29270 Federal Register / Vol. 63, No. 102 /Thursday, May 28, 1998 / Notices

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

2 17 CFR 240.19b–4.

4The text of the proposed rule change contains

a list of the component securities including the

individual component security weights and average

daily trading value and market capitalization for

each security.

4Section 106(j) of the Amex Company Guide

provides that in order to list warrants on a stock

index industry group pursuant to Section

19(b)(3)(A) of the Act, the Exchange may file for

approval of a stock index industry group underlying

a proposed warrant pursuant to the procedures and

criteria set forth in Commentary .02 to Exchange

Rule 901C. (See also Securities Exchange Act

Release No. 34–37007 (March 21, 1996), 61 FR

14165 (March 29, 1996).

5See Securities Exchange Act Release No. 34157

(June 3, 1994), 59 FR 30062 (June 10, 1994).

Accordingly, the Exchange has represented that the

proposed rule 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.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–14019 Filed 5–27–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40008; File No. SR–Amex–

98–17]

Self-Regulatory Organizations; Notice

of Filing of Immediate Effectiveness of

Proposed Rule Change by American

Stock Exchange, Inc. Relating to the

Listing and Trading of Warrants on the

PaineWebber Oil & Gas Producers

Index

May 19, 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 29,

1998, the American Stock Exchange,

Incorporated (‘‘Amex’’ or Exchange’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I, II, and III below, which Items

have been prepared by the Amex. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.

I. Self-Regulatory Organization’s

Statement Of The Terms of Substance of

the The Proposed Rule Change

The Amex proposes to list and trade

warrants on the PaineWebber Oil & Gas

Producers Index (‘‘Index’’), a narrowbased index developed by PaineWebber

Incorporated currently comprised of

stocks of 22 companies in the oil and

gas industry. The text of the proposed

rule change is available at the Office of

the Secretary, Amex and at the

Commission.3

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 represented that no comments were

received on the proposed rule change.

The text of these statements may be

examined at the places specified in Item

IV below. The Amex has prepared

summaries, set forth in sections A, B

and C below, of the most significant

aspects of such statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and the

Statutory Basis for, the Proposed Rule

Change

1. Purpose

The purpose of the proposed rule

change is to permit the Amex to list and

trade warrants on the Index. The Amex

states that warrants on the Index are

designed to provide investors with an

investment vehicle to participate in or

hedge against volatility associated with

the ownership of stocks of companies in

the oil and gas industry and decrease

the risk involved in selecting individual

stocks in this industry. The Amex filed

this proposal pursuant to Section

19(b)(3)(A) of the Act, and Section 106 4

of the Amex Company Guide and Amex

Rule 901C, Commentary .02, which

together provide for the commencement

of the trading of warrants on the Index

thirty days after the date of this filing.

The proposal meets all the criteria set

forth in Section 106 of the Amex

Company Guide, Amex Rule 901C,

Commentary .02 and the Commission’s

order approving Exchange Rule 910C.5

Criteria Under Section 106 of the

Amex Company Guide. Warrant issues

on the Index will conform to the listing

guidelines under Section 106 of the

Amex Company Guide, which provide,

among other things, that (1) the issuer

shall have tangible net worth in excess

of $250,000,000 and otherwise

substantially exceed size and earnings

requirements in Section 101(A) of the

Company Guide or meet the alternate

guideline in paragraph (a); (2) the term

of the warrants shall be for a period

ranging from one to five years from date

of issuance; and (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.

Criteria Under Exchange Rule 901C

For Index Components. Pursuant to

Commentary .02 to Exchange Rule 901C,

(1) each of the component securities has

a minimum market capitalization of at

least $75 million and has a trading

volume in each of the last six months of

not less than 1,000,0000 shares; (2) the

lesser of the five highest weighted

component securities in the Index or the

highest weighted component securities

in the index that in the aggregate

represent at least 30% of the total

number of component securities in the

index, each have an average monthly

trading volume of at least 2,000,000

shares over the previous six months; (3)

at least 90% of the Index’s numerical

index value and at least 80% of the total

number of component securities meet

the current criteria for standardized

option trading set forth in Exchange

Rule 915 (in fact, all of the component

securities in the Index currently

underlie standardized options); (4) the

Index contains no American Depositary

Receipts (‘‘ADRs’’); (5) all component

stocks are listed on the Amex, the New

York Stock Exchange (‘‘NYSE’’), or

traded through the facilities of the

National Association of Securities

Dealers Automated Quotation System

and are reported National Market

System securities (‘‘Nasdaq/NMS’’); and

(6) no component security represents

more than 25% of the weight of the

Index, and the five highest weighted

component securities in the Index do

not in the aggregate account for more

than 60% of the weight of the Index.

Index Design. The Index was designed

by PaineWebber and will be maintained

by the Amex. The Amex represents that

the Index is a narrow-based index

currently comprised of stocks of 22

companies from the oil and gas

industry. The total capitalization of the

component securities in the Index as of

April 21, 1998 was approximately $57

billion. The average capitalization on

that date was approximately $2.6

billion. The individual market

capitalization of the component

securities ranges from $324 million to

$9.9 billion. the components in the

Index had a six month average daily

trading volume of 7 million shares per

day and ranged from 1.6 million shares

per day to 13.2 million shares per day.

Index Calculation. The Index is

market capitalization-weighted such

that the Index value is calculated by

multiplying the primary exchange

regular way last sale price of each

component security by its number of

shares outstanding, adding the sums
Federal Register / Vol. 63, No. 102 /Thursday, May 28, 1998 / Notices 29271

6See Securities Exchange Act Release No. 34–

34157 (June 3, 1994), 59 FR 30062 (June 10, 1994).

and dividing by the current index

divisor.

Maintenance of the Index. 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

in accordance with Amex Rule 901C,

Commentary .02 so that, (1) the Index is

comprised of not less than 15

underlying stocks, and not more than 29

underlying stocks; (2) component stocks

constituting the top 90% of the Index,

by weight, will have a minimum market

capitalization of $75 million, and the

component stocks constituting the

bottom 10% of the Index, by weight,

may have minimum market

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

the Index’s numerical index value and

at least 80% of the total number of

components will meet the then current

criteria for standardized options 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 stocks will either be listed

on the Amex, the NYSE, or Nasdaq/

NMS; (6) no component security will

represent more than 25% of the weight

of the Index, and the five highest

weighted components will not in the

aggregate account for more than 60% of

the Index; (7) trading volume of each

component security shall be at least

500,000 shares for each of the last six

months, or for each of the lowest

weighted components that in aggregate

account for no more than 10% of the

weight of the Index, the monthly trading

volume may be at least 400,000 shares

for each of the last six months; and (8)

the lesser of the five highest weighted

component securities in the index or the

highest weighted component securities

in the index that in the aggregate

represent at least 30% of the total

number of stocks in the index shall have

had an average monthly trading volume

of at least 1,000,000 shares over the

previous six months.

Dissemination of the Index Value.

Similar to other stock index values

which underlie exchange-traded

products, the value of the index will be

calculated continuously and

disseminated every 15 seconds over the

Consolidated Tape Association’s

Network B.

Warrant Expiration and Settlement.

Index warrants will be direct obligations

of their issuer subject to cash-settlement

during their term, and either exercisable

throughout their life (i.e., American

style) or exercisable only on their

expiration date (i.e., European style).

Upon exercise, or at the warrant

expiration date (if not exercisable prior

to such date), the holder of a warrant

structured as a ‘‘put’’ would receive

payment in U.S. dollars to the extent

that the Index has declined below a prestated index level. Conversely, holders

of a warrant structured as a ‘‘call’’

would, upon exercise or at expiration,

receive payment in U.S. dollars to the

extent that the Index has increased

above the pre-stated index level. If ‘‘outof-the-money’’ at the time of expiration,

the warrants would expire worthless. In

addition, the Amex, prior to the

commencement of trading, will

distribute a circular to its membership

calling attention to specific risks

associated with warrants on the Index.

Other Exchange Rules Applicable to

Index Warrants. The listing and trading

of warrants on the Index will comply in

all respects to Exchange Rules 1100

through 1110 for the trading of stock

index and currency warrants. These

rules cover issues such as exercise and

position limits and reporting

requirements. Surveillance procedures

currently used to monitor trading in

each of the Exchange’s other index

warrants will also be used to monitor

trading in warrants on the PaineWebber

Oil & Gas Producers Index. The Index is

deemed to be a Stock Index Industry

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

Exchange expects that the review

required by Rule 1107(b)(ii) will result

in a position limit of 6,750,000

warrants.

2. Basis

The proposed rule change is

consistent with Section 6(b) of the Act

in general and furthers the objectives of

Section 6(b)(5) in particular in that it is

designated to prevent fraudulent and

manipulative acts and practices, to

promote just and equitable principles of

trade, to foster cooperation and

coordination with persons engaged in

facilitating transactions in securities,

and to remove impediments to and

perfect the mechanism of a free and

open market and a national market

system.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The 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

No written comments were solicited

or received with respect to the proposed

rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing For

Commission Action

The foregoing rule change has become

effective pursuant to Section 19(b)(3)(A)

of the Act. The Amex may not list

warrants for trading on the Index prior

to 30 days after the date the proposed

rule change was filed with the

Commission.6 At any time within 60

days of the filing of such proposed rule

change, the Commission that such

action is necessary or appropriate in the

public interest, for the protection of

investors, or otherwise in the

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.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW,

Washington, DC 20549. Copies of the

submission, all subsequent

amendments, all written statements

with respect to the proposed rule

change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of 5 U.S.C. 552, will be

available for inspection and copying in

the Commission’s Public Reference

Room in Washington, DC. Copies of

such filing will also be available for

inspection and copying at the principal

office of the Amex. All submissions

should refer to file number SR–Amex–

98–17 and should be submitted by June

12, 1998.
29272 Federal Register / Vol. 63, No. 102 /Thursday, May 28, 1998 / Notices

7 17 CFR 200.30–3(a)(12)(1994).

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

2 17 CFR 240.19b–4.

3See Letter from William Floyd-Jones, Assistant

General Counsel, Amex, to Heather Seidel,

Attorney, Market Regulation, Commission, dated

March 16, 1998 (‘‘Amendment No. 1’’). Amendment

No. 1 explains in further detail why the Exchange

is eliminating the Gateway; which records members

are required to keep pursuant to Exchange and

Commission rules that the Gateway would have

separately maintained; how the Exchange will

obtain records from its members for surveillance

purposes without the Gateway; and how the

Exchange will monitor overall radio frequency

usage and individual firm usage in the absence of

the a Gateway in order to determine that the

wireless infrastructure is approaching its capacity,

and which firm(s) is using a disproportionate

amount of the radio frequently capacity.

4See Securities Exchange Act Release No. 37728

(September 26, 1996), 61 FR 51476 (October 2,

1996).

5The Commission notes that in general members,

brokers, and dealers are subject to the Commission’s

recordkeeping and record retention rules, Rule 17a–

3, and 17a–4 under the Act (17 CFR 240.17a–3 and

240.17a–4).

6See, e.g., Article II, Section 3(a) of the Exchange

Constitution, Article V, Section 4(k) of the

Exchange Constitution, and Exchange Rule 31.

7The Exchange also states that to the best of its

knowledge, the Exchange’s current procedures for

obtaining member books and records are consistent

with existing practice at all other exchanges.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.7

[FR Doc. 98–14020 Filed 5–27–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40019; File No. SR–Amex–

97–40]

Self-Regulatory Organizations;

American Stock Exchange, Inc.; Order

Granting Approval to Proposed Rule

Change and Notice of Filing and Order

Granting Accelerated Approval to

Amendment No. 1 to Proposed Rule

Change Relating to Proposed

Revisions to the Exchange’s Policy

Regarding the Use of Wireless Data

Communications Devices

May 21, 1998.

I. Introduction

On October 29, 1997, the American

Stock Exchange, Inc. (‘‘Amex’’ 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

amend its policy regarding the use of

wireless data communications devices

on the trading floor.

Notice of the proposed rule change,

together with the substance of the

proposal, was published for comment in

Securities Exchange Act Release No.

39411 (December 8, 1997), 62 FR 65727

(December 15, 1997). No comments

were received on the proposal. The

Exchange subsequently filed

Amendment No. 1 on March 17, 1998.3

The order approves the proposed rule

filing, as amended.

II. Description

The Exchange has undertaken to build

an infrastructure (‘‘Infrastructure’’) to

support wireless data communications

on the trading floor by members and

Exchange staff. On September 26, 1996,

the Commission approved various rule

changes and a policy regarding the use

of wireless data communications

devices on the trading floor (the

‘‘Wireless Communications Policy’’ or

‘‘Policy’’).4 The Wireless

Communications Policy was originally

based upon a design for the

Infrastructure that called for all wireless

data transmissions to pass through an

application residing between the

member firms and the Exchange’s

wireless infrastructure (the ‘‘Gateway’’).

The Gateway would have monitored

data that was being transmitted to and

from the Infrastructure and would have

repackaged it to conform to a standard

format for all members to use. The

Gateway would have permitted the

Exchange to make a record of all

wireless communications and to

unilaterally ‘‘throttle’’ all, or selected,

member communications in the event

that such transmissions used a

disproportionate amount of the

available radio frequency or threatened

to exceed available radio frequency

capacity. The Exchange is now

proposing to eliminate the Gateway.

As noted above, the Gateway would

have maintained a record of all wireless

communications. The Exchange states

that the records obtained through the

Gateway would have been duplicative

of records already maintained by

member firms pursuant to Commission

and Exchange rules and that the

proposed rule change will eliminate this

duplicative data base. Under the revised

Wireless Communications Policy,

members will still be required to

maintain books and records pursuant to

Exchange rules and policies and federal

securities laws. According to the

Exchange, the relevant Exchange rules

require members to prepare and

maintain records of orders and

transactions containing the information

specified in Exchange Rule 111,

Commentary .04; Exchange Rule 114,

Commentary .09; and Exchange Rules

153, 180, 181, and Exchange Rule

950(a), (c) and (d), Commentary .03. The

Exchange’s audit trail policies also

require members to records the time of

trade, executing broker badge number

and contra broker badge number with

respect to all trades. In addition, the

Exchange states that Rules 17a–3(a) (6)

and (7) under the Act require registered

brokers and dealers to prepare records

of brokerage orders and dealer

transactions meeting the requirements

of these rules, and that these records

must be maintained for the period stated

in Rule 17a–4(b)(1) under the Act.5

In addition, the Exchange states that

the elimination of the record keeping

capabilities of the Gateway will not

cause any diminution of the Exchange’s

surveillance capabilities because the

Exchange will retain the same access to

member books and records that it

currently possesses. The Exchange

currently has the ability to obtain

records from its members for

investigative purposes pursuant to its

authority to require members to produce

their books and records and to

discipline members (and their

employees) that fail to comply with

such requests.6 In the Absence of a

Gateway, the Exchange would continue

to employ its current procedures for

obtaining information from its members

and their employees.7

With respect to monitoring radio

frequency capacity and usage, the

revised Wireless Communications

Policy will state that the Exchange’s

staff may request members to reduce

radio traffic if and when required

because a particular user is using more

than its fair share to radio frequency

capacity of overall usage is reaching its

maximum. Members will be obligated to

comply immediately with any such

request and their ability to send wireless

communications may be immediately

terminated for failure to comply.

The Exchange also proposes some

further changes to the Wireless

Communications Policy to include a

requirement that members using

wireless technology maintain a record of

orders and quotes initiated on the Floor

and transmitted to other markets, a

statement that members do not acquire

a property interest in their assigned

band width, a requirement that affiliates

be treated as a single entity for purposes

of band width assignment and a

reduction in the number of handheld

terminals that the system is able to

support in view of anticipated demand

for this capacity.

III. Discussion

The Commission finds that the

proposed rule change is consistent with