[Federal Register: April 14, 2008 (Volume 73, Number 72)]
[Notices]
[Page 20074-20076]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14ap08-95]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57631; File No. SR-Amex-2008-30]
Self-Regulatory Organizations; American Stock Exchange, LLC;
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto To
Amend the Eligibility Criteria for Components of an Index or Portfolio
Underlying Portfolio Depositary Receipts and Index Fund Shares
April 8, 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 25, 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 April 1, 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.
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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 amend Commentary .03 to Amex Rule 1000-
AEMI (Portfolio Depositary Receipts or ``PDRs'') and Commentary .02 to
Amex Rule 1000A-AEMI (Index Fund Shares or ``IFSs,'' and together with
PDRs, collectively, ``ETFs'') to exclude ETFs and securities defined as
Managed Fund Shares (Amex Rule 1000B), Trust Issued Receipts (Amex Rule
1200), Commodity-Based Trust Shares (Amex Rule 1200A), Currency Trust
Shares (Amex Rule 1200B), Partnership Units (Amex Rule 1500), and
Paired Trust Shares (Amex Rule 1600) (together with ETFs, collectively,
``Derivative Securities Products'') when applying certain quantitative
listing requirements of Commentary .03 to Amex Rule 1000-AEMI and
Commentary .02 to Amex Rule 1000A-AEMI. The text of the proposed rule
change is available at the Exchange, the Commission's Public Reference
Room, and www.amex.com.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to enable the listing
and trading of ETFs that are linked to, or based on, Derivative
Securities Products pursuant to Rule 19b-4(e) under the Act.\3\ To this
end, the Exchange proposes to amend Commentary .03 to Amex Rule 1000-
AEMI and Commentary .02 to Amex Rule 1000A-AEMI.
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\3\ Rule 19b-4(e) under the Act 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 Rule 19b-4(c)(1) (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).
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Amex Rules 1000-AEMI and 1000A-AEMI provide that the Exchange may
approve a series of PDRs and IFSs, respectively, for listing and/or
trading (including pursuant to unlisted trading privileges) pursuant to
Rule 19b-4(e) under the Act,\4\ if such series satisfies the criteria
set forth in such Rules. In this proposal, the Exchange seeks to
exclude Derivative Securities Products when applying certain
quantitative listing requirements of Commentary .03 to Amex Rule 1000-
AEMI and Commentary .02 to Amex Rule 1000A-AEMI relating to the listing
of PDRs and IFSs, respectively, based on a U.S. index or portfolio or
an international or global index or portfolio.
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\4\ See id.
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With respect to Commentary .03 to Amex Rule 1000-AEMI and
Commentary .02 to Amex Rule 1000A-AEMI, the Exchange proposes to
exclude Derivative Securities Products, as components, when applying
the following existing component eligibility requirements: (1)
Component stocks that, in the aggregate, account for at least 90% of
the weight of the index or portfolio each must have a minimum market
value of at least $75 million (Commentary .03(a)(A)(1) to Amex Rule
1000-AEMI and Commentary .02(a)(A)(1) to Amex Rule 1000A-AEMI); (2)
component stocks that, in the aggregate, account for at least 90% of
the weight of the index or portfolio each must have a minimum monthly
trading volume during each of the last six months of at least 250,000
shares (Commentary .03(a)(A)(2) to Amex Rule 1000-AEMI and Commentary
.02(a)(A)(2) to Amex Rule 1000A-AEMI); and (3) the most heavily
weighted component stock must not exceed 30% of the weight of the index
or portfolio, and the five most heavily weighted component stocks must
not exceed 65% of the weight of the index or portfolio (Commentary
.03(a)(A)(3) to Amex Rule 1000-AEMI and Commentary .02(a)(A)(3) to Amex
Rule 1000A-AEMI). Component stocks, in the aggregate, excluding
Derivative Securities Products, would still be required to meet the
criteria of these provisions. Thus, for example, when determining
compliance with Commentaries .03(a)(A)(1) and (2) to Amex Rule 1000-
AEMI and Commentaries .02(a)(A)(1) and (2) to Amex Rule 1000A-AEMI,
component stocks that, in the aggregate, account for at least 90% of
the remaining index weight, after excluding any Derivative Securities
Products, would be required to have a minimum market value of at least
$75 million and minimum monthly trading volume of 250,000 shares during
each of the last six months, respectively. In addition, with respect to
Commentary .03(a)(A)(3) to Amex Rule 1000-AEMI and Commentary
.02(a)(A)(3) to Amex Rule 1000A-AEMI, when determining the component
weight for the most heavily
[[Page 20075]]
weighted stock and the five most heavily weighted component stocks for
an underlying index that includes a Derivative Securities Product, the
weight of such Derivative Securities Products included in the
underlying index or portfolio would not be considered.
In addition, the Exchange proposes to modify the requirements in
Commentary .03(a)(A)(4) to Amex Rule 1000-AEMI and Commentary
.02(a)(A)(4) to Amex Rule 1000A-AEMI, which provide that the underlying
index or portfolio must include a minimum of 13 component stocks.
Specifically, the Exchange proposes that there shall be no minimum
number of component stocks if: (1) One or more series of ETFs
constitute, at least in part, components underlying a series of ETFs;
or (2) one or more series of Derivative Securities Products account for
100% of the weight of the index or portfolio. Thus, for example, if the
index or portfolio underlying a series of ETFs includes one or more
series of ETFs, or if it consists entirely of other Derivative
Securities Products, then there would not be required to be any minimum
number of component stocks (i.e., one or more components comprising the
underlying index or portfolio would be acceptable). However, if the
index or portfolio consists of Derivative Securities Products other
than ETFs (e.g., Commodity-Based Trust Shares or Currency Trust
Shares), as well as securities that are not Derivative Securities
Products (e.g., common stocks), then there would have to be at least 13
components in the underlying index or portfolio.
Consistent with current Commentary .03(a)(A)(5) to Amex Rule 1000-
AEMI and Commentary .02(a)(A)(5) to Amex Rule 1000A-AEMI, all
securities in the index or portfolio would have to be ``US Component
Stocks'' (as defined in Amex Rules 1000-AEMI(b)(3) and 1000A-
AEMI(b)(4)) \5\ listed on a national securities exchange and NMS
Stocks, as defined in Rule 600 of under the Act.\6\
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\5\ ``US Component Stock'' is an equity security that is
registered under Section 12(b) or 12(g) of the Act or an American
Depositary Receipt, the underlying equity security of which is
registered under Section 12(b) or 12(g) of the Act. See Amex Rules
1000-AEMI(b)(3) and 1000A-AEMI(b)(4).
\6\ See 17 CFR 242.600(b)(47).
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With respect to Commentary .03(a)(B) to Amex Rule 1000-AEMI and
Commentary .02(a)(B) to Amex Rule 1000A-AEMI, the Exchange proposes to
exclude Derivative Securities Products, as components, when applying
the following existing component eligibility requirements: (1)
Component stocks that, in the aggregate, account for at least 90% of
the weight of the index or portfolio each must have a minimum market
value of at least $100 million (Commentary .03(a)(B)(1) to Amex Rule
1000-AEMI and Commentary .02(a)(B)(1) to Amex Rule 1000A-AEMI); (2)
component stocks that, in the aggregate, account for at least 90% of
the weight of the index or portfolio each must have a minimum worldwide
monthly trading volume during each of the last six months of at least
250,000 shares (Commentary .03(a)(B)(2) to Amex Rule 1000-AEMI and
Commentary .02(a)(B)(2) to Amex Rule 1000A-AEMI); and (3) the most
heavily weighted component stock must not exceed 25% of the weight of
the index or portfolio, and the five most heavily weighted component
stocks must not exceed 60% of the weight of the index or portfolio
(Commentary .03(a)(B)(3) to Amex Rule 1000-AEMI and Commentary
.02(a)(B)(3) to Amex Rule 1000A-AEMI). Thus, for example, when
determining compliance with Commentaries .03(a)(B)(1) and (2) to Amex
Rule 1000-AEMI and Commentaries .02(a)(B)(1) and (2) to Amex Rule
1000A-AEMI, component stocks that, in the aggregate, account for at
least 90% of the remaining index weight, after excluding any Derivative
Securities Products, would be required to have a minimum market value
of at least $100 million and minimum worldwide monthly trading volume
of 250,000 shares during each of the last six months, respectively. In
addition, with respect to Commentary .03(a)(B)(3) to Amex Rule 1000-
AEMI and Commentary .02(a)(B)(3) to Amex Rule 1000A-AEMI, when
determining the component weight for the most heavily weighted stock
and the five most heavily weighted component stocks for an underlying
index that includes a Derivative Securities Product, the weight of such
Derivative Securities Products included in the underlying index or
portfolio would not be considered.
In addition, the Exchange proposes to modify the requirements in
Commentary .03(a)(B)(4) to Amex Rule 1000-AEMI and Commentary
.02(a)(B)(4) to Amex Rule 1000A-AEMI, which provide that the underlying
index or portfolio must include a minimum of 20 component stocks.
Specifically, the Exchange proposes that there shall be no minimum
number of component stocks if: (1) One or more series of ETFs
constitute, at least in part, components underlying a series of ETFs;
or (2) one or more series of Derivative Securities Products account for
100% of the weight of the index or portfolio. Thus, for example, if the
index or portfolio underlying a series of ETFs includes one or more
series of ETFs, or if it consists entirely of other Derivative
Securities Products, then there would not be required to be any minimum
number of component stocks (i.e., one or more components comprising the
underlying index or portfolio would be acceptable). However, if the
index or portfolio consists of Derivative Securities Products other
than ETFs (e.g., Commodity-Based Trust Shares or Currency Trust
Shares), as well as securities that are not Derivative Securities
Products (e.g., common stocks), then there would have to be at least 20
components in the underlying index or portfolio.
Consistent with current Commentary .03(a)(B)(5) to Amex Rule 1000-
AEMI and Commentary .02(a)(B)(5) to Amex Rule 1000A-AEMI, each
component that is a U.S. Component Stock (which would include each
Derivative Securities Product) would be required to be listed on a
national securities exchange and be an NMS Stock, as defined in Rule
600 under the Act, and each component that is a Non-US Component Stock
(as defined in Amex Rules 1000-AEMI(b)(4) and 1000A-AEMI(b)(5)) \7\
would be required to be listed and traded on an exchange that has last-
sale reporting.
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\7\ ``Non-US Component Stock'' is an equity security that is not
registered under Section 12(b) or 12(g) of the Act and that is
issued by an entity that (1) is not organized, domiciled, or
incorporated in the United States, and (2) is an operating company
(including Real Estate Investment Trusts and income trusts, but
excluding investment trusts, unit trusts, mutual funds, and
derivatives). See Amex Rules 1000-AEMI(b)(4) and 1000A-AEMI(b)(5).
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The Exchange believes it is appropriate to exclude Derivative
Securities Products from certain index component eligibility criteria
for ETFs insofar as Derivative Securities Products are themselves
subject to specific quantitative listing and continued listing
requirements of a national securities exchange on which such Derivative
Securities Products are listed. Derivative Securities Products that are
components of an index or portfolio underlying a series of ETFs would
have been listed and traded on a national securities exchange pursuant
to a proposed rule change approved by the Commission pursuant to
Section 19(b)(2) of the Act \8\ or submitted by a national securities
exchange pursuant to Section 19(b)(3)(A) of the Act,\9\ or would have
been listed by a national securities exchange pursuant to the
requirements
[[Page 20076]]
of Rule 19b-4(e) under the Act.\10\ Finally, the Exchange notes that
Derivative Securities Products are derivatively priced, and, therefore,
the Exchange submits that it would not be necessary to apply the
generic quantitative criteria (e.g., market capitalization, trading
volume, index or portfolio component weighting) applicable to non-
Derivative Securities Products (e.g., common stocks) to such products.
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\8\ 15 U.S.C. 78s(b)(2).
\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ See supra note 3.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\11\ in general, and furthers the
objectives of Section 6(b)(5),\12\ 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 mechanisms 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 proposal will facilitate the listing and trading of additional
types of ETFs that will enhance competition among market participants,
to the benefit of investors and the marketplace. In addition, the
listing and trading criteria set forth in the proposed rules are
intended to protect investors and the public interest.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange states that 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 the Exchange 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 (http://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-Amex-2008-30 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-2008-30. 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, 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-2008-30 and should be
submitted on or before May 5, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-7825 Filed 4-11-08; 8:45 am]
BILLING CODE 8011-01-P