[Federal Register Volume 60, Number 176 (Tuesday, September 12, 1995)]
[Notices]
[Pages 47414-47415]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22535]



=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-36186; International Series Release No. 848; File No. 
SR-CBOE-95-46]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Board Options Exchange, Inc. Relating to the 
Listing and Trading of Index Warrants on the Mexico 30 Index

September 5, 1995.
    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 
August 21, 1995, the Chicago Board Options Exchange, Inc. (``CBOE'' 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 self-regulatory 
organization. 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 CBOE proposes to provide for the listing and trading on the 
Exchange of warrants on the Mexico 30 Index (``Mexico Index'' or 
``Index''), a cash-settled, broad-based index.\1\

    \1\ CBOE is concurrently seeking approval to list and trade 
options on the CBOE Mexico 30 Index. For a more detailed description 
of the CBOE Mexico 30 Index and CBOE Mexico 30 Index options, see 
Securities Exchange Act Release No. 36160 (August 28, 1995).
---------------------------------------------------------------------------

    The text of the proposed rule change is available at the Office of 
the Secretary, CBOE 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 CBOE 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 CBOE 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 purpose of the proposed rule change is to permit the Exchange 
to list and trade cash-settled index warrants based on the Mexico 30 
Index. The Index is comprised of 30 representative stocks of the 
Mexican Stock Exchange (``Bolsa'').\2\ CBOE believes that warrants on 
the Index will provide investors with a low-cost means of participating 
in the performance of the Mexican economy and a hedging mechanism 
against the risk of investing in that economy.

    \2\ The components of the Index are Alfa SA-A; Apasco SA; Grupo 
Casa Autrey; Banacci-B; Grupo Carso-Al; Controla Com M-B; Cemex SA-
B; Cifra SA-C; Desc SA-B; Empresas Moderna-A; Fomento Econ M-B; 
Grupo Embotelladoro Mexico; Grupo Financiero Bancomer-B; Grupo 
Financiero Serfin-B; Grupo Gigante; Grupo Modelo-C; Grupo Mexico-B; 
Grupo Tribasa-CPO; Hylsamex SA-BCP; Empresas ICA; Iusacell; 
Kimberly-Clark M-A; Coca-Cola Femsa; Grupo Industrial Maseca-B; 
Grupo Sidek-B; Tubos De Acero; Telefonos De Mexico-L; Tolmex SA-B2; 
Grupo Telev-CPO; and Vitro SA.
---------------------------------------------------------------------------

    Index Warrant Trading. The proposed warrants will be direct 
obligations of their issuer subject to cash-settlement in U.S. dollars, 
and either exercisable throughout their life (i.e., American-style) or 
exercisable only on their expiration date (if not exercisable prior to 
such date). The holder of a warrant structured as a ``put'' would 
receive payment in U.S. dollars to the extent that the Index value has 
declined below a pre-stated cash settlement value. Conversely, holders 
of a warrant structured as a ``call'' would, upon exercise or at 
expiration, receive payment in U.S. dollars to the extent that the 
Index value has increased above the pre-stated cash settlement value. 
If ``out-of-the-money'' at the time of expiration, the warrants would 
expire worthless.
    Warrant Listing Standards and Customer Safeguards. On August 28, 
1995, the Commission approved the Exchange's generic warrant filing 
``Establishment of Uniform Listing and Trading Guidelines for Stock 
Index, Currency and Currency Index Warrants'' (SR-CBOE-94-34) (``Index 
and Currency Warrant Filing''). The listing and trading of Index 
warrants on the Mexico 30 Index will be subject to these guidelines and 
rules.
    Index Design. The Index was designed by and is maintained by the 
CBOE and the Chicago Mercantile Exchange (``CME''). CBOE represents 
that the 30 stocks comprising the Index were selected for their high 
market capitalization and their high degree of liquidity, and further 
believes that they are representative of the industrial composition of 
the broader Mexican equity market. The Mexico Index is composed of 15 
broad industry groups, including building materials, diversified 
holding companies, and telecommunications.
    The Index is weighted by the market capitalization of the component 
stocks, however, at the time of a semi-annual review (occurring after 
the close on expiration Fridays in December and June) the Index will be 
adjusted, if necessary, to ensure that no single component shall have a 
weight in the Index greater than 25%. For example, on June 16, 1995, 
the most recent review date, Telefonos de Mexico (``TMX'') would have 
had a weight of 30.41% of the Index. To reduce TMX's weight, the 
Exchange reduced the number of outstanding TMX shares used in the 
calculation of the Index from 8.0375 billion to 6.1303 billion.
    The total capitalization of the Index as of July 31, 1995 was 
$46.21 billion, which represents 49.35% of the overall capitalization 
of the Mexican Bolsa. The median capitalization of the stocks in the 
Index on July 31, 1995, was 4.507 billion Pesos ($737 million at the 
exchange rate of 6.115 pesos per dollar prevailing on July 31, 1995). 
The 

[[Page 47415]]
average market capitalization of these stocks was $1.54 billion on the 
same date (using the same rate of exchange). The individual market 
capitalization of these stocks ranged from $156 million (Grupo Sidek-B) 
to $13.3 billion (Telmex) on July 31, 1995. The largest stock accounted 
for 23.61% of the Index, while the smallest accounted for 0.36%. The 
top five stocks in the Index by weight accounted for 55.02% of the 
Index. CBOE represents that upon each semi-annual review of the Index, 
the Exchange shall make any necessary modifications to ensure that the 
top three weighted stocks in the Index by weight may not account for 
more than 45% of the Index at the time of a semi-annual review.\3\ The 
average daily volume in the component securities for the period from 
February 1995 through July 1995, ranged from a low of approximately 
9,270 shares to a high of 14,123,392 shares, with an average daily 
trading volume for all components of the Index of approximately 
1,479,390 shares per day.

    \3\ As of July 31, 1995, the top three stocks represented 43.6% 
of the weight of the Index.
---------------------------------------------------------------------------

    Calculation. The value of the Index is determined by multiplying 
the price of each stock times the number of shares outstanding, adding 
those sums and dividing by a divisor which gives the Index a value of 
200 on its base date of January 3, 1995. This divisor is adjusted for 
pertinent changes as described below in the section titled 
``Maintenance.'' The Index had a closing value of 203.07 on July 31, 
1995.
    Maintenance. The Index will be maintained by the CBOE and CME. To 
maintain continuity of the Index, the divisor of the Index will be 
adjusted to reflect certain events relating to the component stocks. 
These events include, but are not limited to, changes in the number of 
shares outstanding, spin-offs, certain rights issuances, and mergers 
and acquisitions. The composition of the Index will be reviewed 
periodically and the Exchanges may make component changes at any time.
    Bridge Information Systems (``Bridge'') will calculate the value of 
the Index every fifteen seconds throughout the trading day and 
disseminate the Index value through the Options Price Reporting 
Authority (``OPRA''). Bridge obtains quotes and trade information on a 
real-time basis directly from the Bolsa through an electronic feed. 
Accordingly, the value of the Index will be based upon the prices of 
the components as traded or quoted on the Bolsa.
    Surveillance Agreements. The Exchange expects to apply its existing 
warrant surveillance procedures to Index warrants. In addition, the 
Exchange is aware of a Memorandum of Understanding (``MOU'') between 
the Commission and the Comision Nacional Bancaria y de Valores. This 
MOU will enable the Commission to obtain information concerning the 
trading of the component stocks of the Mexico 30 Index. The Exchange 
also will make every effort to enter into an effective surveillance 
agreement with the Bolsa.
2. Statutory Basis
    CBOE believes 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 will permit trading in warrants based 
on the Mexico 30 Index pursuant to rules designed to prevent fraudulent 
and manipulative acts and practices and to promote just and equitable 
principles of trade, and thereby will provide investors with the 
ability to invest in warrants based on an additional index.

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

    The Exchange believes the proposed rule change will impose no 
burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
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 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 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 CBOE. All 
submissions should refer to File No. SR-CBOE-95-46 and should be 
submitted by October 3, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\4\

    \4\ 17 CFR 200.30-3(a)(12) (1994).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-22535 Filed 9-11-95; 8:45 am]
BILLING CODE 8010-01-M