[Federal Register Volume 61, Number 79 (Tuesday, April 23, 1996)]
[Notices]
[Pages 17931-17932]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-9894]
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OFFICE OF MANAGEMENT AND BUDGET
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37122; File No. SR-Amex-96-12]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the American Stock Exchange, Inc., Relating to Listing and
Trading of Warrants Based on the Selected Tech Stock Index
April 17, 1996.
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 April 9, 1996, 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.
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\1\ 15 U.S.C. 78s(b)(1) (1988).
\2\ 17 CFR 240.19b-4 (1994).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Amex, pursuant to Rule 19b-4 of the Act, proposes to approve
for listing and trading, under Section 106 of the Amex Company Guide,
index warrants based on the Selected Tech Stock Index (``Index''), a
price-weighted, narrow-based index developed by an issuer and comprised
of 24 technology stocks which are traded on the Amex, the New York
Stock Exchange, Inc. (``NYSE''), or through the facilities of the
National Association of Securities Dealers Automated Quotation system
and are reported national market system securities (``Nasdaq/NMS'').
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
Under Section 106 (Currency and Index Warrants) of the Amex Company
Guide, the Exchange may approve for listing index warrants based on
foreign and domestic market indices. While the Exchange currently lists
and trades warrants on a number of foreign market indices and broad-
based domestic market indices, it now proposes to list and trade a
warrant based on a narrow-based domestic market index. The listing and
trading of warrants on the Selected Tech Stock Index will comply in all
respects with Exchange Rules 1100 through 1110 for the trading of stock
index and currency warrants.
Warrant issues on the Index will conform to the listing guidelines
under Section 106, which provide, among other things, that: (1) The
issuer shall have tangible net worth in excess of $250,000,000 and
otherwise substantially exceed size and earnings requirements in
Section 101(A) of the Company Guide or meet the alternate guideline in
paragraph (a); (2) the term of the warrants shall be for a period
ranging from one to three years from the date of issuance; and (3) the
minimum public distribution of such issues shall be 1,000,000 warrants,
together with a minimum of 400 public holders, and have an aggregate
market value of $4,000,000.
Index warrants will be direct obligations of their issuer subject
to cash-settlement during their term, and either exercisable throughout
their life (i.e., American style) or exercisable only on their
expiration date (i.e., European style). Upon exercise, or at the
warrant expiration date (if not exercisable prior to such date), the
holder of a warrant structured as a ``put'' would receive payment in
U.S. dollars to the extent that the Index has declined below a pre-
stated cash settlement value. Conversely, holders of a warrant
structured as a ``call'' would, upon exercise or at expiration, receive
payment in U.S. dollars to the extent that the Index has increased
above the pre-stated cash settlement value. If ``out-of-the-money'' at
the time of expiration, the warrants would expire worthless. In
addition, the Amex, prior to the commencement of trading, will
distribute a circular to its membership calling attention to specific
risks associated with warrants on the Index.
The Amex is proposing to list index warrants based on the Selected
Tech Stock Index, a price-weighted index developed by an issuer and
representing a narrow-based portfolio of large, actively-traded
technology stocks.\3\ The total market capitalization of the Index was
$329,094,000,000 on April 3, 1996. The median capitalization of the
components in the Index on that date was $3.8 billion, and the average
market capitalization of these companies was $13.71 billion. The
individual market capitalization of the companies ranged from $594
million to $68.1 billion. Average monthly trading volume in the Index
stocks ranged from approximately 4.4 million shares to approximately
229.6 million shares during the six-month period from October 1995
through March 1996. The Exchange will monitor the components in the
basket on a monthly basis and will advise the Commission whenever less
than 75% of those components are eligible for standardized options
trading. Currently, 100% of the components are eligible for
standardized options trading. The Selected Tech Stock Index shall be
used as the basis for only one index warrant to be listed and traded on
the Exchange. If the Exchange wishes to list and trade other products
based on the Selected Tech Stock Index, including other index warrants,
the Exchange shall advise the Commission to determine whether an
additional filing pursuant to Rule 19b-4 of the Act is necessary or
appropriate.
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\3\ The Commission notes that a list of the component securities
and their respective weights in the Index were attached to the
proposed rule filing as Exhibit A, and are available for examination
at the Amex or at the Commission as specified in Item IV.
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The Index is price-weighted; its value corresponds to the sum of
the prices of one share of each of the component stocks, reduced by a
divisor. The Index divisor will be determined to yield the benchmark
value of 100.00 on the date the warrant is priced for initial offering
to the public. Similar to other stock index values published by the
Exchange, the value of the Index will be calculated continuously and
disseminated every 15 seconds over the Consolidated Tape Association's
Network B.
The Index will be monitored daily for certain types of corporate
actions such as the payment of a dividend other than an ordinary cash
dividend, stock distribution, stock split, reverse stock split, rights
offering, distribution, reorganization, recapitalization, or similar
event which may require a divisor adjustment to maintain
[[Page 17932]]
continuity of the index's value. In the event of a merger,
consolidation, dissolution, or liquidation of an issuer, or in certain
other events such as the distribution of property by an issuer to
shareholders, components in the index may be deleted or replaced.
Shares of a component stock may be replaced (or supplemented) with
other securities under certain other circumstances, such as the
conversion of a component stock into another class of security or the
spin-off of a subsidiary. If the stock remains in the index, the
divisor may be adjusted to maintain the continuity of the Index's
value. In the event that a security in the index is removed due to a
corporate consolidation and the holders of such security receive cash,
the cash value of such security will be included in the Index and will
accrue interest at LIBOR to term.
2. Statutory Basis
The Amex believes that the proposed rule change is consistent with
Section 6(b) of the Act in general, and with Section 6(b)(5) in
particular,\4\ in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and is not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
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\4\ 15 U.S.C. 78f(b)(5) (1988).
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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 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 Amex 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, 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
of 5 U.S.C. 552, will be available for inspection and copying at the
Commission's Public Reference Section, 450 Fifth Street, N.W.,
Washington, DC 20549. Copies of such filing also will be available for
inspection and copying at the principal office of the Amex. All
submissions should refer to File No. SR-Amex-96-12 and should be
submitted by May 14, 1996.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\5\
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\5\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-9894 Filed 4-22-96; 8:45 am]
BILLING CODE 8010-01-M
