[Federal Register: February 12, 2007 (Volume 72, Number 28)]
[Notices]
[Page 6624-6626]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12fe07-122]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55240; File No. SR-Amex-2007-07]
Self-Regulatory Organizations; American Stock Exchange LLC;
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto
Amending Existing Rules for Portfolio Depositary Receipts and Index
Fund Shares
February 5, 2007.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 \2\ thereunder, notice is hereby given
that on January 11, 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, II,
and III below, which Items have been substantially prepared by the
Exchange. On January 25, 2007, the Amex submitted 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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[[Page 6625]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its existing rules for portfolio
depositary receipts (Rule 1000) and index fund shares (Rule 1000A) to
eliminate the methodology standards for eligible indexes.
The text of the proposed rule change is available at the 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 Amex included statements
concerning the purpose of and basis for the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Amex has substantially 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 this proposed rule change is to amend Amex's
existing generic listing standards pursuant to Rule 19b-4(e) under the
Act \3\ for portfolio depositary receipts (``PDRs'') and index fund
shares \4\ to eliminate the requirement that an eligible index be
calculated following a specified methodology.
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\3\ 17 CFR 240.19b-4(e).
\4\ PDRs and index fund shares are registered investment
companies under the Investment Company Act of 1940 and are referred
to in this filing as exchange traded funds (``ETFs'').
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The Exchange currently has generic listing standards (within the
meaning of Rule 19b-4(e) under the Act \5\), which permit the listing
and trading of various qualifying ETFs subject to the procedures
contained in Rule 19b-4(e). The existence of generic listing standards
allows qualifying ETFs to list or trade without the need to file a rule
change for each security under Rule 19b-4 under the Act.\6\ By amending
its generic listing standards pursuant to Rule 19b-4(e), the Exchange
intends to reduce the time frame for listing ETFs that rely on indexes
that utilize methodologies not currently identified in the generic
listing standards and thereby reduce the burdens on issuers and other
market participants.
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\5\ 17 CFR 240.19b-4(e).
\6\ 17 CFR 240.19b-4.
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The generic listing standards for ETFs presently provide that
eligible indexes be calculated based on the market capitalization,
modified market capitalization, price, equal-dollar, or modified equal-
dollar weighting methodology.\7\ The proposed rule change will
eliminate this standard and, as a result, the Exchange will no longer
consider index methodology in its review of an ETF's eligibility for
listing and trading pursuant to Rule 19b-4(e) under the Act.\8\
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\7\ See Commentary .03(b)(i) to Amex Rule 1000 and Commentary
.02(b)(i) to Amex Rule 1000A.
\8\ 17 CFR 240.19b-4(e).
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The Exchange states that as the market for ETFs has grown and the
ETF product line matured, the Exchange has witnessed an increase in the
number of methodologies used to calculate indexes. In order for an
index that employs a novel methodology to satisfy the current generic
listing standards, either a traditional methodology must be substituted
for the intended methodology, or the Exchange must submit a proposed
rule change to the Commission amending the generic listing standards to
include the additional methodology. In this regard, the Exchange notes
that, recently, both The NASDAQ Stock Market LLC and NYSE Arca, Inc.
filed rule changes with the Commission in order to permit eligible
indexes to be calculated based on a methodology weighting components
based on their particular financial attributes.\9\
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\9\ See Securities Exchange Act Release Nos. 54459 (September
15, 2006), 71 FR 55533 (September 22, 2006) (SR-NASDAQ-2006-035);
54490 (September 22, 2006), 71 FR 58034 (October 2, 2006) (SR-
NYSEArca-2006-61). Telephone conference among Courtney McBride,
Assistant General Counsel, Amex, Brian Trackman, Special Counsel,
and Michou Nguyen, Special Counsel, Division of Market Regulation,
Commission on February 2, 2007.
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The Exchange believes that the proposed elimination of index
methodology from its generic listing standards for ETFs would
potentially reduce the time frame for bringing ETFs based on indexes
with nontraditional weighting techniques to the market, thereby
reducing the burdens on issuers and other market participants and
promoting competition. The Exchange notes that indexes underlying ETFs
would continue to be subject to the other requirements of the generic
listing standards pursuant to Rule 19b-4(e) under the Act.\10\ For
example, the generic listing standards for domestic indexes require,
without limitation, that the most heavily weighted component stock of
an index not exceed 30% of the weight of the index, and the five most
heavily weighted component stocks of an index not exceed 65% of the
weight of the index,\11\ and that an index include a minimum of 13
component stocks.\12\ Similarly, the generic listing standards for
international or global indexes require, without limitation, that the
most heavily weighted component stock of an index not exceed 25% of the
weight of the index, and the five most heavily weighted component
stocks of an index not exceed 60% of the weight of the index,\13\ and
that an index include a minimum of 20 component stocks.\14\ The
Exchange believes that such requirements will ensure that underlying
indexes are sufficiently diversified, and that their components are
sufficiently liquid to serve as the basis for an ETF.
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\10\ 17 CFR 240.19b-4(e).
\11\ See Commentary .03(a)(A)(3) to Amex Rule 1000 and
Commentary .02(a)(A)(3).
\12\ See Commentary .03(a)(A)(4) to Amex Rule 1000 and
Commentary .02(a)(A)(4).
\13\ See Commentary .03(a)(B)(3) to Amex Rule 1000 and
Commentary .02(a)(B)(3).
\14\ See Commentary .03(a)(B)(4) to Amex Rule 1000 and
Commentary .02(a)(B)(4).
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2. Statutory Basis
The Amex believes that the proposed rule change is consistent with
the requirements of Section 6(b) of the Act \15\ in general, and
furthers the objectives of Section 6(b)(5),\16\ of the Act in
particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to remove impediments to and perfect the mechanism
of a free and open market and a national market system, and, in
general, to protect investors and the public interest. The Exchange
believes that the proposed rule change will facilitate the listing and
trading of ETFs, thereby reducing the burdens on issuers and other
market participants.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposed rule change would not
impose any 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.
[[Page 6626]]
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 the self-regulatory organization 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.
The Amex has requested accelerated approval of this proposed rule
change prior to the 30th day after the date of publication of the
notice of the filing thereof. The Commission has determined that a 15-
day comment period is appropriate in this case.
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 Exchange 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-2007-07 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-2007-07. 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 the filing
also will be available for inspection and copying at the principal
office of the Amex. 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-2007-07 and should be submitted on or before February 27, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-2252 Filed 2-9-07; 8:45 am]
BILLING CODE 8010-01-P