8466 Federal Register / Vol. 62, No. 37 / Tuesday, February 25, 1997 / Notices

19 Id.

20 17 CFR 200.30–3(a)(12).

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

2On November 12, 1996, Amex submitted

Amendment No. 1 to its proposed rule filing,

making several clarifications to the original filing.

See Letter from Claire P. McGrath, Managing

Director and Special Counsel, Amex, to Michael

Walinskas, Senior Special Counsel, Division,

Commission, dated November 7, 1996.

3Securities Exchange Act Release No. 37973

(November 22, 1996), 61 FR 63884.

4This filing only addresses trading requirements

relating to necessary surveillance sharing

procedures.

515 U.S.C. 78f(b) and 78f(b)(5).

6 In approving the rule, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. 78c(f).

V. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,19 that the

proposed rule change (SR–Amex–97–

01), as amended, is approved for a pilot

period ending on March 7, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.20

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–4527 Filed 2–24–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38310; International Series

Release No. 1054; File No. SR–AMEX–96–

36]

Self-Regulatory Organizations;

American Stock Exchange, Inc.; Order

Granting Approval to Proposed Rule

Change and Amendment No. 1 Thereto

Relating to the Policy of the Amex

Regarding Information Obtained

Pursuant to the SEC’s Memorandum of

Understanding With the CONSOB

February 19, 1997.

I. Introduction

On October 2, 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 a proposed rule

change to adopt an official Exchange

policy concerning the circumstances

and conditions under which the

Exchange, in order to carry out its

market surveillance and enforcement

functions for derivative products

containing Italian component securities,

may obtain access to information

regarding activity on the Italian

securities markets obtained by the SEC

pursuant to the Commission’s

Memorandum of Understanding

(‘‘MOU’’) with the Commissione

Nazionale per le Societa e la Borsa

(‘‘CONSOB’’). Amex submitted

Amendment No. 1 to the filing on

November 12, 1996,2 which made

several clarifications to the original

filing.

The proposed rule change was

published for comment in the Federal

Register on December 2, 1996.3 No

comments were received on the

proposal. This order approves the

proposal, as amended.

II. Description of the Proposal

The Amex does not have a

surveillance sharing agreement with the

Milan exchange, which is an

unincorporated association and is not

able under Italian law to enter into such

an arrangement. Therefore, Amex

submitted this rule filing to enable the

Exchange to carry out its market

surveillance and enforcement functions

for derivative products containing

Italian component securities by seeking

the necessary information about activity

on the Italian securities markets from

the SEC pursuant to the SEC’s MOU

with CONSOB. The Exchange’s

proposed policy details the

circumstances and conditions under

which the Exchange may obtain access

to such information from the SEC. By

adopting this policy, therefore, the

Exchange believes it will be in a

position to list derivative products

containing Italian component securities

because it will be able to have access to

information on the underlying securities

which it may need for enforcement or

market surveillance purposes.4

The Exchange’s proposed policy

provides that the Exchange will advise

the SEC of information it needs

regarding activity on the Italian

securities markets for market

surveillance and enforcement purposes.

The SEC, in turn, may request the

CONSOB’s assistance, pursuant to the

MOU, in gaining access to such

information. The Exchange will use

such information it may receive from

the SEC only for the purposes of

conducting market surveillance and

enforcement proceedings. The Exchange

will limit distribution of such

information to officers and directors of

the Exchange and other employees

directly responsible for conducting

market surveillance and enforcement

proceedings relating to the matter in

connection with which the SEC

provided the information to the

Exchange. The Exchange also will

undertake to maintain the

confidentiality of the information and to

take appropriate disciplinary action in

the event it learns of a breach of such

confidentiality, including referral to the

SEC for any action the SEC deems

necessary or appropriate.

By adopting a policy that provides

access to information on the underlying

securities for market surveillance and

enforcement purposes, the Exchange

will be able to list options and other

derivative products containing Italian

component securities, provided that all

other applicable product listing

standards are met. Therefore, the

Exchange believes that the proposed

rule change could potentially provide

investors with the opportunity to invest

in such products and hedge their

exposure to the Italian securities market.

III. Discussion

After careful review, the Commission

finds that the proposed rule hang is

consistent with the requirements of the

Act, and the rules and regulations

thereunder applicable to a national

securities exchange. In particular, the

Commission believes that the proposal

is consistent with Section 6(b) of the

Act, in general, and Section 6(b)(5),5 in

particular, as it is designed to facilitate

transactions in securities, to promote

just and equitable principles of trade,

and to protect investors and the public

interest.6.

Specifically, the Commission believes

that, since the Amex does not and

cannot have a surveillance sharing

agreement with the Milan Exchange, the

Amex’s adoption of the proposed policy

will enable the Exchange to carry out its

market surveillance and enforcement

functions for derivative products

containing Italian component securities

by seeking the necessary information

about activity on the Italian securities

markets from the SEC per the latter’s

MOU with the CONSOB. The

Commission believes that the

Exchange’s proposed policy adequately

details the circumstances and

conditions under which the Exchange

may obtain access to such information

from the SEC.

The Commission believes that, under

the Exchange’s proposed policy, the

Exchange will advise the SEC of

information it needs regarding activity

on the Italian securities markets for

market surveillance and enforcement

purposes. The Commission, in turn,

may request the CONSOB’s assistance,

pursuant to the MOU, in gaining access

to such information. The Commission

notes that the Exchange will use such

information it may receive from the SEC

only for the purposes of conducting

market surveillance and enforcement

proceedings. The Commission also
Federal Register / Vol. 62, No. 37 / Tuesday, February 25, 1997 / Notices 8467

7 15 U.S.C. 78s(b)(2).

8 17 CFR 200.30–3(a)(12).

1 In Amendment No. 1, the Exchange states: (1)

that the proposal is limited to the listing and

trading of options on those exchange-traded fund

shares that have received approval from the

Commission; and (2) the Exchange will list and

trade options on exchange-traded funds shares that

hold foreign country securities only if: (i) the

Exchange has a market information sharing

agreement with the primary exchange for each of

the securities held by the fund, or (ii) the fund is

classified as a diversified fund as that term is

defined by Section 5(b) of the Investment Company

Act of 1940 and the securities held in the fund are

issued by issuers based in five or more countries.

See letter from Claire P. McGrath, Managing

Director and Special Counsel, Derivative Securities,

Amex, to Ivette Lopez, Assistant Director, Office of

Market Supervision (‘‘OMS’’, Division of Market

Regulation (‘‘Division’’), Commission, dated

January 15, 1997. (‘‘Amendment No. 1’’).

2Amendment No. 2 supersedes and replaces

Amendment No. 1 to the extent that it modifies

proposed Commentary .06(4) to state that the Amex

will list and trade options on exchange-traded fund

shares that hold foreign country securities only if:

(i) the exchange has an effective surveillance

sharing agreement with the primary exchange for

each of the securities held by the fund, or (ii) the

fund is classified as a diversified fund as that term

is defined by Section 5(b) of the Investment

Company Act of 1940 and the securities held in the

fund are issued by issuers based in five or more

countries. The Exchange defines an ‘‘effective

surveillance sharing agreement’’ as an agreement

that would permit the Exchange to obtain trading

information relating to the securities held by the

fund including the identity of the customers

transacting in those securities. See letter from Claire

P. McGrath, Managing Director and Special

Counsel, Amex, to Ivette Lopez, Assistant Director,

OMS, Division, Commission, dated February 18,

1997 (‘‘Amendment No. 2’’).

3Currently, the Exchange trades unit investment

trust securities known as Portfolio Depositary

Receipts SM (‘‘PDRs’’) based on the Standard &

Poor’s 500 Composite Stock Price Index and the

Standard & Poor’s MidCap 400 Index TM. In

addition, the Exchange trades Index Fund Shares

which are issued by an open-end management

investment company consisting of seventeen

separate series known as World Equity Benchmark

Shares SM (‘‘WEBS’’) based on seventeen foreign

equity market indexes. PDRs and WEBS are listed

on the Amex pursuant to Rule 1000, et seq. and

Rule 1000A et seq., respectively, and trade like

shares of common stock.

notes that the Exchange will limit

distribution of such information to

officers and directors of the Exchange

and other employees directly

responsible for conducting market

surveillance and enforcement

proceedings relating to the matter in

connection with which the SEC

provided the information to the Amex.

In view of the importance of

maintaining the confidentiality of this

information, the SEC believes that the

officers and/or directors overseeing the

exchange employees conducting the

relevant market surveillance and

enforcement proceedings would be

responsible for ensuring the

confidentiality of the information

provided by the SEC pursuant to the

MOU with the CONSOB and should

take reasonable measures to ensure that

the information does not become

available to unauthorized persons.

Thus, the Commission believes that the

Exchange will undertake to maintain the

confidentiality of such information and

to take appropriate disciplinary action

in the event it learns of a breach of such

confidentiality, including referral to the

SEC for any action the SEC deems

necessary or appropriate.

The Commission believes that the

Amex, by adopting a policy that

provides access to information on the

underlying securities for market

surveillance and enforcement purposes,

will be in a position to list options and

other derivative products containing

Italian component securities, provided

that all other applicable product listing

standards are met. Therefore, the

Exchange’s proposed rule change could

potentially provide investors with the

opportunity to invest in such products

and hedge their exposure to the Italian

securities market. Accordingly, the

Commission believes that the proposed

rule change is consistent with and

furthers the objectives of Section 6(b)(5)

of the Act, in that it is designed to

perfect the mechanisms of a free and

open market and to protect investors

and the public interest.

IV. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,7 that the

proposed rule change (SR–AMEX–96–

36) is approved, as amended.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–4604 Filed 2–24–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38308; File No. SR–Amex–

96–44]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change and

Amendment Nos. 1 and 2 Thereto by

the American Stock Exchange, Inc.

Relating to the Listing and Trading of

Options on Exchange-Traded Fund

Shares

February 19, 1997.

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 November 21,

1996, the American Stock Exchange,

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

the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I, II, and III below, which Items

have been prepared by the Amex. On

January 16, 1997, the Exchange filed

Amendment No. 1 to the proposal.1 On

February 19, 1997, the Exchange filed

Amendment No. 2 to the proposed rule

change.2 The Commission is publishing

this notice to solicit comments on the

proposed rule change and Amendment

Nos. 1 and 2 from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Amex proposes the adoption of

rules to permit the trading of options on

securities representing interests in openend, exchange-listed investment

companies that hold securities

constituting or based on an index or a

portfolio of securities.

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

Statutory Basis for, the Proposed Rule

Change

1. Purpose

The purpose of the proposed rule

change is to provide for the trading of

options on exchange-listed securities

representing interests in open-end unit

investment trusts or open-end

management investment companies that

hold securities based on an index or a

portfolio of securities (referred to

hereinafter as ‘‘Exchange-Traded Fund

Shares’’ or ‘‘Fund Shares’’).3

As noted above, a characteristic of all

Exchange-Traded Fund Shares is that

they are open-ended, and new shares

may be created on any business day at

a cost related to the net asset value in

a transaction with the fund itself. The

ability of the seller of a call on any of

these Fund Shares to deliver upon

exercise will thus be a function of the