# Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the American Stock Exchange, Inc., Relating to the Listing and Trading of Warrants on the Nikkei Stock Index 300 > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A94-17665 ## Record - **Collection:** Federal Register - **Document type:** Uncategorized Document - **Published:** July 20, 1994 ## Text SECURITIES AND EXCHANGE COMMISSION [Release No. 34-34365; International Series Release No. 684; File No. SR-Amex-94-24] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the American Stock Exchange, Inc., Relating to the Listing and Trading of Warrants on the Nikkei Stock Index 300 July 13, 1994. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ notice is hereby given that on June 17, 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. --------------------------------------------------------------------------- \1\15 U.S.C. 78s(b)(1) (1982). --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange is proposing to list and trade under Section 106 of the Amex Company Guide warrants based on the Nikkei Stock Index 300 (``Index''). 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 Under Section 106 (Currency and Index Warrants) of the Amex Company Guide, the Exchange may approve for listing warrants based on established foreign and domestic indexes. The Exchange is proposing to list warrants based on the Nikkei 300 Index.\2\ The Nikkei 300 Index is comprised of 300 stocks which are representative of the first section of the Tokyo Stock Exchange (``TSE''). --------------------------------------------------------------------------- \2\The Exchange also has proposed to list and trade options on the Nikkei 300 Index. See Securities Exchange Act Release No. 34198 (June 10, 1994), 59 FR 31282 (June 17, 1994). --------------------------------------------------------------------------- The Index was designed and is maintained by Nihon Keizai Shimbun, Inc. (``NKS''). The Index's component securities were selected for their high market capitalization and high degree of liquidity, and are representaitve of the relative distribution of industries within the broader Japanese equity market. The median capitalization of the companies in the Nikkei 300 Index on March 31, 1994 was 340.1 billion ($3.3 billion at the exchange rate of 102.75 per US$1.00 prevailing on March 31, 1994). The average market capitalization of these companies was $7.5 billion on the same date and using the same rate of exchange. The individual market capitalization of these companies ranged from $875 million to $75.5 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 products, and dividing by the current Index divisor. The Index divisor initially was determined to yield a benchmark value of 100 on October 1, 1982. The divisor is adjusted for certain changes described below. The Index's closing value on July 8, 1994 was 301.48. For valuation purposes, one Nikkei 300 Index unit (1.0) is assigned a fixed value of US$1.00. The Index will be maintained by NKS. To maintain 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, spin-offs, certain rights issuances, and mergers and acquisitions. The competition of the Index will be reviewed periodically by NKS. Warrant issues on the Index will conform to the listing guidelines under Amex Company Guide Section 106, which provide that (1) the issuer shall have assets in excess of $100,000,000 and otherwise substantially exceed the size and earnings requirements of Section 101(a); (2) the term of warrants shall be for a period ranging from one to five years from the 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 a minimum aggregate market value of $4,000,000. Nikkei 300 Index warrants will be direct obligations of their issuer subject to cash settlement in dollars, and either exercisable throughout their life (i.e., American style) or exercisable only on their expiration date (i.e., European style). Upon exercise, or at the warrant expiration date (if not exercisable prior to such date), the holder of a warrant structured as a ``put'' would receive payment in U.S. dollars to the extent that the Nikkei 300 Index has declined below a pre-stated cash settlement value. Conversely, holders of a warrant structured as a ``call,'' upon exercise or at expiration, would receive payment in U.S. dollars to the extent that the Index has increased above the pre-stated cash settlement value. If ``out-of-the-money'' at the time of expiration, the warrants likely would expire worthless. The Amex has adopted suitability standards applicable to recommendations to customers of index warrants and transactions in customer accounts. Amex Rule 421, Commentary .02, requires a Senior Registered Options Principal or a Registered Options Principal to approve and initial a discretionary order in index warrants on the day entered. In addition, the Exchange, prior to the commencement of trading, will distribute a circular to its membership calling attention to specific risks associated with warrants on the Index. The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act\3\ 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, promote just and equitable principles of change, foster cooperation and coordination with persons engaged in facilitating transactions in securities, and remove impediments to and perfect the mechanism of a free and open market and a national market system. --------------------------------------------------------------------------- \3\15 U.S.C. 78f(b) (1988). --------------------------------------------------------------------------- (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-94-24 and should be submitted by August 10, 1994. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\4\ --------------------------------------------------------------------------- \4\17 CFR 200.30-3(a)(12) (1993). --------------------------------------------------------------------------- Margaret H. McFarland, Deputy Secretary. [FR Doc. 94-17665 Filed 7-19-94; 8:45 am] BILLING CODE 8010-01-M --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A94-17665. Public record. Not legal advice.