[Federal Register Volume 61, Number 157 (Tuesday, August 13, 1996)]
[Notices]
[Pages 42074-42079]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20574]


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[[Page 42075]]


SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37533; File No. SR-Amex-96-28]


Self-Regulatory Organizations; Order Granting Accelerated 
Approval of a Proposed Rule Change and Notice of Filing and Order 
Granting Accelerated Approval of Amendment Nos. 1 and 2 to the Proposed 
Rule Change by the American Stock Exchange, Inc., Relating to Top Ten 
Yield Market Index Target-Term Securities (``MITTS'')

August 7, 1996.

I. Introduction

    On July 15, 1996, the American Stock Exchange, Inc. (``Amex'' or 
``Exchange''), pursuant to Section 19(b)(1) of the Securities Exchange 
Act of 1934 (``Act'')\1\ and Rule 19b-4 thereunder,\2\ filed with the 
Securities and Exchange Commission (``SEC'' or ``Commission'') a 
proposed rule change to list and trade Market Index Target-Term 
Securities (``MITTS''),\3\ the return on which is based upon an equal-
dollar weighted portfolio of securities of representing the ten highest 
dividend yielding stocks in the Dow Jones Industrial Average (``DJIA'') 
from year to year (``Top Ten Yield Index'' or ``Index'').\4\ Notice of 
the proposal appeared in the Federal Register on July 24, 1996.\5\ No 
comment letters were received on the proposed rule change. On July 31, 
1996, the Amex filed Amendment No. 1 to the proposed rule change.\6\ On 
August 2, the Amex filed Amendment No. 2 to the proposed rule 
change.\7\ This order approves the proposal, as amended, on an 
accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ ``MITTS'' and ``Market Index Target-Term Securities'' are 
service marks of Merrill Lynch & Co., Inc. (``Merrill Lynch'').
    \4\ The initial portfolio of securities comprising the Top Ten 
Yield Index for the first year is as follows: Philip Morris; Texaco; 
Exxon; J.P. Morgan; Chevron; General Motors; Minnesota Mining; 
DuPont; International Paper; and AT&T. See Amendment No. 1, infra 
note 6.
    \5\ See Securities Exchange Act Release No. 37444 (July 16, 
1996), 61 FR 38488 (``Release No. 37444'').
    \6\ Amendment No. 1 to the proposed rule change provides the 
initial portfolio of securities comprising the Top Ten Yield Index, 
various specifications regarding the Top Ten Yield MITTS, and a 
detailed explanation of the calculation, adjustments, and 
reconstitution methodologies to be employed for the Top Ten Yield 
Index, as described more fully herein. Additionally, Amendment No. 1 
provides that Top Ten Yield MITTS will be traded under the 
Exchange's equity rules, subject to equity margin requirements, and 
subject to Amex Rule 411, as described more fully herein. See Letter 
from Michael T. Bickford, Vice President, Capital Markets, Amex, to 
Sharon Lawson, Senior Special Counsel, Office of Market Supervision, 
Division of Market Regulation, Commission, dated July 31, 1996 
(``Amendment No. 1'').
    \7\ Amendment No. 2 to the proposed rule change provides that 
the Top Ten Yield MITTS are subject to continued listing provisions 
set forth in Sections 1001 through 1003 in the Exchange's Company 
Guide. Specifically, the Exchange will rely, in part, on the 
continued listing standards relative to distribution for bonds, as 
set forth in Section 1003(b). The Exchange intends to submit a 
proposed rule change in the near future to provide continued listing 
standards that apply specifically to hybrid securities such as the 
Top Ten Yield MITTS. See Letter from Michael Bickford, Vice 
President, Capital Markets Group, Amex, to John Ayanian, Attorney, 
OMS, Market Regulation, Commission, dated August 2, 1996 
(``Amendment No. 2''). See also infra note 12.
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II. Description of the Proposal

    Under Section 107A of the Amex Company Guide, the Exchange may 
approve for listing and trading securities which cannot be readily 
categorized under the listing criteria for common and preferred stocks, 
bonds, debentures, or warrants.\8\ The Amex proposes to list for 
trading under Section 107A of the Company Guide, MITTS based on the Top 
Ten Yield Index (``Top Ten Yield MITTS'').\9\ The Top Ten Yield Index 
will be determined, calculated and maintained solely by the Amex.\10\
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    \8\ See Securities Exchange Act Release No. 27753 (March 1, 
1990) (``Hybrid Approval Order'').
    \9\ The Commission has approved the listing and trading on the 
New York Stock Exchange of MITTS based upon portfolios of securities 
representing (1) telecommunications companies, (2) European 
companies, (3) health care companies, (4) U.S. real estate 
investment trusts, and (5) restructuring companies. See Securities 
Exchange Act Release Nos. 32840 (September 2, 1993), 58 FR 47485 
(September 9, 1993); 33368 (December 22, 1993), 58 FR 68975 
(December 29, 1993); 34655 (September 12, 1994), 59 FR 47966 
(September 19, 1994); 34691 (September 20, 1994), 59 FR 49264 
(September 27, 1994); and 34692 (September 20, 1994), 59 FR 49267 
(September 27, 1994) (``MITTS Approval Orders''). The Commission has 
also approved the listing and trading on the Amex of hybrid 
securities similar to MITTS, based upon portfolios of securities 
representing various industries, including, among others, (1) 
telecommunications companies, (2) banking industry stocks, and (3) 
real estate investment trusts. See Securities Exchange Act Release 
Nos. 33495 (January 19, 1994), 59 FR 3883 (January 27, 1994); 34848 
(October 17, 1994), 59 53217 (October 21, 1994); and 36130 (August 
22, 1995), 60 FR 44917 (August 29, 1995).
    \10\ Subject to the criteria in the prospectus regarding the 
construction of the Index, the Exchange has sole discretion 
regarding changes to the Index due to annual reconstitutions and 
adjustments to the Index and the multipliers of the individual 
components.
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    The MITTS will conform to the initial listing guidelines under 
Section 107A \11\ and continued listing guidelines under Sections 1001-
1003 \12\ of the Company Guide. MITTS are non-callable senior hybrid 
debt securities of the Merrill Lynch that provide for a single payment 
at maturity, and will bear no periodic payments of interest. Top Ten 
Yield MITTS will entitle the owner at maturity to receive an amount 
based upon the percentage change between the ``Original Index Value'' 
and the ``Ending Index Value,'' subject to a minimum repayment amount. 
The ``Original Index Value'' is the value of the Top Ten Index on the 
date on which the issuer prices the Top Ten Yield MITTS issue for the 
initial offering to the public. The ``Ending Index Value'' is the value 
of the Top Ten Index upon the expiration of the Top Ten Yield MITTS 
approximately ten years from the pricing date. The Ending Index Value 
will be used in calculating the amount owners will receive upon 
maturity.\13\
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    \11\ The initial listing standards for MITTS require: (1) a 
minimum public distribution of one million units; (2) a minimum of 
400 shareholders; (3) a market value of at least $4 million; and (4) 
a term of at least one year. In addition, the listing guidelines 
provide that the issuer have assets in excess of $100 million, 
stockholder's equity of at least $10 million, and pre-tax income of 
at least $750,000 in the last fiscal year or in two of the three 
prior fiscal years. In the case of an issuer which is unable to 
satisfy the earning criteria stated in Section 101 of the Company 
Guide, the Exchange will require the issuer to have the following: 
(1) Assets in excess of $200 million and stockholders' equity of at 
least $10 million: or (2) assest in excess of $100 million and 
stockholders' equity of at least $20 million.
    \12\ The Exchange's continued listing guidelines are set forth 
in Sections 1001 through 1003 of Part 10 to the Exchange's Company 
Guide. Section 1002(b) of the Company Guide states that the Exchange 
will consider removing from listing any security where, in the 
opinion of the Exchange, it appears that the extent of public 
distribution or aggregate market value has become so reduced to make 
further dealings on the Exchange inadvisable. With respect to 
continued listing guidelines for distribution of the MITTS, the 
Exchange will rely, in part, on the guidelines for bonds in Section 
1003(b)(iii). Section 1003(b) provides that the Exchange will 
normally consider suspending dealings in, or removing from the list, 
a security if the aggregate market value or the principal amount of 
bonds publicly held is less than $400,000. The Exchange is in the 
process of developing continued listing standards that apply 
specifically to hybrid securities such as the MITTS proposed herein. 
If the Exchange considers delisting the Top Ten Yield MITTS prior to 
adopting its own guidelines, the Exchange would consider NYSE's 
recently adopted continued listing standards when making its 
decision. These guidelines contain minimum criteria for public 
holders, aggregate market value, and publicly held shares. See 
Securities Exchange Act Release No. 37238 (May 22, 1996) (Order 
approving NYSE continued listing guidelines for hybrid securities). 
See also Amendment No. 2 supra note 7.
    \13\ The Top Ten Yield MITTS will entitle a holder at maturity 
to receive the principal amount of the MITTS plus a supplemental 
redemption amount based on the percentage increase, if any, in the 
Top Ten Yield Index over the Original Index Value (100). For 
example, if the Ending Index Value upon maturity is 148, the holder 
will receive $14.80 per $10 principal amount at maturity as follows:
    The supplemental redemption amount will in no event be less than 
an amount equal to $2.30 to $2.80 per $10 principal amount of the 
MITTS (the actual amount to be determined on the date the MITTS are 
priced by Merrill Lynch for initial sale to the public).

[[Page 42076]]

[GRAPHIC] [TIFF OMITTED] TN13AU96.000


    Top Ten Yield MITTS are cash-settled in U.S. dollars \14\ and do 
not give the holder any right to receive a portfolio security or any 
other ownership right or interest in the portfolio securities, although 
the return on the investment is based on the aggregate portfolio value 
of the Top Ten Index securities.
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    \14\ See Amendment No. 1, supra note 6.
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    Components of the Top Ten Yield Index approved pursuant to this 
filing will meet the following criteria: (1) A minimum market value of 
at least $75 million, except that up to 10% of the component securities 
in the Top Ten Yield Index may have a market value of $50 million; (2) 
average monthly trading volume in the last six months of not less than 
1,000,000 shares, except that up to 10% of the component securities in 
the Top Ten Yield Index may have an average monthly trading volume of 
500,000 shares or more in the last six months; (3) 90% of the Top Ten 
Yield Index's numerical value and at least 80% of the total number of 
component securities will meet the then current criteria for 
standardized option trading set forth in Exchange Rule 915; and (4) all 
component stocks will either be listed on the Amex, the New York Stock 
Exchange, or traded through the facilities of the National Association 
of Securities Dealers Automated Quotation System and reported National 
Market System securities.
    As of July 31, 1996, the market capitalization of the initial 
portfolio of securities representing the Top Ten Yield Index ranged 
from a high of $101.5 billion to a low of $11.2 billion. The average 
monthly trading volume for the last six months, as of the same date, 
ranged from a high of 57 million shares to a low of 13 million shares. 
Moreover, as of July 31, 1996, all of the components comprising the 
initial portfolio of securities representing the Top Ten Yield Index 
were eligible for standardized options trading pursuant to Amex Rule 
915.\15\
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    \15\ See Amendment No. 1, supra note 6.
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    At the outset, each of the securities in the Top Ten Yield Index 
will represent approximately an equal percentage of the starting value 
of the Index. Specifically, each security included in the portfolio 
will be assigned a multiplier on the date of issuance so that the 
security represents approximately an equal percentage of the value of 
the entire portfolio on the date of issuance. The multiplier indicates 
the number of shares (or fraction of one share) of a security, given 
its market price on an exchange or through NASDAQ, to be included in 
the calculation of the portfolio. Accordingly, initially each of the 10 
companies included in the Top Ten Yield Index will represent 
approximately 10-percent of the total portfolio at the time of 
issuance. The Top Ten Yield Index will initially be set to provide a 
benchmark value of 100.00 at the close of trading on the day preceding 
its selection.
    The value of the Index at any time will equal (i) The sum of the 
products of the current market price for each stock underlying the 
Index and the applicable share multiplier, plus (ii) an amount 
reflecting current calendar quarter dividends. Current quarter 
dividends for any day will be determined by the Amex and will equal the 
sum of each dividend paid by the issuer on one share of stock during 
the current calendar quarter multiplied by the share multiplier 
applicable to such stock at the time each such dividend is paid.
    As of the first day of the start of each calendar quarter, the Amex 
will allocate the current quarter dividends as of the end of the 
immediately preceding calendar quarter to each then outstanding 
components of the Top Ten Yield Index. The amount of the current 
quarter dividends allocated to each stock will equal the percentage of 
the value of such stock contained in the portfolio of securities 
comprising the Top Ten Yield Index relative to the value of the entire 
portfolio based on the closing market price of such stock on the last 
day in the immediately preceding calendar quarter. The share multiplier 
of each stock will be increased to reflect the number of shares, or 
portion of a share, that the amount of the current quarter dividend 
allocated to each stock can purchase of each stock based on the closing 
market price on the last day in the immediately preceding calendar 
quarter.
    At the end of each calendar quarter, the Index will be reduced by a 
value equal to 0.4375% of the then current Index, provided that (i) 
there will be no deduction at the end of the calendar quarter ending in 
September 1996 and the deduction at the end of the calendar quarter 
ending in December 1996 will be increased to reflect the quarterly rate 
of 0.4375% prorated for the period from the date of the issuance of the 
securities through the end of the calendar quarter in December 1996 and 
(ii) the index will be reduced at the close of business on July 31, 
2006 by a value equal to 0.1507% of the closing value of the Index on 
such date.\16\
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    \16\ This quarterly reduction to the value of the Index may 
potentially reduce the total return to investors upon redeeming Top 
Ten Yield MITTS at maturity. The Amex represents that an explanation 
of this quarterly deduction will be included in any marketing 
materials, fact sheets, or any other materials circulated to 
investors regarding the trading of this product. Telephone 
Conversation between Michael Bickford, Vice President, Capital 
Markets Group, Amex, and John Ayanian, Attorney, OMS, Market 
Regulation, Commission, on August 7, 1996.
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    As of the close of business on each anniversary date (anniversary 
of the date of the initial issuance of Top Ten Yield MITTS) through the 
applicable anniversary date in 2005, the portfolio of securities 
comprising the Top Ten Yield Index will be reconstituted by the Amex so 
as to include the ten common stocks in the DJIA having the highest 
dividend yield on the second scheduled index business day prior to such 
anniversary date. The Exchange will announce such changes to investors 
at least one day prior to the anniversary date.\17\
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    \17\ The Exchange will publish a ticker notice and issue a press 
release to advise investors of changes to the securities underlying 
the Index if any such changes are made following an annual 
reconstitution. Telephone conversation between Michael Bickford, 
Vice President, Capital Markets Group, Amex, and John Ayanian, 
Attorney, OMS, Market Regulation, Commission, on August 6, 1996. See 
Amendment No. 1, supra note 6.
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    The portfolio will be reconstituted and rebalanced on the 
anniversary date so that each stock in the Index will continue to 
represent 10% of the value of the Index. To effectuate this, the share 
multiplier for each new stock will

[[Page 42077]]

be determined by the Amex and will indicate the number of shares or 
fractional portion thereof of each new stock, given the closing market 
price of such new stock on the anniversary date, so that each new stock 
represents an equal percentage of the Index value at the close of 
business on such anniversary date. For example, if the Index value at 
the close of business on an anniversary date was 200, then each of the 
ten new stocks comprising the Top Ten Yield Index would be allocated a 
portion of the value of the Index equal to 20, and if the closing 
market price of one such new stock on the anniversary date was 40, the 
applicable share multiplier would be 0.5. Conversely, if the Index 
value was 80, then each of the ten new stocks comprising the Top Ten 
Yield Index would be allocated a portion of the value of the Index 
equal to 8, and if the closing market price of one such new stock on 
the anniversary was 40, the applicable share multiplier would be 0.2. 
The last anniversary date on which such reconstitution will occur will 
be the anniversary date in 2005, which will be approximately one year 
prior to the maturity date of the Top Ten Yield MITTS. As noted above, 
investors will receive information on the new portfolio of securities 
comprising the Top Ten Yield Index at least 1 day prior to each 
anniversary date.
    The multiplier of each component stock in the Top Ten Yield Index 
will remain fixed unless adjusted for quarterly dividend adjustments, 
annual reconstitutions or certain corporate events, such as payment of 
a dividend other than an ordinary cash dividend, a distribution of 
stock of another issuer to its shareholders,\18\ stock split, reverse 
stock split, and reorganization.\19\
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    \18\ If the issuer of a component security in the Top Ten Yield 
Index issues to all of its shareholders publicly traded stock of 
another issuer, such new securities will be added to the portfolio 
comprising the Top Ten Yield Index until the subsequent anniversary 
date. The multiplier for the new component will equal the product of 
the original issuer's multiplier and the number of shares of the new 
component issued with respect to one share of the original issuer.
    \19\ See Amendment No. 1, supra note 6.
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    The multiplier of each component stock may be adjusted, if 
necessary in the event of a merger, consolidation, dissolution or 
liquidation of an issuer or in certain other events such as the 
distribution of property by an issuer to shareholders. If the issuer of 
a stock included in the Index were to no longer exist, whether by 
reason of a merger, acquisition or similar type of corporate 
transaction, a value equal to the stock's final value will be assigned 
to the stock for the purpose of calculating the Index value prior to 
the subsequent anniversary date. For example, if a company included in 
the Index were acquired by another company, a value will be assigned to 
the company's stock equal to the value per share at the time the 
acquisition occurred. If the issuer of stock included in the Index is 
in the process of liquidation or subject to a bankruptcy proceeding, 
insolvency, or other similar adjudication, such security will continue 
to be included in the Index so long as a market price for such security 
is available or until the subsequent anniversary date. If a market 
price is no longer available for an Index stock due to circumstances 
including but not limited to, liquidation, bankruptcy, insolvency, or 
any other similar proceeding, then the security will be assigned a 
value of zero when calculating the Index for so long as no market price 
exists for that security or until the subsequent anniversary date. If 
the stock remains in the Index, the multiplier of that security in the 
Index may be adjusted to maintain the component's relative weight in 
the Index at the level immediately prior to the corporate action. In 
all cases, the multiplier will be adjusted, if necessary, to ensure 
Index continuity.
    The Exchange will calculate the Top Ten Yield Index and, 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. The Index value 
will equal the sum of the products of the most recently available 
market prices and the applicable multipliers for the component 
securities.
    Top Ten Yield MITTS may not be redeemed prior to maturity and are 
not callable by the issuer.\20\ Holders of Top Ten Yield MITTS will 
only be able to cash-out of their investment by selling the security on 
the Amex.
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    \20\ See Amendment No. 1, supra note 6.
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    Because Top Ten Yield MITTS are linked to a portfolio of equity 
securities, the Amex's existing equity floor trading rules will apply 
to the trading of Top Ten Yield MITTS. First, pursuant to Amex Rule 
411, the Exchange will impose a duty of due diligence on its members 
and member firms to learn the essential facts relating to every 
customer prior to trading Top Ten Yield MITTS.\21\ Second, Top Ten 
Yield MITTS will be subject to the equity margin rules of the 
Exchange.\22\ Third, in accordance with the Amex's Hybrid Approval 
Orders, the Exchange will, prior to trading Top Ten Yield MITTS, 
distribute a circular to the membership providing guidance with regard 
to member firm compliance responsibilities (including suitability 
recommendations) when handling transactions in Top Ten Yield MITTS and 
highlighting the special risks and characteristics of the Top Ten Yield 
MITTS.
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    \21\ See Amendment No. 1, supra note 6. Amex Rule 411 requires 
that every member, member firm or member corporation use due 
diligence to learn the essential facts relative to every customer 
and to every order or account accepted.
    \22\ Id.
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III. Commission 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). Specifically, the 
Commission believes that providing for exchange-trading of Top Ten 
Yield MITTS will offer a new and innovative means of participating in 
the market for high dividend yielding securities. In particular, the 
Commission believes that Top Ten Yield MITTS will permit investors to 
gain equity exposure in such companies, while at the same time, 
limiting the downside risk of the original investment. Accordingly, for 
the same reasons as discussed in the MITTS Approval Orders, the 
Commission finds that the listing and trading of Top Ten Yield MITTS is 
consistent with the Act.\23\
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    \23\ See MITTS Approval Orders, supra note 9.
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    As with other MITTS products, Top Ten Yield MITTS are not leveraged 
instruments, however, their price will still be derived and based upon 
the underlying linked security. Accordingly, the level of risk involved 
in the purchase or sale of a Top Ten Yield MITTS is similar to the risk 
involved in the purchase or sale of traditional common stock. 
Nonetheless, because the final rate of return of a MITTS is 
derivatively priced, based on the performance of a portfolio of 
securities, and the components of the Index are more likely to change 
each year, over a ten-year period, than other similar type MITTS 
products previously issued, there are several issues regarding the 
trading of this type of product.
    The Commission notes that the Exchange's rules and procedures that 
address the special concerns attendant to the trading of hybrid 
securities will be applicable to Top Ten Yield MITTS. In particular, by 
imposing the hybrid listing standards, suitability, disclosure, and 
compliance requirements noted above, the Commission believes the 
Exchange has addressed adequately the potential problems that could 
arise from

[[Page 42078]]

the hybrid nature of Top Ten Yield MITTS. Moreover, the Exchange will 
distribute a circular to its membership calling attention to the 
specific risks associated with Top Ten Yield MITTS.
    In approving the product, the Commission recognizes that unlike 
other previously approved MITTS, the components are more likely to 
change each year over the 10-year life of the product. Nevertheless, 
the Commission believes that this is acceptable because the Amex has 
clearly stated its guidelines and formula for replacing components from 
a specific, group of 30 well-known, and highly capitalized securities. 
Each year, as noted above, the portfolio of securities comprising the 
Top Ten Yield Index will represent the ten highest dividend yielding 
securities in the DJIA. Amex will do the calculation for replacements 
based on a set formula to determine which of the DJIA securities will 
be in the Index for the following year. The Commission believes that 
within these confines the potential frequent changes in the components 
of the Index are reasonable and will meet the expectation of investors.
    The Commission realizes that Top Ten Yield MITTS are dependent upon 
the individual credit of the issuer, Merrill Lynch. To some extent this 
credit risk is minimized by the Exchange's listing standards in Section 
107A of the Company Guide which provide the only issuers satisfying 
substantial asset and equity requirements may issue securities such as 
MITTS. In addition, the Exchange's hybrid listing standards further 
require that Top Ten Yield MITTS have at least $4 million in market 
value.\24\ In any event, financial information regarding Merrill Lynch, 
in addition to the information on the issuers of the underlying 
securities comprising the Top Ten Yield Index, will be publicly 
available.\25\
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    \24\ See Amex Company Guide Sec. 107A.
    \25\ The companies that comprise the Top Ten Yield Index are 
reporting companies under the Act.
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    The Commission also has a systemic concern, however, that a broker-
dealer, such as Merrill Lynch, or a subsidiary providing a hedge for 
the issuer will incur position exposure. As discussed in the MITTS 
Approval Orders, the Commission believes this concern is minimal given 
the size of Top Ten Yield MITTS issuance in relation to the net worth 
of Merrill Lynch.\26\
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    \26\ See MITTS Approval Orders, supra note 9.
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    The Commission also believes that the listing and trading of Top 
Ten Yield MITTS should not unduly impact the market for the underlying 
securities comprising the Top Ten Yield Index. First, the underlying 
securities comprising the DJIA, from which the Index components are 
selected, are well-capitalized, highly liquid stocks. Second, because 
all of the components of the Top Ten Yield Index will be equally 
weighted, initially and immediately following each annual 
reconstitution of the Index, no single stock or group of stocks will 
likely dominate the Top Ten Yield Index. Finally, the issuers of the 
underlying securities comprising the Top Ten Yield Index, are subject 
to reporting requirements under the Act, and all of the portfolio 
securities are either listed or traded on, or traded through the 
facilities of, U.S. securities markets. Additionally, the Amex's 
surveillance procedures will serve to deter as well as detect any 
potential manipulation.
    Finally, the Commission notes that the value of the Top Ten Yield 
Index will be disseminated at least once every 15 seconds throughout 
the trading day. The Commission believes that providing access to the 
value of the Top Ten Yield Index at least once every 15 seconds 
throughout the trading day is extremely important and will provide 
benefits to investors in the product.
    The Commission finds good cause for approving the proposed rule 
change and Amendment Nos. 1 and 2 to the proposed rule change prior to 
the thirtieth day after the date of publication of notice thereof in 
the Federal Register. The Amex has requested accelerated approval, in 
part, so that the product can be issued prior to the implementation of 
pending changes in the tax treatment of these products. In determining 
to grant the accelerated approval for good cause, the Commission notes 
that the Top Ten Yield Index is a portfolio of highly capitalized and 
actively traded securities similar to hybrid securities products that 
have been approved by the Commission for U.S. exchange trading.\27\ 
Additionally, Top Ten Yield MITTS will be listed pursuant to existing 
hybrid security listing standards as described above. Moreover, the 
Index's applicable equal-dollar weighting methodology is a commonly 
applied index calculation method. Finally, no comments to date have 
been received on the proposal, which was subject to a portion of the 
full 21 day notice and comment period.\28\ Based on the above, the 
Commission finds, consistent with Section 6(b) of the Act, that there 
is good cause for accelerated approval of the product.
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    \27\ See supra note 9.
    \28\ See Release No. 37444, supra note 5.
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    Amendment No. 1 to the proposed rule change provides the initial 
portfolio of securities comprising the Top Ten Yield Index, various 
specifications regarding the Top Ten Yield MITTS, and a detailed 
explanation of the calculation, adjustments, and reconstitution 
methodologies to be employed for the Top Ten Yield Index, as described 
above. Additionally, Amendment No. 1 provides that Top Ten Yield MITTS 
will be traded under the Exchange's equity rules, subject to equity 
margin requirements, and subject to Amex Rule 411, as described above. 
The Commission believes that Amendment No. 1, as described herein, 
clarifies and strengthens the Exchange's proposal by providing 
additional information, similar to that provided for other MITTS 
products previously approved by the Commission.
    Amendment No. 2 to the proposed rule change provides that the 
Exchange's continued listing guidelines are set forth in Sections 1001 
through 1003 of Part 10 to the Exchange's Company Guide. Among other 
things, the amendment notes that for distribution of the Top Ten Yield 
MITTS, the Exchange will rely on the continued listing guidelines for 
bonds in Section 1003(b)(iii). The Commission believes that Amendment 
No. 2 clarifies and strengthens the Exchange's proposal by stating the 
specific continued listing guidelines that will apply to these MITTS 
and should help to ensure a minimal level of depth and liquidity for 
continued trading of the product on the Amex.
    Accordingly, the Commission believes it is consistent with Section 
6(b)(5) of the Act to approve the proposed rule change and Amendment 
Nos. 1 and 2 to the proposed rule change on an accelerated basis.
    Interested persons are invited to submit written data, views and 
arguments concerning the proposed rule change and Amendment Nos. 1 and 
2 to the proposed rule change. 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

[[Page 42079]]

available for inspection and copying in the Commission's Public 
Reference Section, 450 Fifth Street, N.W., Washington, D.C. Copies of 
such filing will also be available for inspection and copying at the 
principal office of the Amex. All submissions should refer to File No. 
SR-Amex-96-28 and should be submitted by September 3, 1996.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\29\ that the proposed rule change (File No. SR-Amex-96-28), as 
amended, is approved, on an accelerated basis.

    \29\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\30\
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    \30\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-20574 Filed 8-12-96; 8:45 am]
BILLING CODE 8010-01-M