[Federal Register Volume 59, Number 166 (Monday, August 29, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21235]
[[Page Unknown]]
[Federal Register: August 29, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34572; File No. SR-Amex-94-17]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change and Amendment No.
1 to the Proposed Rule Change by the American Stock Exchange, Inc.,
Relating to the Dissemination of the Value of the Basket Underlying
Stock Upside Note Securities (``SUNS'')
August 22, 1994.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on May 25, 1994, the American
Stock Exchange, Inc. (``Amex'' or ``Exchange'') filed with the
Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Amex. On August 17, 1994, the Exchange filed
Amendment No. 1 to the proposed rule change.\2\ 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. Sec. 78s(b)(1) (1988).
\2\In Amendment No. 1, the Exchange proposes to provide for the
dissemination of the value of the Lehman Brothers Global
Telecommunications Basket at 12:45 p.m. Eastern Standard Time
(``E.S.T.''), instead of at 1:00 p.m. E.S.T. as originally proposed.
See Letter from William Floyd-Jones, Assistant General Counsel,
Legal and Regulatory Policy Division, Amex, to Brad Ritter,
Attorney, Office of Market Supervision (``OMS''), Division of Market
Regulation (``Division''), Commission, dated August 17, 1994
(``Amendment No. 1'').
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Amex proposes to disseminate the value of the Lehman Brothers
Global Emerging Telecommunications Basket (``Telecommunications
Basket'' or ``Basket'')\3\ one additional time each day in order to
provide additional information to investors and holders of
Telecommunications Basket Stock Upside Note Securities (``SUNS'').\4\
The text of the proposed rule change is available at the Office of the
Secretary, Amex, and at the Commission.
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\3\The Telecommunications Basket is a static portfolio
consisting of 24 equity securities in the telecommunications
industry which are listed as: (1) common shares outside of the U.S.
in the countries having the greatest exchange trading volume for the
shares; (2) common shares in the U.S.; or (3) as American Depositary
Receipts in the U.S. The securities that comprise the
Telecommunications Basket are securities issued by corporations
formed under the laws of Argentina, Brazil, Canada, Chile, France,
Hong Kong, Israel, Italy, Malaysia, Mexico, New Zealand, the
Philippines, Spain, Sweden, Thailand, the United States, and the
United Kingdom.
\4\``Stock Upside Note Securities'' and ``SUNS'' are service
marks of Lehman Brothers Holdings, Inc. (``Lehman Brothers'').
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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 the
Statutory Basis for, the Proposed Rule Change
On January 19, 1994, the Commission approved an Amex proposal to
list and trade SUNS, the return on which is based on the
Telecommunications Basket.\5\ SUNS are non-callable senior hybrid
securities issued by Lehman Brothers. SUNS have a six-year term and pay
an annual coupon based on the year-to-year appreciation of the
Telecommunications Basket. At maturity, holders of SUNS will receive
the entire principal amount of the note.
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\5\See Securities Exchange Act Release No. 233495 (January 19,
1994), 59 FR 3883 (January 27, 1994) (``SUNS Approval Order'')
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The value of the Telecommunications Basket is presently calculated
by Lehman Brothers once a day, based upon values for the component
securities as of 4:30 p.m. E.S.T., and is disseminated over Network B
at 5 p.m. E.S.T.\6\ Pursuant to the current proposal, Lehman Brothers
would calculate the value of the Telecommunications Basket one
additional time each day, using the market prices of the component
securities as of 12:30 p.m. E.S.T., and the Exchange would disseminate
this value at 12:45 p.m. E.S.T. The Exchange represents that the
proposed additional calculation and dissemination of the value of the
Telecommunications Basket will not in any way affect the determination
of payments made to SUNS holders by the issuer (i.e., payments will
still be based on the value of the Telecommunications Basket using the
market prices of the component securities as of 4:30 p.m. E.S.T.). The
Exchange represents that the sole purpose of the proposal is to provide
investors and holders of Telecommunications Basket SUNS with additional
market information regarding the value of the Telecommunications
Basket.
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\6\Id.
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The Amex 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) of the Act in particular in that it is designed to
prevent fraudulent and manipulative acts and practices and to promote
just and equitable principles of trade, and is not designed to permit
unfair discrimination between customers, issuers, brokers, or dealers.
(B) Self-Regulatory Organization's Statement on Burden on Competition
The Amex does not believe that the proposed rule change will impose
a 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 respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has requested that the proposed rule change be given
accelerated effectiveness pursuant to Section 19(b)(2) of the Act.
The Commission finds that the proposed rule change, as amended, 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, the Commission finds that the Amex proposal to calculate
and disseminate the value of the Telecommunications Basket one
additional time each day is consistent with the furthers the
Commission's goal that real-time dissemination of the value of the
securities underlying new derivative products should be provided to all
investors.\8\ Although the value of the Basket that will be
disseminated daily at 12:45 p.m. E.S.T. is based on the value of the
components at 12:30 p.m. E.S.T., the Commission believes that providing
investors with an intra-day indication of the value of the Basket may
serve to add liquidity to the market for SUNS and, therefore, may be
beneficial to investors.
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\7\15 U.S.C. Sec. 78f(b)(5) (1988).
\8\See SUNS Approval Order, supra note 4.
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Although the Commission, in approving the original Amex proposal to
list and trade Telecommunications Basket SUNS, permitted the product to
trade without real-time dissemination, the Commission also stated in
the SUNS Approval Order that ``it is useful and beneficial for all
investors and market participants to have access to the value of the
[Telecommunications Basket] on a real-time basis and encourages the
Amex and Lehman Brothers to further explore the possibilities in this
area.''\9\ Accordingly, the Commission believes that the additional
calculation and dissemination of the value of the Telecommunications
Basket as proposed, even though the value to be disseminated is not a
real-time value, should prove useful and beneficial to investors by
providing additional intra-day information on the value of the Basket,
and is therefore consistent with the Act. The Commission, however,
continues to believe that it is extremely important and beneficial for
all investors and market participants to have access to the value of
the Basket on a real-time basis and encourages the Amex and Lehman
Brothers to further explore the possibility of both narrowing the 15
minute gap between the values of the components used to calculate the
Basket value and the time that the value is disseminated at 12:45 p.m.
E.S.T., as well as calculating and disseminating additional intra-day
real-time values of the Basket.
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\9\Id. at note 26.
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The Commission believes that the proposed rule change will not
increase the potential for manipulation of the market for the SUNS or
the Basket components. Lehman Brothers has represented that it has
implemented procedures regarding information about the value of the
Basket to ensure that individuals trading the SUNS or any of the
components of the Basket on behalf of the pricing agent,\10\ will only
be able to receive such information through public means and not prior
to its release to the public.\11\ Furthermore, the Amex has represented
that in addition to its regular surveillance procedures, it will review
trading activity around the 12:45 p.m. E.S.T. dissemination time in
order to detect and deter potential manipulation in the market for SUNS
as a result of the 15-minute gap between the values of the Basket
components used in the calculation and the time that the value of the
Basket is disseminated.\12\ The Amex shall also distribute a circular
notifying members of the intra-day dissemination of the value of the
Basket and of the 15-minute time gap.\13\
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\10\The pricing agent is defined as an affiliate of Lehman
Brothers or an independent third party selected by Lehman Brothers
to compute the value of the Basket. See SUNS Approval Order, supra
note 4.
\11\Id. at note 36.
\12\Telephone conversation among William Floyd-Jones, Assistant
General Counsel, Legal and Regulatory Policy Division, Amex, Sharon
Lawson, Assistant Director, OMS, Division, Commission, and Brad
Ritter, Attorney, OMS, Division, Commission, on June 17, 1994.
\13\Telephone conversation among William Floyd-Jones, Assistant
General Counsel, Legal and Regulatory Policy Division, Amex, Sharon
Lawson, Assistant Director, OMS, Division, Commission, and Brad
Ritter, Attorney, OMS, Division, Commission, on August 22, 1994.
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The Commission finds good cause for approving the proposed rule
change and Amendment No. 1 to the proposed rule change prior to the
thirtieth day after the date of publication of notice of filing thereof
in the Federal Register in order to permit the Exchange to begin
disseminating the additional calculation of the value of the
Telecommunications Basket as soon as possible. For the reasons stated
above and because the proposed rule change will not alter the
determination of payments made to SUNS holders by the issuer, the
Commission believes it is consistent with Sections 6(b)(5) and 19(b)(2)
of the Act to approve the proposed rule change on an accelerated basis.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the proposed rule change and Amendment No. 1 to
the proposed rule change. 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-94-17 and should be submitted by [insert date 21 days from the
date of publication].
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act\14\ that the proposed rule change (SR-Amex-94-17), as amended, is
hereby approved.
\14\15 U.S.C. Sec. 78s(b)(2) (1988).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\15\
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\15\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-21235 Filed 8-26-94; 8:45 am]
BILLING CODE 8010-01-M
