67378 Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Notices

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

2 17 CFR 240.19b–4.

3See Securities Exchange Act Release No. 36020

(July 24, 1995), 60 FR 39039 (July 31, 1995) (order

approving Commentary .05 to Phlx Rule 1009).

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–31510 FIled 12–28–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–36625; File No. SR–Phlx–

95–90]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

Relating to Listing Standards for

Options on Equity Securities Issued in

a Reorganization Transaction Pursuant

to a Public Offering or a Rights

Distribution

December 21, 1995.

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 December

19, 1995, the Philadelphia Stock

Exchange, Inc. (‘‘Phlx’’ 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 Phlx. 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 Phlx proposes to amend its listing

standards in respect of options on

equity securities issues in a spin-off,

reorganization, recapitalization,

restructuring or similar transaction

where the issuance is made pursuant to

a public offering or a rights distribution.

The text of the proposed rule change is

available at the Office of the Secretary,

Phlx, 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,

Phlx 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 Phlx 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

The purpose of the proposed rule

change is to amend the special listing

standards set forth in Phlx Rule 1009,

Commentary .05 that apply to options

on equity securities issued in certain

spin-offs, reorganizations,

recapitalizations, restructurings or

similar transactions (referred to herein

as ‘‘restructuring transactions’’) so as to

also include securities issued pursuant

to a public offering or a rights

distribution that is part of a

restructuring transaction.

The proposed amendment to Rule

1009, Commentary .05 is intended to

facilitate the listing of options on equity

securities issued in restructuring

transactions (referred to as ‘‘Restructure

Securities’’) by permitting the Exchange

to base its determination as to the

satisfaction of certain of the listing

standards set forth in Exchange Rule

1009 and Commentary .01 thereunder

by reference to (1) specified

characteristics of the ‘‘Original

Security’’ in respect of which the

Restructure Security was issued or

distributed; (2) the trading market of the

Original Security; (3) the number of

shares of the Restructure Security issued

and outstanding; or (4) to the listing

standards of the exchange on which the

Restructure Security is listed. Rule

1009, Commentary .05 would permit the

Exchange to certify a Restructure

Security as options eligible sooner than

if it had to wait until it could base its

certification on characteristics of the

Restructure Security itself, but only in

circumstances where the factors relied

upon make it reasonable to conclude

that the Restructure Security will in fact

satisfy applicable listing criteria.

As recently approved by the

Commission, Phlx Rule 1009,

Commentary .05 does not extend to

restructuring transactions involving the

issuance of a Restructure Security in a

public offering or a rights distribution.3

The questions raised by the proposed

extension of Commentary .05 to Phlx

Rule 1009 to reorganization transactions

involving public offering or rights

distributions reflect that when a

Restructure Security is issued in a

public offering or pursuant to a rights

distribution, it cannot automatically be

assumed that the shareholder

population of the Restructure Security

and the Original Security will be the

same. Instead, the holders of a

Restructure Security issued in a public

offering will be those persons who

subscribed for and purchased the

security in the offering, and the holders

of a Restructure Security issued in a

rights distribution will be those persons

who elected to exercise their rights.

Even in the case of a distribution of

nontransferable rights to shareholders of

the Original Security, not all such

shareholders may choose to exercise

their rights. As a result, it cannot be

assumed that the Restructure Security

will necessarily satisfy listing criteria

pertaining to minimum number of

holders, minimum public float and

trading volume simply because the

Original Security satisfied these criteria.

On the other hand, the Exchange

believes that the same reasons for

wanting to make an options market

available without delay to holders of

securities issued in reorganizations that

do not involve public offerings or rights

distributions apply with equal force to

securities issued in reorganizations that

do involve public offerings or rights

distributions, so long as there can be

reasonable assurance that the securities

satisfy applicable options listing

standards. That is, holders of an

Original Security who utilize options to

manage the risks of their stock positions

may well find themselves to be holders

of both the Original Security and the

Restructure Security following a

reorganization because they chose to

purchase the Restructure Security in a

public offering or to exercise rights in

order to maintain the same investment

position they had prior to the

reorganization. Such holders may want

to continue to use options to manage the

risks of their combined stock position

after the reorganization, but they can do

so only if options on the Restructure

Security are available. The Exchange

believes that it is important to avoid any

undue delay in the introduction of

options trading in such a Restructure

Security in circumstances where there is

sound reason to believe that the

Restructure Security does in fact satisfy

options listing standards.

Accordingly, the Phlx proposes to add

new paragraph (d) to Commentary .05 of

Rule 1009, to address situations where

a Restructure Security is issued

pursuant to a public offering or rights

distribution. Pursuant to the proposed

rule change, the Exchange may certify

the Restructure Security as satisfying

minimum shareholder and minimum

public float requirements on the basis

provided for in approved Commentary

.05(c), only after at least five days of

‘‘regular way’’ trading. Moreover, after

due diligence, the Exchange must have

no reason to believe that the Restructure
Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Notices 67379

4 17 CFR 200.30–(a)(12).

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

2 17 CFR 240.19b–4.

3See Securities Exchange Act Release No. 36295

(September 28, 1995), 60 FR 52229.

4 In Amendment No. 1, as discussed more fully

herein, the Exchange proposed certain maintenance

standards for the Automotive Index. See Letter from

Eileen Smith, Director, Product Development,

Research Department, CBOE, to John Ayanian,

Attorney, Office of Market Supervision (‘‘OMS’’),

Continued

Security does not satisfy these

requirements. Additionally, in order to

base certification on Commentary .05 of

Rule 1009, the closing prices of the

Restructure Security on each of the five

or more trading days prior to the

selection date must be at least $7.50.

Finally, as is required for all underlying

securities selected for options trading,

trading volume in the Restructure

Security must be at least 2,400,000

shares during a period of twelve months

or less up to the time the security is so

selected.

The effect of the proposed rule change

is that a Restructure Security issued

pursuant to a public offering or a rights

distribution that is part of a

reorganization will be eligible for

options trading only if it satisfies all of

the existing standards applicable to the

selection of underlying securities

generally, except that (A) the Exchange

may assume the satisfaction of the

minimum public ownership

requirement of 7,000,000 shares and the

minimum 2,000 shareholders

requirement if (i) either the percentage

of value tests of subparagraph (a)(1) of

Commentary .05 are met or the aggregate

market value represented by the

Restructure Security is at least

$500,000,000; and if (ii) the Restructure

Security is listed on an exchange or an

automatic quotation system having

equivalent listing requirements or at

least 40,000,000 shares of the

Restructure Security are issued and

outstanding, and if (iii) after the

Restructure Security has traded ‘‘regular

way’’ for at least five trading days and

after having conducted due diligence in

the matter, the Exchange has no reason

to believe that these requirements are

not met, and (B) subject to the same

percentage of value or aggregate market

value requirements, the Restructure

Security may be deemed to satisfy the

minimum market price per share

requirement if it has a closing market

price per share of at least $7.50 during

each of the five or more trading days

preceding the date of selection, instead

of having to satisfy this requirement

over a majority of days over a period of

three months. (In the event the

Restructure Security has a closing price

that is less than $7.50 on any of the

trading days preceding its selection, it

will have to satisfy this requirement on

a majority of trading days over a period

of three months before it can be certified

as eligible for options trading.) For any

Restructure Security issued in a public

offering or a rights distribution that does

satisfy these requirements, the effect of

the proposed rule change will be to

permit its certification of options

trading to take place as early as on the

sixth day after trading in the stock

commences, instead of having to wait

for three months of trading.

The Exchange believes that the

proposed rule change is consistent with

Section 6(b) of the Securities Exchange

Act of 1934 in general, and furthers the

objectives of Section 6(b)(5) in

particular, by removing impediment to

a free and open market in options

covering securities issued in public

offerings or pursuant to rights

distributions as part of restructuring

transactions and other similar corporate

reorganizations.

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

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, 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, NW.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the Phlx. All submissions

should refer to the File No. SR-Phlx-95-

90 and should be submitted by January

19, 1996.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.4

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–31504 Filed 12–28–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–36623; File No. SR–CBOE–

95–51]

Self-Regulatory Organizations; Order

Approving a Proposed Rule Change

and Notice of Filing and Order

Granting Accelerated Approval of

Amendment No. 1 to the Proposed

Rule Change by the Chicago Board

Options Exchange, Incorporated,

Relating to the Listing of the Trading

of Options and Long-Term Options on

the CBOE Automotive Index and LongTerm Options on a Reduced-Value

CBOE Automotive Index

December 21, 1995.

I. Introduction

On August 31, 1995, the Chicago

Board Options Exchange, Inc. (‘‘CBOE’’

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

provide for the listing and trading of

index options on the CBOE Automotive

Index (‘‘Automotive Index’’ or ‘‘Index’’).

Notice of the proposal appeared in the

Federal Register on October 5, 1995.3

No comment letters were received on

the proposed rule change. On December

14, 1995, the Exchange filed with the

Commission Amendment No. 1 to the

proposed change.4 This order approves

the Exchange’s proposal, as amended.