[Federal Register Volume 60, Number 116 (Friday, June 16, 1995)] [Notices] [Pages 31747-31749] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 95-14794] ----------------------------------------------------------------------- [[Page 31748]] SECURITIES AND EXCHANGE COMMISSION [Release No. 34-35835; File No. SR-Amex-95-21] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the American Stock Exchange, Inc., Relating to the Listing and Trading of Indexed Term Notes. June 9, 1995. 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 May 31, 1995, 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 will be based in whole or in part on changes in the value of ten equity securities (``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 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.\1\ 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 a static index composed of ten actively-traded equity securities. The securities to be included in the Index will be those selected by the issuer of the Notes, Lehman Brothers, Inc. (``Lehman''), on or about July 1, 1995, as their selections of ten securities that they believe will outperform the stock market during the succeeding twelve months.\2\ The securities in the Index will be selected by Lehman based on its market research and investment strategy, and will be announced at or as close as possible to the time of the offering of the Notes. \1\See Securities Exchange Act Release No. 27753 (March 1, 1990), 55 FR 8626 (March 8, 1990). \2\Lehman refers to these ten securities as the ``Lehman 10 Uncommon Values in Common Stocks.'' Lehman has generated similar lists on an annual basis for many years. Telephone conversation between Michael Bickford, Vice President, Capital Markets Group, Amex, and Brad Ritter, Senior Counsel, Office of Market Supervision, Division of Market Regulation, Commission, on June 7, 1995. --------------------------------------------------------------------------- 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 approximately one year 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. In addition, the Notes may feature a ``cap'' on the maximum amount to be paid either periodically or at maturity. The Notes, however, will provide that at maturity, holders will receive not less than 90% of the initial issue price. Consistent with other structured products listed by the Amex, the Amex represents that prior to the commencement of listing and trading of the Notes, the Exchange will distribute a circular to its membership providing guidance with regard to member firm compliance responsibilities, including appropriate suitability criteria and/or guidelines. \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 $4 million; and (4) a term of at least one year. Additionally, the issuer of the Notes, Lehman, 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. Eligibility Standards for Index Components The Exchange represents that each of the components in the Index will meet the following criteria at the time of the issuance of the Notes: (1) a minimum market capitalization of $75 million, except that one component 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 one of the component securities may have a trading volume in each of the six months prior to the offering of the Notes of not less than 500,000 shares; (3) at least nine of the component securities will meet the then current criteria for standardized options trading set forth in Exchange Rule 915;\4\ and (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 though Nasdaq.\5\ \4\For these purposes, the Commission notes that in addition to the other requirements in Amex Rule 915, any security issued by a non-U.S. company that is included in the Index must also satisfy the requirements set forth in Amex Rule 915, Commentary .03. A non-U.S. company is defined as any company formed or incorporated outside of the United States. \5\The Commission notes that all components of the Index will be required to 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 $10,000 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 time that the Notes are priced for issuance. 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 [[Page 31749]] 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 shareholders, the expropriation or nationalization of a foreign issuer, or the imposition of certain foreign taxes on shareholders of a foreign issuer. Shares of a component security may be replaced (or supplemented) with other securities under certain circumstances, such as the conversion of a component security 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.\6\ In all cases, the divisor will be adjusted, if necessary, to ensure continuity of the value of the Index. \6\Lehman will not attempt to find a replacement stock or compensate for the extinction of a security due to bankruptcy or a similar event. --------------------------------------------------------------------------- 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 Ampex 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 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, N.W., 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 File No. Sr-Amex-95-21 and should be submitted by July 7, 1995. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\7\ \7\17 CFR 200.30-3(a)(12) (1994). --------------------------------------------------------------------------- Margaret H. McFarland, Deputy Secretary. [FR Doc. 95-14794 Filed 6-15-95; 8:45 am] BILLING CODE 8010-01-M