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

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