[Federal Register Volume 59, Number 98 (Monday, May 23, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-12468]
[[Page Unknown]]
[Federal Register: May 23, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34071; File No. SR-Amex-94-16]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the American Stock Exchange, Inc., Relating to the Listing
and Trading of Indexed Term Notes
May 17, 1994.
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 May 13,
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.\1\
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\1\On May 16, 1994, the Amex filed Amendment No. 1 to the
proposed rule change to alter the eligibility standards for Index
(as defined herein) components as originally proposed. As amended,
non-U.S. component securities (stocks or American Depositary
Receipts) that are not subject to comprehensive surveillance
agreements may not in the aggregate represent more than two
components of the Index. See Letter from Claire McGrath, Managing
Director and Special Counsel, Derivative Securities, Amex, to
Michael Walinskas, Branch Chief, Office of Derivatives and Equity
Oversight, Division of Market Regulation, Commission, dated May 16,
1994.
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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 under
Section 107A of the Amex Company Guide (``Guide''), Indexed Term Notes
(``Notes''), the return on which is based in whole or in part on
changes in the value of a static portfolio of ten equity securities.
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
Under section 107 of the Guide, the Exchange may approve for
listing and trading securities which cannot be readily categorized
under the listing criteria for common and preferred stocks, bonds,
debentures, or warrants.\2\ The Amex now proposes to list for trading
under section 107A of the Guide, Notes whose value is based in whole or
in part on a static index composed of ten actively-traded equity
securities to be determined and published by Lehman Brothers on or
about July 1, 1994 (``Index''). The securities to be included in the
Index will be announced by Lehman Brothers at or as close as possible
to the time of the offering of the Notes.
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\2\See Securities Exchange Act Release No. 27753 (March 1,
1990), 55 FR 8626 (March 8, 1990).
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The Notes will be non-convertible debt securities and will conform
to the listing guidelines under Section 107A of the Guide.
Specifically, the Notes must have: (1) A minimum public distribution of
one million trading units; (2) a minimum of 400 holders; (3) an
aggregate market value of at least $20 million; and (4) a term of at
least one year. Additionally, the issuer of the Notes (i.e., Lehman
Brothers) must have assets of at least $100 million, stockholders'
equity of at least $10 million, and pre-tax income of at least $750,000
in the last fiscal year or in two of the three prior fiscal years.\3\
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\3\As an alternative to these financial criteria, the issuer may
have either: (1) Assets in excess of $200 million and stockholders'
equity in excess of $10 million; or (2) assets in excess of $100
million and stockholders' equity in excess of $20 million.
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Although the specific maturity date will not be established until
immediately prior to the time of the offering, the Notes will provide
for maturity within approximately one year from the date of issue.
Notes may provide for periodic payments and/or payments at maturity
based in whole or in part on changes in the value of the Index. In
addition, the Notes may feature a ``cap'' on the maximum amount and/or
a ``floor'' on the minimum amount to be paid either periodically or at
maturity. Prior to the commencement of listing and trading of the
Notes, the Exchange shall distribute a circular to its membership
providing guidance with regard to member firm compliance
responsibilities, including appropriate suitability criteria and/or
guidelines.
The ten components of the Index shall meet the following criteria:
(1) A minimum market capitalization of $75 million, except that one
component security may have a market capitalization of not less than
$50 million; (2) trading volume in each of the six months prior to the
offering of the Notes of not less than one million shares, except that
one component security may have a trading volume in each of the six
months prior to the offering of the Notes of not less than 500,000
shares; (3) at least nine of the ten components of the Index will meet
the then current criteria for standardized options trading set forth in
Exchange Rule 915; (4) all components of the Index will be listed on
the Amex or the New York Stock Exchange, or will be National Market
securities traded through the National Association of Securities
Dealers Automated Quotation System; and (5) no more than two components
of the Index shall be non-U.S. securities that are not subject to
comprehensive surveillance sharing agreements between the appropriate
regulatory organizations.
The Index will be calculated using an ``equal dollar-weighting''
methodology designed to ensure that each of the component securities is
represented in an approximately equal dollar amount in the Index. To
create the Index, a portfolio of ten equity securities will be
established by the issuer, Lehman Brothers, representing an investment
of $10,000 in each component security (rounded to the nearest whole
share). The value of the Index will equal the current market value of
the sum of the assigned number of shares of each of the component
securities divided by the current Index divisor. The Index divisor will
initially be set to provide a benchmark value of 100.00 at the close of
trading on the day preceding the establishment of the Index.
The number of shares of each component stock in the Index will
remain fixed except in the event of certain types of corporate actions
such as the payment of a dividend (other than an ordinary cash
dividend), a stock distribution, stock split, reverse stock split,
rights offering, distribution, reorganization, recapitalization, or
similar event with respect to the component securities. The number of
shares of each component security may also be adjusted, if necessary,
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, the expropriation or
nationalization of a foreign issuer of the imposition of certain
foreign taxes on shareholders of a foreign issuer. Shares of a
component security may be replaced (or supplemented) with other
securities under certain circumstances, such as the conversion of a
component stock into another class of security, the termination of a
depositary receipt program, or the spin-off of a subsidiary. If the
security remains in the Index, the number of shares of that security
may be adjusted, to the nearest whole share, to maintain the
component's relative weight in the Index at the level immediately prior
to the corporate action. In all cases, the divisor will be adjusted, if
necessary, to ensure continuity of the value of the Index.
The value of the Index will be calculated continuously by the Amex
and disseminated every 15 seconds over the Consolidated Tape
Association's Network B.
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 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 in the
Commission's Public Reference Section, 450 Fifth Street NW.,
Washington, DC. 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-94-16 and should be
submitted by June 13, 1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\4\
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\4\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-12468 Filed 5-20-94; 8:45 am]
BILLING CODE 8010-01-M
