Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the American Stock Exchange, Inc., Relating to Listing and Trading of Warrants Based on the Selected Tech Stock Index

OFFICE OF MANAGEMENT AND BUDGET

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-37122; File No. SR-Amex-96-12]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule

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

Trading of Warrants Based on the Selected Tech Stock Index

April 17, 1996.

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 April 9, 1996, 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.

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

\2\ 17 CFR 240.19b-4 (1994).

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

of the Proposed Rule Change

The Amex, pursuant to Rule 19b-4 of the Act, proposes to approve

for listing and trading, under Section 106 of the Amex Company Guide,

index warrants based on the Selected Tech Stock Index (``Index''), a

price-weighted, narrow-based index developed by an issuer and comprised

of 24 technology stocks which are traded on the Amex, the New York

Stock Exchange, Inc. (``NYSE''), or through the facilities of the

National Association of Securities Dealers Automated Quotation system

and are reported national market system securities (``Nasdaq/NMS'').

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

Under Section 106 (Currency and Index Warrants) of the Amex Company

Guide, the Exchange may approve for listing index warrants based on

foreign and domestic market indices. While the Exchange currently lists

and trades warrants on a number of foreign market indices and broad-

based domestic market indices, it now proposes to list and trade a

warrant based on a narrow-based domestic market index. The listing and

trading of warrants on the Selected Tech Stock Index will comply in all

respects with Exchange Rules 1100 through 1110 for the trading of stock

index and currency warrants.

Warrant issues on the Index will conform to the listing guidelines

under Section 106, which provide, among other things, that: (1) The

issuer shall have tangible net worth in excess of $250,000,000 and

otherwise substantially exceed size and earnings requirements in

Section 101(A) of the Company Guide or meet the alternate guideline in

paragraph (a); (2) the term of the warrants shall be for a period

ranging from one to three 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 have an aggregate

market value of $4,000,000.

Index warrants will be direct obligations of their issuer subject

to cash-settlement during their term, 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 Index has declined below a pre-

stated cash settlement value. Conversely, holders of a warrant

structured as a ``call'' would, upon exercise or at expiration, 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 would expire worthless. In

addition, the Amex, 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 Amex is proposing to list index warrants based on the Selected

Tech Stock Index, a price-weighted index developed by an issuer and

representing a narrow-based portfolio of large, actively-traded

technology stocks.\3\ The total market capitalization of the Index was

$329,094,000,000 on April 3, 1996. The median capitalization of the

components in the Index on that date was $3.8 billion, and the average

market capitalization of these companies was $13.71 billion. The

individual market capitalization of the companies ranged from $594

million to $68.1 billion. Average monthly trading volume in the Index

stocks ranged from approximately 4.4 million shares to approximately

229.6 million shares during the six-month period from October 1995

through March 1996. The Exchange will monitor the components in the

basket on a monthly basis and will advise the Commission whenever less

than 75% of those components are eligible for standardized options

trading. Currently, 100% of the components are eligible for

standardized options trading. The Selected Tech Stock Index shall be

used as the basis for only one index warrant to be listed and traded on

the Exchange. If the Exchange wishes to list and trade other products

based on the Selected Tech Stock Index, including other index warrants,

the Exchange shall advise the Commission to determine whether an

additional filing pursuant to Rule 19b-4 of the Act is necessary or

appropriate.

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\3\ The Commission notes that a list of the component securities

and their respective weights in the Index were attached to the

proposed rule filing as Exhibit A, and are available for examination

at the Amex or at the Commission as specified in Item IV.

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The Index is price-weighted; its value corresponds to the sum of

the prices of one share of each of the component stocks, reduced by a

divisor. The Index divisor will be determined to yield the benchmark

value of 100.00 on the date the warrant is priced for initial offering

to the public. Similar to other stock index values published by the

Exchange, the value of the Index will be calculated continuously and

disseminated every 15 seconds over the Consolidated Tape Association's

Network B.

The Index will be monitored daily for certain types of corporate

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

dividend, stock distribution, stock split, reverse stock split, rights

offering, distribution, reorganization, recapitalization, or similar

event which may require a divisor adjustment to maintain

[[Page 17932]]

continuity of the index's value. 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

shareholders, components in the index may be deleted or replaced.

Shares of a component stock may be replaced (or supplemented) with

other securities under certain other circumstances, such as the

conversion of a component stock into another class of security or the

spin-off of a subsidiary. If the stock remains in the index, the

divisor may be adjusted to maintain the continuity of the Index's

value. In the event that a security in the index is removed due to a

corporate consolidation and the holders of such security receive cash,

the cash value of such security will be included in the Index and will

accrue interest at LIBOR to term.

2. Statutory Basis

The Amex believes that the proposed rule change is consistent with

Section 6(b) of the Act in general, and with Section 6(b)(5) in

particular,\4\ in that it is designed to prevent fraudulent and

manipulative acts and practices, to promote just and equitable

principles of trade, and is not designed to permit unfair

discrimination between customers, issuers, brokers, or dealers.

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\4\ 15 U.S.C. 78f(b)(5) (1988).

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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 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 Amex 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, 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, N.W.,

Washington, DC 20549. 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-96-12 and should be

submitted by May 14, 1996.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.\5\

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\5\ 17 CFR 200.30-3(a)(12) (1994).

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Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96-9894 Filed 4-22-96; 8:45 am]

BILLING CODE 8010-01-M