[Federal Register Volume 60, Number 40 (Wednesday, March 1, 1995)]
[Notices]
[Pages 11158-11159]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-4932]
[[Page 11158]]
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35410; File No. SR-PSE-95-04]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by Pacific Stock Exchange, Inc. Relating to Earlier Listing of
Options on Securities Issued by Companies in Certain Corporate
Restructuring Transactions
February 22, 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 February
15, 1995, the Pacific Stock Exchange, Inc. (``PSE'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'' or
``SEC'') the proposed rule change as described in Items I, II and III
below, which Items have been prepared by the self-regulatory
organization. On February 21, 1995, the Exchange submitted to the
Commission Amendment No. 1 to the proposed rule change in order to make
certain technical corrections to the text of the proposal.\1\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
\1\See letter from Michael D. Pierson, Senior Attorney, Market
Regulation, PSE, to Beth A. Stekler, Attorney, Division of Market
Regulation, SEC, dated February 17, 1995 (``Amendment No. 1'').
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its rules to permit the earlier
listing of options on securities issued by companies in connection with
certain corporate restructuring transactions. The text of the proposed
rule change is available at the Office of the Secretary, PSE, 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 self-regulatory organization
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 self-regulatory organization
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
1. Purpose
The Exchange proposes to amend its rules to permit the earlier
listing of options on securities issued by companies in connection with
certain corporate restructuring transactions (``New Securities'').
Currently, certain of the Exchange's rule preclude the listing of
options on any security until that security has been actively traded at
or above a specific price level for a certain period of time. For
example, under PSE Rule 3.6(a)(3), trading volume in an underlying
security must be at least 2,400,000 shares during the preceding twelve
months (the ``Volume Test''). Further, under PSE Rule 3.6(a)(4), the
market price for an underlying security must be at least $7.50 for the
majority of business days during the three calendar month period
preceding the date the security is selected as an underlying security
(the ``Price Test'').
The proposed rule change would facilitate the earlier listing of
options on New Securities by permitting the Exchange to determine
whether a New Security satisfies the Volume Test and Price Test by
reference to the trading volume and market price history of an
outstanding equity security (the ``Original Security'') previously
issued by the issuer of the New Security (or an affiliate thereof).
Specifically, if (a) the aggregate market value, assets or revenue
attributable to a New Security is at least a stated percentage of the
same measure attributable to the Original Security and if a stated
minimum value of assets or revenues represented by the New Security, as
applicable, is satisfied or (b) the aggregate market value of the New
Security is not less than $500 million,\2\ then the Exchange would be
permitted to determine whether a New Security satisfied the Volume Test
and Price Test by reference to the trading volume and market price
history of the Original Security. Reference may be made to the trading
volume and market price history of the Original Security only for
trading days occurring prior to the ex-date for the transaction in
which the New Security is issued\3\ and prior to any trading day for
which these tests are determined to be satisfied by reference to the
trading volume and market price history of the New Security. If
reference is made to either the trading volume or market price history
of the Original Security for this purpose for any period of time, then
reference must be made to both such criteria in respect of the Original
Security for that period.
\2\The proposed rule change would apply to a New Security if at
least one of the following conditions is met:
(1) Any one or more of (A) the aggregate market value of the New
Security, (B) the aggregate book value of the assets attributed to
the business represented by the New Security, or (C) the revenues
attributed to the business represented by the New Security are at
least 25% of the same measure determined with respect to the
Original Security or the business represented by the Original
Security, as applicable, calculated in a comparable manner on a
basis that reflects the inclusion of the business represented by the
New Security, provided that in the case of the qualification of a
New Security under clause (B), the aggregate book value of the
assets attributed to the business represented by the New Security is
not less than $50 million, and in the case of the qualification of a
New Security under clause (C), the revenues to the business
represented by the New Security are not less than $50 million;
(2) Any one or more of (A) the aggregate market value of the New
Security, (B) the aggregate book value of the assets attributed to
the business represented by the New Security, or (C) the revenues
attributed to the business represented by the New Security are at
least 33 1/3% of the same measure determined with respect to the
Original Security or the business represented by the Original
Security, as applicable, calculated in a comparable manner on a
basis that reflects the exclusion of the business represented by the
New Security, provided that in the case of the qualification of a
New Security under clause (B), the aggregate book value of the
assets attributed to the business represented by the New Security is
not less than $50 million, and in the case of the qualification of a
New Security under clause (C), the revenues attributed to the
business represented by the New Security are not less than $50
million; or
(3) The aggregate market value represented by the New Security
is at lease five hundred million dollars ($500,000,000).
\3\Under the proposed rule change, options contracts may not
initially be listed for trading in respect of a New Security until
such time as shares of the New Security are issued and outstanding
and are the subject of trading that is not on a ``when issued''
basis or in any other way contingent on the issuance or distribution
of the shares.
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In addition, if the New Security is to be listed on an exchange or
in an automatic quotation system that has an initial listing
requirement equivalent to the requirement of PSE Rule 3.6(a)(2) (number
of shareholders must be at least 2,000), that requirement would be
deemed to be satisfied. Finally, if at least 40 million shares of a New
Security will be outstanding in a restructuring, the Exchange may
assume that the New Security will satisfy the listing criteria of both
PSE Rule 3.6(a)(1) (sufficient public float) and PSE Rule 3.6(a)(2).
Before relying on either of the assumptions described above, the
Exchange must make a reasonable investigation as to the number of
shareholders and public float of the New Security and must not have
determined that the requirements of PSE Rules 3.6(a)(1) and 3.6(a)(2)
will, in fact, not be satisfied.
[[Page 11159]]
The proposed rule change also would revise one of the Exchange's
guidelines relating to the withdrawal of approval of underlying
securities. Currently, under PSE Rule 3.7, Commentaries .01.2 and
.01.3, an underlying security will not be deemed to satisfy the
Exchange's listing criteria if the trading volume of the underlying
security in all markets was less than 1,800,000 shares in the preceding
twelve months (the ``Maintenance Volume Test'') or if the market price
of the underlying security closed below $5 on a majority of business
days during the preceding six months (the ``Market Price Test'').
Because New Securities have limited trading history, they may be unable
to satisfy the Maintenance Volume Test or the Market Price Test at the
time options on such securities are first listed for trading on the
Exchange. Accordingly, the proposed rule change would add a new
Commentary .01.4 to PSE Rule 3.7 to provide that the Exchange may
determine whether a New Security satisfies the Maintenance Volume and
Market Price Tests set forth in Commentaries .01.2 and .01.3 of Rule
3.7, as well as the comparable tests set forth in Rule 3.7, Commentary
.04, by reference to the trading volume and price history of the
Original Security prior to commencement of trading in the New Security,
including ``when issued'' trading.
2. Statutory Basis
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, by removing impediments to a free and open market in
options covering securities issued by companies engaged in corporate
restructuring transactions.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange 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 publication of this notice in the Federal
Register or within such other 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 the 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. Sec. 552, will be available for inspection and copying at
the Commission's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such filing will also be available
for inspection and copying at the principal office of the PSE. All
submissions should refer to File No. SR-PSE-95-04 and should be
submitted by March 22, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-4932 Filed 2-28-95; 8:45 am]
BILLING CODE 8010-01-M