[Federal Register Volume 64, Number 82 (Thursday, April 29, 1999)]
[Notices]
[Pages 23138-23142]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10760]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41322; International Series Release No. 1192; File No. 
SR-Amex-98-49]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment Nos. 1 and 2 Thereto by the American Stock 
Exchange LLC. Relating to Listing Additional Series of World Equity 
Benchmark SharesTM

April 22, 1999.
    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 December 23, 1998, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change. The Exchange submitted 
Amendment No. 1 to its proposal on February 24, 1999,\3\ and Amendment 
No. 2 on April 9, 1999.\4\ The proposal rule change, as amended, is 
described in Items I, II, and III below, which Items have been prepared 
by the Exchange. The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange generally added a new 
Morgan Stanley Capital International (``MSCI'') Index based on the 
European Economic and Monetary Union (``EMU''), added references to 
Amex Rules 127 and 190, analogized the minimum number of shares per 
Creation Unit for the proposed WEBS to the number needed for 
Portfolio Depository Receipts and Index Fund Shares, and described 
the Exchange's prospectus delivery requirements. See Restated 19b-4 
Filing marked Amendment No. 1 (``Amendment No. 1'').
    \4\ In Amendment No. 2, the Exchange provided a description of 
the methodology used to calculate the MSCI Indices, discussed the 
requirements of Amex Rule 411 and the disclosure of the procedure 
for making purchases and redemption of WEBS, revised its tracking 
error discussion, and lowered the minimum number of shares needed 
for Creation Unit. See Letter from Michael Cavalier, Associate 
General Counsel, Legal & Regulatory Policy, Amex, to Katherine 
England, Assistant Director, Division of Market Regulation 
(``Division''), Commission, dated April 8, 1999 (``Amendment No. 
2'').
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to list and trade under Amex Rules 1000A et 
seq. Index Fund Shares based on the following MSCI Indices: Brazil, 
Greece, Indonesia (Free), South Korea, Portugal, South Africa, Taiwan, 
Thailand (Free), Turkey, United States and EMU. The MSCI EMU Index is 
comprised of companies from countries participating in the EMU.\5\
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    \5\ See Amendment No. 1, supra note 3.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    In Securities Exchange Act Release No. 36947,\6\ the Commission 
approved Amex's listing and trading of Index Fund Shares under Amex 
Rules 1000A et seq. Index Fund Shares are shares issued by an open-end 
management investment company that seek to provide investment results 
that correspond generally to the price and yield performance of a 
specified foreign or domestic equity market index.
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    \6\ Securities Exchange Act Release No. 36947 (March 8, 1996), 
61 FR 10606 (March 14, 1996).
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    The first Index Fund Shares listed on the Exchange were seventeen 
series of World Equity Benchmark SharesTM 
(``WEBSTM'') issued by Foreign Fund, Inc. (now WEBS Index 
Fund, Inc.) (``Fund''), based on the following Morgan Stanley Capital 
International (``MSCI'') indices: Australia, Austria, Belgium, Canada, 
France, Germany, Hong Kong, Italy, Japan, Malaysia, Mexico (Free), 
Netherlands, Singapore (Free), Spain, Sweden, Switzerland and the 
United Kingdom.\7\ These WEBS Index Series, which the Commission 
specifically approved for Amex listing and trading in Securities 
Exchange Act Release No. 36947,\8\ have been trading on the Amex since 
March 18, 1996.
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    \7\ ``World Equity Benchmark Shares'' and ``WEBS'' are service 
marks of Morgan Stanley Group, Inc. ``MSCI'' and ``MSCI Indices'' 
are service marks of Morgan Stanley & Co. Incorporated.
    \8\ See Securities Exchange Act Release No. 36947, supra note 6.
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    The Exchange proposes to list additional WEBS Index Series based on 
the following MSCI indices: MSCI Brazil Index, MSCI Greece Index, MSCI 
Indonesia (Free) Index, MSCI South Korea Index, MSCI Portugal Index, 
MSCI South Africa Index, MSCI Taiwan Index, MSCI Thailand (Free) Index, 
MSCI Turkey Index, MSCI United States Index and MSCI EMU Index.\9\ 
Descriptions of the eleven specific indices referenced above have been 
prepared by the Fund and are available in the public file.
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    \9\ The Fund has filed with the Commission an Application for 
Orders under Sections 6(c) and 17(b) of the Investment Company Act 
of 1940 (``1940 Act'') as amended, for the purpose of exempting the 
eleven additional WEBS Index Series referenced herein from various 
provisions of the 1940 Act and rules thereunder (File No. 812-
10756).
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    The MSCI EMU Index is comprised of stocks of companies from 
countries participating in the EMU. Currently, eleven countries are 
participating in the EMU: Austria, Belgium, Finland, France, Germany, 
Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. The 
MSCI EMU is currently comprised of stocks of companies from ten of 
these EMU countries (e.g., all of the EMU countries except Luxembourg). 
MSCI has advised that it may, in accordance with its methodology, 
change the composition of MSCI EMU in the future, such changes could 
include adding stock(s) of companies from Luxembourg or from any other

[[Page 23139]]

country that becomes a participant in EMU.\10\
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    \10\ See Amendment No. 1, supra note 3.
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    Issuances of WEBS by the Fund are made only in Creation Unit size 
aggregations or multiples thereof. The size of the applicable Creation 
Unit size aggregation will be set forth in the Fund's prospectus and 
varies from one WEBS Index Series to another, but is generally 
substantial (e.g., value in excess of $450,000 per Creation Unit). The 
Fund issues and sells WEBS through Funds Distributor, Inc. 
(``Distributor''), the distributor and principal underwriter, on a 
continuous basis at the net asset value per share next determined after 
an order to purchase WEBS in Creation Unit size aggregations is 
received in proper form. Following issuance, WEBS are traded on the 
Exchange like other equity securities by professionals, as well as 
retail and institutional investors.
    Creation Unit size aggregations of WEBS are generally issued in 
exchange for the ``in kind'' deposit of a specified portfolio of 
securities, together with a cash payment representing, in part, the 
amount of dividends accrued up to the time of issuance. Such deposits 
are made primarily by institutional investors, arbitrageurs and the 
Exchange specialist. Redemption of WEBS is generally made on an in-kind 
basis, with a portfolio of securities and cash exchanged for WEBS that 
have been tendered for redemption. Issuances or redemptions could also 
occur for cash under specified circumstances (e.g., if it is not 
possible to effect delivery of securities underlying the specific 
series in a particular foreign country) and at other times in the 
discretion of the Fund.
    The Fund makes available on a daily basis a list of the names and 
the required number of shares of each of the securities to be deposited 
in connection with the issuance of a particular WEBS Index Series in 
Creation Unit size aggregations, as well as information relating to the 
required cash payment representing, in part, the amount of accrued 
dividends.
    A WEBS Index Series may make periodic distributions of dividends 
from net investment income, including net foreign currency gains, if 
any, in an amount approximately equal to accumulated dividends on 
securities held by the WEBS Index Series during the applicable period, 
net of expenses and liabilities for such period.
    The net asset value for each WEBS Index Series is calculated by the 
Fund's administrator, PFPC Inc. (``Administrator''). After calculation, 
such net asset values are available to the public from the Fund's 
Distributor via a toll free telephone number, and are also available to 
National Securities Clearing Corporation (``NSCC'') participants 
through data made available from NSCC.
    WEBS are registered in book entry form through The Depository Trust 
Company. Trading in WEBS on the Exchange is effected until 4:00 p.m. 
(ET) each business day. The minimum trading increment for WEBS is \1/
16\ of $1.00, pursuant to Amex Rule 127, Commentary .02.\11\
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    \11\ Id.
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    a. MSCI Indices. A description of the methodology used to calculate 
the MSCI Indices was prepared by MSCI. The methodology is substantially 
similar to the procedures previously submitted to the Commission in 
connection with the Exchange's initial proposal to list WEBS. The 
current description varies from the original description submitted in 
connection with the Exchange's initial WEBS proposal. As to the 
changes, the current description expands upon the reasons MSCI believes 
full market capitalization weighting is preferable to other weighting 
schemes; expands upon the description of calculating the foreign MSCI 
``Free'' Indices (indices that exclude companies and share classes not 
purchasable by foreigners based on certain countries' restrictions on 
foreign ownership); provides specific reasons for excluding large new 
issues from an Index; and provides factors to be considered in 
determining which companies should be deleted from an Index.\12\ MSCI 
generally seeks to have 60% of the capitalization of a country's stock 
market reflected in the MSCI Index for such country, although in some 
cases, other considerations may result in an MSCI Index reflecting less 
or more than this percentage.\13\
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    \12\ See Amendment No. 2, supra note 4.
    \13\ Telephone conversation between Michael Cavalier, Associate 
General Counsel, Legal & Regulatory Policy, Amex, and Marc McKayle, 
Attorney, Division, Commission, on April 14, 1999.
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    b. Shares Per Creation Unit. It is anticipated that the number of 
WEBS shares constituting a Creation Unit for each WEBS Index Series 
will range from 50,000 to 500,000 \14\ and that the value of a Creation 
Unit at start of trading for these series will be in excess of 
$500,000. The fund will establish a minimum number of WEBS shares per 
Creation Unit for each Index Series prior to commencement of trading, 
which minimum will be disclosed in the Fund's prospectus. It is further 
anticipated that the net asset value \15\ of an individual share will 
initially range from $7 to $25.
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    \14\ Id.
    \15\ The Exchange expanded the term ``NVA.'' Telephone 
conversation between Michael Cavalier, Associate General Counsel, 
Legal & Regulatory Policy, Amex, and Terri Evans, Attorney, 
Division, Commission, on March 10, 1999.
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    Each MSCI Index on which a WEBS Index Series is based is calculated 
by MSCI for each trading day in the applicable foreign exchange markets 
based on official closing prices of the applicable foreign exchange 
markets. For each trading day, MSCI publicly disseminates each index 
value for the previous day's close. MSCI Indices are reported 
periodically in major financial publications worldwide, and are also 
available through vendors of financial information.
    There are two broad categories of changes to the MSCI Indices. The 
first consists of market-driven changes, including mergers, 
acquisitions and bankruptcies. These are announced and implemented as 
they occur. The second category consists of structural changes to 
reflect the evolution of a market that may occur due to changes in 
industry composition or regulations, among other reasons. Structural 
changes to MSCI Indices may occur only on four dates throughout the 
year: the first business day of March, June, September and December. 
The changes are announced at least two weeks in advance.
    As noted in the WEBS prospectus for the initial seventeen WEBS 
Index Series (Registration No. 33-97598), the investment objective of 
each WEBS Index Series is to seek to provide investment results that 
correspond generally to the price and yield performance of public 
securities traded in the aggregate in particular markets, as 
represented by specific MSCI benchmark indices. Each WEBS Index Series 
utilizes a ``passive'' or indexing investment approach which attempts 
to approximate the investment performance of its benchmark index 
through quantitative analytical procedures. Each Index Series has the 
policy to remain as fully invested as practicable in a pool of 
securities the performance of which will approximate the performance of 
the benchmark MSCI Index taken in its entirety.
    A WEBS Index Series will normally invest at least 95% of its total 
assets in stocks that are represented in the relevant MSCI Index and 
will at all times invest at least 90% of its total assets in such 
stocks, subject to certain limited exceptions.\16\ A WEBS Index

[[Page 23140]]

Series does not hold all of the issues that comprise the subject MSCI 
Index, but attempts to hold a representative sample of the securities 
in the Index utilizing a technique known as ``portfolio sampling.'' As 
noted in the WEBS prospectus, it is expected that, over time, the 
``expected tracking error'' of a WEBS Index Series relative to the 
performance of the relevant MSCI Index will be less that 5%.\17\ An 
expected tracking error of 5% means that there is a 68% probability 
that the net return on the asset values for the Index Series (including 
dividends and without reflecting expenses) will be between 95% and 105% 
of the return of the subject MSCI Index after one year without 
rebalancing the portfolio composition.\18\ While no particular level of 
tracking error is assured, the Fund's advisor, Barclays Global Fund 
Advisors (``Advisor''), monitors the tracking error of each Index 
Series on an ongoing basis and seeks to minimize tracking error to the 
maximum extent possible. Semi-annual and annual reports of the Fund 
disclose tracking error over the previous six month periods, and in the 
event that tracking error exceeds 5%, the Fund Board of Directors will 
consider what action might be appropriate.
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    \16\ The WEBS prospectus states that, in order to permit the 
Advisor additional flexibility to comply with the requirements of 
the Internal Revenue Code of 1986, as amended, and other regulatory 
requirements and to manage future corporate actions and index 
changes in the smaller markets, each of the Australia, Austria, 
Belgium, Hong Kong, Italy, Mexico (Free), Netherlands, Singapore 
(Free), Spain, Sweden and Switzerland WEBS Index Series will at all 
times invest at least 80% of its total assets in such stocks and at 
least half of the remaining 20% of its total assets in such stocks 
or in stocks included in the relevant market, but not in the 
relevant MSCI Index. See Amendment No. 1, supra note 3.
    \17\ This expected tracking error applies to all WEBS Index 
Series, including the proposed eleven WEBS Index Series and existing 
WEBS Index Series. See Amendment No. 2, supra note 4.
    \18\ This applies to all WEBS Index Series. See Amendment No. 2, 
supra note 4. The Exchange clarified that there is only a 68%, not 
69% as described in Amendment No. 2, probability that the net return 
on the asset value of the Index Series will be between 95% and 105%. 
Telephone conversation between Michael Cavalier, Associate General 
Counsel, Legal & Regulatory Policy, Amex, and Terri Evans, Attorney, 
Division, Commission, on April 13, 1999.
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    c. Criteria for Initial and Continued Listing. WEBS are subject to 
the criteria for initial and continued listing of Index Fund Shares in 
Amex Rule 1002A. For each of the eleven WEBS Index Series,\19\ it is 
anticipated that a minimum of two Creation Units will be required to be 
outstanding at the start of trading, with the exception of the United 
States WEBS Index Series, for which one Creation Unit will be required 
to be outstanding at commencement of trading (in light of the large 
size of a Creation Unit of the United States WEBS Index Series in 
comparison with the others). It is anticipated that a Creation Unit 
will consist of 50,000 WEBS except for the United States WEBS Index 
Series and EMU WEBS Index Series, for which the anticipated minimums 
are 500,000 and 200,000 WEBS, respectively. The value of a Creation 
Unit at the start of trading would in all cases be in excess of 
$500,000. The proposed minimum number of Creation Units is identical to 
the minimum applied in connection with the listing of the initial 
seventeen WEBS Index Series in 1996, except for the Japan WEBS Index 
Series, for which one Creation Unit was required to be outstanding.\20\ 
For the initial WEBS Index Series, the number of shares per Creation 
Unit ranged from 40,000 (for the Belgium Index Series) to 600,000 (for 
the Japan Index Series).\21\ The Exchange believes that the proposed 
minimum number of WEBS outstanding at the start of trading of each WEBS 
Index Series is sufficient to provide market liquidity and to further 
the Fund's objective to seek to provide investment results that 
correspond generally to the price and yield performance of a specified 
MSCI Index.\22\
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    \19\ See Amendment No. 1, surpa note 3.
    \20\ See Securities Exchange Act Release No. 36947, supra note 
6.
    \21\ See Amendment No. 2, supra note 4. The Commission notes 
that number of shares per Creation Unit for the original WEBS were 
as follows: Australia--200,000, Austria--100,000, Belgium--40,000, 
Canada--100,000, France--200,000, Germany--300,000, Hong Kong--
75,000, Italy--150,000, Japan--600,000, Malaysia--75,000, Mexico--
100,000, Netherlands--50,000, Singapore (Free)--100,000, Spain--
75,000, Sweden--75,000, Switzerland--125,000 and United Kingdom--
200,000. See Securities Exchange Act Release No. 36947, supra note 
6.
    \22\ See Amendment No. 2, supra note 4.
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    d. Dissemination of Indicative Optimized Portfolio Value. As noted 
above, MSCI disseminates values for each MSCI Index once each trading 
day, based on closing prices in the relevant exchange market. In 
addition, the Fund makes available on a daily basis the names and 
required number of shares of each of the securities to be deposited in 
connection with the issuance of WEBS in Creation Unit size aggregations 
for each WEBS Index Series, as well as information relating to the 
required cash payment representing, in part, the amount of accurued 
dividends appliable to such WEBS Index Series. This information is made 
available by the Fund's Advisor to any NSCC participant requesting such 
information. In addition, other investors can request such information 
directly from the Fund's Distributor. The net asset value for each WEBS 
Index Series is calculated daily by the Fund's Administrator.
    In order to provide updated informaiton relating to each WEBS Index 
Series for use by investors, professionals and persons wishing to 
create or redeem WEBS,\23\ the Exchange disseminates through the 
facilities of the Consolidated Tape Association (``CTA'') an updated 
``indicative optimized portfolio value'' (``Value'') for each of the 
seventeen WEBS Index Series cureently traded as calculated by 
Bloomberg, L.P. The Exchange will also disseminate a Value for the 
proposed eleven new WEBS Index Series\24\ over CTA facilities (Network 
B) as calculated by a securities information provider (``Value 
calaclator''). It is anticipated that the methodology utilized in 
connenction with the seventeen WEBS Index Series currently traded will 
also be utilitzed for the proposed eleven new series. The Value is 
disseminated on a per WEBS basis every 15 seconds during regular Amex 
trading hours of 9:30 a.m. to 4:00 p.m. (ET). The equity securities 
values included in the Value are the values of the designated portfolio 
of equity securities (``Deposit Securities'') constituting an optimized 
representation of the benchmark MSCI foreign index for each WEBS Index 
Series, which is the same as the portfolio that is to be utilized 
generally in connection with creations and redemptios of WEBS in 
Creation Unit size aggregations on that day. The equity securities 
included in the Value reflect the same market capitalization weighting 
as the Deposit Securities in the optimized portfolio for the particular 
WEBS Index Series. In addition to the value of the Deposit Securities 
of each WEBS Index Series, the Value includes a cash component 
consisting of estimated accured dividend and other income, less 
expenses. The Value also reflects changes in currency exchange rates 
between the U.S. dollar and the applicable home country currency.
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    \23\ WEBS cannot be redeemed individually but must be redeemed 
in Creation Unit size aggregations applicable to the specific WEBS 
Index Series.
    \24\ Telephone conversation between Michael Cavalier, Assistant 
General Counsel, Legal & Regulatory Policy, Amex, and Terri Evans, 
Attorney, Division, Commission, on March 10, 1999.
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    The Value does not reflect the value of all securities included in 
the applicable benchmark MSCI index. In addition, the Value does not 
necessarily reflect the precise composition of the current portfolio of 
securities held by the Fund for each WEBS Index Series at

[[Page 23141]]

a particular point in time. Therefore, the Value on a per WEBS basis 
disseminated during Amex trading hours should not be viewed as a real 
time update of the net asset value of the Fund, which is calculated 
only once a day. While the Value disseminated by the Amex at 9:30 a.m. 
is generally very close to the most recently calculated Fund net asset 
value on a per WEBS basis,\25\ it is possible that the value of the 
portfolio of securities held by the Fund for a particular WEBS Index 
Series may diverge from the Deposit Securities Values during any 
trading day. In such case, the Value will not precisely reflect the 
value of the Fund portfolio. Following calculation of net asset value 
by the Fund's Administrator as of 4:00 p.m. (ET), the Value on a per 
WEBS basis can be expected to be the same as the net asset value of the 
Fund on a per WEBS basis.
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    \25\ A slight difference between the Value disseminated at 9:30 
a.m. and the most recently calculated Fund net asset value can be 
expected because the Value will include an estimated cash amount 
consisting principally of any dividend accruals for the Deposit 
Securities going ``ex-dividend'' on that day.
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    However, during the trading day, the Value can be expected to 
closely approximate the value per WEBS share of the portfolio of 
securities for each WEBS Index Series except under unusual 
circumstances (e.g., in the case of extensive rebalancing of multiple 
securities in a WEBS Index Series at the same time by the Fund 
Advisor). The circumstances that might cause the Value to be based on 
calculations different from the valuation per WEBS share of the actual 
portfolio of an Index Series would not be different than circumstances 
causing any index fund or trust to diverge from an underlying benchmark 
index.
    The Exchange believes that dissemination of the Value based on the 
Deposit Securities providing additional information regarding each WEBS 
Index Series that is not otherwise available to the public and is 
useful to professionals and investors in connection with WEBS trading 
on the Exchange or the creation or redemption of WEBS.
     Greece, Indonesia (Free), South Korea, Taiwan, Thailand 
(Free)
    For Greece, Indonesia (Free), South Korea, Taiwan, Thailand (Free), 
there is no overlap in trading hours between the foreign markets and 
the Amex. Therefore, for each Index Series, the Value calculator will 
utilize closing prices (in applicable foreign currency prices) in the 
principal foreign market for securities in the WEBS portfolio, and 
convert the price to U.S. dollars. This Value will be updated every 15 
seconds during Amex trading hours to reflect changes in currency 
exchange rates between the U.S. dollar and the applicable foreign 
currency. The Value will also include the applicable estimated cash 
component for each WEBS Index Series.
     Brazil, Portugal, South Africa, Turkey, EMU
    For Brazil, Portugal, South Africa, Turkey, and countries included 
in the WEBS EMU Index,\26\ which have trading hours overlapping regular 
Amex trading hours, the Value calculator will update the applicable 
Value every 15 seconds to reflect price changes in the applicable 
foreign market or markets,\27\ and convert such prices into U.S. 
dollars based on the current currency exchange rate. When the foreign 
market or markets \28\ are closed but the Amex is open, the Value will 
be updated every 15 seconds to reflect changes in currency exchange 
rates after the foreign markets close. \29\ The Value will also include 
the applicable estimated cash component for each Index Series.
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    \26\ See Amendment No. 1, supra note 3.
    \27\ Id.
    \28\ Id.
    \29\ Id.
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     United States
    For United States WEBS Index Series, the Value calculator will 
update the Value at least every 15 seconds, and such Value will include 
the applicable estimated cash component.
    e. Original and Annual Listing Fees. The Amex original listing fee 
applicable to the listing of WEBS Index Series is $5,000 per WEBS Index 
Series (i.e., $55,000 for the eleven WEBS Index Series listed above). 
\30\ In addition, the annual listing fee applicable to WEBS Index 
Series under Section 141 of the Amex Company Guide will be based upon 
the year-end aggregate number of outstanding WEBS in all series, 
including the seventeen existing series and the additional series 
proposed herein.
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    \30\ Id.
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    f. Stop and Stop Limit Orders. Amex Rule 154, Commentary .04(c) 
provides that stop and stop limit orders to buy or sell a security 
(other than an option, which is covered by Amex Rule 950(f) and 
Commentary thereto) the price of which is derivatively priced based 
upon another security or index of securities, may with the prior 
approval of a Floor Official, be elected by a quotation, as set forth 
in Commentary .04(c)(i-v). The Exchange has designated Index Fund 
Shares, including WEBS, as eligible for this treatment.\31\
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    \31\ See Securities Exchange Act Release No. 29063 note 9 (April 
10, 1991) 56 FR 15652 (April 17, 1991) (regarding Exchange 
designation of equity derivative securities as eligible for such 
treatment under Rule 154, Commentary .04(c)).
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    g. Amex Rule 190. Amex Rule 190, Commentary .04, applies to Index 
Fund Shares listed on the Exchange, including WEBS. Commentary. 04 
states that nothing in Amex Rule 190(a) should be construed to restrict 
a specialist registered in a security issued by an investment company 
from purchasing and redeeming the listed security, or securities that 
can be subdivided or converted into the listed security, from the 
issuer as appropriate to facilitate the maintenance of a fair and 
orderly market.\32\
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    \32\ See Amendment No. 1, supra note 3.
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    h. Prospectus Delivery. The Exchange, in an Information Circular to 
Exchange members and member organizations, will inform members and 
member organizations, prior to commencement of trading, that investors 
purchasing WEBS are required to receive a Fund prospectus prior to or 
concurrently with the confirmation of a transaction therein.\33\
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    \33\ Id.
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    i. Purchases and Redemption in Creation Unit Size. In the 
Information Circular, members and member organization will be informed 
that procedures for purchases and redemptions of WEBS in Creation Unit 
Size are described in the Fund prospectus and Statement of Additional 
Information, and that WEBS are not individually redeemable but are 
redeemable only in Creation Unit Size aggregations or multiples 
thereof.\34\
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    \34\ See Amendment No. 2, supra note 4.
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    j. Suitability. Prior to commencement of trading, the Exchange will 
issue an Information Circular informing members and member 
organizations of the characteristics of the specific series and of 
applicable Exchange rules, as well as of the requirements of Amex Rule 
411 (Duty to Know and Approve Customers).\35\
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    \35\ Id.
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    k. Trading Halts. In addition to other factors that may be 
relevant, the Exchange may consider factors such as those set forth in 
Amex Rule 918C(b) in exercising its discretion to halt or suspend 
trading in Index Fund Shares, including WEBS. These factors would 
include, but are not limited to: (1) the extent to which trading is not 
occurring in stocks underlying the index; or (2) whether other unusual 
conditions or circumstances determental to the maintenance of a fair 
and orderly market are present.\36\ In addition, trading in WEBS will 
be halted if the

[[Page 23142]]

circuit breaker parameters under Amex Rule 117 have been reached.
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    \36\ See Amex Rule 918C.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the Act 
\37\ in general and furthers the objectives of Section 6(b)(5) \38\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transaction in 
securities, and, in general to protect investors and the public 
interest.
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    \37\ 15 U.S.C. 78f.
    \38\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the proposed rule change will impose no 
burden on competition.

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

    The Exchange neither solicited nor received written comments with 
respect to the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (A) by order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-
0609. Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Room in Washington, D.C. Copies of such 
filing will also be available for inspection and copying at the 
principal office of the Exchange. All submissions should refer to File 
No. SR-Amex-98-49 and should be submitted by May 20, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\39\
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    \29\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-10760 Filed 4-28-99; 8:45 am]
BILLING CODE 8010-01-M