[Federal Register Volume 60, Number 237 (Monday, December 11, 1995)]
[Notices]
[Pages 63550-63552]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30068]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36550; File No. SR-Amex-95-47]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by American Stock Exchange, Inc. Relating to Listing Standards
for Options on Equity Securities Issued in a Reorganization Transaction
Pursuant to a Public Offering or a Rights Distribution
December 4, 1995.
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 November 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 Amex. The
Commission is published this notice to solicit comments on the proposed
rule change from interested persons.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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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 its listing standards in respect of
options on equity securities issued in a spin-off, reorganization,
recapitalization, restructuring or similar transaction where the
issuance is made pursuant to a public offering or a rights
distribution.
The text of the proposed rule change 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, 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
The purpose of the proposed rule change is to amend the special
listing standards set forth in Amex Rule 915, Commentary .05 that apply
to options on equity securities issued in certain spin-offs,
reorganizations, recapitalizations, restructurings or similar
transactions (referred to herein as ``restructuring transactions'') so
as to also include securities issued pursuant to a public offering or a
rights distribution that is part of a restructuring transaction.
The proposed amendment to Rule 915, Commentary .05 is intended to
facilitate the listing of options on equity securities issued in
restructuring transactions (referred to as ``Restructure Securities'')
by permitting the Exchange to base its determination as to the
satisfaction of certain of the listing standards set forth in Exchange
Rule 915 and Commentary .01 thereunder by reference to (1) specified
characteristics of the ``Original Security'' in respect of which the
Restructure Security was issued or distributed; (2) the trading market
of the Original Security; (3) the number of shares of the Restructure
Security issued and outstanding; or (4) to the listing standards of the
exchange on which the Restructure Security is
[[Page 63551]]
listed. Rule 915, Commentary .05 would permit the Exchange to certify a
Restructure Security as options eligible sooner than if it had to wait
until it could base its certification on characteristics of the
Restructure Security itself, but only in circumstances where the
factors relied upon make it reasonable to conclude that the Restructure
Security will in fact satisfy applicable listing criteria.
As recently approved by the Commission, Amex Rule 915, Commentary
.05 does not extend to restructuring transactions involving the
issuance of a Restructure Security in a public offering or a rights
distribution.\3\ The questions raised by the proposed extension of
Commentary .05 to Amex Rule 915 to reorganization transactions
involving public offerings or rights distributions reflect that when a
Restructure Security is issued in a public offering or pursuant to a
rights distribution, it cannot automatically be assumed that the
shareholder population of the Restructure Security and the Original
Security will be the same. Instead the holders of a Restructure
Security issued in a public offering will be those persons who
subscribed for and purchased the security in the offering, and the
holders of a Restructure Security issued in a rights distribution will
be those persons who elected to exercise their rights. Even in the case
of a distribution of nontransferable rights to shareholders of the
Original Security, not all such shareholders may choose to exercise
their rights. As a result, it cannot be assumed that the Restructure
Security will necessarily satisfy listing criteria pertaining to
minimum number of holders, minimum public float and trading volume
simply because the Original Security satisfied these criteria.
\3\ See Securities Exchange Act Release No. 36020 (July 24,
1995), 60 FR 39029 (July 31, 1995) (order approving Commentary .05
to Amex Rule 915).
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On the other hand, the Exchange believes that the same reasons for
wanting to make an options market available without delay to holders of
securities issued in reorganizations that do not involve public
offerings or rights distributions apply with equal force to securities
issued in reorganizations that do involve public offerings or rights
distributions, so long as there can be reasonable assurance that the
securities satisfy applicable options listing standards. That is,
holders of an Original Security who utilize options to manage the risks
of their stock positions may well find themselves to be holders of both
the Original Security and the Restructure Security following a
reorganization because they chose to purchase the Restructure Security
in a public offering or to exercise rights in order to maintain the
same investment position they had prior to the reorganization. Such
holders may want to continue to use options to manage the risks of
their combined stock position after the reorganization, but they can do
so only if options on the Restructure Security are available. The
Exchange believes that it is important to avoid any undue delay in the
introduction of options trading in such a Restructure Security in
circumstances where there is sound reason to believe that the
Restructure Security does in fact satisfy options listing standards.
Accordingly, the Amex proposes to add new paragraph (d) to
Commentary .05 of Rule 915, to address situations where a Restructure
Security is issued pursuant to a public offering or rights
distribution. Pursuant to the proposed rule change, the Exchange may
certify the Restructure Security as satisfying minimum shareholder and
minimum public float requirements on the basis provided for in approved
Commentary .05(c), only after at least five days of ``regular way''
trading. Moreover, after due diligence, the Exchange must have no
reason to believe that the Restructure Security does not satisfy these
requirements. Additionally, in order to base certification on
Commentary .05 of Rule 915, the closing prices of the Restructure
Security on each of the five or more trading days prior to the
selection date must be at least $7.50. Finally, as is required for all
underlying securities selected for options trading, trading volume in
the Restructure Security must be at lease 2,400,000 shares during a
period of twelve months or less up to the time the security is so
selected.
The effect of the proposed rule change is that a Restructure
Security issued pursuant to a public offering or a rights distribution
that is part of a reorganization will be eligible for options trading
only if it satisfies all of the existing standards applicable to the
selection of underlying securities generally, except that (A) the
Exchange may assume the satisfaction of the minimum public ownership
requirement of 7,000,000 shares and the minimum 2,000 shareholders
requirement if (i) either the percentage of value tests of subparagraph
(a)(1) of Commentary .05 are met or the aggregate market value
represented by the Restructure Security is at least $500,000,000; and
if (ii) the Restructure Security is listed on an exchange of an
automatic quotation system having equivalent listing requirements or at
least 40,000,000 shares of the Restructure Security are issued and
outstanding, and if (iii) after the Restructure Security has traded
``regular way'' for at least five trading days and after having
conducted due diligence in the matter, the Exchange has no reason to
believe that these requirements are not met, and (B) subject to the
same percentage of value or aggregate market value requirements, the
Restructure Security may be deemed to satisfy the minimum market price
per share requirement if it has a closing market price per share of at
least $7.50 during each of the five or more trading days preceding the
date of selection, instead of having to satisfy this requirement over a
majority of days over a period of three months. (In the event the
Restructure Security has a closing price that is less than $7.50 on any
of the trading days preceding its selection, it will have to satisfy
this requirement on a majority of trading days over a period of three
months before it can be certified as eligible for options trading.) For
any Restructure Security issued in a public offering or a rights
distribution that does satisfy these requirements, the effect of the
proposed rule change will be to permit its certification for options
trading to take place as early as on the sixth day after trading in the
stock commences, instead of having to wait for three months of trading.
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Securities Exchange Act of 1934 in general,
and furthers the objectives of Section 6(b)(5) in particular, by
removing impediments to a free and open market in options covering
securities issued in public offerings or pursuant to rights
distributions as part of restructuring transactions and other similar
corporate reorganizations.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any 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)
[[Page 63552]]
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. 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 the File No. SR-Amex-95-47 and should be
submitted by January 2, 1996.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\4\
\4\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-30068 Filed 12-8-95; 8:45 am]
BILLING CODE 8010-01-M
