Self-Regulatory Organization; Notice of Filing of Proposed Rule Change by the American Stock Exchange, Inc. Relating to the Listing and Trading of Indexed Term Notes Based on a Portfolio of Banking Industry Securities

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34723; File No. SR-Amex-94-39]

Self-Regulatory Organization; Notice of Filing of Proposed Rule

Change by the American Stock Exchange, Inc. Relating to the Listing and

Trading of Indexed Term Notes Based on a Portfolio of Banking Industry

Securities

September 27, 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

September 22, 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 Exchange proposes to approve for listing and trading under

Section 107A of the Amex Company Guide (``Guide''), Indexed Term Notes

(``Notes''), the return on which is based in whole or in part on

changes in the value of a static portfolio of twenty banking industry

securities (``Index'').\1\ The text of the proposed rule change is

available at the Office of the Secretary, the Amex, and at the

Commission.

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\1\The components of the Index are: Bancorp Hawaii, Inc.;

Barnett Banks, Inc.; Baybanks, Inc.; City National Corp.; Corestates

Financial; Crestar Financial Corp.; First American Corp.; First

Chicago Corp.; Hibernia Corp.; Mercantile Bancorp.; Michigan

National; Midlantic Corp.; North Fork Bancorp; Provident Bankshares;

Summit Bancorp; U.S. Bancorp; UJB Financial Corp.; Union Planters

Corp.; UST Corp.; and Vermont Financial Services.

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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 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 the

Statutory Basis for, the Proposed Rule Change

Under Section 107 of the Guide, the Exchange may approve for

listing and trading securities which cannot be readily categorized

under the listing criteria for common and preferred stocks, bonds,

debentures, or warrants.\2\ The Amex now proposes to list for trading,

under Section 107A of the Guide, Notes whose value is based in whole or

in part on the Index.

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\2\See Securities Exchange Act Release No. 27753 (March 1,

1990), 55 FR 8626 (March 8, 1990).

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The Notes will be non-convertible debt securities and will conform

to the listing guidelines under Section 107A of the Guide.\3\ Although

the specific maturity date will not be established until immediately

prior to the time of the offering, the Notes will provide for maturity

within a period of not less than one nor more than seven years from the

date of issue. The Notes may provide for periodic payments and/or

payments at maturity based in whole or in part on changes in the value

of the Index.\4\ In addition, the Notes may feature a ``cap'' on the

maximum amount and/or a ``floor'' on the minimum amount to be paid

periodically. Additionally, the Notes shall provide that at maturity,

holders will receive not less than 90% of the initial issue price of

the Notes. Prior to the commencement of listing and trading of the

Notes, the Exchange shall distribute a circular to its membership

providing guidance with regard to member firm compliance

responsibilities, including appropriate suitability criteria and/or

guidelines.

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\3\Specifically, the Notes must have: (1) A minimum public

distribution of one million trading units; (2) a minimum of 400

holders; (3) an aggregate market value of at least $20 million; and

(4) a term of at least one year. Additionally, the issuer of the

Nortes, Lehman Brothers, Inc., must have assets of at least $100

million, stockholders' equity of at least $10 million, and pre-tax

income of at least $750,000 in the last fiscal year or in two of the

three prior fiscal years. As an alternative to these financial

criteria, the issuer may have either: (1) Assets in excess of $200

million and stockholders' equity in excess of $10 million; or (2)

assets in excess of $100 million and stockholders' equity in excess

of $20 million. The Exchange has filed a proposed rule change that

would, among other things, reduce securities under Section 107A of

the Guide from $20 million to $4 million. See File No. SR-Amex-94-

36.

\4\The Commission notes that the value of the Index at maturity

shall not be adjusted to account for ordinary cash dividends paid on

the component securities during the term of the Notes.

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Eligibility Standards for Index Components

The Components of the Index shall meet the following criteria at

the time of issuance of the Notes: (1) A minimum market capitalization

of $75 million, except that up to 10% of the component securities may

have a market capitalization of not less than $50 million; (2) trading

volume in each of the six months prior to the offering of the Notes of

not less than one million shares, except that up to 10% of the

component securities may have a trading volume in each of the six

months prior to the offering of not less than 500,000 shares; (3) at

least 90% of the weight of the Index and at least 80% of the total

number of components will meet the then current criteria for

standardized options trading set forth in Exchange Rule 915; (4) all

components of the Index will be listed on the Amex or the New York

Stock Exchange, or will be National market securities traded through

Nasdaq; and (5) all components of the Index will be subject to last

sale reporting pursuant to Rule 11Aa3-1 of the Act.

Index Calculation

The Index will be calculated using an ``equal dollar-weighting''

methodology designed to ensure that each of the component securities is

represented in an approximately equal dollar amount in the Index. To

create the Index, a portfolio of equity securities will be established

by the issuer representing an investment of a specified dollar amount

in each component security (rounded to the nearest whole share). The

value of the Index will equal the current market value of the sum of

the assigned number of shares of each of the component securities

divided by the current Index divisor. The Index divisor will initially

be set to provide a benchmark value of 100.00 at the close of trading

on the day preceding the establishment of the Index.

The number of shares of each component stock in the Index will

remain fixed except in the event of certain types of corporate actions

such as the payment of a dividend (other than an ordinary cash

dividend), a stock distribution, stock split, reverse stock split,

rights offering, distribution, reorganization, recapitalization, or

similar event with respect to the component securities. The number of

shares of each component security may also be adjusted, if necessary,

in the event of a merger, consolidation, dissolution, or liquidation of

an issuer or in certain other events such as the distribution of

property by an issuer to stockholders. Shares of a component security

may be replaced (or supplemented) with other securities under certain

circumstances, such as the conversion of a component stock into another

class of security, the termination of a depositary receipt program, or

the spin-off of a subsidiary. If the security remains in the Index, the

number of shares of that security may be adjusted, to the nearest whole

share, to maintain the component's relative weight in the Index at the

level immediately prior to the corporate action.\5\ In all cases, the

divisor will be adjusted, if necessary, to ensure continuity of the

value of the Index.

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\5\The issuer will not attempt to find a replacement stock or

compensate for the extinction of a security due to bankruptcy or a

similar event.

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The value of the Index will be calculated continuously by the Amex

and disseminated every 15 seconds over the Consolidated Tape

Association's Network B.

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 inappropriate 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 reason 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 Amex. All

submissions should refer to File No. SR-Amex-94-39 and should be

submitted by October 25, 1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.\6\

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\6\17 CFR 200.30-3(a)(12) (1993).

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Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-24515 Filed 10-3-94; 8:45 am]

BILLING CODE 8010-01-M