[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]
-----------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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'').
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
[[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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\26\ Supra note 14.
\27\ Supra note 15.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\32\ Supra note 4.
\33\ Supra note 4.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\34\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\35\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jonathan G. Katz,
Secretary.
[FR Doc. 98-21721 Filed 8-12-98; 8:45 am]
BILLING CODE 8010-01-M