[Federal Register Volume 59, Number 93 (Monday, May 16, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-11799]
[[Page Unknown]]
[Federal Register: May 16, 1994]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34032; International Series Release No. 665; File No.
SR-PHLX-90-35]
Self-Regulatory Organizations; Order Approving a Proposed Rule
Change by the Philadelphia Stock Exchange, Inc., Relating to the
Listing of Warrants Based on the Financial Times-Stock Exchange 100
Index
May 10, 1994.
On December 10, 1990, the Philadelphia Stock Exchange, Inc.
(``PHLX'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission''), pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to list warrants based on the
Financial Times-Stock Exchange 100 Index (``FT-SE 100'' or ``Index'').
Notice of the proposal appeared in the Federal Register on January 7,
1991.\3\ No comment letters were received on the proposed rule change.
This order approves the Exchange's proposal.
---------------------------------------------------------------------------
\1\15 U.S.C. 78s(b)(1) (1988).
\2\17 CFR 240.19b-4 (1992).
\3\See Securities Exchange Act Release No. 28723 (December 28,
1990), 56 FR 543 (January 7, 1991).
---------------------------------------------------------------------------
The Exchange proposes to list index warrants based on the FT-SE
100, a broad-based, internationally recognized, capitalization-weighted
stock index based on the prices of 100 of the most highly capitalized
and actively traded stocks traded on the London Stock Exchange
(``LSE'').
The Commission has previously approved the listing of FT-SE 100
warrants by other self-regulatory organizations (``SROs'').\4\ The PHLX
will list FT-SE 100 warrants consistent with the standards set forth in
the FT-SE 100 Warrant Approval Orders. Specifically, trading in FT-SE
100 warrants will be subject to Exchange Rule 1026 (Suitability), which
applies the options suitability standard to index warrant
recommendations made by members and member organizations, and to
Exchange Rule 1027 (Discretionary Accounts), which requires that a
Senior Registered Options Principal or Registered Options Principal
approve and initial any discretionary index warrant transaction on the
day it is executed. In addition, Exchange Rule 747 (Approval of
Accounts), which requires that member organizations obtain certain
approvals prior to making brokerage transactions for customer accounts,
shall apply to trading FT-SE 100 warrants. Finally, the Exchange will
also distribute a circular regarding suitability requirements to its
membership.
---------------------------------------------------------------------------
\4\See, e.g., Securities Exchange Act Release Nos. 28627
(November 19, 1990), 55 FR 49357 (November 27, 1990) (approval for
Chicago Board Options Exchange, Inc. (``CBOE'')); 28106 (June 12,
1990), 55 FR 24955 (June 19, 1990) (approval for Pacific Stock
Exchange, Inc. (``PSE'')) (``FT-SE Warrant Approval Orders'').
---------------------------------------------------------------------------
Further, consistent with the proposals set forth and approved in
the FT-SE 100 Warrant Approval Orders, FT-SE 100 warrants may be
American-style\5\ or European-style,\6\ and may have a term of one to
five years. Additionally, (1) issuers must exceed the Exchange's
financial listing criteria and have assets in excess of $100 million,
(2) the warrants must have a minimum public distribution of one million
warrants with a minimum of 400 public warrant holders, and (3) the
warrants must have an aggregate market value of at least $4 million.
---------------------------------------------------------------------------
\5\American-style warrants may be exercised at any time prior to
expiration.
\6\European-style warrants may only be exercised during a
specified period prior to expiration.
---------------------------------------------------------------------------
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange, and, in
particular, the requirements of section 6(b)(5).\7\ Specifically, for
the reasons stated in the FT-SE 100 Warrant Approval Orders, the
Commission believes FT-SE 100 warrants may provide a valuable hedging
vehicle for investors, allowing them to hedge against stock market
fluctuations in the United Kingdom.\8\ Additionally, the Commission
notes the PHLX is a member of the Intermarket Surveillance Group
(``ISG'')\9\ and that the LSE is an affiliate member of the ISG. As an
affiliate member, the LSE has agreed to provide certain information to
other ISG members, including the PHLX, upon request.\10\ Accordingly,
the Commission believes the LSE's affiliate membership in the ISG helps
to ensure the effectiveness of an information sharing arrangement that
will assist the PHLX in its surveillance of trading in FT-SE 100
warrants. Finally, the Commission notes that other U.S. SROs have
listed FT-SE 100 warrants pursuant to the FT-SE 100 Warrant Approval
Orders for several years and the Commission is not currently aware of
any prior or existing problems regarding the listing and trading of
these warrants. Based on the above, the Commission finds that the
Exchange's proposal to list FT-SE 100 warrants as described herein is
consistent with just and equitable principles of trade and the
protection of investors.
---------------------------------------------------------------------------
\7\15 U.S.C. 78f(b)(5) (1988).
\8\See supra note 4.
\9\The ISG was formed on July 14, 1983 to, among other things
coordinate more effectively surveillance and investigative
information sharing arrangements in the stock and options markets.
See Intermarket Surveillance Group Agreement, July 14, 1983. The
most recent amendment to the ISG Agreement, which incorporates the
original agreement and all amendments made thereafter, was signed by
ISG members on January 29, 1990. See Second Amendment to the
Intermarket Surveillance Group Agreement, January 29, 1990. The
current members of the ISG are the American Stock Exchange, Inc.;
the Boston Stock Exchange, Inc.; the CBOE; the National Association
of Securities Dealers, Inc.; the PSE; and the PHLX.
\10\The LSE has agreed to provide certain trading information to
members of the ISG, including information relating to: (1) component
securities of the Index; and (2) the identity, trading activity, and
positions of LSE members or customers of LSE members. Id.
---------------------------------------------------------------------------
It is Therefore ordered, pursuant to section 19(b)(2) of the
Act,\11\ that the proposed rule change (SR-PHLX-90-35) is hereby
approved.
\11\15 U.S.C. 78s(b)(2) (1988).
---------------------------------------------------------------------------
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
---------------------------------------------------------------------------
\12\17 CFR 200.30-3(a)(12) (1993).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-11799 Filed 5-13-94; 8:45 am]
BILLING CODE 8010-01-M
