[Federal Register Volume 60, Number 116 (Friday, June 16, 1995)]
[Notices]
[Pages 31747-31749]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14794]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35835; File No. SR-Amex-95-21]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange, Inc., Relating to the Listing 
and Trading of Indexed Term Notes.

June 9, 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 May 31, 
1995, 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 will be based in whole or in part on 
changes in the value of ten equity securities (``Index''). 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 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.\1\ 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 a static index composed of ten actively-traded equity 
securities. The securities to be included in the Index will be those 
selected by the issuer of the Notes, Lehman Brothers, Inc. 
(``Lehman''), on or about July 1, 1995, as their selections of ten 
securities that they believe will outperform the stock market during 
the succeeding twelve months.\2\ The securities in the Index will be 
selected by Lehman based on its market research and investment 
strategy, and will be announced at or as close as possible to the time 
of the offering of the Notes.

    \1\See Securities Exchange Act Release No. 27753 (March 1, 
1990), 55 FR 8626 (March 8, 1990).
    \2\Lehman refers to these ten securities as the ``Lehman 10 
Uncommon Values in Common Stocks.'' Lehman has generated similar 
lists on an annual basis for many years. Telephone conversation 
between Michael Bickford, Vice President, Capital Markets Group, 
Amex, and Brad Ritter, Senior Counsel, Office of Market Supervision, 
Division of Market Regulation, Commission, on June 7, 1995.
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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 approximately one year 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. In addition, the 
Notes may feature a ``cap'' on the maximum amount to be paid either 
periodically or at maturity. The Notes, however, will provide that at 
maturity, holders will receive not less than 90% of the initial issue 
price. Consistent with other structured products listed by the Amex, 
the Amex represents that prior to the commencement of listing and 
trading of the Notes, the Exchange will distribute a circular to its 
membership providing guidance with regard to member firm compliance 
responsibilities, including appropriate suitability criteria and/or 
guidelines.

    \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 $4 million; and 
(4) a term of at least one year. Additionally, the issuer of the 
Notes, Lehman, 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.
Eligibility Standards for Index Components
    The Exchange represents that each of the components in the Index 
will meet the following criteria at the time of the issuance of the 
Notes: (1) a minimum market capitalization of $75 million, except that 
one component 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 
one of the component securities may have a trading volume in each of 
the six months prior to the offering of the Notes of not less than 
500,000 shares; (3) at least nine of the component securities will meet 
the then current criteria for standardized options trading set forth in 
Exchange Rule 915;\4\ and (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 though Nasdaq.\5\

    \4\For these purposes, the Commission notes that in addition to 
the other requirements in Amex Rule 915, any security issued by a 
non-U.S. company that is included in the Index must also satisfy the 
requirements set forth in Amex Rule 915, Commentary .03. A non-U.S. 
company is defined as any company formed or incorporated outside of 
the United States.
    \5\The Commission notes that all components of the Index will be 
required to be subject to last sale reporting pursuant to Rule 
11Aa3-1 of the Act.
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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 $10,000 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 time that the Notes are priced for 
issuance.
    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 

[[Page 31749]]
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 
shareholders, the expropriation or nationalization of a foreign issuer, 
or the imposition of certain foreign taxes on shareholders of a foreign 
issuer. Shares of a component security may be replaced (or 
supplemented) with other securities under certain circumstances, such 
as the conversion of a component security 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.\6\ In all cases, the divisor 
will be adjusted, if necessary, to ensure continuity of the value of 
the Index.

    \6\Lehman 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 Ampex 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, 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, 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-95-21 and should be 
submitted by July 7, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\

    \7\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-14794 Filed 6-15-95; 8:45 am]
BILLING CODE 8010-01-M