[Federal Register Volume 63, Number 171 (Thursday, September 3, 1998)]
[Notices]
[Pages 47052-47056]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23764]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40367; File No. SR-Amex-98-24]
Self-Regulatory Organizations; American Stock Exchange, Inc.;
Order Granting Approval to Proposed Rule Change and Notice of Filing
and Order Granting Accelerated Approval to Amendment No. 1 Relating to
the Listing and Trading of Merrill Lynch EuroFund Market Index Target
Term Securities
August 26, 1998.
I. Introduction
On June 30, 1998, the American Stock Exchange, Inc. (``Exchange''
or ``Amex'') submitted to 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 approve for listing and trading under Section
107A of the Exchange's Company Guide, Merrill Lynch EuroFund Market
Index Target Term Securities SM (``MITTS
Securities'') based in whole or in part on changes in the value of the
Merrill Lynch EuroFund Index (``EuroFund Index'').\3\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ The Commission notes that the ``EuroFund Index'' (a term
defined in the prospectus for the MITTS Securities) reflects the
adjusted total return of Class B shares of the Merrill Lynch
EuroFund, a mutual fund registered under the Investment Company Act
of 1940. The EuroFund Index does not measure the performance of any
securities other than Class B shares of the Merrill Lynch EuroFund.
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The proposed rule change was published for comment in Securities
Exchange Act Release No. 40228 (July 17, 1998), 63 FR 40145 (July 27,
1998). No comment letters were received in response to the proposal.
The Exchange submitted Amendment No. 1 to the proposed rule change on
August 21, 1998.\4\ This order grants approval to the proposed rule
change and accelerates approval of Amendment No. 1.
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\4\ Amendment No. 1 discusses the surveillance procedures that
the Exchange will undertake with regard to trading in the MITTS
Securities. The Exchange represented that its Market Surveillance
department will monitor trading in the MITTS Securities and shares
of the EuroFund underlying the EuroFund Index. If the Market
Surveillance department detects unusual trading activity in the
MITTS Securities, it will examine, if necessary, trading activity in
the EuroFund's component stocks and the redemption activity in
shares of the EuroFund. See Letter to Sharon Lawson, Senior Special
Counsel, Division of Market Regulation, Commission, from Claire P.
McGrath, Vice President and Special Counsel, Exchange, dated August
20, 1998.
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II. Description of the Proposal
a. Listing Requirements
The Exchange seeks to list the MITTS Securities for trading under
Section 107A of the Exchange's Company Guide. Section 107A provides for
the listing and trading of securities that cannot be readily
categorized under the listing criteria for common and preferred stocks,
bonds, debentures, or warrants.\5\ The MITTS Securities are structured
as senior, unsecured debt securities, the value of which will be
linked, in whole or in part, to the adjusted total return value of
Class B shares of the Merrill Lynch EuroFund (``EuroFund'').\6\ The
EuroFund is an open-end mutual fund registered under the Investment
Company Act of 1940 and is a ``diversified company'' as defined in
Section 5(b)(1) of the Investment Company Act of 1940.\7\
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\5\ See Securities Exchange Act Release No. 27753 (Mar. 1,
1990), 55 FR 8626 (Mar. 8, 1990).
\6\ According to the prospectus prepared by the underwriter, the
EuroFund is a diversified, open-end management company that seeks to
provide shareholders with capital appreciation primarily through
investment in equities of corporations domiciled in European
countries. While there are no prescribed limits on geographic
distribution within the European community, it currently is
anticipated that a majority of the EuroFund's assets will be
invested in equity securities of issuers domiciled in Western
European countries. Current income from dividends and interest will
not be an important consideration in selecting portfolio securities.
The EuroFund expects that under normal market conditions at least
80% of its net assets will be invested in European corporate
securities, primarily common stocks, and debt and preferred
securities convertible into common stocks.
\7\ See 15 U.S.C. 80a-5(b)(1). Section 5(b)(1) requires that at
least 75% of the value of a diversified company's total assets must
represent cash; cash items; government securities; securities of
other investment companies; and other securities which, with respect
to any single issuer, do not account for more than: (i) 5% of the
value of the management company's total assets, and (ii) 10% of the
outstanding voting securities of that issuer.
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The Exchange has represented that both the issue (MITTS Securities)
and the issuer (Merrill Lynch & Co., Inc.) will conform to and meet the
listing guidelines set forth in Section 107A of the Exchange's Company
Guide.\8\ In addition: (i) the issuer has a minimum
[[Page 47053]]
tangible net worth in excess of $250 million; (ii) the EuroFund has
total net assets of approximately $2.16 billion; and (iii) the
EuroFund's net asset value (``NAV'') \9\ is reported each day through
the facilities of the National Association of Securities Dealers
Automated Quotation System (``Nasdaq''). The Exchange's continued
listing guidelines governing the MITTS Securities are set forth in
Sections 1001 through 1003 of the Exchange's Company Guide. In
particular, Section 1003(b) regarding suspensions and delistings with
respect to limited distribution and reduced market value will apply to
MITTS Securities.\10\
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\8\ Specifically, the MITTS Securities must have: (i) a minimum
public distribution of one million trading units; (ii) a minimum of
400 public holders (if traded in thousand dollar denominations then
no number of holders is required); and (iii) an aggregate market
value not less than $4 million. In addition, the issuer of the MITTS
Securities must have assets in excess of $100 million and
stockholders' equity of at least $10 million, and must meet the
earnings criteria set forth in Section 101 of the Exchange's Company
Guide. If the issuer of the MITTS Securities did not have pre-tax
income of at least $750,000 in its last fiscal year, or in two of
its last three fiscal years, the issuer must have: (i) assets in
excess of $200 million and stockholders' equity of at least $10
million; or (ii) assets in excess of $100 million and stockholders'
equity of at least $20 million.
\9\ The EuroFund's prospectus states that the net asset value
per share is computed by dividing the sum of the value of the
securities held by the EuroFund plus any cash or other assets
(including interest and dividends accrued but not yet received)
minus all liabilities (including accrued expenses) by the total
number of shares outstanding at such time, rounded to the nearest
cent. Expenses, including the fees payable to the EuroFund's
investment adviser and any account maintenance and/or distribution
fees payable to the EuroFund's distributor, are accrued daily.
\10\ Under Section 1003(b)(iii), the Exchange may consider
suspending or delisting the MITTS Securities if: (i) the aggregate
market value or the principal amount of the MITTS Securities
publicly held is less than $400,000; or (ii) the issuer is unable to
meet its obligations on the MITTS Securities.
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b. Description of MITTS Securities on the EuroFund
The MITTS Securities will provide for payment at maturity based in
whole or in part on changes in the value of the EuroFund Index, an
index based on the adjusted total return of the Class B shares of the
EuroFund.\11\ The total return value reflects the change in the NAV of
Class B shares of the EuroFund, plus cash dividends and distributions
paid on those shares. After the Exchange calculates the EuroFund Index
based on changes in the total return value, the Exchange will reduce
the EuroFund Index value each day by a percentage equal to the pro rata
portion of an annual reduction factor. The annual reduction factor is
expected to be between 2.50% and 2.75% of the value of the EuroFund
Index and will be determined on the date that the MITTS Securities are
priced for initial sale to the public.\12\ The EuroFund Index, as
adjusted by the annual reduction factor, will be calculated by the
Exchange once a day after the EuroFund's NAV has been determined. After
calculation, the EuroFund Index value will be disseminated over the
Consolidated Tape Association's Network B and updated again after the
next close of trading and reporting of the EuroFund's NAV.\13\
Likewise, the EuroFund's NAV will be disseminated through the
facilities of Nasdaq subsequent to calculation. If the EuroFund does
not comply with the Rule 22c-1 under the Investment Company Act of
1940,\14\ which requires daily computation of a fund's current NAV, the
Exchange will use the last available price in its calculation.
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\11\ The EuroFund consists of Class A, Class B, Class C, and
Class D shares. Each class of shares represents an identical
interest in the investment portfolio of the EuroFund and has the
same rights. However, each class of shares varies with regard to:
(i) sales charges; (ii) account maintenance fees; (iii) distribution
fees; and (iv) conversion features.
\12\ Holders of Class B shares receive the value of their shares
plus cash dividends and distributions paid on those shares less
fees. Holders of the MITTS Securities receive at maturity the
principal amount of their investment plus a Supplemental Redemption
Amount in the form of Class D shares (see Section II(c) infra,
``Maturity and Settlement of MITTS Securities'') based on the
adjusted total return of Class B shares of the EuroFund which may be
lower, due to the annual reduction factor, than what a holder of
Class B EuroFund shares might receive. The Exchange has represented
that an explanation of the annual reduction factor will be included
in any marketing materials, fact sheets, or any other materials
circulated to investors regarding the trading of MITTS Securities.
\13\ The EuroFund Index is updated only at the close of trading
each day because that is the only time when the EuroFund's NAV is
determined and disseminated. The Exchange believes this should not
pose an obstacle to the trading of the MITTS Securities, anymore
than it prevents investors from entering intra-day orders to
purchase or redeem shares of the EuroFund itself at a closing NAV
that is unknown at the time the orders are entered.
\14\ 17 CFR 270.22c-1.
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c. Maturity and Settlement of MITTS Securities
A specific maturity date will not be established until the time of
the offering, however, the underwriter's preliminary prospectus
indicates that the MITTS Securities are expected to mature sometime in
February, 2006. Although the value of the MITTS Securities will be
derived from the performance of Class B shares of the EuroFund, the
MITTS Securities will settle in Class D shares of the EuroFund.\15\
Specifically, the MITTS Securities will guarantee holders 100% of
principal return plus any additional amount that may be due as a result
of appreciation of the adjusted total return of Class B shares to be
paid in either the value of Class D shares of the EuroFund or, if such
shares are unavailable, cash. the MITTS Securities will settle by
delivery of the number of Class D shares of the EuroFund equal in value
to the principal amount ($10 per MITTS Security) plus the Supplemental
Redemption Amount,\16\ if any, based on the NAV for Class D shares
determined on a specified date prior to the stated maturity of the
MITTS Securities.\17\ If the issuer is unable to deliver the Class D
shares because the EuroFund is not issuing Class D shares to new
investors in the EuroFund as of the date immediately prior to the
stated maturity date, it will pay the equivalent amount in cash.
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\15\ See supra note 11.
\16\ The Supplemental Redemption Amount, which may not be less
than zero, will equal the principal amount ($10) multiplied by the
percentage difference between the ending value of the EuroFund Index
and the starting value [$10 ((ending EuroFund Index value--starting
EuroFund Index value)/starting EuroFund Index value)]. The ending
and starting EuroFund Index values used to calculate the
Supplemental Redemption Amount shall reflect the application of the
annual reduction factor.
\17\ The specified date shall be two business days prior to the
stated maturity of the MITTS Securities. Telephone conversation
between Sharon Lawson, Senior Special Counsel, Division of Market
Regulation, Commission; Claire McGrath, Vice President and Special
Counsel, Exchange; and Thomas Lee, Vice President of Customized
Investments, Merrill Lynch & Co. (July 16, 1998).
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d. Exchange Rules Applicable to MITTS
Because the MITTS Securities are linked to the EuroFund, which
holds a portfolio of equity securities, the Exchange has decided to
apply its equity floor trading rules. Regular equity trading hours
(9:30 A.M. to 4:00 P.M. Eastern Standard Time) will govern the trading
of the MITTS Securities. In addition, the MITTS Securities will be
subject to the equity margin rules of the Exchange.\18\
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\18\ See Exchange Rule 462, ``Minimum Margins.''
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In accordance with Exchange Rule 411,\19\ the Exchange shall impose
a duty of due diligence on its members and member firms to determine
the essential facts relating to customers prior to their purchasing and
trading MITTS Securities. Furthermore, consistent with the offering of
other structured products, the Exchange will distribute a circular to
its membership prior to the commencement of trading in the MITTS
Securities to provide guidance regarding member firm compliance
responsibilities, including appropriate suitability criteria and/or
guidelines. The circular shall require that before an Exchange member,
member organization, or employee of such member organization,
undertakes to recommend a transaction in the MITTS Securities, such
member or member organization should make a determination that the
MITTS Securities are suitable for such customer. As part of that
determination, the person making the recommendation should have a
reasonable basis for believing at
[[Page 47054]]
the time of making the recommendation, that the customer has such
knowledge and experience in financial matters that they may be capable
of evaluating the risks and the special characteristics of the
recommended transaction, including those highlighted, and that the
customer is financially able to bear the risks of the recommended
transaction. Lastly, as with other structured products, the Exchange
has stated that it will monitor closely the trading activity in the
MITTS Securities to identify and deter any potential improper trading
activity. In this regard, the Exchange has submitted an amendment that
discusses in more detail surveillance for the MITTS Securities.\20\
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\19\ Exchange Rule 411, ``Duty to Know and Approve Customers,''
requires every Exchange member or member organization to ``use due
diligence to learn the essential facts relative to every customer
and to every order or account accepted.''
\20\ See Amendment No. 1 supra note 4, and discussion infra.
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III. Discussion
For the reasons discussed below, 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, with the requirements of
Section 6(b)(5) \21\ that the rules of an exchange market be designed
to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general, to protect investors and the
public interest.\22\ The Commission believes providing for exchange-
trading of the MITTS Securities will offer investors a new and
innovative means of participating in a mutual fund that invests in
foreign securities. Specifically, the Commission believes that the
MITTS Securities will permit investors to gain equity exposure in
European exchange markets \23\ while at the same time limiting the down
side risk of their original investment as a result of the issuer's 100%
principal guarantee.
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\21\ 15 U.S.C. 78f(b)(5).
\22\ In approving this proposed rule change, the Commission
notes that it has considered the proposal's impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
\23\ The EuroFund can invest in Western or Eastern European
exchange markets. According to information provided by Amendment No.
1, the five most recent semi-annual reports filed by the EuroFund
pursuant to Section 30(e) of the Investment Company Act of 1940
indicate that on average, 96.38% of the EuroFund's assets were
invested in Western European countries.
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The Commission recognizes that the MITTS Securities have certain
characteristics that are similar to previously approved hybrid products
linked to individual and/or indexes of securities. For example, like
other market index target term securities, the MITTS Securities are not
leveraged instruments.\24\ Nevertheless, the Commission has not
previously approved for listing and trading a hybrid product like the
MITTS Securities that is physically settled and linked to a single,
open-end investment company. In addition, the MITTS Securities linked
to the EuroFund Index are unlike other previously approved market index
target term securities because the final rate of return of the MITTS
Securities is derivatively priced based upon the performance of a
generally undisclosed portfolio of securities. Finally, the Commission
notes that the MITTS Securities have raised potential conflict of
interest concerns because the issuer of the MITTS Securities is an
affiliate of the investment adviser to the EuroFund. The Commission
believes that these factors, along with certain other features of the
MITTS Securities, raise unique and novel issues.\25\ As discussed in
more detail below, the Commission believes that the Exchange and the
issuer have adequately addressed these issues.
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\24\ Certain characteristics of the MITTS Securities being
approved herein more closely resemble equity linked notes under
Section 107B of the Exchange's Company Guide rather than market
index target term securities listed under Section107A for ``Other
Securities.'' Generally, equity linked notes are based on the
performance of one security, either a common stock or non-
convertible preferred stock, and are settled in the underlying
linked security. Market index target term securities, on the other
hand, have traditionally measured the performance of a known
portfolio of securities and are generally cash settled. Because
equity linked notes listed under Section 107B of the Exchange's
Company Guide can only overlie common stock or non-convertible
preferred stock, the Exchange has appropriately relied on its
broader ``Other Securities'' listing standard for the listing of the
MITTS Securities.
\25\ For example, the settlement value of the MITTS Securities
is based on changes in one class of EuroFund shares while the holder
will receive settlement in another class.
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First, the Commission notes that the Exchange's rules and
procedures addressing the special concerns attendant to the trading of
hybrid securities will be applicable to the MITTS Securities. In
particular, by imposing the hybrid listing standards, heightened
suitability for recommendations in MITTS Securities, disclosure, and
compliance requirements noted above, the Commission believes that the
Exchange has adequately addressed the potential problems that could
arise from the hybrid nature of the MITTS Securities. In addition, the
Exchange will distribute an information circular to its membership
calling attention to the specific risks associated with the MITTS
Securities, as well as suitability requirements and compliance
responsibilities. The circular also will highlight certain unusual
features of the MITTS Securities including the annual reduction factor,
the relationship between the issuer of the MITTS Securities and the
investment adviser to the EuroFund, and the physical settlement in a
class of shares different than the class underlying the EuroFund
Index.\26\
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\26\ Telephone conversation between Sharon Lawson, Senior
Special Counsel, Division of Market Regulation, Commission; and
Scott Van Hatten, Legal Counsel, Exchange (Aug. 24, 1998).
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Second, the MITTS Securities remain a non-leveraged product with
the issuer guaranteeing 100% of principal return. The Commission
realizes that the final payout on the MITTS Securities is dependent in
part upon the individual credit of the issuer. To some extent, however,
this credit risk is minimized by the Exchange's hybrid listing
standards in Section 107A of the Company Guide which provide that only
issuers satisfying substantial asset and equity requirements may issue
securities such as MITTS Securities.\27\ In addition, these standards
require that the MITTS Securities have at least $4 million in aggregate
market value. Furthermore, financial information regarding the issuer,
as well as the MITTS Securities and the underlying EuroFund, that is
required to be disclosed under the federal securities laws will be
publicly available to investors.
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\27\ See supra note 8.
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Third, the history and performance of the EuroFund should be
available through a variety of public sources. In particular, the
EuroFund's NAV will be disseminated through the facilities of Nasdaq
after the close of trading each business day. The Commission believes
this information will be useful and beneficial for investors in the
MITTS Securities. The Commission notes that the Exchange has
represented that the value of the EuroFund Index will be calculated by
the Exchange once each business day after the close of trading and
after the NAV for the EuroFund has been reported. This value will be
disseminated over the Consolidated Tape Association's Network B
throughout the trading day and shall be updated again after the next
close of trading when a new NAV is calculated and reported. The result
of this is that the EuroFund Index value disseminated during the
trading day is based on the prior day's NAV. The Commission generally
believes that updating values on a real-time basis throughout the
trading day is essential to any securities
[[Page 47055]]
product.\28\ Nevertheless, the Commission believes that disseminating
the static value of the EuroFund Index is acceptable because the
EuroFund's NAV is only available once a day after the close of trading,
and the portfolio of securities held by the EuroFund is not publicly
available and is not disclosed on a real-time, intra-day basis.\29\
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\28\ See e.g., Securities Exchange Act Release Nos. 38940 (Aug.
15, 1997), 62 FR 44735 (Aug. 22, 1997); 38819 (July 7, 1997), 62 FR
37320 (July 11, 1997); and 37744 (Sept. 27, 1996), 61 FR 52480 (Oct.
7, 1996).
\29\ As discussed in its order approving the listing and trading
of options on the Lipper Analytical/Salomon Brothers Growth and
Growth & Income Fund Indexes, the Commission recognizes that only an
investment adviser should have knowledge of a fund's component
securities and their values on a regular basis throughout the
trading day. In accordance with the Investment Company Act of 1940,
we note that information regarding the securities held by the
EuroFund will only be generally available to the public on a semi-
annual basis and all investors should have equal access to this
information when it is disseminated. See discussion infra on
informational barriers. Unless certain factors are present, the
Commission may determine it is not appropriate to allow a product to
trade without real-time dissemination of values. See Securities
Exchange Act Release No. 39244 (Oct. 15, 1997), 62 FR 55289 (Oct.
23, 1997).
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Fourth, as discussed above, the settlement value of the MITTS
Securities is based on changes in one class of EuroFund shares while
the holder will receive physical settlement in another class. This is
an unusual feature of the MITTS Securities. Nevertheless, because the
differences among the EuroFund classes are not related to the portfolio
held by the EuroFund, but instead appear to be related to differences
in fees and this fact has been disclosed and will be highlighted in the
Exchange's information circular to members, the Commission believes any
concerns about this feature have been adequately addressed.
Finally, the Commission believes that the Exchange and the issuer
of the MITTS Securities have adequately addressed the potential
manipulation concerns raised by the listing and trading of the MITTS
Securities.\30\ First, as previously noted, the issuer of the MITTS
Securities is an affiliate of the investment adviser to the underlying
EuroFund. The Commission believes that the Exchange, the issuer of the
MITTS Securities, and the investment adviser to the EuroFund have
established adequate safeguards to ensure the integrity of the MITTS
Securities and the EuroFund. In particular, Merrill Lynch & Co. has
represented that its wholly owned affiliate, Merrill Lynch Asset
Management (the investment adviser to the EuroFund), does not provide
information with respect to the investments contained in the EuroFund
to any proprietary trading operations of its Merrill Lynch affiliates
or employees engaged in such trading operations, except at such time as
such information is disseminated to the public-at-large. Further, any
such dissemination is effected in compliance with applicable laws
including the Investment Company Act of 1940. Merrill Lynch & Co. has
also represented that Merrill Lynch Asset Management maintains adequate
procedures to assure compliance with this policy. These informational
barrier procedures, as represented, should help prevent and deter the
misuse of any informational advantages with respect to changes in the
securities held by the EuroFund.
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\30\ The Commission notes that by approving this proposed rule
change the Commission is not approving the EuroFund Index for
options or warrants trading.
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Secondly, the Exchange has developed surveillance procedures to
monitor trading activity in the MITTS Securities and EuroFund shares
and will examine trading activity in the component stocks of the
EuroFund if necessary. In this regard, the Exchange has noted that
based on previous disclosure, the EuroFund invests a substantial
percentage of its assets in companies that are domiciled in countries
with which the Exchange or the Commission has information sharing
agreements.\31\ Further, the Commission notes that the size of the
EuroFund in comparison to the MITTS Securities offering, coupled with
the fact that the securities held by the EuroFund are only disclosed
semi-annually and the EuroFund is a diversified investment company
under the Investment Company Act of 1940,\32\ reduces concerns that the
EuroFund's underlying portfolio would be manipulated to affect the
MITTS Securities.\33\ Nevertheless, the Exchange has states it will be
able to monitor activity in the securities held by the EuroFund if
necessary.
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\31\ According to information provided by Amendment No. 1, the
five most recent semi-annual reports filed by the EuroFund pursuant
to Section 30(e) of the Investment Company Act of 1940 indicate that
on average, 77.46% of the EuroFund's assets were invested in
countries where the Exchange or the Commission has in place a
comprehensive surveillance sharing agreement.
\32\ With respect to 75% of its assets, the EuroFund is
prohibited from investing more than 5% of its assets in the
securities of a single issuer. In addition, Amendment No. 1 notes
that based on the EuroFund's most recent semi-annual disclosures, it
appears the EuroFund held between 106 to 138 securities, and that
each quarter the make-up of the EuroFund's portfolio changed between
22% to 50%.
\33\ See Amendment No. 1 supra note 4.
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The Commission has also been concerned that the price of the MITTS
Securities may be improperly influenced by large redemptions or
purchases of shares in the EuroFund, especially near the date of
settlement and valuation. The Commission believes that this concern has
been reduced by certain factors such as the size of the EuroFund in
relation to the MITTS Securities offering, and the EuroFund's practice
of maintaining a cash position to avoid having to immediately liquidate
assets to cover redemptions.\34\ Nevertheless, the Exchange has
committed to monitor trading activity in the MITTS Securities and
shares of the EuroFund, and has stated it will be able to obtain, if
necessary, the identity of investors who have made EuroFund redemptions
if it detects unusual trading activity in the MITTS Securities.
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\34\ Id.
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Based on the above, the Commission believes the Exchange has
developed adequate surveillance procedures to monitor trading activity
in the MITTS Securities and shares of the EuroFund. The Exchange's
surveillance procedures, in combination with the policies outlined by
Merrill Lynch & Co., should help to deter and detect any potentially
inappropriate or manipulative trading activity in the MITTS Securities,
or in the EuroFund shares or the securities held by the EuroFund that
affects the MITTS Securities.\35\
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\35\ The Commission notes that its conclusions on the MITTS
Securities are based on a variety of factors including the size of
the MITTS Securities offering in relation to the size of the
underlying EuroFund. A similar type of market index target term
security on a different open-end mutual fund may raise new or novel
issues and may have to be separately reviewed under Section 19(b) of
the Act.
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The Commission finds good cause to approve 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.
Amendment No. 1 provides additional information concerning the
surveillance procedures the Exchange will employ to monitor trading
activity in the MITTS Securities and shares of the EuroFund. The
information provided by Amendment No. 1 strengthens the Exchange's
proposal and indicates the Exchange is committed to monitoring trading
activity in the MITTS Securities and EuroFund shares and has
implemented procedures capable of detecting unusual trading activity
that is designed to affect the price of such securities. Accordingly,
the Commission believes that it is consistent with Section 6(b)(5)
[[Page 47056]]
of the Act \36\ to approve Amendment No. 1 to the proposed rule change
on an accelerated basis.
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\36\ 15 U.S.C. 78f(b)(5).
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Interested persons are invited to submit written data, views, and
arguments concerning Amendment No. 1 to the proposal, including whether
the proposed rule change as supplemented by Amendment No. 1 is
consistent with the Act. 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
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 persons, 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, DC 20549.
Copies of such filing also will be available for inspection and copying
at the principal office of the Exchange. All submissions should refer
to File No. SR-Amex-98-24 and should be submitted by September 24,
1998.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\37\ that the proposed rule change (SR-Amex-98-24), as supplemented
by Amendment No. 1, is approved.
\37\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\38\
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\38\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 98-23764 Filed 9-2-98; 8:45 am]
BILLING CODE 8010-01-M
