Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto To Adopt Listing Rules for Fixed Income-Linked Securities, Futures-Linked Securities, and Combination-Linked Securities, 16395-16399 [E8-6249]
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Federal Register / Vol. 73, No. 60 / Thursday, March 27, 2008 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57539; File No. SR–Amex–
2008–17]
Self-Regulatory Organizations;
American Stock Exchange LLC; Notice
of Filing of Proposed Rule Change and
Amendment No. 1 Thereto To Adopt
Listing Rules for Fixed Income-Linked
Securities, Futures-Linked Securities,
and Combination-Linked Securities
March 20, 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 February
29, 2008, 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, II, and III below, which Items
have been substantially prepared by the
Exchange. On March 20, 2008, the
Exchange filed Amendment No. 1 to the
proposed rule change. 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 Exchange proposes to adopt
generic listing standards for Fixed
Income-Linked Securities, FuturesLinked Securities, and CombinationLinked Securities (collectively, the
‘‘New Linked Securities’’) and a
technical change to section 107D of the
Amex Company Guide. The text of the
proposed rule change is available at
Amex, the Commission’s Public
Reference Room, and https://
www.amex.com.
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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.
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to add new
sections 107G, 107H, and 107I of the
Amex Company Guide to provide
generic listing standards for the New
Linked Securities. The purpose of the
proposed rule change is to enable the
listing and trading of the New Linked
Securities pursuant to Rule 19b–4(e) 3
under the Act, without individual
Commission approval of each such
product pursuant to section 19(b)(2) of
the Act.4 The Exchange represents that
within five business days after
commencement of trading of a series of
New Linked Securities under proposed
sections 107G, 107H, and 107I of the
Amex Company Guide, as applicable,
the Exchange will file a Form 19b–4(e).5
General Issuer and Issue Eligibility
As with Index-Linked Securities
under current Section 107D,6
Commodity-Linked Securities under
section 107E,7 and Currency-Linked
Securities under section 107F of the
Amex Company Guide,8 the New
3 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
Section (c)(1) of Rule 19b–4 (17 CFR 240.19b–
4(c)(1)), if the Commission has approved, pursuant
to Section 19(b) of the Act (15 U.S.C. 78s(b)), 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.
See 17 CFR 240.19b–4(e).
4 15 U.S.C. 78s(b)(2).
5 17 CFR 240.19b–4(e)(2)(ii); 17 CFR 249.820.
6 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. As part of this proposed rule
change, the Exchange seeks to make a technical
change to Section 107D of the Amex Company
Guide to define such underlying index or indexes
as the ‘‘Equity Reference Asset.’’ Such securities
may or may not provide for the repayment of the
original principal investment amount. See Section
107D and Section 107D(d) of the Amex Company
Guide.
7 Commodity-Linked Securities are securities that
provide for the payment at maturity of a cash
amount based on the performance of one or more
commodities, 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 (the
‘‘Commodity Reference Asset’’). Such securities
may or may not provide for the repayment of the
original principal investment amount. See Section
107E of the Amex Company Guide.
8 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 (the ‘‘Currency Reference
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16395
Linked Securities do not give the holder
any right to receive a portfolio
component or any other ownership right
or interest in the portfolio or underlying
components comprising the applicable
Reference Asset (as defined herein) and
may or may not provide for the
repayment of the original principal
investment amount. Likewise, the
general standards set forth in section
107D(a)–(f), section 107E(a)–(f), and
section 107F(a)–(f) of the Amex
Company Guide will similarly apply to
the New Linked Securities.9
Specifically, the Exchange will apply
the following requirements to all issuers
of New Linked Securities:
• The issuer will be expected to have
a minimum tangible net worth of
$250,000,000 and to otherwise exceed
certain earnings requirements. In the
alternative, the issuer will be expected:
(1) To have a minimum tangible net
worth of $150,000,000; and (2) not to
have issued index-linked note offerings
(including the New Linked Securities),
the original issue price of which,
combined with all the issuer’s other
index-linked note offerings listed on a
national securities exchange, exceeds
25% of the issuer’s tangible net worth
at the time of issuance.
• The issuer must be in compliance
with Rule 10A–3 under the Act.10 In
addition, the Exchange will apply the
following requirements to each issue of
New Linked Securities:
• The issue must have a minimum
public distribution of at least 1,000,000
trading units with a minimum of 400
public shareholders. This minimum
public distribution and minimum
public shareholders requirements will
not be applicable to an issue traded in
thousand dollar denominations or if the
securities are redeemable at the option
of the holders thereof on at least a
weekly basis.
• The issue must have a principal
amount/aggregate market value of not
less than $4 million.
• The issue must have a term of at
least one year, but not greater than 30
years.
• The issue must be the
nonconvertible debt of the issuer.
• The payment at maturity may or
may not provide for a multiple of the
Asset’’). Such securities may or may not provide for
the repayment of the original principal investment
amount. See Section 107F of the Amex Company
Guide.
9 See Section 107A of the Amex Company Guide
(setting forth the ‘‘General Criteria’’ relating to
minimum issuer eligibility requirements based on
assets, earnings, and stockholders’ equity, and
minimum issue requirements based on public
distribution, public shareholders, and principal
amount/aggregate market value).
10 See 17 CFR 240.10A–3.
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direct or inverse performance of the
underlying Reference Asset; however, in
no event will a loss or negative payment
at maturity be accelerated by a multiple
that exceeds twice the performance of
the underlying Reference Asset.
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Fixed Income-Linked Securities
Fixed Income-Linked Securities will
be subject to the criteria proposed in
new Section 107G of the Amex
Company Guide for initial and
continued listing. Fixed Income-Linked
Securities are securities that provide for
the payment at maturity of a cash
amount based on the performance of
one or more indexes or portfolios of
debt securities that are notes, bonds,
debentures or evidence of indebtedness
that include, but are not limited to, U.S.
Department of Treasury securities
(‘‘Treasury Securities’’), governmentsponsored entity securities (‘‘GSE
Securities’’), municipal securities, trust
preferred securities, supranational debt
and debt of a foreign country or
subdivision thereof, or a basket or index
of any of the foregoing (collectively,
‘‘Fixed Income Reference Asset’’).
For the initial listing of Fixed IncomeLinked Securities, the Fixed Income
Reference Asset must either: (1) Have
been approved for the trading of options
or other derivatives by the Commission
under section 19(b)(2) of the Act and the
rules thereunder, and the conditions set
forth in the Commission’s approval
order, including comprehensive
surveillance sharing agreements,
continue to be satisfied; or (2) meet the
following requirements: 11
• Components of the Fixed Income
Reference Asset that, in the aggregate,
account for at least 75% of the weight
of the Fixed Income Reference Asset
must each have a minimum original
principal amount outstanding of $100
million or more;
• A component of the Fixed Income
Reference Asset may be a convertible
security; however, once the convertible
security component converts to the
underlying equity security, the
component is removed from the Fixed
Income Reference Asset;
• No component of the Fixed Income
Reference Asset (excluding Treasury
11 The Exchange notes that the quantitative
criteria for Fixed Income Reference Assets are
substantially similar to those set forth under
Commentary .02 to Amex Rule 1000–AEMI and
Commentary .03 to Amex Rule 1000A–AEMI,
relating to Portfolio Depositary Receipts and Index
Fund Shares, respectively, based on a fixed income
index or portfolio. See Securities Exchange Act
Release No. 55437 (March 9, 2007), 72 FR 12233
(March 15, 2007) (SR–Amex–2006–118) (approving
the adoption of ‘‘fixed income’’ and ‘‘combination’’
generic listing standards for exchange-traded
funds).
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Securities and GSE Securities) may
represent more than 30% of the weight
of the Fixed Income Reference Asset,
and the five highest weighted
components in the Fixed Income
Reference Asset may not, in the
aggregate, account for more than 65% of
the weight of the Fixed Income
Reference Asset;
• An underlying Fixed Income
Reference Asset (excluding one
consisting entirely of exempted
securities) 12 must include a minimum
of 13 non-affiliated issuers;
• Component securities that, in the
aggregate, account for at least 90% of
the weight of the Fixed Income
Reference Asset must be one of the
following: (1) From issuers that are
required to file reports pursuant to
sections 13 and 15(d) of the Act; 13 (2)
from issuers that have a worldwide
market value of their outstanding
common equity held by non-affiliates of
$700 million or more; (3) from issuers
that have outstanding securities that are
notes, bonds, debentures, or evidence of
indebtedness having a total remaining
principal amount of at least $1 billion;
(4) exempted securities as defined in
Section 3(a)(12) of the Act; 14 or (5) from
issuers that are a government of a
foreign country or a political
subdivision of a foreign country; and
• The Fixed Income Reference Asset
must be widely disseminated to the
public by one or more major market
vendors at least once per trading day.
The Exchange will commence
delisting or removal proceedings: 15
• If any of the initial listing criteria
for Fixed Income-Linked Securities are
not continuously maintained;
• If the aggregate market value or the
principal amount of the Fixed Income
Index-Linked Securities publicly held is
less than $400,000;
• The value of the Fixed Income
Reference Asset is no longer calculated
or available, and a new Fixed Income
Reference is substituted, unless the new
Fixed Income Reference Asset meets the
12 ‘‘Exempted securities’’ is defined in Section
3(a)(12) of the Act (15 U.S.C. 78c(a)(12)). The
Exchange notes that, for purposes of a Fixed Income
Reference Asset, an ‘‘exempted security’’ may
include Treasury Securities, municipal securities
and/or GSE Securities.
13 See 15 U.S.C. 78m; 15 U.S.C. 78o(d).
14 See 15 U.S.C. 78c(a)(12).
15 The Exchange notes that the proposed
continued listing standards for each of Fixed
Income-Linked Securities, Futures-Linked
Securities, and Combination-Linked Securities are
substantially similar to those standards under
Sections 107D, 107E, and 107F currently applicable
to Index-Linked Securities, Commodity-Linked
Securities, and Currency-Linked Securities,
respectively. See Sections 107D, 107E, and 107F of
the Amex Company Guide.
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requirements of proposed section 107G
of the Company Guide; or
• If such other event shall occur or
condition exists that, in the opinion of
the Exchange, makes further dealings on
the Exchange inadvisable.
Futures-Linked Securities
Futures-Linked Securities will be
subject to the criteria in proposed
Section 107H of the Amex Company
Guide for initial and continued listing.
Futures-Linked Securities are securities
that provide for the payment at maturity
of a cash amount based on the
performance of one or more indexes or
portfolios of: (1) Futures on Treasury
Securities, GSE Securities,
supranational debt and debt of a foreign
country or a subdivision thereof, or
options or other derivatives on any of
the foregoing; or (2) interest rate futures
or options or derivatives on the
foregoing (collectively, ‘‘Futures
Reference Asset’’).
The issue must meet one of the initial
listing standards set forth below:
• The Futures Reference Asset must
have been reviewed and approved for
the trading of Futures Securities or
options or other derivatives by the
Commission under Section 19(b)(2) of
the Act and rules thereunder, and the
conditions set forth in the Commission’s
approval order, including with respect
to comprehensive surveillance sharing
agreements, continue to be satisfied; or
• The pricing information for
components of a Futures Reference
Asset must be derived from a market
which is an Intermarket Surveillance
Group (‘‘ISG’’) member or affiliate
member or with which the Exchange
has a comprehensive surveillance
sharing agreement. A Futures Reference
Asset may include components
representing not more than 10% of the
dollar weight of such Futures Reference
Asset for which the pricing information
is derived from markets that do not meet
the specified requirements; provided,
however, that no single component
subject to this exception exceeds 7% of
the dollar weight of the Futures
Reference Asset.
In addition, the issue must meet both
of the following initial listing criteria:
(1) The value of the Futures Reference
Asset must be calculated and widely
disseminated by one or more major
market data vendors on at least a 15second basis during trading on the
Exchange; and (2) in the case of FuturesLinked Securities that are periodically
redeemable, the indicative value of the
subject Futures-Linked Securities must
be calculated and widely disseminated
by one or more major market data
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vendors on at least a 15-second basis
during trading on the Exchange.
The Exchange will commence
delisting or removal proceedings:
• If any of the initial listing criteria
for Futures-Linked Securities are not
continuously maintained;
• If the aggregate market value or the
principal amount of the Futures-Linked
Securities publicly held is less than
$400,000;
• The value of the Futures Reference
Asset is no longer calculated or
available, and a new Futures Reference
Asset is substituted, unless the new
Futures Reference Asset meets the
requirements of proposed section 107H
of the Amex Company Guide; or
• If such other event shall occur or
condition exists that, in the opinion of
the Exchange, makes further dealings on
the Exchange inadvisable.
Combination-Linked Securities
Combination-Linked Securities will
be subject to the criteria in proposed
section 107I of the Amex Company
Guide for initial and continued listing.
Combination-Linked Securities are
securities that provide for the payment
at maturity of a cash amount based on
the performance of any combination of
two or more Equity Reference Assets,
Commodity Reference Assets, Currency
Reference Assets, Fixed Income
Reference Assets, or Futures Reference
Assets (collectively, ‘‘Combination
Reference Asset,’’ and together with
Equity Reference Assets, Commodity
Reference Assets, Currency Reference
Assets, Fixed Income Reference Assets,
and Futures Reference Assets,
collectively, ‘‘Reference Assets’’). In
addition, a Combination Reference
Asset may include as a component a
notional investment in cash or a cash
equivalent based on a widely accepted
overnight loan interest rate, London
Interbank Offered Rate (‘‘LIBOR’’),
Prime Rate, or an implied interest rate
based on observed market spot and
foreign currency forward rates. The
Exchange states that, for purposes of a
notional investment as a component of
a Multifactor Reference Asset, a long
LIBOR weighting would represent a
leverage charge offsetting long positions
in the underlying Reference Assets.
For the initial listing of a series of
Combination-Linked Securities, each
component of the Combination
Reference Asset must: (1) Have been
reviewed and approved for the trading
of options or other derivatives by the
Commission under section 19(b)(2) of
the Act and rules thereunder, and the
conditions set forth in the Commission’s
approval order, including with respect
to comprehensive surveillance sharing
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agreements, continued to be satisfied; or
(2) meet the following requirements:
• Each Reference Asset included in
the Combination Reference Asset must
meet the applicable initial and
continued listing criteria set forth in
sections 107D, 107E, 107F, 107G and/or
107H of the Amex Company Guide;
• The value of the Combination
Reference Asset must be calculated and
widely disseminated to the public on at
least a 15-second basis during the time
the Combination-Linked Securities trade
on the Exchange; and
• In the case of Combination-Linked
Securities that are periodically
redeemable, the indicative value of the
Combination-Linked Securities must be
calculated and widely disseminated by
one or more major market data vendors
on at least a 15-second basis during the
time the Combination-Linked Securities
trade on the Exchange.
The Exchange will commence
delisting or removal proceedings:
• If any of the initial listing criteria
for Combination-Linked Securities are
not continuously maintained;
• If the aggregate market value or the
principal amount of the CombinationLinked Securities publicly held is less
than $400,000;
• The value of the Combination
Reference Asset is no longer calculated
or available, and a new Combination
Reference is substituted, unless the new
Combination Reference Asset meets the
requirements of section 107I of the
Amex Company Guide; or
• If such other event shall occur or
condition exists that, in the opinion of
the Exchange, makes further dealings on
the Exchange inadvisable.
16397
Security, the Exchange represents that it
will prepare and distribute, if
appropriate, an Information Circular to
member organizations describing the
products. Accordingly, the particular
structure and corresponding risks of a
New Linked Security will be
highlighted and disclosed. The
Information Circular will disclose
whether the New Linked Security will
trade as equity or debt, subject to
appropriate trading rules including,
among others, rules governing priority,
parity and precedence of orders,
specialist responsibilities, account
opening, and margin.
The Information Circular will also
detail the Exchange’s suitability rule
that requires a member organization
recommending a transaction in these
Securities: (1) To determine that such
transaction is suitable for the customer
(Amex Rule 411); and (2) to have a
reasonable basis for believing that the
customer can evaluate the special
characteristics, and is able to bear the
financial risks, of such transaction. In
addition, the Information Circular will
reference the requirement that Amex
member organizations must deliver a
prospectus to investors purchasing
newly issued New Linked Securities
prior to or concurrently with the
confirmation of a transaction.
Surveillance
Upon evaluating the nature and
complexity of each New Linked
The Exchange states that it will
closely monitor activity in the New
Linked Securities to identify and deter
any potential improper trading activity.
Additionally, the Exchange represents
that its surveillance procedures are
adequate to properly monitor the
trading of the New Linked Securities.
Specifically, the Exchange will rely on
its existing surveillance procedures
governing equities, options, and
exchange-traded funds.17 The Exchange
has developed procedures to closely
monitor activity in the New Linked
Securities and the underlying indexes
and/or portfolios to identify and deter
potential improper trading activity. To
the extent applicable, the Exchange will
be able to obtain trading and beneficial
holder information from the primary
trading markets for the portfolio
components in relation to the New
Linked Securities, either pursuant to
bilateral information sharing agreements
with those markets or because those
markets are SRO members or affiliate
members of ISG.
16 See proposed Sections 107G(k), 107H(k), and
107I(k) of the Amex Company Guide.
17 See proposed Sections 107G(j), 107H(j), and
107I(j) of the Amex Company Guide.
Applicable Exchange Rules
The New Linked Securities traded on
the Exchange’s equity trading floor will
be subject to all Exchange rules
governing the trading of equity
securities. The Exchange’s equity
margin rules and the Exchange’s regular
trading hours (9:30 a.m. to 4 p.m.
Eastern Time) will apply to transactions
in the New Linked Securities. New
Linked Securities listed and traded as
bond or debt securities will be subject
to the rules applicable to bond or debt
securities, however, those New Linked
Securities redeemable at the option of
the holders thereof on at least a weekly
basis will be subject to the trading rules
applicable to exchange-traded funds.16
Information Circular
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Firewall Procedures
If an underlying index is maintained
by a broker-dealer, the broker-dealer is
required to erect a ‘‘firewall’’ around the
personnel responsible for the
maintenance of such underlying index
or who have access to information
concerning changes and adjustments to
the underlying index, and the
underlying index must be calculated by
a third party who is not a broker-dealer.
Any advisory committee, supervisory
board, or similar entity that advises an
index license provider or that makes
decisions regarding the underlying
index or portfolio composition,
methodology, and related matters must
implement and maintain, or be subject
to, procedures designed to prevent the
use and dissemination of material, nonpublic information regarding the
applicable underlying index or
portfolio.18 The Exchange further
proposes to apply Amex Rules 1203A
and 1203B 19 and 1204A and 1204B 20 to
Futures-Linked Securities and
Combination-Linked Securities, to the
extent such Combination-Linked
Securities are comprised in part of
Futures, Commodity, or Currency
Reference Assets.
Trading Halts
If the indicative value or the
Reference Asset value applicable to a
series of New Linked Securities is not
being disseminated as required, the
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18 See
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2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
section 6(b) of the Act,22 in general, and
furthers the objectives of section 6(b)(5)
of the Act,23 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, 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 Exchange believes
the adoption of generic listing standards
for Fixed Income-Linked Securities,
Futures-Linked Securities, and
Combination-Linked Securities would
benefit the marketplace and investors by
reducing the administrative burdens
associated with the listing of such
securities based on identifiable
reference assets.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
proposed Sections 107G(i), 107H(i), and
107I(i) of the Amex Company Guide.
19 Amex Rules 1203A and 1203B restrict the
ability of the specialist firm for any issue of
Commodity-Based Trust Shares and Currency Trust
Shares or its affiliates to make markets in and trade
the Commodity Reference Asset and/or Currency
Reference Asset components, the commodities or
currencies underlying the Commodity Reference
Asset or Currency Reference Asset components, or
options, futures, or options on futures on the
Commodity Reference Asset or Currency Reference
Asset, or any other derivatives based on the
Commodity Reference Asset or Currency Reference
Asset, any Commodity Reference Asset or Currency
Reference Asset component, or any physical
commodity or commodities underlying a
Commodity Reference Asset component or any
currency or currencies underlying a Currency
Reference Asset component. See Amex Rules 1203A
and 1203B. The Exchange maintains that these rules
would similarly apply to the trading of the New
Linked Securities to the extent such New Linked
Securities are comprised in part of a Futures,
Commodity, or Currency Reference Asset.
20 Amex Rules 1204A and 1204B provide that
specialists handling Commodity-Based Trust Shares
and Currency Trust Shares provide the Exchange
with all necessary information relating to their
trading in underlying physical assets, commodities
or currencies, related futures or options on futures,
or any other related derivatives. See Amex Rules
1204A and 1204B. The Exchange maintains that
these rules would similarly apply to the trading of
New Linked Securities to the extent such New
Linked Securities are comprised in part of a
Futures, Commodity, or Currency Reference Asset.
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Exchange may halt trading during the
day on which such interruption first
occurs. If such interruption persists past
the trading day in which it occurred, the
Exchange will halt trading no later than
the beginning of the trading day
following the interruption.21
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. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which Amex consents, the
Commission will:
21 See proposed Sections 107G(h)(3), 107H(h)(3),
and 107I(h)(3) of the Amex Company Guide.
22 15 U.S.C. 78f(b).
23 15 U.S.C. 78f(b)(5).
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A. By order approve such proposed
rule change, or
B. Institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
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–2008–17 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–2008–17. 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
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 the 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–2008–17 and should
be submitted on or before April 17,
2008.
E:\FR\FM\27MRN1.SGM
27MRN1
Federal Register / Vol. 73, No. 60 / Thursday, March 27, 2008 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–6249 Filed 3–26–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57540; File No. SR–Amex–
2008–23]
Self-Regulatory Organizations;
American Stock Exchange LLC; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change Adding
Designated Amex Remote Traders to
Amex’s Revenue Sharing Program
March 20, 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 March 13,
2008, the American Stock Exchange LLC
(‘‘Exchange’’ or ‘‘Amex’’) 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
substantially prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to add
Designated Amex Remote Traders
(‘‘DARTs’’) to Amex’s existing revenue
sharing program for ETF specialists and
registered traders and to make related
changes to its Exchange Traded Funds
and Trust Issued Receipts Fee Schedule.
The text of the proposed rule change is
available on the Exchange’s Web site at:
https://www.amex.com, at the
Exchange’s principal office, and at the
Commission’s Public Reference Room.
pwalker on PROD1PC71 with NOTICES
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
2417
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Aug<31>2005
16:08 Mar 26, 2008
Jkt 214001
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
On June 28, 2007, the Exchange: (i)
Amended its Exchange Traded Funds
and Trust Issued Receipts Fee Schedule
to eliminate charges for ETF
transactions by ETF specialists and
registered traders (collectively, ‘‘ETF
market makers’’); and (ii) implemented
a revenue sharing program whereby the
Exchange would make certain
payments, on a per-share executed basis
out of general Exchange revenues, to
ETF market makers which either buy or
sell ETFs on the Exchange and provide
liquidity in such transactions (e.g., the
specialist’s quote is traded against or the
specialist offsets an order imbalance as
part of an opening or closing
transaction).3 The Exchange enacted the
revenue sharing program to provide
incentives to the ETF market makers to
quote aggressively in Amex-traded
ETFs.
On January 31, 2008, the Commission
approved the Exchange’s DARTs
program, which established DARTs as a
third category of ETF market maker.
Like ETF specialists and registered
traders, DARTs provide liquidity to the
Exchange in the ETFs in which they are
assigned.4
Because DARTs operate similarly to
ETF specialists and registered traders—
in that they will also exclusively be
quoting in their assigned ETFs—the
Exchange proposes to fold DARTs into
the existing revenue sharing program
described above to provide DARTs
similar incentives to provide liquidity
on the Exchange. Amex proposes that a
DART will receive a revenue sharing
payment of $0.0015 per share (or 15
cents per 100 shares) whenever the
DART either buys or sells an ETF on the
Exchange and is a provider of liquidity
in that transaction, which places the
DART rate between the specialist rate of
$0.0020 per share and the registered
trader rate of $0.0010 per share.5
3 See Securities Exchange Act Release No. 55983
(June 29, 2007), 72 FR 37059 (July 6, 2007) (SR–
Amex–2007–68) (‘‘RSP Filing’’).
4 See Securities Exchange Act Release No. 57241
(January 31, 2008), 73 FR 7335 (February 7, 2008)
(SR–Amex–2007–138).
5 Revenue sharing payments for DARTs are set at
a higher rate than for registered traders to
compensate for the fact that DARTs, unlike
registered traders, will not participate in any post-
PO 00000
Frm 00155
Fmt 4703
Sfmt 4703
16399
Further, like specialists and registered
traders, a DART:
• Will not be assessed any transaction
fees for ‘‘taking’’ liquidity; 6
• Will not receive revenue sharing
payments when another ETF market
maker is a contra-party to the same
transaction (i.e., a specialist buying
shares from a DART);
• Will receive revenue sharing
payments on transactions in securities
trading at less than $1.00, but only on
the portion of a transaction for which
the Exchange collects revenue;
• Will receive revenue sharing
payments based only on the first 43,478
shares it executes in any particular
transaction, given that customer
transaction charges are capped at $100
per transaction (which means the
transaction charge of $0.0023 per share
is assessed on only the first 43,478
shares executed by a customer).
The revisions to the ETF Fee
Schedule and the addition of DARTs to
the revenue sharing program for ETF
specialists and registered traders were
implemented March 17, 2008, the date
that DARTs were scheduled to
commence trading on the Exchange.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
section 6(b) of the Act 7 in general and
furthers the objectives of section 6(b)(4)
of the Act 8 in particular in that it is
intended to assure the equitable
allocation of reasonable dues, fees, and
other charges among its members and
issuers and other persons using its
facilities. Specifically, the Exchange is
proposing to adopt for the DARTs, a
new class of quoting participants in the
Amex ETF marketplace, a fee structure
and revenue sharing program similar to
the one already in place for ETF
specialists and registered traders, which
are similarly-situated quoting
participants.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange believes that the
proposed rule change does not impose
trade allocations in connection with auction trades
under Rule 128B—AEMI(b). See e-mail from Daniel
Mollin, Associate General Counsel, Amex, to
Nathan Saunders, Special Counsel, Division of
Trading and Markets, Commission, dated March 19,
2008.
6 In the proposed rule change, the Exchange
amended its Exchange Traded Funds and Trust
Issued Receipts Fee Schedule to exclude DARTs
from the customer transaction charges for
transactions in ETFs. Specialists and registered
traders were previously excluded from this fee
pursuant to the terms of the revenue sharing
program. See RSP Filing, supra note 3.
7 15 U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(4).
E:\FR\FM\27MRN1.SGM
27MRN1
]]>Agencies
[Federal Register Volume 73, Number 60 (Thursday, March 27, 2008)]
[Notices]
[Pages 16395-16399]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-6249]
[[Page 16395]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57539; File No. SR-Amex-2008-17]
Self-Regulatory Organizations; American Stock Exchange LLC;
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto To
Adopt Listing Rules for Fixed Income-Linked Securities, Futures-Linked
Securities, and Combination-Linked Securities
March 20, 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 February 29, 2008, 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, II,
and III below, which Items have been substantially prepared by the
Exchange. On March 20, 2008, the Exchange filed Amendment No. 1 to the
proposed rule change. The Commission is publishing this notice to
solicit comments on the proposed rule change, as amended, from
interested persons.
---------------------------------------------------------------------------
\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 adopt generic listing standards for Fixed
Income-Linked Securities, Futures-Linked Securities, and Combination-
Linked Securities (collectively, the ``New Linked Securities'') and a
technical change to section 107D of the Amex Company Guide. The text of
the proposed rule change is available at Amex, 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 Exchange proposes to add new sections 107G, 107H, and 107I of
the Amex Company Guide to provide generic listing standards for the New
Linked Securities. The purpose of the proposed rule change is to enable
the listing and trading of the New Linked Securities pursuant to Rule
19b-4(e) \3\ under the Act, without individual Commission approval of
each such product pursuant to section 19(b)(2) of the Act.\4\ The
Exchange represents that within five business days after commencement
of trading of a series of New Linked Securities under proposed sections
107G, 107H, and 107I of the Amex Company Guide, as applicable, the
Exchange will file a Form 19b-4(e).\5\
---------------------------------------------------------------------------
\3\ 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
Section (c)(1) of Rule 19b-4 (17 CFR 240.19b-4(c)(1)), if the
Commission has approved, pursuant to Section 19(b) of the Act (15
U.S.C. 78s(b)), 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. See 17 CFR 240.19b-4(e).
\4\ 15 U.S.C. 78s(b)(2).
\5\ 17 CFR 240.19b-4(e)(2)(ii); 17 CFR 249.820.
---------------------------------------------------------------------------
General Issuer and Issue Eligibility
As with Index-Linked Securities under current Section 107D,\6\
Commodity-Linked Securities under section 107E,\7\ and Currency-Linked
Securities under section 107F of the Amex Company Guide,\8\ the New
Linked Securities do not give the holder any right to receive a
portfolio component or any other ownership right or interest in the
portfolio or underlying components comprising the applicable Reference
Asset (as defined herein) and may or may not provide for the repayment
of the original principal investment amount. Likewise, the general
standards set forth in section 107D(a)-(f), section 107E(a)-(f), and
section 107F(a)-(f) of the Amex Company Guide will similarly apply to
the New Linked Securities.\9\ Specifically, the Exchange will apply the
following requirements to all issuers of New Linked Securities:
---------------------------------------------------------------------------
\6\ 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. As part of this proposed rule change,
the Exchange seeks to make a technical change to Section 107D of the
Amex Company Guide to define such underlying index or indexes as the
``Equity Reference Asset.'' Such securities may or may not provide
for the repayment of the original principal investment amount. See
Section 107D and Section 107D(d) of the Amex Company Guide.
\7\ Commodity-Linked Securities are securities that provide for
the payment at maturity of a cash amount based on the performance of
one or more commodities, 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 (the
``Commodity Reference Asset''). Such securities may or may not
provide for the repayment of the original principal investment
amount. See Section 107E of the Amex Company Guide.
\8\ 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 (the
``Currency Reference Asset''). Such securities may or may not
provide for the repayment of the original principal investment
amount. See Section 107F of the Amex Company Guide.
\9\ See Section 107A of the Amex Company Guide (setting forth
the ``General Criteria'' relating to minimum issuer eligibility
requirements based on assets, earnings, and stockholders' equity,
and minimum issue requirements based on public distribution, public
shareholders, and principal amount/aggregate market value).
---------------------------------------------------------------------------
The issuer will be expected to have a minimum tangible net
worth of $250,000,000 and to otherwise exceed certain earnings
requirements. In the alternative, the issuer will be expected: (1) To
have a minimum tangible net worth of $150,000,000; and (2) not to have
issued index-linked note offerings (including the New Linked
Securities), the original issue price of which, combined with all the
issuer's other index-linked note offerings listed on a national
securities exchange, exceeds 25% of the issuer's tangible net worth at
the time of issuance.
The issuer must be in compliance with Rule 10A-3 under the
Act.\10\ In addition, the Exchange will apply the following
requirements to each issue of New Linked Securities:
---------------------------------------------------------------------------
\10\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------
The issue must have a minimum public distribution of at
least 1,000,000 trading units with a minimum of 400 public
shareholders. This minimum public distribution and minimum public
shareholders requirements will not be applicable to an issue traded in
thousand dollar denominations or if the securities are redeemable at
the option of the holders thereof on at least a weekly basis.
The issue must have a principal amount/aggregate market
value of not less than $4 million.
The issue must have a term of at least one year, but not
greater than 30 years.
The issue must be the nonconvertible debt of the issuer.
The payment at maturity may or may not provide for a
multiple of the
[[Page 16396]]
direct or inverse performance of the underlying Reference Asset;
however, in no event will a loss or negative payment at maturity be
accelerated by a multiple that exceeds twice the performance of the
underlying Reference Asset.
Fixed Income-Linked Securities
Fixed Income-Linked Securities will be subject to the criteria
proposed in new Section 107G of the Amex Company Guide for initial and
continued listing. Fixed Income-Linked Securities are securities that
provide for the payment at maturity of a cash amount based on the
performance of one or more indexes or portfolios of debt securities
that are notes, bonds, debentures or evidence of indebtedness that
include, but are not limited to, U.S. Department of Treasury securities
(``Treasury Securities''), government-sponsored entity securities
(``GSE Securities''), municipal securities, trust preferred securities,
supranational debt and debt of a foreign country or subdivision
thereof, or a basket or index of any of the foregoing (collectively,
``Fixed Income Reference Asset'').
For the initial listing of Fixed Income-Linked Securities, the
Fixed Income Reference Asset must either: (1) Have been approved for
the trading of options or other derivatives by the Commission under
section 19(b)(2) of the Act and the rules thereunder, and the
conditions set forth in the Commission's approval order, including
comprehensive surveillance sharing agreements, continue to be
satisfied; or (2) meet the following requirements: \11\
---------------------------------------------------------------------------
\11\ The Exchange notes that the quantitative criteria for Fixed
Income Reference Assets are substantially similar to those set forth
under Commentary .02 to Amex Rule 1000-AEMI and Commentary .03 to
Amex Rule 1000A-AEMI, relating to Portfolio Depositary Receipts and
Index Fund Shares, respectively, based on a fixed income index or
portfolio. See Securities Exchange Act Release No. 55437 (March 9,
2007), 72 FR 12233 (March 15, 2007) (SR-Amex-2006-118) (approving
the adoption of ``fixed income'' and ``combination'' generic listing
standards for exchange-traded funds).
---------------------------------------------------------------------------
Components of the Fixed Income Reference Asset that, in
the aggregate, account for at least 75% of the weight of the Fixed
Income Reference Asset must each have a minimum original principal
amount outstanding of $100 million or more;
A component of the Fixed Income Reference Asset may be a
convertible security; however, once the convertible security component
converts to the underlying equity security, the component is removed
from the Fixed Income Reference Asset;
No component of the Fixed Income Reference Asset
(excluding Treasury Securities and GSE Securities) may represent more
than 30% of the weight of the Fixed Income Reference Asset, and the
five highest weighted components in the Fixed Income Reference Asset
may not, in the aggregate, account for more than 65% of the weight of
the Fixed Income Reference Asset;
An underlying Fixed Income Reference Asset (excluding one
consisting entirely of exempted securities) \12\ must include a minimum
of 13 non-affiliated issuers;
---------------------------------------------------------------------------
\12\ ``Exempted securities'' is defined in Section 3(a)(12) of
the Act (15 U.S.C. 78c(a)(12)). The Exchange notes that, for
purposes of a Fixed Income Reference Asset, an ``exempted security''
may include Treasury Securities, municipal securities and/or GSE
Securities.
---------------------------------------------------------------------------
Component securities that, in the aggregate, account for
at least 90% of the weight of the Fixed Income Reference Asset must be
one of the following: (1) From issuers that are required to file
reports pursuant to sections 13 and 15(d) of the Act; \13\ (2) from
issuers that have a worldwide market value of their outstanding common
equity held by non-affiliates of $700 million or more; (3) from issuers
that have outstanding securities that are notes, bonds, debentures, or
evidence of indebtedness having a total remaining principal amount of
at least $1 billion; (4) exempted securities as defined in Section
3(a)(12) of the Act; \14\ or (5) from issuers that are a government of
a foreign country or a political subdivision of a foreign country; and
---------------------------------------------------------------------------
\13\ See 15 U.S.C. 78m; 15 U.S.C. 78o(d).
\14\ See 15 U.S.C. 78c(a)(12).
---------------------------------------------------------------------------
The Fixed Income Reference Asset must be widely
disseminated to the public by one or more major market vendors at least
once per trading day.
The Exchange will commence delisting or removal proceedings: \15\
---------------------------------------------------------------------------
\15\ The Exchange notes that the proposed continued listing
standards for each of Fixed Income-Linked Securities, Futures-Linked
Securities, and Combination-Linked Securities are substantially
similar to those standards under Sections 107D, 107E, and 107F
currently applicable to Index-Linked Securities, Commodity-Linked
Securities, and Currency-Linked Securities, respectively. See
Sections 107D, 107E, and 107F of the Amex Company Guide.
---------------------------------------------------------------------------
If any of the initial listing criteria for Fixed Income-
Linked Securities are not continuously maintained;
If the aggregate market value or the principal amount of
the Fixed Income Index-Linked Securities publicly held is less than
$400,000;
The value of the Fixed Income Reference Asset is no longer
calculated or available, and a new Fixed Income Reference is
substituted, unless the new Fixed Income Reference Asset meets the
requirements of proposed section 107G of the Company Guide; or
If such other event shall occur or condition exists that,
in the opinion of the Exchange, makes further dealings on the Exchange
inadvisable.
Futures-Linked Securities
Futures-Linked Securities will be subject to the criteria in
proposed Section 107H of the Amex Company Guide for initial and
continued listing. Futures-Linked Securities are securities that
provide for the payment at maturity of a cash amount based on the
performance of one or more indexes or portfolios of: (1) Futures on
Treasury Securities, GSE Securities, supranational debt and debt of a
foreign country or a subdivision thereof, or options or other
derivatives on any of the foregoing; or (2) interest rate futures or
options or derivatives on the foregoing (collectively, ``Futures
Reference Asset'').
The issue must meet one of the initial listing standards set forth
below:
The Futures Reference Asset must have been reviewed and
approved for the trading of Futures Securities or options or other
derivatives by the Commission under Section 19(b)(2) of the Act and
rules thereunder, and the conditions set forth in the Commission's
approval order, including with respect to comprehensive surveillance
sharing agreements, continue to be satisfied; or
The pricing information for components of a Futures
Reference Asset must be derived from a market which is an Intermarket
Surveillance Group (``ISG'') member or affiliate member or with which
the Exchange has a comprehensive surveillance sharing agreement. A
Futures Reference Asset may include components representing not more
than 10% of the dollar weight of such Futures Reference Asset for which
the pricing information is derived from markets that do not meet the
specified requirements; provided, however, that no single component
subject to this exception exceeds 7% of the dollar weight of the
Futures Reference Asset.
In addition, the issue must meet both of the following initial
listing criteria: (1) The value of the Futures Reference Asset must be
calculated and widely disseminated by one or more major market data
vendors on at least a 15-second basis during trading on the Exchange;
and (2) in the case of Futures-Linked Securities that are periodically
redeemable, the indicative value of the subject Futures-Linked
Securities must be calculated and widely disseminated by one or more
major market data
[[Page 16397]]
vendors on at least a 15-second basis during trading on the Exchange.
The Exchange will commence delisting or removal proceedings:
If any of the initial listing criteria for Futures-Linked
Securities are not continuously maintained;
If the aggregate market value or the principal amount of
the Futures-Linked Securities publicly held is less than $400,000;
The value of the Futures Reference Asset is no longer
calculated or available, and a new Futures Reference Asset is
substituted, unless the new Futures Reference Asset meets the
requirements of proposed section 107H of the Amex Company Guide; or
If such other event shall occur or condition exists that,
in the opinion of the Exchange, makes further dealings on the Exchange
inadvisable.
Combination-Linked Securities
Combination-Linked Securities will be subject to the criteria in
proposed section 107I of the Amex Company Guide for initial and
continued listing. Combination-Linked Securities are securities that
provide for the payment at maturity of a cash amount based on the
performance of any combination of two or more Equity Reference Assets,
Commodity Reference Assets, Currency Reference Assets, Fixed Income
Reference Assets, or Futures Reference Assets (collectively,
``Combination Reference Asset,'' and together with Equity Reference
Assets, Commodity Reference Assets, Currency Reference Assets, Fixed
Income Reference Assets, and Futures Reference Assets, collectively,
``Reference Assets''). In addition, a Combination Reference Asset may
include as a component a notional investment in cash or a cash
equivalent based on a widely accepted overnight loan interest rate,
London Interbank Offered Rate (``LIBOR''), Prime Rate, or an implied
interest rate based on observed market spot and foreign currency
forward rates. The Exchange states that, for purposes of a notional
investment as a component of a Multifactor Reference Asset, a long
LIBOR weighting would represent a leverage charge offsetting long
positions in the underlying Reference Assets.
For the initial listing of a series of Combination-Linked
Securities, each component of the Combination Reference Asset must: (1)
Have been reviewed and approved for the trading of options or other
derivatives by the Commission under section 19(b)(2) of the Act and
rules thereunder, and the conditions set forth in the Commission's
approval order, including with respect to comprehensive surveillance
sharing agreements, continued to be satisfied; or (2) meet the
following requirements:
Each Reference Asset included in the Combination Reference
Asset must meet the applicable initial and continued listing criteria
set forth in sections 107D, 107E, 107F, 107G and/or 107H of the Amex
Company Guide;
The value of the Combination Reference Asset must be
calculated and widely disseminated to the public on at least a 15-
second basis during the time the Combination-Linked Securities trade on
the Exchange; and
In the case of Combination-Linked Securities that are
periodically redeemable, the indicative value of the Combination-Linked
Securities must be calculated and widely disseminated by one or more
major market data vendors on at least a 15-second basis during the time
the Combination-Linked Securities trade on the Exchange.
The Exchange will commence delisting or removal proceedings:
If any of the initial listing criteria for Combination-
Linked Securities are not continuously maintained;
If the aggregate market value or the principal amount of
the Combination-Linked Securities publicly held is less than $400,000;
The value of the Combination Reference Asset is no longer
calculated or available, and a new Combination Reference is
substituted, unless the new Combination Reference Asset meets the
requirements of section 107I of the Amex Company Guide; or
If such other event shall occur or condition exists that,
in the opinion of the Exchange, makes further dealings on the Exchange
inadvisable.
Applicable Exchange Rules
The New Linked Securities traded on the Exchange's equity trading
floor will be subject to all Exchange rules governing the trading of
equity securities. The Exchange's equity margin rules and the
Exchange's regular trading hours (9:30 a.m. to 4 p.m. Eastern Time)
will apply to transactions in the New Linked Securities. New Linked
Securities listed and traded as bond or debt securities will be subject
to the rules applicable to bond or debt securities, however, those New
Linked Securities redeemable at the option of the holders thereof on at
least a weekly basis will be subject to the trading rules applicable to
exchange-traded funds.\16\
---------------------------------------------------------------------------
\16\ See proposed Sections 107G(k), 107H(k), and 107I(k) of the
Amex Company Guide.
---------------------------------------------------------------------------
Information Circular
Upon evaluating the nature and complexity of each New Linked
Security, the Exchange represents that it will prepare and distribute,
if appropriate, an Information Circular to member organizations
describing the products. Accordingly, the particular structure and
corresponding risks of a New Linked Security will be highlighted and
disclosed. The Information Circular will disclose whether the New
Linked Security will trade as equity or debt, subject to appropriate
trading rules including, among others, rules governing priority, parity
and precedence of orders, specialist responsibilities, account opening,
and margin.
The Information Circular will also detail the Exchange's
suitability rule that requires a member organization recommending a
transaction in these Securities: (1) To determine that such transaction
is suitable for the customer (Amex Rule 411); and (2) to have a
reasonable basis for believing that the customer can evaluate the
special characteristics, and is able to bear the financial risks, of
such transaction. In addition, the Information Circular will reference
the requirement that Amex member organizations must deliver a
prospectus to investors purchasing newly issued New Linked Securities
prior to or concurrently with the confirmation of a transaction.
Surveillance
The Exchange states that it will closely monitor activity in the
New Linked Securities to identify and deter any potential improper
trading activity. Additionally, the Exchange represents that its
surveillance procedures are adequate to properly monitor the trading of
the New Linked Securities. Specifically, the Exchange will rely on its
existing surveillance procedures governing equities, options, and
exchange-traded funds.\17\ The Exchange has developed procedures to
closely monitor activity in the New Linked Securities and the
underlying indexes and/or portfolios to identify and deter potential
improper trading activity. To the extent applicable, the Exchange will
be able to obtain trading and beneficial holder information from the
primary trading markets for the portfolio components in relation to the
New Linked Securities, either pursuant to bilateral information sharing
agreements with those markets or because those markets are SRO members
or affiliate members of ISG.
---------------------------------------------------------------------------
\17\ See proposed Sections 107G(j), 107H(j), and 107I(j) of the
Amex Company Guide.
---------------------------------------------------------------------------
[[Page 16398]]
Firewall Procedures
If an underlying index is maintained by a broker-dealer, the
broker-dealer is required to erect a ``firewall'' around the personnel
responsible for the maintenance of such underlying index or who have
access to information concerning changes and adjustments to the
underlying index, and the underlying index must be calculated by a
third party who is not a broker-dealer. Any advisory committee,
supervisory board, or similar entity that advises an index license
provider or that makes decisions regarding the underlying index or
portfolio composition, methodology, and related matters must implement
and maintain, or be subject to, procedures designed to prevent the use
and dissemination of material, non-public information regarding the
applicable underlying index or portfolio.\18\ The Exchange further
proposes to apply Amex Rules 1203A and 1203B \19\ and 1204A and 1204B
\20\ to Futures-Linked Securities and Combination-Linked Securities, to
the extent such Combination-Linked Securities are comprised in part of
Futures, Commodity, or Currency Reference Assets.
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\18\ See proposed Sections 107G(i), 107H(i), and 107I(i) of the
Amex Company Guide.
\19\ Amex Rules 1203A and 1203B restrict the ability of the
specialist firm for any issue of Commodity-Based Trust Shares and
Currency Trust Shares or its affiliates to make markets in and trade
the Commodity Reference Asset and/or Currency Reference Asset
components, the commodities or currencies underlying the Commodity
Reference Asset or Currency Reference Asset components, or options,
futures, or options on futures on the Commodity Reference Asset or
Currency Reference Asset, or any other derivatives based on the
Commodity Reference Asset or Currency Reference Asset, any Commodity
Reference Asset or Currency Reference Asset component, or any
physical commodity or commodities underlying a Commodity Reference
Asset component or any currency or currencies underlying a Currency
Reference Asset component. See Amex Rules 1203A and 1203B. The
Exchange maintains that these rules would similarly apply to the
trading of the New Linked Securities to the extent such New Linked
Securities are comprised in part of a Futures, Commodity, or
Currency Reference Asset.
\20\ Amex Rules 1204A and 1204B provide that specialists
handling Commodity-Based Trust Shares and Currency Trust Shares
provide the Exchange with all necessary information relating to
their trading in underlying physical assets, commodities or
currencies, related futures or options on futures, or any other
related derivatives. See Amex Rules 1204A and 1204B. The Exchange
maintains that these rules would similarly apply to the trading of
New Linked Securities to the extent such New Linked Securities are
comprised in part of a Futures, Commodity, or Currency Reference
Asset.
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Trading Halts
If the indicative value or the Reference Asset value applicable to
a series of New Linked Securities is not being disseminated as
required, the Exchange may halt trading during the day on which such
interruption first occurs. If such interruption persists past the
trading day in which it occurred, the Exchange will halt trading no
later than the beginning of the trading day following the
interruption.\21\
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\21\ See proposed Sections 107G(h)(3), 107H(h)(3), and
107I(h)(3) of the Amex Company Guide.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\22\ in general, and furthers the
objectives of section 6(b)(5) of the Act,\23\ 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, 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 Exchange
believes the adoption of generic listing standards for Fixed Income-
Linked Securities, Futures-Linked Securities, and Combination-Linked
Securities would benefit the marketplace and investors by reducing the
administrative burdens associated with the listing of such securities
based on identifiable reference assets.
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\22\ 15 U.S.C. 78f(b).
\23\ 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. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which Amex consents, the Commission will:
A. By order approve such proposed rule change, or
B. Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, 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-2008-17 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-2008-17. 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 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 the 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-2008-17 and should be
submitted on or before April 17, 2008.
[[Page 16399]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-6249 Filed 3-26-08; 8:45 am]
BILLING CODE 8011-01-P
