addressed this issue argued that U.S. investors should have sufficient access to information in English concerning the relevant futures markets and underlying debt instruments. 16 In addition, the Commission solicited comment on whether there are any legal or policy reasons for determining that debt securities issued by Austria, Denmark, Finland, the Netherlands, Norway, Sweden, Switzerland, or West Germany should not be accorded the same treatment for purposes of futures trading in the U.S. as are debt securities issued by the six designated sovereign ssuers. The one commentator that addressed this issue stated that there did not appear to be any valid legal or policy reasons for denying U.S. Investors the ability to trade futures on debt ssued by Austria, Denmark, Finland, the Netherlands, Norway, Sweden, Switzerland, or West Germany. 17 Based on the comment letters received and for the additional reasons discussed below, the Com mission has determined that Rule 3a12-8 should be amended to include the debt obligations of Austria, Denmark, Finland, the Netherlands, Switzerland, and West Germany. The Commission agrees that there are no valid legal or policy reasons for denying U.S. investors the ability to rade futures on debt securities issued by the six newly-designated sovereign issuers and that the availability of these new hedging vehicles will issuers, i.e., the governments of Canada and the United Kingdom. In addition, Australia and New Zealand had government debt issues registered in the U.S. when they were added to the Rule's list of eligible issuers. The Japanese and French governments, however, had not registered any securities in the U.S. when they were added to the Rule. Of the new countries that will become eligible under the current amendment, only Austria and Denmark currently have government debt securities registered in the U.S. 16 Arnold & Porter Letter, supra note 12, at 5-6; Shearson Letter, supra note 12, at 1. Arnold & Porter stressed the availability of information regarding West German Bund futures contracts traded on LIFFE, the underlying German sovereign debt securities, and the "general creditworthiness of the German government so as to allow U.S. investors knowledgeably to trade futures on Bunds." Arnold & Porter Letter, supra note 12, at 5-6. 17 See Shearson Letter, supra note 12, at 1. The Commis sion also solicited comments on possible procedures or standards pursuant to which it could exempt the debt securities of additional countries without having to so on a country-by-country basis, including the generic rating standard approach proposed originally in May 1987 (see note 11, supra) and a standard based on volume and depth of trading in a sovereign issuer's debt. In response, one commentator, Shearson Lehman Hutton, argued that all sovereign debt securities should qualify for the exemption provided by Rule 3a12-8. See Shearson Letter, supra note 12, at 2-3. Volume 42, No. 2 allow investors to take advantage of the growing globalization of the securities markets. Due in large part to this trend toward internationalization, U.S. investors should have ready access to information in English concerning the markets and government securities of the six newly-designated sovereign issuers. It also is important to note that the existing conditions set forth in the Rule (i.e., that the underlying securities not be registered in the U.S., that the futures contracts require delivery outside the U.S.,18 and that the contracts be traded on a board of trade) will apply to futures contracts on debt securities issued by the six newly-designated sovereign issuers. This should ensure that the federal securities laws will not be subverted by the marketing and trading of futures on additional government securities in this country, 19 The Commission has determined not to add Norway and Sweden to the Rule's list of eligible sovereign issuers. As noted above, Norway and Sweden objected to the exemption of their sov ereign debt securities for purposes of futures trading thereon. Although the Commission believes that trading of Norwegian and Swedish sovereign debt securities could become active enough to support development of a futures market on such securities, as a matter of international comity the Commission will not add Norwegian and Swedish sovereign debt securities to those exempted by the Rule.20 18 Although the only futures contract likely to be eligible immediately for sale in the U.S. once the amendment is adopted is the physically-settled West German bond futures contract traded on LIFFE, the Commission in the past has stated that cash-settlement would be consistent with the Rules's requirement that delivery occur outside the U.S. See Securities Exchange Act Release No. 25072, October 29, 1987, 52 FR 42277, at 42279 n. 19. 19 The marketing and trading of foreign futures contracts also is subject to regulation by the CFTC. In particular, Section 4(b) of the CEA authorizes the CFTC to regulate the offer and sale of foreign futures contracts to U.S. residents, while Rule 30.02 (18 CFR § 30.02), promulgated under Section 2(a)(1)(A) of the CEA, is intended to prohibit fraud in connection with the domestic offer and sale of futures contracts executed on foreign exchanges. In addition, the CFTC recently adopted a series of regulations governing the domestic offer and sale of futures and options contracts traded on foreign boards of trade. The rules, which became effective on January 4, 1988, but which have not been fully implemented pending CFTC review of petitions for exemption, require, among other things, that the domestic offer and sale of foreign futures be effected through CFTC registrants or through entities subject to a foreign regulatory frameworkcomparable to that governing domestic futures trading. See 52 FR 28980 (August 5, 1987). 20 The Commission specifically reserves the right to consider exempting such debt securities under the Rule in the SEC DOCKET 125 (vii) Austria; (ix) Finland; (x) the Netherlands; (xi) Switzerland; or (xii) West Germany. ** By the Commission. Jonathan G. Katz Secretary SECURITIES EXCHANGE ACT OF 1934 Self-Regulatory Organizations; Midwest Stock Pursuant to § 19(b)(1) of the Securities and Exchange Act of 1934 (“Act”), 15 U.S.C. § 78s(b)(1), notice is hereby given that on October 17, 1988, the Midwest Stock Exchange, Inc. ("MSE" 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 This proposed rule change adds the following new Rule 10A to Article IX. This rule change shall be effective for a one-year pilot period ending on the last day of the month in which the first anniversary of its effective date falls.1 The text of the rule change is as follows: SM2 reaches a value 250 or more points below its closing value on the previous trading day, trading in stocks shall halt on the Exchange and may not reopen for one hour. If, on the same day, the average subsequently reaches a value 400 or more points below that closing value, trading in stocks shall halt on the Exchange and may not reopen for two hours. ... Interpretations and Policies .10 The restrictions in this Rule 10A shall apply whenever the Dow Jones Industrial Average reaches the trigger values notwithstanding the fact that, at any given time, the calculation of the value of the average may be based on the prices of less than all of the stocks included in the average. .20 The reopening of trading following a trading halt under this Rule 10A shall be conducted pursuant to procedures adopted by the Exchange and communicated by notice to its members and member organizations. .30 If the 250-point trigger is reached within one hour of the scheduled close of trading for a day, or if the 400-point trigger is reached within two hours of the scheduled close of trading for a day, trading in stocks shall halt for the remainder of the day; provided, however, that if the 250-point trigger is reached between one hour and one-half hour before the scheduled closing, or the 400point trigger is reached between two hours and one hour before the scheduled closings, the Exchange may use abbreviated reopening procedures either to permit trading to reopen before the scheduled closing or to establish closing prices. 40 Nothing in this Rule 10A should be construed to limit the ability of the Exchange to otherwise halt or suspend the trading in any stock or stocks traded on the Exchange pursuant to any other Exchange rule or policy. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change Trading Halts Due to Extraordinary Market Vol- In its filing with the Commission, the self-regula atility tory organization included statements concerning the purpose of and basis for the proposed Rule 10A. If the Dow Jones Industrial Average rule change and discussed any comments it re 'The MSE originally stated that the rule would not become effective until all other U.S. stock and options exchanges, the NASD, and U.S. futures exchanges that trade futures contracts on stock indexes and options on such futures contracts adopted corresponding rules. The MSE subsequently amended its filing to eliminate this con tingency. Letter from Craig Long, Vice President, General Counsel and Secretary, MSE, to Mary Revell, Attorney, Commission, dated October 21, 1988. 2"Dow Jones Industrial Average" is a service mark of Dow Jones & Company, Inc. ceived 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 Over the last year, the securities markets have experienced unprecedented volatility. This volatility has been the subject of a number of market studies and reports. The most recent of these reports was the Interim Report ("Report") of The Working Group on Financial Markets ("Working Group") issued by the Under Secretary for Finance of the Department of the Treasury and the Chairmen of the Commission, the Commodity Futures Trading Commission, and the Board of Governors of the Federal Reserve System in May, 1988. In its Report, the Working Group recommends "coordinated trading halts and reopenings for large, rapid market declines that threaten to create panic conditions." The Working Group specifically recommended that all U.S. markets for equity and equity-related products-stocks, individual stock options, stock index options, futures and options on futures-halt trading for one hour if the Dow Jones Industrial Average ("DJIA") declines 250 or more points from its previous day's closing level and for two hours if the DJIA declines 400 points from the previous day's close. In light of the Working Group Report, the NYSE adopted Rule 80B which will provide for temporary halts in the trading of all stocks, stock options, and stock index options on the NYSE when the DJIA reaches the trigger values discussed in the Working Group's Report.3 The NYSE asserted that halts will promote stability in the stock market by allowing market participants time to reestablish an equilibrium between buying and selling interest and to help ensure that all market participants have a reasonable opportunity to become aware of and respond to significant market price movements. The NYSE originally conditioned the effectiveness of Rule 80B upon the adoption of corresponding rules by all other U.S. stock and option exchanges, as well as other U.S. futures markets that trade futures on stock index groups (and options on such futures), and upon such rules receiving all necessary regulatory approvals and becoming effective. The NYSE subsequently amended its filing to make its rule effective upon approval by the Commission.4 The MSE is filing its proposed Rule 10A in response to the NYSE's filing and anticipates that its effectiveness will be coordinated with the other exchanges' corresponding rule effective dates. Rule 10A is proposed for a pilot period of one year, during which time the Exchange will analyze its experience with proposed Rule 10A and will determine in conjunction with the Commission and other market places whether to continue the pilot beyond one year. Statutory Basis-The basis under the Act for this proposed rule change is the requirement under §6(b)(5) that an exchange have rules that are designed 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, in general, to protect investors and the public interest. (B) Self-Regulatory Organization's Statement on Burden on Competition This proposed rule change does not impose 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 The Exchange has not solicited, and does not intend to solicit, comments regarding this proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Commission finds good cause for approving the MSE proposed rule change prior to the thirtieth day after the date of publication of the proposal in the Federal Register. The proposal is substantially identical to the NYSE circuit breaker proposal contained in File No. SRNYSE-88-23 that was published for the full thirtyday period and was approved by the Commission in Securities Exchange Act Release No. 26198 (October 19, 1988). In light of the absence of any comments on the NYSE's filing and the Commis 3 File No. SR-NYSE-88-23, approved in Securities Ex- Operating Officer, NYSE, to Richard Ketchum, Director, change Act Release No. 26198 (October 19, 1988). 4 Letter from Richard A. Grasso, President and Chief Division of Market Regulation, Commission, dated October 17, 1988. sion's view of the benefits that may accrue from adoption of coordinated circuit breakers that respond to stock market volatility and that may increase investor confidence in the markets, the Commission believes a good cause finding is justified. 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 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. Copies of such filing also will be available for inspection and copying at the principal office of the above-referenced self-regulatory organization. All submissions should refer to the file number in the caption above and should be submitted by [insert date 21 days from the date of publication]. The Commission finds that the proposed rule change filed by the MSE is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange, and, in particular, the requirements of § 65 and the rules and regulations thereunder. IT IS THEREFORE ordered, pursuant to § 19(b)(2) of the Act, that the proposed rule change is approved for a one-year pilot period ending October 31, 1989. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.7 Jonathan G. Katz Secretary SECURITIES EXCHANGE ACT OF 1934 Release No. 34-26219/October 26, 1988 sons until November 16, 1988 to comment on the application of the Boston Stock Exchange, Inc. for unlisted trading privileges in six issues which are listed and registered on one or more other national securities exchange and are reported in the consolidated transaction reporting system. SECURITIES EXCHANGE ACT OF 1934 A notice has been issued giving interested persons until November 16, 1988 to comment on the application of the Midwest Stock Exchange, Inc. for unlisted trading privileges in sixteen issues which are listed and registered on one or more other national securities exchange and are reported in the consolidated transaction reporting system. SECURITIES EXCHANGE ACT OF 1934 Release No. 34-26221/October 26, 1988 An order has been issued granting the application of the Philadelphia Stock Exchange, Inc. for unlisted trading privileges in the common stock of seven issues which are listed and registered on one or more other national securities exchange and are reported in the consolidated transaction reporting system. SECURITIES EXCHANGE ACT OF 1934 Self-Regulatory Organizations; Notice of Filing and Accelerated Approval of Proposed Rule Change by the American Stock Exchange, Inc. Relating to the Expansion of the Number of Component Stocks in the Oil and Gas Index. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934, 15 U.S.C. 78s(b)(1), notice is hereby given that on October 20, 1988 the American Stock Exchange, Inc. filed with the Securities and Exchange Commission the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the A notice has been issued giving interested per- proposed rule change from interested persons. 515 U.S.C. § 78f (1982). 615 U.S.C. § 78s(b)(2) (1982). 717 C.F.R. § 200.30-3(a)(12) (1988). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The American Stock Exchange, Inc. ("Amex" or "Exchange") proposes to expand to 16 the number of component stocks in its Oil Index ("XOI" or "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. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In September, 1983, the Exchange began trading options on the XOI, an industry index composed of 30 component securities known as the Oil and Gas Index. In September, 1984, the index was revised to delete companies engaged in gas exploration and production activities, reduce the number of component stocks to fifteen, and changed to a price-weighted index. It was renamed the Oil Index and the same symbol, XOI, has remained. The Sun Company ("Sun") has been a component stock of the XOI since its inception. Re is necessary to increase the number of component stocks from fifteen to sixteen. The Exchange will advise its membership of this change prior to its effective date via circulars and other communications. In addition, the Exchange requests the authority to add or delete component securities to maintain the continuity of the composition of the Index. The Amex believes the proposed change is consistent with Section 6(b)(5) of the Securities Exchange Act of 1934 ("Act") in that it will facilitate transactions in securities and protect investors and the public interest. Therefore, the Amex believes the proposed rule change is consistent with Section 6(b)(5) of the Act, which provides in pertinent part, that the rules of the Exchange be designed to promote just and equitable principles of trade and to protect the investing public. B. Self-Regulatory Organization's Statement on Burden on Competition The Amex believes that the proposed rule change will not impose a burden on competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received from Members, Participants, or Others The Options Committee, a committee of the Amex Board of Governors comprised of members and representatives of member firms, has endorsed the proposed rule change. No written comments were either solicited or received. cently, Sun announced that it will be spinning off III. Date of Effectiveness of the Proposed Rule the company's exploration and production unit to Change and Timing for Commission Action be called Sun Exploration Co. ("Sun Explora- The Amex has requested that the proposed rule tion"). Each shareholder of Sun will receive one change be given accelerated effectiveness purshare of Sun Exploration for each Sun share held. suant to Section 19(b)(2) of the Act so that the At the time of the spinoff, which is expected to Exchange can modify the Index and give approoccur on or about November 1, 1988, the Ex-priate notice to its membership before the effecchange proposes to add Sun Exploration as a tive date of the Sun Exploration spinoff, which is sixteenth component stock of the XOI. Since the currently scheduled to occur on or about November 1, 1988. pricing of the Index has historically reflected the value of the total assets of Sun before the spinoff, the inclusion of those same assets after the spinoff would appear advisable in order to maintain continuity in the pricing of the XOI. Therefore, it 1See Securities Exchange Act Release No. 21409 (October 19, 1984), 49 FR 43011. The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a securities exchange, and, in par |