[Federal Register: May 29, 2007 (Volume 72, Number 102)]
[Notices]
[Page 29558-29563]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29my07-116]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55794; File No. SR-Amex-2007-45]
Self-Regulatory Organizations; American Stock Exchange LLC;
Notice of Filing and Order Granting Accelerated Approval of Proposed
Rule Change, as Modified by Amendment No. 1 Thereto, To Amend the
Generic Listing Standards for Index-Linked Securities and Adopt New
Generic Listing Standards for Commodity-Linked Securities and Currency-
Linked Securities
May 22, 2007.
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 May 4, 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 May 9, 2007, the Exchange filed Amendment No. 1 to the proposed rule
change. This order provides notice of the proposed rule change, as
modified by Amendment No. 1, and approves the proposed rule change, as
amended, on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to adopt generic listing standards for
commodity-linked securities (``Commodity-Linked Securities'') and
currency-linked securities (``Currency-Linked Securities'') under new
Sections 107E and 107F of the Amex Company Guide, respectively, and
make changes with respect to trading halts and trading rules for index-
linked securities (``Index-Linked Securities'') under 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 http://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 III below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to enable the listing
and trading of Commodity-Linked Securities and Currency-Linked
Securities pursuant to Rule 19b-4(e) under the Act.\3\ The Exchange
proposes to add new Sections 107E and 107F to the Amex Company Guide to
provide generic listing standards for Commodity-Linked Securities and
Currency-Linked Securities, respectively. In addition, the Exchange
proposes to make changes to Section 107D with respect to trading halts
and rules governing the trading of Index-Linked Securities.\4\
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\3\ 17 CFR 240.19b-4(c).
\4\ E-mail from Jeffrey P. Burns, Associate General Counsel,
Amex, to Edward Cho, Special Counsel, Division of Market Regulation,
Commission, dated May 21, 2007 (confirming the scope of the proposed
rule change).
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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,\5\ if the Commission has approved,
pursuant to Section 19(b) of the Act,\6\ the SRO's trading rules,
procedures, and listing standards for the product class that would
include the new derivative securities product, and the SRO has a
surveillance program for such product class.\7\ Amex is proposing to
adopt generic listing standards under new Sections 107E and 107F of the
Company Guide pursuant to which it will be able to trade Commodity-
Linked Securities and Currency-Linked Securities \8\ without individual
Commission approval of each such product pursuant to Section 19(b)(2)
of the Act.\9\ The Exchange represents that within five (5) business
days after commencement of trading of a
[[Page 29559]]
Commodity-Linked Security or Currency-Linked Security in reliance on
Section 107E and 107F of the Amex Company Guide, respectively, the
Exchange will file a Form 19b-4(e).\10\
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\5\ 17 CFR 240.19b-4(c)(1).
\6\ 17 U.S.C. 78s(b).
\7\ See Securities Exchange Act Release No. 40761 (December 8,
1998), 63 FR 70952 (December 22, 1998) (S7-13-98).
\8\ Commodity-Linked Securities and Currency-Linked Securities
are similar to Index-Linked Securities. See Section 107D of the Amex
Company Guide.
\9\ 15 U.S.C. 78s(b)(2).
\10\ See 17 CFR 240.19b-4(e)(2)(ii); 17 CFR 249.820.
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General Issuer and Issue Eligibility
The general criteria set forth in Section 107D of the Company Guide
for Index-Linked Securities will equally apply to Commodity-Linked
Securities and Currency-Linked Securities, respectively, in proposed
Sections 107E(a)-(f) and 107F(a)-(f).\11\ As with Index-Linked
Securities, Commodity-Linked Securities and Currency-Linked Securities
will not give the holder thereof any right to receive a portfolio
component or any other ownership right or interest in the portfolio or
underlying components comprising the Commodity Reference Asset \12\ or
Currency Reference Asset,\13\ as applicable.
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\11\ See Securities Exchange Act Release No. 51563 (April 15,
2005), 70 FR 21257 (April 25, 2005) (SR-Amex-2005-001) (approving
the generla listing criteria for Index-Linked Securities).
\12\ Proposed Section 107E defines ``Commodity Reference Asset''
to be one or more commodities, commodity futures, options or other
commodity derivatives, Commodity-Based Trust Shares (as defined in
Amex Rule 1200A), or a basket or index of any of the foregoing.
\13\ Proposed Section 107F defines ``Currency Reference Asset''
to be one or more currencies, commodity futures, options or other
commodity derivatives, Currency Trust Shares (as defined in Amex
Rule 1200B), or a basket or index of any of the foregoing.
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The Exchange will apply the following requirements to all issuers
of Commodity-Linked and Currency-Linked Securities:
The issuer will be expected to have a minimum tangible net
worth of $250,000,000. In the alternative, the issuer will be expected:
(1) To have a minimum tangible net worth of $150,000,000 and (ii) not
to issue index-linked note offerings (including Commodity-Linked and
Currency-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; and
The issuer must be in compliance with Rule 10A-3 under the
Act.\14\
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\14\ 17 CFR 240.10A-3.
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The Exchange will also apply the following requirements to each
issue of Commodity-Linked and Currency-Linked Securities:
The issue must have a minimum public distribution of at
least one million trading units and a minimum of 400 public
shareholders. This minimum public distribution and minimum public
shareholders requirement will not be applicable to an issue traded in
thousand dollar denominations. In addition, the minimum public
shareholders requirement will not apply 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 thirty years;
The issue must be the non-convertible debt of the issuer;
and
The issue must not base its payment at maturity on a
multiple of the negative performance of the Commodity Reference Asset
or Currency Reference Asset, as applicable, although the payment at
maturity may or may not provide for a multiple of the positive
performance of such Commodity Reference Asset or Currency Reference
Asset.
Commodity-Linked Securities
Commodity-Linked Securities will also be subject to the specific
criteria proposed in new Section 107E of the Company Guide for initial
and continued listing. Commodity-Linked Securities will be securities
that provide for the payment at maturity of a cash amount based on the
performance of the Commodity Reference Asset.\15\ Such securities may
or may not provide for the repayment of the original principal
investment amount.
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\15\ See supra note 12.
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An issue of Commodity-Linked Securities must meet either of the
following initial listing standards:
The Commodity Reference Asset to which the Commodity-
Linked Security is linked must have been reviewed and approved for the
trading of Commodity-Based Trust Shares, options, or other derivatives
by the Commission under Section 19(b)(2) of the Act \16\ and rules
thereunder, and the conditions set forth in the Commission's order
approving such Commodity Reference Asset, including with respect to
comprehensive surveillance sharing agreements, continue to be
satisfied; or
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\16\ 15 U.S.C. 78s(b)(2).
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The pricing information for each component of a Commodity
Reference Asset must be derived from a market (1) that is a SRO member
or affiliate member of the Intermarket Surveillance Group (``ISG'') or
(2) with which the Exchange has a comprehensive surveillance sharing
agreement. Pricing information for gold and silver bullion, however,
may be derived from the London Bullion Market Association in connection
with Commodity-Linked Securities, without regard to provisions (1) and
(2) above.
In addition, an issue of Commodity-Linked Securities must also meet
the following initial listing criteria:
The value of the Commodity Reference Asset must be
calculated and widely disseminated on at least a 15-second basis during
the time the corresponding Commodity-Linked Securities trade on the
Exchange; and
In the case of Commodity-Linked Securities that are
periodically redeemable, the indicative value of the subject Commodity-
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 such Commodity-Linked Securities trade on the Exchange.
The Exchange submits that it will commence delisting or removal
proceedings if any of the foregoing initial listing criteria are not
continuously maintained. However, a particular issue of Commodity-
Linked Securities will not be delisted for a failure to have
comprehensive surveillance sharing agreements in place if the
underlying Commodity Reference Asset has at least 10 components, and
the Exchange has comprehensive surveillance sharing agreements with
respect to at least 90% of the dollar weight of the Commodity Reference
Asset. The Exchange will also commence delisting or removal
proceedings:
If the aggregate market value or the principal amount of
the Commodity-Linked Securities publicly held is less than $400,000;
The value of the Commodity Reference Asset is no longer
calculated or available and a new Commodity Reference Asset is
substituted, unless the new Commodity Reference Asset meets the
requirements of Section 107E of the Company Guide; or
If such other event shall occur or condition exists which
in the opinion of the Exchange makes further dealings on the Exchange
inadvisable.
Currency-Linked Securities
Currency-Linked Securities will also be subject to the specific
criteria in proposed new Section 107F of the Company Guide for initial
and continued listing. Currency-Linked Securities will be securities
that provide for the payment at maturity of a cash amount based on the
performance of the
[[Page 29560]]
Currency Reference Asset.\17\ Such securities may or may not provide
for the repayment of the original principal investment amount.
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\17\ See supra note 13.
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An issue of Currency-Linked Securities must meet either of the
following initial listing standards:
The Currency Reference Asset to which the Currency-Linked
Security is linked must have been reviewed and approved for the trading
of Currency Trust Shares, options, or other derivatives by the
Commission under Section 19(b)(2) of the Act \18\ and rules thereunder,
and the conditions set forth in the Commission's order approving such
Currency Reference Asset, including with respect to comprehensive
surveillance sharing agreements, continue to be satisfied; or
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\18\ 15 U.S.C. 78s(b)(2).
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The pricing information for each component of the Currency
Reference Asset must be (1) the generally accepted spot price for the
currency exchange rate in question or (2) derived from a market (a)
which is an ISG SRO member or affiliate member or with which the
Exchange has a comprehensive surveillance sharing agreement and (b)
which is the pricing source for components of a Currency Reference
Asset that has previously been approved by the Commission.
In addition, an issue of Currency-Linked Securities must also meet
the following initial listing criteria:
The value of the Currency Reference Asset must be
calculated and widely disseminated on at least a 15-second basis during
the time the corresponding Currency-Linked Securities trade on the
Exchange; and
In the case of Currency-Linked Securities that are
periodically redeemable, the indicative value of the subject Currency-
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 such Currency-Linked Securities trade on the Exchange.
The Exchange submits that it will commence delisting or removal
proceedings if any of the foregoing initial listing criteria are not
continuously maintained. An issue of Currency-Linked Securities will
not be delisted, however, for a failure to have comprehensive
surveillance sharing agreements in place if the underlying Currency
Reference Asset has at least 10 components, and the Exchange has
comprehensive surveillance sharing agreements with respect to at least
90% of the dollar weight of the Currency Reference Asset. The Exchange
will also commence delisting or removal proceedings under any of the
following circumstances:
If the aggregate market value or the principal amount of
the Currency-Linked Securities publicly held is less than $400,000;
If the value of the Currency Reference Asset is no longer
calculated or available and a new Currency Reference Asset is
substituted, unless the new Currency Reference Asset meets the
requirements of Section 107F of the Company Guide; or
If such other event shall occur or condition exists which
in the opinion of the Exchange makes further dealings on the Exchange
inadvisable.
Trading Halts
Proposed Sections 107E(h)(3) and 107F(h)(3) state that if the
indicative value, the Commodity Reference Asset value, or Currency
Reference Asset value, as the case may be, applicable to a series of
Commodity-Linked or Currency-Linked Securities, is not being calculated
and 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 on which it occurred, the Exchange will
halt trading no later than the beginning of the trading day following
the interruption. Similarly, with respect to the proposed changes in
Section 107D, if the value of the underlying index is not being
disseminated as required, the Exchange may halt trading of Index-Linked
Securities during the day on which the interruption first occurs. If
such interruption persists past the trading day on which it occurred,
the Exchange will halt trading no later than the beginning of the
trading day following the interruption.
Firewall Procedures
Proposed Sections 107E(i) and 107F(i) state that if an underlying
index (or group of commodities or currencies, as the case may be) is
maintained by a broker-dealer, the broker-dealer will be 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 will be calculated by a third party who is not a
broker-dealer. In addition, any advisory committee, supervisory board,
or similar entity that advises a Reporting Authority (as defined in
Amex Rule 1000A-AEMI(b)(3)) 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. The
Exchange submits that Amex Rules 1203A and 1203B, which impose certain
restrictions on specialist firms and their affiliates, would also apply
to the trading of Commodity-Linked and Currency-Linked Securities,
respectively.
Surveillance
Proposed Sections 107E(j) and 107F(j) state that the Exchange will
implement written surveillance procedures for Commodity-Linked and
Currency-Linked Securities, respectively, including adequate
comprehensive surveillance sharing agreements, as applicable. The
Exchange represents that it will closely monitor activity in the
Commodity-Linked and Currency-Linked Securities to identify and deter
any potential improper trading activity. In addition, the Exchange
represents that its surveillance procedures are adequate to properly
monitor the trading of such securities. Specifically, the Exchange will
rely on its existing surveillance procedures governing equities,
options, and exchange-traded funds. The Exchange states that it has
developed procedures to closely monitor activity in such securities and
the underlying indexes, instruments, and/or portfolios to identify and
deter potential improper trading activity. To the extent applicable,
the Exchange will also be able to obtain trading and beneficial holder
information from the primary trading markets for the components
comprising the Commodity Reference Assets or Currency Reference Assets,
as the case may be, either pursuant to bilateral information sharing
agreements with those markets or because those markets are SRO or
affiliate members of ISG.
Applicable Exchange Rules
Proposed Sections 107D(k), 107E(k), and 107F(k) state that Index-
Linked Securities, Commodity-Linked Securities, and Currency-Linked
Securities, respectively, 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 such securities. Index-Linked Securities, Commodity-
Linked Securities, and Currency-Linked Securities listed and traded as
bond or debt securities will be subject to the
[[Page 29561]]
rules applicable to bond or debt securities.
Information Circular
Upon evaluating the nature and complexity of a Commodity-Linked or
Currency-Linked Security, as the case may be, the Exchange represents
that it will prepare and distribute, if appropriate, an Information
Circular to member organizations describing each product. Accordingly,
the particular structure and corresponding risks of such securities
will be highlighted and disclosed. The Information Circular will also
disclose whether such securities 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, margin, and customer suitability requirements.\19\ In
addition, the Information Circular will reference the requirement that
Amex member organizations must deliver a prospectus to investors
purchasing newly issued Commodity-Linked or Currency-Linked Securities,
as the case may be, prior to or concurrently with the confirmation of a
transaction.
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\19\ The Exchange states that the Information Circular will
detail the Exchange's suitability rule that requires each member
organization recommending a transaction in such securities: (1) To
determine that such transaction is suitable for the customer 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. See Amex Rule 411.
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2. Statutory Basis
The proposal is consistent with Section 6(b) of the Act,\20\ in
general, and Section 6(b)(5) of the Act,\21\ in particular, in that it
is designed to remove impediments to and perfect the mechanism of a
free and open market, and, in general, to protect investors and the
public interest.
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\20\ 15 U.S.C. 78f(b).
\21\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purpose of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
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 (http://www.sec.gov/rules/sro.shtml.
); or Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-Amex-2007-45 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-2007-45. 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 (http://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. Copies of such
filing also will be available for inspection and copying at the
principal offices 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-2007-45 and should be submitted on or before June
19, 2007.
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, as amended, is consistent with the requirements of the Act
and the rules and regulations thereunder applicable to a national
securities exchange.\22\ In particular, the Commission finds that the
proposed rule change is consistent with the requirements of Section
6(b)(5) of the Act,\23\ which requires, among other things, that the
Exchange's rules be designed to promote just and equitable principles
of trade, to foster cooperation and coordination with persons engaged
in regulating, clearing, settling, processing information with respect
to, and 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.
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\22\ In approving this proposed 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).
\23\ 15 U.S.C. 78f(b)(5).
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Generic Listing Standards for Commodity-Linked and Currency-Linked
Securities
To list and trade Commodity-Linked and Currency-Linked Securities,
the Exchange currently must file a proposed rule change with the
Commission pursuant to Section 19(b)(1) of the Act \24\ and Rule 19b-4
thereunder.\25\ However, Rule 19b-4(e) provides that the listing and
trading of a new derivative securities product by a SRO will not be
deemed a proposed rule change pursuant to Rule 19b-4(c)(1) under the
Act 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 derivative securities product,
and the SRO has a surveillance program for the product class. The
Exchange's proposed rules for the listing and trading of Commodity-
Linked Securities and Currency-Linked Securities pursuant to Rule 19b-
4(e) fulfill these requirements.
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\24\ 15 U.S.C. 78s(b)(1).
\25\ 17 CFR 240.19b-4.
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The Exchange's ability to rely on Rule 19b-4(e) to list and trade
Commodity-Linked and Currency-Linked Securities that meet the
requirements of proposed Sections 107E and 107F of the Company Guide,
respectively, should reduce the time frame for bringing these
securities to the market and thereby reduce the burdens on issuers and
other market participants, while also promoting competition and making
such securities available to investors more quickly.
The Commission has previously approved generic listing standards
that are substantially similar to Amex's
[[Page 29562]]
proposal.\26\ The Commission believes that the proposed generic listing
standards for Commodity-Linked and Currency-Linked Securities and the
proposed changes to the generic listing standards for Index-Linked
Securities should fulfill the intended objective of Rule 19b-4(e) and
allow securities that satisfy the proposed generic listing standards to
commence trading without the need for public comment and Commission
approval.\27\
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\26\ See Securities Exchange Act Release No. 55687 (May 1,
2007), 72 FR 25824 (May 7, 2007) (SR-NYSE-2007-27) (approving
generic listing standards for Equity Index-Linked Securities,
Commodity-Linked Securities, and Currency-Linked Securities).
\27\ The Commission notes that the failure of a particular
product or index to comply with the proposed generic listing
standards under Rule 19b-4(e), however, would not preclude the
Exchange from submitting a separate filing pursuant to Section
19(b)(2), requesting Commission approval to list and trade a
particular commodity- or currency-linked product.
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Listing and Trading Index-Linked, Commodity-Linked, and Currency-Linked
Securities
Taken together, the Commission finds that Amex's proposal contains
adequate rules and procedures to govern the listing and trading of
Index-Linked, Commodity-Linked, and Currency-Linked Securities listed
pursuant to Rule 19b-4(e) on the Exchange. All such securities listed
under their respective generic standards will be subject to the full
panoply of Amex rules and procedures that currently govern the trading
of equity or debt securities on the Exchange, as applicable.
As set forth more fully above, Amex has proposed size, earnings,
and minimum tangible net worth requirements for each issuer, as well as
minimum public distribution and shareholder, principal amount/aggregate
market value, and minimum term thresholds for each issuance of
Commodity-Linked and Currency-Linked Securities. In addition, the
Exchange's proposal requires that the assets (or their derivatives)
underlying such securities must either have been reviewed and approved
for trading by the Commission or their pricing information must be
derived from certain required sources. These requirements are designed
to ensure that the trading markets for the underlying components are
adequately capitalized and sufficiently liquid. The Commission believes
that these requirements should minimize the potential for manipulation.
The Commission also finds that, in the case of Commodity-Linked and
Currency-Linked Securities with at least 10 components, the requirement
that at least 90% of the dollar weight of the corresponding Commodity
Reference Asset or Currency Reference Asset, as the case may be, must
have comprehensive surveillance sharing agreements with the Exchange
should permit the Exchange to identify potential trading and other
violations of its rules. The Commission believes that such a
requirement will contribute to the transparency of the Commodity
Reference Asset or Currency Reference Asset. The Commission also notes
that, by requiring pricing information for the relevant components to
be readily available, the proposed listing standards of Sections 107E
and 107F of the Company Guide should help ensure a fair and orderly
market for Commodity-Linked and Currency-Linked Securities listed and
traded pursuant to Rule 19b-4(e).
The Exchange has also developed delisting criteria that will permit
it to suspend trading of Commodity-Linked and Currency-Linked
Securities in circumstances that make further dealings in such products
inadvisable. The Commission believes that the delisting criteria should
help ensure that a minimum level of liquidity exists for each such
security to allow for the maintenance of fair and orderly markets.
Also, in the event that the value of the underlying index for Index-
Linked Securities, or the applicable Commodity Reference Asset or
Currency Reference Asset or, in the case of Commodity-Linked and
Currency-Linked Securities that are periodically redeemable, the
corresponding indicative value, is no longer calculated and widely
disseminated on at least a 15-second basis, the Exchange may halt
trading during the day on which the interruption first occurs; however,
if the interruption persists past the trading day on which it occurred,
the Exchange will halt trading no later than the beginning of the
trading day following the interruption and will commence delisting
proceedings.
Surveillance
The Commission notes that any Commodity-Linked and Currency-Linked
Securities approved for listing and trading would be subject to the
Exchange's existing surveillance procedures governing equities,
options, and exchange-traded funds, as well as procedures the Exchange
represents it has developed to closely monitor activity in such
securities and the underlying indexes and/or portfolios. The Exchange
also has represented that its surveillance procedures are adequate to
properly monitor the trading of Commodity-Linked and Currency-Linked
Securities listed pursuant to the proposed generic listing standards
and that it will be able to obtain necessary trading and beneficial
holder information from the primary trading markets for the underlying
components, either pursuant to bilateral information sharing agreements
with those markets or because those markets are full or affiliate
members of ISG.
Information Memorandum
The Exchange has represented that it will distribute, as
appropriate, an Information Memorandum to members describing the
product, the specific structure of the product, and the corresponding
risks of Commodity-Linked and Currency-Linked Securities. In addition,
the Information Memorandum will set forth the Exchange's suitability
requirements with respect to recommendations in transactions in
Commodity-Linked and Currency-Linked Securities to customers and the
prospectus delivery requirements. The Memorandum will also identify and
describe the applicable Exchange trading rules governing such
securities.
Firewall Procedures
The Exchange has further represented that if the underlying index
is maintained by a broker-dealer, such broker-dealer will establish a
``firewall'' around personnel responsible for the maintenance of such
underlying index or who have access to information concerning changes
and adjustments to the underlying index. As an added measure, a third-
party who is not a broker-dealer will be required to calculate the
value of the Commodity Reference Asset or Currency Reference Asset, as
applicable. In addition, the Exchange has stated that any advisory
committee, supervisory board, or similar entity that advises a
Reporting Authority (as defined in Amex Rule 1000A-AEMI(b)(3)) 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. With respect to trading on
Amex, the Exchange has stated that, with respect to any issue of
Commodity-Linked or Currency-Linked Securities, specialists and their
affiliates will be restricted from making markets in and trading the
components underlying the Commodity Reference Asset or Currency
[[Page 29563]]
Reference Asset, as the case may be, or any derivative instruments
thereof.
Acceleration
The Commission finds good cause for approving the proposed rule
change, as modified by Amendment No. 1 thereto, before the 30th day
after the date of publication of notice of filing thereof in the
Federal Register. The Exchange requested accelerated approval of the
proposal to facilitate the prompt listing and trading of Commodity-
Linked Securities and Currency-Linked Securities based on the specified
criteria of proposed Sections 107E and 107F of the Company Guide. The
Commission notes that the Exchange's proposed changes to the generic
listing standards for Index-Linked Securities and the proposed generic
listing standards for Commodity-Linked and Currency-Linked Securities
are based on previously approved listing standards for such securities
\28\ and presently is not aware of any regulatory issue that should
cause it to revisit that finding or would preclude the trading of such
securities on the Exchange. Therefore, accelerating approval of this
proposal should benefit investors by creating, without undue delay,
additional competition in the market for Commodity-Linked Securities
and Currency-Linked Securities, subject to the standards and
representations discussed herein. Therefore, the Commission finds good
cause, consistent with Section 19(b)(2) of the Act,\29\ to approve the
proposed rule change on an accelerated basis.
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\28\ See supra note 26.
\29\ 15 U.S.C. 78s(b)(2).
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\30\ that the proposed rule change (SR-Amex-2007-45), as modified
by Amendment No. 1 thereto, be, and it hereby is, approved on an
accelerated basis.
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\30\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-10195 Filed 5-25-07; 8:45 am]
BILLING CODE 8010-01-P