Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the American Stock Exchange, Inc. Relating to Warrants Based on Foreign Government Bonds

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34016; International Series Release No. 663; File No.

SR-Amex-94-05]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule

Change by the American Stock Exchange, Inc. Relating to Warrants Based

on Foreign Government Bonds

May 5, 1994.

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 March 2,

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. 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 Amex proposes to approve for listing and trading under Section

106 of the Amex Company Guide warrants tied to changes in the prices of

foreign government bonds.

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 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

The Exchange proposes to list and trade under Section 106 of the

Amex Company Guide warrants that can be expected to fluctuate in value

based on changes in prices of foreign government bonds.\1\ Such issues

may relate to a single bond issue or several bond issues of one or more

foreign countries.\2\

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\1\The size required for an individual government bond issue

relating to a warrant based thereon shall not be less than the

equivalent of U.S. $100,000,000. In addition, such warrant issues

shall be based on only those government bonds for which prices are

readily available from independent vendors of financial information.

\2\For purposes of this rule change, the Exchange intends to

limit such issues to warrants based on government bonds of the

following countries: Australia, Austria, Canada, Denmark, Finland,

France, Germany, Italy, Japan, the Netherlands, Spain, Sweden,

Switzerland, and the United Kingdom. The Exchange will consult with

Commission staff prior to listing warrants based on bonds issued by

governments other than those specified above.

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Warrants based on prices of foreign government bonds will conform

to the listing guidelines under Section 106 of the Amex Company Guide

which currently provide that:

(1) The issuer shall have assets in excess of U.S. $100,000,000 and

otherwise substantially exceed the size and earnings requirements of

Section 101(A) of the Amex Company Guide;

(2) The term of the warrants shall be for a period ranging from one

to five years from date of issuance; and

(3) The minimum public distribution of such issues shall be

1,000,000 warrants together with a minimum of 400 public holders, and

an aggregate market value of U.S. $4,000,000.

Such warrants shall be direct obligations of their issuer subject

to cash settlement in U.S. dollars, and exercisable throughout their

life (i.e. American style) or exercisable only at expiration (i.e.,

European style). Upon exercise, or at the warrant expiration date (if

not exercisable prior to such date), the holder of a warrant will be

entitled to a cash settlement value computed in accordance with a

formula specified in the issuer's prospectus. If ``out of the money''

at the time of expiration, the warrants will expire worthless.

Warrants may be structured either to increase or decrease in value

based on the increase or decrease in the price or yield of the

government bond or bonds. Because all payments will be required to be

in U.S. dollars, there would be no currency risk except to the extent

that fluctuations in the value of the relevant currency affect the

price or yield of the government bond(s).

The Amex will require that member firms only sell such warrants to

investors whose accounts have been approved for options trading

pursuant to Amex Rule 921. The Exchange also will distribute a circular

to its membership prior to the commencement of trading calling

attention to the risks associated with the purchase and trading of such

warrants.

At this time, the Exchange anticipates the listing of a warrant

issue based on the prices of between three and five foreign government

issues. Holders of such warrants would be entitled to receive from the

issuer in U.S. dollars a cash settlement value, if any, based on

changes in the arithmetic average yield to maturity of the bonds as

calculated by the designated Calculation Agent based on prices obtained

from three dealers in the bonds.\3\

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\3\The Exchange represents that it will consult with Commission

staff prior to listing warrant issues tied to government bond(s)

with respect to (1) the specific calculation methodology to be used

by individual warrant issuers, and (2) the adequacy of available

bond pricing information.

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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 and to promote just and

equitable principals of trade, and is not designed to permit unfair

discrimination between customers, issuers, brokers and dealers.

(B) Self-Regulatory Organization's Statement on Burden on Competition

The Amex believes that the proposed rule change will not impose an

inappropriate burden on competition.

(C) Self-Regulatory Organization's Statement on Comments on the

Proposed Rule Change Received from Members, Participants, or Others

Written comments on the proposed rule change were neither solicited

nor received.

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 will also be available for

inspection and copying at the principal office of the above-mentioned

self-regulatory organization. All submissions should refer to File No.

SR-Amex-94-05 and should be submitted by June 1, 1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.\4\

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\4\17 CFR 200.30-3(a)(12)(1993).

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[FR Doc. 94-11340 Filed 5-10-94; 8:45 am]

BILLING CODE 8010-01-M