[Federal Register Volume 63, Number 154 (Tuesday, August 11, 1998)]
[Notices]
[Pages 42892-42896]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-21478]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40303; File No. SR-NYSE-98-22]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval to Proposed Rule Change by the New York 
Stock Exchange, Inc. Relating to Listing and Trading Broad InDex 
Guarded Equity-linked Securities on the Dow Jones Euro STOXX 50 Index

August 4, 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 July 24, 1998, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the NYSE. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons and to grant accelerated 
approval to he proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\17 CFR 240.19-4.
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I. Self-Regulatory Organization's Statement of the Term of 
Substance of the Proposed Rule Change

    The Exchange proposes to list for trading BRoad InDex Guarded 
Equity-linked Securities (``BRIDGES''),\3\ the return on which is based 
upon the performance of a 50-company index (the ``Dow Jones Euro STOXX 
50'' or ``DJES50'') that an affiliate of Dow Jones & Co.,Inc. 
Publishes. The companies comprising the DJES5O are highly-capitalized, 
``blue chip'' European companies.\4\
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    \3\ ``BRoad InDex Guarded Equity-linked Security'' and 
``BRIDGES'' are service marks of Morgan Stanley Dean Witter & Co. 
(``MSDW'').
    \4\ Appendix A to the NYSE's proposal, which is available at the 
Office of the Secretary, NYSE and at the Commission, lists he 50 
component companies of the DJES50 and identifies the home country 
and industry sector for each company, each company's relative 
weighting within the DJES50, each component company's price and 
capitalization average daily share volume over the past 12 months 
for each company.
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    The text of the proposed rule change is available at the Office of 
the Secretary, NYSE and at 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 NYSE included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it receive on the proposed rule change. The NYSE 
has prepared summaries, set forth in Sections A, B, and C below, of the 
most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of , and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Pursuant to the listing criteria set forth in Section 703.19 of the 
Exchange's Listed Company Manual, the Exchange lists and trades 
BRIDGES.\5\ BRIDGES are securities that entitle the holder to receive 
from the issue upon maturity pre-established percentage of the 
principal amount of the BRIDGES plus an amount based upon the increase

[[Page 42893]]

in the market value of a stock index or portfolio.\6\
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    \5\ Currently, the Exchanged lists and trades BRIDGES on the S&P 
500 and the Dow Jones Industrial Average.
    \6\The Commission has previously approved the listing and 
trading of hybrid securities similar to BRIDGES based upon 
portfolios of securities or stock indices. See e.g., Securities 
Exchange Act Release No 32840 (September 2, 1993), 58 FR 47485 
(September 9, 1993); 33368 (December 22, 1993), 58 FR 68975 
(December 29, 1993); 33495 (January 19, 1994), 59 FR 3883 (January 
27, 1994); 34692 (September 20, 1994), 59 FR 49267 (September 27, 
1994); 37533 (August 7. 1996), 61 FR 42075 (August 13, 1996); and 
37744 (September 27, 1996), 61 FR 52480 (October 7, 1996) (``Term 
Notes Approval Orders'').
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    The Exchange is submitting the proposed rule change specifically to 
enable the Exchange to list for trading BRIDGES on the DJES50 \7\ 
issued by MSD BRIDGES on the DJES50 will allow inventors to combine 
protection of a pre-established portion of the principal amount of the 
BRIDGES with potential additional payments based on an index of 
securities of selected companies. The first issue of BRIDGES on the 
DJES50 will provide that 100 percent of the principal amount thereof 
will be repaid at maturity. The Exchange will not list an issue of 
BRIDGES on the DJES50 with a pre-established repayment percentage of 
less than 90 percent without first consulting with the Commission.
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    \7\ The component stocks of the DOW Jones Euro STOXX 50 are: 
ABN-AMRO Hdlg NV, Aegon NV, Ahold NV, Air Liquide SA, Akzo Nobel, 
Alcatel Alsthom SA, Allianz, Allied Irish Bank, Assicurazioni 
Generali S.p.A., AXA-UAP SA, Banco Bilbao Vicaya, Bayer AG, 
Carrefour, Cie de St-Gobain, Credito Italiano, Dalmer-Benz AG, 
Deutsche Bank, Deutsche Lufthansa, Deutsche Telecom, Electrabel SA, 
ELF Aquitane, Elsevier NV, Endesa SA, ENI S.p.A., Fiat S.p.A., 
Fortis AG, France Telecom, ING Groep NV, Koninklijke PTT NV, LVMH 
Moet-Hennesey Louis Vuitton, L'Oreal, Mannesmann AG, Meto AG, Nokia 
AB Oy A, Parisbas,Petrofina SA, Philips Electronics, Portugal 
Telecom SA, Repsol SA, Rhone-Poulenc A, Royal Dutch Petroelum, RWE 
AG, Schneider SA, Siemens AG, Societe Generale, Telecom Italia, 
Telefonica de Espana, Unilever NV, Veba AG, and Vivendi.
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The Security

    BRIDGES on the DJES50 will be denominated in U.S. dollars \8\ and 
will entitle the owner at maturity to receive the pre-established 
percentage of the issue's principal amount plus an additional amount 
(the ``Supplemental Redemption Amount'') that is based upon the 
percentage increase, if any, between the ``Initial Index Value'' and 
the ``Final Index Value,'' The Initial Index Value is the value of the 
DJES50 on the date on which the issuer prices the BRIDGES issue for the 
initial offering to the public. The Final Index Value will equal the 
arithmetic average of the closing values of the DJES50 on each of 
multiple determination dates spread out over the period prior to the 
maturity of the BRIDGES issue. For instance, the first issuance of 
BRIDGES on the DJES50 will have three determination dates spread out 
over the two years prior to the issue's maturity date. Thus, the 
Supplemental Redemption Amount requires the following calculation:
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    \8\ The prices of the securities underlying the DJES50 are 
quoted in currencies other than U.S. dollars. Therefore, investments 
in securities indexed to the value of non-U.S. securities may 
involve greater risks, subject to fluctuations of foreign exchange 
rates, future foreign political and economic developments, and the 
possible imposition of exchange controls or other foreign 
governmental laws or restrictions applicable to such investments.
[GRAPHIC] [TIFF OMITTED] TN11AU98.002

    If the Final Index Value of the DJES50 is below the Initial Index 
Value of the DJES50, the owner will receive not less than the specified 
percentage of the principal amount of the security. For instance, if 
the market value of the DJES50 used to calculate the amount payable at 
maturity has declined, the owners of the first issue of BRIDGES on the 
DJES50 will still receive 100 percent of the principal amount of the 
securities.\9\ The additional payment at maturity is based on changes 
in the value of the DJES50.
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    \9\ As noted above, the NYSE has stated that the first issue of 
BRIDGES on the DJES50 will provide 100% principal guarantee. The 
Commission notes that subsequent issues must guarantee at least 90% 
of the principal unless a lesser amount is permitted after 
consultation with Commission staff.
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    As with other BRIDGES, BRIDGES on the DJES50 may not be redeemed 
prior to maturity and are not callable by the issuer. Owners may sell 
the security on the Exchange. The Exchange anticipates that the trading 
value of the security in the secondary market will depend in large part 
on the value of the DJES50 and also on other factors, including the 
level of interest rates, the volatility of the value of the DJES50, the 
time remaining to maturity, dividend rates and the creditworthiness of 
the issuer.
    In accordance with Section 703.19 of the Exchange's Listed Company 
Manual, the Exchange only will list for trading BRIDGES on the DJES50 
if there are at least one million outstanding securities, at least 400 
shareholders, the issue has a minimum life of one year and at least a 
$4 million market value and if the BRIDGES otherwise comply with the 
Exchange's initial listing criteria.\10\ In addition, the Exchange will 
monitor each issue to verify that it complies with the Exchange's 
continued listing criteria.\11\
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    \10\ The hybrid listing standards in Section 703.19 of the 
Listed Company Manual are intended to accommodate listed companies 
in good standing, their subsidiaries and affiliates, and non-listed 
companies which meet the Exchange's original listing standards. 
Issuers must also meet the earnings and net tangible assets criteria 
set forth in Sections 102.01-102.03 of the Listed Company Manual. 
Specifically, the minimum original listing criteria requires that 
issuers have: (1) 2,000 shareholders holding 100 shares or more, or 
have 2,200 shareholders and an average monthly trading volume of 
100,000 shares for the most recent 6 months, or 500 shareholders and 
an average monthly trading volume of 1,000,000 shares for the most 
recent 12 months; (2) a public float of 1.1 million shares; (3) an 
aggregate public market value of $40 million or total net tangible 
assets of $40 million; and (4) earnings before taxes of $2.5 million 
in the latest fiscal year and earnings before taxes of $2 million in 
each of the preceding two fiscal years, or earnings before taxes of 
$6.5 million in the aggregate for the last three fiscal years with a 
$4.5 million minimum in the most recent fiscal year (all three years 
are required to be profitable). See NYSE Listed Company Manual 
Sec. 102.01.
    \11\ The continued listing standards for Specialized Securities 
provide that the NYSE will consider delisting a security when: (1) 
the number of publicly-held shares is less than 100,000; (2) the 
number of holders is less than 100; (3) the aggregate market value 
of the securities outstanding is less than $1,000,000; or (4) in the 
case of specialized securities which are debt, the issuer is not 
able to meet its obligations on such debt. See NYSE Listed Company 
Manual Sec. 802.00.
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    MSDW will deposit registered global securities representing BRIDGES 
on the DJES50 with its depositary, The Depository Trust Company, so as 
to permit book-entry settlement of transactions by participants in The 
Depository Trust Company.
    BRIDGES on the DJES50 will trade on the Exchange's equity floor, 
subject to the margin and other trading rules that apply to equity 
trading on the Exchange. Specifically, pursuant to NYSE Rule 405, 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

[[Page 42894]]

trading BRIDGES on the DJES50.\12\
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    \12\ NYSE Rule 405 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.
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The Index

    The DJES50 was launched by STOXX Ltd., a company jointly founded by 
Schweizer Borse, SBF-Bourse de Paris, Deutsche Borse, and Dow Jones & 
Co., Inc. (``STOXX'') on February 26, 1998, to create, distribute and 
market European indexes and to market Dow Jones indexes. STOXX is not a 
broker/dealer.
    STOXX constructed the DJES50 to have an initial value of 1000 at 
December 31, 1991 and designed it to measure the stock market 
performance of highly-capitalized companies of countries that are 
expected to participate in the European Economic and Monetary Union 
(the ``EMU''), which is scheduled to commence on January 1, 1999. The 
index is calculated and disseminated on a real-time basis every 15 
seconds and is published daily in The Wall Street Journal.
    The NYSE represents that the DJES50 consists of the common stock of 
companies that are leaders in their industry sectors and are among the 
largest in market capitalization, and the highest in liquidity, among 
the companies of the eleven countries that are likely to be the initial 
member states of the EMU. Currently, nine of those eleven countries are 
represented in the DJES50. Each component company is a major factor in 
its industry and its securities are widely held by individuals and 
institutional investors.
    The Exchange believes that adequate surveillance exists for the 
component stocks as a result of ``Surveillance Information Sharing 
Arrangements'' with appropriate entities in component stocks' home 
countries. Surveillance Information Sharing Arrangements include 
surveillance information-sharing agreements that the Exchange has 
entered into with foreign markets, memoranda of understanding that the 
SEC has entered into with foreign securities regulatory agencies and 
similar agreements and arrangements between the United States or the 
SEC and their counterparts in the home countries for companies whose 
securities are components of the DJES50.
    At present, in excess of 95 percent of the capitalization of the 
DJES50 is subject to Surveillance Information Sharing Arrangements. The 
Exchange will not list a new issue of BRIDGES on the DJES50 if either:

    (i) The home countries of component securities representing more 
than 50 percent of the capitalization of the DJES50 are not subject 
to Surveillance Information Sharing Arrangements;
    (ii) A home country of component securities representing more 
than 20 percent of the capitalization of the DJES50 is not subject 
to Surveillance Information Sharing Arrangements; or
    (iii) Two home countries of component securities representing 
more than 33\1/3\ percent of the capitalization of the DJES50 are 
not subject to Surveillance Information Sharing Arrangements.

    Companies are selected for inclusion in the calculation of the 
DJES50 by its proprietor, STOXX. The companies that are included in the 
DJES50 are representative of the broad market in the EMU and of a wide 
array of European industries within the following industry sectors: 
automobile; food and beverage; banking; industrial; chemical; 
insurance; conglomerates; media; consumer goods; cyclical; 
pharmaceutical; non-cyclical; retail; construction; technology; energy; 
telecommunications; financial services; and utility.
    The Supervisory Board of STOXX is responsible for adding and 
deleting companies from the DJES50. That board selects stocks that they 
believe, in their subjective discretion, to be representative of 
highly-capitalized, highly-liquid blue chip companies that are 
representative of a variety of industry sectors in the EMU countries. 
Neither STOXX nor any of its founders is affiliated with MSDW.
    The DJES50 is a capitalization-weighted index. The number of shares 
outstanding and the share price for each class of stock are used to 
determine each component company's market capitalization. No company 
may comprise more than 10 percent of the value of the index. Currently, 
Royal Dutch Shell represents 7.76 percent of the DJES50, more than any 
other company. If any company exceeds 10 percent of the value of the 
index, STOXX will cap that company's representation in the index at 10 
percent and adjust the relative representation of the remaining 
component stocks so that they represent the remaining 90 percent. In 
order to avoid distortions, changes in the index for dividends, stock 
splits, rights offerings, spin-offs, repurchases and the like are made 
on a quarterly basis, unless the number of outstanding shares of a 
component company changes by more than 10 percent, in which case the 
adjustment is made immediately.
    The market capitalization of the 50 companies that currently 
represent the DJES50 differs significantly from a high of $180 billion 
(Bayer AG) to a low of $7.7 billion (RWE AG), as do the market prices 
of their common stock from a high of $591.64 (Carrefour) to a low of 
$4.58 (Fiat Spa).\13\ The ten companies with the highest weighting in 
the DJES50 represent 40.43 percent of the DJES50.\14\ The ten companies 
with the smallest weighting in the DJES50 calculation represent 7.75 
percent of the DJES50.
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    \13\ These values are as of June 1, 1998.
    \14\ As noted above, the highest weighted component of the 
DJES50 represents 7.76 percent of the weight of the index. In 
addition, the top 5 highest weighted securities in the index 
represent 24.55 percent of the weight of the index.
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    Also as of June 1, 1998, the nine countries that are represented in 
the Index accounted for the following percentages of the Index: Germany 
(27.28 percent); The Netherlands (26.22 percent); France (23.41 
percent); Italy (10.06 percent); Spain (7.70 percent); Belgium (2.23 
percent); Finland (1.77 percent); Ireland (0.70 percent); and Portugal 
(0.63 percent).
    Real-time prices from the primary market for each company in its 
home country will be used to calculate DJES50 index values.\15\ Until 
January 1, 1999, the value of the index will be determined in European 
currency units (``ECU's''). The Telerate Reporting Service, at 11:45 
a.m., New York time, will be used to convert the prices of component 
stocks (initially reported in the currency of the company's primary 
market) into ECU values. After the EMU introduces the euro currency on 
January 1, 1999, the index will be calculated in euros, with currency 
conversions made at the exchange rates prescribed by EMU law. As a 
result, changes in exchange rates between the U.S. dollar and ECU's or 
euros will not affect the percentage increase or decrease in the value 
of the DJES50 over the life of the BRIDGES.
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    \15\ Appendix A identifies those primary markets for all 
component companies. See supra note 4.
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    DJES50 index values will be disseminated every 15 seconds. Insofar 
as a component security trades on its home country's primary market 
during NYSE trading hours, each index calculation will use the last 
sale price from that market for the security, the value of which will 
be converted into ECUs or euros, as discussed above. Otherwise, the 
most recent closing price on that primary market will be used. Prior to 
trading BRIDGES on the DJES50, the Exchange will distribute a circular 
to its membership highlighting the special risks associated with the 
trading the product.\16\
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    \16\ Telephone conversation between Vincent F. Patten, Assistant 
Vice President, Investment Banking Division and New Products, NYSE: 
James T. McHale, Special Counsel, Division of Market Regulation 
(``Division''), SEC and David Sieradzki, Attorney, Division, SEC on 
July 31, 1998.

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[[Page 42895]]

The Issuer

    The Exchange has determined that the issuer of the BRIDGES on the 
DJES50, MSDW, meets the listing criteria set forth in Section 703.19 of 
the Exchange's Listed Company Manual.\17\ It is an Exchange-listed 
company in good standing and has sufficient assets to justify the 
issuance of BRIDGES offerings of the size contemplated by the proposed 
rule change.
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    \17\ See supra note 9.
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2. Statutory Basis
    The basis under the Act for the proposed rule change is the 
requirement under Section 6(b)(5)\18\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest.
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    \18\ 15 U.S.C. 78f(b)(5).
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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 that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. 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 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 in 
the Commission's Public Reference Room at 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 at the NYSE. All 
submissions should refer to File No. SR-NYSE-98-22 and should be 
submitted by September 1, 1998.

IV. Commission's Findings and Order Granting Accelerated Approval 
of Proposed Rule Change

    The Commission finds that the proposed rule change is consistent 
with the Act and the rules and regulations thereunder applicable to a 
national securities exchange, and, in particular, with the requirements 
of Section 6(b)(5) of the Act.\19\ Specifically, the Commission 
believes that providing for exchange-trading of BRIDGES on the DJES50 
\20\ will offer a new and innovative means of participating in the 
market for securities of companies from countries that are expected to 
participate in the EMU. In particular, the Commission believes that 
BRIDGES on the DJES50 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 Term Notes Approval Orders,\21\ the Commission finds that the 
listing and trading of BRIDGES on the DJES50 is consistent with the 
Act.\22\
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    \19\ 15 U.S.C. 78f(b)(5).
    \20\ The Commission notes that this approval order is limited to 
the BRIDGES product; separate Commission approval would be required 
for the Exchange to list and trade any option or warrant product 
based on the DJES50.
    \21\ See Term Notes Approval orders, supra note 6
    \22\ In approving this rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
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    As with other derivative products similar to BRIDGES, BRIDGES on 
the DJES50 are not leveraged instruments, however, their price will 
still be derived from the based upon the underlying linked security. 
Accordingly, the level of risk involved in the purchase or sale of 
BRIDGES on the DJES50 is similar to the risk involved in the purchase 
or sale of traditional common stock. Nonetheless, because the final rte 
of return of BRIDGES is derivatively priced, based on the performance 
of a portfolio of securities, there are several issues regarding the 
trading of this type of product.
    The Commission believes that the Exchange has adequately addressed 
these issues. First, 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 BRIDGES on the DJES50. In 
particular, by imposing the hybrid listing standards, and the 
suitability, disclosure, and compliance requirements noted above, the 
Commission believes the Exchange has addressed adequately the potential 
problems that could arise from the hybrid nature of BRIDGES on the 
DJES50. Moreover, the Exchange will distribute a circular to its 
membership calling attention to the specific risks associated with 
BRIDGES on the DJES50. In particular, the circular will highlight, 
among other things, that the BRIDGES on the DJES50 allow investors to 
participate in appreciation only to the extent that the DJES50 
outperforms the initial index value based on the average of 3 pre-
selected separate dates that occur throughout the life of the BRIDGES.
    Second, BRIDGES on the DJES50 remain a non-leveraged product with 
the issuer guaranteeing no less than 90 percent of principal 
return.\23\ The Commission realizes that the final payout on the 
BRIDGES on the DJES50 is dependent in part upon the individual credit 
of the issuer. To some extent this credit risk is minimized by the 
Exchange's listing standards in Section 703.19 of the NYSE's Listed 
Company Manual which provide that only issuers satisfying substantial 
asset and equity requirements may issue securities such as BRIDGES.\24\ 
In addition, the Exchange's hybrid listing standards further require 
that the proposed indexed term notes have at least $4 million in market 
value.\25\ In any event, financial information regarding the issuer, in 
addition to information on the underlying securities, will be publicly 
available to investors.
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    \23\ As noted above, the NYSE may not list for trading BRIDGES 
with less than a 90% principal guarantee without first consulting 
with the Commission. For example, the Commission may determine that 
BRIDGES with less than a 90% principal guarantee should only be sold 
to customers meeting certain heightened account approval and 
suitability requirements.
    \24\ See supra note 9 and accompanying text.
    \25\ See NYSE Listed Company Manual Sec. 703.19.
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    Third, the component securities in the Index are highly-
capitalized, actively-traded European stocks. In addition, the 
components are all publicly traded on the home country's primary 
market.\26\ Accordingly, both the history and performance of these 
securities, as well as current pricing trends, should be

[[Page 42896]]

readily available through a variety of public sources.
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    \26\ See Appendix A.
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    Further, the Commission notes that the value of the DJES50 will be 
disseminated on a real time basis at least once every 15 seconds 
throughout the trading day. The Commission believes that this 
information will be extremely useful and beneficial for investors in 
DJES50 BRIDGES. Although the BRIDGES are denominated in U.S. dollars, 
as noted above, the index value, until January 1, 1999, will be derived 
from converting the value of each security from its home currency into 
ECUs. After the EMU introduces the euro currency on January 1, 1999, 
the index will be calculated in euros, with currency conversions made 
at the exchange rates prescribed by EMU law. The Commission believes 
that valuing all the index components using the ECU or euros, as 
appropriate, is permissible since the same methodology for valuing the 
index will be used throughout the life of the BRIDGES. Nevertheless, 
the fact that the index value does not reflect U.S. dollars and 
contains currency risk will be highlighted in the circular to 
members.\27\
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    \27\ Telephone conversation between Vincent F. Patten, Assistant 
Vice President, Investment Banking Division and New Products, NYSE; 
James T. McHale, Special Counsel, Division, SEC and David Sieradzki, 
Attorney, Division, SEC on July 31, 1998.
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    Fourth, while the Commission has a systematic concern that a 
broker-dealer or a subsidiary providing a hedge for the issuer will 
incur position exposure, the Commission believes this concern is 
minimal given the size of the proposed BRIDGES issuance in relation to 
the net worth of the issuer.\28\
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    \28\ See Term Notes Approval Orders, supra note 6.
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    Finally, the Exchange's surveillance procedures will serve to deter 
as well as detect any potential manipulation. As noted above, NYSE 
represents that it has in place surveillance sharing arrangements with 
the appropriate regulatory organizations in countries representing over 
95 percent of the capitalization of the DJES50. Further, if the 
surveillance coverage should fall below certain levels, as discussed 
above, no new BRIDGES will be listed. This should help to ensure that 
adequate surveillance mechanisms exist in the future.
    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice thereof in the Federal Register. Specifically, the Commission 
believes that the proposal does not raise any regulatory issues that 
were not addressed by the Term Notes Approval Orders. In addition, to 
the extent that the DJES50 has certain characteristics that differ from 
the previous Term Notes Approval Orders, the Commission believes that 
the NYSE has adequately addressed those issues. Accordingly, the 
Commission believes that good cause exists, consistent with Section 
6(b)(5) and Section 19(b)(2) of the Act, to grant accelerated approval 
to the proposed rule change.\29\
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    \29\ 15 u.S.C. 78f(b)(5) and 78s(b)(2).
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    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the Act, 
\30\ that the proposed rule change (SR-NYSE-98-22) is approved on an 
accelerated basis.

    \30\ 15 u.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 98-21478 Filed 8-6-98; 8:45 am]
BILLING CODE 8010-01-M