Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1 and 2 Thereto, Relating to Certain Modifications to the Initial Listing Standards for Index-Linked Securities, Commodity-Linked Securities, and Currency-Linked Securities, 3765-3767 [E8-996]
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Federal Register / Vol. 73, No. 14 / Tuesday, January 22, 2008 / Notices
investing in such products and
competition in the market for Index
Securities, while maintaining
transparency of the underlying
components comprising an index. As
such, the Commission believes it is
reasonable and consistent with the Act
for the Exchange to eliminate the 331⁄3%
requirement from the listing standards
for Index Securities in the manner
described in the proposal.
The Commission finds good cause for
approving the proposed rule change
before the 30th day after the date of
publication of notice of filing thereof in
the Federal Register. With respect to the
Exchange’s proposals to: (i) Eliminate
the requirement that an eligible index
for Index Securities be calculated and
weighted following a specified
methodology; (ii) provide that indexes
based on the equal-dollar or modified
equal-dollar weighting methods be
rebalanced semi-annually rather than
quarterly, as is currently the case; and
(iii) eliminate the continued listing
requirement prohibiting an index from
increasing or decreasing by more than
331⁄3% from the number of index
components initially listed rule change,
the Commission notes that it has
recently approved substantially similar
proposals for other national securities
exchanges.21 The Commission does not
believe that these proposals raise any
novel regulatory issues. Therefore, the
Commission finds good cause,
consistent with section 19(b)(2) of the
Act,22 to approve the proposed rule
change on an accelerated basis.
V. Conclusion
It is therefore ordered, pursuant to
section 19(b)(2) of the Act,23 that the
proposed rule change (SR–Amex–2007–
137), as modified by Amendment No. 1,
be, and it hereby is, approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–995 Filed 1–18–08; 8:45 am]
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BILLING CODE 8011–01–P
21 See
supra notes 12 and 14.
U.S.C. 78s(b)(2).
23 15 U.S.C. 78s(b)(2).
24 17 CFR 200.30–3(a)(12).
22 15
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57150; File No. SR–Amex–
2007–130]
Self-Regulatory Organizations;
American Stock Exchange LLC; Notice
of Filing and Order Granting
Accelerated Approval of a Proposed
Rule Change, as Modified by
Amendment Nos. 1 and 2 Thereto,
Relating to Certain Modifications to the
Initial Listing Standards for IndexLinked Securities, Commodity-Linked
Securities, and Currency-Linked
Securities
January 15, 2008.
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 November
30, 2007, the American Stock Exchange
LLC (‘‘Amex’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been substantially prepared by the
Exchange. On December 5, 2007, the
Exchange filed Amendment No. 1 to the
proposed rule change. On December 21,
2007, the Exchange filed Amendment
No. 2 to the proposed rule change. This
order provides notice of the proposed
rule change, as amended, and approves
the proposed rule change, as modified
by Amendment Nos. 1 and 2 thereto, on
an accelerated basis.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
sections 107D, 107E, and 107F of the
Amex Company Guide to revise the
initial listing standards applicable to
Index-Linked Securities, CommodityLinked Securities, and Currency-Linked
Securities (collectively, the ‘‘Section
107 Securities’’),3 respectively. In
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Index-Linked Securities are securities that
provide for the payment at maturity of a cash
amount based on the performance of an underlying
index or indexes of equity securities (‘‘Underlying
Index’’). See Section 107D of the Amex Company
Guide. Commodity-Linked Securities are securities
that provide for the payment at maturity of a cash
amount based on the performance of one or more
physical commodities or commodity futures,
options or other commodity derivatives or
Commodity-Based Trust Shares (as defined in
Amex Rule 1200A), or a basket or index of any of
the foregoing (‘‘Commodity Reference Asset’’). See
Section 107E of the Amex Company Guide.
Currency-Linked Securities are securities that
provide for the payment at maturity of a cash
amount based on the performance of one or more
currencies, or options or currency futures or other
2 17
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3765
addition, the Exchange proposes a
conforming revision to Commentary .05
to Amex Rule 411 to apply the
suitability standard to all derivative
securities that seek investment results
based on a multiple of the direct or
inverse performance of an underlying
asset. The text of the proposed rule
change is available at the Exchange, the
Commission’s Public Reference Room,
and https://www.amex.com.
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
Exchange 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
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
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend the generic listing
standards of sections 107D, 107E, and
107F of the Amex Company Guide so
that section 107 Securities may be listed
where the positive and/or negative
payment at maturity may be accelerated
by a multiple of the performance of the
underlying Reference Asset. The
Exchange believes that liberalizing the
existing listing criteria for section 107
Securities will benefit the marketplace
and investors by providing additional
risk/return alternative structures.
Sections 107D, 107E, and 107F of the
Amex Company Guide set forth the
generic listing standards that permit the
Exchange to list and trade Index-Linked
Securities, Commodity-Linked
Securities, and Currency-Linked
Securities, respectively, pursuant to
Rule 19b–4(e) under the Act.4 Currently,
currency derivatives or Currency Trust Shares (as
defined in Amex Rule 1200B), or a basket or index
of any of the foregoing (‘‘Currency Reference
Asset,’’ and, together with the Underlying Index
and Commodity Reference Asset, collectively, the
‘‘Reference Asset’’). See Section 107F of the Amex
Company Guide.
4 See 17 CFR 240.19b–4(e). Rule 19b–4(e)
provides that the listing and trading of a new
derivative securities product by a self-regulatory
organization (‘‘SRO’’) shall not be deemed a
proposed rule change, pursuant to paragraph (c)(1)
of Rule 19b–4, if the Commission has approved,
E:\FR\FM\22JAN1.SGM
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22JAN1
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sroberts on PROD1PC70 with NOTICES
the respective generic listing standards
for such securities state, among other
requirements, that the payment at
maturity may or may not provide for a
multiple of the positive performance of
the applicable underlying Reference
Asset, and in no event may payment at
maturity be based on a multiple of the
negative performance of the applicable
underlying Reference Asset.
Amex seeks to clarify and amend the
generic listing standards for each of the
section 107 Securities such that, with
respect to the listing and trading of an
issue of such securities pursuant to Rule
19b–4(e): (1) The payment at maturity
may or may not provide for a multiple
of the direct or inverse performance of
the applicable Reference Asset; and (2)
in no event may a loss or negative
payment at maturity be accelerated by a
multiple that exceeds twice the
performance of the applicable Reference
Asset. The Exchange believes that the
current restriction in the generic listing
standards for each of the section 107
Securities is unnecessarily limiting,
given the changes in the market for
these securities and the demand for
differing structures. In addition, the
Exchange notes that certain exchangetraded funds (‘‘ETFs’’) seeking to
provide (a) investment results that
correspond to or exceed twice (200%)
the direct performance of a specified
stock index, or (b) investment results
that correspond to twice (¥200%) the
inverse or opposite of the index’s
performance, are currently listed and
traded on the Exchange.5
The Exchange also seeks to amend
Commentary .05 to Amex Rule 411
(Duty to Know and Approve
Customers). Section 107 Securities are
subject to the general eligibility or
suitability requirements existing for all
products listed and traded on Amex, as
set forth in Amex Rule 411. The
Exchange specifically seeks to apply
pursuant to Section 19(b) of the Act, the SRO’s
trading rules, procedures, and listing standards for
the product class that would include the new
derivatives securities product, and the SRO has a
surveillance program for the product class.
5 See, e.g., Securities Exchange Act Release Nos.
52553 (October 3, 2005), 70 FR 59100 (October 11,
2005) (SR–Amex–2004–62) (approving the listing
and trading of shares of the xtraShares Trust); 54040
(June 23, 2006), 71 FR 37629 (June 30, 2006) (SR–
Amex–2006–41) (approving the listing and trading
of shares of the ProShares Trust); 55117 (January 17,
2007), 72 FR 3442 (January 25, 2007) (SR–Amex–
2006–101) (approving the listing and trading of
shares of the ProShares Trust based on various
sector indexes); 56592 (October 1, 2007), 72 FR
57364 (October 9, 2007) (SR–Amex–2007–60)
(approving the listing and trading of shares of the
ProShares Trust based on various international
equity indexes); and 56713 (October 29, 2007), 72
FR 61915 (November 1, 2007) (SR–Amex–2007–74)
(approving the listing and trading of shares of funds
of the Rydex ETF Trust).
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Commentary .05 to Amex Rule 411 to all
section 107 Securities that seek
investment results based on a multiple
of the direct or inverse performance of
an underlying Reference Asset.
Currently, Commentary .05 to Amex
Rule 411 is limited to Index Fund
Shares, listed pursuant to Amex Rule
1000A(b)(2), that seek to provide
investment results that either exceed the
performance of a specified foreign or
domestic stock index by a specified
multiple or that correspond to the
inverse (opposite) of the performance of
such index by a specified multiple. The
proposed revision would apply
Commentary .05 to Amex Rule 411 to all
derivative securities, including IndexLinked Securities, Commodity-Linked
Securities, and Currency-Linked
Securities, that seek to provide
investment results that either exceed the
performance of an underlying reference
asset by a specified multiple or that
correspond to the inverse (opposite) of
the performance of an underlying
reference asset by a specified multiple.
Prior to commencement of trading,
the Exchange will issue an Information
Circular to its members and member
organizations providing guidance with
regard to member firm compliance
responsibilities (including suitability
obligations) when effecting transactions
in section 107 Securities that seek
investment results based on a multiple
of the direct or inverse performance of
an underlying Reference Asset and
highlighting the special risks and
characteristics of the securities and
applicable Exchange rules. This
Information Circular will set forth the
requirements relating to Commentary
.05 to Amex Rule 411. Specifically, the
Information Circular will remind
members of their obligations in
recommending transactions in the
securities so that members have a
reasonable basis to believe that (1) the
recommendation is suitable for a
customer given reasonable inquiry
concerning the customer’s investment
objectives, financial situation and
needs, and any other information
known by such member, and (2) the
customer can evaluate the special
characteristics, and is able to bear the
financial risks, of such investment. In
connection with the suitability
obligation, the Information Circular will
also provide that members make
reasonable efforts to obtain the
following information: (1) The
customer’s financial status; (2) the
customer’s tax status; (3) the customer’s
investment objectives; and (4) such
other information used or considered to
be reasonable by such member or
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
registered representative in making
recommendations to the customer.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,6 in general, and
furthers the objectives of Section 6(b)(5)
of the Act,7 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 believes the proposed
rule change will impose no 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 states that no written
comments were solicited or received
with respect to the proposed rule
change.
III. 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 File
Number SR–Amex–2007–130 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–Amex–2007–130. This file
number should be included on the
subject line if e-mail is used. To help the
Commission process and review your
6 15
7 15
E:\FR\FM\22JAN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
22JAN1
Federal Register / Vol. 73, No. 14 / Tuesday, January 22, 2008 / Notices
sroberts on PROD1PC70 with NOTICES
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
Room, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
Copies of such filing also will be
available 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 File
Number SR–Amex–2007–130 and
should be submitted on or before
February 12, 2008.
IV. Commission’s Findings and Order
Granting Accelerated Approval of the
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.8 In
particular, the Commission finds that
the proposed rule change is consistent
with section 6(b)(5) of the Act,9 which
requires that the rules of a national
securities exchange be designed, among
other things, 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.
The Commission believes that the
Exchange’s proposal is consistent with
the Act, and, in particular, reasonably
balances the removal of impediments to
a free and open market with the
protection of investors and the public
interest, two principles set forth in
section 6(b)(5) of the Act. The
8 In approving this rule change, the Commission
notes that it has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
9 15 U.S.C. 78f(b)(5).
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20:38 Jan 18, 2008
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Commission notes that a variety of
exchange-traded funds seeking to
provide (a) investment results that
correspond to or exceed twice (200%)
the direct performance of a specified
stock index, or (b) investment results
that correspond to twice (¥200%) the
inverse or opposite of the index’s
performance, are currently listed and
traded on the Exchange.10 In addition,
the Commission further believes that
heightened suitability standards are
appropriate for derivative securities
products, including section 107
Securities, that seek to provide
investment results that correspond to
the direct or inverse performance of an
underlying reference asset by a specified
multiple and allow for a loss or negative
payment at maturity to be accelerated by
a specified multiple. Before
recommending transactions in these
types of leveraged products, Exchange
members must have a reasonable basis
to believe that the customer can
evaluate the special characteristics, and
is able to bear the financial risks, of
such investment. The Commission
expects the Exchange to continue to
monitor the application of its suitability
requirements, including those under
Commentary .05 to Amex Rule 411, as
proposed.
The Commission finds good cause for
approving the proposed rule change
prior to the thirtieth day after the date
of publication of notice thereof in the
Federal Register. The Commission notes
that it has approved identical revisions
to the initial listing standards for the
same type of derivative securities
products, as proposed by another
national securities exchange.11 With
respect to the revisions to Commentary
.05 to Amex Rule 411, the Commission
believes that the proposal strengthens
the suitability standards and raises no
new regulatory issues. Accordingly, the
Commission finds good cause for
approving the proposal on an
accelerated basis, pursuant to section
19(b)(2) of the Act.
VI. Conclusion
It is therefore ordered, pursuant to
section 19(b)(2) of the Act,12 that the
10 See
supra note 5 and accompanying text.
11 See Securities Exchange Act Release No. 57149
(January 15, 2008) (SR–NYSEArca–2007–122)
(approving the proposal to make substantively
identical revisions to the initial listing standards for
Index-Linked Securities listed and/or traded on
NYSE Arca, Inc. (‘‘NYSE Arca’’)). See also
Securities Exchange Act Release No. 56907
(December 5, 2007), 72 FR 70640 (December 12,
2007) (SR–NYSEArca–2007–122) (providing notice
of the proposal to make substantively identical
revisions to the initial listing standards for IndexLinked Securities listed and/or traded on NYSE
Arca).
12 15 U.S.C. 78s(b)(2).
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Fmt 4703
Sfmt 4703
3767
proposed rule change (SR–Amex–2007–
130), as modified by Amendment Nos.
1 and 2 thereto, be, and it hereby is,
approved on an accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–996 Filed 1–18–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57152; File No. SR–BSE–
2007–55]
Self-Regulatory Organizations; Boston
Stock Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change and
Amendment No. 1 Thereto Relating to
Exchange Fees and Charges To Be
Assessed in Connection With the
Implementation of an Electronic
Registration Process
January 15, 2008.
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
21, 2007, the Boston Stock Exchange,
Inc. (‘‘BSE’’ 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 substantially by the
Exchange. On January 11, 2008, BSE
filed Amendment No. 1 to the proposed
rule change. BSE has designated this
proposal as one establishing or changing
a member due, fee, or other charge
imposed by the Exchange under section
19(b)(3)(A)(ii) of the Act 3 and Rule 19b–
4(f)(2) thereunder,4 which renders the
proposal effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change,
as amended, from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The BSE proposes to amend the BSE
Fee Schedule and the Boston Options
Exchange (‘‘BOX’’) Fee Schedule in
order to adopt certain fees to be charged
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
1 15
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22JAN1
]]>Agencies
[Federal Register Volume 73, Number 14 (Tuesday, January 22, 2008)]
[Notices]
[Pages 3765-3767]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-996]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57150; File No. SR-Amex-2007-130]
Self-Regulatory Organizations; American Stock Exchange LLC;
Notice of Filing and Order Granting Accelerated Approval of a Proposed
Rule Change, as Modified by Amendment Nos. 1 and 2 Thereto, Relating to
Certain Modifications to the Initial Listing Standards for Index-Linked
Securities, Commodity-Linked Securities, and Currency-Linked Securities
January 15, 2008.
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 November 30, 2007, the American Stock Exchange LLC (``Amex'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been substantially prepared by the Exchange.
On December 5, 2007, the Exchange filed Amendment No. 1 to the proposed
rule change. On December 21, 2007, the Exchange filed Amendment No. 2
to the proposed rule change. This order provides notice of the proposed
rule change, as amended, and approves the proposed rule change, as
modified by Amendment Nos. 1 and 2 thereto, on an accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend sections 107D, 107E, and 107F of the
Amex Company Guide to revise the initial listing standards applicable
to Index-Linked Securities, Commodity-Linked Securities, and Currency-
Linked Securities (collectively, the ``Section 107 Securities''),\3\
respectively. In addition, the Exchange proposes a conforming revision
to Commentary .05 to Amex Rule 411 to apply the suitability standard to
all derivative securities that seek investment results based on a
multiple of the direct or inverse performance of an underlying asset.
The text of the proposed rule change is available at the Exchange, the
Commission's Public Reference Room, and https://www.amex.com.
---------------------------------------------------------------------------
\3\ Index-Linked Securities are securities that provide for the
payment at maturity of a cash amount based on the performance of an
underlying index or indexes of equity securities (``Underlying
Index''). See Section 107D of the Amex Company Guide. Commodity-
Linked Securities are securities that provide for the payment at
maturity of a cash amount based on the performance of one or more
physical commodities or commodity futures, options or other
commodity derivatives or Commodity-Based Trust Shares (as defined in
Amex Rule 1200A), or a basket or index of any of the foregoing
(``Commodity Reference Asset''). See Section 107E of the Amex
Company Guide. Currency-Linked Securities are securities that
provide for the payment at maturity of a cash amount based on the
performance of one or more currencies, or options or currency
futures or other currency derivatives or Currency Trust Shares (as
defined in Amex Rule 1200B), or a basket or index of any of the
foregoing (``Currency Reference Asset,'' and, together with the
Underlying Index and Commodity Reference Asset, collectively, the
``Reference Asset''). See Section 107F of the Amex Company Guide.
---------------------------------------------------------------------------
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 Exchange 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 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the generic
listing standards of sections 107D, 107E, and 107F of the Amex Company
Guide so that section 107 Securities may be listed where the positive
and/or negative payment at maturity may be accelerated by a multiple of
the performance of the underlying Reference Asset. The Exchange
believes that liberalizing the existing listing criteria for section
107 Securities will benefit the marketplace and investors by providing
additional risk/return alternative structures.
Sections 107D, 107E, and 107F of the Amex Company Guide set forth
the generic listing standards that permit the Exchange to list and
trade Index-Linked Securities, Commodity-Linked Securities, and
Currency-Linked Securities, respectively, pursuant to Rule 19b-4(e)
under the Act.\4\ Currently,
[[Page 3766]]
the respective generic listing standards for such securities state,
among other requirements, that the payment at maturity may or may not
provide for a multiple of the positive performance of the applicable
underlying Reference Asset, and in no event may payment at maturity be
based on a multiple of the negative performance of the applicable
underlying Reference Asset.
---------------------------------------------------------------------------
\4\ See 17 CFR 240.19b-4(e). Rule 19b-4(e) provides that the
listing and trading of a new derivative securities product by a
self-regulatory organization (``SRO'') shall not be deemed a
proposed rule change, pursuant to paragraph (c)(1) of Rule 19b-4, if
the Commission has approved, pursuant to Section 19(b) of the Act,
the SRO's trading rules, procedures, and listing standards for the
product class that would include the new derivatives securities
product, and the SRO has a surveillance program for the product
class.
---------------------------------------------------------------------------
Amex seeks to clarify and amend the generic listing standards for
each of the section 107 Securities such that, with respect to the
listing and trading of an issue of such securities pursuant to Rule
19b-4(e): (1) The payment at maturity may or may not provide for a
multiple of the direct or inverse performance of the applicable
Reference Asset; and (2) in no event may a loss or negative payment at
maturity be accelerated by a multiple that exceeds twice the
performance of the applicable Reference Asset. The Exchange believes
that the current restriction in the generic listing standards for each
of the section 107 Securities is unnecessarily limiting, given the
changes in the market for these securities and the demand for differing
structures. In addition, the Exchange notes that certain exchange-
traded funds (``ETFs'') seeking to provide (a) investment results that
correspond to or exceed twice (200%) the direct performance of a
specified stock index, or (b) investment results that correspond to
twice (-200%) the inverse or opposite of the index's performance, are
currently listed and traded on the Exchange.\5\
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\5\ See, e.g., Securities Exchange Act Release Nos. 52553
(October 3, 2005), 70 FR 59100 (October 11, 2005) (SR-Amex-2004-62)
(approving the listing and trading of shares of the xtraShares
Trust); 54040 (June 23, 2006), 71 FR 37629 (June 30, 2006) (SR-Amex-
2006-41) (approving the listing and trading of shares of the
ProShares Trust); 55117 (January 17, 2007), 72 FR 3442 (January 25,
2007) (SR-Amex-2006-101) (approving the listing and trading of
shares of the ProShares Trust based on various sector indexes);
56592 (October 1, 2007), 72 FR 57364 (October 9, 2007) (SR-Amex-
2007-60) (approving the listing and trading of shares of the
ProShares Trust based on various international equity indexes); and
56713 (October 29, 2007), 72 FR 61915 (November 1, 2007) (SR-Amex-
2007-74) (approving the listing and trading of shares of funds of
the Rydex ETF Trust).
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The Exchange also seeks to amend Commentary .05 to Amex Rule 411
(Duty to Know and Approve Customers). Section 107 Securities are
subject to the general eligibility or suitability requirements existing
for all products listed and traded on Amex, as set forth in Amex Rule
411. The Exchange specifically seeks to apply Commentary .05 to Amex
Rule 411 to all section 107 Securities that seek investment results
based on a multiple of the direct or inverse performance of an
underlying Reference Asset.
Currently, Commentary .05 to Amex Rule 411 is limited to Index Fund
Shares, listed pursuant to Amex Rule 1000A(b)(2), that seek to provide
investment results that either exceed the performance of a specified
foreign or domestic stock index by a specified multiple or that
correspond to the inverse (opposite) of the performance of such index
by a specified multiple. The proposed revision would apply Commentary
.05 to Amex Rule 411 to all derivative securities, including Index-
Linked Securities, Commodity-Linked Securities, and Currency-Linked
Securities, that seek to provide investment results that either exceed
the performance of an underlying reference asset by a specified
multiple or that correspond to the inverse (opposite) of the
performance of an underlying reference asset by a specified multiple.
Prior to commencement of trading, the Exchange will issue an
Information Circular to its members and member organizations providing
guidance with regard to member firm compliance responsibilities
(including suitability obligations) when effecting transactions in
section 107 Securities that seek investment results based on a multiple
of the direct or inverse performance of an underlying Reference Asset
and highlighting the special risks and characteristics of the
securities and applicable Exchange rules. This Information Circular
will set forth the requirements relating to Commentary .05 to Amex Rule
411. Specifically, the Information Circular will remind members of
their obligations in recommending transactions in the securities so
that members have a reasonable basis to believe that (1) the
recommendation is suitable for a customer given reasonable inquiry
concerning the customer's investment objectives, financial situation
and needs, and any other information known by such member, and (2) the
customer can evaluate the special characteristics, and is able to bear
the financial risks, of such investment. In connection with the
suitability obligation, the Information Circular will also provide that
members make reasonable efforts to obtain the following information:
(1) The customer's financial status; (2) the customer's tax status; (3)
the customer's investment objectives; and (4) such other information
used or considered to be reasonable by such member or registered
representative in making recommendations to the customer.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\6\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\7\ 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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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes the proposed rule change will impose no
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 states that no written comments were solicited or
received with respect to the proposed rule change.
III. 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
File Number SR-Amex-2007-130 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-Amex-2007-130. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your
[[Page 3767]]
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 Room, 100 F Street, NE., Washington, DC 20549, on official
business days between the hours of 10 a.m. and 3 p.m. Copies of such
filing also will be available 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
File Number SR-Amex-2007-130 and should be submitted on or before
February 12, 2008.
IV. Commission's Findings and Order Granting Accelerated Approval of
the 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.\8\ In particular, the Commission finds that the proposed rule
change is consistent with section 6(b)(5) of the Act,\9\ which requires
that the rules of a national securities exchange be designed, among
other things, 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.
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\8\ In approving this rule change, the Commission notes that it
has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\9\ 15 U.S.C. 78f(b)(5).
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The Commission believes that the Exchange's proposal is consistent
with the Act, and, in particular, reasonably balances the removal of
impediments to a free and open market with the protection of investors
and the public interest, two principles set forth in section 6(b)(5) of
the Act. The Commission notes that a variety of exchange-traded funds
seeking to provide (a) investment results that correspond to or exceed
twice (200%) the direct performance of a specified stock index, or (b)
investment results that correspond to twice (-200%) the inverse or
opposite of the index's performance, are currently listed and traded on
the Exchange.\10\ In addition, the Commission further believes that
heightened suitability standards are appropriate for derivative
securities products, including section 107 Securities, that seek to
provide investment results that correspond to the direct or inverse
performance of an underlying reference asset by a specified multiple
and allow for a loss or negative payment at maturity to be accelerated
by a specified multiple. Before recommending transactions in these
types of leveraged products, Exchange members must have a reasonable
basis to believe that the customer can evaluate the special
characteristics, and is able to bear the financial risks, of such
investment. The Commission expects the Exchange to continue to monitor
the application of its suitability requirements, including those under
Commentary .05 to Amex Rule 411, as proposed.
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\10\ See supra note 5 and accompanying text.
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The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of publication of
notice thereof in the Federal Register. The Commission notes that it
has approved identical revisions to the initial listing standards for
the same type of derivative securities products, as proposed by another
national securities exchange.\11\ With respect to the revisions to
Commentary .05 to Amex Rule 411, the Commission believes that the
proposal strengthens the suitability standards and raises no new
regulatory issues. Accordingly, the Commission finds good cause for
approving the proposal on an accelerated basis, pursuant to section
19(b)(2) of the Act.
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\11\ See Securities Exchange Act Release No. 57149 (January 15,
2008) (SR-NYSEArca-2007-122) (approving the proposal to make
substantively identical revisions to the initial listing standards
for Index-Linked Securities listed and/or traded on NYSE Arca, Inc.
(``NYSE Arca'')). See also Securities Exchange Act Release No. 56907
(December 5, 2007), 72 FR 70640 (December 12, 2007) (SR-NYSEArca-
2007-122) (providing notice of the proposal to make substantively
identical revisions to the initial listing standards for Index-
Linked Securities listed and/or traded on NYSE Arca).
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VI. Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\12\ that the proposed rule change (SR-Amex-2007-130), as modified
by Amendment Nos. 1 and 2 thereto, be, and it hereby is, approved on an
accelerated basis.
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\12\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-996 Filed 1-18-08; 8:45 am]
BILLING CODE 8011-01-P
