Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the American Stock Exchange, Inc. to Amend the Manner of Calculation of the Hong Kong Option Index]

[Federal Register Volume 62, Number 100 (Friday, May 23, 1997)]
[Notices]
[Pages 28524-28525]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13609]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38651; International Series Release No. 1081; File No. 
SR-AMEX-97-18]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange, Inc. to Amend the Manner of 
Calculation of the Hong Kong Option Index]

May 16, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on April 9, 
1997, 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 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 proposed rule change amends the manner in which the AMEX 
calculates the Hong Kong Option (``HKO'') Index by using a floating 
rate of exchange for the Hong Kong dollar rather than a fixed value. 
The text of the proposed rule change is available at the AMEX and at 
the Commission.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the 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.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On April 11, 1994, the AMEX received approval to trade standardized 
options on the HKO Index.\1\ The HKO

[[Page 28525]]

Index is a broad-based capitalization-weighted stock index designed and 
maintained by the AMEX, based on the capitalizations of 30 stocks that 
are traded on the Hong Kong Stock Exchange (``HKSE'') and whose issuers 
have major business interests located in Hong Kong. The HKO Index value 
is calculated by multiplying the price of each component security (in 
Hong Kong dollars) by its number of shares outstanding, adding the 
sums, and dividing by the current HKO Index divisor. For valuation 
purposes, one HKO Index unit is assigned a fixed value of one U.S. 
dollar. The Exchange adopted a fixed value for the HKO Index unit 
because Hong Kong has traditionally pegged the value of the Hong Kong 
dollar to the U.S. dollar.\2\
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    \1\ See Securities Exchange Act Release No. 33894 (April 11, 
1994), 59 FR 18429 (April 18, 1994).
    \2\ As of April 14, 1997, the exchange rate was approximately HK 
$7.75 per U.S. $1.
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    At midnight on June 30, 1997, sovereignty over Hong Kong will 
transfer from the United Kingdom to the People's Republic of China, and 
Hong Kong will become a Special Administrative Region of China. While 
there has been much debate over what this will mean financially, 
politically, and socially for the former British colony, statements 
from the People's Republic of China indicate that the existing currency 
and financial systems of Hong Kong will remain unchanged. In order, 
however, to be prepared for any possible changes with respect to the 
Hong Kong dollar, such as a change in the policy of pegging its value 
to the U.S. dollar, the Exchange has determined to adopt a floating 
rate of exchange for the Hong Kong dollar when calculating the value of 
the HKO Index.
    The AMEX will use the WM/Reuters Hong Kong dollar/U.S. dollar 
exchange rate available at the close of trading in London. AMEX will 
receive this rate between approximately 11:30 a.m. and 12:00 noon (New 
York time) each trading day. The Exchange will then use this rate in 
calculating and disseminating the HKO Index value after it is received 
on that trading day, and will also use the rate in calculating and 
disseminating the HKO Index value on the following day until a new 
value is received, again typically between 11:30 a.m. and 12:00 noon. 
If on any business day WM/Reuters does not post a closing spot exchange 
rate for the Hong Kong dollar, the last reported closing spot rate will 
remain in effect until a new rate is posted. Once the AMEX has received 
Commission approval to implement this change, it will do so by 
establishing a separate contract on the HKO Index using the floating 
rate in its calculation. The current contract using the fixed rate will 
continue to trade until the expiration of any remaining contracts.\3\ 
No new series will be added using the fixed rate after the new floating 
rate calculation goes into effect.
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    \3\ As of April 15, 1997, the outstanding interest in HKO Index 
contracts with expiration dates after July 1, 1997 was as follows: 
September 1997 series, 2042 contracts; 2042 contracts; December 1997 
series, 835 contracts; and January 1998 series, 162 contracts. Phone 
conversation between Claire McGrath, Managing Director and Special 
Counsel, AMEX, and Heather Seidel, Attorney, Market Regulation, 
Commission, on April 18, 1997.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act \4\ in general and furthers the objectives of 
Section 6(b)(5) \5\ in particular in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, and is not designed to permit unfair 
competition between customers, issuers, brokers, or dealers.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any inappropriate 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 either solicited or received.

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 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-AMEX-97-18 and 
should be submitted by June 13, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-13609 Filed 5-22-97; 8:45 am]
BILLING CODE 8010-01-M