[Federal Register Volume 60, Number 40 (Wednesday, March 1, 1995)]
[Notices]
[Pages 11159-11161]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-4933]



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

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35409; File No. SR-Phlx-95-12]
February 22, 1995.


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by Philadelphia Stock Exchange, Inc. Relating to Adoption of 
Listing Standards Applicable to Options on Securities Issued in Certain 
Corporate Restructuring Transactions

    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. Sec. 78s(b)(1), notice is hereby given that on 
February 13, 1995, the Philadelphia Stock Exchange, Inc. (``Phlx'' 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 Michell R. Weisbaum, Associate General 
Counsel, Phlx, to Beth Stekler, Attorney, Division of Market 
Regulation, SEC, dated February 21, 1995 (``Amendment No. 1'').
---------------------------------------------------------------------------

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

    The Phlx, pursuant to Rule 19b-4 of the Act, proposes to amend 
Exchange Rule 1009 in order to adopt listing standards applicable to 
options on securities issued in certain corporate restructuring 
transactions.\2\ The text of the proposed rule change is available at 
the Commission.

    \2\This filing withdraws and replaces File No. SR-Phlx-94-43. 
See letter from Michelle R. Weisbaum, Associate General Counsel, 
Phlx, to Michael A. Walinskas, Branch Chief, Division of Market 
Regulation, SEC, dated February 17, 1995.
---------------------------------------------------------------------------

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 Items 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 Phlx proposes to amend Exchange Rule 1009 in order 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 rules 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 Exchange Rule 1009, Commentary 
[[Page 11160]] .01(3), trading volume in an underlying security must be 
at least 2,400,000 shares during the preceding twelve months (``volume 
test''). Further, under Exchange Rule 1009, Commentary .01(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 
(``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 and price tests by 
reference to the trading volume and market price history of an 
outstanding equity security (``Old security'') previously issued by the 
issuer (or an affiliate thereof) of the New security. 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 Old security; or (b) the aggregate market value of 
the New security is not less than $500 million,\3\ then the Exchange 
would be permitted to determine whether a New security satisfies the 
volume and price tests by reference to the training volume and market 
price history of the Old security. Reference may be made to the trading 
volume and market price history of the Old security only for trading 
days occurring prior to the ex-date for the transaction in which the 
New security is issued\4\ 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 Old security 
for this purpose for any period of time, then reference must be made to 
both such criteria in respect of the Old security for that period.

    \3\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 market 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 Old 
security or the business represented by the Old 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 attributed 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 
Old security or the business represented by the Old 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 revenue 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 least five hundred million dollars ($500,000,000).
    \4\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.
---------------------------------------------------------------------------

    Further, should the New security be listed on an exchange or in an 
automatic quotation system that has an initial listing requirement 
equivalent to the requirement of paragraph (2) of Commentary .01 under 
Exchange Rule 1009 (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 set forth in Exchange Rule 1009, 
Commentary .01(1) (sufficient public float) and .01(2) (minimum number 
of security holders). 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 paragraphs (1) and 
(2) will, in fact, not be satisfied.
    The proposed rule change also would revise one of the Exchange's 
guidelines relating to the withdrawal of approval of underlying 
securities. Currently, under Exchange Rule 1010, Commentary .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 (``maintenance volume test'') or, under Commentary .01(4), if 
the market price of the underlying security closed below $5 for a 
majority of the business days during the preceding six months (``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(7) to Exchange Rule 1010 to provide that the 
Exchange may determine whether a New security satisfies the maintenance 
volume and market price tests, as well as the comparable tests set 
forth in Commentary .05 under Exchange Rule 1010, by reference to the 
trading volume and price history of the Old security prior to the first 
day of trading in the New security, including ``when issued'' trading.
2. Statutory Basis
    The proposed rule change is consistent with Section 6 of the Act in 
general and, in particular, with Section 6(b)(5) in that it is designed 
to promote just and equitable principles of trade, to prevent 
fraudulent and manipulative acts and practices, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market, as well as to protect investors 
and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Phlx 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.

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. [[Page 11161]] 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 
Phlx. All submissions should refer to File No. SR-Phlx-95-12 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. 95-4933 Filed 2-28-95; 8:45 am]
BILLING CODE 8010-01-M