[Federal Register Volume 61, Number 104 (Wednesday, May 29, 1996)]
[Notices]
[Pages 26940-26942]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-13388]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37228; International Series Release No. 981; File No.
SR-CHX-96-14]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change, by the Chicago Stock Exchange, Inc., Relating to Trading of
Particular Investment Company Units
May 20, 1996.
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 April 23,
1996, the Chicago Stock Exchange, Inc. (``CHX'' or
[[Page 26941]]
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'' of ``SEC'') the proposed rule change, as described in
Items I, II, and III below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Article XXVIII of the CHS's Rules
governing the listing requirements of securities on the CHX.
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 self-regulatory organization
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 self-regulatory organization
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 SR-CHX-96-12, the Exchange requested approval of proposed rule
changes allowing listing and/or trading of units representing an
interest in a registered investment company (``Units'').\1\ In that
rule filing, the Exchange also stated its intent to trade CountryBasket
securities, pursuant to a request for unlisted trading privileges.
CountryBasket securities are Units designed to track the performance of
specific foreign indices, more fully described in SR-CHX-96-12 and SR-
NYSE-95-23.\2\
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\1\ See Securities Exchange Act Release No. 37121 (April 17,
1996), 61 FR 17932 (notice of File No. SR-CHX-96-12).
\2\ Id. See also Securities Exchange Act Release No. 36923
(March 5, 1996), 61 FR 10410 (order approving File No. SR-NYSE-95-
23).
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The American Stock Exchange (``Amex''), in SR-Amex-95-43, requested
and received approval of rules allowing listing and/or trading of
Units.\3\ The Amex also requested specific approval for the listing and
trading of World Equity Benchmark Securities (``WEBS''), securities
similar to CountryBaskets.
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\3\ See Securities Exchange Act Release No. 36947 (March 14,
1996), 61 FR 10606 (order approving File No. SR-AMEX-95-43 as
amended).
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The CHX is proposing to adopt listing standards to permit its
members to trade WEBS pursuant to unlisted trading privileges
(``UTP''). If at a later time CHX desires to list WEBS, rather than
only trade the Amex-approved WEBS pursuant to UTP, the Exchange will
request SEC approval for that listing in a separate proposed rule
change filed pursuant to Section 19(b) of the Act.
WEBS
The remainder of this filing discusses the structure of WEBS, the
details of which are taken from SR-Amex-95-43 and its Amendments Nos.
1, 2, and 3. The information provided here is significantly condensed
from the Amex's filing. CHX notes that the Amex has represented that
customers who purchase WEBS will receive a detailed prospectus from the
issuer.
Structure of WEBS
WEBS are issued by Foreign Fund, Inc., and based on seventeen
Morgan Stanley Capital International (``MSCI'') Indices (each
individually an ``MSCI Index'' or ``Index'' and collectively ``MSCI
Indices'' or ``Indices''). The countries whose markets are represented
by those indices are: Australia, Austria, Belgium, Canada, France,
Germany, Hong Kong, Italy, Japan, Malaysia, Mexico, Netherlands,
Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
The investment objective of each WEBS series is to seek to provide
investment results that correspond generally to the price and yield
performance of public securities traded in the aggregate in particular
foreign markets, as represented by specific MSCI Indices. Each WEBS
series will use a ``passive'' or indexing investment approach which
attempts to approximate the investment performance of its benchmark
index through quantitative analytical procedures.
A WEBS series normally will invest at least 95% of its total assets
in stocks that are represented in the relevant MSCI Index and will at
all times invest at least 90% of its total assets in such stocks. A
WEBS series will not hold all of the issues that comprise the subject
MSCI Index, but will attempt to hold a representative sample of the
securities in the Index in a technique known as ``portfolio sampling.''
Foreign Fund, Inc., will issue and redeem WEBS of each Index Series
only in aggregations of shares specified for each Index Series (each
aggregation a ``Creation Unit''). The number of shares per Creation
Unit will range from 40,000 to 600,000. The Amex anticipates that the
value of a Creation Unit at the start of trading will range from
$450,000 to $10,000,000 and the net asset value (``NAV'') of an
individual WEBS will range from $10 to $20.
The MSCI Indices
MSCI generally seeks to have 60% of the capitalization of a
country's stock market index reflected in the MSCI Index for such
country. Thus, the MSCI Indices seek to balance the inclusiveness of an
``all share'' index against the replicability of a ``blue chip'' index.
MSCI applies the same criteria and calculation methodology across all
markets for all indices, developed and emerging.
All single-country MSCI Indices are market capitalization weighted.
For countries that restrict foreign ownership, MSCI calculates two
Indices. The additional Indices are called ``free'' Indices, and they
exclude companies and share classes not purchasable by foreigners. Free
Indices are currently calculated for Singapore, Mexico, the
Philippines, and Venezuela, and for those regional and international
Indices which include such markets. The Mexico and Singapore WEBS
series will be based on the free Indices for those countries. There are
no WEBS series corresponding to the Philippines and Venezuela MSCI
Indices.
All MSCI Indexes are calculated daily. The calculation method
weights stocks in an index by their beginning-of-period market
capitalization. Share prices are ``swept clean'' daily and adjusted for
any rights issues, stock dividends or splits. The MSCI Indices
currently are calculated in local currency and in U.S. dollars, without
dividends and with gross dividends reinvested.
Prices used to calculate the MSCI Indices are the official exchange
closing prices. All prices are taken from the dominant exchange in each
market. To calculate the applicable foreign currency exchange rate,
MSCI uses WM/Reuters Closing Spot Rates for all developed and emerging
markets except those in Latin America. Because of the high volatility
of currencies in some Latin American countries, MSCI continues to
calculate its own rates for those countries. Under exceptional
circumstances MSCI may elect to use an alternative exchange rate for
any country if the WM/Reuters rate is believed not to be representative
for a given currency on a particular day.
Each MSCI Index on which a WEBS series is based is calculated by
MSCI for
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each trading day in the applicable foreign exchange market based on
official closing prices in such exchange market.
For each trading day, MSCI publicly disseminates each Index value
for the previous day's close. MSCI Indices are reported periodically in
major financial publications and also are available through vendors of
financial information.
Foreign Fund, Inc., will cause to be made available daily the names
and required number of shares of each of the securities to be deposited
in connection with the issuance of WEBS in Creation Unit size
aggregations for each WEBS series, as well as information relating to
the required cash payment representing, in part, the amount of accrued
dividends applicable to such WEBS series. This information will be made
available by the Fund Advisor to any National Securities Clearing
Corporation (``NSCC'') participant requesting such information. In
addition, other investors can request such information directly from
the Fund distributor. The NAV for each WEBS series will be calculated
directly by the Fund administrator, PFPC Inc. NAVs will be made
available to the public from the Fund distributor by means of a toll-
free number, and also will be available to NSCC participants through
data made available from NSCC.
To provide current WEBS pricing information, the Amex has
represented that it anticipates it will disseminate through the
facilities of the Consolidated Tape Association an ``indicative
optimized portfolio value'' (``Value'') for each WEBS series as
calculated by Bloomberg, L.P. (``Bloomberg''). The Value will be
disseminated on a per WEBS basis every fifteen seconds during regular
Amex trading hours of 9:30 a.m. to 4:00 p.m. New York time.
The Value likely will not reflect the value of all securities
included in the applicable benchmark MSCI Index. In addition, the Value
will not necessarily reflect the precise composition of the current
portfolio of securities held by the Fund for each WEBS series at a
particular moment. Therefore, the Value on a per WEBS basis
disseminated during Amex trading hours should not be viewed as a real-
time update of the net asset value of the Fund, which is calculated
only once a day. It is expected, however, that during the trading day
the Value will closely approximate the value per WEBS share of the
portfolio of securities for each WEBS series except under unusual
circumstances.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b)(5) of the
Act in that the proposal fosters cooperation and coordination with
persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, removes impediments to and perfects the mechanism of a free
and open market and a national market system and protects investors and
the public interest.
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
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 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, D.C. 20549.
Copies of the submissions, 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 NW.,
Washington, D.C. 20549. Copies of such filing will also be available at
the principal office of the CHX. All submissions should refer to File
No. SR-CHX-96-14 and should be submitted by [insert date 21 days from
date of publication].
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-13388 Filed 5-28-96; 8:45 am]
BILLING CODE 8010-01-M
