[Federal Register Volume 60, Number 149 (Thursday, August 3, 1995)]
[Notices]
[Pages 39774-39778]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19161]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-36029; File No. SR-NYSE-95-07]


Self-Regulatory Organization; Filing and Order Granting 
Accelerated Approval of Proposed Rule Change and Amendment No. 1 to 
Proposed Rule Change by New York Stock Exchange, Inc., Relating to 
Listing Standards for Options on Securities Issued in Certain Corporate 
Restructuring Transactions

July 27, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 1, 1995, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. On July 18, 
1995, the Exchange submitted to the Commission Amendment No. 1 to the 
proposed rule change.\3\ The Commission is approving the proposal, as 
amended, and soliciting comments from interested persons.

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter from James E. Buck, Senior Vice President, NYSE, 
to Michael Walinskas, Branch Chief, Office of Market Supervision 
(``OMS''), Division of Market Regulation (``Market Regulation''), 
Commission, dated July 18, 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 initial listing standards for 
options as set forth in NYSE Rule 715 in order to permit the listing of 
options on securities issued by public companies in connection with 
corporate spin-offs, reorganizations, recapitalizations, restructurings 
and similar corporate transactions at an earlier time than is presently 
the case.\4\ Similarly, NYSE proposes to amend its options maintenance 
standards as set forth in Rule 716 in order to give Restructure 
Securities greater opportunity to meet those standards during the first 
months after issuance. The text of the proposed rule change is 
available at the Office of the Secretary, the Exchange, and at the 
Commission.

    \4\ The Commission notes that substantively identical proposals 
by the other U.S. options exchanges have been recently approved. See 
Securities Exchange Act Release No. 36020 (July 24, 1995) (File Nos. 
SR-CBOE-95-11; SR-PSE-95-04; SR-Phlx-95-12; and SR-Amex-95-07).
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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. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
section (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

    The options exchanges currently maintain uniform standards 
regarding approval of underlying securities for options trading.\5\ 
Specifically, to be options eligible, a security shall meet the 
following guidelines: (1) Trading volume in all markets of at least 2.4 
million shares in the preceding twelve months (``Volume Test''); (2) 
market price per share of at least $7.50 for the majority of business 
days during the three calendar month period preceding the date of 
selection (``Price Test''); (3) a minimum of 7 million shares that are 
owned by persons other than those required to report their stock 
holdings under section 16(a) of the Act (``Share Requirement''); and 
(4) a minimum of 2,000 holders (``Number of Shareholder 
Requirement'').\6\ The Exchange must determine that a security 
satisfies the above requirements, as of the date it is selected for 
options trading (``selection date''), before the exchange may certify 
the listing to the Options Clearing Corporation (``OCC''). Depending on 
interest from other markets, the exchange may begin options trading 
three or five business days after the selection date.

    \5\ See NYSE Rule 715; Amex Rule 915; CBOE Rule 5.3; PSE Rule 
3.6; and Phlx Rule 1009.
    \6\ This proposal addresses price, volume, public ownership, and 
holder requirements specifically. For a Restructure Security to meet 
initial listing requirements, however, it must additionally comply 
with all requirements set forth by the Exchange in its options 
eligibility rules. For example, the security must be registered, and 
listed on a national securities exchange, or traded through the 
facilities of a national securities association and reported as a 
``national market system'' (``NMS'') security as set forth in Rule 
11Aa3-1 under the Act, and the issuer must be in compliance with any 
applicable requirements of the Act. See supra note 5.
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    The options exchanges have adopted corresponding criteria for 
withdrawal of approval of underlying securities.\7\ A security 
previously approved for options transactions shall be deemed not to 
meet the guidelines for continued listing if (1) trading volume in all 
markets is less than 1.8 million shares in the preceding twelve months 
(``Maintenance Volume Test''); (2) market price per share closes below 
$5.00 on a majority of business days during the preceding six calendar 
months (``Maintenance Price Test''); \8\ (3) fewer than 6.3 million 
shares owned by persons not required to report their stock holdings 
under section 16(a) of the Act (``Maintenance Share Requirement''); or 
(4) there are fewer than 1,600 holders (``Maintenance Number of 
Shareholder Requirement'').\9\

    \7\ See NYSE Rule 716; Amex Rule 916; CBOE Rule 5.4; PSE Rule 
3.7; and Phlx Rule 1010.
    \8\ Additional criteria permits the underlying security under 
certain circumstances to trade as low as $3.00 for a temporary 
period of time. See Id.
    \9\ This proposal addresses maintenance criteria for market 
price and trading volume specifically. For a Restructure Security to 
meet maintenance requirements for an underlying security subject to 
options trading, however, it must additionally comply with all 
requirements set forth by the Exchange in its options eligibility 
rules. See supra note 7.
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    The Exchange proposes to amend NYSE Rule 715 to permit the 
expedited listing of standardized options in certain restructuring 
transactions. The proposal will apply to securities (``Restructure 
Security'') issued by a public company to existing shareholders, with 
existing publicly traded shares subject to options trading, in 
connection with certain ``restructuring transactions.'' \10\

    \10\ The proposal defines a ``restructuring transaction'' as a 
spin-off, reorganization, recapitalization, restructuring or similar 
corporate transaction.
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    Under current standards, the Exchange is generally precluded from 
listing eligible options on newly issued securities for at least three 
months, given that the guidelines require three months of price history 
to determine if the underlying security meets the Price Test. 
Additionally, the Exchange may only list eligible options on newly 
issued securities, if the underlying security meets the Volume Test 
which requires trading volume in all markets of at least 2.4 million 
shares in the preceding twelve months. The proposed rule change, 
however, would facilitate the earlier listing of options on a 
Restructure Security by permitting the Exchange to determine whether 
the 

[[Page 39775]]
Restructure Security satisfies the trading volume and market price 
criteria by reference to the trading volume and market price history of 
an outstanding equity security (``Original Equity Security'') 
previously issued by the issuer of the Restructure Security, or 
affiliate thereof. In addition, the Exchange proposes specific criteria 
for evaluating the distribution of shares of a Restructure Security for 
the proposes of meeting the Share and Number of Shareholder 
Requirements. To the extent the initial options listing requirements 
are satisfied based upon these ``lookback'' provisions of the Original 
Equity Security and the other provisions of the proposal, then the 
Exchange will permit options trading to begin on the ex-date for the 
transaction.\11\

    \11\ The Exchange shall not list for trading option contracts 
that overlie a Restructure Security until the ex-date. The ex-date 
occurs at such time when shares of the Restructure Security become 
issued and outstanding and are not the subject of trading on a 
``when issued'' basis or on another basis that is contingent upon 
the issuance or distribution of shares.
    Before the Exchange may invoke this proposed ``lookback'' provision 
and utilize the volume and price of the Original Equity Security for 
purposes of meeting the options eligibility criteria for the 
Restructure Security, the Restructure Security must first satisfy one 
of four alternate conditions. The first three alternate conditions are 
intended to ensure that the trading volume and market price history of 
the Original Equity Security represent a reasonable surrogate for 
determining the likely future trading volume and price data of the 
Restructure Security. Under these conditions either, (a) the aggregate 
market value of the Restructure Security, (b) the aggregate book value 
of the assets attributed to the business represented by the Restructure 
Security (minimum $50 million) or (c) the revenues attributed to the 
business represented by the Restructure Security (minimum $50 million) 
must exceed one of two stated percentages (``Relevant Percentages'') of 
the same measure for the Original Equity Security.\12\ The Relevant 
Percentages will be 25% if the applicable measure determined with 
respect of the Original Equity Security represents an interest in the 
combined enterprise prior to the restructuring transaction, and 33\1/
3\% if the applicable measure determined with respect of the Original 
Equity Security represents an interest in the remainder of the 
enterprise after the restructuring transaction. The fourth alternate 
condition is that the aggregate market value represented by the 
Restructure Security be at least $500 million.

    \12\ Aggregate market values will be based on share prices that 
are either (a) the Restructure Security's closing prices in the 
primary market on the last business day preceding the selection date 
or (b) the Restructure Security's opening prices in the primary 
market on the selection date. The aggregate market value of the 
Restructure Security may be determined from ``when issued'' prices, 
if available.
    Asset values and revenues will be derived from the later of (a) 
the most recent annual financial statements or (b) the most recent 
interim financial statements of the respective issuers covering a 
period of not less than three months. Such financial statements may 
be audited or unaudited and may be pro forma.
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    If any of the four alternate conditions set forth above is 
satisfied, a Restructure Security will qualify for the ``lookback'' 
provision. Under the ``lookback'' provision, a Restructure Security may 
be eligible for options trading immediately upon its issuance provided 
the following requirements are satisfied. First, the Restructure 
Security must satisfy the options Volume and Price Tests. The Exchange 
may be permitted to determine whether a Restructure Security satisfies 
the Volume and Price Tests by reference to the trading volume and 
market price history of the Original Equity Security. Under the 
proposed rule change, the trading volume and market price history of 
the Original Equity Security that occurs prior to the restructuring ex-
date can be used for these calculations (emphasis added). Volume and 
price data may be derived from ``when issued'' trading in the 
Restructure Security. However, once the Exchange first uses ``when 
issued'' volume or price for the Restructure Security to satisfy the 
relevant guidelines, it may not use the Original Equity Security for 
that purpose on any subsequent trading day. In addition, both the 
trading volume and market price history of the Original Equity Security 
must be used, if either is so used.
    Additionally, the Exchange must determine whether a Restructure 
Security will satisfy the Share and Number of Shareholder Requirements. 
This determination will either be based upon facts and circumstances 
that the Exchange expects to exist on the intended date for listing the 
option, or based on assumptions that are permitted under the proposal. 
Because the shares of the Restructure Security are to be issued or 
distributed to the shareholders of the issuer of the Original Equity 
Security, the Exchange proposes that these requirements may be 
satisfied based upon the Exchange's knowledge of the existing number of 
outstanding shares and holders of the Original Equity Security.
    The Exchange further proposes that if a Restructure Security is to 
be listed on an exchange or automatic quotation system that has, and 
subjects the Restructure Security to, an initial listing requirement of 
no less than 2,000 holders, then the Exchange may assume that the 
Number of Shareholders Requirement will be satisfied. Similarly, if a 
Restructure Security is to be listed on an exchange or in an automatic 
quotation system that has, and subjects the Restructure Security to, an 
initial listing requirement of no less than 7 million shares, held by 
persons not required to report their stock holdings under section 16(a) 
of the Act, then the Exchange may assume that the Share Requirement 
will be satisfied. Additionally, if the Exchange determines that at 
least 40 million shares of a Restructure Security will be issued and 
outstanding in a restructuring transaction, then it may assume that the 
Restructure Security will satisfy both the Share and the Number of 
Shareholder Requirements.
    The Exchange, however, may not rely on the above assumptions if, 
after reasonable investigation, it determines that either the Share or 
Number of Shareholder Requirement, in fact, will not be satisfied on 
the intended date for listing the option. In addition, pursuant to the 
proposal, other exchanges will have the opportunity to challenge the 
certification by demonstrating that the Restructure Security will not 
meet the initial listing criteria with respect to shares and number of 
shareholders.
    Finally, the proposal will adopt a similar ``lookback'' provision 
for the Maintenance Volume Test and the Maintenance Price Test. 
Specifically, for purposes of satisfying these requirements, the 
trading volume and market price history of the Original Equity 
Security, as well as any ``when issued'' trading in the Restructure 
Security, can be used for such calculations, provided that they are 
only used for determining price and volume history for the period prior 
to commencement of trading in the Restructure Security.
    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 remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest.
(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.

[[Page 39776]]


(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

    The Exchange requests accelerated effectiveness of the proposed 
rule change pursuant to section 19(b)(2) of the Act.
    The Commission believes that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to national securities exchanges, particularly, 
section 6(b)(5) of the Act,\13\ in that the rules of an exchange be 
designed to promote just and equitable principles of trade, to prevent 
fraudulent and manipulative acts, and, in general, to protect investors 
and the public interest.

    \13\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that it is necessary for securities to meet 
certain minimum standards regarding both the quality of the issuer and 
the quality of the market for a particular security to become options 
eligible. These standards are imposed to ensure that those issuers upon 
whose securities options are to be traded are financially sound 
companies whose trading volume, market price, number of shareholders, 
and number of shares owned by persons not required to report their 
stock holdings under section 16(a) of the Act are substantial enough to 
ensure adequate depth and liquidity to sustain options trading that is 
not readily susceptible to manipulation. The Commission also recognizes 
that under current equity options listing criteria, existing 
shareholders of an issuer that becomes involved in a restructuring 
transaction, may be precluded for a significant period from employing 
an adequate hedging strategy involving options on any newly acquired 
Restructure Security received in connection with such transaction.
    Accordingly, to determine whether the earlier listing of options 
overlying a Restructure Security is reasonable, the Commission must 
balance the benefits of providing adequate hedging strategies to 
shareholders of the issuer of the Restructure Security, and the risks 
of approving certain securities for options trading before such 
securities actually satisfy the options eligibility criteria, which 
currently, for newly issued securities, can not occur, at the very 
least, prior to the three months after the security begins trading. The 
Commission believes that the proposed limited exception to established 
equity options listing procedures, as proposed, strikes such a 
reasonable balance.
    As discussed in more detail below, the Commission believes that the 
conditions of the new rule will help to ensure that only those 
securities that are most likely to have adequate depth and liquidity 
will be eligible for options trading prior to the establishment of a 
recognized trading history. Additionally, by facilitating the earlier 
listing of options on a Restructure Security, the Commission believes 
that investors formerly holding the Original Equity Security, upon 
which options are currently traded, should be able to better hedge the 
risk of their newly acquired stock position in the Restructure 
Security.\14\

    \14\ Although not specifically addressed by the proposal, the 
Commission understands that the application of the proposal is 
limited to instances where options are listed on the Original Equity 
Security.
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    Despite the benefits of the proposal, the Commission believes that 
the proposal should only apply to restructuring transactions that 
involve financially sound and sufficiently large companies. The 
Commission believes that the Exchange has addressed this concern by 
adding conditions to the proposal that require the Restructure Security 
to either satisfy certain comparative tests (comparing the Restructure 
Security, or its related business with that of the Original Equity 
Security, or its related business),\15\ or meet a very high aggregate 
market value standard ($500 million).

    \15\ See supra note 12 and accompanying text.
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    The Commission believes that if one of the comparative tests is 
satisfied, the Restructure Security should adequately resemble the 
Original Equity Security to qualify for the ``lookback'' provision. 
Under the ``lookback'' provision, a Restructure Security will be able 
to satisfy the Volume and Price Tests if the trading volume and market 
price history of the Restructure Security, together with the trading 
volume and market price history of the Original Equity Security 
occurring prior to the ex-date, meet the existing related requirements. 
Moreover, the Commission believes that, given the limited scope of the 
proposal, it is appropriate to conclude that a Restructure Security 
with an aggregate market value of at least $500 million appropriately 
qualifies for the ``lookback'' provision.
    The Commission also believes that it is appropriate for the 
Exchange to count ``when issued'' trading in the Restructure Security 
when determining if the Restructure Security will satisfy the Volume 
and Price Tests set forth in the initial options listing requirements. 
However, once the Exchange begins to use ``when issued'' volume or 
price history for the Restructure Security to satisfy the Volume or 
Price Tests, it may not use the Original Equity Security for such 
purposes on any subsequent trading day. In addition, both the trading 
volume and market price history of the Original Equity Security must be 
used, if either is so used. For example, if in order to satisfy the 
Volume Test for a Restructure Security for which the ex-date is 
expected to be February 1, 1996, an exchange may elect to base its 
determination on the trading volume of the Original Equity Security 
from February 1, 1995 through December 27, 1995, and then utilize the 
trading volume in the when-issued market for the Restructure Security 
from December 28, 1995 through January 31, 1996, in determining whether 
options covering the Restructure Security may be listed on the February 
1 ex-date. Under this example, after December 28, 1995, only when-
issued trading data for the Restructure Security may be used in 
determining whether it meets the Volume and Price Tests. An exchange, 
however, would be permitted to use the volume and price history of the 
Original Equity Security throughout the entire period prior to February 
1, 1996, provided that it did not rely on any when-issued trading data 
during that period.
    The Commission notes that the Exchange shall not use trading 
history relating to the Original Equity Security after the exdate to 
meet the initial options listing requirements for the option contracts 
overlying the Restructure Security. Additionally, the condition that 
option contracts overlying a Restructure Security shall not be 
initially listed for trading until such time as shares of the 
Restructure 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 will ensure 
that options will only be traded on a Restructure Security when it is 
certain the security is actually issued and outstanding.
    In addition to satisfying the Volume and Price Tests, a Restructure 
Security must also meet certain distribution requirements before the 
Exchange can deem such security to be options eligible. Specifically, 
the Restructure Security must have 2,000 holders, and 7 million shares 
must be owned by 

[[Page 39777]]
persons not required to report their stock holdings under Section 16(a) 
of the Act to be options eligible. Under the most typical restructuring 
transaction, a spin-off to existing shareholders of the issuer of the 
Original Equity Security, the Exchange should be able to determine from 
publicly available information or otherwise reasonably deduce whether 
the Restructure Security will satisfy the 2,000 shareholder requirement 
and the 7 million share requirement. As an example, if Issuer A, having 
10 million outstanding shares of common stock owned by persons not 
required to report their stock holdings under section 16(a) of the Act, 
and 5,000 shareholders, intends to effect a spin-off of a subsidiary, 
whereby one share of the subsidiary is issued to existing shareholders 
of Issuer A for each currently held outstanding share of Issuer A, 
immediately following the spin-off the former subsidiary will have 10 
million shares held by persons not required to report their stock 
holdings under section 16(a) of the Act, and 5,000 shareholders. As a 
result, the former subsidiary will satisfy both the Share and Number of 
Shareholder Requirements.
    As an alternative to the above, the proposal provides that the 
Exchange may make certain limited assumptions based on facts and 
circumstances that the Exchange expects to exist on the intended date 
for listing the options in order to determine the Share and Number of 
Shareholder Requirements. First, if a Restructure Security is to be 
listed on an exchange or in an automatic quotation system that has, and 
applies to the Restructure Security, an initial listing requirement 
that the issuer have no less 2,000 shareholders, the Commission 
believes that it is reasonable for the Exchange to assume that its 
comparable option listing requirement will be satisfied. Second, if a 
Restructure Security is to be listed on an exchange or in an automatic 
quotation system that has, and applies to the Restructure Security, an 
initial listing requirement of no less than 7 million shares owned by 
persons not required to report their stockholdings under section 16(a) 
of the Act, the Commission believes that it is reasonable for the 
Exchange to assume that its comparable option listing requirement will 
be satisfied.
    The Commission notes that currently no exchange or automatic 
quotation system has a share requirement for initial stock listing 
purposes that is as stringent as those required under the options 
eligibility requirements. Moreover, a stock exchange may now be able to 
list stocks pursuant to alternate listing standards. For example, the 
Commission has recently approved alternate listing standards for 
companies listed on the NYSE, including, among other things, the 
distribution of shares.\16\ Under these alternate listing standards, 
the NYSE is currently allowed to list certain companies with 500 
shareholders that meet heightened requirements in other areas in lieu 
of its 2,200 total shareholder requirement. Therefore, the Exchange 
should be careful to precisely determine which listing standards are 
being applied to the listing of the Restructure Security prior to 
making a determination as to whether the Restructure Security meets the 
corresponding options listing criteria.

    \16\ See Paragraph 102.01 of the NYSE's Listed Company Manual. 
See also Securities Exchange Act Release No. 35571 (April 5, 1995), 
60 FR 18649 (April 12, 1995) (order approving proposed rule change 
relating to domestic listing standards).
    Additionally, the proposal provides that if at least 40 million 
shares of a Restructure Security will be issued and outstanding in a 
restructuring transaction, the Exchange may assume that the Restructive 
Security will satisfy both the Share and Number of Shareholder 
Requirements. The Commission believes this is appropriate because it 
appears unlikely that a Restructure Security with at least 40 million 
issued and outstanding shares, will have fewer than 2,000 holders or 
less than 7 million shares owned by persons not required to report 
their stock holdings under section 16(a) of the Act.
    The Commission believes that concerns associated with the ability 
of the Exchange to make important listing decisions based on 
assumptions rather than confirmed facts are alleviated by the crucial 
provision contained in the proposal that the Exchange may not rely on 
the above assumptions if, after a reasonable investigation, it 
determines that either the Share or Number of Shareholder Requirements, 
in fact, will not be satisfied on the intended date for listing the 
option. At the very least, the Exchange should investigate the basis 
for its assumptions regarding the ownership of shares and number of 
shareholders just prior to selecting the option and just prior to 
trading the option, utilizing a worst case analysis in making its 
assumptions that the Restructure Security will meet these listing 
standards upon completion of the restructuring transaction.\17\

    \17\ See e.g., Letter from Michael Meyer, Schiff Hardin & Waite, 
to Sharon Lawson, Assistant Director, OMS, Market Regulation, dated 
January 25, 1995 (File No. SR-CBOE-95-11).
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    In addition, other exchanges will continue to have the opportunity 
to challenge the certification by demonstrating that the Restructure 
Security will not meet the initial listing criteria with respect to the 
Share and Number of Shareholder Requirements. The Commission believes 
that this provision provides an important check and should help to 
ensure that no unqualified securities are listed for options trading.
    The Commission also believes that it is appropriate for the 
Exchange to apply the ``lookback'' provision, to determine if a 
Restructure Security will satisfy the Maintenance Volume and Price 
Tests. The Commission believes that it is appropriate to use the 
trading volume and market price history of the Original Equity 
Security, as well as any ``when issued'' trading in the Restructure 
Security for such calculations, provided that they are only used for 
determining price and volume history for the period prior to 
commencement of trading in the Restructure Security.
    The commission notes that because the Maintenance Volume and Price 
Tests are calculated on a rolling forward basis, ``when issued'' 
trading history for the Restructure Security or trading history for the 
Original Equity Security prior to the ex-date may be used for 
maintenance calculations for no more than twelve months after the ex-
date for the Restructure Security with respect to the Maintenance 
Volume Test, and for no more than six months after the ex-date for the 
Restructure Security with respect to the Maintenance Price Test. For 
example, if in order to satisfy the Maintenance Volume Test for a 
Restructure Security on November 1, 1995, for which the ex-date is 
September 1, 1995, an exchange may elect to base its determination on 
the trading volume of the Original Equity Security from November 1, 
1994 through August 1, 1995, the trading volume in the when-issued 
market for the Restructure Security from August 2, 1995 through August 
31, 1995, but must use the trading volume in the Restructure Security 
from September 1, 1995 through November 1, 1995. Similarly, in order to 
satisfy the Maintenance Price Test for the same Restructure Security on 
November 1, 1995, an exchange may elect to base its determination on 
the trading price of the Original Equity Security from August 1, 1995 
through August 15, 1995, the trading price in the when-issued market 
for the Restructure Security from August 16, 1995 through August 31, 
1995, but must use the trading price in the Restructure Security 

[[Page 39778]]
from September 1, 1995 through November 1, 1995.
    The Commission notes that the Exchange's proposal only permits it 
to avail itself of the accelerated listing procedures for a traditional 
restructuring transaction that is limited to the distribution of shares 
to existing shareholders of the issuer of the Original Equity Security. 
Accordingly, the Commission notes that this proposal does not address 
or apply to restructuring transactions that involve a sale of such 
securities to the general public, including, but not limited to, 
initial public offerings or secondary offerings. The Commission is 
approving the current proposal based, in part, on the need for 
investors and other market participants with combined stock/option 
positions in an Original Equity Security to be able to maintain their 
positions immediately following a restructuring transaction. Otherwise, 
holders of the Original Equity Security might be temporarily prevented 
(until the Restructure Security independently satisfies the options 
listing criteria) from adequately hedging their involuntarily received 
new positions in the Restructure Security.
    The Commission also notes that this proposal does not address or 
apply to restructuring transactions that involve a sale of such 
securities in a rights offering to existing holders of the Original 
Equity Security. The Commission believes that the contingencies in the 
terms of such an offering make it too difficult to determine whether 
the number of subscribers for such an offering would be adequate to 
meet the Share and Number of Shareholder Requirements and therefore 
such an offering does not justify the immediate availability of options 
for the underlying security.
    The Commission believes that if the Exchange proposes to expand the 
scope of this proposal beyond that of restructuring transactions 
involving distributions of securities to existing shareholders or 
expanding the rule to include rights offerings, it must address 
potential concerns associated with being able to adequately determine 
the minimum number of publicly owned shares and holders of the 
Restructure Security that will exist on the intended date for listing 
the options in order to justify accelerated availability of options 
trading.
    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice in the Federal Register. The NYSE's proposed rule change is 
substantively identical to proposals submitted by the Chicago Board 
Options Exchange, the Pacific Stock Exchange, the Philadelphia Stock 
Exchange, and the American Stock Exchange, which were recently approved 
by the Commission.\18\

    \18\ See supra note 4.
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    The NYSE rule change proposal raises no unique or novel issues that 
have not been previously addressed in the other options exchanges' 
approved proposals.\19\ Moreover, the CBOE, PSE, and Phlx proposals 
were noticed for the full notice and comment period without any 
comments being received by the Commission.

    \19\ Id.
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    Amendment No. 1 to the proposed rule change by the NYSE makes 
certain technical clarifications to make the proposed rule change 
substantively similar to those filed by the other options exchanges. 
The Commission does not believe Amendment No. 1 to NYSE's proposed rule 
change raises any new or unique regulatory issues. Accordingly, the 
Commission believes that it is consistent with section 6(b)(5) of the 
Act to approve the proposed rule change and Amendment No. 1 to the 
proposed rule change, on an accelerated basis.

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 at the 
Commission's Public Reference Section, 450 Fifth Street, NW., 
Washington, DC. 20549. Copies of such filing will also be available for 
inspection and copying at the principal office of the NYSE. All 
submissions should refer to SR-NYSE-95-07 and should be submitted by 
August 24, 1995.
    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\20\ that the proposed rule change, as amended, (File NO. SR-NYSE-
95-07) is hereby approved.

    \20\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\21\

    \21\ 17 CFR 200.30-3(a)(12).

[FR Doc. 95-19161 Filed 8-2-95; 8:45 am]
BILLING CODE 8010-01-M