26658 Federal Register / Vol. 63, No. 92 /Wednesday, May 13, 1998 / Notices

6 15 U.S.C. 78f(b).

7 15 U.S.C. 78f(b)(4).

8 15 U.S.C. 78s(b)(3)(A)(ii).

9 17 CFR 240.19b–4(e)(2).

10 In reviewing this proposal, the Commission has

considered the proposed rule change’s impact on

efficiency, competition, and capital formation. 15

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

11 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See Letter from Stephanie C. Mullins, Attorney,

CBOE to Marianne H. Duffy, Special Counsel,

Division of Market Regulation, SEC, dated April 30,

1998 (‘‘Amendment No. 1’’). Amendment No. 1

clarifies, among other things, that the Index, as

defined above, is narrow-based and will comply

with the generic narrow-based margin requirements

(CBOE Rule 30.53) and position limited

requirements (CBOE Rule 30.35) of the Exchange.

* * * * *

As with the previous schedule,

cabinet trades/accommodation

liquidations, as described in CBOE

Rules 6.54 and 21.15, will continue to

be charged $0.10 per contract. In

addition, as in the previous schedule,

no execution fee will be assessed for

market orders for any index option sent

to the book prior to the opening and

executed during opening rotation. Also,

as before, no execution fee will be

assessed for limit orders in options on

the Standard & Poor’s 100 Index sent to

the book prior to the opening and

executed during opening rotation. The

new fee schedule should reduce the

overall Order Book Official book fees

paid by all Exchange members. The

Exchange believes that the reduction in

the book fees will allow the Exchange to

compete more effectively for business in

these types of products.

The proposed rule change is

consistent with Section 6(b) of the Act,6

in general, and furthers the objectives of

Section 6(b)(4) of the Act 7 in particular,

in that it is designed to provide for the

equitable allocation of reasonable dues,

fees, and other charges among CBOE

members.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange believes that the

proposed rule change will not result in

any burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Comments were neither solicited nor

received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The proposed rule change establishes

or changes a due, fee, or other charge

imposed by the Exchange and, therefore,

has become effective immediately upon

filing with the Commission, pursuant to

Section 19(b)(3)(A)(ii) of the Act 8 and

subparagraph (e)(2) of Rule 19b–4 9

thereunder. At any time within 60 days

of the filing of the 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.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposed rule

change is consistent with the Act.10

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 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–CBOE–98–16 and should be

submitted by June 3, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–12707 Filed 5–12–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39965; International Series

Release No. 1133; File No. SR–CBOE–98–

17]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change,

and Amendment No. 1 Thereto, by the

Chicago Board Options Exchange,

Incorporated Relating To Listing and

Trading Warrants on a Narrow-Based

Index

May 6, 1998.

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 April 23,

1998, the Chicago Board Options

Exchange, incorporated (‘‘CBOE’’ 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 CBOE. The Exchange

also submitted an amendment to the

filing dated April 30, 1998.3 The

Commission is publishing this notice to

solicit comments on the proposed rule

change and Amendment No. 1 from

interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The CBOE proposes to list and trade

warrants on an equal dollar-weighted,

narrow-based index (‘‘Index’’),

comprised of 15 to 20 actively traded

common stocks, no more than four of

which will be foreign issued and traded.

The remaining stocks will be listed on

the American Stock Exchange,

Incorporated (‘‘Amex’’), New York Stock

Exchange, Incorporated (‘‘NYSE’’) or

through the facilities of the National

Association of Securities Dealers

Automated Quotation (‘‘Nasdaq’’)

system and are reported national market

system securities (‘‘Nasdaq/NMS’’). The

text of the proposed rule change is

available at the Office of the Secretary,

CBOE 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

CBOE included statements concerning

the purpose of and basis for the

proposed rule change and represented

that it did not receive any comments on

the proposed rule change. The text of

those statements may be examined at

the places specified in Item IV below

and is set forth in Sections A, B and C

below.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and the

Statutory Basis for, the Proposed Rule

Change

1. Purpose

The Exchange is permitted to list and

trade stock index warrants under CBOE

Rule 31.5E. The Exchange now is

proposing to list and trade cash-settled,
Federal Register / Vol. 63, No. 92 /Wednesday, May 13, 1998 / Notices 26659

4No attempt will be made to find a replacement

stock or to otherwise compensate for a stock which

is extinguished due to bankruptcy or similar

circumstances.

stock index warrants linked to the

Index. At the time of listing and trading,

the warrants will meet all of the generic

criteria for stock index warrants as set

forth in Exchange Rule 31.5E. Rule 31.5E requires, among other

things, that: (1) the issuer has a tangible

net worth in excess of $250,000,000 and

otherwise substantially exceeds

earnings requirements in Rule 31.5(A)

or meet the alternate guidelines in

paragraph (4) of Rule 31.5E; (2) the term

of the warrants shall be for a period

ranging from one to five years from date

of issuance; (3) the minimum public

distribution of such issues shall be

1,000,000 warrants, together with a

minimum of 400 public holders, and

have an aggregate market value of

$4,000,000; and (4) foreign country

securities or American Depositary

Receipts that are not subject to a

comprehensive surveillance agreement

and have less than 50% of their global

trading volume in dollar value in 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. Index Design and Stock Selection

Criteria. The Exchange represents that

the Index will be categorized as narrowbased. The stocks to be included in the

Index will be selected by a member firm

of the Exchange and will be announced

at or as close as possible to the time of

the offering, and included in the Issuer’s

offering materials. The component

stocks in the Index will meet the

following criteria prior to trading of the

warrants: (1) minimum market

capitalization of $150 million, except

that two component stocks may have a

market capitalization of not less than

$50 million; (2) trading volume during

each of the six months prior to the

offering of the warrants of not less than

one million shares, except that two of

the component securities may have a

trading volume during each of the six

months prior to the offering of the

warrants of not less than 500,000 shares;

(3) at least 80 percent of the component

stocks will meet the then current criteria

for standardized options trading set

forth in CBOE Rule 5.3 and; (4) at least

80% of the Index components will be

listed on the Amex, NYSE, or will be

Nasdaq/NMS securities. Calculation and Dissemination of the

Index Value. The Index will be

calculated using an equal dollarweighting 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 a member firm of the

Exchange representing an investment of

$10,000 in each component security

(rounded to the nearest whole share).

The value of the Index will equal the

market value of the sum of the assigned

number of shares of each of the

component securities divided by an

Index divisor. The Index divisor

initially will be set to provide a

benchmark value of 100 at the time that

the warrants are priced for sales to the

investing public. 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 also

may 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

another security only under certain

circumstances, such as in the event of

a merger or consolidation, 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.4

If the security remains in the Index, the

number of shares of the 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. In all cases, the divisor will be

adjusted, if necessary, to ensure

continuity of the value of the Index. Prices for any non-U.S. traded stock

included in the Index will be based

upon prevailing prices for such stock(s)

at their primary exchange(s). Primary

and backup pricing sources will be used

to obtain prices for such stocks. All nonU.S. traded stocks will be valued in U.S.

dollars using each country’s cross-rate

to the U.S. dollar. Bloomberg’s

composite New York rates, or

comparable rates, quoted at 2:00 p.m.

Chicago time the previous day, will be

used to convert any non-U.S. traded

stock price from the respective countries

to U.S. dollars. If there are several

quotes, the first quoted rate in that

minute will be used to calculate the

Index. In the event that there is no

Bloomberg exchange rate for a country’s

currency at 2:00 p.m. the previous day,

stocks will be valued at the first U.S.

dollar cross-rate quoted before 2:00 p.m.

Chicago time the previous day.

The value of the Index will be

calculated and disseminated by CBOE

every 15 seconds.

Index Warrant Trading (Exercise and

Settlement). The warrants will be direct

obligations of their issuer, subject to

cash settlement in U.S. dollars and will

be exercisable throughout their life (i.e.,

American-Style) or exercisable at

expiration (i.e., European-Style). Upon

exercise (or at the warrant expiration

date in the case of warrants with

European-Style exercise), the holder of

a Warrant structured as a ‘‘put’’ will

receive payment in U.S. dollars to the

extent that the value of the Index has

declined below a pre-stated cash

settlement value. Conversely, upon

exercise (or at the warrant expiration

date in the case of warrants with

European-Style exercise), the holder of

a Warrant structured as a ‘‘call’’ will

receive payment in U.S. dollars to the

extent that the value of the Index has

increased above the pre-stated cash

settlement value. Warrants that are ‘‘outof-the-money’’ at the time of expiration

will expire worthless.

Warrant Listing Standards and

Customer Safeguards. Sales practice

rules applicable to the trading of index

warrants are provided for in Exchange

Rule 30.50 and to the extent provided

by Rule 30.52 they are also contained in

Chapter IX of the Exchange’s Rules.

Rule 30.50 governs, among other things,

communications with the public. Rule

30.52 subjects the transaction of

customer business in stock index

warrants to many of the requirements of

Chapter IX of the Exchange’s rules

dealing with public customer business,

including suitability. For example, no

member organization may accept an

order from a customer to purchase a

stock index warrant unless that

customer’s account has been approved

for options transactions. The same

suitability and use of discretion

provisions that are applicable to

transactions in options will be equally

applicable to the warrants pursuant to

CBOE rules. The listing and trading of

index warrants on the Index will be

subject to these guidelines and rules.

Other Applicable Exchange Rules. As

previously stated, the CBOE represents

that the Index will be categorized as

narrow-based. As such, the generic
26660 Federal Register / Vol. 63, No. 92 /Wednesday, May 13, 1998 / Notices

5 15 U.S.C. 78f.

6 15 U.S.C. 78f(b)(5).

7 17 CFR 200.30–3(a)(12) (1994).

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

2 In Amendment No. 1, the Exchange made

technical corrections to the proposed rule change

and clarified the purpose of the proposal. See Letter

from James E. Buck, Senior Vice President and

Secretary, NYSE, to Michael Walinskas, Deputy

Associate Director, Division of Market Supervision,

dated April 29, 1998 (‘‘Amendment No. 1’’).

narrow-based standards regarding

margin requirements provided for under

Exchange Rules 30.53 and 12.3 will

apply. The applicable generic narrowbased position and exercise limits will

be determined pursuant to Exchange

Rule 30.35.

2. Basis

The Exchange believes that the

proposed rule change is consistent with

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

furthers the objectives of Section

6(b)(5) 6 in particular, in that it will

permit trading in warrants based on the

Index pursuant to Exchange rules

designed to prevent fraudulent and

manipulative acts and practices, 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 to protect investors and the

public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The CBOE 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

No written comments were solicited

or received with respect to the proposed

rule change.

III. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning the foregoing,

including whether the proposed rule

change, and Amendment No. 1 thereto,

is consistent with the Act. 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

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of CBOE. All submissions should

refer to file number SR–CBOE–98–17

and should be submitted by June 3,

1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–12708 Filed 5–12–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39973; File No. SR–NYSE–

98–12]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change and

Amendment No. 1 Thereto by the New

York Stock Exchange, Inc. Relating To

Changes in Bond Listing Procedures

and Practices

May 7, 1998.

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

Securities Exchange Act of 1934

(‘‘Act’’), 1 notice is hereby given that on

April 15, 1998, the New York Stock

Exchange, Inc. (‘‘NYSE’’ 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 NYSE. On

April 30, 1998, the NYSE submitted to

the Commission Amendment No. 1 to

the proposed rule change.2 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 amend its

Listed Company Manual to make certain

changes regarding the listing

requirements for debt securities and

other debt security practices.

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

NYSE 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 NYSE 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 Exchange proposes to make

certain changes to its rules, standards

and procedures relating to debt

securities. The changes are designed to

facilitate the process for listing debt

securities on the Exchange and to

update certain rules and policies to

conform to todays practices.

(a) Interest Payments. Paragraph

204.18 (Interest Payments) of the Listed

Company Manual requires an issuer or

its paying agent to notify the Exchange

whenever it makes an interest payment.

The obligation can be satisfied through

the use of confirmation cards where that

is appropriate. It also requires the issuer

to notify the press and the Exchange

whenever it does not meet its interest

obligations. The Exchange proposes to

delete the obligation to inform the

Exchange of interest payments, whether

by confirmation cards or otherwise.

Instead, the Exchange feels that

reliance upon an issuer’s obligation to

report its failure to meet a payment

obligation adequately protects the

holders of debt securities. The Exchange

is also proposing to add to the end of

Paragraph 204.18 a cross-reference to

202.00, which reminds issuers that they

are required to disclose material

information (including the inability to

meet payment obligations).

The Exchange believes that the

issuer’s obligation to report immediately

to the press and the Exchange a failure

to meet an interest payment or any

unusual circumstance or condition

relating to its ability to meet an interest

payment makes the practice of mailing

and collecting interest payment

confirmation cards an administrative

burden that is not necessary to the

proper monitoring and surveillance of

debt securities.

(b) Multiple Facsimile Signatures.

Paragraph 501.06 (Bond Signatures)

requires bonds to be executed, either

manually or by facsimile machine, by

two of the issuer’s officers. Whether the

issuer uses one facsimile signature (and

one manual signature) or two facsimile

signatures, the Exchange currently

requires the issuer to submit an opinion