Self-Regulatory Organizations; Order Approving Proposed Rule Change and Notice of Filing and Order Granting Accelerated Approval of Amendment Nos. 1, 2, and 3 Thereto by the American Stock Exchange, Inc., Relating to the Listing and Trading of Warrants on the ING Barings Securities Limited BEMI Latin America Index

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39079; International Series Release No. 1099, File No.

SR-Amex-96-38]

Self-Regulatory Organizations; Order Approving Proposed Rule

Change and Notice of Filing and Order Granting Accelerated Approval of

Amendment Nos. 1, 2, and 3 Thereto by the American Stock Exchange,

Inc., Relating to the Listing and Trading of Warrants on the ING

Barings Securities Limited BEMI Latin America Index

September 15, 1997.

I. Introduction

On October 15, 1996, the American Stock Exchange, Inc. (``Amex'' or

``Exchange'') submitted to the Securities and Exchange Commission

(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4

thereunder,\2\ the proposed rule change to list and trade warrants on

the ING Barings Securities Limited BEMI Latin America Index

(``Index'').\3\ A notice appeared in the Federal Register on November

21, 1996.\4\ No comment letters were received concerning the proposed

rule change. On December 24, 1996, March 3, 1997 and June 3, 1997, the

Exchange filed Amendment Nos. 1, 2 and 3, respectively, to the proposed

rule change.\5\ This order approves the Amex's proposal, as amended.

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

\2\ 17 CFR 240.19b-4.

\3\ See Securities Exchange Act Release No. 37960 (November 15,

1996).

\4\ See 61 FR 59261.

\5\ See Letters from Claire P. McGrath, Managing Director &

Special Counsel, Derivative Securities, Amex, to Ivette Lopez,

Assistant Director, Division of Market Regulation (``Division''),

SEC, dated December 23, 1996 (``Amendment No. 1''), February 28,

1997 (``Amendment No. 2''), and June 3, 1997 (``Amendment No. 3''),

respectively. Amendment No. 1, sets forth, among other things, the

definition of ``available capitalization,'' the calculation formula

for the Index and the foreign stock exchanges with which the Amex

has comprehensive surveillance sharing agreements. In Amendment No.

2, the Amex provides for each Index component, the average daily

trading volume for the six month period ending December 31, 1996 and

their weights in the Index. In Amendment No. 3, the Amex provides

Index maintenance standards.

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II. Description of the Proposal

The purpose of the proposed rule change is to permit the Exchange

to list and trade, under Section 106 of the Amex Company Guide, cash-

settled index warrants based on the Index.

A. Design of the Index

The Exchange represents that the Index is a market capitalization-

weighted broad-based index developed by ING Barings Securities Limited

(``Barings'') comprised of 122 stocks from 112 companies from the

following seven Latin American countries: Argentina; Brazil; Chile;

Colombia; Mexico; Peru; and Venezuela.\6\ In addition, the stocks

represent eleven different industry groups. As of June 30, 1997, the

number of stocks and weightings in the Index was as follows: Argentina

22 stocks/12.63% weighting; Brazil 22 stocks/46.84% weighting; Chile 21

stocks/11.20% weighting; Columbia 12 stocks/1.50% weighting; Mexico 26

stocks/21.76% weighting; Peru 12 stocks/3.90% weighting; and Venezuela

7 stocks/2.16% weighting. As of the same date, the largest stock

accounted for 10.95% of the Index weight, while the smallest accounted

for 0.016%. The top five stocks in the Index by weight accounted for

32.15%.

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\6\ The Index is a sub-index of the Barings Emerging Markets

Index (``BEMI'').

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The total available market capitalization of the Index was

$158,437,566,290 billion on that date.\7\ The average available market

capitalization of these companies was $1,298,668,576 billion. The

individual available market capitalization of the companies ranged from

$25,050,774 million to $17,343,762,504 billion.

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\7\ A company's ``available capitalization'' is defined as the

lower of (i) the company's ``free float'' or (ii) the legally

available capitalization of the company. A company's ``free float''

is defined as the percentage of shares which could reasonably be

expected to trade on the open market. Generally, government

holdings, corporate cross-ownership and other strategic holdings are

not considered freely floating.

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B. Maintenance of the Index

The Index is maintained by Barings' Recomposition Committee. The

Recomposition Committee, established at the time of the launch of the

Index, reviews on a quarterly basis the Index rules and composition.

The Recomposition Committee implements changes or fixes standards as

appropriate and oversees the security environment of the Index and its

record-keeping. The quarterly meeting is normally held in the second

week of the last month of the quarter. The date of these meetings is

posted at least two months in advance on Reuters and the results are

publicly disclosed on Reuters the day after a meeting. Actual

implementation of any changes to the composition of the Index occurs on

the last day of the month that the meeting is held. This is

approximately two

[[Page 49544]]

weeks after the Recomposition Committee has met and the changes to the

Index have been publicly announced.

Exceptionally, in the case of new issues, privatizations and

takeovers, a stock can be introduced to or deleted from the Index

without waiting for the next quarterly meeting. In these cases, the

decision to include or remove a stock is taken by an ad hoc meeting of

members of the Recomposition Committee in accordance with established

rules. New companies resulting from a spin-off of a component company

will be put into the Index and remain in the Index until the next

quarterly recomposition meeting. The Amex notes that Barings will

adjust the Index divisor, if necessary, in order to ensure Index

continuity.\8\

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\8\ See Amendment No. 1, supra note 5.

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The stocks selected for inclusion in the Index were chosen on the

basis of both country and company criteria. To be included in the

Index, a country must have a minimum Gross Domestic Product per capita

of $400 and a minimum market trading value of $2 billion per year in at

least one of the last three years. The companies included in the Index

are drawn from a database of stock entities, which may represent

individual companies in their entirety, or separate classes of stock

(e.g., A shares and B shares, of the same company). The criteria for

stock entities to be included are: capitalization value greater than 1%

of the Barings database for that country; minimum free float of 10%;\9\

and minimum average daily trading value of $100,000. In addition,

shares that rank first or second in their industry sector may be

included if they have a minimum capitalization of 0.5% of the Barings

database for that country and meet the normal free-float and daily

trading value rules.

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\9\ See note 7 supra for a definition of free float.

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The Amex notes that Barings will maintain the Index to ensure that

no more than 10% of the index weight is represented by stocks that do

not have a minimum average daily trading value, on a rolling four

quarter basis, of US$200,000.\10\ In addition, no more than 5% of the

index weight will be represented by stocks that fall below US$100,000

average daily trading value on a semi-annual basis.\11\ If the Index

fails to meet either of these standards, the Index will be rebalanced

by removing the requisite stocks.

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\10\ A ``rolling four quarter basis'' is defined to mean that a

stock will be reviewed each quarter to determine if it has

maintained an average daily trading value of US$200,000 for the

combined previous four quarters. For example, a security is reviewed

at the beginning of the third quarter of 1997 and it maintained an

average daily trading value of US$200,000 during the second and

first quarters of 1997 and the fourth quarter of 1996 but it did not

maintain such an average during the third quarter of 1996. The

security may be removed if the figures from the third quarter of

1996 reduce the average daily trading value below US$200,000 for the

combined four quarter period.

\11\ In contrast to a rolling four quarter review, component

securities will be reviewed twice a year to determine if they meet

this standard.

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In addition, Barings maintains the Index to ensure that no single

stock comprises more than 20% of the Index weight and no five stocks

comprise more than 50% of the Index weight. If the Index fails to

satisfy this maintenance requirement, the Exchange will apply margin

requirements for stock index industry group warrants.\12\

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\12\ See Amex Rule 462.

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Barings has created special procedures to prevent material non-

public information from being improperly used by its research, sales

and trading divisions in connection with the maintenance of the Index.

Specifically, membership of the Recomposition Committee is regulated by

a ``Fire Wall.'' All members are isolated from sales, trading and

corporate finance functions. Members are drawn from Index research,

calculation, legal and compliance departments of Barings. To ensure

impartiality and good practice, the committee has retained Russell

Systems Limited (``Russell''), part of the Frank Russell Group, to

attend all meetings and to provide an audit of attendance and

appropriateness of the agenda. Russell also provides advice on good

practice in indexation and on how to ensure the use of the best

available information on emerging markets.

C. Trading of the Index Warrants

Currently, the Amex is seeking authority to list and trade only a

single issuance of warrants on the Index which have a term of less than

five years.\13\ The 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 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 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.

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\13\See note 22 infra.

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In addition, the Amex has adopted account approval standards

covering transactions in customer accounts as the suitability standards

applicable to recommendations to purchasers of index warrants. Amex

Rule 411, Commentary .02 recommends that index warrants under Section

106 of the Company Guide be sold only to investors whose accounts have

been approved for options trading pursuant to Rule 921. The suitability

requirements under Amex Rule 923 apply to recommendations in index

warrants both with respect to customer accounts that have been approved

for options trading and customer accounts that have not been so

approved. Under these requirements, the person recommending a purchase

of the Index warrants should have a reasonable basis for believing that

the customer has such knowledge and experience in financial matters

that he may reasonably be expected to be capable of evaluating the

risks of the recommended transaction and is financially able to bear

the risks of the position in the option contract. 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 the order is entered.

D. Calculation and Dissemination of the Value of the Index

The Index was first calculated on January 7, 1992 with a benchmark

value of 100. As of June 30, 1997 the Index had a value of 203.825. The

Amex disseminates the Index value every 15 seconds throughout the

trading day over the Consolidated Tape Association's Tape B. The Amex,

however, does not have real-time data feeds from the exchange that

trade the component securities in Colombia, Peru and Venezuela. As a

result, for those component securities that trade in Colombia, Peru and

Venezuela, the previous day's last sale price, converted into U.S.

dollars using Reuters 4 p.m. EST exchange rates, is used to calculate

the Index value. If a security from a non-real-time reporting country,

however, has options eligible American Depositary Receipts (``ADRs'')

that trade on the New York Stock Exchange (``NYSE''), the ADR's real-

time NYSE price is used to calculate the Index value.

As a result, the Index value is calculated so that stocks

representing no more than 7% of the Index weight

[[Page 49545]]

report non-real-time prices.\14\ If the Index fails to meet this

standard, the Index will be rebalanced at the quarterly Recomposition

Committee meeting by removing the requisite stocks to permit the Index

to meet this standard. In the event a component security in the Index

does not open for trading, however, the most recent closing value for

that component will be used in the Index's calculation.

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\14\ The Commission believes that the most current last sale

prices for each component stock should be used in calculating the

Index value. Nevertheless, because of the difficulty in receiving

timely information from the three countries noted above, the

Commission has decided to permit the use of the previous day's

closing price for a number of Index components as long as their

weight remains relatively minor and in no case more than 7% of the

Index weight. The Commission notes that a proposal to list and trade

derivative instruments overlying an index that had more than 7% of

its component securities reporting non-real-time prices would raise

questions regarding whether that particular index and any derivative

instruments overlying it would be susceptible to manipulation.

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In the event of 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,

reorganization, recapitalization or similar event with respect to the

component stocks, the Index divisor will be adjusted, if necessary, to

ensure Index continuity.\15\

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\15\ See Amendment No. 1, supra note 5.

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E. Warrant Listing Standards and Customer Safeguards

The Exchange represents that the listing and trading of warrants

based on the Index will comply in all respects with the Amex warrant

listing standards. Under Section 106 of the Amex Company Guide, the

Exchange may approve for listing index warrants based on foreign and

domestic market indices. In addition, the listing and trading of

warrants on the Index will comply in all respects to Exchange Rules

1100 through 1110 for the trading of stock index and currency warrants.

As discussed below, these standards govern issuer eligibility, position

and exercise limits, reportable positions, settlement, automatic

exercise, margin and trading halts and suspensions.\16\

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\16\ See Amex Rules 1109 and 918(c) for the regulations

regarding trading halts and suspensions.

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Under Section 106(a) of the Amex Company Guide, issuers are

required to have minimum tangible net worth in excess of $250 million

or, in the alternative, to have a minimum tangible net worth in excess

of $150 million, provided that the issuer has not, including as a

result of the proposed issuance, issued outstanding warrants where the

aggregate original issue price of all such warrant offerings, combined

with offerings by its affiliates, listed on a national securities

exchange or traded through the facilities of Nasdaq exceeds 25% of the

warrant issuer's net worth. In addition, Sections 106(b) and 106(c) of

the Amex Company Guide require that warrant issues have a term of one

to five years and have a minimum public distribution of one million

warrants together with a minimum of 400 public holders and an aggregate

market value of $4 million.

Under Amex Rule 1107, no member can hold or control an aggregate

position in a stock index warrant issue, or in all warrants issued on

the same stock index, whether long or short, on the same side of the

market, in excess of 15 million warrants with an original issue price

of ten dollars or less. Stock index warrants with an original issue

price greater than ten dollars will be weighted more heavily in

calculating position limits. Amex Rule 1108 established exercise limits

on stock index warrants analogous to those found on stock index

options. Accordingly, no member, acting alone or in concert with

others, directly or indirectly, may exercise a long position in

warrants within five consecutive business days in excess of the

permissible position limit. In addition, such limits are separate and

distinct from any exercise limits that may be imposed by the issuers of

stock index warrants.

Under Amex Rule 1110, members are required to file a report with

the Exchange whenever any account in which the member has an interest

has established an aggregate position, whether long or short, of

100,000 warrants overlying the same index, currency, or currency index.

Under Section 106(d) of the Amex Company Guide, currency and index

warrants must be cash-settled in U.S. dollars. The procedures for

determining the cash settlement value for the warrants have not yet

been determined by Barings.\17\ Once those procedures have been

determined by Barings, they will be fully set forth in the prospectus

and in the Information Circular distributed by the Exchange to its

membership prior to the commencement of trading the warrant.

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\17\ The Amex notes that the procedures for determining the cash

settlement value of the warrants will be in accordance with its

listing criteria for warrants. In the event that such procedures do

not comport with established requirements, the Amex will notify the

Commission, prior to implementing such procedures, in order to

determine the proper regulatory response.

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Under Section 106(f) of the Amex Company Guide, all unexercised

warrants that are in-the-money will be automatically exercised on their

expiration date or on or promptly following the date on which the

warrants are delisted by the Exchange, provided that such warrant issue

has not been listed on another organized securities market in the

United States.

In general, the margin requirements for long and short positions in

stock index warrants are the same as the margin requirements for long

and short positions in stock index options. Accordingly, the purchase

of a stock index warrant will require payment in full and the short

sale of a stock index warrant will require margin of 100% of the

current value of the warrant plus 15% of the current value of the

underlying index less the amount by which the warrant is out-of-the-

money, but not less than 10% of the index value.\18\

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\18\ See Amex Rule 462, supra note 12.

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F. Surveillance

The Amex notes that although it does not have comprehensive

surveillance sharing agreements (``CSSAs'') with all seven countries

represented in the Index, it does comply with section 106(g) of the

Amex Company Guide. Section 106(g) of the Company Guide states that

foreign country securities or ADRs thereon that are not subject to a

CSSA, and have less than 50% of their global trading volume in dollar

value within the United States, shall not in the aggregate, represent

more than 20% of the weight of an index, unless such index is otherwise

approved for warrant or option trading. The Commission has Memoranda of

Understanding with government authorities in Argentina, Brazil, Chile

and Mexico. The Exchange has CSSAs with the securities markets and/or

self-regulators in Argentina, Brazil and Chile. The Amex notes that the

Commission previously has permitted U.S. derivatives markets to list

derivatives on securities where the home market for such securities is

located in Argentina, Brazil, Chile and Mexico based upon the

Commission's and the Exchange's information sharing arrangements with

the appropriate government or self-regulatory authorities in such

countries.\19\

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\19\ As of June 30, 1997, component securities from these four

countries comprised 92.44% of the Index weight.

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III. Commission Findings and Conclusions

The Commission finds that the proposed rule change by the Exchange

is consistent with the requirements of the Act and the rules and

regulations

[[Page 49546]]

thereunder applicable to a national securities exchange, and in

particular, the requirements of Section 6(b)(5) of the Act.\20\

Specifically, the Commission finds that the listing and trading of

warrants based on the Index will serve to promote the public interest

and help to remove impediments to a free and open securities market by

providing investors with a means to hedge exposure to market risk

associated with the Latin American equity markets \21\ and promote

efficiency, competition, and capital formation.\22\

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\20\ 15 U.S.C. 78f(b)(5).

\21\ Pursuant to Section 6(b)(5) of the Act, the Commission must

predicate approval of any new securities product upon a finding that

the introduction of such product is in the public interest. Such a

finding would be difficult with respect to a warrant that served no

hedging or other economic function, because any benefits that might

be derived by market participants likely would be outweighed by the

potential for manipulation, diminished public confidence in the

integrity of the markets, and other valid regulatory concerns.

\22\ 15 U.S.C. 78c(f).

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Nevertheless, the trading of warrants on the Index raises several

concerns related to the design and maintenance of the Index, customer

protection, surveillance and market impact. The Commission believes,

however, for the reasons discussed below, that the Amex has adequately

addressed these concerns.\23\

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\23\ The Commission also notes that the Amex presently is only

seeking the authority to list and trade a single issuance of

warrants on the Index and that if the Exchange proposes to list and

trade other products based on the Index, including other Index

warrants, the Exchange will advise the Commission in order to

determine whether a rule filing pursuant to Section 19(b) of the Act

will be necessary and appropriate.

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A. Design and Maintenance of the Index

The Commission finds that it is appropriate and consistent with the

Act for the Amex to designate the Index as Broad-based for warrant

trading. First, the Index is composed of 112 companies from 11 industry

groups including: consumer goods, energy, capital equipment, basic

materials, agriculture/food and financial services. Second, no

particular stock or group of stocks dominates the Index. Specifically,

as of June 30, 1997, the largest stock accounted for 10.95% of the

Index weight, while the smallest accounted for 0.016%. The top five

stocks in the Index by weight accounted for 32.15%. Accordingly, the

Commission believes that it is appropriate to classify the Index as

broad-based so that the Exchange may list warrants for trading pursuant

to the Amex warrant listing standards for broad-based indices.

The Commission notes that with respect to the maintenance of the

Index, Barings has implemented several safeguards in connection with

the listing and trading of the index warrants that will serve to ensure

that the Index is a highly capitalized, diversified and actively-traded

index. In this regard, Barings will maintain the Index so that: (1) No

single stock may comprise more than 20% of the Index weight and no five

stocks may comprise more than 50% of the Index weight; (2) no more than

7% of the Index weight may report non-real-time prices in calculating

the Index value (in addition, NYSE prices will be used for options

eligible ADRs for securities from non-real-time reporting countries);

(3) no more than 10% of the index weight may be represented by stocks

that do not have a minimum average daily trading value, on a rolling

four quarter basis, of US$200,000 \24\ and (4) no more than 5% of the

Index weight may be represented by stocks that fall below US$100,000

average daily trading value on a semi-annual basis. If the 20% single

stock, 50% top five stock standard is not maintained, then the Exchange

will re-classify the Index as narrow-based and would, among other

things, impose minimum margin requirements for stock index industry

group warrants.

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\24\ See note 10 supra.

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In particular, the Commission believes that the real-time reporting

of simultaneously traded index component securities that underlie an

exchange-traded index component securities that underlie an exchange-

traded derivatives product is an important element for the intra-day

pricing of derivatives products, the reduction of potential market

manipulation and other trading abuses. While not all of the Index's

component securities report real-time prices, the Commission believes

that the Exchange has reasonably addressed this concern by noting that

no more than 7% of the Index weight, a de minimis amount, may report

non-real-time prices. The Commission notes that if the Index fails to

satisfy the 7% non-real time price reporting requirement or the minimum

trading value requirements, Barings immediately will rebalance the

Index by removing the requisite stocks.\25\

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\25\ See note 14 supra.

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In addition, the Commission notes that Barings has adopted

appropriate procedures to be followed by those responsible for

maintaining the Index in order to help prevent and deter the misuse of

any informational advantages with respect to changes in the composition

of the Index. Such procedures include, for example, informational

barriers.

B. Customer Protection

The Commission notes that the rules and procedures of the Exchange

adequately address the special concerns attendant to the trading of

index warrants. Specifically, the applicable suitability, account

approval, disclosure and compliance requirements of the Amex warrant

listing standards satisfactorily address potential public concerns.

Moreover, the Amex plans to distribute a circular to its membership

calling attention to specific risks associated with warrants on the

Index. Pursuant to the Exchange's listing guidelines, only companies

capable of meeting the Amex's index warrant issuer standards will be

eligible to issue Index warrants. In addition, the Amex presently is

seeking authority to list and trade only a single issuance of warrants

on the Index which have a term of less than five years.

C. Surveillance

In evaluating new derivative instruments, the Commission,

consistent with the protection of investors, considers the degree to

which the derivative instrument is susceptible to manipulation. The

ability to obtain information necessary to detect and deter market

manipulation and other trading abuses is a critical factor in the

Commission's evaluation. It is for this reason that the Commission

requires that there be a CSSA in place between an exchange listing or

trading a derivative product and the exchanges trading the stocks

underlying the derivative contract that specifically enables officials

to survey trading in the derivative product and its underlying

stocks.\26\ Such agreements provide a necessary deterrent to

manipulation because they facilitate the availability of information

needed to fully investigate a potential manipulation if it were to

occur. For foreign stock index derivative products, these agreements

are especially important to facilitate the collection of necessary

regulatory, surveillance and other information from foreign

jurisdictions.

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\26\ The Commission believes that the ability to obtain relevant

surveillance information, including, among other things, the

identity of the ultimate purchasers and sellers of securities, is an

essential and necessary component of a CSSA. A CSSA should provide

the parties thereto with the ability to obtain information necessary

to detect and deter market manipulation and other trading abuses.

Consequently, the Commission generally requires that a CSSA require

that the parties to the agreement provide each other, upon request,

information about market trading activity, clearing activity and

customer identity. See Securities Exchange Act Release No. 31529

(November 27, 1992).

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[[Page 49547]]

In order to address the above noted concerns and to comply with

Section 106(g) of the Amex Company Guide, the Amex has entered into

information sharing arrangements with the Buenos Aires Stock Exchange

in Argentina, the Sao Paolo Stock Exchange in Brazil, and the Santiago

Stock Exchange in Chile. In addition, the SEC has memoranda of

understanding with: the Comision Nacional de Valores in Argentina; the

Comissao de Valores Mobiliarios in Brazil; the Superintendencia de

Valores y Seguros in Chile; and the Comision Nacional Bancaria y de

Valores in Mexico. As of June 30, 1997, stocks from Argentina, Brazil,

Chile, and Mexico represent 92.44% of the Index weight. As a result, no

single uncovered country represents more than 3.90% of the Index weight

and not two uncovered countries represent more than 6.06% of the Index

weight.

D. Market Impact

The Commission believes that the listing and trading of Index

warrants on the Amex should not adversely impact the securities markets

in the U.S. or Latin America. First, the existing index warrant

surveillance procedures of the Amex will apply to warrants based on the

Index. Second, the Commission notes that the Index is broad-based and

diversified and includes highly capitalized securities that are

actively traded in their home markets.\27\ Accordingly, the Commission

does not believe that the introduction of Index warrants on the Amex

will have a significant effect on the underlying Latin American

securities markets.

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\27\ As the Amex notes, while some of the stocks in the Index

have relatively low trading volume, they account for only a small

percentage of the Index weighting.

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For the reasons described above, the Commission finds good cause to

approve Amendment Nos. 1, 2 and 3, prior to the thirtieth day after the

date of publication of notice of filing thereof in the Federal

Register. Specifically, Amendment No. 1 provides, among other things,

the definition of ``available capitalization,'' the calculation formula

for the Index and the foreign stock exchange with which the Amex has

surveillance sharing agreements. Amendment No. 2 provides the average

daily trading volume for the six month period ending December 31, 1996

and the weights of the Index components. Lastly, Amendment No. 3 adds

several maintenance standards that the Commission believes strengthen

the Amex proposal by ensuring that the Index remains broad-based and is

comprised of relatively well-capitalized and liquid securities. No

single stock may comprise more than 20% of the Index weight and no five

stocks may comprise more than 50% of the Index weight. In addition, no

more than 7% of the Index weight may report non-real-time prices in

calculating the Index value. NYSE prices will be used for options

eligible ADRs for securities from non-real-time reporting countries.

The Commission believes that this standard will ensure that a

substantial portion of the Index value will be calculated using current

prices.\28\

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\28\ See note 14 supra.

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Accordingly, the Commission believes that it is consistent with

Sections 6(b)(5) and 19(b)(2) \29\ of the Act, to find that good cause

exists to approve Amendments Nos. 1, 2 and 3, on an accelerated basis.

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\29\ 15 U.S.C. 78s(b)(2).

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IV. Solicitation of Comments and Conclusion

Interested persons are invited to submit written data, views and

arguments concerning Amendments Nos. 1, 2 and 3. 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 in the Commission's Public Reference Room in Washington, D.C.

Copies of such filing will also be available for inspection and copying

at the principal office of the Amex. All submissions should refer to

the File No. SR-Amex-96-38 and should be submitted by October 14, 1997.

For the foregoing reasons, the Commission finds that the Amex's

proposal to list and trade warrants based on the Barings BEMI Latin

America Index is consistent with the requirements of the Act and the

rules and regulations thereunder.

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

that the proposed rule change (SR-Amex-96-38), as amended, is approved.

For the Commission by the Division of Market Regulation,

pursuant to delegated authority.\30\

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\30\ 17 CFR 200.30-3(a)(12).

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Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97-25025 Filed 9-19-97; 8:45 am]

BILLING CODE 8010-01-M