[No title available]

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-35097; File No. SR-PHLX-94-54]

Self-Regulatory Organizations; Notice of Filing and Order Granting

Accelerated Approval of Proposed Rule Change by the Philadelphia

Stock Exchange, Inc., Relating to the Holiday Expiration Date for

Cash/Spot Foreign Currency Options

December 13, 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 November

7, 1994, the Philadelphia Stock Exchange, Inc. (``PHLX'' or

``Exchange'') filed with the Securities and Exchange Commission

(``SEC'' or ``Commission'') the proposed rule change as described in

Items I and II below, which Items have been prepared by the self-

regulatory organization.\1\ The Commission is publishing this notice to

solicit comments on the proposed rule change from interested persons.

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\1\On December 7, 1994, the PHLX withdrew the portion of the

proposal requesting approval to list cash/spot foreign currency

options in consecutive month and cycle month series. In addition,

the PHLX requested accelerated approval for the portion of the

proposal concerning holiday expirations and the definition of

``underlying foreign currency.'' See Letter from Michele R.

Weisbaum, Associate General Counsel, PHLX, to Michael Walinskas,

Branch Chief, Division of Market Regulation, Commission, dated

December 5, 1994 (``Amendment No. 1''). Under Amendment No. 1, the

contract listed on December 19, 1994, will be effected on Friday,

December 23, 1994, will not be effected by the new procedure.

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I. Self-Regulatory Organization's Statement of the Terms of

Substance of the Proposed Rule Change

The PHLX proposes to amend PHLX Rule 1000, ``Applicability,

Definitions, and References,'' to provide that the expiration date for

cash/spot foreign currency options (``3D options'') that expire on a

holiday or an Exchange designated bank holiday will be the business day

following the holiday or the Exchange designated bank holiday. In

addition, the PHLX proposes to amend PHLX Rule 1000(b)(14) to correct

the definition of ``underlying foreign currency'' as it applies to 3D

options. Under the proposal, the 3D option contract listed on December

19, 1994, will be effected by the proposed expiration procedure, but

the 3D contract expiring on Friday, December 23, 1994, will not be

effected by the proposed expiration procedure.\2\

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\2\See Amendment No. 1, supra note 1.

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The text of the proposed rule change is available at the Office of

the Secretary, PHLX, 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 PHLX proposes to amend its rules to make two changes to its 3D

options. Presently, 3D options expire every Monday at 11:59 p.m.

Eastern Standard Time. PHLX Rule 1000(b)(21)(iii), ``Expiration Date,''

provides that if Monday is a holiday or Exchange designated bank

holiday, 3D options will expire on the preceding business day. The

Exchange also trades physically settled foreign currency options that

expire on the Friday preceding the third Wednesday of each month

(``mid-month options'') and on the last Friday of each month (``month-

end options''). the PHLX states that the Exchange created 3D options

with a Monday expiration to attract users seeking an option capturing

the risk associated with the weekend.

Pursuant to existing PHLX Rule 1000(b)(21)(iii), if Monday is a

holiday, the expiration reverts back to the preceding business day,

which is usually Friday but on some occasions may be Thursday. The

Exchange now realizes that this defeats the purpose of using 3D options

to capture weekend risk. In response to this concern, which has been

raised by users of the product, the Exchange proposes that 3D options

expire on the following business day, instead of the previous business

day, when the regular Monday expiration occurs on an Exchange holiday

or designated bank holiday. This usually will be a Tuesday, however, it

may be a Wednesday. For example, Monday, December 26, 1994, is an

Exchange holiday, (Christmas) so expiration, as proposed, should be

Tuesday. However, Tuesday, December 27, 1994, is a designated bank

holiday (Boxing Day), so expiration would occur on Wednesday, December

28, 1994, if the proposed ``next business date'' rule were in effect.

In addition, the PHLX proposes to revise the definition of

``underlying foreign currency'' to reflect that for 3D options which

are cash settled, the underlying foreign currency is the currency that

the Options Clearing Corporation (``OCC'') would have been obligated to

sell or purchase upon exercise of the contract since OCC actually

transfers the cash value upon exercise of the foreign currency.

The Exchange believes that the proposed rule change is consistent

with Section 6 of the Act, in general, and, in particular with Section

6(b)(5), in that it is designed to promote just and equitable

principles of trade and to protect investors and the public interest by

providing both a more appropriate expiration date for 3D options when

the expiration date falls on a holiday.

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

The PHLX 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 either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing

for Commission Action

The Exchange has requested that the proposed rule change be given

accelerated effectiveness pursuant to Section 19(b)(2) of the Act.

The Commission finds that the proposed rule change is consistent

with the requirements of the Act of the rules and regulations

thereunder applicable to a national securities exchange and, in

particular, the requirements of Section 6(b)(5).\3\ The PHLX state that

the Exchange created 3D options with a Monday expiration in order to

attract investors seeking an option that captures weekend risk. Under

current rules, however, if Monday is a holiday or designated bank

holiday, the 3D options will expire on the preceding business day,

which is usually the preceding Friday. By amending its rules to provide

that 3D options will expire on the following business day when the

regular expiration Monday is an Exchange holiday or designated bank

holiday, the Commission believes that the proposal will accommodate the

investment objectives of market participants and facilitate

transactions in 3D options by providing investors with a means to

capture weekend currency risk.

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\3\15 U.S.C. 78f(b)(50 (1988).

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The Commission believes that 3D options, as amended, should provide

investors with greater flexibility to tailor foreign currency options

positions to satisfy their investment objectives. In this regard, the

Commission notes that the PHLX has stated that foreign currency options

provide a strategic investment tool for sophisticated retail options

customers, multi-national corporations, and proprietary traders who

manage and hedge foreign currency exposure, as well as banks, which

trade short-term FCOs to hedge the risks of trading in the foreign

currency forward and cash markets.\4\ In addition, the Commission

continues to believe that 3D options broaden the hedging opportunities

of foreign currency market participants by providing them with an

alternative to using futures contracts, forward contracts and/or off-

exchange customized derivative instruments to satisfy their short-term

currency investment needs.

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\4\See Securities Exchange Act Release No. 33732 (March 8,

1994), 59 FR 12023 (March 15, 1994) (order approving File No. SR-

PHLX-93-10).

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The Commission believes that the proposal to revise the definition

of ``underlying foreign currency'' clarifies the definition in the

context of 3D options by reflecting the fact that the OCC delivers the

cash value, rather than the underlying currency, upon exercises of a 3D

option.

The Commission finds good cause for approving the proposed rule

change prior to the thirtieth day after the date of publication of

notice of filing thereof in the Federal Register in order to allow the

Exchange to implement the new holiday expiration procedure prior to the

January 2, 1995, expiration, an Exchange holiday. The Commission

believes that the proposal to amend the holiday expiration procedure

for 3D options will allow investors to continue to use 3D options for

the purpose of hedging weekend currency risk. In addition, the

Commission notes that the PHLX has notified its members of the proposed

change and that the Commission has received no comments on the

proposal. The Commission also believes that it is appropriate to grant

accelerated approval to the proposal to revise the definition of

``underlying foreign currency'' because the proposal clarifies the

Exchange's rule without making any substantive change. Accordingly, the

Commission believes it is consistent with Sections 6(b)(5) and 19(b)(2)

of the Act to approve the proposed rule change on an accelerated basis.

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. 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 the file

number in the caption above and should be submitted by January 10,

1995.

It is therefore ordered, pursuant to Section 19(b)(2) of the

Act,\5\ that the proposed rule change (SR-PHLX-94-54) is hereby

approved.

\5\15 U.S.C. 78s(b)(2) (1988).

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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.

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-35086; File No. SR-Amex-94-38]

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 Stock Index

and Currency Warrants

December 12, 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 September 12, 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 self-regulatory

organization. The Commission is publishing this notice to solicit

comments on the proposed rule change from interested persons.

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\1\15 U.S.C. 78s(b)(1) (1988).

\2\17 CFR 240.19b-4 (1991).

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I. Self-Regulatory Organization's Statement of the Terms of

Substance of the Proposed Rule Change

The Amex proposes to: (1) Amend Section 106 of the Amex Company

Guide to revise the listing criteria for stock index (``stock index''

or ``index'') warrants and currency warrants (``currency

warrants'');\3\ (2) amend Rule 462 to specify the customer margin

requirements for the purchase or short sale of stock index and currency

warrants; (3) add a new Part VI to the rules of the Exchange to provide

rules for the trading of index and currency warrants; and (4) rescind

Commentaries .01 and .02 to Rule 411 (Duty to Know and Approve

Customers) upon the adoption of new Part VI of the Exchange's rules. On

Dec. 2, 1994, the Amex amended certain surveillance related matters

addressed in the filing. See footnote 5 infra.

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\3\Currency warrants, as used in this filing, may refer to

warrants on individual currencies (or cross currencies) or to

warrants on a specific currency index group (``currency index

warrants'').

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The text of the proposed rule change is available at the Office of

the Secretary, 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

1. Purpose

The Amex proposes to: (1) Amend its listing guidelines and

establish uniform rules for the trading of stock index and currency

warrants; and (2) establish special customer margin requirements for

positions in stock index and currency warrants.

The Amex seeks to amend Section 106 of the Amex Company Guide to

provide higher standards for index and currency warrant issuers than

currently exists. In particular, such issuers would be expected to have

a minimum tangible net worth in excess of $150 million. In addition,

the aggregate original issuer price of all of a particular issuer's

warrant offerings (combined with offerings by its affiliates) that are

listed on a national securities exchange or that are National Market

securities traded through NASDAQ would not be permitted to exceed 25%

of the issuer's net worth. The proposed amendment requires that each

warrant issuer will be automatically exercised on either the delisting

date (if the issue is not listed upon another organized securities

market) or upon expiration. Section 106 also will be amended to provide

that opening prices (``a.m. settlement'') for all U.S. traded

securities will be used to determine an index's settlement value where

25 percent or more of the value of the index is represented by

securities whose primary trading market is in the U.S.

Rule 462 is being amended to apply the current customer margin

requirements for broad based stock index and currency options to stock

index and currency warrants, respectively. Thus, purchases of stock

index and currency warrants will require payment in full, and short

sales of stock index warrants will require initial margin of: (i) 100

percent of the current value of the warrant plus (ii) 15 percent of the

current value of the underlying broad stock index less the amount by

which the warrant is out of the money, up to a maximum of five percent

of the index value. Short sales of currency warrants will follow the

margin requirements applicable to listed currency options. The Exchange

proposes that its stock index and currency warrant margin requirements

be permitted offset treatment for spread, straddle and covered

positions.\4\

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\4\The staff of the Commission has indicated to the Exchange

that it must request and obtain appropriate interpretive or no-

action relief from the Commission in order to permit its index and

currency warrant margin requirements to allow offset treatment for

spread, straddle and covered positions.

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Proposed Part VI of the Exchange rules applies to the trading of

index warrants and currency warrants. Proposed Rule 1100 provides that,

unless the context otherwise requires or a specific rule in part VI

applies, the provisions of the Constitution and all other rules and

policies of the Exchange apply to trading of such securities.

Proposed Rule 1101 states that no member or member organization

shall accept an order from a customer for the purchase or sale of index

or currency warrants unless the customer's account has been approved

for options trading pursuant to Exchange Rule 921. Accordingly, the

Exchange will rescind Commentaries .01 and .02 to Rule 411, its current

suitability standard applicable to warrants, which currently provide

that the Exchange ``recommends'' that index and currency warrants only

be sold to investors whose accounts have been approved for options

trading. Furthermore, proposed Rules 1102-1105 require that the option

rules pertaining to suitability, discretionary account trading,

supervision of accounts and customer complaints be applied to stock

index an currency warrants.

Proposed Rule 1106 requires approval by a Compliance Registered

Options Principal of all advertisements, sales literature and

educational material issued by a member organization pertaining to

stock index and currency warrants. The rule further requires Exchange

approval of all advertisements and educational materials pertaining to

stock index and currency warrants.

Proposed Rule 1107 provides that position limits for stock index

warrants on the same index with original issue prices of ten dollars or

less will be fifteen million warrants covering all such issues. In

addition, with respect to warrants on the Standard & Poor's MidCap 400

Index, the position limit will be seven and one-half million warrants

covering all such issues, provided the original issue prices of the

warrants are not grater than ten dollars. The rule provides that

warrants with an original issue price of ten dollars or more will be

weighted more heavily than warrants with an original issue price of ten

dollars or less in calculating position limits. The rule also gives the

Exchange the authority to require the liquidation of a position in

stock index warrants that is in excess of the position limits set forth

in the rule, and Commentary V to the rule provides procedures for

allowing limited exceptions to the position limits.

Proposed Rule 1108 provides for exercise limits on stock index

warrants analogous to those found in stock index options and states

that such limits are distinct from any exercise limits that may be

imposed by the issuers of stock index warrants.

Proposed Rule 1109 requires that the trading halt provisions in

Rule 918C(b) shall be applied to the trading stock index warrants.

Upon Commission approval of the foregoing amendments, the Exchange

proposes that it will only file rule changes for specific warrant

issues where there is no corresponding option or warrant on the same

underlying index already listed on a national securities exchange or

NASDAQ. Accordingly, when a listed option overlies a particular broad

based index, the Exchange proposes it be allowed to list warrants on

that index without further Commission review and approval pursuant to

Section 19(b) of the Act.

Both initial and maintenance listing standards for stock index

warrants will require that no more than 20% of the securities in the

underlying index, by weight, may be comprised of foreign securities or

American depositary receipts (``ADRs'') overlying foreign securities

that are not subject to comprehensive surveillance sharing agreements

between the Amex and the primary exchange on which the foreign security

(including a foreign security underlying an ADR) is traded.\5\

Furthermore, proposed Rule 1100 provides that stock index and currency

warrants listed on the Exchange prior to SEC approval of this filing

shall continue to be governed by those provisions of the Exchange's

rules that were applicable to such warrants prior to approval of this

filing. Finally, prior to trading index or currency warrants, the

Exchange will distribute a circular to its membership providing

guidance regarding member firm compliance responsibilities (including

suitability recommendations) when handling transactions in index or

currency warrants.

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\5\Telephone conversation between Benjamin D. Krause, Amex, and

Michael Walinskas, SEC, on December 2, 1994 (``Amendment No. 1'').

The Exchange proposes that the ``20% test'' be applied in the same

manner as that contained in Securities Exchange Act Release No.

34157 (June 3, 1994), 59 FR 30062 (June 10, 1994) (Commission

approval order allowing the expedited trading approval of certain

narrow-based index options).

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2. Statutory Basis

The Exchange believes 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 principles 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 Exchange believes the proposed rule change will impose no

burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed

Rule Change Received From Members, Participants, or Others

The Exchange has neither solicited nor received written comments on

the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for

Commission Action

Within 35 days of the publication of this notice in the Federal

Register or within such other 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 the 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, N.W., Washington, D.C. 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, N.W.,

Washington, D.C. 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 File No. SR-Amex-94-38 and should be

submitted by January 10, 1995.

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. 94-31202 Filed 12-19-94; 8:45 am]

BILLING CODE 8010-01-M