[Federal Register: December 4, 2002 (Volume 67, Number 233)]
[Notices]
[Page 72247-72251]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04de02-98]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-46923; File No. SR-Amex-2002-92]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of a Proposed Rule Change by the American
Stock Exchange LLC Relating to the Listing and Trading of Corporate
Bond TRACERS Units Representing Ownership Interests in a Trust Linked
to a Basket of Investment Grade Fixed Income Securities
November 27, 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 November 5, 2002, the American Stock Exchange LLC (``Amex'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') the proposed rule change as described in
items I, and II below, which items have been prepared by the Exchange.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons and is approving the
proposal on an accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to approve for listing and trading under
section 107A of the Amex Company Guide (``Company Guide''), trust
certificates linked to a basket of investment-grade fixed-income
corporate debt instruments.
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 III 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Under section 107A of the Company Guide, the Exchange may approve
for listing and trading securities which cannot be readily categorized
under the listing criteria for common and preferred stocks, bonds,
debentures, or warrants.\3\ The Amex proposes to list for trading under
section 107A of the Company Guide, Corporate Bond TRACERS Units (the
``Units'') representing ownership interests in the Structured Asset
Trust Repackaging Series 2002------- (the ``Trust''),\4\ a special
purpose entity to be formed by Morgan Stanley Dean Witter (``MSDW'')
Structured Asset Corporation (``SAC''),\5\
[[Page 72248]]
the depositor, and the trustee of the Trust pursuant to a trust
agreement, which will be entered into on the date that the Units are
issued. The assets of the Trust will consist of a basket or portfolio
of not less than 15 investment-grade fixed-income securities (the
``Underlying Corporate Bonds'').
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 27753 (March 1,
1990), 55 FR 8626 (March 8, 1990) (order approving File No. SR-Amex-
89-29).
\4\ A series number will be assigned when the Trust is
established. Pursuant to a telephone conversation between Jeffrey P.
Burns, Assistant General Counsel, Amex, and Hong-Anh Tran, Special
Counsel, Division of Market Regulation (``Division''), Commission,
dated November 14, 2002.
\5\ SAC is a wholly-owned special purpose entity of Morgan
Stanley and the registrant under form S-3 Registration Statement
(No. 333-64879) under which the securities will be issued.
---------------------------------------------------------------------------
The issuance of the Units will be a repackaging of the Underlying
Corporate Bonds with the obligation of the Trust to make distributions
to holders of the Units depending on the amount of distributions
received by the Trust on the Underlying Corporate Bonds. Due to the
pass-through and passive nature of the Units, the Exchange intends to
rely on the asset and stockholder equity of the corporate issuer,
parent or guarantor of such issuer of the Underlying Corporate Bonds
rather than the Trust to meet the requirement in section 107A of the
Company Guide. The distribution and principal amount/aggregate market
value requirements found in sections 107A(b) and (c), respectively,
will otherwise be met by the Trust as issuer of the Units.\6\ The
corporate issuer, parent or guarantor of such issuer of each of the
Underlying Corporate Bonds will meet or exceed the requirements of
section 107A of the Company Guide.\7\ Further, the Units will initially
conform to the listing guidelines under section 107A,\8\ and the
continued listing guidelines under sections 1001-1003 \9\ of the
Company Guide. At the time of issuance, the Units will receive an
investment grade rating from a nationally recognized securities rating
organization (an ``NRSRO'').
---------------------------------------------------------------------------
\6\ Telephone conversation between Jeff P. Burns, Assistant
General Counsel, Amex, and Florence Harmon, Senior Special Counsel,
Division, Commission, on November 26, 2002.
\7\ See section 104 of the Company Guide permitting the Exchange
to list corporate debt securities where the issuer of equity
securities listed on the Amex, New York Stock Exchange (``NYSE'') or
Nasdaq National Market (``Nasdaq''), directly or indirectly owns a
majority interest in, or is under common control with, the issuer of
the debt security or has guaranteed the debt security.
\8\ The initial listing standards for the Units require: (1) A
minimum public distribution of one million units; (2) a minimum of
400 shareholders; (3) a market value of at least $4 million; and (4)
a term of at least one year. However, if traded in thousand dollar
denominations, then there is no minimum public distribution and
holder requirement. In addition, the listing guidelines provide that
the issuer have assets in excess of $100 million, stockholder's
equity of at least $10 million, and pre-tax income of at least
$750,000 in the last fiscal year or in two of the three prior fiscal
years. In the case of an issuer which is unable to satisfy the
earning criteria stated in section 101 of the Company Guide, the
Exchange will require the issuer to have the following: (1) Assets
in excess of $200 million and stockholders' equity of at least $10
million; or (2) assets in excess of $100 million and stockholders'
equity of at least $20 million.
\9\ The Exchange's continued listing guidelines are set forth in
sections 1001 through 1003 of part 10 to the Exchange's Company
Guide. Section 1002(b) of the Company Guide states that the Exchange
will consider removing from listing any security where, in the
opinion of the Exchange, it appears that the extent of public
distribution or aggregate market value has become so reduced to make
further dealings on the Exchange inadvisable. With respect to
continued listing guidelines for distribution of the Units, the
Exchange will rely, in part, on the guidelines for bonds in section
1003(b)(iv). Section 1003(b)(iv)(A) provides that the Exchange will
normally consider suspending dealings in, or removing from the list,
a security if the aggregate market value or the principal amount of
bonds publicly held is less than $400,000.
---------------------------------------------------------------------------
The Exchange states that the basket of Underlying Corporate Bonds
will not be managed and will generally remain static over the term of
the Units. The Units provide for periodic distributions of interest
dependent on the interest paid by the Underlying Corporate Bonds. To
insure periodic interest distributions, the Underlying Corporate Bonds
held by the Trust will have stepped or staggered interest payment
dates. Principal distributions on the Units are expected to be made on
or about the dates that correspond to the maturity dates of the
Underlying Corporate Bonds. However, some of the Underlying Corporate
Bonds may have redemption provisions, and in the event of an early
redemption or other liquidation (e.g., upon an event of default) of the
Underlying Corporate Bonds, the proceeds from such redemption
(including any amortization payments) or liquidation will be
distributed pro rata to the holders of the Units.\10\ Each Underlying
Corporate Bond will be issued by a corporate issuer and purchased in
the secondary market.
---------------------------------------------------------------------------
\10\ The Trust will pay to holders of the Units interest and
principal distributions pursuant to the schedule set forth in the
prospectus. Among other things, the schedule discloses to holders of
the Units, the maturity dates of the Underlying Corporate Bonds.
Upon such distributions, holders of the Units will receive a report
or notification regarding interest and principal payments showing
the remaining Underlying Corporate Bonds.
---------------------------------------------------------------------------
Holders of the Units will receive interest on the face value of the
Underlying Corporate Bonds in an amount to be determined at the time of
issuance of the Units and disclosed to investors. The rate of interest
payments will be based upon prevailing interest rates at the time of
issuance and made to the extent that coupon payments are received from
the Underlying Corporate Bonds. Distributions of interest will be made
periodically. Investors will also be entitled to be repaid the
principal of their Units from the proceeds of the principal payments on
the Underlying Corporate Bonds. The payout or return to investors on
the Units will not be leveraged.
The Units will mature on the latest maturity date of the Underlying
Corporate Bonds. Holders of the Units will have no direct ability to
exercise any of the rights of a holder of the Underlying Corporate
Bonds. However, holders of the Units as a group will have the right to
direct the Trust in its exercise of its rights as a holder of the
Underlying Corporate Bonds.
The Exchange states that the proposed Units are similar to equity
linked notes (``ELNs''), previously approved by the Commission, except
that the cash flow from the proposed Units will come from a basket of
investment-grade corporate bonds as compared to a single equity, basket
of equity securities or equity index in the case of an ELN.\11\ In
addition, ELNs may or may not pay interest while the Units will pay
interest periodically based on the pass-through nature of the
structure. Also, publicly issued asset backed securities that repackage
a single underlying corporate debt obligation are currently listed and
traded on the NYSE.\12\ The proposed Units are similar to those
repackaging transactions, except that the Trust will own more than one
corporate debt obligation. In addition, the Exchange recently filed a
similar proposal to list and trade asset-backed securities representing
ownership interest in a trust consisting of a basket of investment-
grade fixed-income
[[Page 72249]]
securities.\13\ Accordingly, the Exchange proposes to provide for the
listing and trading of the Units where the Underlying Corporate Bonds
meet the Exchange's Bond and Debenture Listing Standards set forth in
section 104 of the Company Guide. The Exchange represents that all of
the Underlying Corporate Bonds in the proposed basket will meet or
exceed these listing standards.
---------------------------------------------------------------------------
\11\ See e.g., Securities Exchange Act Release Nos. 44483 (June
27, 2001), 66 FR 35677 (July 6, 2001) (approving the listing and
trading of non-principal protected exchangeable notes linked to the
Institutional Holdings Index); 44437 (June 18, 2001), 66 FR 33585
(June 22, 2001) (approving the listing and trading of non-principal
protected exchangeable notes linked to the Industrial 15 Index);
44342 (May 23, 2001), 66 FR 29613 (May 31, 2001) (approving the
listing and trading of non-principal protected exchangeable notes
linked to the Select Ten Index); 42582 (March 27, 2000), 65 FR 17685
(April 4, 2000) (approving the listing and trading of notes linked
to a basket of no more than 20 equity securities); 40956 (January
20, 1999), 64 FR 4480 (January 28, 1999) (approving the listing and
trading of notes linked to Select Sector SPDRs); 37533 (August 7,
1996), 61 FR 42075 (August 13, 1996) (approving the listing and
trading of the Top Ten Yield MITTS); and 32343 (May 20, 1993), 58 FR
30833 (May 27, 1993) (listing and trading of equity linked
securities). See also Securities Exchange Act Release No. 41334
(April 27, 1999), 64 FR 23883 (May 4, 1999) (Bond Index Term Notes).
\12\ See e.g. Structured Asset Trust Unit Repackagings
(SATURNS), CSFB USA Debenture Backed Series 2002-10, 1,330,000 of
7.00% Class A Callable Units, dated August 15, 2002 and trading
under the symbol ``MKK''; 1,380,000 PreferredPlus 8.375% Trust
Certificates underlying 7.05% Debentures of Citizens Communications
Company, dated August 24, 2001 and trading under the symbol ``PIY'';
and 1,980,000 Corporate Backed Trust Certificates, Royal & Sun
Alliance Bond Backed Series 2002-2, underlying securities 8.95%
subordinated guaranteed bonds issued by Royal & Sun Alliance
Insurance Group plc, dated February 11, 2002 and trading under the
symbol ``CCS.''
\13\ See Securities Exchange Act Release No. 46835 (November 14,
2002), 67 FR 70271 (November 21, 2002).
---------------------------------------------------------------------------
The Exchange's Bond and Debenture Listing Standards in section 104
of the Company Guide provide for the listing of individual bond or
debenture issuances provided the issue has an aggregate market value or
principal amount of at least $5 million and any of: (1) The issuer of
the debt security has equity securities listed on the Exchange (or on
the NYSE or on Nasdaq); (2) an issuer of equity securities listed on
the Exchange (or on the NYSE or on Nasdaq) directly or indirectly owns
a majority interest in, or is under common control with, the issuer of
the debt security; (3) an issuer of equity securities listed on the
Exchange (or on the NYSE or on Nasdaq) has guaranteed the debt
security; (4) a NRSRO has assigned a current rating to the debt
security that is no lower than a Standard & Poor's Corporation
(``S&P'') ``B'' rating or equivalent rating by another NRSRO; or (5) or
if no NRSRO has assigned a rating to the issue, an NRSRO has currently
assigned (i) an investment grade rating to an immediately senior issue
or (ii) a rating that is no lower than an S&P ``B'' rating or an
equivalent rating by another NRSRO to a pari passu or junior issue.
In addition to the Exchange's Bond and Debenture Listing Standards,
an Underlying Corporate Bond must also be of investment grade quality
as rated by a NRSRO and at least 75% of the underlying basket is
required to contain Underlying Corporate Bonds from issuances of $100
million or more. The payment of principal of the Units is expected to
be made upon the maturity of each Underlying Corporate Bond unless it
is paid upon an earlier redemption (including any amortization
payments) or liquidation, as discussed above, with the maturity date of
the Units being the latest maturity date of the Underlying Corporate
Bonds. Amortization of the Units will be based on (1) the respective
maturities of the Underlying Corporate Bonds; (2) principal payout
amounts reflecting the pro-rata principal amount of maturing Underlying
Corporate Bonds; and (3) any early redemption or liquidation of the
Underlying Corporate Bonds.
Investors will be able to obtain the prices for the Underlying
Corporate Bonds through Bloomberg L.P. (``Bloomberg'') or other market
vendors, including the broker-dealer through whom the investor
purchased the Units. In addition, the Bond Market Association provides
links to price and other bond information sources on its investor web
site at http://www.investinginbonds.com. Transaction prices and volume
data for the most actively traded bonds on the exchanges are also
published daily in newspapers and on a variety of financial websites.
The National Association of Securities Dealers, Inc. (``NASD'') Trade
Reporting and Compliance Engine (TRACE) will also help investors obtain
transaction information for most corporate debt securities, such as
investment grade corporate bonds.\14\ For a fee, investors can have
access to intra-day bellwether quotes.\15\ Price quotes are also
available to institutional investors via proprietary systems such as
Bloomberg, Reuters and Dow Jones Telerate. Valuation prices \16\ and
analytical data may be obtained through vendors such as Bridge
Information Systems, Muller Data, Capital Management Sciences,
Interactive Data Corporation and Barra.
---------------------------------------------------------------------------
\14\ See Securities Exchange Act Release No. 43873 (January 23,
2001), 66 FR 8131 (January 29, 2001). Investors are able to access
TRACE information at http://www.nasdbondinfo.com/.
\15\ Corporate prices are available at 20-minute intervals from
Capital Management Services at http://www.bondvu.com/.
\16\ ``Valuation Prices'' refer to an estimated price that has
been determined based on an analytical evaluation of a bond in
relation to similar bonds that have traded. Valuation prices are
based on bond characteristics, market performance, changes in the
level of interest rates, market expectations and other factors that
influence a bond's value.
---------------------------------------------------------------------------
The prices of the Underlying Corporate Bonds generally will be
determined by one or more market makers in accordance with applicable
statutory rules, self-regulatory organization rules and generally
accepted accounting principles regarding the valuation of securities.
The Units will be listed in $1,000 denominations with the
Exchange's existing debt floor trading rules applying to trading.
First, pursuant to Amex rule 411, the Exchange will impose a duty of
due diligence on its members and member firms to learn the essential
facts relating to every customer prior to trading the Units.\17\
Second, the Units will be subject to the debt margin rules of the
Exchange.\18\ Third, the Exchange will, prior to trading the Units,
distribute a circular to the membership providing guidance with regard
to member firm compliance responsibilities (including suitability
recommendations) when handling transactions in the Units and
highlighting the special risks and characteristics of the Units. With
respect to suitability recommendations and risks, the Exchange will
require members, member organizations and employees thereof
recommending a transaction in the Units: (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 of, and is able to bear the financial risks of such
transaction.
---------------------------------------------------------------------------
\17\ Amex rule 411 requires that every member, member firm or
member corporation use due diligence to learn the essential facts,
relative to every customer and to every order or account accepted.
\18\ See Amex rule 462.
---------------------------------------------------------------------------
The Exchange represents that its surveillance procedures are
adequate to properly monitor the trading of the Units. Specifically,
the Amex will rely on its existing surveillance procedures governing
debt, which have been deemed adequate under the Act. In addition, the
Exchange also has a general policy, which prohibits the distribution of
material, non-public information by its employees.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6 of the Act,\19\ in general, and furthers the objectives
of section 6(b)(5),\20\ 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 mechanisms of a free and open market and, in general, protect
investors and the public interest.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange did not receive any written on the proposed rule
change.
III. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing,
[[Page 72250]]
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 Exchange. All
submissions should refer to File No. SR-Amex-2002-92 and should be
submitted by December 26, 2002.
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
After careful consideration, the Commission finds that the proposed
rule change is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to the national securities
exchange, and, in particular, with the requirements of section 6(b)(5)
of the Act.\21\ The Commission finds that this proposal is similar to
several approved equity-linked instruments currently listed and traded
on the Amex,\22\ as well as to asset-backed securities listed and
traded on the NYSE.\23\ In addition, the Commission recently approved a
similar proposal to list and trade asset-backed securities representing
ownership interest in a trust consisting of a basket of investment-
grade fixed-income securities.\24\ Accordingly, the Commission finds
that the listing and trading of the Units are consistent with the Act
and will promote just and equitable principles of trade, foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, and, in general, protect
investors and the public interest consistent with Securities 6(b)(5) of
the Act.\25\
---------------------------------------------------------------------------
\21\ Id.
\22\ See Securities Exchange Act Release Nos. 45160 (December
17, 2001), 66 FR 66485 (December 26, 2001) (approving the listing
and trading of non-principal protected notes linked to the Balanced
Strategy Index) (File No. SR-Amex-2001-91); 44483 (June 27, 2001),
66 FR 35677 (July 6, 2001) (approving the listing and trading of
non-principal protected notes linked to the Institutional Holdings
Index) (File No. SR-Amex-2001-40); 44437 (June 18, 2001), 66 FR
33585 (June 22, 2001) (approving the listing and trading of non-
principal protected notes linked to the Industrial 15 Index) (File
No. SR-Amex-2001-39); 44342 (May 23, 2001), 66 FR 29613 (May 31,
2001) (accelerated approval order for the listing and trading of
Select Ten Notes) (File No. SR-Amex-2001-28); 42582 (March 27,
2000), 65 FR 17685 (April 4, 2000) (accelerated approval order for
the listing and trading of notes linked to a basket of no more than
20 equity securities) (File No. SR-Amex-99-42); 41546 (June 22,
1999), 64 FR 35222 (June 30, 1999) (accelerated approval order for
the listing and trading of notes linked to a narrow-based index with
a non-principal protected put option) (File No. SR-Amex-99-15);
39402 (December 4, 1997), 62 FR 65459 (December 12, 1997) (notice of
immediate effectiveness for the listing and trading non-principal
protected commodity preferred securities linked to certain
commodities indices) (File No. SR-Amex-97-47); 37533 (August 7,
1996), 61 FR 42075 (August 13, 1996) (accelerated approval order for
the listing and trading of the Top Ten Yield Market Index Target
Term Securities (``MITTS'')) (File No. SR-Amex-96-28); 33495
(January 19, 1994), 59 FR 3883 (January 27, 1994) (accelerated
approval order for the listing and trading of Stock Upside Note
Securities) (File No. SR-Amex-93-40); and 32343 (May 20, 1993), 58
FR 30833 (May 27, 1993) (accelerated approval order for the listing
and trading of non-principal protected notes linked to a single
equity security) (File No. SR-Amex-92-42).
\23\ See e.g., supra note 12.
\24\ See supra note 13.
\25\ 15 U.S.C. 78f(b)(5). In approving this rule, the Commission
notes that it has considered the proposed rule's impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------
As described more fully above, the Units are asset-backed
securities and represent a repackaging of the Underlying Corporate
Bonds, subject to certain distribution of interest obligations of the
Trust. The Units are not leveraged instruments. The Units are debt
instruments whose price will still be derived and based upon the value
of the Underlying Corporate Bonds. The Exchange represents that the
value of the Underlying Corporate Bonds will be determined by one or
more market makers, in accordance with Exchange rules and generally
accepted principles of accounting regarding the valuation of
securities. Investors are guaranteed at least the principal amount that
they paid for the Underlying Corporate Bonds. In addition, holders of
the Units will receive interest on the face value of the Underlying
Corporate Bonds in an amount to be determined at the time of issuance
of the Units and disclosed to investors. The rate of interest payments
will be based upon prevailing interest rates at the time of issuance
and made to the extent that coupon payments are received from the
Underlying Corporate Bonds. Distributions of interest will be made
periodically. In addition, the Units will mature on the latest maturity
date of the Underlying Corporate Bonds. However, due to the pass-
through nature of Units, the level of risk involved in the purchase or
sale of the Unit is similar to the risk involved in the purchase or
sale of traditional common stock. The Commission notes that asset-
backed securities that repackage a single underlying debt instrument
are currently listed and traded on the NYSE. However, because the Units
are asset-backed securities that repackage a basket of Underlying
Corporate Bonds, instead of a single underlying corporate bond, there
are several issues regarding the trading of this type of product that
the Exchange must address.
The Commission notes that the Exchange's rules and procedures that
address the special concerns attendant to the trading of hybrid
securities will be applicable to the Units. In particular, by imposing
the hybrid listing standards, suitability, disclosure, and compliance
requirements notes above, the Commission believes the Exchange has
addressed adequately the potential problems that could arise from the
hybrid nature of the Units. Moreover, the Commission notes that the
Exchange will distribute a circular to its membership calling attention
to the specific risks associated with the Units.
The Commission notes that the Units are dependent upon the
individual credit of the issuers of the Underlying Corporate Bonds. To
some extent the credit risk is minimized by the Exchange's listing
standards in section 107A of the Company Guide, which provide that only
issuers satisfying asset and equity requirements may issue securities
such as the Units. In addition, the Exchange's ``Other Securities''
listing standards further provide that there is no minimum holder
requirement if the securities are traded in thousand dollar
denominations.\26\ The Commission notes that the Exchange has
represented that the Units will be listed in $1000 denominations with
its existing debt floor trading rules applying to the trading. In any
event, financial information regarding the issuers of the Underlying
Corporate Bonds will be publicly available.\27\
---------------------------------------------------------------------------
\26\ See Company Guide section 107A.
\27\ The Units will be registered under section 12 of the Act.
---------------------------------------------------------------------------
Due to the pass-through and passive nature of the Units, the
Commission does not object to the Exchange's reliance on the assets and
stockholder equity of the corporate issuer, parent or guarantor of such
issuer of the Underlying Corporate Bonds rather than the Trust to meet
the requirement in section 107A of the Company Guide. The Commission
notes that the
[[Page 72251]]
distribution and principal amount/aggregate market value requirements
found in sections 107A(b) and (c), respectively, will otherwise be met
by the Trust as issuer of the Units. Thus, the Units will initially
conform to the listing guidelines under section 107A and the continued
listing guidelines under sections 1001-1003 of the Company Guide,
except for the assets and stockholder equity characteristics of the
Trust. At the time of issuance, the Commission also notes that the
Unites will receive an investment grade rating from an NRSRO.
The Commission also believes that the listing and trading of the
Units should not unduly impact the market for the Underlying Corporate
Bonds or raise manipulative concerns. As discussed more fully above,
the Exchange represents that, in addition to requiring the issuers of
the Underlying Corporate Bonds meet the Exchange's section 107A listing
requirements, the Underlying Corporate Bonds will be required to meet
or exceed the Exchange's Bond and Debenture Listing Standards pursuant
to section 104 of the Company Guide, which among other things, requires
that underlying debt instrument receive at least in investment grade
rating of ``B'' or equivalent from an NRSRO. Furthermore, at least 75%
of the underlying basket is required to contain Underlying Corporate
Bonds from issuances of $100 million or more. The Amex has also
represents that the basket of Underlying Corporate Bonds will not be
managed and will remain static over the term of the Units. In addition,
the Amex's surveillance procedures will serve to deter as well as
detect any potential manipulation.
The Commission notes that the investors may obtain price
information on the Underlying Corporate Bonds through market venders
such Bloomberg, or though websites such as www.investinbonds.com.
The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of publication of the
notice of filing thereof in the Federal Register. The Amex has
requested accelerated approval because this product is similar to a
recently approved proposal to list and trade asset-backed securities
representing ownership interest in a trust consisting of a basket of
investment-grade fixed-income securities,\28\ several other equity-
linked instruments currently listed and traded on the Amex,\29\ and
other asset-backed securities currently listed and traded on the
NYSE.\30\ The Commission believes that the Units will provide investors
with an additional investment choice and that accelerated approval of
the proposal will allow investors to begin trading the Units promptly.
Additionally, the Units will be listed pursuant to Amex's existing
hybrid security listing standards as described above. Based on the
above, the Commission believes that there is good cause, consistent
with sections 6(b)(5) and 19(b)(2) of the Act,\31\ to approve the
proposal an accelerated basis.
---------------------------------------------------------------------------
\28\ See supra note 13.
\29\ See supra note 22.
\30\ See, e.g. supra note 12.
\31\ 15 U.S.C. 78f(b)(5) and 78s(b)(2).
---------------------------------------------------------------------------
V. Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\32\ that the proposed rule change (SR-Amex-2002-92), is hereby
approved on an accelerated basis.
---------------------------------------------------------------------------
\32\ 15 U.S.C. 78s(b)(2).
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\33\
---------------------------------------------------------------------------
\33\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-30681 Filed 12-3-02; 8:45 am]
BILLING CODE 8010-01-P