Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Notices 65463

17 17 CFR 200.30–3(a)(12).

1 15 U.S.C. § 78s(b)(1).

2 17 CFR 240.19b–4.

3See letter from Claire McGrath, Vice President

and Special Counsel, Amex to Michael Walinskas,

Senior Special Counsel, Commission dated

November 13, 1997 (‘‘Amendment No. 1’’). In

Amendment No. 1, the Exchange added Rock of

Ages Corp. to the Index. The Exchange also

amended Exchange Rule 904C to set the position

limit for the Index at 6,000 contracts on the same

side of the market. In addition, the Exchange

represents that component securities that in the

aggregate account for no more than 10% of the

weight of the Index will have an average monthly

trading volume of at least 100,000 shares. The

Exchange represents that it will maintain the Index

so that at least 90% of the Index’s numerical value

and at least 70% of the total number of component

securities will meet the then current criteria for

standardized options trading set forth in Exchange

Rule 915. Finally, Amendment No. 1 makes a nonsubstantive change to clarify the proposal.

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. Copies of such filing will also be

available for inspection and copying at

the principal office of the Exchange. All

submissions should refer to File No.

SR–Amex–97–46 and should be

submitted by January 2, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.17

Jonathan G. Katz,

Secretary.

[FR Doc. 97–32486 Filed 12–11–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39407; File No. SR–AMEX–

97–33]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change and

Amendment No. 1 Thereto by the

American Stock Exchange, Inc.

Relating to Listing and Trading

Options on the Pauze ́ Tombstone

Common Stock Index SM

December 5, 1997.

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 October

8, 1997, the American Stock Exchange,

Inc. (‘‘Amex’’ or ‘‘Exchange’’) filed with

the Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’)

the proposed rule change as described

in Items I, II, and III below, which Items

have been prepared by the selfregulatory organization. On November

14, 1997 the Exchange submitted an

amendment to the proposal.3 The

Commission is publishing this notice to

solicit comments on the proposed rule

change, as amended from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange proposes to trade

options on the Pauze ́ Tombstone

Common Stock Index SM (the ‘‘Index’’),

a new index developed by Pauze ́

Swanson Capital Management Co. TM

comprising death care industry stocks.

In addition, the Amex proposes to

amend Rule 902C to include the Pauze ́

Tombstone Common Stock Index SM in

the disclaimer provisions of the rule.

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

1. Purpose

The purpose of the proposed rule

change is to permit the Exchange to

trade standardized options on the Index.

The Index is composed of the stocks of

ten companies involved in providing

death care services or products

consisting of funeral services, cemetery

services, and funeral and cemetery

support goods and services. Options on

the Index will provide investors with a

low-cost means to participate in the

performance of the death care industry

and to hedge against the risk of

investing in the industry. The Index also

currently serves as the basis for an index

mutual fund being offered by Pauze ́

Swanson Capital Management Co. TM,

which has been registered with the

Commission as an investment advisor

since 1993. Pauze ́ Swanson’s president,

Philip C. Pauze ́, has specialized in

providing investment management for

the assets of pre-need funeral accounts

and cemetery endowment care funds

since 1985, and is financial consultant

to several state- and nation-wide funeral

trusts and funeral directors associations’

retirement plans.

The value to the public offered by

options trading on the Index is

underscored by the expected long-term

growth of the death care industry,

which offers essential, basic services

required by the public regardless of

economic conditions. Studies

conducted by the Bureau of the Census

of the United States Department of

Commerce indicate that the aging of the

population, as the ‘‘Baby Boom’’

generation begins to reach the age of

mortality, as well as the population

increase of approximately 28% from the

years 1995 to 2025 will lead to a

significant rise in the annual aggregate

number of deaths. Consolidator

companies, which purchase private

funeral homes and consolidate their

operations, currently constitute only

about 15% of the total United States

funeral service market, although the

trend is toward consolidation.

Consequently, these companies have a

very large potential for future growth

through acquisitions.

Eligibility Standards for Index

Components. Pauze ́ Swanson Capital

Management Co.TM, as developer of the

Index, is responsible for selecting and

maintaining the list of companies to be

included in the Index. Only stocks of

companies which derive at least fifteen

percent of their revenues from the

provision of goods and/or services to the

death care sector of the economy are

eligible to be included. The Index

conforms with the criteria of Exchange

Rule 901C for including stocks in an

index on which standardized options

trade. In addition, all of the component

securities currently meet the following

standards: (1) Each component has a

market capitalization of at least $100

million; (2) the total market

capitalization of the Index is greater

than $17 billion; (3) more than 95% of

the weight of the Index is accounted for

by securities each having an average

monthly trading volume of greater than

1,000,000 shares over the six months

preceding the date of this filing; (3)

foreign country securities or American

Depositary Receipts thereon are not

currently represented in the Index; (4)
65464 Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Notices

4The Index’s value at the close of trading on

August 19, 1997 was 523.04.

all component stocks are either listed on

the New York Stock Exchange

(‘‘NYSE’’), Amex, or traded through the

facilities of the National Association of

Securities Dealers Automated Quotation

System (‘‘Nasdaq’’) and are reported

National Market System securities; and

(5) over 95% of the numerical value of

the Index is accounted for by securities

that meet the current criteria for

standardized options trading set forth in

Exchange Rule 915.

While the shares of Service Corp.

International constitute 55.63% of the

overall Index value, the Exchange

believes that the price of Service Corp.

Stock is not readily susceptible to

manipulation because the company

enjoys a sizable market capitalization of

more than 8.04 billion dollars, has over

251 million shares outstanding, and has

experienced an average monthly trading

volume of over 13 million shares in the

six months preceding the date of this

filing. Furthermore, its contribution to

the value of the Index will diminish as

the stocks of more companies are added.

The Exchange anticipates that several

more companies will qualify for

addition to the Index within the next

few months. No other component

security in the Index currently accounts

for more than 15.59% of its value.

The Exchange believes the potential

for manipulation of the Index is

minimized and, in particular, the lessertraded component stocks should

properly be included in the Index for

the following reasons: (1) The

representation of these stocks in relation

to the overall Index value (an aggregate

of 4.76% of the weight of the Index) is

small; and (2) over 95% of the value of

the Index is accounted for by stocks

which comply with the listing criteria

for standardized options trading set

forth in Rule 915 and have an average

market capitalization of 3.12 billion

dollars, an average of 91 million shares

outstanding, and a six-month average

monthly trading volume of 5.14 million

shares.

Index Maintenance. The Index will be

maintained by the Amex. If necessary in

order to maintain continuity of the

Index, its divisor may be adjusted to

reflect certain events relating to the

component stocks. These events

include, but are not limited to, stock

distributions, stock splits, reverse stock

splits, spin-offs, certain rights issuance,

recapitalizations, reorganizations, and

mergers and acquisitions.

The Exchange will maintain the Index

so that: (1) The Index is comprised of no

less than 9 component securities; (2)

each of the component securities

constituting the top 90% of the Index by

weight, will have a minimum market

capitalization of $75 million and each of

the component stocks constituting the

bottom 10% of the Index, by weight,

may have a minimum market

capitalization of $50 million; (3) 90% of

the Index’s numerical index value and

at least 70% of the total number of

component securities will meet the then

current criteria for standardized option

trading set forth in Amex Rule 915; (4)

foreign country securities or ADRs

thereon that are not subject to

comprehensive surveillance agreements

will not in the aggregate represent more

than 20% of the weight of the Index; (5)

all component securities will either be

listed on Amex, the New York Stock

Exchange, or Nasdaq/NMS listed; and

(6) 90% of the component securities

shall have a monthly trading volume of

at least 500,000 shares and the

component securities constituting the

bottom 10% of the Index, by weight,

shall have a minimum average monthly

trading volume of at least 100,000

shares.

The Exchange shall not open for

trading any additional option series

should the Index fail to satisfy any of

the maintenance criteria set forth above

unless such failure is determined by the

Exchange not to be significant and the

Commission concurs in that

determination.

Index Calculation. The Index will be

calculated by the Amex using a

modified market capitalization

methodology. The value of the Index is

determined by multiplying the price of

each stock times the number of its

shares outstanding times the percentage

of the company’s revenues derived from

the death care industry, adding those

products and dividing by a divisor.

Currently, in the case of Hillenbrand

Industries and American Annuity

Group, only 40% and 15%, respectively,

of their total market capitalization are

valued in the Index since those

proportions of the companies’ revenues

are derived from business in the death

care industry. The divisor was initially

determined to yield a benchmark Index

value of 100 at the close of trading on

its base date of December 31, 1985.4

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.

Expiration and Settlement. The

proposed options on the Index will be

European style (i.e., exercises permitted

at expiration only), and cash settled.

Standard option trading hours (9:30 a.m.

to 4:02 p.m. New York Time) will apply.

The options on the Index will expire on

the Saturday following the third Friday

of the expiration month. The last trading

day in an expiring option series will

normally be the second to last business

day preceding the Saturday following

the third Friday of the expiration month

(normally a Thursday). Trading in

expiring options will cease at the close

of trading on the last trading day.

The Exchange plans to list option

series with expirations in the three nearterm calendar months and in the two

additional calendar months in the

March cycle. In addition, longer term

option series having up to thirty-six

months to expiration may be traded.

Instead of such long-term options on a

full value Index level, the Exchange may

list long-term, reduced value put and

call options based on the one-tenth

(1⁄10th) of the Index’s full value. The

interval between expirations months for

either a full value or reduced value

long-term option will not be less than

six months. The trading of any longterm options would be subject to the

same rules that govern the trading of all

the Exchange’s index options, including

sales practice rules, margin

requirements and floor trading

procedures, and all options will have

European style exercise.

The exercise settlement value for all

of the Index’s expiring options will be

calculated based upon the primary

exchange regular way opening sale

prices for the component stocks. In the

case of securities traded through the

NASDAQ system, the first reported

regular way sale price will be used. If

any component stock does not open for

trading on its primary market on the last

trading day before expiration, then the

prior day’s last sale price will be used

in the calculation.

Exchange Rules Applicable to Stock

Index Options. Amex Rules 900C

through 980C will apply to the trading

of option contracts based on the Index.

These Rules cover issues such as

surveillance, exercise prices and

position limits. The Index is deemed to

be a Stock Index Option under Rule

901C(a) and a Stock Index Industry

Group under Rule 900C(b)(1). With

respect to Rule 903C(b), the Exchange

proposes to list near-the-money (i.e.,

within ten points above or below the

current Index value) option series on the

Index at 21⁄2 point strike (exercise) price

intervals when the value of the Index is

below 200 points. In addition, the

Exchange has set a position limit of

6,000 contracts on the same side of the

market with respect to options on this
Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Notices 65465

5See Amendment No. 1, supra note 3.

6 15 U.S.C. § 78f(b).

7 17 CFR 200.30–3(a)(12).

1 15 U.S.C. § 78s(b)(1).

2 17 CFR 240.19b–4.

3For purposes of Exchange Rule 37, ‘‘agency

order’’ means an order for the account of a customer

but does not include professional orders.

4The ITS BBO is the best bid/offer quote among

the American, Boston, Cincinnati, Chicago, New

York, Pacific, and Philadelphia Stock Exchanges or

the Intermarket Trading System/Computer Assisted

Execution System, as appropriate.

5The NBBO is the best bid or offer disseminated

pursuant to SEC Rule 11Ac1–1.

6 15 U.S.C. § 78f(b).

7The MAX System provides an automated

delivery and execution facility for orders that are

Continued

Index.5 Surveillance procedures

currently used to monitor trading in

each of the Exchange’s other index

options will also be used to monitor

trading options on the Index.

2. Statutory Basis

The Exchange represents that the

proposed rule change is consistent with

Section 6(b)(5) of the Act 6 in that it is

designed to prevent fraudulent and

manipulative acts and practices and to

perfect the mechanism of a free and

open market.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange 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

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 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

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the Exchange. All

submissions should refer to File No.

SR–AMEX–97–33 and should be

submitted by January 22, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.7

Jonathan G. Katz,

Secretary.

[FR Doc. 97–32527 Filed 12–11–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39403; File No. SR–CHX–

97–20]

Self-Regulatory Organizations;

Chicago Stock Exchange,

Incorporated; Order Granting Approval

to Proposed Rule Change Defining the

Scope and Application of the

Guarantee Available Under the

Exchange’s Guaranteed Execution

System

December 4, 1997.

I. Introduction

On September 12, 1997, the Chicago

Stock Exchange, Incorporated (‘‘CHX’’or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission

(‘‘Commission’’), pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’) 1 and Rule 19b–4

thereunder,2 a proposed rule change to

clarify the scope and application of the

guarantee available under the

Exchange’s Guaranteed Execution

System (‘‘BEST System’’).

The proposed rule change was

published for comment in Securities

Exchange Act Release No. 39249 (Oct.

16, 1997), 62 FR 55443 (Oct. 24, 1997).

No comments were received on the

proposal. This order approves the

proposed rule change.

II. Description of the Proposal

The provision currently governing the

BEST System, Exchange Rule 37(a) of

Article XX, states that, subject to certain

exceptions, specialists must accept and

guarantee execution of all agency

orders 3 and fill such orders on the basis

of the Intermarket Trading System

(‘‘ITS’’) Best Bid or Best Offer (‘‘BBO’’) 4

for Dual Trading System issues and the

NBBO 5 for Nasdaq/NM issues. The

proposed rule change would amend

Exchange Rule 37(a) to eliminate any

ambiguity concerning the scope and

application of the guarantee available

under the BEST System and would

make it clear that the guarantee is

limited to both the size and price

associated with the ITS BBO or NBBO.

III. Discussion

For the reasons discussed below, the

Commission finds that the proposed

rule change is consistent with the

requirements of the Act and the rules

and regulations thereunder applicable to

a national securities exchange, and, in

particular with the requirements of

Section 6(b).6 In particular, the

commission believes the proposed rule

change is consistent with the Section

6(b)(5) requirements that the rules of an

exchange be designed to promote just

and equitable principles of trade, to

remove impediments to and perfect the

mechanism of a free and open market

and a national market system, and, in

general, to protect investors and the

public interest.

Each bid and offer, including the ITS

BBO and NBBO, contains two

components—price and size. Because

the Exchange’s BEST Rule requires a

specialist to accept and guarantee the

execution of an agency market order on

the basis of the ITS BBO or NBBO, the

Exchange has consistently interpreted

this guarantee as applying to both the

size and price associated with that best

bid or offer. However, the current text

of the BEST Rule does not explicitly

state that the guarantee is qualified in

such a manner. To eliminate any

uncertainty concerning the breadth of

the guarantee, the proposed rule change

adds the words ‘‘size and price

associated with’’ to the BEST Rule to

clarify that the guarantee available

under the BEST System is limited to

both the size and price associated with

the ITS BBO or NBBO.

The proposed rule change is

consistent with the automatic execution

parameters employed by the Exchange’s

Midwest Automated Execution System

(‘‘MAX’’).7 Automatic execution of a