Self-Regulatory Organizations; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change by the American Stock Exchange LLC Relating to the Listing and Trading of Notes Linked to the Performance of the Dow Jones Industrial Average, 7129-7132 [E5-571]
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Federal Register / Vol. 70, No. 27 / Thursday, February 10, 2005 / Notices
necessary filings and paying any
associated fees to continue listing the
Security on the Exchange; and (iv) that
the Security currently trades on the
Over-the-Counter Market on the Pink
Sheets.
The Issuer stated in its application
that it has complied with BSE
procedures for delisting by filing the
required documents governing the
withdrawal of securities from listing
and registration on the BSE.
The Issuer’s application relates solely
to withdrawal of the Security from
listing on the BSE and from registration
under Section 12(b) of the Act,4 and
shall not affect its obligation to be
registered under Section 12(g) of the
Act.5
Any interested person may, on or
before March 1, 2005, comment on the
facts bearing upon whether the
application has been made in
accordance with the rules of the BSE,
and what terms, if any, should be
imposed by the Commission for the
protection of investors. All comment
letters may be submitted by either of the
following methods:
Electronic Comments
• Send an e-mail to rulecomments@sec.gov. Please include the
File Number 1–12451 or;
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
450 Fifth Street, NW., Washington, DC
20549–0609.
All submissions should refer to File
Number 1–12451. This file number
should be included on the subject line
if e-mail is used. To help us process and
review your comments more efficiently,
please use only one method. The
Commission will post all comments on
the Commission’s Internet Web site
(https://www.sec.gov/rules/delist.shtml).
Comments are also available for public
inspection and copying in the
Commission’s Public Reference Room.
All comments received will be posted
without change; we do not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly.
The Commission, based on the
information submitted to it, will issue
an order granting the application after
the date mentioned above, unless the
December 20, 2004, the Exchange granted the
request and extended the Issuer’s time to either
respond or voluntarily delist until January 14, 2005.
4 15 U.S.C. 78l(b).
5 15 U.S.C. 78l(g).
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Commission determines to order a
hearing on the matter.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.6
Jonathan G. Katz,
Secretary.
[FR Doc. E5–563 Filed 2–9–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51133; File No. SR–Amex–
2004–101]
Self-Regulatory Organizations; Notice
of Filing and Order Granting
Accelerated Approval of a Proposed
Rule Change by the American Stock
Exchange LLC Relating to the Listing
and Trading of Notes Linked to the
Performance of the Dow Jones
Industrial Average
February 3, 2005.
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
10, 2004, the American Stock Exchange
LLC (‘‘Amex’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I and II below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons and is approving the proposal
on an accelerated basis.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade under Section 107A of the Amex
Company Guide (‘‘Company Guide’’),
notes linked to the performance of the
Dow Jones Industrial Average (‘‘DJIA’’
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
Amex 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 III below. The Exchange has
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6 17
CFR 200.30–3(a)(1).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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7129
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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Under Section 107A of the Company
Guide, the Exchange may approve for
listing and trading securities that cannot
be readily categorized under the listing
criteria for common and preferred
stocks, bonds, debentures, or warrants.3
The Amex proposes to list for trading
under Section 107A of the Company
Guide notes issued by Citigroup, linked
to the performance of the DJIA (the
‘‘DJIA Notes’’ or ‘‘Notes’’).4 The DJIA is
determined, calculated and maintained
solely by Dow Jones.5 The Notes will
provide for a multiplier of 300%
(‘‘Upside Participation Rate’’) of any
positive performance of the DJIA during
such term subject to a maximum
payment amount or ceiling expected to
be 5.7%, which will be determined at
the time of issuance (‘‘Capped Value’’).6
3 See Securities Exchange Act Release No. 27753
(March 1, 1990), 55 FR 8626 (March 8, 1990) (order
approving File No. SR–Amex–89–29).
4 Citigroup Global Markets Holdings, Inc.
(‘‘Citigroup’’) and Dow Jones & Co. (‘‘Dow Jones’’)
have entered into a non-exclusive license agreement
providing for the use of the DJIA by Citigroup and
certain affiliates and subsidiaries in connection
with certain securities including these Notes. Dow
Jones is not responsible and will not participate in
the issuance and creation of the Notes.
5 The DJIA is a price-weighted index comprised
of 30 common stocks chosen by the editors of the
Wall Street Journal (‘‘WSJ’’) as representative of the
broad market of U.S. industry. A price-weighted
index refers to an index that assigns weights to
component stocks based on the price per share
rather than total market capitalization of such
component stock. The corporations represented in
the DJIA tend to be leaders within their respective
industries and their stocks are typically widely held
by individuals and institutional investors. Changes
in the composition of the DJIA are made solely by
the editors of the WSJ. In addition, changes to the
common stocks included in the DJIA tend to be
made infrequently with most substitutions the
result of mergers and other extraordinary corporate
actions. However, over time, changes are made to
more accurately represent the broad market of U.S.
industry. In choosing a new corporation for the
DJIA, the editors of the WSJ focus on the leading
industrial companies with a successful history of
growth and wide interest among investors. Dow
Jones, publisher of the WSJ, is not affiliated with
Citigroup and has not participated in any way in
the creation of the Notes. The number of common
stocks in the DJIA has remained at 30 since 1928,
and, in an effort to maintain continuity, the
constituent corporations represented in the DJIA
have been changed on a relatively infrequent basis.
6 Telephone conversation between Jeff Burns,
Associate General Counsel, Amex, and Florence E.
Harmon, Senior Special Counsel, Division of
Market Regulation (‘‘Division’’), SEC, dated January
31, 2005 (as to expected amount payable at maturity
under various scenarios).
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The Capped Value limits the portion of
any appreciation in the value of the
DJIA in which an investor can
participate to approximately 17.1% of
the principal amount of the Notes (e.g.,
a multiplier of 300% of the positive
performance of the Index subject to the
Capped Value of 5.7%). If the ending
value of the DJIA exceeds the starting
value by more than the expected
Capped Value of 5.7%, then the return
on the Notes will be limited to 17.1%;
thus, if the DJIA appreciates more that
17.1%, the return on the Notes will be
less than an investment in the
underlying stocks of the DJIA or a
similar security that was directly linked
to the DJIA but not subject to an
appreciation cap. However, for increases
in the value of the Index equal to or
greater than 5.7% and less than 17.1%,
the appreciation on the Notes will be
17.1%; thus, the Notes provide more
appreciation than an investment in an
instrument directly linked to the Index.
If the DJIA increases by less than 5.7%,
the appreciation on the Notes will equal
three (3) times the appreciation of an
investment in an instrument directly
linked to the Index; thus, the Notes will
again provide more appreciation than an
investment in an instrument directly
linked to the Index. If the DJIA
decreases during this period, however,
the value of the Notes will decline on
a one-to-one basis with the Index and
there is no floor on the depreciation.
The Notes will conform to the initial
listing guidelines under Section 107A 7
and continued listing guidelines under
Sections 1001–1003 8 of the Company
Guide. The Notes are senior nonconvertible debt securities of Citigroup.
The Notes will have a term of at least
one but no more than ten years.9 The
original public offering price will be $10
per Note. The Notes will entitle the
owner at maturity to receive an amount
based upon the percentage change of the
DJIA. The Notes will not have a
minimum principal amount that will be
repaid, and accordingly, payment on the
Notes prior to or at maturity may be less
than the original issue price of the
Notes.10 The Notes are also not callable
by the issuer, Citigroup, or redeemable
by the holder.
The payment that a holder or investor
of a Note will be entitled to receive (the
‘‘Redemption Amount’’) will depend on
the relation of the level of the DJIA at
the close of the market on a single
business day (the ‘‘Valuation Date’’)
shortly prior to maturity of the Notes
(the ‘‘Final Index Level’’) and the
closing value of the Index on the date
the Notes are priced for initial sale to
the public (the ‘‘Initial Index Level’’). If
there is a ‘‘market disruption event’’ 11
when determining the Final Index
Level, the Final Index Level maybe
deferred up to two (2) business days if
deemed appropriate by the calculation
agent.
If the percentage change of the Index
is positive (i.e., the Final Index Level is
greater than the Initial Index Level), the
Redemption Amount per Note will
equal:
Final Index Level − Initial Index Level
$10 + $10 ×
× Upside Partcipation Rate , not to exceed the Capped Value.
Initial Index Level
The Upside Participation Rate,
determined at the time of issuance, is
expected to be approximately 300%.
If the percentage change of the Index
is zero or negative (i.e., the Final Index
Level is less than or equal to the Initial
$10 + $10 ×
Index Level), the Redemption Amount
per Note will equal:
Final Index Level − Initial Index Level
Initial Index Level
on the Notes during such term. The
Commission has previously approved
the listing of securities and related
options linked to the performance of the
DJIA.12
7 Section 107A of the Amex Company Guide
requires: (1) A minimum public distribution of one
million units; (2) a minimum of 400 shareholders
because the Notes are issued in $10 denominations;
(3) a market value of at least $4 million; and (4) a
term of at least one year. In addition, the listing
guidelines provide that the issuer has assets in
excess of $100 million, stockholder’s equity of at
least $10 million, and pre-tax income of at least
$750,000 in the last fiscal year or in two of the three
prior fiscal years. In the case of an issuer that is
unable to satisfy the earning criteria stated in
Section 101 of the Company Guide, the Exchange
will require the issuer to have the following: (1)
assets in excess of $200 million and stockholders’
equity of at least $10 million; or (2) assets in excess
of $100 million and stockholders’ equity of at least
$20 million.
8 The Exchange’s continued listing guidelines are
set forth in Sections 1001 through 1003 of Part 10
to the Exchange’s Company Guide. Section 1002(b)
of the Company Guide states that the Exchange will
consider removing from listing any security where,
in the opinion of the Exchange, it appears that the
extent of public distribution or aggregate market
value has become so reduced to make further
dealings on the Exchange inadvisable. With respect
to continued listing guidelines for distribution of
the Notes, the Exchange will rely, in part, on the
guidelines for bonds in Section 1003(b)(iv). Section
1003(b)(iv)(A) provides that the Exchange will
normally consider suspending dealings in, or
removing from the list, a security if the aggregate
market value or the principal amount of bonds
publicly held is less than $400,000.
9 The term of the Notes is expected to be 21
months and will be disclosed in the pricing
supplement.
10 A negative return of the DJIA will reduce the
redemption amount at maturity with the potential
that the holder of the Note could lose his entire
investment amount.
11 A ‘‘market disruption event’’ is defined as (i)
the occurrence of a suspension, absence or material
limitation of trading of 20% or more of the
component stocks of the Index on the primary
market for more than two hours of trading or during
the one-half hour period preceding the close of the
principal trading session on such primary market;
(ii) a breakdown or failure in the price and trade
reporting systems of any primary market as a result
of which the reported trading prices for 20% or
more of the component stocks of the Index during
the last one-half hour preceding the close of the
principal trading session on such primary market
are materially inaccurate; and (iii) the suspension,
material limitation, or absence of trading on any
major securities market for trading in options
contracts, future contracts, or any options on such
futures contracts related to the Index for more than
two hours of trading or during the one-half hour
period preceding the close of the principal trading
session on such market.
12 See Securities Exchange Act Release Nos.
39011 (September 3, 1997), 62 FR 47840 (September
11, 1997) (approving the listing and trading of
options on the DJIA); 39525 (January 8, 1998), 63
FR 2438 (January 15, 1998) (approving the listing
and trading of DIAMONDS SM Trust Units, portfolio
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EN10fe05.001</MATH>
comprising the DJIA. The Notes are
designed for investors who want to
participate in or gain enhanced upside
exposure to the DJIA, subject to a cap,
and who are willing to forego principal
protection and market interest payments
EN10fe05.000</MATH>
The Notes are cash-settled in U.S.
dollars and do not give the holder any
right to receive a portfolio security,
dividend payments, or any other
ownership right or interest in the
portfolio or index of securities
Federal Register / Vol. 70, No. 27 / Thursday, February 10, 2005 / Notices
As of November 30, 2004, the market
capitalization of the securities included
in the DJIA ranged from a high of $373
billion to a low of $17.9 million.13 The
average daily trading volume for these
same securities for the last six months
ranged from a high of 67.123 million
shares to a low of 1.861 million shares.
The Index value will be widely
disseminated at least once every fifteen
seconds throughout the trading day.
Because the Notes are issued in $10
denominations, the Amex’s existing
equity floor trading rules will apply to
the trading of the Notes. First, pursuant
to Amex Rule 411, the Exchange will
impose a duty of due diligence on its
members and member firms to learn the
essential facts relating to every customer
prior to trading the Notes.14 Second, the
Notes will be subject to the equity
margin rules of the Exchange.15 Third,
the Exchange will, prior to trading the
Notes, distribute a circular to the
membership providing guidance with
regard to member firm compliance
responsibilities (including suitability
recommendations) when handling
transactions in the Notes and
highlighting the special risks and
characteristics of the Notes. With
respect to suitability recommendations
and risks, the Exchange will require
members, member organizations, and
employees thereof recommending a
transaction in the Notes: (i) To
determine that such transaction is
suitable for the customer, and (ii) to
have a reasonable basis for believing
that the customer can evaluate the
special characteristics of and is able to
bear the financial risks of such
transaction. In addition, Citigroup will
deliver a prospectus in connection with
initial sales of the Notes.
The Exchange represents that its
surveillance procedures are adequate to
properly monitor the trading of the
Notes. Specifically, the Amex will rely
on its existing surveillance procedures
governing equities, which have been
deemed adequate under the Act. In
addition, the Exchange also has a
general policy which prohibits the
depositary receipts based on the DJIA); 46883
(November 21, 2002), 67 FR 71216 (November 29,
2002) (approving the listing and trading of Market
Recovery Notes on the DJIA) and 49453 (March 19,
2004), 69 FR 15913 (March 26, 2004) (approving the
listing and Trading of Contingent Principal
Protection Notes Linked to the Performance of the
DJIA).
13 As reported by Dow Jones & Company at
https://www.averages.dowjones.com.
14 Amex Rule 411 requires that every member,
member firm or member corporation use due
diligence to learn the essential facts, relative to
every customer and to every order or account
accepted.
15 See Amex Rule 462 and Section 107B of the
Company Guide.
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distribution of material, non-public
information by its employees.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6 of the Act 16 in general and
furthers the objectives of Section
6(b)(5) 17 in particular in that it is
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities,
and to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system.
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
The Exchange did not receive any
written comments on the proposed rule
change.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form https://www.sec.gov/
rules/sro.shtml; or
• Send an E-mail to rulecomments@sec.gov. Please include SR–
Amex–2004–101 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
450 Fifth Street, NW., Washington, DC
20549–0609.
All submissions should refer to SR–
Amex–2004–101. This file number
should be included on the subject line
if e-mail is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site https://www.sec.gov/
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16 15
17 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00058
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7131
rules/sro.shtml. 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 20549. Copies of such
filing also will be available on the
Exchange’s Web site at https://
www.amex.com and for inspection and
copying at the principal office of the
Exchange. All comments received will
be posted without change; the
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to SR–Amex–2004–101 and
should be submitted on or before March
3, 2005.
IV. Commission’s Findings and Order
Granting Accelerated Approval of
Proposed Rule Change
After careful consideration, 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 national securities exchange, and,
in particular, with the requirements of
Section 6(b)(5) of the Act.18 The
Commission has approved the listing of
securities similar to that of the Notes.19
Accordingly, the Commission finds that
the listing and trading of the Notes
based on the DJIA is consistent with the
Act and will 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 transactions in
securities, and, in general, protect
investors and the public interest
consistent with Section 6(b)(5) of the
Act.20
The requirements in Section 107A in
the Company Guide were designed to
18 15
U.S.C. 78f(b)(5).
e.g., Securities Exchange Act Release No.
48152 (July 10, 2003), 68 FR 42435 (July 17, 2003)
(order approving File No. SR–Amex–2003–62);
48486 (September 11, 2003), 68 FR 54758
(September 18, 2003) (order approving File No. SR–
Amex–2003–74).
20 In approving the proposed rule, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
19 See
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address the special concerns attendant
to the trading of hybrid securities like
the Notes. For example, Section 107A of
the Company Guide provides that the
only issuers satisfying substantial asset
and equity requirements may issue
securities, such as the Notes. In
addition, the Exchange’s ‘‘Other
Securities’’ listing standards further
require that the Notes have a market
value of at least $4 million.21 By
imposing the hybrid listing standards,
suitability, disclosure, and compliance
requirements noted above, the
Commission believes that the Exchange
has addressed adequately the potential
problems that could arise from the
hybrid nature of the Notes.
In approving the products, the
Commission recognizes that the DJIA is
a price-weighted index comprised of 30
common stocks chosen by the editors of
the WSJ as representative of the broad
market of U.S. industry, with each stock
affecting the DJIA in proportion to its
market price. Given the large trading
volume and capitalization of
compositions of the stocks underlying
the DJIA, the Commission believes that
the listing and trading of the Notes that
are linked to the DJIA should not
unduly impact the market for the
underlying securities comprising the
DJIA or raise manipulative concerns.
Moreover, the issuers of the
underlying securities comprising the
DJIA, are subject to reporting
requirements under the Act, and all of
the component stocks are either listed or
traded on, or traded through the
facilities of U.S. securities markets.
The Commission also believes that
any concerns that a broker-dealer, such
as Citigroup, or a subsidiary providing
a hedge for the issuer, will incur undue
position exposure are minimized by the
size of the Notes issuance in relation to
the net worth of Citigroup.22
Finally, the Commission notes that
the value of the DJIA will be
disseminated at least once every fifteen
seconds throughout the trading day. The
21 The Commission also notes that the 30
component stocks that comprise the DJIA are
reporting companies under the Act, and the Notes
will be registered under Section 12 of the Act.
22 See Securities Exchange Act Release Nos.
44913 (October 9, 2001), 66 FR 52469 (October 15,
2001) (order approving the listing and trading of
notes whose return is based on the performance of
the Nasdaq-100 Index) (File No. SR–NASD–2001–
–73); 44483 (June 27, 2001), 66 FR 35677 (July 6,
2001) (order approving the listing and trading of
notes whose return is based on a portfolio of 20
securities selected from the Amex Institutional
Index) (File No. SR–Amex–2001–40); and 37744
(September 27, 1996), 61 FR 52480 (October 7,
1996) (order approving the listing and trading of
notes whose return is based on a weighted portfolio
of healthcare/biotechnology industry securities)
(File No. SR–Amex–96–27).
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V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,25 that the
proposed rule change (SR–Amex–2004–
101) is hereby approved on an
accelerated basis.
included in the exhibition ‘‘The Power
of Conversation: Jewish Women and
their Salons,’’ imported from abroad for
temporary exhibition within the United
States, are of cultural significance. The
objects are imported pursuant to loan
agreements with the foreign owners. I
also determine that the exhibition or
display of the exhibit objects at the
Jewish Museum, New York, NY, from
on or about March 4, 2005, to on or
about July 10, 2005; the McMullen
Museum, Boston College, Boston, MA,
from on or about August 22, 2005, to on
or about December 4, 2005, and at
possible additional venues yet to be
determined, is in the national interest.
Public Notice of these Determinations is
ordered to be published in the Federal
Register.
FOR FURTHER INFORMATION CONTACT: For
further information, including a list of
the exhibit objects, contact Julianne
Simpson, Attorney-Adviser, Office of
the Legal Adviser, U.S. Department of
State, (telephone: (202) 453–8049). The
address is U.S. Department of State, SA–
44, 301 4th Street, SW., Room 700,
Washington, DC 20547–0001.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.26
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–571 Filed 2–9–05; 8:45 am]
Dated: February 4, 2005.
C. Miller Crouch,
Principal Deputy Assistant Secretary for
Educational and Cultural Affairs, Department
of State.
[FR Doc. 05–2623 Filed 2–9–05; 8:45 am]
BILLING CODE 8010–01–P
BILLING CODE 4710–08–P
Exchange represents that the DJIA will
be determined, calculated, and
maintained by the editors of the WSJ.
The Exchange has requested and the
Commission finds good cause for
approving the proposed rule change
prior to the thirtieth day after the date
of publication of notice of filing thereof
in the Federal Register. The
Commission believes that the Notes will
provide investors with an additional
investment choice and that accelerated
approval of the proposal will allow
investors to begin trading the Notes
promptly. In addition, the Commission
notes that it has previously approved
the listing and trading of similar Notes
and other hybrid securities based on the
Index.23 Accordingly, the Commission
believes that there is good cause,
consistent with Sections 6(b)(5) and
19(b)(2) of the Act,24 to approve the
proposal, on an accelerated basis.
DEPARTMENT OF STATE
DEPARTMENT OF STATE
[Public Notice 4989]
[Public Notice 4990]
Culturally Significant Objects Imported
for Exhibition Determinations: ‘‘The
Power of Conversation: Jewish
Women and Their Salons’’
Notice is hereby given of the
following determinations: Pursuant to
the authority vested in me by the Act of
October 19, 1965 (79 Stat. 985; 22 U.S.C.
2459), Executive Order 12047 of March
27, 1978, the Foreign Affairs Reform and
Restructuring Act of 1998 (112 Stat.
2681, et seq.; 22 U.S.C. 6501 note, et
seq.), Delegation of Authority No. 234 of
October 1, 1999, Delegation of Authority
No. 236 of October 19, 1999, as
amended, and Delegation of Authority
No. 257 of April 15, 2003 [68 FR 19875],
I hereby determine that the objects to be
PO 00000
23 See
supra note 22.
U.S.C. 78f(b)(5) and 78s(b)(2).
25 15 U.S.C. 78s(b)(2).
26 17 CFR 200.30–3(a)(12).
24 15
Frm 00059
Fmt 4703
Sfmt 4703
Department of State.
Notice.
AGENCY:
ACTION:
Department of State.
ACTION: Notice.
AGENCY:
SUMMARY:
Culturally Significant Objects Imported
for Exhibition Determinations:
‘‘Thomas Demand’’
SUMMARY: Notice is hereby given of the
following determinations: Pursuant to
the authority vested in me by the Act of
October 19, 1965 (79 Stat. 985; 22 U.S.C.
2459), Executive Order 12047 of March
27, 1978, the Foreign Affairs Reform and
Restructuring Act of 1998 (112 Stat.
2681, et seq.; 22 U.S.C. 6501 note, et
seq.), Delegation of Authority No. 234 of
October 1, 1999, Delegation of Authority
No. 236 of October 19, 1999, as
amended, and Delegation of Authority
No. 257 of April 15, 2003 [68 FR 19875],
I hereby determine that the objects to be
included in the exhibition ‘‘Thomas
Demand,’’ imported from abroad for
temporary exhibition within the United
States, are of cultural significance. The
objects are imported pursuant to loan
agreements with the foreign owners. I
E:\FR\FM\10FEN1.SGM
10FEN1
]]>Agencies
[Federal Register Volume 70, Number 27 (Thursday, February 10, 2005)]
[Notices]
[Pages 7129-7132]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-571]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51133; File No. SR-Amex-2004-101]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of a Proposed Rule Change by the American
Stock Exchange LLC Relating to the Listing and Trading of Notes Linked
to the Performance of the Dow Jones Industrial Average
February 3, 2005.
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 10, 2004, the American Stock Exchange LLC (``Amex'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons and is approving the
proposal on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade under Section 107A of the
Amex Company Guide (``Company Guide''), notes linked to the performance
of the Dow Jones Industrial Average (``DJIA'' 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 Amex 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 III below. The Exchange 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Under Section 107A of the Company Guide, the Exchange may approve
for listing and trading securities that cannot be readily categorized
under the listing criteria for common and preferred stocks, bonds,
debentures, or warrants.\3\ The Amex proposes to list for trading under
Section 107A of the Company Guide notes issued by Citigroup, linked to
the performance of the DJIA (the ``DJIA Notes'' or ``Notes'').\4\ The
DJIA is determined, calculated and maintained solely by Dow Jones.\5\
The Notes will provide for a multiplier of 300% (``Upside Participation
Rate'') of any positive performance of the DJIA during such term
subject to a maximum payment amount or ceiling expected to be 5.7%,
which will be determined at the time of issuance (``Capped Value'').\6\
[[Page 7130]]
The Capped Value limits the portion of any appreciation in the value
of the DJIA in which an investor can participate to approximately 17.1%
of the principal amount of the Notes (e.g., a multiplier of 300% of the
positive performance of the Index subject to the Capped Value of 5.7%).
If the ending value of the DJIA exceeds the starting value by more than
the expected Capped Value of 5.7%, then the return on the Notes will be
limited to 17.1%; thus, if the DJIA appreciates more that 17.1%, the
return on the Notes will be less than an investment in the underlying
stocks of the DJIA or a similar security that was directly linked to
the DJIA but not subject to an appreciation cap. However, for increases
in the value of the Index equal to or greater than 5.7% and less than
17.1%, the appreciation on the Notes will be 17.1%; thus, the Notes
provide more appreciation than an investment in an instrument directly
linked to the Index. If the DJIA increases by less than 5.7%, the
appreciation on the Notes will equal three (3) times the appreciation
of an investment in an instrument directly linked to the Index; thus,
the Notes will again provide more appreciation than an investment in an
instrument directly linked to the Index. If the DJIA decreases during
this period, however, the value of the Notes will decline on a one-to-
one basis with the Index and there is no floor on the depreciation.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 27753 (March 1,
1990), 55 FR 8626 (March 8, 1990) (order approving File No. SR-Amex-
89-29).
\4\ Citigroup Global Markets Holdings, Inc. (``Citigroup'') and
Dow Jones & Co. (``Dow Jones'') have entered into a non-exclusive
license agreement providing for the use of the DJIA by Citigroup and
certain affiliates and subsidiaries in connection with certain
securities including these Notes. Dow Jones is not responsible and
will not participate in the issuance and creation of the Notes.
\5\ The DJIA is a price-weighted index comprised of 30 common
stocks chosen by the editors of the Wall Street Journal (``WSJ'') as
representative of the broad market of U.S. industry. A price-
weighted index refers to an index that assigns weights to component
stocks based on the price per share rather than total market
capitalization of such component stock. The corporations represented
in the DJIA tend to be leaders within their respective industries
and their stocks are typically widely held by individuals and
institutional investors. Changes in the composition of the DJIA are
made solely by the editors of the WSJ. In addition, changes to the
common stocks included in the DJIA tend to be made infrequently with
most substitutions the result of mergers and other extraordinary
corporate actions. However, over time, changes are made to more
accurately represent the broad market of U.S. industry. In choosing
a new corporation for the DJIA, the editors of the WSJ focus on the
leading industrial companies with a successful history of growth and
wide interest among investors. Dow Jones, publisher of the WSJ, is
not affiliated with Citigroup and has not participated in any way in
the creation of the Notes. The number of common stocks in the DJIA
has remained at 30 since 1928, and, in an effort to maintain
continuity, the constituent corporations represented in the DJIA
have been changed on a relatively infrequent basis.
\6\ Telephone conversation between Jeff Burns, Associate General
Counsel, Amex, and Florence E. Harmon, Senior Special Counsel,
Division of Market Regulation (``Division''), SEC, dated January 31,
2005 (as to expected amount payable at maturity under various
scenarios).
---------------------------------------------------------------------------
The Notes will conform to the initial listing guidelines under
Section 107A \7\ and continued listing guidelines under Sections 1001-
1003 \8\ of the Company Guide. The Notes are senior non-convertible
debt securities of Citigroup. The Notes will have a term of at least
one but no more than ten years.\9\ The original public offering price
will be $10 per Note. The Notes will entitle the owner at maturity to
receive an amount based upon the percentage change of the DJIA. The
Notes will not have a minimum principal amount that will be repaid, and
accordingly, payment on the Notes prior to or at maturity may be less
than the original issue price of the Notes.\10\ The Notes are also not
callable by the issuer, Citigroup, or redeemable by the holder.
---------------------------------------------------------------------------
\7\ Section 107A of the Amex Company Guide requires: (1) A
minimum public distribution of one million units; (2) a minimum of
400 shareholders because the Notes are issued in $10 denominations;
(3) a market value of at least $4 million; and (4) a term of at
least one year. In addition, the listing guidelines provide that the
issuer has assets in excess of $100 million, stockholder's equity of
at least $10 million, and pre-tax income of at least $750,000 in the
last fiscal year or in two of the three prior fiscal years. In the
case of an issuer that is unable to satisfy the earning criteria
stated in Section 101 of the Company Guide, the Exchange will
require the issuer to have the following: (1) assets in excess of
$200 million and stockholders' equity of at least $10 million; or
(2) assets in excess of $100 million and stockholders' equity of at
least $20 million.
\8\ The Exchange's continued listing guidelines are set forth in
Sections 1001 through 1003 of Part 10 to the Exchange's Company
Guide. Section 1002(b) of the Company Guide states that the Exchange
will consider removing from listing any security where, in the
opinion of the Exchange, it appears that the extent of public
distribution or aggregate market value has become so reduced to make
further dealings on the Exchange inadvisable. With respect to
continued listing guidelines for distribution of the Notes, the
Exchange will rely, in part, on the guidelines for bonds in Section
1003(b)(iv). Section 1003(b)(iv)(A) provides that the Exchange will
normally consider suspending dealings in, or removing from the list,
a security if the aggregate market value or the principal amount of
bonds publicly held is less than $400,000.
\9\ The term of the Notes is expected to be 21 months and will
be disclosed in the pricing supplement.
\10\ A negative return of the DJIA will reduce the redemption
amount at maturity with the potential that the holder of the Note
could lose his entire investment amount.
---------------------------------------------------------------------------
The payment that a holder or investor of a Note will be entitled to
receive (the ``Redemption Amount'') will depend on the relation of the
level of the DJIA at the close of the market on a single business day
(the ``Valuation Date'') shortly prior to maturity of the Notes (the
``Final Index Level'') and the closing value of the Index on the date
the Notes are priced for initial sale to the public (the ``Initial
Index Level''). If there is a ``market disruption event'' \11\ when
determining the Final Index Level, the Final Index Level maybe deferred
up to two (2) business days if deemed appropriate by the calculation
agent.
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\11\ A ``market disruption event'' is defined as (i) the
occurrence of a suspension, absence or material limitation of
trading of 20% or more of the component stocks of the Index on the
primary market for more than two hours of trading or during the one-
half hour period preceding the close of the principal trading
session on such primary market; (ii) a breakdown or failure in the
price and trade reporting systems of any primary market as a result
of which the reported trading prices for 20% or more of the
component stocks of the Index during the last one-half hour
preceding the close of the principal trading session on such primary
market are materially inaccurate; and (iii) the suspension, material
limitation, or absence of trading on any major securities market for
trading in options contracts, future contracts, or any options on
such futures contracts related to the Index for more than two hours
of trading or during the one-half hour period preceding the close of
the principal trading session on such market.
---------------------------------------------------------------------------
If the percentage change of the Index is positive (i.e., the Final
Index Level is greater than the Initial Index Level), the Redemption
Amount per Note will equal:
[GRAPHIC] [TIFF OMITTED] TN10FE05.000
The Upside Participation Rate, determined at the time of issuance,
is expected to be approximately 300%.
If the percentage change of the Index is zero or negative (i.e.,
the Final Index Level is less than or equal to the Initial Index
Level), the Redemption Amount per Note will equal:
[GRAPHIC] [TIFF OMITTED] TN10FE05.001
The Notes are cash-settled in U.S. dollars and do not give the
holder any right to receive a portfolio security, dividend payments, or
any other ownership right or interest in the portfolio or index of
securities comprising the DJIA. The Notes are designed for investors
who want to participate in or gain enhanced upside exposure to the
DJIA, subject to a cap, and who are willing to forego principal
protection and market interest payments on the Notes during such term.
The Commission has previously approved the listing of securities and
related options linked to the performance of the DJIA.\12\
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\12\ See Securities Exchange Act Release Nos. 39011 (September
3, 1997), 62 FR 47840 (September 11, 1997) (approving the listing
and trading of options on the DJIA); 39525 (January 8, 1998), 63 FR
2438 (January 15, 1998) (approving the listing and trading of
DIAMONDS SM Trust Units, portfolio depositary receipts
based on the DJIA); 46883 (November 21, 2002), 67 FR 71216 (November
29, 2002) (approving the listing and trading of Market Recovery
Notes on the DJIA) and 49453 (March 19, 2004), 69 FR 15913 (March
26, 2004) (approving the listing and Trading of Contingent Principal
Protection Notes Linked to the Performance of the DJIA).
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[[Page 7131]]
As of November 30, 2004, the market capitalization of the
securities included in the DJIA ranged from a high of $373 billion to a
low of $17.9 million.\13\ The average daily trading volume for these
same securities for the last six months ranged from a high of 67.123
million shares to a low of 1.861 million shares. The Index value will
be widely disseminated at least once every fifteen seconds throughout
the trading day.
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\13\ As reported by Dow Jones & Company at https://
www.averages.dowjones.com.
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Because the Notes are issued in $10 denominations, the Amex's
existing equity floor trading rules will apply to the trading of the
Notes. First, pursuant to Amex Rule 411, the Exchange will impose a
duty of due diligence on its members and member firms to learn the
essential facts relating to every customer prior to trading the
Notes.\14\ Second, the Notes will be subject to the equity margin rules
of the Exchange.\15\ Third, the Exchange will, prior to trading the
Notes, distribute a circular to the membership providing guidance with
regard to member firm compliance responsibilities (including
suitability recommendations) when handling transactions in the Notes
and highlighting the special risks and characteristics of the Notes.
With respect to suitability recommendations and risks, the Exchange
will require members, member organizations, and employees thereof
recommending a transaction in the Notes: (i) To determine that such
transaction is suitable for the customer, and (ii) to have a reasonable
basis for believing that the customer can evaluate the special
characteristics of and is able to bear the financial risks of such
transaction. In addition, Citigroup will deliver a prospectus in
connection with initial sales of the Notes.
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\14\ Amex Rule 411 requires that every member, member firm or
member corporation use due diligence to learn the essential facts,
relative to every customer and to every order or account accepted.
\15\ See Amex Rule 462 and Section 107B of the Company Guide.
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The Exchange represents that its surveillance procedures are
adequate to properly monitor the trading of the Notes. Specifically,
the Amex will rely on its existing surveillance procedures governing
equities, which have been deemed adequate under the Act. In addition,
the Exchange also has a general policy which prohibits the distribution
of material, non-public information by its employees.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6 of the Act \16\ in general and furthers the objectives
of Section 6(b)(5) \17\ in particular in that it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system.
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\16\ 15 U.S.C. 78f(b).
\17\ 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 burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange did not receive any written comments on the proposed
rule change.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form https://
www.sec.gov/rules/sro.shtml; or
Send an E-mail to rule-comments@sec.gov. Please include
SR-Amex-2004-101 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609.
All submissions should refer to SR-Amex-2004-101. This file number
should be included on the subject line if e-mail is used. To help the
Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's Internet Web site https://www.sec.gov/rules/sro.shtml.
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 20549. Copies of such filing also will be available on
the Exchange's Web site at https://www.amex.com and for inspection and
copying at the principal office of the Exchange. All comments received
will be posted without change; the Commission does not edit personal
identifying information from submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to SR-Amex-2004-101 and should be submitted on or before
March 3, 2005.
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
After careful consideration, 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 national securities
exchange, and, in particular, with the requirements of Section 6(b)(5)
of the Act.\18\ The Commission has approved the listing of securities
similar to that of the Notes.\19\ Accordingly, the Commission finds
that the listing and trading of the Notes based on the DJIA is
consistent with the Act and will 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 transactions in securities, and, in general, protect
investors and the public interest consistent with Section 6(b)(5) of
the Act.\20\
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\18\ 15 U.S.C. 78f(b)(5).
\19\ See e.g., Securities Exchange Act Release No. 48152 (July
10, 2003), 68 FR 42435 (July 17, 2003) (order approving File No. SR-
Amex-2003-62); 48486 (September 11, 2003), 68 FR 54758 (September
18, 2003) (order approving File No. SR-Amex-2003-74).
\20\ In approving the proposed rule, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------
The requirements in Section 107A in the Company Guide were designed
to
[[Page 7132]]
address the special concerns attendant to the trading of hybrid
securities like the Notes. For example, Section 107A of the Company
Guide provides that the only issuers satisfying substantial asset and
equity requirements may issue securities, such as the Notes. In
addition, the Exchange's ``Other Securities'' listing standards further
require that the Notes have a market value of at least $4 million.\21\
By imposing the hybrid listing standards, suitability, disclosure, and
compliance requirements noted above, the Commission believes that the
Exchange has addressed adequately the potential problems that could
arise from the hybrid nature of the Notes.
---------------------------------------------------------------------------
\21\ The Commission also notes that the 30 component stocks that
comprise the DJIA are reporting companies under the Act, and the
Notes will be registered under Section 12 of the Act.
---------------------------------------------------------------------------
In approving the products, the Commission recognizes that the DJIA
is a price-weighted index comprised of 30 common stocks chosen by the
editors of the WSJ as representative of the broad market of U.S.
industry, with each stock affecting the DJIA in proportion to its
market price. Given the large trading volume and capitalization of
compositions of the stocks underlying the DJIA, the Commission believes
that the listing and trading of the Notes that are linked to the DJIA
should not unduly impact the market for the underlying securities
comprising the DJIA or raise manipulative concerns.
Moreover, the issuers of the underlying securities comprising the
DJIA, are subject to reporting requirements under the Act, and all of
the component stocks are either listed or traded on, or traded through
the facilities of U.S. securities markets.
The Commission also believes that any concerns that a broker-
dealer, such as Citigroup, or a subsidiary providing a hedge for the
issuer, will incur undue position exposure are minimized by the size of
the Notes issuance in relation to the net worth of Citigroup.\22\
Finally, the Commission notes that the value of the DJIA will be
disseminated at least once every fifteen seconds throughout the trading
day. The Exchange represents that the DJIA will be determined,
calculated, and maintained by the editors of the WSJ.
---------------------------------------------------------------------------
\22\ See Securities Exchange Act Release Nos. 44913 (October 9,
2001), 66 FR 52469 (October 15, 2001) (order approving the listing
and trading of notes whose return is based on the performance of the
Nasdaq-100 Index) (File No. SR-NASD-2001--73); 44483 (June 27,
2001), 66 FR 35677 (July 6, 2001) (order approving the listing and
trading of notes whose return is based on a portfolio of 20
securities selected from the Amex Institutional Index) (File No. SR-
Amex-2001-40); and 37744 (September 27, 1996), 61 FR 52480 (October
7, 1996) (order approving the listing and trading of notes whose
return is based on a weighted portfolio of healthcare/biotechnology
industry securities) (File No. SR-Amex-96-27).
---------------------------------------------------------------------------
The Exchange has requested and the Commission finds good cause for
approving the proposed rule change prior to the thirtieth day after the
date of publication of notice of filing thereof in the Federal
Register. The Commission believes that the Notes will provide investors
with an additional investment choice and that accelerated approval of
the proposal will allow investors to begin trading the Notes promptly.
In addition, the Commission notes that it has previously approved the
listing and trading of similar Notes and other hybrid securities based
on the Index.\23\ Accordingly, the Commission believes that there is
good cause, consistent with Sections 6(b)(5) and 19(b)(2) of the
Act,\24\ to approve the proposal, on an accelerated basis.
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\23\ See supra note 22.
\24\ 15 U.S.C. 78f(b)(5) and 78s(b)(2).24
---------------------------------------------------------------------------
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\25\ that the proposed rule change (SR-Amex-2004-101) is hereby
approved on an accelerated basis.
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\25\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\26\
Margaret H. McFarland,
Deputy Secretary.
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\26\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E5-571 Filed 2-9-05; 8:45 am]
BILLING CODE 8010-01-P
