SEC Gives Tentative OK to New Market Hedge : Securities: Leland O’Brien Rubinstein unveils a plan to bet on any one of four stock market scenarios.

The Los Angeles money management firm that introduced “portfolio insurance” to Wall Street in the 1980s is readying a major new stock market-hedging tool--this time for individuals as well as big investors.

Leland O’Brien Rubinstein Associates on Wednesday received tentative Securities and Exchange Commission approval for the firm’s SuperShares plan. If the SEC gives a final OK after a 30-day public comment period, the investments could begin trading in October.

The plan would allow individuals and institutions, in effect, to bet on any of four scenarios for the overall stock market. The plan begins with two tradable SuperUnit securities: one representing a basket of big stocks (the Standard & Poor’s 500), the other a basket of money market securities. Both portfolios would have three-year lives.

Investors then could split either SuperUnit into two tradable SuperShares, representing different ways of betting on the stock market’s trend over three years:

The stock SuperUnit (initial price: $100) could be split into one $90 share that bets on a moderate three-year gain in stock prices and one $10 share that bets on a sharp gain in prices. The former share would earn all dividends the stocks pay in the period, and up to 39% of the stocks’ appreciation. The latter share would earn any appreciation in the stocks beyond 39%.

The money market SuperUnit (initial price: $50) could be split into one $6 share that would appreciate if stock prices plunge and one $44 share that would bet on a flat market, while earning interest on money market securities.

Though the plan is complex, it’s a simple idea, said firm principal John O’Brien: The securities would permit someone to invest broadly in the stock market while also hedging, in varying degrees, against a weak or bear market.

Portfolio insurance, as created by the firm in the 1980s, allowed big money managers to hedge stock market positions via S&P; 500 stock-index futures contracts.

But many individual investors could not or would not use futures, Leland says. Also, futures are controversial because they aren’t actually backed by the S&P; 500 stocks. In contrast, SuperShares would represent actual ownership of the stocks or money market securities, O’Brien said.

The program must attract at least $2 billion to make it worth launching, O’Brien said. Salomon Bros. will lead the underwriting. The SuperUnits would trade on the American Stock Exchange, and the SuperShares would trade on the Chicago Board Options Exchange.