
Nasdaq; and (5) all components of the Index will be subject to last
sale reporting pursuant to Rule 11Aa3-1 of the Act.
Index Calculation
The Index will be calculated using an ``equal dollar-weighting''
methodology designed to ensure that each of the component securities is
represented in an approximately equal dollar amount in the Index. To
create the Index, a portfolio of equity securities will be established
by the issuer representing an investment of a specified dollar amount
in each component security (rounded to the nearest whole share). The
value of the Index will equal the current market value of the sum of
the assigned number of shares of each of the component securities
divided by the current Index divisor. The Index divisor will initially
be set to provide a benchmark value of 100.00 at the close of trading
on the day preceding the establishment of the Index.
The number of shares of each component stock in the Index will
remain fixed except in the event of certain types of corporate actions
such as the payment of a dividend (other than an ordinary cash
dividend), a stock distribution, stock split, reverse stock split,
rights offering, distribution, reorganization, recapitalization, or
similar event with respect to the component securities. The number of
shares of each component security may also be adjusted, if necessary,
in the event of a merger, consolidation, dissolution, or liquidation of
an issuer or in certain other events such as the distribution of
property by an issuer to stockholders. Shares of a component security
may be replaced (or supplemented) with other securities under certain
circumstances, such as the conversion of a component stock into another
class of security, the termination of a depositary receipt program, or
the spin-off of a subsidiary. If the security remains in the Index, the
number of shares of that security may be adjusted, to the nearest whole
share, to maintain the component's relative weight in the Index at the
level immediately prior to the corporate action.\5\ In all cases, the
divisor will be adjusted, if necessary, to ensure continuity of the
value of the Index.
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\5\The issuer will not attempt to find a replacement stock or
compensate for the extinction of a security due to bankruptcy or a
similar event.
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The value of the Index will be calculated continuously by the Amex
and disseminated every 15 seconds over the Consolidated Tape
Association's Network B.
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 inappropriate 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 reason 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 Amex. All
submissions should refer to File No. SR-Amex-94-39 and should be
submitted by October 25, 1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
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\6\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-24515 Filed 10-3-94; 8:45 am]
BILLING CODE 8010-01-M