[Federal Register Volume 61, Number 84 (Tuesday, April 30, 1996)]
[Notices]
[Pages 19102-19106]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10585]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37139; File No. SR-Amex-96-08]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change and Notice of Filing and Order Granting Accelerated Approval of 
Amendment No. 1 to the Proposed Rule Change by the American Stock 
Exchange, Inc., Relating to the Trading of Options on the Amex Gold 
BUGS SM Index

April 23, 1996.

I. Introduction

    On February 9, 1996, the American Stock Exchange, Inc. (``Amex'' or 
``Exchange'') submitted to the Securities and Exchange Commission 
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to provide for the listing and 
trading of standardized options on the Amex Gold BUGS SM Index 
(``Index'').
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    \1\ 15 U.S.C. Sec. 78s(b)(1) (1988).
    \2\ 17 CFR 240.19b-4 (1995).
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    Notice of the proposed rule change appeared in the Federal Register 
on March 20, 1996.\3\ On April 15, 1996, the Amex amended its 
proposal.\4\ No comment letters were received on the proposed rule 
change. This order approves the Exchange's proposal, as amended.
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    \3\ See Securities and Exchange Act Release No. 36953 (March 11, 
1996), 61 FR 11448.
    \4\ See Letter from Claire P. McGrath, Managing Director and 
Special Counsel, Derivative Securities, Amex, to Michael Walinskas, 
Branch Chief, Derivatives Regulation, Office of Self-Regulatory 
Oversight, Division of Market Regulation, Commission, dated April 
15, 1996 (``Amendment No. 1''). In Amendment No. 1, the Amex 
replaced one of the Index's component stocks, Hemlo Gold Mines, with 
Cambior Inc., because Hemlo Gold Mines is expected to merge with 
Battle Mountain Gold Company in June 1996. The Amex also removed 
Santa Fe Pacific Gold Corp. from the Index because it no longer 
meets the Amex's requirement for the hedging of gold production. In 
addition, the Amex represented that (1) the Exchange will promptly 
notify the Commission if the Index fails to meet the maintenance 
criteria provided in the proposal; and (2) the Index will be 
maintained so that foreign country securities or American Depositary 
Receipts (``ADRs'') thereon that are not subject to comprehensive 
surveillance sharing agreements will not represent more than 20% of 
the weight of the Index.
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II. Description of Proposal

A. General

    The Amex proposes to trade options on the Index, a modified equal-
dollar weighted index developed by the Amex and comprised of 14 gold 
mining company stocks (or ADRs thereon) which are traded on the Amex or 
the New York Stock Exchange, Inc. (``NYSE''). In addition, the Amex 
proposes to amend Commentary .01 to Amex Rule 901C, ``Designation of 
Stock Index Options,'' to indicate that 90% of the Index's numerical 
index value must be accounted for by stocks which meet the then current 
criteria and guidelines provided in Amex Rule 915, ``Criteria for 
Underlying Securities'' and to indicate that these criteria must also 
be satisfied immediately following each quarterly rebalancing.
    The Exchange believes that an index of gold mining stocks whose 
values are affected strongly by the price of gold will be attractive to 
many investors. According to the Amex, gold companies generally manage 
the risks associated with fluctuating prices by hedging their future 
production. The Amex notes that companies that hedge their gold 
production for longer periods are less affected by the fluctuating 
price of gold. In an effort to give investors an index with a 
significant exposure to the near term movements in gold prices, the 
Exchange has included in the Index those gold mining companies that do 
not hedge their gold production for extensive periods into the future. 
Specifically, the Amex states that only companies that have a hedging 
ratio of less than 1\1/2\ years production will be considered for 
inclusion in the Index.

B. Eligibility Standards for Index Components

    The Amex states that the Index conforms with Exchange Rule 901C, 
which specifies criteria for the inclusion of stocks in an index on 
which standardized options will be traded. According to the Amex, the 
Index also conforms to most of the criteria set forth in Amex Rule 
901C, Commentary .02 (which provides for the commencement of trading of 
options on an index 30 days after the date of filing), except that the 
Index is calculated using a modified version of the equal-dollar 
weighting method and four of the components of the Index do not meet 
the six month minimum trading volume criteria.\5\

[[Page 19103]]

According to the Amex, all of the Index's component securities meet the 
following standards: (1) all of the Index's component securities are 
traded on the Amex or the NYSE; (2) the component stocks comprising the 
top 90% of the Index by weight have a market capitalization \6\ of at 
least $75 million, and those component stocks constituting the bottom 
10% of the Index by weight have a market capitalization of at least $50 
million; and (3) foreign country securities or ADRs thereon that are 
not subject to comprehensive surveillance agreements do not in the 
aggregate represent more than 20% of the weight of the Index.
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    \5\ Under Amex Rule 901C, Commentary .02, the Amex may list 
options on a stock industry index pursuant to Section 19b(3)(A) 
under the Act provided that the index satisfies certain criteria. 
Commentary .02 requires, among other things, that the index be 
calculated based on either the capitalization weighting, price 
weighting, or equal-dollar weighting methodology, and that the 
trading volume for each component stock of the index in each of the 
last six months be not less than 1,000,000 shares, except that for 
each of the lowest weighted component securities in the index that 
in the aggregate account for no more than 10% of the weight of the 
index, the trading volume must be at least 500,000 shares in each of 
the last six months.
    \6\ In the case of ADRs, this represents market capitalization 
as measured by total world-wide shares outstanding.
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C. Index Calculation

    The Index is calculated using a modified equal-dollar weighting 
methodology. Three of the Index's 14 component companies are given 
higher weightings based upon their market value. The following is a 
description of how this modified equal-dollar weighting calculation 
method works. As of the market close on February 5, 1996, a portfolio 
of gold mining company stocks was established representing an 
investment of approximately (1) $16,000 in two components in the Index; 
(2) $12,000 in one of the components; (3) $2,000 in two components; and 
(4) $4,300 in the remaining 12 components (rounded to the nearest whole 
share). The value of the Index equals the current market value (i.e., 
based on U.S. primary market prices) of the sum of the assigned number 
of shares of each of the stocks in the Index portfolio divided by the 
Index divisor. The Index divisor was initially determined to yield the 
benchmark value of 200.00 at the close of trading on February 5, 1995. 
Each quarter thereafter, following the close of trading on the Thursday 
prior to the third Friday of March, June, September, and December, the 
Index portfolio will be reviewed and adjusted if any one of the three 
components initially representing higher weightings in the Index value 
currently represents 25% or more of the Index value, or if any one of 
the other components initially representing lower weightings in the 
Index value currently represents 5% or more of the Index value. The 
Index portfolio will be rebalanced, if necessary, by changing the 
number of whole shares of each component stock so that the three 
components initially given higher weights will again represent less 
than 25% of the Index value and the remaining lower-weighted components 
will each represent less than 5% of the Index value. In any event, the 
five highest weighted components cannot represent more than 60% of the 
Index value at each quarterly rebalancing.\7\
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    \7\ See infra Section II.D.
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    The Exchange has chosen to rebalance the Index following the close 
of trading on the Thursday prior to the third Friday of March, June, 
September and December, since it allows an option contract to be held 
for up to three months without a change in the Index portfolio while, 
at the same time, maintaining the equal-dollar weighting feature of the 
Index. If necessary, a divisor adjustment will be made at the 
rebalancing to ensure the continuity of the Index's value. The newly 
adjusted portfolio becomes the basis for the Index's value on the first 
trading day following the quarterly adjustment.
    As noted above, the number of shares of each component stock in the 
Index portfolio remains fixed between quarterly reviews except in the 
event of certain types of corporate actions such as the payment of a 
dividend other than an ordinary cash dividend, stock distribution, 
stock split reverse stock split, rights offering, distribution, 
reorganization, recapitalization, or similar event with respect to the 
component stocks. In a merger or consolidation of an issuer of a 
component stock, if the stock remains in the Index, the number of 
shares of that security in the portfolio 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. In the 
event of a stock addition or replacement, the new component stock will 
be added to the Index at a weight determined by the Exchange and the 
Index will be rebalanced. In all cases, the divisor will be adjusted, 
if necessary, to ensure Index continuity.
    Similar to other stock index values published by the Exchange, the 
value of the Index will be calculated continuously and disseminated 
every 15 seconds over the Consolidated Tape Association's Network B.

D. Maintenance of the Index

    The Exchange will maintain the Index so that upon quarterly 
rebalancing: (1) the total number of component securities will not 
increase or decrease by more than 33\1/3\% from the number of 
components in the Index at the time of its initial listing and in no 
event will the Index have fewer than nine components; (2) components 
stocks constituting the top 90% of the Index by weight will have a 
minimum market capitalization of $75 million and the component stocks 
constituting the bottom 10% of the Index by weight will have a minimum 
market capitalization of $50 million; (3) at least 90% of the Index's 
numerical index value and at least 80% of the total number of component 
securities individually will meet the then current criteria for 
standardized option trading set forth in Amex Rule 915; (4) stocks 
constituting 85% of the Index will have a monthly trading volume of at 
least 500,000 shares for each of the last six months; (5) no single 
component will represent more than 25% of the weight of the Index and 
the highest weighted components will represent no more than 60% of the 
Index at each quarterly rebalancing; and (6) in order to maintain the 
character of the Index, companies whose gold production hedging 
policies change to greater than 1\1/2\ times annual production will be 
considered for removal from the Index. In addition, the Index will be 
maintained so that foreign country securities or ADRs thereon that are 
not subject to comprehensive surveillance sharing agreements will not 
in the aggregate represent more than 20% of the weight of the Index.\8\
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    \8\ See Amendment No. 1, supra note 4.
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    The Amex will not open for trading any additional option series if 
the Index fails to satisfy any of the maintenance criteria set forth 
above unless the Exchange determines that such failure is not 
significant and the Commission concurs in that determination or unless 
the continued listing of options on the Index has been approved by the 
commission pursuant to Section 19(b)(2) of the Act.

E. Expiration and Settlement

    The options on the proposed Index will be European-style (i.e., 
exercises permitted only at expiration) and cash-settled. Standard 
option trading hours (9:30 a.m. to 4:10 p.m. New York time) will apply. 
Options on the Index will expire on the Saturday following the third 
Friday of the expiration month (``Expiration Friday''). The last 
trading day in an expiring option series normally will be the second to 
last business day preceding the Saturday following the third Friday of 
the expiration month (normally a Thursday). Trading in expiring options 
will cease at the close of trading on the last trading day.
    The Amex plans to list options series with expirations in the three 
near-term calendar months and in the two

[[Page 19104]]

additional calendar months in the March cycle. In addition, the Amex 
may list longer term option series having up to 36 months to 
expiration. In lieu of such long-term options on a full value Index, 
the Amex may instead list long-term, reduced value put and call options 
based on one-tenth (1/10th) the Index's full value. In either event, 
the interval between expiration months for either a full value or 
reduced value long-term option will not be less than six months. The 
trading of any long-term Index options will be subject to the same 
rules which govern the trading of all of the Amex's index options, 
including sales practice rules, margin requirements, and floor trading 
procedures, and all Index options will have European-style exercise. 
Position limits on reduced-value long term Index options will be 
equivalent to the position limits for full value Index options and will 
be aggregated with such options. For example, if the position limit for 
the full value Index options is 9,000 contracts on the same side of the 
market, then the position limit for the reduced value Index options 
will be 90,000 contracts on the same side of the market.
    The exercise settlement value for all of the Index's expiring 
options will be calculated based upon the primary exchange's regular 
way opening sale prices for the component stocks. In the case of 
securities traded through the facilities of the National Association of 
Securities Dealers Automated Quotation system (``NASDAQ''), the first 
regular way sale price will be used. If any component stock does not 
open for trading on its primary market on the last trading day before 
expiration, then the prior day's last sale price will be used in the 
calculation.

F. Exchange Rules Applicable to Stock Index Options

    Amex Rules 900C, ``Applicability and Definitions,'' through 980C, 
``Exercise of Stock Index Option Contracts,'' will apply to the trading 
of option contracts based on the Index. These rules cover issues such 
as surveillance, margin requirement, trading halts, exercise prices, 
and position and exercise limits. The Index is deemed to be a stock 
index option under Amex Rule 901C (a) and a stock index industry group 
under Amex Rule 900C (b)(1).\9\ With respect to paragraph (b) of Amex 
Rule 903C, ``Series of Stock Index Options,'' the Exchange proposes to 
list near-the-money option series on the Index at 2\1/2\ point strike 
(exercise) price intervals when the value of the Index is below 200 
points. In addition, the Exchange expects that the review required by 
paragraph (c) of Amex Rule 904C, ``Position Limits,'' will result in a 
position limit of 9,000 contracts for options on the Index.\10\
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    \9\ Under Amex Rule 900C(b)(1), a stock index industry group is 
an index of stocks representing a particular industry or related 
industries.
    \10\ Amex Rule 904C(c) provides that the position limit for an 
industry index option will be 9,000 contracts if the Amex determines 
at the commencement of trading of the options that any single stock 
in the underlying stock index industry group accounted, on average, 
for 20% or more of the numerical index value or that any five stocks 
in the group together accounted, on average, for more than 50% of 
the numerical index value, but that no single stock in the group 
accounted, on average, for 30% or more of the numerical index value, 
during the 30-day period immediately preceding the review.
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G. Surveillance

    Surveillance procedures currently used to monitor trading in each 
of the Exchange's other index options will also be used to monitor 
trading in options on the Index. Further, the Intermarket Surveillance 
Group (``ISG'') Agreement, dated July 14, 1983, as amended on January 
29, 1990, will be applicable to the trading of options on the 
Index.\11\
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    \11\ ISG was formed on July 14, 1983, to among other things, 
coordinate more effectively surveillance and investigative 
information sharing arrangements to the stock and options markets. 
See Intermarket Surveillance Group Agreement, July 14, 1983. The 
most recent amendment to the ISG Agreement, which incorporates the 
original agreement and all amendments made thereafter, was signed by 
ISG members on January 29, 1990. See Second Amendment to the 
Intermarket Surveillance Group Agreement, January 29, 1990. The 
members of the ISG are: the Amex; the Boston Stock Exchange, Inc.; 
the Chicago Board Options Exchange, Inc.; the Chicago Stock 
Exchange, Inc.; the National Association of Securities Dealers, Inc. 
(``NASD''); the NYSE; the Pacific Stock Exchange, Inc.; and the 
Philadelphia Stock Exchange, Inc. Because of potential opportunities 
for trading abuses involving stock index futures, stock options, and 
the underlying stock, and the need for greater sharing of 
surveillance information for these potential intermarket trading 
abuses, the major stock index futures exchanges (e.g., the Chicago 
Mercantile Exchange and the Chicago Board of Trade) joined the ISG 
as affiliate members in 1990.
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III. Findings and Conclusions

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange, and, in 
particular, the requirements of Section 6(b)(5).\12\ Specifically, the 
Commission finds that the trading of Index options, including full-
value and reduced-value long-term Index options, will serve to promote 
the public interest and help to remove impediments to a free and open 
securities market by providing investors with an additional means to 
hedge exposure to market risk associated with stocks in the gold mining 
industry.\13\ The Amex states that the Index is designed to provide 
significant exposure to the near term movements in gold prices and, 
accordingly, is comprised of gold mining companies that do not hedge 
their gold production for extensive periods into the future.
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    \12\ 13 U.S.C. 78f(b)(5) (1988).
    \13\ Pursuant to Section 6(b)(5) of the Act, the Commission must 
predicate approval of any new option proposal upon a finding that 
the introduction of such new derivative instrument is in the public 
interest. Such a finding would be difficult for a derivative 
instrument that served no hedging or other economic function, 
because any benefits that might be derived by market participants 
likely would be outweighed by the potential for manipulation, 
diminished public confidence in the integrity of the markets, and 
other valid regulatory concerns. In this regard, the trading of 
listed options on the Index will provide investors with a hedging 
vehicle that should reflect the overall movement of the stocks 
representing companies in the gold mining sector in the U.S. stock 
markets.
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    The trading of options on the Index and on a reduced-value Index, 
however, raises several issues relating to index design, customer 
protection, surveillance, and market impact. The Commission believes, 
for the reasons discussed below, that the Amex has addressed these 
issues adequately.

A. Index Design and Structure

    The Commission believes it is appropriate for the Exchange to 
designate the Index as a narrow-based index for purposes of index 
options trading. The Index is comprised of 14 stocks intended to track 
gold mining companies whose values are strongly affected by the price 
of gold. The Commission also finds that the reduced-value Index is a 
narrow-based index because it is composed of the same component 
securities as the Index, and merely dividing the Index value by ten 
will not alter its basic character. Accordingly, the Commission 
believes that it is appropriate for the Amex to apply its rules 
governing narrow-based index options to trading in the Index options 
and long-term full-value and reduced-value Index options.\14\
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    \14\ See supra Section II.F.
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    The Commission also believes that the large capitalizations, liquid 
markets, and relative weighings of the Index's component stocks 
minimize the potential for manipulation of the Index. First, the stocks 
that comprise the Index are actively traded, with a mean and median 
average monthly trading volume for the six month period ending March 
29, 1996, of 6,429,400 shares and 3,500,655 shares, respectively. 
Second, the market capitalizations of the stocks in the Index are very 
large, ranging from a high of $6.6 billion to a low of $145 million as 
of March 29, 1996, with the

[[Page 19105]]

mean and median being $1.8 billion and $759 million, respectively. 
Third, because the index is modified equal dollar-weighted, as 
described above, no one particular stock or group of stocks dominates 
the Index. Specifically, as of March 29, 1996, no one stock accounted 
for more than 16.79% of the Index's total value and the percentage 
weighting of the five highest weighted stocks in the Index accounted 
for 59.19% of the Index's value.
    The Amex's proposed inclusion of Class B common and the Class B and 
Class C convertible preferred stock of Freeport McMoran Cooper & Gold 
presents some concern since options trading is not currently allowed on 
convertible preferred stock. However, given the de minimis 
representation of these components in relation to the overall Index 
(4.2% of the Index's weight) and the Index requirement that over 90% of 
the weight of the Index must comply with the listing criteria for 
standardized options trading set forth in Amex Rule 915, the Commission 
believes it is appropriate to include these components in the 
Index.\15\ The Commission notes that, currently, 91.29% of the weight 
of the Index complies with the listing criteria for standardized 
options trading set forth in Amex Rule 915.
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    \15\ This conclusion is strengthened by the fact that the 
Freeport McMoran Copper & Gold convertible preferred components, 
when added along with the Freeport McMoran Copper & Gold common 
stock component, result in a total weighting of only 16.59% of the 
Index's total value. The Commission notes that it would be concerned 
if the Freeport McMoran components, taken together, dominated the 
Index. The Amex's maintenance criteria, along with the quarterly 
rebalancings of the Index, should help to ensure that such 
domination is not likely to occur.
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    Fourth, the proposed maintenance criteria will serve to ensure 
that: (1) The Index remains composed substantially of liquid highly 
capitalized securities; and (2) the Index is not dominated by one or 
several securities that do not satisfy the Exchange's options listing 
criteria. Specifically, in considering changes to the composition of 
the Index, 90% of the weight of the Index and 80% of the number of 
components in the Index must at all times comply with the listing 
criteria for standardized options trading set forth in Amex Rule 915.
    The Amex will notify Commission staff promptly at any time the Amex 
determines that the Index fails to satisfy any of the foregoing 
maintenance criteria.\16\ Further, in such an event, the Exchange will 
not open for trading any additional series of Index options or Index 
long-term options unless the Exchange determines that such failure is 
not significant, and Commission staff concurs in the determination.
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    \16\ See Amendment No. 1, supra note 4.
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    Finally, the Commission believes that the existing mechanisms to 
monitor trading activity in the component stocks of the Index, or 
options on those stocks, will help deter as well as detect any illegal 
activity.

B. Customer Protection

    The Commission believes that a regulatory system designed to 
protect public customers must be in place before the trading of 
sophisticated financial instruments, such as Index options (including 
full-value and reduced-value long-term Index Options), can commence on 
a national securities exchange. The Commission notes that the trading 
of standardized exchange-traded options occurs in an environment that 
is designed to ensure, among other things, that: (1) the special risks 
of options are disclosed to public customers; (2) only investors 
capable of evaluating and bearing the risks of options trading are 
engaged in such trading; and (3) special compliance procedures are 
applicable to options accounts. Accordingly, because the Index options 
and Index long-term full-value and reduced-value options will be 
subject to the same regulatory regime as the other standardized index 
options currently traded on the Amex, the Commission believes that 
adequate safeguards are in place to ensure the protection of investors 
in Index options and full-value or reduced-value Index long-term 
options.

C. Surveillance

    The Commission believes that a surveillance sharing agreement 
between an exchange proposing to list a stock index derivative product 
and the exchange(s) trading the stocks underlying the derivative 
product is an important measure for surveillance of the derivative and 
underlying securities markets. Such agreements ensure the availability 
of information necessary to detect and deter potential manipulations 
and other trading abuses, thereby making the stock index product less 
readily susceptible to manipulation.\17\ In this regard, the Commission 
notes that the Amex and the NYSE are members of the ISG.\18\ The 
Commission believes that this arrangement ensures the availability of 
information necessary to detect and deter potential manipulations and 
other trading abuses, thereby making the Index options and full-value 
and reduced-value long-term Index options less readily susceptible to 
manipulation.\19\
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    \17\ See Securities Exchange Act Release No. 31243 (September 
28, 1992), 57 FR 45849.
    \18\ See supra note 10.
    \19\ See, e.g., Securities Exchange Act Release No. 31243 
(September 28, 1992), 57 FR 45849 (order approving the listing of 
index options and index LEAPS on the Chicago Board Options Exchange 
Biotech Index).
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    The Commission notes that foreign country securities or ADRs 
thereon that are not subject to comprehensive surveillance agreements 
do not in the aggregate represent more than 20% of the weight of the 
Index.\20\ Accordingly, because the Amex and the NYSE are members of 
the ISG, at least 80% of the securities comprising the Index are 
subject to an arrangement that ensures the availability of information 
necessary to detect and deter potential trading abuses. As a result, 
the Amex should be able to adequately investigate any potential 
manipulations of Index options or their underlying securities. In 
addition, the Commission believes that the limitation on the foreign 
securities or ADRs may be included in the Index will help to ensure 
that Index options are not used as surrogate instruments to trade 
options on stocks and/or ADRs that otherwise are not eligible for 
options trading.
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    \20\ The Index will be maintained so that foreign country 
securities or ADRs thereon that are not subject to a comprehensive 
surveillance sharing agreement will not in the aggregate represent 
more than 20% of the weight of the Index. See Amendment No. 1, supra 
note 4.
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D. Market Impact

    The Commission believes that the listing and trading of Index 
options, including full-value and reduced-value Index LEAPS on the 
Amex, will not adversely affect the underlying securities markets. 
First, because of the ``modified equal dollar-weighting'' method that 
will be used, as described above, no one security or group of 
securities represented in the Index will dominate the weight of the 
Index immediately following a quarterly rebalancing. Second, the Index 
maintenance criteria ensure that the Index will be substantially 
comprised of securities that satisfy the Exchange's listing standards 
for standardized options trading, and that one or a few stocks do not 
dominate the Index. Third, the currently applicable 9,000 contract 
position and exercise limits will serve to minimize potential 
manipulation and market impact concerns. Fourth, the risk to investors 
of contra-party non-performance will be minimized because the Index 
options and Index long-term options will be issued and guaranteed by 
the Options Clearing Corporation just like any other

[[Page 19106]]

standardized option traded in the United States.
    Lastly, the Commission believes that settling expiring Index 
options (including full-value and reduced-value long-term Index 
options) based on the opening prices of component securities is 
reasonable and consistent with the Act. As has been noted previously, 
valuing index options for exercise settlement on expiration based on 
opening rather than closing prices of index component securities may 
help to reduce adverse effects on markets for such securities.\21\
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    \21\ See Securities Exchange Act Release No., 30944 (July 21, 
1992), 57 FR 33376 (July 28, 1992).
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    The Commission finds good cause for approving Amendment No. 1 to 
the proposal prior to the thirtieth day after the date of publication 
of the notice of filing thereof in the Federal Register. Specifically, 
Amendment No. 1 strengthens the Exchange's proposal by eliminating from 
the Index the stock of one company which is expected to merge with 
another company and replacing one Index component which no longer meets 
the Amex's requirement for the hedging of gold production. In addition, 
Amendment No. 1 strengthens and clarifies the proposal by indicating 
that the Exchange will promptly notify the Commission if the Index 
fails to meet the maintenance criteria provided in the proposal and 
representing that the Index will be maintained so that foreign country 
securities or ADRs thereon that are not subject to comprehensive 
surveillance sharing agreements will not represent more than 20% of the 
weight of the Index. Accordingly, the Commission believes that it is 
consistent with Sections 6(b)(5) and 19(b)(2) of the Act to approve 
Amendment No. 1 to the proposal on an accelerated basis.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning Amendment No. 1. 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. 552, will be available for inspection and 
copying at 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 above-mentioned 
self-regulatory organization. All submissions should refer to the file 
number in the caption above and should be submitted by May 21, 1996.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\22\ that the proposed rule change (SR-Amex-96-08), as amended, is 
approved.

    \22\ 15 U.S.C. 78s(b)(2) (1988).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12) (1995).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-10585 Filed 4-29-96; 8:45 am]
BILLING CODE 8010-01-M