[Federal Register Volume 60, Number 174 (Friday, September 8, 1995)]
[Notices]
[Pages 46876-46878]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22240]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36175; File No. SR-Amex-95-32]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change and Amendment No. 1 to the Proposed Rule Change by the American
Stock Exchange, Inc., Relating to the Listing and Trading of Options on
the Amex HMO Index
August 31, 1995.
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 July 31, 1995, 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 Exchange. The
Exchange filed with the Commission Amendment No. 1 on August 24,
1995.\3\ The Commission is publishing this notice, as amended, to
solicit comments on the proposed rule change from interested persons.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, the Amex proposes to amend Amex Rule
904C to provide that position and exercise limits for options on the
HMO Index shall be 5,500 contracts of the put class and the call
class on the same side of the market. See Letter from Claire
McGrath, Special Counsel, Derivative Securities, Amex, to Michael
Walinskas, Branch Chief, Office of Market Supervision (``OMS''),
Division of Market Regulation (``Market Regulation''), Commission,
dated August 24, 1995.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange proposes to list for trading options on the Amex HMO
Index (``HMO Index'' or ``Index''). In addition, the Amex proposes to
amend Rule 901C, Commentary .01 to reflect that 90% of the Index's
numerical index value will be accounted for by stocks that meet the
current criteria and guidelines set forth in Rule 915. The text of the
proposed rule change is available at the Office of the Secretary, the
Exchange, 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 The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Section (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 purpose of the proposed rule change is to permit the Exchange
to list and trade cash-settled, European-style \4\ stock index options
on the HMO Index, an industry-specific index created by the Exchange.
\4\ European-style options can only be exercised during a
specified period before the options expire.
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Index Design
The HMO Index \5\ consists of ten highly capitalized health care
maintenance organization stocks and American Depository Receipts
(``ADRs'') traded on the Amex, the New York Stock Exchange (``NYSE''),
or through the National Association of Securities Dealers Automated
Quotations system
[[Page 46877]]
and are reported national market system securities (``NASDAQ/NMS'').\6\
The components comprising the Index ranged in capitalization from $6.9
billion to $1.4 billion as of July 25, 1995. The total capitalization
as of that date was $28 billion; the mean capitalization was $2.8
billion; and the median capitalization was $1.9 billion. The largest
component accounted for 24.70% of the total weight of the Index, and
the five largest components accounted for 72.56% of the total weight of
the Index. On that same date, the smallest component accounted for
5.02% of the total weight of the Index.
\5\ The HMO Index is a new stock index established in 1995 by
the Amex based on health maintenance organization stocks (or ADRs
thereon).
\6\ The components of the Index are: United Healthcare Corp.;
U.S. Healthcare Inc.; Humana Inc.; Wellpoint Health Networks,
Pacificare Health Systems-B; Foundation Health Corp.; Value Health
Inc.; Oxford Health Plans; Health Systems Intl. Inc.-A; and
Healthsource Inc.
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Index Calculation
The Index will be calculated by Amex or its designee on a real-time
basis using last-sale prices and will be disseminated every 15 seconds
by the Amex to vendors over the Consolidated Tape Association's Network
B. If a component share is not currently being traded on its primary
market, the most recent price at which the share traded on such market
will be used in the Index calculation.
The Index is calculated on ``capitalization-weighted'' basis, using
the U.S. primary market prices for component securities, and current
shares outstanding. For ADRs, the ADR price and total worldwide shares
outstanding on an ADR-equivalent basis will be used. The value of the
Index equals the current market value (based on U.S. primary market
prices) of each of the Components in the Index divided by the current
Index divisor. The Index divisor was initially calculated to yield a
bench-mark value of 200.00 at the close of trading on May 31, 1995.
Maintenance
The Index will be maintained by Amex, and pursuant to Exchange Rule
901C(b) may at any time or from time to time substitute stocks, or
adjust the number of stocks included in the Index, based on changing
conditions in the HMO Industry. In the event the Exchange determines to
change the number of Index component stocks to less than nine or
greater than thirteen, the Exchange will submit a rule filing pursuant
to Section 19(b) of the Act.
Additionally, the Exchange will ensure that at least 90% of the
stocks in the Index, by weight, individually satisfy the Exchange's
listing and maintenance criteria applicable to listing standardized
options thereon. Currently, the Exchange represents that all of the
Index's components are options eligible \7\ and the subject of
standardized options trading.
\7\ The Amex's options listing standards, which are uniform
among the options exchanges, provide that a security underlying an
option must, among other things, meet the following requirements:
(1) there must be a minimum of 7,000,000 shares of the underlying
security which are owned by persons other than those required to
report their security holdings under Section 16(a) of the Act; (2)
there must a minimum of 2,000 stockholders; (3) trading volume in
the U.S. must have been at least 2.4 million over the preceding
twelve months; and (4) the U.S. market price must have been at least
$7.50 for a majority of the business days during the preceding three
calendar months. See Amex Rule 915, Commentary 01.
Expiration and Settlement
HMO Index options will have European-style exercise and will be
A.M.-settled index options. Standard option trading hours (9:30 a.m. to
4:10 p.m. New York time) will apply. The proposed options on the HMO
Index will expire on the Saturday following the third Friday of the
expiration month. Thus, the last day for trading in an expiring series
will be the second business day (ordinarily a Thursday) preceding the
expiration date.
The Index value for purposes of settling a specific HMO Index
option will be calculated based upon the primary exchange regular way
opening sale prices for the component stocks. In the case of securities
traded through the NASDAQ system, the first reported sale price will be
used. As trading begins in each of the Index's component securities,
its opening sale price is captured for use in the calculation. Once all
the component stocks have opened, the value of the Index is determined
and that value is used as the settlement value for the option. If any
of the component stocks does not open for trading in its primary market
on the last trading day before expiration, then the prior day's last
sale price is used in the calculation.
Eligibility Standards for Index Components
Amex Rule 901C specifies criteria for inclusion of stocks in an
index on which options will be traded on the Exchange. In choosing
among HMO stocks that meet the minimum criteria set forth in Rule 901C,
the Exchange will focus on stocks that (1) have a minimum market value
(in U.S. dollars) of at least $75 million,\8\ (2) have an average
monthly trading volume in the U.S. markets over the previous six month
period of not less than 1 million shares (or ADRs), and (3) are traded
on either the NYSE, Amex (subject to limitations of Rule 901C) or
NASDAQ. Although the stocks currently selected for inclusion in the HMO
Index meet or surpass the above additional criteria, the Exchange
intends these additional criteria to be guidelines only and reserves
the right to include stocks in the Index that may not meet these
guidelines. All Index component securities currently have market
capitalizations in excess of $1 billion, with the largest being $6.9
billion. Average monthly trading volume over the previous six months
for the individual component stocks ranged from 3.5 million to 43.3
million shares. The five most heavily weighted components account for
approximately 73% of the total Index weight, with the largest
representing 24.7%.
\8\ In the case of ADRs this represents market value as measured
by total world-wide shares outstanding.
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Exchange Rules Applicable to Stock Index Options
Amex Rules 900C through 980C will apply to option contracts based
on the HMO Index. These rules cover issues such as surveillance,
exercise prices, and position limits. The Index is deemed to be a Stock
Index Option under Amex Rule 900C(a) and a Stock Index Industry Group
under Rule 900C(b)(1). Under Rule 903C, the Exchange intends to list up
to three near calendar months and two additional calendar months in the
three month intervals in the January cycle. The Exchange proposes to
codify in Amex Rule 904C that for HMO Index options, the position limit
will be 5,500 contracts on the same side of the market.\9\
\9\ The Amex, selecting the 5,500 contracts position limit for
the HMO Index, will not utilize the three tier mechanism set forth
in Rule 904C for other narrow-based index options. See Amendment No.
1, supra note 3.
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The Exchange believes that the proposed rule change is consistent
with Section 6 of the Act, in general, and furthers the objectives of
Section 6(b)(5) of the Act,\10\ in particular, in that it is designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of change, to foster cooperation and
coordination with persons engaged in facilitating transactions in
securities, and to remove impediments to perfect the mechanism of a
free and open market and a national market system.
\10\ 15 U.S.C. 78f(b)(5).
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(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.
[[Page 46878]]
(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 at the
Commission's Public Reference Section, 450 Fifth Street, NW.,
Washington, DC 20549. Copies of such filing will also be available for
inspection and copying at the principal office of the Amex. All
submissions should refer to SR-Amex-95-32 and should be submitted by
September 29, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
\11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-22240 Filed 9-7-95; 8:45 am]
BILLING CODE 8010-01-M
