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Notice

Self-Regulatory Organizations; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change by the American Stock Exchange LLC Revising Section 107B of the Amex Company Guide

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Start Preamble March 27, 2000

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 October 13, 1999, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission the proposed rule change as described in Items I, and II below, which Items have been prepared by the Amex. On December 1, 1999, the Amex submitted Amendment No. 1 to the proposed rule change.[3] The Commission is publishing this notice and order to solicit comments on the proposed rule change, as amended, from interested persons and to grant accelerated approval on the proposed rule change, as amended.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange seeks to revise Section 107B of the Amex Company Guide concerning the listing standards for the listing of equity linked notes (“ELNs”). The Exchange proposes to allow more than one equity security to be linked to an ELN, thereby creating a basket of equity securities to be linked to an ELN, provided that each of the underlying equity securities meets the listing standards for ELNs set forth in Section 107B. The Exchange proposes to cap the maximum number of underlying equity securities that may be linked to an ELN at 20.[4]

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 Statutory Basis for, the Proposed Rule Change

1. Purpose

On May 20, 1993, the Exchange received Commission approval to adopt Section 107B of the Amex Company Guide to provide for the listing and Start Printed Page 17686trading of ELNs, hybrid instruments whose values are linked to the performance of highly capitalized, actively traded equity securities.[5] ELNs are non-convertible debt securities. Their value is derived from the value of another issuer's common stock or non-convertible preferred stock.

Section 107B of the Amex Company Guide sets forth the Exchange's listing standards for ELNs. Specifically, Section 107B requires that the equity securities linked to ELNs each must have (i) 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) 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) a minimum market capitalization of $500 million and during the 12 months preceding listing shown to have traded at least 15 million shares.

The Exchange occasionally receives proposals to list ELNs that are linked to more than one equity security. The Exchange believes that linking more than one equity security to an ELN is appropriate only if each of the underlying securities meets the listing standards for ELNs set forth in Section 107B. Furthermore, the Exchange proposes to cap the maximum number of underlying securities that may be linked to an ELN at 20.[6] Accordingly, the Exchange proposes to amend the text of Section 107B to clarify that ELNs may be linked to more than one equity security only if all of the underlying equity securities individually satisfy the applicable listing standards set forth in Section 107B of the Amex Company Guide.

2. Statutory Basis

The Exchange represents 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, promote just and equitable principles of trade, foster cooperation and coordination with persons engaged in facilitating transactions in securities, and remove impediments to and perfect the mechanism of a free and open market and a national market system.

B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange believes that the proposed rule change will 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 has neither solicited nor received written comments on the proposed rule change.

III. Solicitation of Comments

Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Additionally, the Commission seeks comment on whether the rule should contain a maximum number of underlying securities linked on an ELN. If so, is 20 an appropriate maximum number of underlying equity securities? Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., 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 Section, 450 Fifth Street, NW, Washington, DC 20549. Copies of such filing will also be available for inspection and copying at the principal office of the Amex. All submissions should refer to the File No. SR-Amex-99-42 and should be submitted by April 25, 2000.

IV. Commission's Findings and Order Granting Accelerated Approval of Proposed Rule Change

After careful consideration, the Commission finds, for the reasons set forth below, that the Amex's proposal is consistent with the requirements of the Act and the rules and regulations thereunder. Specifically, the Commission finds that the proposal is consistent with Section 6(b)(5) of the Act.[9] Section 6(b)(5) of the Act requires that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, foster cooperation and coordination with persons engaged in facilitating transactions in securities, and remove impediments to and perfect the mechanism of a free and open market and a national market system. The proposal is consistent with Section 6(b)(5) of the Act because by requiring each of the equity securities linked to ELNs to meet the listing standards set forth in Amex Company Guide Section 107B, the integrity of the security is strengthened and the likelihood and susceptibility of ELN baskets to manipulation is reduced.[10]

The Commission finds good cause for approving the proposed rule change prior to the 30th day after the date of publication of notice thereof in the Federal Register. The Commission finds that because each of the equity securities linked to ELNs must meet the Exchange's listing standards for ELNs, increased financial stability in the marketplace and enhanced market integrity are provided for. Moreover, the Commission finds that these listing standards are designed to reduce the likelihood and susceptibility of ELN baskets to manipulation. Therefore, the Commission finds good cause for approving the proposed rule change on an accelerated basis.

It is therefore ordered, pursuant to Section 19(b)(2) of the Act,[11] proposed rule change (SR-Amex-99-42), as amended, is hereby approved on an accelerated basis.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[12]

Margaret H. McFarland,

Deputy Secretary.

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Footnotes

3.  See Letter from Scott Van Hatten, Legal Counsel, Amex, to Nancy Sanow, Senior Special Counsel, Division of Market Regulation, Commission, dated December 1, 1999 (“Amendment No. 1”). Amendment No. 1 proposed to cap the maximum number of underlying equity securities that may be linked to an ELN at 20.

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5.  Securities Exchange Act Release No. 32343 (May 20, 1993), 58 FR 30833 (May 27, 1993).

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6.  See supra, note 3.

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10.  In approving this proposal, the Commission has considered its impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

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[FR Doc. 00-8194 Filed 4-3-00; 8:45 am]

BILLING CODE 8010-01-M