[Federal Register Volume 63, Number 156 (Thursday, August 13, 1998)]
[Notices]
[Pages 43435-43439]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-21721]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40298; File Nos. SR-Amex-98-28; SR-CBOE-98-32; and SR-
Phlx-98-33]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change and Related 
Amendments by the American Stock Exchange, Incorporated, the Chicago 
Board Options Exchange, Incorporated and the Philadelphia Stock 
Exchange, Incorporated Relating to the Listing and Trading of Options 
on Telebras Holding Company Depositary Receipts SM

August 3, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
\1\

[[Page 43436]]

(``Act'') and Rule 19b-4 \2\ thereunder, on July 10, 1998, July 16, 
1998 and July 28, 1998, the Chicago Board Options Exchange, 
Incorporated (``CBOE''), the American Stock Exchange, Incorporated 
(``Amex'') and the Philadelphia Stock Exchange, Incorporated 
(``Phlx''), respectively, filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule changes, as 
described in Items I and II below, which Items have been prepared by 
the self-regulatory organizations (``SROs''), to permit the listing and 
trading of standardized equity options on Telebras Holding Company 
Depositary ReceiptsSM (``HOLDRs''),\3\ as described below.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ ``HOLDRs'' and ``Holding Company Depositary Receipts'' are 
service marks of Merrill Lynch & Co., Inc. (``Merrill Lynch'').
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    On July 28, 1998 and July 31, 1998 the Amex and the CBOE, 
respectively submitted amendments to their proposed rule changes.\4\ 
This order approves the proposed rule changes, and Amex Amendment No. 1 
and CBOE Amendment No. 1 on an accelerated basis.
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    \4\ See Letter from Claire P. McGrath, Vice President and 
Special Counsel, Amex to Michael Walinskas, Deputy Associate 
Director, Division of Market Regulation (`'Division'') SEC dated 
July 28, 1998 (``Amex Amendment No. 1'') and Letter from Eileen 
Smith to Michael Walinskas, Deputy Associate Director, Division, 
SEC, July 31, 1998 (``CBOE Amendment No. 1''). Amex Amendment No. 1 
clarifies the procedures to be followed in the event that a 
surveillance sharing arrangement with Brazil ceases to exist. CBOE 
Amendment No. 1 clarifies, among other things, the price and trading 
volume requirements that HOLDRs must satisfy in order to permit 
options trading overlying HOLDRs
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The SROs propose to list and trade standardized equity options on 
HOLDRs, as described below. The texts of the proposed rule changes are 
available at the Office of the Secretary, Amex, CBOE and Phlx, 
respectively, and at the Commission.

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

    In their filings with the Commission, the SROs included statements 
concerning the purpose of and basis for the proposed rule changes and 
discussed any comments they received on the proposed rule change. The 
text of those statements may be examined at the places specified in 
Item IV below and summaries of the most significant aspects are set 
forth in sections (A), (B), and (C) below.

(A) Self-Regulatory Organizations' Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Telecommunicacoes Brasileiras S.A. (``Telebras'') is a corporation 
organized under the laws of the Federative Republic of Brazil. Prior to 
July 28, 1998, Telebras was wholly-owned by the government of Brazil. 
HOLDRs are American Depositary Receipts (``ADRs'') intended to 
represent the American Depositary Shares (``ADSs'') of Telebras 
currently listed on the NYSE, until such time as Telebras spins off 
twelve companies (``Reorganization'').\5\ More specifically, HOLDRs are 
designed to provide current Telebras ADS owners with a single, exchange 
traded instrument that is intended to represent, as each spin-off 
occurs in connection with the Reorganization, (whether concurrently or 
in tranches), the ADSs of each spin-off company (``Spin-Off ADSs'') and 
Telebras ADSs (collectively with the Spin-Off ADSs, known as the 
``Securities'') until the Telebras ADSs are extinguished. After the 
Telebras ADSs are extinguished, HOLDRs will represent all the Spin-Off 
ADSs. HOLDRs will be a separately registered security, with a separate 
CUSIP number, from each of the Spin-Off ADSs.
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    \5\ The government of Brazil divested its interest in Telebras 
through a public auction in Brazil that commenced on July 28, 1998. 
Subsequent to the auction, Telebras will be divided into 12 spin-off 
companies. After all 12 spin-offs are completed, Telebras, and 
therefore Telebras ADSs, may continue to exist for a limited period 
of time, but both eventually will be extinguished. The NYSE listed 
HOLDRs on July 28, 1998.
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    In order to purchase HOLDRs before the Reorganization, existing 
beneficial owners of Telebras ADSs may elect to deposit their Telebras 
ADSs with The Bank of New York as depositary (``Depositary'') in return 
for one HOLDR for each Telebras ADS as deposited.\6\ After the spin-
offs occur, either concurrently or in tranches, beneficial owners of 
Telebras ADSs also may deposit their Telebras ADSs (until they are 
extinguished) with the Depositary, along with their newly acquired 
Spin-Off ADSs, in order to receive HOLDRs. The beneficial owners of the 
HOLDRs registered on the books of the Depositary (``Owners'') will only 
be able to trade the HOLDRs themselves, which, in effect, will 
constitute a trade of a basket of the Securities. If an Owner of HOLDRs 
desires to buy or sell some but not all of the Securities the HOLDRs 
represent at that time.
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    \6\ A copy of the Deposit Agreement and Form F-6 (Registration 
No. 333-8840) has been filed with the Commission, declared effective 
on July 21, 1998 and is publicly available.
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    Currently, the SROs provide for the trading of standardized equity 
options overlying the Telebras ADSs. Telebras is the most active stock 
in Brazil, trading 22 million shares per day and accounting for 55% of 
the total value of trade on the Bolsa de Valores de Sao Paolo 
(``Bovespa''). Prior to July 28, 1998, Telebras ADSs were trading at 
approximately $115 per share with 96 million ADSs outstanding and 
40,000 holders, with average daily trading volume of 3.5 million 
shares, and annual volume during the preceding twelve months equal to 
approximately 892 million shares.\7\ Since July 28, 1998, Telebras ADSs 
have been trading at approximately $125 per share with an average daily 
trading volume of approximately 8.2 million shares.\8\ In addition, 
options on Telebras ADSs are the sixth most active option class in the 
U.S., with an average daily trading volume of 23,400 contracts and an 
open interest of 415,000 contracts.
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    \7\ Data provided by Bridge Data Company for the period July 1, 
1997 through June 30, 1998.
    \8\ Data provided by Reuters and Bloomberg L.P. for the period 
after July 28, 1998.
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    The SROs now propose to trade options on HOLDRs pursuant to Amex 
Rule 915. CBOE Rule 5.3 and Phlx Rule 1009 (collectively, the ``SRO 
Rules''), respectively.\9\ The SROs, however, have requested to rely 
upon the trading volume and market price history of Telebras ADSs for 
purposes of satisfying the associated requirements under the SRO Rules. 
Commentary .01 of the SRO Rules \10\ requires that, absent exceptional 
circumstances, at the time the SRO selects an underlying security for 
options transactions, the following guidelines with respect to the 
issuer shall be met: (1) there are a minimum of 7 million shares of the 
underlying securities which are owned by persons other than those 
required to report their security holding under Section 16(a) of the 
Act (``Public Ownership Requirement''); (2) there are a minimum of 
2,000 holders of the underlying security (``Public Holder 
Requirement''); (3) there is trading volume (in all markets in which 
the underlying security is traded) of a least 2.4 million shares during 
the preceding 12 months (``Volume Requirement''); (4) the market price 
per share of the underlying security has been at least $7.50 for the

[[Page 43437]]

majority of business days during the three calendar months preceding 
the date of selection (``Price Requirement''); (5) the issuer is in 
compliance with any applicable requirements of the Act. Unless the 
SROs' request to rely upon the price history of Telebras ADSs in order 
to satisfy the Price Requirement applicable to options on HOLDRs is 
approved, the SROs would be required to wait at least three months 
prior to listing options on HOLDRs. The SROs believe, however, that it 
is essential that options on HOLDRs be provided without significant 
delay so that investors who have exchanged their Telebras ADSs for 
HOLDRs can use options to manage the risks of their positions in 
HOLDRs.
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    \9\ The SROs have already filed certification with the Options 
Clearing corporation for options on HOLDRs.
    \10\ The Amex and Phlx Rules refer to ``Commentaries'' while the 
CBOE Rules refer to ``Interpretations and Policies.'' For purposes 
of this order, the term ``Commentary'' will be used for all SRO 
Rules.
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    Commentary .03 of the SRO Rules requires that with respect to an 
ADR, an effective surveillance sharing arrangement be in place with the 
proper regulatory authority in the country where the security 
underlying the ADR trades or, as one of several alternatives, as the 
Commission otherwise authorizes the listing. The SROs note that the 
Commission has entered into a Memorandum of Understanding (``MOU'') 
with the Comissao de Valores Mobiliarios (``CVM'') in Brazil. In 
addition, the Amex represents that it has a surveillance sharing 
agreement (``SSA'') with the Bovespa. The CBOE represents that it has 
an SSA with the Bovespa and the Rio de Janeiro Stock Exchange 
(``RJSE'').\11\ The Phlx does not have an SSA with the Bovespa or the 
RJSE. If the MOU ceases to exist, each SRO represents that it will 
contact the Commission immediately in order to enable the Commission to 
determine what measures should be taken with regards to the listing and 
trading of options on HOLDRs.\12\
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    \11\ The Amex makes this representation in Amex Amendment No. 1 
and the CBOE makes this representation in CBOE Amendment No. 1.
    \12\ In the case of the Amex and CBOE, if the SSAs cease to 
exist but the MOU is still effective, they are not required to 
notify the Commission.
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    Commentary .05(d) of the SRO Rules, which applies to options on 
securities issued during a restructuring transaction that are sold in a 
public offering or pursuant to a rights distribution (``Restructure 
Security''), provides that an SRO may ``look back'' to the ``original'' 
security regarding the Public Ownership Requirement and Public Holder 
Requirement subject to certain conditions enumerated in the SRO Rules. 
Commentary .05(d) also provides that an SRO may certify that the market 
price of the Restructure Security meets the Price Requirement by 
replying on the price history of the original security, provided that 
the Restructure Security has traded ``regular way'' on an exchange or 
automatic quotation system for at least five trading days immediately 
preceding the date of selection and has a market price of at least 
$7.50. Finally, Commentary .05(d) provides that an SRO may certify that 
the trading volume of the Restructure Security satisfies the Volume 
Requirement only if the trading volume in the Restructure Security, 
without reliance on the original security, has been at least 2.4 
million shares during a period of 12 months or less ending on the date 
of the Restructure Security is selected for options trading.\13\
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    \13\ The Restructure Security cannot piggyback upon the trading 
volume of the original security. Accordingly, the SROs cannot select 
a Restructure Security for options listing until 2.4 million shares 
of the Restructure Security actually have traded.
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    Initial reports indicate that at least 40 million shares of HOLDRs 
have been issued, with at least 2,000 public holders,\14\ and that 
HOLDRs have been trading near the current market price for Telebras 
ADSs after July 28, 1998 (approximately $125) with an average daily 
trading volume of approximately 3.4 million shares.\15\ In addition, 
the SROs state that although HOLDRs is a unique product, it resembles 
shares issued during a restructuring transaction. Therefore, the SROs 
believe that they should be allowed to rely on the price history of the 
original security. Accordingly, the SROs represent that HOLDRs will 
comply with the requirement that its market price be at least $7.50 for 
at least 5 trading days immediately prior to the listing date in order 
to rely upon the market price history of the original security to 
satisfy the three month Price Requirement. Thus, the SROs assert that 
options should be permitted to be listed on HOLDRs on the sixth day 
following the five day Price Requirement Period, provided that all 
other options listing criteria, including that HOLDRs has traded 2.4 
million shares, have been met.\16\
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    \14\ Data provided by Merrill Lynch. See CBOE Amendment No. 1.
    \15\ Data provided by Reuters and Bloomberg L.P.
    \16\ Phone call between Nadita Yagnik, Counsel, Phlx and 
Marianne Duffy, Special Counsel, Division, SEC on August 3, 1998 and 
phone call between Scott Van Hatten, Legal Counsel, and Marianne 
Duffy, Special Counsel, Division, SEC on August 3, 1998.
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    The SROs believe that review under their respective rules will 
result in the establishment of position and exercise limits for the 
options overlying HOLDRs equal to 25,000 contracts on the same side of 
the market. Prior to the commencement of trading, the SROs will issue 
an Information Circular advising their concerning the proposed options 
on Telebras HOLDRs.
(2) Statutory Basis
    The basis under the Act of the proposed rule changes is the 
requirement under Section 6(b) of the Act, and Section 6(b)5 in 
particular,\17\ that an exchange have rules that are designed to 
promote just and equitable principals 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. The SROs believe that the proposed rule changes satisfy the 
requirements of Section 6(b) in general, and Section 6(b)(5) in 
particular, because the expedited trading of options on HOLDRs will 
allow investors currently holding Telebras ADSs, and desiring to 
deposit those shares to receive HOLDRs, to continue to hedge their 
respective positions in Telebras ADSs by opening offsetting positions 
in HOLDRs options.
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    \17\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organizations Statement on Burden on Competition

    The SROs do not believe that the proposed rule change will impose 
any inappropriate 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 either solicited or received.

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

    For the reasons discussed below, the Commission finds that the 
SROs' proposal are consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange. Specifically, the Commission finds that the proposed rule 
change is consistent with Section 6(b)(5) of the Act, which requires an 
exchange to have rules designed 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.\18\
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    \18\ Pursuant to section 6(b)(5) of the Act, the Commission must 
predicate approval of any new securities product upon a finding that 
the introduction of such product is in the public interest. Such a 
finding would be difficult with respect to a warrant that served no 
hedging or other economic function, because any benefits that might 
be derived by market participants likely would be outweighed by the 
potential for manipulation, diminished public confidence in the 
integrity of the markets, and other valid regulatory concerns.

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[[Page 43438]]

    As the Commission has previously stated,\19\ it is necessary for 
securities to meet certain minimum standards regarding both the quality 
of the issuer and the quality of the market for a particular security 
to become options eligible. The Commission believes that these 
standards are imposed to ensure that those issuers upon whose 
securities options are to be traded are financially sound companies 
whose trading volume, market price, number of holders and public 
ownership of shares are substantial enough to ensure adequate depth and 
liquidity to sustain options trading that is not readily susceptible to 
manipulation. The Commission also recognizes that under Commentary .01 
of the SRO Rules, investors may be precluded for a significant period 
(generally, the three calendar month period required to meet the Price 
Requirement) from employing an adequate hedging strategy involving 
options on newly issued securities such as those issued during an 
initial public offering or rights distribution.
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    \19\ See Securities Exchange Release No. 37011 (March 22, 1996) 
61 FR 14177 (March 29, 1996) (order approving proposed rule changes 
relating to listing standards for options on securities issued in a 
reorganization transaction pursuant to a public offering or a rights 
distribution).
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    As the SROs observe in their filings, an alternate method of 
meeting equity option listing standards has been established for 
securities issued in connection with a spin-off, reorganization, 
restructuring or similar corporate transaction.\20\ These alternate 
standards facilitate the earlier listing of options on Restructure 
Securities by permitting an SRO to determine whether the Restructure 
Security satisfies the Volume Requirement and Price Requirement by 
reference to the trading volume and market price history of an 
outstanding equity security previously issued by the issuer of the 
Restructure Security.\21\ While such criteria are not directly 
applicable to the listing of options on HOLDRs, the CBOE notes that 
HOLDRs are being issued as a result of a corporate restructuring. The 
SROs believe that the price history of Telebras ADSs should be allowed 
to be used to determine compliance with the Price Requirement since 
HOLDRs is designed to replicate Telebras ADSs at least until the spin-
offs occur.\22\ The SROs also originally asserted that the trading 
volume of Telebras ADSs should be used to determine the Volume 
Requirement but have now amended their proposals to represent that 
HOLDRs must trade 2.4 million shares prior to listing options 
thereon.\23\
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    \20\ The Commission notes that there is a distinction in 
treatment of options overlying securities issued to existing 
shareholders in a spin-off, reorganization or restructuring and 
options overlying securities issued through a public offering or 
rights distribution. Specifically, options overlying securities 
issued pursuant to a public offering or rights distribution cannot 
be listed until the market price of the Restructure Security has 
been at least $7.50 for at least five trading days immediately 
preceding the selection date, while options overlying securities 
issued to existing shareholders in a spin-off, reorganization or 
restructuring can ``look back'' to the ``original'' security to meet 
the Price Requirement without waiting five trading days.
    \21\ These alternate criteria also provide special provisions 
for evaluating the distribution of shares of a Restructure Security 
for purposes of meeting the Public Ownership Requirement and Public 
Holder Requirement.
    \22\ Although pages 7 and 8 of the Phlx filing represent that 
the Phlx alternatively argues that options on HOLDRs could be listed 
and traded on the day that the NYSE listed HOLDRs for trading, the 
Phlx has agreed to such language. Phone conversation between Nandita 
Yagnik, Counsel, Phlx and Marianne H. Duffy, Special Counsel, 
Division, SEC on July 31, 1998.
    \23\ The Commission notes, however, that holders of Telebras 
ADSs are not required to deposit their Telebras ADSs for HOLDRs. 
Therefore, the actual number of outstanding shares of, and public 
investors in, HOLDRs could not be determined with certainty for 
purposes of the Public Ownership Requirement and Public Holder 
Requirement of the SRO Rules, prior to the date that HOLDRs was 
listed on the NYSE. The Commission also notes that it is for this 
reason, among others, that Commission would not consider it 
permissible for the SROs to list and trade options on HOLDRs on the 
day that the NYSE listed HOLDRs.
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    The Commission believes that it is appropriate for the SROs to deem 
the Price Requirement satisfied for the listing of options on HOLDRs if 
HOLDRs has a closing price of at least $7.50 for at least five trading 
days since its issuance.\24\ This conclusion is based on the 
Commission's determination that HOLDRs is designed to track the price 
of Telebras ADSs and/or the Spin-Off ADSs. It is extremely likely that 
HOLDRSs would independently meet the Price Requirement over the next 
three months.\25\ Nevertheless, permitting the use of Telebras ADS 
price history to meet the Price Requirement will allow the desirable 
result of permitting Owners of HOLDRs to be able to hedge their 
exposure sooner through a single overlying options product. Finally, 
the Commission notes that requiring actual five day price history of 
HOLDRs prior to listing options thereon, further ensures that the 
market is sufficient to support options trading and is not subject to 
manipulation.
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    \24\ This approach incorporates the price history of Telebras 
ADSs for the prior measured period. Telebras ADSs have traded well 
in excess of $7.50 per share for the prior three months.
    \25\ As previously noted, HOLDRs has traded at approximately 
$125 per share since July 28, 1998.
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    The Commission's approval of these proposals is also based on the 
fact that, apart from the Price Test, all other options listing 
criteria will be met prior to the listing of options on HOLDRs. In this 
regard, the Commission notes that initial reports indicate that HOLDRs 
has satisfied the requirements of Commentary .05(d) of the SRO Rules in 
that at least 40 million shares of HOLDRs have been issued, with at 
least 2,000 public holders,\26\ and that HOLDRs has been trading near 
the current market price for Telebras ADSs after July 28, 1998 
(approximately $125) with an average daily trading volume of 
approximately 3.4 million shares.\27\
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    \26\ Supra note 14.
    \27\ Supra note 15.
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    In addition, as previously stated, Commentary .03 of the SRO Rules 
requires that with respect to an ADR, an affective surveillance sharing 
arrangement be in place with the proper regulatory authority in the 
country where the security underlying the ADR trades or, as one of 
several alternatives, as the Commission otherwise authorizes the 
listing. In evaluating new derivative instruments, the Commission, 
consistent with the protection of investors, considers the degree to 
which the derivative instrument is susceptible to manipulation. The 
ability to obtain information necessary to detect and deter market 
manipulation and other trading abuses is a critical factor in the 
Commission's evaluation. It is for this reason that the Commission 
requires that there be an SSA in place between an exchange listing or 
trading a derivative product and the exchanges trading the stocks 
underlying the derivative contract that specifically enables officials 
to survey trading in the derivative product and its underlying 
stocks.\28\ Such agreements provide a necessary deterrent to 
manipulation because they facilitate the availability of information 
needed to fully investigate a potential manipulation if it were to 
occur. With regards to HOLDRs, these agreements are especially 
important to facilitate the collection of necessary

[[Page 43439]]

regulatory, surveillance and other information from foreign 
jurisdictions.\29\
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    \28\ The Commission believes that the ability to obtain relevant 
surveillance information, including, among other things, the 
identity of the ultimate purchasers and sellers of securities, is an 
essential and necessary component of an SSA. An SSA should provide 
the parties thereto with the ability to obtain information necessary 
to detect and deter market manipulation and other trading abuses. 
Consequently, the Commission generally requires that an SSA require 
that the parties to the agreement provide each other, upon request, 
information about market trading activity, clearing activity and 
customer identity. See Securities Exchange Act Release No. 31529 
(November 27, 1992).
    \29\ An MOU provides a framework for mutual assistance in 
investigatory and regulatory matters. Generally, the Commission has 
permitted an SRO to rely on an MOU in the absence of an SSA only if 
the SRO receives an assurance from the Commission that such an MOU 
can be relied on for surveillance purposes and includes, at a 
minimum, the transaction, clearing and customer information 
necessary to conduct an investigation. See Securities Exchange Act 
Release No. 35184 (December 30, 1994) 60 FR 2616 (January 10, 1995). 
In addition, an SRO should nonetheless endeavor to develop SSAs with 
the foreign exchange that trades the underlying securities even if 
the SRO receives prior Commission approval to rely on an MOU in 
place of an SSA.
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    In order to address the above noted concerns and to comply with 
Commentary .03 of the SRO Rules, the SROs note that the Commission has 
entered into an MOU with the CVM. The Amex represents that it has an 
SSA with the Bovespa. The CBOE represents that it has an SSA with the 
Bovespa and the RJSE.\30\ If the MOU ceases to exist, each SRO 
represents that it will contact the Commission immediately in order to 
enable the Commission to determine what measures should be taken with 
regards to the listing and trading of options of HOLDRs.\31\ The 
Commission believes that the combination of the SSAs and the MOU 
satisfy the requirement of Commentary .03 of the SRO Rules. The 
Commission also notes that the SROs have relied on the SSAs and the MOU 
to trade options overlying Telebras ADSs.
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    \30\ Supra note 11.
    \31\ The Commission notes that although the Phlx does not have 
an SSA with the Bovespa or RJSE, the MOU alone satisfies the 
requirement of Commentary .03 of the SRO Rules. Furthermore, the 
Commission believes that in the case of the Amex and the CBOE, if 
the SSAs cease to exist but the MOU is still effective, the Amex and 
the CBOE are not required to notify the Commission.
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    For the reasons described above, the Commission finds good cause to 
approve the proposed rule changes, and Amex Amendment No. 1 and CBOE 
Amendment No. 1, prior to the thirtieth day after publication of notice 
of filing thereof in the Federal Register. Specifically, Amex Amendment 
No. 1 clarifies the procedures to be followed in the event that a 
surveillance sharing arrangement with Brazil ceases to exist.\32\ CBOE 
Amendment No. 1 clarifies, among other things, the Volume Requirement 
and five day Price Requirement that HOLDRs must satisfy in order to 
permit options trading overlying HOLDRs.\33\ The Commission believes 
that the proposal will benefit investors who want to trade the Spin-Off 
ADSs in one exchange traded product, (similar to what investors trade 
through one Telebras ADS), and who seek to hedge their exposure through 
a single overlying options product. In addition, the Commission 
believes that any regulatory issues that are posed by options on HOLDRs 
have been adequately addressed by the SROs.
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    \32\ Supra note 4.
    \33\ Supra note 4.
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    Accordingly, the Commission believes that it is consistent with 
Sections 6(b)(5) and 19(b)(2) \34\ of the Act, to find that good cause 
exists to approve the proposed rule changes and Amex Amendment No. 1 
and CBOE Amendment No. 1 on an accelerated basis.
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    \34\ 15 U.S.C. 78s(b)(2).
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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 
changes are 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 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Section, 450 Fifth 
Street, NW, Washington, DC 20549. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
SROs. All submissions should refer to File Nos. SR-Amex-98-28, SR-CBOE-
98-32 and SR-Phlx-98-33 and should be submitted by September 3, 1998.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule changes (SR-Amex-98-28, SR-CBOE-98-32 and SR-
Phlx-98-33), and Amex Amendment No. 1 and CBOE Amendment No. 1, are 
approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\35\
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    \35\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 98-21721 Filed 8-12-98; 8:45 am]
BILLING CODE 8010-01-M