[Federal Register: December 30, 2002 (Volume 67, Number 250)]
[Notices]
[Page 79669-79670]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30de02-124]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-47055; File No. SR-Amex-2002-110]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the American Stock Exchange
LLC To Increase the Maximum Number of Equity Securities Permitted To Be
Linked to an ELN
December 19, 2002
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 December 19, 2002, the American Stock Exchange LLC (``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 prepared by the Amex. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Amex proposes to revise Amex Company Guide Section 107B to
permit the listing and trading of notes linked to up to thirty (30)
equity securities (``ELNs'').
The text of the proposed rule change is available at the Office of
the Secretary, the Amex, and the Commission.
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 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 Amex 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 May 20, 1993, the Commission approved Section 107B of the Amex
Company Guide to provide for the listing and trading of equity linked
term notes (ELNs), hybrid instruments whose values are linked to the
performance of highly capitalized, actively traded common stock.\3\
ELNs are non-convertible debt of an issuer, whose value is based, at
least in part, on the value of another issuer's common stock or non-
convertible preferred stock.
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\3\ See Securities Exchange Act Release No. 32343 (May 20,
1993), 58 FR 30833 (May 27, 1993) (SR-Amex-92-42).
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Section 107B of the Amex Company Guide details the Amex's listing
standards for ELNs. Specifically, Section 107B requires, among other
things, that securities linked to ELNs (i) have a minimum market
capitalization of $3 billion and during the 12 months preceding listing
shown to have traded at least 2.5 million shares; (ii) have a minimum
market capitalization of $1.5 billion and during the 12 months
preceding listing shown to have traded at least 10 million shares; or
(iii) have a minimum market capitalization of $500 million and during
the 12 months preceding listing shown to have traded at least 15
million shares.
On March 27, 2000, the Commission granted authority to the Amex to
list and trade notes linked to more than one equity security.\4\ Each
of the underlying securities of an ELN is required to meet the
standards for linked securities set forth in Section 107B. However, the
2000 Order limited the basket of underlying securities that may be
linked to an ELN to no more than twenty (20).\5\ Based on the its
experience over the last two (2) years, the Amex believe that the limit
of twenty (20) equity securities linked to an ELN is overly
restrictive. Accordingly, the Amex proposes to amend the text of
Section 107B to enable ELNs to be linked to up to thirty (30) equity
securities provided that each linked equity security individually
[[Page 79670]]
satisfies the applicable standards set forth in Section 107B.\6\
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\4\ See Securities Exchange Act Release No. 42582 (March 27,
2000), 65 FR 17685 (April 4, 2000) (SR-Amex-99-42) (the ``2000
Order'').
\5\ See Id.
\6\ The Amex notes that a recent proposal by UBS AG to list and
trade Enhanced Appreciation Securities (the ``Notes'') on the Amex
would be prohibited under current Section 107B because of the
limitation of twenty (20) equity securities. These Notes, issued in
amounts of $1,000 under the symbol ``EAN.B,'' will consist of a
basket of thirty (30) common stocks each of which are component
stocks of the Dow Jones Industrial Average (``DJIA''). Each
component of the basket is equally weighted and will represent
approximately 3.33% of the basket. The payment that an investor will
receive at maturity is based on the return of each basket stock. For
each positive return, the basket stock will be doubled subject to a
maximum gain amount. Therefore, the maximum total return at maturity
for each $1,000 principal amount of the Notes will be such maximum
or ceiling amount. The Notes are also subject to full downside risk
with a negative return reducing the cash payment at maturity. The
Amex believes that the limitation of twenty (20) equity securities
to be linked to an ELN such as these Notes is unduly restrictive
because each linked security is highly capitalized and actively-
traded. In addition, the Amex submits that it lists and trades
options, exchange-traded funds and index-linked notes based on the
DJIA. These Notes are essentially linked to the DJIA with a
different payout scenario at maturity.
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The Amex submits that its proposal to increase the number of equity
securities that may be linked to an ELN to thirty (30) will better
reflect the competitive nature of attracting listings to the Amex. The
Amex believes that expanding the basket of equity securities that may
be linked to an ELN will enhance competition and benefit investors and
the marketplace through additional product choices and alternatives.
Amex also believes that there would be no investor protection concerns
with expanding the number of equity securities that may be linked to an
ELN from twenty (20) to thirty (30).
(2) Statutory Basis
The Amex 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),\8\ in particular, in that it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of change, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, and 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 Amex does not believe that the proposed rule change will impose
any burden on competition 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
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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \9\ and subparagraph (f)(6) of Rule 19b-4 \10\
thereunder because the Amex has designated the proposed rule change as
one that does not: (i) significantly affect the protection of investors
or the public interest; (ii) impose any significant burden on
competition; (iii) become operative for 30 days from the date on which
it was filed, or such shorter time as the Commission may designate. At
any time within 60 days of the filing of such 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.
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6).
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Under Rule 19b-4(f)(6)(iii) of the Act,\11\ the proposed rule
change does not become operative for 30 days after the date of its
filing, or such shorter time as the Commission may designate if
consistent with the protection of investors and the public interest and
the Amex is required to give the Commission written notice of its
intention to file the proposed rule change at least five business days
prior to filing. The Amex has requested that the Commission waive the
30-day operative date and the five-day pre-filing notice requirement in
order for it to implement the proposed rule change on December 19, 2002
to allow the Amex to list and trade UBS AG Enhanced Appreciation
Securities (``EAN.B'') immediately. The Commission, consistent with the
protection of investors and the public interest, has determined to
waive the 30-day operative period as well as the five-day pre-filing
notice requirement,\12\ and, therefore, the proposal is effective and
operative upon filing with the Commission.
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\11\ 17 CFR 240.19b-4(f)(6)(iii).
\12\ For purposes only of waiving the five-day pre-filing notice
requirement and the 30-day operative period for 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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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 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 will also be
available for inspection and copying at the principal office of the
Amex. All submissions should refer to File No. SR-Amex-2002-110 and
should be submitted by January 21, 2003.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-32924 Filed 12-27-02; 8:45 am]
BILLING CODE 8010-01-P