Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Notices 65459

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

2 17 CFR 240.19b–4(e)(6).

3The Exchange has represented that this

proposed rule change: (i) will not significantly

affect the protection of investors or the public

interest; (ii) will not impose any significant burden

on competition, and (iii) will not become operative

for 30 days after the date of this filing. The

Exchange also has provided at least five business

days notice to the Commission of its intent to file

this proposed rule change, as required by Rule 19b–

4(e)(6) under the Act.

4Telephone call between Bill Floyd-Jones,

Assistant General Counsel, Amex and Marianne H.

Duffy, Special Counsel, Division of Market

Regulation, SEC on December 1, 1997 (‘‘Amex

Call’’).

5Securities Exchange Act Release No. 36885

(February 26, 1996) 61 FR 8315 (March 4, 1996)

(order approving the listing and trading of ComPS

on the Amex linked to one of eleven physical

commodities that comprise the JPMCI and JPMCI:X

(‘‘Amex Individual ComPS Order’’)) and Securities

Exchange Act Release No. 37188 (May 9, 1996) 61

FR 24846 (May 16, 1996) (order approving the

listing and trading of commodity futures index

preferred securities (‘‘CFIPs’’) on the NYSE linked

to one of eleven physical commodities that

comprise the JPMCI and JPMCI:X (‘‘NYSE

Individual CFIPs Order’’)).

6The proposed underwriter of the ComPS has

advised the Exchange that the securities will

comply with the ‘‘hybrid exemption’’ of the

Commodity Futures Trading Commission (‘‘CFTC’’)

under 17 CFR Part 34. The underwriter has further

advised the Exchange that it presented a description

of the structure and sample term sheet of ComPS

to the staff of the CFTC when the underwriter first

proposed the structure for ComPS overlying

individual commodities in 1995. The CFTC raised

no objection to the structure. See Amex Individual

ComPS Order, id.

7Amex Call, supra note 4.

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39402; File No. SR–Amex–

97–46]

Self-Regulatory Organizations; Notice

of Filing and Order Granting Immediate

Effectiveness of Proposed Rule

Change by American Stock Exchange,

Incorporated Relating to the Listing of

Commodity Indexed Preferred or Debt

Securities

December 4, 1997.

Pursuant to section 19(b)(1) of the

Securities Exchange Act of 1934, as

amended, (‘‘Act’’),1 notice is hereby

given that on November 25, 1997, the

American Stock Exchange, Incorporated

(‘‘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 Exchange. The

Exchange has designated the proposed

rule change as constituting a ‘‘noncontroversial’’ rule change under

paragraph (e)(6) of Rule 19b–4 under the

Act 2 which renders the proposal

effective upon receipt of this filing by

the Commission.3 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

Under Section 107A of the Amex

Company Guide, the Exchange may

approve for listing and trading securities

that cannot be readily categorized under

the listing criteria for common and

preferred stock, bonds and debentures

and warrants. The Amex proposes to list

and trade commodity index preferred or

debt securities (‘‘ComPS’’) on futures

contracts for: corn; soybeans; wheat; a

corn, soybean and wheat index

(‘‘Agricultural Index’’); the ‘‘total

return’’ variation of the J.P. Morgan

Commodity Index (‘‘JPMCI’’); the

‘‘excess return’’ variation of the JPMCI

(‘‘JPMCI:X’’); and the total return and

excess return versions of the Energy

(‘‘JPMCI:E’’), Base Metal (‘‘JPMCI:B’’)

and Precious Metal (‘‘JPMCI:P’’)

subindices of the JPMCI.4 An excess

return represents the cumulative returns

of investing in unleveraged positions in

nearby commodity futures contracts and

constantly rolling the position forward

to the next designated contract as the

contract nears expiration. A total return

consists of the excess return plus the

return on the three-month Treasury

Bills. In 1996, the Commission

approved ComPS overlying various

financial instruments for listing on both

the Amex and the New York Stock

Exchange, Incorporated (‘‘NYSE’’).5

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 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

As previously stated, the Amex

proposes to list for trading ComPS

overlying futures contracts for: corn;

soybeans; wheat; the Agricultural Index;

the JPMCI; the JPMCI:X; the JPMCI:E;

the JPMCI:B; and the JPMCI:P. The

ComPS and the issuer of the ComPS will

conform to the Amex’s listing guidelines

under Section 107A of the Company

Guide.6 Accordingly, all issuances of

ComPS must have: a public distribution

of one million trading units; 400

holders; and a market value of not less

than $4 million. The Exchange also will

require that the issuer have a minimum

tangible net worth of $150 million.

Holders of ComPS may receive a

dividend or interest payment as

applicable on the face value of their

securities. The frequency and rate of the

dividend or interest payment varies

from issue to issue based upon

prevailing interest rates and other

factors. In addition, investors will

receive at maturity a payment linked to

the value of an index based upon a

single commodity in accordance with

the following formula: Face Amount ×

(Ending Index Value/Beginning Index

Value) ¥ Factor.

The ‘‘Beginning Index Value’’ is

announced at the time of the offering.

The ‘‘Ending Index Value’’ is based

upon a 10 day average of the daily index

value computed during the

determination period prior to the

redemption date. The ‘‘Factor’’

represents the costs of issuing and

hedging the securities and also may

include the future value of the stated

dividend or interest payment (if any).

Commodity prices for the purpose of

determining the payment to holders at

maturity will be determined by

reference to prices for a linked

commodity over at least a ten business

day period. The securities will have a

term of from two to ten years. Holders

of the securities have no claim to any of

the underlying physical linked

commodities.7

(a) Design of the Underlying

Instruments. The Amex asserts that the

futures contracts are all actively traded

for: Corn, soybeans, and wheat on the

Board of Trade of the City of Chicago

(‘‘CBOT’’); the base metal components

of the JPMCI and JPMCI:X on the

London Mercantile Exchange (‘‘LME’’);

the energy components of the JPMCI

and JPMCI:X on the New York

Mercantile Exchange (‘‘NYMEX’’); and

the precious metal components of the

JPMCI and JPMCI:X of the Comex

division of the NYMEX (‘‘COMEX’’).

The Amex asserts that prices for all of

the above commodities are widely

reported by vendors of financial

information and the press. Information
65460 Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Notices

8For liquidity purposes, JPMCI and JPMCI:X

indices skip May and September wheat, September

corn and August and September soybeans in the

designated contract definitions.

9Securities Exchange Act Release No. 35581

(March 21, 1995) 60 FR 15804 (March 27, 1997)

(order approving the listing and trading of

commodity linked intermediate term notes

(‘‘COINs’’) overlying the JPMCI and the JPMC:X on

the Amex).

10Such developments could include, among

other things, changing liquidity conditions or the

discontinuation of existing contracts, the emergence

of new ‘‘benchmark’’ contracts for the particular

linked commodity or the imposition of a tax or

other charge on transactions.

regarding the proposed underlying

contracts follows: 8

Underlying futures

1996 average open interest

(billions)

1996 ADT

volume

(millions)

Contract month Description

Corn ................................ $6.6 ............................... $1.4 Mar, May, Jul, Dec ....... No. 2 yellow corn & substitutes as specified by

CBOT rules.

Soybeans ....................... $7.0 ............................... $2.1 Jan, Mar, May, Jul, &

Nov.

No. 2 yellow soybeans & substitutes as specified

by CBOT rules.

Wheat ............................. $2.0 ............................... $516 Mar, Jul, Dec ................ Hard winter wheat & substitute grades as specified by CBOT rules.

The following commodities comprise the JPMCI and JPMCI:X:

Name/units Market Units per contract Contracts in index

Aluminum $/Metric Tons .................. LME (MT) 25 tons .................. 3rd Wed of Mar, Jun, Sep and Dec.

Copper $/MT .................................... LME 25 tons .................. 3rd Wed of Mar, Jun, Sep and Dec.

Nickel $/MT ...................................... LME 6 tons .................... 3rd Wed of Mar, Jun, Sep and Dec.

Zinc $/MT ......................................... LME 25 tons .................. 3rd Wed of Mar, Jun, Sep and Dec.

Heat Oil $/gal ................................... NYMEX 42,000 gal ............. Every month.

Nat Gas $/MM BTU ......................... NYMEX 10,000 MM BTU ... Every month.

Unleaded Gas $/gal ......................... NYMEX 42,000 gal ............. Every month.

WTI Lt Swt Crude Oil $/BBL ........... NYMEX 1,000 bbl ............... Every month.

Platinum $/troy ounce ...................... NYMEX 50 troy oz .............. Jan, Apr, Jul, Oct.

Gold $/troy ounce ............................ COMEX 100 troy oz ............ Feb, Apr, Jun, Aug, and Dec.

Silver $/troy ounce ........................... COMEX 5,000 troy oz ......... Mar, May, Jul, Sep and Dec.

The relative weighting of the various commodities in the JPMCI:E, JPMCI:B, JPMCI:P and Agricultural Index are

as follows:

Component Subindex

Weight in

subindex

(percent)

Aluminum ...................................................................................... Base metal .................................................................................... 40.91

Copper .......................................................................................... Base metals .................................................................................. 36.36

Nickel ............................................................................................ Base metals .................................................................................. 9.09

Zinc ............................................................................................... Base metals .................................................................................. 13.64

Crude Oil ....................................................................................... Energy .......................................................................................... 60.00

Heating Oil .................................................................................... Energy .......................................................................................... 18.18

Unleaded Gas ............................................................................... Energy .......................................................................................... 9.09

Natural Gas ................................................................................... Energy .......................................................................................... 12.73

Gold .............................................................................................. Precious metals ............................................................................ 65.22

Silver ............................................................................................. Precious metals ............................................................................ 21.74

Platinum ........................................................................................ Precious metals ............................................................................ 13.04

Corn .............................................................................................. Agricultural .................................................................................... 33.33

Soybeans ...................................................................................... Agricultural .................................................................................... 33.33

Wheat ........................................................................................... Agricultural .................................................................................... 33.33

Based on the foregoing information

and for the following reason, the

Exchange believes that the JPMCI and

the JPMCI:X are diversified indices of

industrial commodities. The JPMCI is a

weighted arithmetic average of total

returns afforded by an investment in

liquid exchange traded futures on

eleven industrial commodities. In

addition, the Exchange notes that the

Commission has previously reviewed

and approved the listing of a security

which was linked to the performance of

the JPMCI or the JPMCI:X.9

b. Maintenance of Underlying

Instruments. It is anticipated that the

contract or contracts underlying a

particular issue of ComPS will remain

unchanged during the term of the

instrument. Certain developments,

however, may necessitate changes with

respect to the underlying contract or

contracts.10 Decisions regarding such

changes will be made by J.P. Morgan

upon the advice of the JPMCI Policy

Committee, a neutral business

committee. This committee consists of

senior employees in the commodities

and research areas of J.P. Morgan as well

as independent and academic experts.

Personnel from J.P. Morgan’s

Commodities group serve only in an

advisory, non-voting role on the

committee. J.P. Morgan will

immediately notify the Exchange and

vendors of financial information if there

is a change in the design, composition

or calculation of the securities.

If it becomes necessary to choose a

replacement price source for the

securities, the new price source will

meet the following criteria: (i) it will be
Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Notices 65461

11The O.E.C.D. (Organization of Economic

Cooperation and Development) consists of the

following countries: the U.S., Japan, Germany,

France, Italy, U.K., Canada, Australia, Austria,

Belgium, Denmark, Finland, Greece, Iceland,

Ireland, Luxembourg, Mexico, Netherlands, New

Zealand, Norway, Portugal, Spain, Sweden,

Switzerland and Turkey.

12The Exchange currently has information

sharing arrangements that qualify as comprehensive

information sharing agreements with the following

futures markets and self-regulators: CBOT; Chicago

Mercantile Exchange, London International

Financial Futures and Options Exchange; Montreal

Exchange; New York Futures Exchange; NYMEX;

the SFA; and the Sydney Futures Exchange.

13See Amex Individual ComPS Order and NYSE

Individual CFIPs Order, supra note 4.

priced in U.S. dollars, or if priced in a

foreign currency, the exchange on

which the contract is traded must

publish an official exchange rate for

conversion of the price into U.S. dollars

and such currency must be freely

convertible in U.S. currency, (ii) it will

be traded on a regulated futures

exchange in the U.S., Canada, U.K,

Japan, Singapore or an O.E.C.D.

country,11 and (iii) it will have a

minimum annual volume of 300,000

contracts of $500 million. The

underwriter will immediately notify the

Exchange and vendors of financial

information in the event that there is a

change in the futures contract

underlying a particular series of ComPS.

In the event that a determination is

made to change a contract related to an

issue of ComPS and an appropriate

benchmark replacement contract is

identified, the substitution of the new

contract for the old only will be done

where: (1) the Exchange has established

a comprehensive information sharing

agreement with the market or selfregulator for the replacement contract,

or (2) the SEC has established suitable

alternative agreements with an

appropriate regulator of the market for

the replacement contract.

When there is no suitable benchmark

replacement contract or, there is

suitable benchmark contract but the

Exchange’s or the Commission’s

information sharing arrangement do not

meet the above criteria, in the case of

ComPS on a single commodity, the

affected ComPS either will be called by

the issuer or the payment to be made to

holders at maturity will be fixed as of

such time using prices derived from the

old underlying contract, and thereafter

the principal amount will not fluctuate

throughout the term of the instrument as

a result of the price of a linked

commodity. In the case of ComPS

related to a basket of commodities, the

affected contract within the index

basket will be removed from the basket.

Unlike ComPS on individual

commodities, the index value of ComPS

related to baskets will not be fixed and

determined early. Rather, the index will

continue to be calculated using the

above described index calculation

methodology by excluding the removed

commodity, and using the new weights

determined by J.P. Morgan under the

advice of the JPMCI Policy Committee.

The new weights will adjust only for the

removed commodity, taking its old

arithmetic percentage weight in the

index and dividing it up among one or

more of its same sector index group

members (i.e., energy, precious metal,

base metal or agricultural). Thus, for

example, the removal of an energy

related commodity will not change the

energy related weighting in the JPMCI

basket, but it will change the individual

weightings of some or all of the

remaining energy components within

the energy subindex. For example, if

natural gas were removed from the

JPMCI, its 7% weight in the basket

would be divided among the three

remaining energy commodities as

determined by J.P. Morgan with the

advice of the JPMCI Policy Committee

and the energy subindex would remain

at 55% of the basket. The removal of a

commodity will not change the value of

the index; it only will change the

weights of the contracts in the index

which, going forward, will be used to

determine future changes in the value of

the index.

Members of the JPMCI Policy

Committee will be prohibited from

trading ComPS and from

communicating any knowledge

concerning changes in the underlying

commodities.

c. Surveillance. The Amex is able to

obtain market surveillance information,

including customer identify

information, with respect to transactions

occurring on the LME pursuant to its

information sharing arrangements with

the Securities and Futures Authority

(‘‘SFA’’) through the Intermarket

Surveillance Group (‘‘ISG’’). The

Exchange also is able to obtain market

surveillance information, including

customer identity information, with

respect to transactions occurring on

NYMEX or COMEX pursuant to its

information sharing agreement with

NYMEX. In addition, the Exchange is

able to obtain market surveillance

information, including customer

identity information, regarding

transactions on the CBOT through the

ISG.12

d. Calculation of Value of Underlying

Instruments. The JPMCI:E, JPMCI:B,

JPMCI:P and agricultural index

(collectively the ‘‘sector indices’’) are

calculated using the same methodology

as the JPMCI or JPMCI:X which the

Commission previously approved.13

The sector indexes are dollar weighted,

arithmetic averages measuring the

return from an investment in the

applicable futures contracts. The value

of each sector index is defined by a

trading strategy that holds a futures

position in each of the commodities for

a one month period and then rebalances

the value of the commodities held for

the following month based on a constant

dollar weighting scheme. The

rebalancing generally occurs at the end

of the trading on the 4th business day

of every month on which the relevant

exchanges are open. The new contract

used to rebalance is the nearest

designated futures contract which has

termination of trading or first notice day

at least 10 business days into the

following month. In addition, due to the

periodic expiration of the futures

contracts used to compute the index

value, it also is necessary to ‘‘roll’’ out

of expiring contracts and into the new

nearby contracts. To minimize possible

pricing volatility arising from

conducting the roll on a single business

day, the substitution of the new contract

for the old is accomplished over a five

business day period in increments of

20%.

The futures contract to be used for

monthly rebalancing and rolling of each

commodity will be the nearest

designated futures contract to be used in

the index, with a termination of trading

date or first notice day not earlier than

ten business days into the following

month. The futures contract used for

rebalancing will be called the ‘‘new

contracts’’ and the futures contract that

the index refers to up to the rebalancing

date will be called the ‘‘old contract.’’

For energy futures the new and old

contracts will be different. For precious

metals, base metals and agricultural

commodities, the new and old contracts

may be the same contract because of the

absence of a designated contract for

every month. Where the new and old

contracts are the same, rebalancing and

rolling only involve and adjustment of

the amount held of the old contract.

Rebalancing is calculated according to

the following formulae on the

rebalancing date: number of new units

needed = current index value * weight

of the commodity in the index/current

price of the new contract per unit; and

number of contracts needed = number of

new units needed/number of units per

contract.

After rebalancing has occurred, the

roll is executed. This is the process by

which the old contracts are sold and the
65462 Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Notices

14This last step is a result of the convention that

contract prices are quoted on a per unit basis rather

than a per contract basis. 15Amex Call, supra note 6. 16 15 U.S.C. 78s(b)(3)(A)(iii).

new contracts are purchased. Twenty

per cent of the roll volume is transacted

on each of the five subsequent business

days after the rebalance date.

The rebalancing and rolling process

determines the new contract and the

number of new contracts to be used in

the daily index calculation for the

coming month. (During the five day roll

period, the theoretical portfolio may

consist of a blend of the new and old

contracts for each commodity.) The

daily index value is calculated as the

sum of the previous day’s closing index

value plus the gain, or minus the loss,

of the theoretical portfolio on that day.

For each component commodity, the

gain for the day is calculated by

multiplying the difference between the

current day’s price and the previous

day’s price times the number of these

contracts held in the theoretical

portfolio times the number of units of

the commodity per contract.14 The daily

gain or loss on the theoretical portfolio

then is simply the sum total of the gains

and losses of the individual positions in

the theoretical portfolio. The index

value calculated in this manner for

today then serves as the base to which

tomorrow’s gain or loss on the

theoretical portfolio is added to

determine the next day’s index level.

The foregoing describes an ‘‘excess

return’’ methodology for calculating the

index such as used in the JPMCI:X. If a

total return index is used, a return based

upon the U.S. Treasury Bill rate is

incorporated into the index. The index

calculation may be described as follows:

Index (today) = Index (yesterday) ∂ P&L

on theoretical portfolio ∂ Daily

collateral interest where; Daily collateral

interest = Index (yesterday) × Treasury

Bill yield; and P&L on theoretical

portfolio = Sum of individual P&L

calculations for all commodities in

theoretical portfolio. The P&L

calculations are in the form of: P&L =

[number of contracts × change in price

of designated contracts].

e. Dissemination of Value of

Underlying Instruments. During U.S.

market hours, index values with respect

to ComPS based upon corn, wheat and

soybeans will be calculated every 60

seconds and distributed by Reuters and

Bloomberg. Index values with respect to

the JPMCI, JPMCI:X and the four sector

indices also will be calculated every 60

seconds and distributed by an

independent calculation agent. The last

disseminated price from the applicable

exchange will be incorporated into the

index calculations. The Ending Index

Value for ComPS prior to the

redemption date will be calculated by

J.P. Morgan or an affiliate.

f. Suitability. Returns to investors in

ComPS are unleveraged with neither a

cap nor a floor. The Amex asserts that

since commodity returns historically

have been negatively correlated with

financial assets, the ownership of

ComPS (although their return is

uncertain) will help to diversify a

portfolio of financial instruments. There

is an element of derivative pricing,

however with respect to the calculation

of the final payment. The Exchange,

accordingly, will require members,

member organizations and employees

thereof to make a determination with

respect to customers whose accounts

have not previously been approved to

trade futures or options that a

transaction in the proposed securities is

suitable for such customer. In addition,

members, member organizations or

employees thereof recommending a

transaction in ComPS would be

required: (1) to determine that the

transaction recommended is suitable for

the customer and (2) to have a

reasonable basis for believing that the

customer can evaluate the special

characteristics of, and is able to bear the

financial risks of, the recommended

transaction. This is more than the duty

to know and approve customers, but

entails an obligation to make a

determination that the transaction is

suitable for the customer. The Exchange

will distribute a circular to its

membership prior to trading such

securities providing guidance with

regard to member firm compliance

responsibilities (including suitability

recommendations) when handling

transactions in ComPS and highlighting

the special risks and characteristics

thereof. The Exchange will provide the

Commission staff with a copy of the

circular prior to distribution.

ComPS will be subject to the quality

margin and trading rules of the

Exchange, except when ComPS are

issued as debt in denominations with a

face value of $1,000 or more, they will

be traded subject to the Exchange’s debt

trading rules (although they will still

remain subject to the Exchange’s equity

margin rules).15

2. Statutory Basis

The Exchange asserts that the

proposed rule change is consistent with

Section 6(b) of the Act in general and

furthers the objectives of Section 6(b) in

particular in that it is designed to

prevent fraudulent and manipulative

acts and practices, promote just and

equitable principles of trade, remove the

impediments to and perfect the

mechanisms of a free and open market

and a national market system, and, in

general, protect investors and the public

interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed rule change will impose

any burden on competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Written comments on the proposed

rule change were neither solicited nor

received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

This proposed rule change has been

filed by the Exchange as a

‘‘noncontroversial’’ rule change

pursuant to paragraph (e)(6) of Rule

19b–4. Consequently, the rule change

shall become operative 30 days after the

date of filing, or such shorter time as the

Commission may designate, if the

change (1) does not significantly affect

the protection of investors or the public

interest and (2) does not impose any

significant burden on competition,

pursuant to Section 19(b)(3)(A)(iii) of

the Act 16 and subparagraph (e)(6) of

Rule 19b–4 thereunder.

At any time within 60 days of the

filing of such proposed rule change, the

Commission may summarily abrogate

such rule change if it appears to the

Commission that such action is

necessary or appropriate in the public

interest, for the protection of investors,

or otherwise in furtherance of the

purposes of the Act. Because the

foregoing proposed rule change: (1) does

not significantly affect the protection of

investors or the public interest; (2) does

not impose any significant burden on

competition; and (3) does not become

operative for 30 days from November

25, 1997, the date on which it was filed,

and the Exchange provided the

Commission with written notice of its

intent to file the proposed rule change

at least five days prior to the filing date,

it has become effective pursuant to

Section 19(b)(3)(A) of the Act and Rule

19b–4(e)(6) thereunder.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning the foregoing.
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)