[Federal Register Volume 63, Number 102 (Thursday, May 28, 1998)]
[Notices]
[Pages 29270-29272]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-14020]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40008; File No. SR-Amex-98-17]


Self-Regulatory Organizations; Notice of Filing of Immediate 
Effectiveness of Proposed Rule Change by American Stock Exchange, Inc. 
Relating to the Listing and Trading of Warrants on the PaineWebber Oil 
& Gas Producers Index

May 19, 1998.
    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 April 29, 1998, the American Stock Exchange, Incorporated (``Amex'' 
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 Amex. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1)
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement Of The Terms of 
Substance of the The Proposed Rule Change

    The Amex proposes to list and trade warrants on the PaineWebber Oil 
& Gas Producers Index (``Index''), a narrow-based index developed by 
PaineWebber Incorporated currently comprised of stocks of 22 companies 
in the oil and gas industry. The text of the proposed rule change is 
available at the Office of the Secretary, Amex and at the 
Commission.\3\
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    \4\ The text of the proposed rule change contains a list of the 
component securities including the individual component security 
weights and average daily trading value and market capitalization 
for each security.
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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 self-regulatory organization 
included statements concerning the purpose of and basis for the 
proposed rule change and represented that no comments were 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
    The purpose of the proposed rule change is to permit the Amex to 
list and trade warrants on the Index. The Amex states that warrants on 
the Index are designed to provide investors with an investment vehicle 
to participate in or hedge against volatility associated with the 
ownership of stocks of companies in the oil and gas industry and 
decrease the risk involved in selecting individual stocks in this 
industry. The Amex filed this proposal pursuant to Section 19(b)(3)(A) 
of the Act, and Section 106 \4\ of the Amex Company Guide and Amex Rule 
901C, Commentary .02, which together provide for the commencement of 
the trading of warrants on the Index thirty days after the date of this 
filing. The proposal meets all the criteria set forth in Section 106 of 
the Amex Company Guide, Amex Rule 901C, Commentary .02 and the 
Commission's order approving Exchange Rule 910C.\5\
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    \4\ Section 106(j) of the Amex Company Guide provides that in 
order to list warrants on a stock index industry group pursuant to 
Section 19(b)(3)(A) of the Act, the Exchange may file for approval 
of a stock index industry group underlying a proposed warrant 
pursuant to the procedures and criteria set forth in Commentary .02 
to Exchange Rule 901C. (See also Securities Exchange Act Release No. 
34-37007 (March 21, 1996), 61 FR 14165 (March 29, 1996).
    \5\ See Securities Exchange Act Release No. 34157 (June 3, 
1994), 59 FR 30062 (June 10, 1994). Accordingly, the Exchange has 
represented that the proposed rule will not become operative for 30 
days after the date of this filing. The Exchange also has provided 
at least five business days notice to the Commission of its intent 
to file this proposed rule change.
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    Criteria Under Section 106 of the Amex Company Guide. Warrant 
issues on the Index will conform to the listing guidelines under 
Section 106 of the Amex Company Guide, 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 five 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.
    Criteria Under Exchange Rule 901C For Index Components. Pursuant to 
Commentary .02 to Exchange Rule 901C, (1) each of the component 
securities has a minimum market capitalization of at least $75 million 
and has a trading volume in each of the last six months of not less 
than 1,000,0000 shares; (2) the lesser of the five highest weighted 
component securities in the Index or the highest weighted component 
securities in the index that in the aggregate represent at least 30% of 
the total number of component securities in the index, each have an 
average monthly trading volume of at least 2,000,000 shares over the 
previous six months; (3) at least 90% of the Index's numerical index 
value and at least 80% of the total number of component securities meet 
the current criteria for standardized option trading set forth in 
Exchange Rule 915 (in fact, all of the component securities in the 
Index currently underlie standardized options); (4) the Index contains 
no American Depositary Receipts (``ADRs''); (5) all component stocks 
are listed on the Amex, the New York Stock Exchange (``NYSE''), or 
traded through the facilities of the National Association of Securities 
Dealers Automated Quotation System and are reported National Market 
System securities (``Nasdaq/NMS''); and (6) no component security 
represents more than 25% of the weight of the Index, and the five 
highest weighted component securities in the Index do not in the 
aggregate account for more than 60% of the weight of the Index.
    Index Design. The Index was designed by PaineWebber and will be 
maintained by the Amex. The Amex represents that the Index is a narrow-
based index currently comprised of stocks of 22 companies from the oil 
and gas industry. The total capitalization of the component securities 
in the Index as of April 21, 1998 was approximately $57 billion. The 
average capitalization on that date was approximately $2.6 billion. The 
individual market capitalization of the component securities ranges 
from $324 million to $9.9 billion. the components in the Index had a 
six month average daily trading volume of 7 million shares per day and 
ranged from 1.6 million shares per day to 13.2 million shares per day.
    Index Calculation. The Index is market capitalization-weighted such 
that the Index value is calculated by multiplying the primary exchange 
regular way last sale price of each component security by its number of 
shares outstanding, adding the sums

[[Page 29271]]

and dividing by the current index divisor.
    Maintenance of the Index. The Index will be maintained by the Amex. 
If necessary in order to maintain continuity of the Index, its divisor 
may be adjusted to reflect certain events relating to the component 
stocks. These events include, but are not limited to, stock 
distributions, stock splits, reverse stock splits, spin-offs, certain 
rights issuance, recapitalizations, reorganizations, and mergers and 
acquisitions.
    The Exchange will maintain the Index in accordance with Amex Rule 
901C, Commentary .02 so that, (1) the Index is comprised of not less 
than 15 underlying stocks, and not more than 29 underlying stocks; (2) 
component 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, may have 
minimum market capitalization of $50 million; (3) 90% of the Index's 
numerical index value and at least 80% of the total number of 
components will meet the then current criteria for standardized options 
trading set forth in Amex Rule 915; (4) foreign country securities or 
ADRs thereon that are not subject to comprehensive surveillance 
agreements will not in the aggregate represent more than 20% of the 
weight of the Index; (5) all component stocks will either be listed on 
the Amex, the NYSE, or Nasdaq/NMS; (6) no component security will 
represent more than 25% of the weight of the Index, and the five 
highest weighted components will not in the aggregate account for more 
than 60% of the Index; (7) trading volume of each component security 
shall be at least 500,000 shares for each of the last six months, or 
for each of the lowest weighted components that in aggregate account 
for no more than 10% of the weight of the Index, the monthly trading 
volume may be at least 400,000 shares for each of the last six months; 
and (8) the lesser of the five highest weighted component securities in 
the index or the highest weighted component securities in the index 
that in the aggregate represent at least 30% of the total number of 
stocks in the index shall have had an average monthly trading volume of 
at least 1,000,000 shares over the previous six months.
    Dissemination of the Index Value. Similar to other stock index 
values which underlie exchange-traded products, the value of the index 
will be calculated continuously and disseminated every 15 seconds over 
the Consolidated Tape Association's Network B.
    Warrant Expiration and Settlement. 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 index level. 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 index level. 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.
    Other Exchange Rules Applicable to Index Warrants. The listing and 
trading of warrants on the Index will comply in all respects to 
Exchange Rules 1100 through 1110 for the trading of stock index and 
currency warrants. These rules cover issues such as exercise and 
position limits and reporting requirements. Surveillance procedures 
currently used to monitor trading in each of the Exchange's other index 
warrants will also be used to monitor trading in warrants on the 
PaineWebber Oil & Gas Producers Index. The Index is deemed to be a 
Stock Index Industry Group under Rule 900C(b)(1). The Exchange expects 
that the review required by Rule 1107(b)(ii) will result in a position 
limit of 6,750,000 warrants.
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 designated to prevent fraudulent and manipulative acts 
and practices, to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in 
facilitating transactions in securities, and to remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system.

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.

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 foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act. The Amex may not list warrants for trading on 
the Index prior to 30 days after the date the proposed rule change was 
filed with the Commission.\6\ At any time within 60 days of the filing 
of such proposed rule change, the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in the furtherance of the purposes of the Act.
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    \6\ See Securities Exchange Act Release No. 34-34157 (June 3, 
1994), 59 FR 30062 (June 10, 1994).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. 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 in the 
Commission's Public Reference Room in Washington, DC. 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 
number SR-Amex-98-17 and should be submitted by June 12, 1998.


[[Page 29272]]


    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12)(1994).
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[FR Doc. 98-14020 Filed 5-27-98; 8:45 am]
BILLING CODE 8010-01-M