[Federal Register Volume 60, Number 17 (Thursday, January 26, 1995)]
[Notices]
[Pages 5231-5233]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1978]
[[Page 5231]]
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35246; International Series Release No. 773 File No.
SR-Amex-94-60]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the American Stock Exchange, Inc. Relating to the Listing of
Options and Long-Term Options Based on a Reduced-Value of the Deutscher
Aktienindex (DAX)
January 19, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on December
15, 1994, the American Stock Exchange, Inc. (``Amex'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Amex. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to approve for listing and trading
standardized options and long-term options on a reduced-value of the
Deutscher Aktienindex (``DAX Index'' or ``Index'') computed at one-
tenth of the full-value of the Index. In addition, the Amex proposes to
amend Rule 904C(b) to provide for a position limit for standardized
options on the Index of 25,000 contracts on the same side of the
market, provided no more than 15,000 of such contracts are in series in
the nearest expiration month. The text of the proposed rule change is
available at the Office of the Secretary, the Amex, and at the
Commission.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the 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 Amex has prepared summaries, set forth in sections
(A), (B), and (C) below, of the most significant aspects of such
statements.
(A) Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
The Exchange is proposing to trade standardized options and long-
term options on a reduced-value of the DAX Index, and internationally
recognized, capitalization-weighted\1\ index of 30 highly capitalized
German stocks trading on the Frankfurt Stock Exchange (``FSE'').\2\ The
stocks included in the Index are among the largest German corporations
and their shares are among the most actively traded of German issuers.
The DAX Index is composed of ten broad industry groups including
chemicals, automobile manufacturers, banks, and insurance companies.
\1\ The capitalization of a particular stock in the DAX Index is
calculated by multiplying the price of the stock by the ``listed
capital.'' Listed capital includes common and preferred shares and
shares held in the corporate treasury. The Amex represents that this
weighting method differs from the method used in calculating
domestic capitalization-weighted indexes, which are calculated by
multiplying the price of the stock only by the number of common
shares.
\2\ The components of the Index are as follows: Allianz AG
Holdings; BASF AG; Bayer AG; Bayer Hypo/Wech; BMW; Bayer Vereinsbank
AG; Commerzbank AG; Continental AG; Daimler-Benz AG; Beutsche
Babcock AG; Beutsche Bank AG; Degussa AG; Dresdner Bank AG; Henkel
KGAA-Pfd; Hoechst AG; Karstadt AG; Kaufhof Holdings AG; Lufthansa
AG; Linde AG; Man AG; Metallgesellsch; Mannesmann AG; Preussag AG;
RWE AG; Schering AG; Siemens AG; Thyssen AG; Veba AG; Viag AG; and
Volkswagen AG.
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The median capitalization of the companies in the Index as of
December 2, 1994, was US $6.52 billion.\3\ The average market
capitalization of these companies was US $8.78 billion as of that date.
The market capitalizations of the individual companies in the Index
ranged from US $740.51 million to US $32.02 billion as of December 2,
1994. Also on that date, the largest component of the Index, Allianz AG
Holdings, accounted for 12.15% of the total weighting of the DAX Index,
while the smallest, Deutsche Babcock AG, accounted for 0.28% of the
weight of the Index. The five highest weighted components of the Index
on that date accounted for 43.69% of the total weight of the Index.
Average daily volume in the component securities for the period from
June 1994, through November 1994, ranged from a low of approximately
59,408 shares to a high of 1.04 million shares, with an average daily
trading volume for all components of the Index of approximately 338,449
shares per day. The Index had a closing value of 2,038.5 on December 2,
1994.
\3\Based on the exchange rate of DM 1=US $1.5800 prevailing on
December 2, 1994.
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The DAX Index is maintained by the FSE in conjunction with the
Borsen-Zeitung (an industry newspaper). To maintain continuity of the
Index, the FSE adjusts the Index to reflect certain events relating to
the component stocks. In addition, the composition of the DAX Index is
reviewed periodically by the FSE. The FSE will not alter the
composition of the DAX Index unless a stock fails to meet certain
criteria, e.g., market capitalization and trading volume. If possible,
a replacement stock will be selected by the FSE from the same industry
as the stock that it is replacing.
Index Calculation
The DAX Index is a capitalization-weighted index and is calculated
by multiplying the price of each component security by its listed
capital,\4\ adding those sums and dividing by the current Index
divisor. The Index divisor was initially determined to yield a
benchmark value of 1,000 on December 30, 1987. The divisor is adjusted
by the FSE for the changes described above regarding Index maintenance.
\4\See supra note 1.
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The value of the Index is calculated every minute by the FSE from
10:30 a.m. to 1:30 p.m. Frankfurt time (4:30 a.m. to 7:30 a.m. New York
time)\5\ and is disseminated over Reuters News Service, among
others.\6\ For purposes of standardized options trading, the Index
trading value (``Trading Value'') will be one-tenth the level of the
DAX Index as calculated and disseminated by the FSE. Thus, at the close
of trading in December 2, 1994, the Index value was at 2,038.5, the
Trading Value for Index options trading on the Amex would have been
203.85.
\5\Telephone conversation between Claire McGrath, Managing
Director and Special Counsel, Derivative Securities, Amex, and Brad
Ritter, Senior Counsel, Office of Market Supervision, Division of
Market Regulation, Commission, on January 5, 1995.
\6\The Amex represents that the FSE also operates the Integrated
Stock Exchange Trading and Information System (``IBIS'') that is
available to trading the 30 DAX Index components from 8:30 a.m. to
5:00 p.m. Frankfurt time (2:30 a.m. to 11:00 a.m. New York time).
Because trading on IBIS extends for 3\1/2\ hours after trading of
the FSE ends and overlaps trading on the Amex for two hours (9:00
a.m. to 11:00 a.m. New York time), the Amex will disseminate, for
information purposes only, an Index Trading Value (as defined
herein) based on the ``indicative DAX'' level disseminated by IBIS.
Once trading on IBIS has concluded, the Amex will disseminate a
closing Trading Value based on the ``indicative DAX'' level
disseminated by IBIS. The ``indicative DAX'' as disseminated by IBIS
will have a different ticker symbol from the DAX Index value as
reported by the FSE.
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Options Expiration and Settlement
The proposed options on the Trading Value of the Index are to be
European- [[Page 5232]] style,\7\ and cash-settled. Trading hours for
the Index options will be 9:00 a.m. to 4:15 p.m. New York time. Options
on the Trading Value of the Index will expire on the Saturday following
the third Friday of the expiration month (``Expiration Friday''). The
last trading day in an option series will normally be the business day
immediately preceding Expiration Friday of each expiration month
(normally a Thursday) and trading in expiring options will cease at the
close of trading on such day. The exercise settlement value for all of
the expiring reduced-value Index options will be calculated based upon
the closing value of the Index as determined by the FSE. The FSE
calculates an average Index value based upon the average of ten
separate Index levels, taken once each minute, between 1:21 p.m. and
1:30 p.m. Frankfurt time on the day following the last day of trading
in the expiring contracts, i.e., normally Expiration Friday. The Amex
represents that if a component stock does not trade during this
interval or if it fails to open for trading, the last available price
of the stock will be used by the FSE to calculate the value of the
Index. The Amex will then use that value to calculate the settlement
Trading Value for the reduced-value Index options. When an option
expiration is moved in accordance with an Exchange holiday, the last
trading day for the expiring Index options will be the Wednesday before
Expiration Friday and the exercise settlement value of the Index
options will be determined at the close of the regular Thursday trading
session on the FSE, even if the FSE is open for trading on Expiration
Friday. If the FSE will be closed on an Expiration Friday, the last
trading day for expiring Index options listed by the Amex will be on
the Wednesday before Expiration Friday.
\7\European-style options may only be exercised during a
specified period immediately prior to expiration of the options.
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The Exchange plans to list reduced-value Index options series with
expirations in the three near-term calendar months and in the three
additional calendar months in the March cycle. In addition, longer term
reduced-value Index options series having up to 36 months to expiration
may be traded (``Index LEAPS''). In lieu of such long-term options on
the Trading Value of the Index, the Exchange may instead list long-term
reduced-value options based on one-tenth of the Index's Trading Value,
i.e., 1/100th of the value of the DAX Index as calculated by the FSE.
The current and closing trading values of such reduced-value Index
LEAPS will, after the initial computation, be rounded to the nearest
one-hundredth. In either event, the interval between expiration months
for all long-term Index options will not be less than six months.
Exchange Rules Applicable to Stock Index Options
Amex Rules 900C through 980C will apply to the trading of
standardized and long-term option contracts based on the DAX Index.
These rules cover issues such as sales practices, margin requirements,
exercise prices, position limits, and floor trading procedures.
Surveillance procedures currently used to monitor trading in each of
the Exchange's other index options will also be used to monitor trading
in options on the DAX Index. In order to provide an adequate mechanism
for sharing surveillance information with respect to the Index's
component stocks, the Amex represents that it has entered into
discussions with representatives of the FSE and has reached preliminary
agreement with respect to establishing an appropriate means to
accomplish such information sharing.
The Amex represents that the DAX Index is deemed to be a Stock
Index Option under Rule 901C(a) and a Broad Stock Index Group under
Rule 900C(b)(1). With respect to Rule 903C(b), the Exchange proposes to
list near-the-money (i.e., within ten points above or below the current
Index value) options series on the Index at 2-\1/2\ point strike
(exercise) price intervals when the value of the Index is below 200
points. In addition, the Exchange proposes to establish position limits
for options on the reduced-value DAX Index, including Index LEAPS,
pursuant to Rule 904C(b), of 25,000 contracts on the same side of the
market, provided no more than 15,000 of such contracts are in series in
the nearest term month.
In anticipation of substantial activity in the options on this
Index (including institutional activity), the Exchange also proposes to
have the ability to utilize its Auto-Ex system for orders in the
reduced-value DAX Index options of up to 50 contracts. Auto-Ex is the
Exchange's automated execution system which provides for the automatic
execution of market and marketable limit orders at the best bid or
offer at the time the order is entered. The Exchange represents that
the ability to use Auto-Ex for orders of up to 50 contracts will
provide customers with deep, liquid markets as well as expeditious
executions.
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act, in general, and furthers the objectives
of Section 6(b)(5) in particular, in that it is 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 facilitating transactions in securities, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system.
(B) Self-Regulatory Organization's Statement on Burden on Competition
The Amex does 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 solicited or received 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 self-regulatory organization 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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for inspection and copying in the
Commission's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. Copies of such filing [[Page 5233]] will also be
available for inspection and copying at the principal office of the
Amex. All submissions should refer to File No. SR-Amex-94-60 and should
be submitted by February 16, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
\8\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-1978 Filed 1-25-95; 8:45 am]
BILLING CODE 8010-01-M
