Federal Register / Vol. 60, No. 234 / Wednesday, December 6, 1995 / Notices 62513

9 17 CFR 200.30–3(a)(12) (1994).

1 17 CFR 200.30–3(a)(12) (1994).

1 15 U.S.C. 78s(b)(1) (1988).

2 In Amendment No. 1, the Amex states that any

broker-dealer handling transactions for customers

in ‘‘World Equity Benchmark Securities’’ (or

‘‘WEBS’’) will have an obligation to deliver to such

customers a prospectus regarding WEBS pursuant

to the requirements of the Securities Act of 1933.

Amendment No. 1 also states that prior to listing

series of Index Fund Shares for indices other than

those described in the present rule filing, it will

make an appropriate filing pursuant to Rule 19b–

4 under the Act. Letter from James F. Duffy,

Executive Vice President and General Counsel,

Legal Chief, Office of Market Supervisor, Division

of Market Regulation, Commission, dated November

14, 1995 (‘‘Amendment No. 1’’).

prevent fraudulent and manipulative

acts and practices and to promote just

and equitable principles of trade, and

thereby will provide investors with the

ability to invest in warrants based on

additional indexes.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange believes the proposed

rule change will impose no burden on

competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received from

Members, Participants or Others

The Exchange has neither solicited

nor received written comments on the

proposed rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the publication of

this notice in the Federal Register or

within such longer period (i) as the

Commission may designate up to 90

days of such date if it finds such longer

period to be appropriate and publishes

its reasons for so finding or (ii) as to

which the self-regulatory organization

consents, the Commission will:

(A) by order approve the proposed

rule change, or

(B) institute proceedings to determine

whether the proposed rule change

should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning the foregoing.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of the

submission, all subsequent

amendments, all written statements

with respect to the proposed rule

change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of 5 U.S.C. § 552, will be

available for inspection and copying at

the Commission’s Public Reference

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 the CBOE. All submissions

should refer to File No. SR–CBOE–95–

67 and should be submitted by

December 27, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–29690 Filed 12–5–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–36439A; File No. SR–

CBOE–95–56]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the Chicago Board

Options Exchange, Inc., Relating to

Modifications of the Position and

Exercise Limits for Narrow-Based

Index Options

November 30, 1995.

Correction

In FR Document No. 95–27424,

beginning on page 56075, column 1, for

Monday, November 6, 1995, a phrase in

footnote number three was incorrectly

stated. The first part of footnote number

three is corrected to read:

Under CBOE Rule 24.4A, the current

position limits for industry index options are

as follows: (1) 5,500 contracts if the CBOE

determines in its semi-annual review that

any single underlying stock accounted, on

average, for 30% or more of the index value

during the 30-day period immediately

preceding the review; . . .’’ 1

The remainder of footnote number

three remains unchanged.

In addition, the position limits for the

Standard & Poor’s (‘‘S&P’’) Chemical

Index and the S&P Retail Index were

incorrectly stated as 5,500 contracts.

The position limits for both the S&P

Chemical Index and the S&P Retail

Index are revised to be stated as 7,500

contracts.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–29692 Filed 12–5–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–36527; International Series

Release No. 891; File No. SR–Amex–95–43]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change and

Amendment No. 1 thereto by the

American Stock Exchange, Inc.

Relating to Index Fund Shares

November 29, 1995.

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

Securities Exchange Act of 1934

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

October 26, 1995, 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

November 14, 1995, the Amex filed

Amendment No. 1 to its proposal.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 Amex proposes to list and trade

under Amex Rules 1000A et seq. Index

Fund Shares, which are shares issued by

an open-end management investment

company that seeks to provide

investment results that correspond

generally to the price and yield

performance of a specified foreign or

domestic equity market index.

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.
62514 Federal Register / Vol. 60, No. 234 / Wednesday, December 6, 1995 / Notices

3The Exchange has stated that it will make an

appropriate filing pursuant to Rule 19b–4 under the

Act prior to listing series of Index Fund Shares for

indices other than those described in the present

proposal. Amendment No. 1, supra note 2.

4The description of the MSCI Indices was

prepared by Foreign Fund, Inc.

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Introduction

The Amex proposed to list and trade

under Rules 1000A et seq. Index Fund

Shares issued by an open-end

management investment company

(‘‘Fund’’) that seeks to provide

investment results that correspond

generally to the price and yield

performance of a specified foreign or

domestic equity market index. Index

Fund Shares will be issued by an entity

registered with the Commission as an

open-end management investment

company, and which may be organized

as a series fund providing for the

creation of separate series of securities,

each with a portfolio consisting of some

or all of the component securities of a

specified securities index. A Fund may

be managed so as to permit the purchase

or sale or certain securities in the

underlying portfolio in an effort to track,

to the extent desired, the relevant

securities index. A Fund may establish

tracking tolerances which will be

disclosed in the prospectus for a

particular Fund or series thereof. Such

Fund or series normally will not

replicate exactly a specific index, but

instead will seek to track an index

within the tolerances stated in the

prospectus.

Issuances of Index Fund Shares by a

Fund will be made only in minimum

Creation Unit size aggregations or

multiplies thereof. The size of the

applicable Creation Unit size

aggregation will be set forth in the

Fund’s prospectus and will vary from

one series of Index Fund Shares to

another, but generally will be of

substantial size (e.g., value in excess of

$500,000 per Creation Unit). It is

expected that a Fund will issue and sell

Index Fund Shares through a principal

underwriter (‘‘Distributor’’) on a

continuous basis at the net asset value

per share next determined after an order

to purchase Index Fund Shares in

Creation Unit size aggregations is

received in proper form. Following

issuance, Index Fund Shares would be

traded on the Exchange like other equity

securities by professionals, as well as

retail and institutional investors.

It is expected that Creation Unit size

aggregations of Index Fund Shares

generally will be issued in exchange for

the ‘‘in kind’’ deposit of a specified

portfolio of securities, together with a

cash payment representing, in part, the

amount of dividends accrued up to the

time of issuance. It is anticipated that

such deposits will be made primarily by

institutional investors, arbitrageurs, and

the Exchange specialist. Redemption of

Index Fund Shares generally will be

made ‘‘in kind,’’ with a portfolio of

securities and cash exchanged for Index

Fund Shares that have been tendered for

redemption. Issuance or redemptions

also could occur for cash under

specified circumstances (e.g., if it is not

possible to effect delivery of securities

underlying the specific series in a

particular foreign country) and at other

times in the discretion of the Fund.

It is expected that a Fund will make

available on a daily basis a list of the

names and the required number of

shares of each of the securities to be

deposited in connection with issuance

of Index Fund Shares of a particular

series in Creation Unit size aggregations,

as well as information relating to the

required cash payment representing, in

part, the amount of accrued dividends.

A Fund make periodic distributions of

dividends from net investment income,

including net foreign currency gains, if

any, in an amount approximately equal

to accumulated dividends on securities

held by the Fund during the applicable

period, net of expenses and liabilities

for such period.

Index Fund Shares will be registered

in book entry form through The

Depository Trust Company. Trading in

Index Fund Shares on the Exchange

may be effected until 4:15 p.m. (New

York time) each business day.

Index Fund Shares initially to be

listed on the Exchange will be series

(‘‘Index Series’’) of World Equity

Benchmark Shares issued by Foreign

Fund, Inc., and based on the following

Morgan Stanley Capital International

(‘‘MSCI’’) Indices (‘‘MSCI Indices’’ or

‘‘(Indices’’); MSCI Australia Index;

MSCI Belgium Index; MSCI Canada

Index; MSCI France Index; MSCI

Germany Index; MSCI Hong Kong

Index; MSCI Italy Index; MSCI Japan

Index; MSCI Malaysia Index; MSCI

Mexico Index; MSCI Netherlands Index;

MSCI Singapore (Free) Index; MSCI

Spain Index; MSCI Sweden Index; MSCI

Switzerland Index; and MSCI United

Kingdom Index.3

Foreign Fund, Inc. will issue and

redeem WEBS of each Index Series only

in aggregations of shares specified for

each Index Series. The following table

sets forth the number of shares of an

Index Series that it is anticipated will

constitute a Creation Unit for such

Index Series:

Index series

Shares

per creation unit

Australia Index Series .................. 75,000

Austria Index Series ..................... 40,000

Belguim Index Series ................... 40,000

Canada Index Series .................... 75,000

France Index Series ..................... 75,000

Germany Index Series .................. 250,000

Hong Kong Index Series .............. 40,000

Italy Index Series .......................... 40,000

Japan Index Series ....................... 250,000

Malaysia Index Series .................. 75,000

Mexico Index Series ..................... 75,000

Neterlands Index Series ............... 75,000

Singapore (Free) Index Series ..... 75,000

Spain Index Series ....................... 40,000

Sweden Index Series ................... 75,000

Switzerland Index Series .............. 75,000

United Kingdom Index Series ....... 75,000

3. The MSCI Indices 4

General

The Indices were founded in 1969 by

Capital International S.A. as the first

international performance benchmarks

constructed to facilitate accurate

comparison of world markets. Morgan

Stanley acquired rights to the Indices in

1986. The MSCI Indices have covered

the world’s developed markets since

1969, and in 1988, MSCI commenced

coverage of the emerging markets.

Although local stock exchanges

traditionally have calculated their own

indices, these generally are not

comparable with one another, due to

differences in the representation of the

local market, mathematical formulas,

base dates, and methods of adjusting for

capital changes. MSCI applies the same

criteria and calculation methodology

across all markets for all indices,

developed and emerging.

MSCI generally seeks to have 60% of

the capitalization of a country’s stock

market reflected in the MSCI Index for

such country. Thus, the MSCI Indices

balance the inclusiveness of an ‘‘all

share’’ index against the replicability of

a ‘‘blue chip’’ index.

Weighting

All single-country MSCI Indices are

market capitalization weighted, i.e.,

companies are included in the indices at

their full market value (total number of

shares issued and paid up, multiplied

by price). For countries that restrict

foreign ownership, MSCI calculates two

indices. The additional indices are

called ‘‘free’’ indices, and they exclude

companies and share classes not

purchasable by foreigners. Free indices

currently are calculated for Singapore,

Mexico, the Philippines, and Venezuela,
Federal Register / Vol. 60, No. 234 / Wednesday, December 6, 1995 / Notices 62515

and for those regional and international

indices which include such markets.

Selection Criteria

The constituents of a country index

are selected from the full range of

securities available in the market,

excluding issues which are either small

or highly illiquid. Non-domiciled

companies and investment trusts are

also excluded from consideration. After

the index constituents are chosen, they

are reclassified using MSCI’s schema of

38 industries and eight economic

sectors to facilitate cross-country

comparisons.

The process of choosing index

constituents from the universe of

available securities is consistent among

indices. Determining the constituents of

an index is an optimization process

which involves maximizing float and

liquidity, reflecting accurately the

market’s size and industry profiles, and

minimizing cross-ownership.

To reflect accurately country-wide

performance, MSCI aims to capture 60%

of total market capitalization at both the

country and industry level. To reflect

local market performance, an index

should contain a percentage of the

market’s overall capitalization sufficient

to achieve a high level of tracking. The

greater the coverage, however, the

greater the risk of including securities

which are illiquid or have restricted

float. MSCI’s 60% coverage target seeks

to balance these considerations.

Within the overall target of 60%

market coverage, MSCI aims to capture

60% of the capitalization of each

industry group, as defined by local

practice. MSCI believes this target

assures that the index reflects the

industry characteristics of the overall

market and permits the construction of

accurate industry indices.

MSCI may exceed the 60% of market

capitalization target in the index for a

particular country because, e.g., one or

two large companies dominate an

industry. Similarly, MSCI may

underweight an industry in an index if,

e.g., the companies in such industry

lack good liquidity and float, or because

of extensive cross-ownership.

Liquidity is measured by trading

value, as reported by the local

exchanges. Trading value is monitored

over time to determine ‘‘normal’’ levels

exclusive of short-term peaks and

troughs. A stock’s liquidity is significant

not only in absolute terms (i.e., a

determination of the market’s most

actively traded stocks), but also relative

to its market capitalization and to

average liquidity for the country as a

whole.

Float, or the percentage of shares

freely tradeable, is one measure of

potential short-term supply. Low float

raises the risk of insufficient liquidity.

MSCI monitors float for every security

in its coverage, and low float may

exclude a stock from consideration.

However, float can be difficult to

determine. In some markets good

sources generally are not available. In

other markets, information on smaller

and less prominent issues can be subject

to error and time lags. Government

ownership and cross-ownership

positions can change over time, and are

not always made public. Float also

tends to be defined differently

depending on the source. MSCI seeks to

maximize float. As with liquidity, float

is an important determinant, but not a

hard-and-fast screen, for inclusion of a

stock in, or exclusion of a stock from,

a particular index.

Cross-ownership occurs when one

company has an ownership position in

another. In situations where crossownership is substantial, including both

companies in an index can skew

industry weights, distort country-level

valuations and overrepresent buyable

opportunities. An integral part of

MSCI’s country research is identifying

cross-ownerships to avoid or minimize

inclusion of both companies in an

index. Cross-ownership cannot always

be avoided, especially in markets where

it is prevalent. When MSCI makes

exceptions, it seeks to select situations

where the constituents operate in

different economic sectors, or where the

subsidiary company makes only a minor

contribution to the parent company’s

results.

MSCI attempts to meet its 60%

coverage target by including a

representative sample of large, medium

and small capitalization stocks, to

capture the sometimes disparate

performance of these sectors. In the

emerging markets, the liquidity of

smaller issues can be a constraint. At

the same time, properly representing the

lower capitalization end of the market

risks overwhelming the index with

names. Within these constraints, MSCI

strives to include smaller capitalization

stocks, provided they exhibit sufficient

liquidity.

Calculation Methodology

All MSCI Indices are calculated daily

using Laspeyres’ concept of a weighted

arithmetic average together with the

concept of ‘‘chain-linking,’’ a classical

method of calculating stock market

indices. The Laspeyres method weighs

stocks in an index by their beginning-ofperiod market capitalization. Share

prices are ‘‘swept clean’’ daily and

adjusted for any rights issues, stock

dividends or splits. The MSCI Indices

currently are calculated in local

currency and in U.S. dollars, without

dividends and with gross dividends

reinvested (e.g., before withholding

taxes).

In respect of developed markets,

MSCI Indices with dividends reinvested

constitute an estimate of total return

arrived at by reinvesting one-twelfth of

the month end yield at every month

end.

In respect of emerging markets, MSCI

has constructed its indices with

dividends reinvested as follows:

• In the period between the ex-date and

the date of dividend reinvestment, a

dividend receivable is a component of

the index return.

• Dividends are deemed received on the

payment date.

• To determine the payment date, a

fixed time lag is assumed to exist

between the ex-date and the payment

date. This time lag varies by country,

and is determined in accordance with

general practices within that market.

• Reinvestment of dividends occurs at

the end of the month in which the

payment date falls.

Price and Exchange Rates

Prices used to calculate the MSCI

Indices are the official exchange closing

prices. All prices are taken from the

dominant exchange in each market. In

countries where there are foreign

ownership limits, MSCI uses the price

quoted on the official exchange,

regardless of whether the limit has been

reached.

MSCI uses WM/Reuters Closing Spot

Rates for all developed and emerging

markets except those in Latin America.

The WM/Reuters Closing Spot Rates

were established by a committee of

investment managers and data

providers, including MSCI, whose

object was to standardize exchange rates

used by the investment community.

Exchange rates are taken daily at 4 p.m.

London time by the WM Company and

are sourced whenever possible from

multi-contributor quotes on Reuters.

Representative rates are selected for

each currency based on a number of

‘‘snapshots’’ of the latest contributed

quotations taken from the Reuters

service at short intervals around 4 p.m.

WM/Reuters provides closing bid and

offer rates. MSCI uses these to calculate

the mid-point to 5 decimal places.

MSCI continues to monitor exchange

rates independently and may, under

exceptional circumstances, elect to use

an alternative exchange rate if the WM/

Reuters rate is believed not to be

representative for a given currency on a
62516 Federal Register / Vol. 60, No. 234 / Wednesday, December 6, 1995 / Notices

5Amendment No. 1, supra note 2. The Amex also

states that in the event that it obtains an exemption

from the prospectus delivery requirements in the

future with respect to WEBS or to the other series

of Index Fund Shares listed on the Exchange, the

Exchange will consult with Commission staff and

will file any necessary rule changes. Id.

particular day. Because of the high

volatility of currencies in some Latin

American countries, MSCI continues to

use its own timing and sources for these

markets.

Changes to the Indices

In changing the constituents of the

indices, MSCI attempts to balance

representativeness versus undue

turnover. An index must represent the

current state of an evolving marketplace,

yet minimize turnover, which is costly

as well as inconvenient for managers.

There are two broad categories of

changes to the MSCI Indices. The first

consists of market-driven changes such

as mergers, acquisitions, bankruptcies,

etc. These are announced and

implemented as they occur. The second

category consists of structural changes

to reflect the evolution of a market,

including changes in industry

composition or regulations. In the

emerging markets, index restructurings

generally take place every 12 to 18

months. Structural changes may occur

only on four dates during the year: the

first business days of March, June,

September and December. They are

preannounced at least two weeks in

advance.

Restructuring an index involves a

balancing of additions and deletions. To

maintain continuity and minimize

turnover, MSCI is reluctant to delete

index constituents, and its approach to

additions is correspondingly stringent.

As markets grow because of

privatizations, investor interest, or the

relaxation of regulations, index

additions (with or without

corresponding deletions) may be needed

to bring industry representations up to

the 60% target. Companies are

considered not only with respect to

their broad industry, but also with

respect to their subsector, so as to reflect

if possible a broader range of economic

activity. Beyond industry

representativeness, new constituents are

selected based on the criteria discussed

above, i.e. float, liquidity, crossownership, etc.

In general, new issues are not eligible

for immediate inclusion in the MSCI

Indices because their liquidity remains

unproven. Usually, new issues undergo

a ‘‘seasoning’’ period of one year to 18

months between index restructurings

until a trading pattern and volume are

established. After that time, they are

eligible for inclusion, subject to the

criteria discussed above.

In the emerging markets, however, it

is not uncommon that a large new issue,

usually a privatization, comes to market

and substantially changes the country’s

industry profile. In exceptional

circumstances, where an issue’s size,

visibility and investor interest assure

high liquidity, and where excluding it

would distort the characteristics of the

market, MSCI may decide to include it

immediately in an Index. In other cases,

MSCI may decide not to include a large

new issue even in the normal process of

restructuring, and in spite of substantial

size and liquidity.

MSCI’s primary concern when

considering deletions is the continuity

of the Indices. Of secondary concern are

the turnover costs associated with

deletions. The Indices must represent

the full investment cycle, including bear

as well as bull markets. Out-of-favor

stocks may exhibit declining price,

market capitalization or liquidity, and

yet continue to be good representatives

of their industry.

Companies may be deleted because

they have diversified away from their

industry classification, because the

industry has evolved in a different

direction from the company’s thrust, or

because a better industry representative

exists (either a new issue or an existing

company). In addition, in order not to

exceed the 60% target coverage of

industries and countries, adding new

index companies may entail

corresponding deletions. Usually such

deletions take place within the same

industry, but there are occasional

exceptions.

3. Criteria for Initial and Continued

Listing

Because of the open-end nature of

Funds issuing Index Fund Shares, the

Exchange believes it is necessary to

maintain appropriate flexibility in

connection with the listing of Index

Fund Shares of a particular Fund or

series thereof. In connection with initial

listing, the Exchange will establish a

minimum number of Index Shares

required to be outstanding at the time of

commencement of Exchange trading.

For each series of Index Fund Shares, it

is anticipated that a minimum of the

equivalent of three Creation Units will

be required to be outstanding when

trading begins.

Each series of Index Fund Shares will

be subject to the initial and continued

listing criteria of Rule 1002A(b) which

provides that following the initial

twelve month period following

commencement of Exchange trading of

a series of Index Fund Shares, the

Exchange will consider suspension of

trading in, or removal from listing of,

such series under any of the following

circumstances:

(a) if there are fewer than 50

beneficial holders of the series of Index

Fund Shares for 30 or more consecutive

trading days; or

(b) if the value of the index or

portfolio of securities on which the

series of Index Fund Shares is based is

no longer calculated or available; or

(c) if such other event shall occur or

condition exists which, in the opinion

of the Exchange, makes further dealings

on the Exchange inadvisable.

The Exchange will require the Index

Fund Shares be removed from listing

upon termination of the Fund that

issued such shares.

4. Trading Halts

Prior to commencement of trading in

Index Fund Shares, the Exchange will

issue a circular to members informing

them of Exchange policies regarding

trading halts in such securities. The

circular will make clear that, in addition

to other factors that may be relevant, the

Exchange may consider factors such as

those set for in Rule 918C(b) in

exercising its discretion to halt or

suspend trading. These factors would

include: (1) for Index Fund Shares based

on a domestic stock index, whether

trading has been halted or suspended in

the primary market(s) for any

combination of underlying stocks

accounting for 20% or more of the

applicable current index group value;

(2) for Index Fund Shares based on a

foreign stock index, whether trading has

been halted or suspended market-wide

in the applicable foreign market; or (3)

whether other unusual conditions or

circumstances detrimental to the

maintenance of a fair and orderly

market are present.

5. Terms and Characteristics

Prior to commencement of trading of

a series of Index Fund Shares, the

Exchange will distribute to Exchange

members and member organizations an

Information Circular calling attention to

characteristics of the specific series and

to applicable Exchange rules. The

circular also will inform member

organizations regarding any applicable

requirements for delivery of a

prospectus to investors. The Amex has

stated that any broker-dealer handling

transactions for customers in WEBS will

have an obligation to deliver to such

customers a prospectus regarding WEBS

pursuant to the requirements of the

Securities Act of 1933.5
Federal Register / Vol. 60, No. 234 / Wednesday, December 6, 1995 / Notices 62517

6 17 CFR 200.30–3(a)(12) (1994).

1Position limits impose a ceiling on the number

of option contracts which an investor or group of

investors acting in concert may hold or write in

each class of options on the same side of the market

(i.e., aggregating long calls and short puts or long

puts and short calls). The PSE’s proposal is

identical to a proposal submitted by the

Philadelphia Stock Exchange, Inc. (‘‘PHLX’’), See

Securities Exchange Act Release No. 36380 (October

17, 1995), 60 FR 54403 (October 23, 1995) (File No.

SR–PHLX–95–45).

2PSE Rule 7.6(a) provides the following position

limits for industry index options: 5,500 contracts if,

during the Exchange’s semi-annual review, the

Exchange determines that any single stock in the

group accounted, on average, for 30% or more of

the index value during the 30-day period

immediately preceding the review; 7,500 contracts

if the Exchange determines that any single stock in

the group accounted, on average, for 20% or more

of the index value for that any five stocks in the

group together accounted, on average, for more than

50% of the index value, but that no single stock in

the group accounted, on average, for 30% or more

of the index value, during the 30-day period

immediately preceding the review; or 10,500

contracts if the Exchange determines that the above

conditions have not occurred.

The Exchange believes that 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 designed to

prevent fraudulent and manipulative

acts and practices, promote just and

equitable principles of trade, foster

cooperation and coordination with

persons engaged in regulating, clearing,

settling, processing information with

respect to, and facilitating transaction in

securities, and, in general protect

investors and the public interest.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

The Amex believes that the proposed

rule change will not 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

Within 35 days of the date of

publication of this notice in the Federal

Register or within such longer period (i)

as the Commission may designate up to

90 days of such date if it finds such

longer period to be appropriate and

publishes its reasons for so finding or

(ii) as to which the self-regulatory

organization consents, the Commission

will:

(a) by order approve such proposed

rule change, or

(b) institute proceedings to determine

whether the proposed rule change

should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning the foregoing.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street 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

Section, 450 Fifth Street NW.,

Washington, DC. Copies of such filing

will also be available for inspection and

copying at the principal office of the

above-mentioned self-regulatory

organization. All submissions should

refer to File No. SR–Amex–95–43 and

should be submitted by December 27,

1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority 6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–29691 Filed 12–5–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–36526; File No. SR–PSE–

95–28]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Pacific Stock Exchange, Inc.,

Relating to Establishing a Hedge

Exemption for Narrow-Based Index

Options

November 29, 1995.

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 1, 1995,

the Pacific Stock Exchange, Inc., (‘‘PSE’’

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 self-regulatory

organization. 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 PSE proposes to amend PSE Rule

7.6, ‘‘Position Limits for Index

Options,’’ to establish a hedge

exemption from industry (narrow-based)

index option position limits which

would allow PSE members and member

organizations, as well as public

customers, to exceed the established

position limits for narrow-based index

options by three times the established

position limit for such index options,

provided that the position is ‘‘hedged’’

with shares of at least 75% of the

number of stocks comprising the index.1

The text of the proposed rule change

is available at the Office of the

Secretary, PSE 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

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 aspect of such

statements.

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

Purpose

The purpose of the proposed rule

change is to establish a hedge

exemption from the industry index

option position limits established in

PSE Rule 7.6(a).2 Specifically, the PSE

proposes to add Commentary .03 to PSE

Rule 7.6, which will provide that

industry index option positions may be

exempt from established position limits

for each contract ‘‘hedged’’ by an

equivalent dollar amount of the

underlying component securities or

securities convertible into such

components, provided that each option

position to be exempted is hedged by a

position in at least 75% of the number

of component securities underlying the

index, and that the underlying value of

the option position does not exceed the

value of the underlying portfolio. The

value of the portfolio is: (a) the total

market value of the net stock position,