[Federal Register Volume 60, Number 215 (Tuesday, November 7, 1995)]
[Notices]
[Pages 56180-56181]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27517]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36448; File No. SR-Amex-95-39]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change and Amendment No. 1 to Proposed Rule Change by the American
Stock Exchange, Inc., Relating to Uniform Listing and Trading
Guidelines for Narrow-Based Stock Index Warrants
November 1, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. Sec. 78s(b)(1), notice is hereby given that on
September 29, 1995, 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 self-regulatory
organization. On October 31, 1995, the Amex submitted Amendment No. 1
(``Amendment No. 1'') to the proposal to establish a maintenance
requirement with respect to the minimum number of securities that must
comprise an index underlying a warrant issuance and to clarify issues
relating to settlement values for both narrow-based and broad-based
index warrants.\1\ The Commission is publishing this notice to solicit
comments on the proposed rule change and Amendment No. 1 from
interested persons.
\1\ Letter from William Floyd-Jones, Assistant General Counsel,
Amex, to Michael Walinskas, SEC, dated October 31, 1995.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Amex proposes to amend Exchange Rules 462, 1100 and 1107 to
establish uniform listing and training guidelines applicable to narrow-
based stock index warrants. The text of the proposed rule change and
Amendment No. 1 thereto is available at the Office of the Secretary,
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 Amex 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
In view of the recent approval of the regulatory framework for
stock index warrants on broad-based stock indexes,\2\ the Exchange now
proposes to establish uniform listing and trading guidelines for
warrants based on narrow-based indexes. To accommodate the trading of
warrants on narrow-based indexes, the Exchange proposes to modify the
recently approved regulatory framework for broad-based index
warrants.\3\ Thus, the Exchange proposes to conform the rules
applicable to warrants on narrow-based indexes to those applicable to
options on narrow-based indexes.
\2\ See Securities Exchange Act Release No. 36168 (Aug. 29,
1995).
\3\ The Exchange notes that a substantially similar regulatory
scheme generally applies to broad-based index options and warrants.
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The Commission approved the trading of options on narrow-based
indexes in 1982 and it approved the trading of stock index warrants in
1988.\4\ The Exchange represents that it has had experience with
respect to the trading of these derivative products, and it believes
that the trading of warrants on narrow-based stock indexes presents no
novel regulatory issues and should be permitted on the same basis as
warrants overlying broad-based indexes.
\4\ See Securities Exchange Act Release Nos. 19264 (Nov. 22,
1982) and 26152 (Oct. 3, 1988).
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To conform the trading of warrants on narrow-based indexes to the
rules applicable to options on narrow-based indexes, the Exchange
proposes that the same margin requirements applicable to short sales of
narrow-based index options apply to warrants overlying the same index.
In addition, the Exchange proposes to apply a position limit structure
similar to that which is applicable to narrow-based index options.
Accordingly, the Exchange proposes to establish position limits for
narrow-based index warrants at three separate, fixed-tier amounts
(4,875,000, 6,750,000, and 9,000,000), the applicable level being
determined by the level of index component concentration. These levels
are equivalent to 75% of the position limits applicable to narrow-based
index options. Because broad-based index warrant position limit levels
were established at approximately 75% of the corresponding levels for
broad-based index options, the Exchange believes it is appropriate to
establish narrow-based index warrant position limits at the
corresponding level applicable to narrow-based index options.\5\
\5\ The position limit tiers have been established at 75% of the
levels recently approved by the SEC in connection with a
Philadelphia Stock Exchange proposal to increase position limits for
narrow-based index options. See Securities Exchange Act Release No.
36194 (Sept. 6, 1995). Accordingly, the Exchange proposes that
position limits for narrow-based index warrants be set at roughly
75% of the 6,000, 9,000 and 12,000 position limit levels.
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Also consistent with the existing regulatory framework for broad-
based warrants, the issuer may elect to use closing prices for the
securities underlying the index to determine settlement values at all
times other than the day on which the final settlement valued is to be
determined (``valuation date''), as well as during the two business
days preceding valuation date.\6\ Finally, the Exchange represents that
it will not list a warrant on an index consisting of fewer then nine
stocks unless the SEC separately approves such index for warrant
trading. In addition, the Amex will impose a maintenance standard that
requires an index to have at least nine stocks at all times, unless
separately approved by the SEC.\7\
\6\ See Amendment No. 1. The Commission notes that although the
recently approved regulatory framework for broad-based index
warrants establishes uniform settlement provisions for all
exchanges, the Amex in this filing proposes to amend Section 106(e)
to clarify its rule language.
\7\ See Amendment No. 1.
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In all other respects, the Exchange represents that the rules
applicable to the trading of broad-based and narrow-based index options
are the same. Accordingly, it proposes that all other rules applicable
to broad-based index warrants apply equally to warrants on narrow-based
indexes. Finally, the Exchange represents that it will surveil trading
in narrow-based index warrants in a similar manner to the surveillance
[[Page 56181]]
of trading in broad-based index warrants.
Upon approval of this filing, the Exchange proposes that additional
Commission review of a specific narrow-based warrant issuance will be
required only for warrants overlying narrow-based indexes that have not
previously been approved by the SEC for option or warrant trading.
Thus, upon approval of this filing, the Exchange proposes it be
permitted to list a warrant on any narrow-based index that the SEC has
already approved for option trading.\8\
\8\ In order to expedite SEC review of a particular warrant
issuance, the Exchange may file for approval of the index underlying
the proposed warrants pursuant to the procedures and criteria set
forth in Commentary .02 to Rule 901C. These criteria establish
streamlined procedures for listing options on stock industry groups
(i.e., narrow-based). Accordingly, the Exchange proposes that the
same criteria apply to subsequent proposals to establish narrow-
based indexes which underlie proposed warrant issuances.
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2. Statutory Basis
The Exchange believes 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 and to promote just and
equitable principles of trade, and is not designed to permit unfair
discrimination between customers, issuers, brokers and dealers.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes the proposed rule change will reduce or
eliminate a burden on competition by allowing the listing of warrants
on narrow-based indexes in the same manner as options on narrow-based
indexes.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the 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 the 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 NW., Washington, D.C. 20549.
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. Sec. 552, will be available for inspection and copying at
the Commission's Public Reference Section, 450 Fifth Street NW.,
Washington, D.C. 20549. Copies of such filing will also be available
for inspection and copying at the principal office of the Amex. All
submissions should refer to File No. SR-Amex-95-39 and should be
submitted by November 28, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
\9\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-27517 Filed 11-6-95; 8:45 am]
BILLING CODE 8010-01-M
