[Federal Register Volume 61, Number 110 (Thursday, June 6, 1996)]
[Notices]
[Pages 28914-28916]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14179]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37252; File No. SR-Amex-96-18]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by American Stock Exchange, Inc. Relating to the Listing and 
Trading of a Narrow-Based Domestic Index Warrants

May 30, 1996.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934, 15 U.S.C. 78s(b)(1), notice is hereby given that on May 20, 1996, 
the American Stock Exchange, Inc. (``Amex'' or ``Exchange'') filed with 
the Securities and Exchange 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 list and trade, under Section 106 of the 
Amex Company Guide, index warrants based on a portfolio of equity 
securities (``Index''), and equal-dollar weighted narrow-based index 
developed by an issuer comprised of actively traded equity securities 
which are traded on the Amex, New York Stock Exchange (``NYSE''), or 
through the facilities of the National Association of Securities 
Dealers Automated Quotation system and are reported national market 
system securities (``NASDAQ/NMS''). The text of the proposed rule 
change is available at the Office of the Secretary, 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 Amex 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

(1) Purpose
    Under Section 106 (Currency and Index Warrants) of the Amex Company 
Guide, the Exchange may approve for listing index warrants based on 
foreign and domestic market indices. While the Exchange currently lists 
and trades warrants on a number of foreign market indices and broad-
based domestic market indices, it now proposes to list and trade a 
warrant on a narrow-based domestic market index. The listing and 
trading of warrants on the A portfolio of value equity securities will 
comply in all respects to Exchange Rules 1100 through 1110 for the 
trading of stock index and currency warrants.
    Warrant issues on the Index will conform to the listing guidelines 
under Section 106, which provide, among other things, that (1) the 
issuer shall have tangible net worth in excess of $250,000,000 and 
otherwise substantially exceed size and earnings requirements in 
Section 101(A) of the Company Guide or meet the alternate guideline in 
paragraph (a); (2) the term of the warrants shall be for a period 
ranging from one to three years from date of issuance; and (3) the 
minimum public distribution of such issues shall be 1,000,000 warrants, 
together with a minimum of 400 public holders, and have an aggregate 
market value of $4,000,000.
    Index warrants will be direct obligations of their issuer subject 
to cash-settlement during their term, and either exercisable throughout 
their life (i.e., American style) or exercisable only on their 
expiration date (i.e., European style). Upon exercise, or at the 
warrant 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 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 has increased 
above the pre-stated cash settlement value. If ``out-of-the-money'' at 
the time of expiration, the warrants would expire worthless. In 
addition, the Amex, prior to the commencement of trading, will 
distribute a circular to its membership calling attention to specific 
risks associated with warrants on the Index.

The Index

    The Amex is proposing to list index warrants based on a popular 
portfolio of ten large actively traded equity securities. The portfolio 
will be designed as an equal dollar weighted index. Each of the 
component securities in the Index will have a market value of at least 
$75 Million and trading volume in each of the last six months of not 
less than 1,000,000 shares. At least 90% of the securities in the Index 
will meet the current criteria for standardized option trading. If the 
Index includes foreign securities or American Depositary Receipts on 
foreign securities that are traded in countries with which the Exchange 
does not have comprehensive surveillance agreements with the 
appropriate regulatory authorities, such components will not represent 
more than 20% of the Index. All of the component securities in the 
Index will be listed on the Amex, the New York Stock Exchange or trade 
through the facilities of NASDAQ.
    The Index will be set with a benchmark value of 100 on the date the 
warrant is priced for initial offering to the public. Similar to other 
stock index values published by the Exchange, the value of the Index 
will be calculated continuously and disseminate every 15 second over 
the Consolidated Tape Association's Network B.
    The Exchange will monitor the components in the portfolio on a 
monthly basis and will advise the Commission whenever (1) less than 75% 
of the components are eligible for standardized option trading, (2) the 
number of components in the index decreases to less than nine, (3) the 
three highest weighted components represent more than 60% of the weight 
of the Index or (4) the trading volume of any of the components falls 
below 500,000 shares for each of the last six months.
    The Index will be monitored daily for 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 which may require a multiplier adjustment to maintain continuity 
of the Index's value. 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, 
components in the Index may be deleted or replaced. Shares of a 
component security may be replaced (or supplemented) with other 
securities under certain other circumstances, such as the conversion of 
a component

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security into another class of security or the spin-off of a 
subsidiary. If the security remains in the Index, the multiplier may be 
adjusted to maintain the continuity of the Index's value. In the event 
that a security in the Index is removed due to a corporate 
consolidation and the holders of such security receive cash, the cash 
value of such security will be included in the index and will accrue 
interest at LIBOR to term.
(2) Basis
    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, and is 
not designed to permit unfair discrimination between customers, 
issuers, brokers or dealers.

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

    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

    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, 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 Amex. All 
submissions should refer to SR-Amex-96-18 and should be submitted by 
June 27, 1996.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\1\
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    \1\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 96-14179 Filed 6-5-96; 8:45 am]
BILLING CODE 8010-01-M