[Federal Register: May 21, 2003 (Volume 68, Number 98)]
[Notices]
[Page 27874-27876]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21my03-82]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-47862; File No. SR-Amex-2003-38]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the American Stock Exchange
LLC Relating to the Withdrawal of Approval for Securities Underlying
Options Traded on the Exchange
May 14, 2003.
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 1, 2003, 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 prepared by the Exchange. The
proposed rule change has been filed by the Amex as a ``non-
controversial'' rule change under Rule 19b-4(f)(6) under the Act.\3\
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Amex proposes to amend Exchange Rule 916, which governs the
withdrawal of approval for securities underlying options traded on the
Exchange. Below is the text of the proposed rule change. Proposed new
language is in italics.
* * * * *
Rule 916. Withdrawal of Approval of Underlying Securities
No Change
Commentary.
01 The Board of Governors has established guidelines to be
considered by the Exchange in determining whether an underlying
security previously approved for Exchange option transactions no longer
meets its requirements for the continuance of such approval. Absent
exceptional circumstances, with respect to items 1, 2, or 3 listed
below, an underlying security will not be deemed to meet the Exchange's
requirements for continued approval whenever any of the following
occur:
1. There are fewer than 6,300,000 shares of the underlying security
held by persons other than those who are required to report their
security holdings under section 16(a) of the Securities Exchange Act of
1934.
2. There are fewer than 1,600 holders of the underlying security.
3. The trading volume (in all markets in which the underlying
security is traded) was less than 1,800,000 shares in the preceding
twelve months.
4. Subject to Commentary .02 below, the market price per share of
the underlying security closed below $3 on the previous trading day as
measured by the highest closing price reported in the primary market
(as that term is defined in Rule 900(26)) in which the underlying
security traded.
5. The issuer has failed to make timely reports as required by
applicable requirements of the Securities Exchange Act of 1934, and
such failure has not been corrected within 30 days after the date the
report was due to be filed.
6. The issue, in the case of an underlying security that is
principally traded on a national securities exchange, is delisted from
trading on that exchange and neither meets NMS criteria nor is traded
through the facilities of a national securities association, or the
issue, in the case of an underlying security that is principally traded
through the facilities of a national securities association, is no
longer designated as an NMS security.
7. If an underlying security is approved for options listing and
trading under the provisions of Commentary .05 of Rule 915, the trading
volume and price history of the Original Security (as therein defined)
prior to but not after the commencement of trading in the Restructured
Security (as therein defined), including ``when issued'' trading, may
be taken into account in determining whether the trading volume and
market price requirements of paragraphs 3. and 4. of the Commentary .01
are satisfied, provided however, that in the case of a Restructured
Security approved for options listing and trading under paragraph (d)
of Commentary .05 under Rule 915, such trading volume requirements must
be satisfied based on the trading volume history of the Restructured
Security.
.02-.09 No Change
.10 In determining whether any of the events specified in
Commentary .01(1) or (2) of this Rule have occurred, the Exchange will
monitor on a daily basis news sources for information of corporate
actions, including stock splits, mergers and acquisitions, distribution
of special cash dividends, recapitalizations, and stock buy-backs. If a
corporate action indicates that an underlying security no longer meets
the Exchange's requirements for continued approval under Commentary .01
(1) or (2) of this Rule, the Exchange will not open additional series
of option contracts of the class covering the underlying security. If,
however, information of a corporate action does not indicate that any
of the events specified in Commentary .01(1) or (2) have occurred, the
Exchange shall consider the events specified in Commentary .01(1) and
(2) to have been satisfied.
* * * * *
[[Page 27875]]
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 parts of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Exchange Rule 916 sets forth the guidelines to be considered by the
Exchange in determining whether an underlying security previously
approved for Exchange option transactions no longer meets its
requirements for the continuance of such approval. Specifically,
Commentary .01(1) to Exchange Rule 916 provides that, absent
exceptional circumstances, the Exchange may not list additional series
on an option class if there are fewer than 6,300,000 shares of the
underlying security held by persons other than those who are required
to report their security holdings under section 16(a) of Act \4\ (the
``float'' requirement). Commentary .01(2) to Exchange Rule 916 provides
that, absent exceptional circumstances, the Exchange may not list
additional series on an option class if there are fewer than 1,600
holders of the underlying security (the ``holders'' requirement). The
Exchange is now proposing to add Commentary .10 to Exchange Rule 916 to
clarify the manner in which the Exchange determines whether the
``float'' and ``holders'' requirements found in Commentary .01 to
Exchange Rule 916 are met.\5\
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\4\ 15 U.S.C. 78p(a).
\5\ Proposed Commentary .10 to Exchange Rule 916 will clarify
how the Exchange will determine whether the float of an underlying
security is less than 6.3 million shares or the number of holders of
the underlying security is fewer than 1,600.
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The Exchange proposes to expressly state that in determining
whether any of the events specified in Commentary .01(1) or (2) to
Exchange Rule 916 have occurred, the Exchange would monitor on a daily
basis news sources for information of corporate actions, including
stock splits, mergers and acquisitions, distribution of special cash
dividends, recapitalizations, and stock buy backs. If a corporate
action indicates that an underlying security no longer meets the
Exchange's requirements for continued approval under Commentary .01(1)
or (2) to Exchange Rule 916, the Exchange would not open additional
series of option contracts of the class covering the underlying
security. If, however, information of a corporate action does not
indicate that any of the events specified in Commentary .01(1) or (2)
to Exchange Rule 916 have occurred, the Exchange shall consider the
events specified in Commentary .01(1) and (2) to have been
satisfied.\6\
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\6\ The Exchange represents that existing Commentary .03 to
Exchange Rule 916 would continue to apply when the Exchange
considers whether any of the events specified in Commentary .01 have
occurred with respect to an underlying security. Specifically,
Commentary .03 to Exchange Rule 916 provides that the Exchange shall
ordinarily rely on information made publicly available by the issuer
and/or markets in which such security is traded.
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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)(5) of the Act \8\ 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.
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\7\ 15 U.S.C. 78f(b).
\8\ 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 will impose no
burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received with respect
to the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because, the foregoing proposed rule change (1) does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
and (3) by its terms, does not become operative until 30 days from the
date on which it was filed, or such shorter time as the Commission may
designate if consistent with the protection of investors and the public
interest, and the exchange provided the Commission with written notice
of its intent to file the proposed rule change at least five business
days prior to the date of filing of the proposed rule change,\9\ it has
become effective pursuant to section 19(b)(3)(A) of the Act \10\ and
Rule 19b-4(f)(6) thereunder.\11\
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\9\ See e-mail from Jeffrey P. Burns, Associate General Counsel,
Amex, to Nancy Sanow, Assistant Director, Division of Market
Regulation, Commission, dated April 15, 2003.
\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6).
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The Amex has requested that the Commission waive the usual 30-day
pre-operative waiting period. The Commission notes that this proposal
is the same in all material respects to another proposal submitted by
the Chicago Board Options Exchange, Inc. (``CBOE'') and recently
approved by the Commission.\12\ As a result, the Commission believes
that it is consistent with the protection of investors and the public
interest to accelerate the operative date because the proposal raises
no new regulatory issues. Therefore, the Commission designates that the
proposal become operative immediately.\13\
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\12\ See Securities Exchange Act Release No. 47400 (February 25,
2003), 68 FR 10286 (March 4, 2003).
\13\ For purposes only of accelerating the operative date of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of this proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609.
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
[[Page 27876]]
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 Section. Copies of such filing will also be available for
inspection and copying at the principal office of the Amex. All
submissions should refer to File No. SR-Amex-2003-38 and should be
submitted by June 11, 2003.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 03-12735 Filed 5-20-03; 8:45 am]
BILLING CODE 8010-01-P