[Federal Register Volume 59, Number 116 (Friday, June 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-14739]
[[Page Unknown]]
[Federal Register: June 17, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34198; International Series Release No. 672; File No.
SR-Amex-94-19]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change and Amendment No. 1 to Proposed Rule Change by the American
Stock Exchange, Inc. Relating to the Listing and Trading of Options on
the Nikkei Stock Index 300
June 10, 1994.
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 May 31, 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. On June 10,
1994, the Amex filed Amendment No. 1 to the proposed rule change.\3\
The `Commission is publishing this notice to solicit comments on the
proposed rule change and Amendment No. 1 from interested persons.
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\1\15 U.S.C. section 78s(b)(1) (1988).
\2\17 CFR Sec. 240.19b-4 (1993).
\3\In Amendment No. 1, the Amex amended its proposal to provide
that: (1) The exercise settlement value for all of the Nikkei Stock
Index 300 expiring option contracts will be the special opening
quotation, which is calculated based upon the opening prices of each
of the component securities on the Tokyo Stock Exchange on the last
business day prior to expiration; (2) the position and exercise
limits for Nikkei Stock Index 300 option contracts in the series
with the nearest expiration month will be 30,000 contracts; (3) the
trading unit for Nikkei Stock Index 300 options is the Index value
multiplied by $100; (4) for valuation purposes, one Nikkei Stock
Index 300 unit (1.0) is assigned a fixed value of one U.S. dollar;
and (5) the Tokyo Stock Exchange has recently requested that a new
comprehensive surveillance sharing agreement be entered into for
options on the Nikkei Stock Index 300, which agreement will cover
the sharing of surveillance information regarding the index's
component securities. See Letter from Claire P. McGrath, Managing
Director and Special Counsel for Derivative Securities, Amex, to
Michael Walinskas, Branch Chief, Derivatives Regulation, Division of
Market Regulation, Commission, dated June 10, 1994.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposing to trade standardized options on the
Nikkei Stock Index 300 (``Index''). In addition, the Amex proposes to
amend Amex Rule 904C(b) to provide for a position limit for the Index
of 50,000 contracts on the same side of the market, provided that no
more than 30,000 of such contracts are in series in the nearest
expiration month.
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 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 Exchange is proposing to trade standardized options on the
Index. The Index is comprised of 30 stocks which are representative of
the first section of the Tokyo Stock Exchange (``TSE'').
The Index was designed and is maintained by Nihon Keizai Shimbun,
Inc. (``Nihon''). The Index's component securities were selected for
their high market capitalizations and high degree of liquidity, and are
representative of the relative distribution of industries within the
broader Japanese equity market.
The median capitalization of the companies in the Index on March
31, 1994, was 340.1 billion yen (US $3.3 billion at the exchange rate
of 102.75 yen per dollar prevailing on March 31, 1994). The average
market capitalization of these companies was US $7.5 billion on the
same date and using the same rate of exchange. The individual market
capitalizations of these companies ranged from a low of US $875 million
to a high of US $76.5 billion on March 31, 1994. The largest stock
accounted for 3.41 percent of the total weighting of the Index, while
the smallest accounted for 0.04 percent.
The Index is a capitalization-weighted index and is calculated by
multiplying the price of each component security (in Japanese yen) by
its number of shares outstanding, adding those sums and dividing by the
current Index divisor. The Index divisor was determined initially to
yield a benchmark value of 100 on October 1, 1982. The Index's closing
value on April 13, 1994, was 296.35. The Index multiplier is 100, and,
for valuation purposes, one Index unit (1.0) is assigned a fixed value
of one U.S. dollar.
The Index will be maintained by Nihon. To maintain the continuity
of the Index, the divisor will be adjusted to reflect certain events
relating to the component securities. These events include, but are not
limited to, changes in the number of shares outstanding, spinoffs,
certain rights issuances, and mergers and acquisitions. The composition
of the Index will be reviewed periodically by Nihon.
The proposed options on the Index are to be European-style (i.e.,
exercises are permitted at expiration only), and cash-settled. Trading
hours for the Index options will be 9 a.m. to 4:15 p.m. (New York
time). Options on the Index will expire on the Saturday following the
third Friday of the expiration month (``Expiration Friday''). The last
trading day in an option series normally will be the business day
immediately preceding Expiration Friday of each expiration month
(normally a Thursday) and trading in expiring options will cease at the
close of trading on such day. The exercise settlement value for all of
the Index's expiring options will be the special opening quotation,
which is calculated based upon the opening price of each of the
component securities on the TSE on the last business day prior to
expiration. If a stock fails to open for trading, the last available
price of the stock will be used to calculate the Index's settlement
value. When an option expiration is moved in accordance with an
Exchange holiday, the last trading day for the expiring Index options
will be Wednesday, and the exercise settlement value of the Index
options will be determined at the opening of the regular Thursday
trading session on the TSE, even if the TSE is open on Friday. If the
TSE will be closed on the Friday before expiration but the Amex is not,
the last trading day for expiring Index options will be on Wednesday.
The Exchange plans to list options series with expirations in the
three near-term calendar months and in the three additional calendar
months in the March cycle. In addition, longer-term options series
having up to 36 months to expiration may be traded. In lieu of such
long-term options on a full-value Index level, the Exchange may list
long-term, reduced-value put and call options based on one-tenth (\1/
10\th) of the Index's full value. The current and closing Index value
of any such reduced-value long-term option will be rounded to the
nearest one-hundredth (\1/100\th) after the initial computation. In
either event, the interval between expiration months for either a full-
value or reduced-value long-term option will not be less than six
months.
Amex Rules 900C through 980C will apply to the trading of
standardized and long-term option contracts based on the Index. These
rules cover issues such as sales practices, margin requirements,
exercise prices, position and exercise limits, and floor trading
procedures. Surveillance procedures currently used to monitor trading
in each of the Exchange's other index options also will be used to
monitor trading in options on the Index. The Exchange represents that
the TSE has requested that a new comprehensive surveillance sharing
agreement be executed with respect to options on the Index. This
agreement will cover the sharing of surveillance information regarding
the Index's component securities.
The Exchange believes that the Index is a Stock Index Option under
Amex Rule 901C(a) and a Broad Stock Index Group under Amex Rule
900C(b)(1). With respect to Amex Rule 903C(b), the Exchange proposes to
list near-the-money (i.e., Within ten points above or below the current
index value) option series on the Index at 2\1/2\ point strike
(exercise) price intervals when the value of the Index is below 200
points. In addition, the Exchange proposes to establish, pursuant to
Amex Rule 904C(b), a position limit of 50,000 contracts on the same
side of the market, provided no more than 30,000 of such contracts are
in series in the nearest expiration month.
In anticipation of substantial customer activity in the options on
this Index (including institutional activity), the Exchange seeks to
have the ability to utilize its Auto-Ex system for orders in the Index
options of up to 50 contracts. Auto-Ex is the Exchange's automated
execution system which provides for the automatic execution of market
and marketable limit orders at the best bid or offer at the time the
order is entered. The Exchange believes that the ability to use Auto-Ex
for orders of up to 50 contracts will provide customers with deep,
liquid markets, as well as expeditious executions.
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 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 also will be available for
inspection and copying at the principal office of the Amex. All
submissions should refer to File No. SR-Amex-94-19 and should be
submitted by July 8, 1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\4\
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\4\17 CFR Sec. 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-14739 Filed 6-16-94; 8:45 am]
BILLING CODE 8010-01-M
