[Federal Register Volume 60, Number 17 (Thursday, January 26, 1995)]
[Notices]
[Pages 5236-5237]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1980]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35249; International Series Release No. 775 File No.
SR-Amex-94-55]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change By the American Stock Exchange, Inc. Relating to the Listing of
Warrants Based on the Deutscher Aktienindex (DAX)
January 19, 1995.
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 December
5, 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 106 of the Amex Company Guide (``Guide'') warrants based on the
Deutscher Aktienindex (``DAX Index'' or ``Index''), a capitalization-
weighted index of 30 German stocks trading on the Frankfurt Stock
Exchange (``FSE''). 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 Propose 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 106 (Currency and Index Warrants) of the Guide, the
Exchange may approve for listing index warrants based on established
foreign and domestic market indexes.\1\ The Amex is currently trading a
number of issues of index warrants pursuant to Section 106.\2\
\1\The Commission notes that the Exchange has filed a proposed
rule change that would, among other things, revise the criteria
pursuant to Rule 106 for listing stock index and currency warrants.
These new standards will apply to Index warrants issued following
approval of that proposal rule change. See Securities Exchange Act
Release No. 35086 (December 12, 1994), 59 FR 65561 (December 20,
1994) (notice of File No. SR-Amex-94-38).
\2\See Securities Exchange Act Release Nos. 33036 (October 8,
1993), 58 FR 53588 (October 15, 1993) (approval for index warrants
on the Amex Hong Kong 30 Index), 31016 (August 11, 1992), 57 FR
37012 (August 17, 1992) (approval for index warrants on the Japan
Index), and 30462 (March 11, 1992), 57 FR 9290 (March 17, 1992)
(approval for index warrants and index options on FT-SE Eurotrack
200 Index).
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The Amex is proposing to list index warrants based on the DAX
Index, an internationally-recognized, capitalization-weighted\3\ index
of 30 highly capitalized German stocks trading on the FSE.\4\ The DAX
Index is calculated by the FSE and is updated on a continuous basis.
The stocks included in the Index are among the largest German
corporations and their shares are among the most actively traded of
German issuers. The DAX Index is composed of ten broad industry groups
including chemicals, automobile manufacturers, banks, and insurance
companies.
\3\The capitalization of a particular stock in the DAX Index is
calculated by multiplying the price of the stock by the ``listed
capital.'' Listed capital includes common and preferred shares and
shares held in the corporate treasury. The Amex represents that this
weighting method differs from the method used in calculating
domestic capitalization-weighted indexes, which are calculated by
multiplying the price of the stock only by the number of common
shares.
\4\The components of the Index are as follows: Allianz AG
Holdings; BASF AG; Bayer AG; Bayer Hypo/Wech; BMW; Bayer Vereinsbank
AG; Commerzbank AG; Continental AG; Daimler-Benz AG; Deutsche
Babcock AG; Deutsche Bank AG; Degussa AG; Dresdner Bank AG; Henkel
KGAA-Pfd; Hoechst AG; Karstadt AG; Kaufhof Holdings AG; Lufthansa
AG; Linde AG; Man AG; Metallgesellsch; Mannesmann AG; Preussag AG;
RWE AG; Schering AG; Siemens AG; Thyssen AG; Veba AG; Viag AG; and
Volkswagen AG.
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The median capitalization of the companies in the Index as of
December 2, 1994, was US$6.52 billion.\5\ The average market
capitalization of these companies was US$8.78 billion as of that date.
The market capitalizations of the individual companies in the Index
ranged from US$740.51 million to US$32.02 billion as of December 2,
1994. The largest component, Allianz AG Holdings, accounted for 12.5%
of the total weighting of the DAX Index, while the smallest, Deutsche
Babcock AG, accounted for 0.28% of the weight of the Index. The five
highest weighted components of the Index on that date accounted for
43.69% of the total weight of the Index. Average daily volume in the
component securities for the period from June 1994, through November
1994, ranged from a low of approximately 59,408 shares to a high of
1.04 million shares, with an average trading volume for all components
of the Index of approximately 338,449 shares per day. The Index had a
closing value of 2,038.5 on December 2, 1994.
\5\Based on the exchange rate of DM 1 = US$1.58 prevailing on
December 2, 1994.
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The DAX Index is maintained by the FSE in conjunction which the
Borsen-Zeitung (an industry newspaper). The value of the Index is
calculated every minute by the FSE from 10:30 a.m. to 1:30 p.m.
Frankfurt time (4:30 a.m. to 7:30 a.m. New York time)\6\ and is
disseminated over Reuters News Service, among others. In addition, the
composition of the DAX Index is reviewed periodically by the FSE. The
FSE will not alter the composition of the DAX Index unless a stock
fails to meet certain criteria, e.g., market capitalization and trading
volume. Replacement stocks are usually selected from a list of
substitute stocks. If possible, a replacement stock will be selected by
the FSE from the same industry as the stock that it is replacing.
\6\Telephone conversation between Claire McGrath, Managing
Director and Special Counsel, Derivative Securities, Amex, and Brad
Ritter, Senior Counsel, Office of Market Supervision, Division of
Market Regulation, Commission, on January 5, 1995.
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The Exchange represents that warrant issues on the DAX Index will
conform [[Page 5237]] to the listing guidelines under Section 106 of
the Guide, which provide, among other things, that: (1) the issuer
shall have tangible net worth of at last US$150 million and otherwise
substantially exceed size and earnings requirements in Section 101(A)
of the Guide; (2) the term of the 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 one million
warrants, together with a minimum of 400 public holders, and an
aggregate market value of at least US$4 million.
DAX Index warrants will be direct obligations of their issuer
subject to cash-settlement during their term. Index warrants will
either be exercisable throughout their life (i.e., American-style) or
exercisable only during a specified period immediately prior to the
expiration date (i.e., European-style). Upon exercise, the holder of a
warrant structured as a ``put'' will receive payment in U.S. dollars to
the extent that the DAX Index has declined below a cash settlement
value specified at the time of issuance. Conversely, upon exercise,
holders of an Index warrant structured as a ``call'' will receive
payment in U.S. dollars to the extent that the DAX Index has increased
above a cash settlement value specified at the time of issuance. Index
warrants that are ``out-of-the-money'' at the time of expiration will
expire worthless.
The Amex has adopted suitability standards applicable to
recommendations to purchasers of Index warrants and transactions in
customer accounts. Amex Rule 411, Commentary .02 applies the options
suitability standard in Amex Rule 923 to recommendations regarding
Index warrants; and the Amex requires that Index warrants be sold only
to accounts approved for the trading of options. 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 the order is entered. In addition,
the Amex, prior to the commencement of trading of Index warrants, will
distribute a circular to its membership calling attention to specific
risks associated with warrants on the DAX Index.\7\
\7\The Commission notes that the Amex will be required to submit
a draft of the circular to the Commission staff for approval prior
to distribution to members.
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In its order approving listing standards for foreign currency and
index warrants, the Commission noted that, with respect to foreign
index warrants, there should be an adequate mechanism for sharing
surveillance information with respect to an index's component
securities.\8\ In this regard, the Amex represents that it has entered
into discussions with representatives of the FSE and has reached
preliminary agreement with respect to establishing an appropriate means
to accomplish such information sharing.
\8\See Securities Exchange Act Release No. 26152 (October 3,
1988), 53 FR 39832 (October 12, 1988).
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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 objections
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, 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
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 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, N.W., Washington, D.C. 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, N.W.,
Washington, D.C. 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-94-55 and should be
submitted by February 16, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
\9\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-1980 Filed 1-25-95; 8:45 am]
BILLING CODE 8010-01-M