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Notice

Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change and Amendment No. 1 by the American Stock Exchange LLC Relating to the Listing and Trading of Trust Issued Receipts

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Start Preamble June 2, 2000.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 Start Printed Page 36854(“Act”) [1] and Rule 196-4 thereunder,[2] notice is hereby given that on February 14, 2000, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. Amendment No. 1 was filed on June 2, 2000.[3] The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

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

The Exchange proposes to amend Amex Rule 1202 to provide for the trading of Holding Company Depository Receipts (“HOLDRs”) pursuant to Rule 19b-4(e) of the Act.[4] The text of the proposed rule change follows. Italics indicate text to be added.

TRUST ISSUED RECEIPTS

Initial and Continued Listing

Rule 1202

Trust Issued Receipts will be listed and traded on the Exchange subject to application of the following criteria:

(a)-(e) No change.

Commentary .01 The Exchange may approve a series of HOLDRs for listing and trading on the Exchange pursuant to Rule 19b-4(e) under the Securities Exchange Act of 1934 (“Act”), provided each of the component securities satisfies the following criteria:

Eligibility Criteria for Component Securities Represented by a series of HOLDRs:

(i) each component security must be registered under Section 12 of the Exchange Act;

(ii) each component security must have a minimum public float of at least $150 million;

(iii) each component security must be listed on a national securities exchange or traded through the facilities of Nasdaq and be a reported national market system security;

(iv) each component security must have an average daily trading volume of at least 100,000 shares during the preceding sixty-day trading period;

(v) each component security must have an average daily dollar value of shares traded during the preceding sixty-day trading period of at least $1 million; and

(vi) the most heavily weighted security may not initially represent more than 20% of the overall value of the HOLDR.

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 Exchange proposes to amend Amex rule 1202 to provide for the trading of HOLDRs pursuant to Rule 19b-4(e) of the Act. On September 21, 1999, the Amex received approval to adopt new Rules 1200 et seq. to permit the trading of Trust Issued Receipts (of which HOLDRs are a type).[5] Since that time, the Exchange has listed Internet, Biotechnology, Pharmaceutical, Telecommunications, Business to Business, Internet Architecture, Internet Infrastructure, Broadband, and Semiconductor HOLDRs. The Exchange anticipates additional proposals to list new HOLDRs products.

To accommodate the listing of additional HOLDRs, the Exchange now proposes to revise existing listing criteria and trading rules to permit the listing and trading of HOLDRs pursuant to Rule 19b-4(e).[6] The Exchange believes listing newly proposed HOLDRs products pursuant to Rule 19-4(e) is appropriate because the Commission has approved, pursuant to Section 19(b) of the Act, trading rules, procedures and listing standards for the HOLDRs product class and the Exchange has a surveillance program for the HOLDRs' product class.[7] In addition, the Commission has reviewed a number of proposals to list and trade the Internet and Biotech holders that comprised the same product structure. The Commission noticed these proposed rule changes regarding the Internet and Biotech HOLDRS in the Federal Register and did not receive any comments concerning the proposals.

Amex Rule 1200 subjects HOLDRs to all of the Exchange's trading rules by providing that the provisions of the Exchange's Constitution and all other rules and policies of the Board of Governors apply to the trading of HOLDRs on the Exchange. Further, initial and continued listing standards applicable to HOLDRs, as set forth in Amex Rule 1202, currently provide that HOLDRs will be listed and traded on the Exchange subject to application of the following criteria: (a) Initial Listing—For each Trust, the Exchange will establish a minimum number of Trust Issued Receipts required to be outstanding at the time of commencement of trading on the Exchange: (b) Continued Listing—Following the initial twelve month period following formation of a Trust and commencement of trading on the Exchange, the Exchange will consider the suspension of trading in or removal from listing of a Trust upon which a series of Trust Issued Receipts is based under any of the following circumstances: (i) if the Trust has more than 60 days remaining until termination and there are fewer than 50 record and/or beneficial holders of Trust Issued Receipts for 30 or more Start Printed Page 36855consecutive trading days; (ii) if the Trust has fewer than 50,000 receipts issued and outstanding; (iii) if the market value of all receipts issued and outstanding is less than $1,000,000; or, (iv) if such other event shall occur or condition exists which in the opinion of the Exchange, makes further dealings on the Exchange inadvisable.

In addition, the component securities represented by the securities in the portfolio underlying HOLDRs must meet the following minimum criteria: (1) Each component security must be registered under Section 12 of the Exchange Act; (2) the minimum public float of each component security included in the portfolio must be at least $150 million; (3) each component security must either be listed on a national securities exchange or be traded through the facilities of Nasdaq and be a reported national market system security; (4) the average daily trading volume for each component security must be at least 100,000 shares during the preceding sixty-day trading period; and (5) the average daily dollar value of the shares traded during the preceding sixty-day trading period must be at least $1 million. And lastly, no component security may initially represent more than 20% of the overall value of the receipt.[8]

The Exchange believes codifying the abovbe listing criteria for HOLDRs listed pursuant to Rule 19b-4(e) will ensure that no security included in the basket and HOLDRs will be readily susceptible to manipulation, while permitting sufficient flexibility in the construction of various HOLDRs baskets to meet investors' needs. Additionally, the listing criteria will further serve to ensure sufficient liquidity for those investors seeking to purchase and deposit in basket securities with the trustee to create HOLDRs.

2. Statutory Basis

The proposed rule change is consistent with Section 6(b) of the Act [9] in general and furthers the objectives of Section 6(b)(5)[10] in particular in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, protect investors and the public interest.

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

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 self-regulatory organization consents, the Commission will:

(A) by order approve the 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, as amended, is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 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 at 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-00-10 and should be submitted by July 3, 2000.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[11]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  In Amendment No. 1, which has been incorporated into the proposed rule change, the Exchange replaced the word “companies” with the term “component securities” throughout the proposed rule change and the proposed rule text. The Exchange also clarified that the Exchange, and not the Commission, may approve a series of HOLDRs for listing pursuant to Rule 19b-4(e) provided each of the component securities satisfies the proposed listing criteria. See Letter from Scott Van Hatten, Attorney, Amex, to Nancy Sanow, Assistant Director, Division of Market Regulation, SEC, dated May 24, 2000.

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4.  Rule 19b-4(e) provides that the listing and trading of a new derivative securities product by an SRO shall not be deemed a proposed rule change, pursuant to paragraph (c)(1) of Rule 19b-4, if the Commission has approved, pursuant to Section 19(b) of the Act, the SRO's trading rules, procedures and listing standards for the product class that include the new derivative securities product and the self-regulatory organization has a surveillance program for the product class. 17 CFR 240.19b-(4)(e).

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5.  HOLDRs are negotiable receipts issued by trusts that represent investors' discrete identifiable and undivided beneficial ownership interest in the securities deposited into the trust. See Securities Exchange Act Release No. 41892 (September 21, 1999), 64 FR 52559 (September 29, 1999).

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6.  Rule 19b-4(e), adopted by the Commission on December 8, 1998, permits the Exchange to list and trade new derivative securities products without a rule change provided the Exchange has in place trading rules, procedures, a surveillance program and listing standards that pertain to the class of securities covering the new product. See Securities Exchange Act Release No. 40761 (December 8, 1998), 63 FR 70952 (December 22, 1998).

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7.  See Amendment to Rule Filing Requirements for Self-Regulatory Organizations Regarding New Derivative Securities Products and Order Approving the Listing and Trading of Trust Issued Receipts, Securities Exchange Act Release Nos. 40761 (December 8, 1998), 63 FR 70952 (December 22, 1998) and 41892 (September 21, 1999), 64 FR 52559 (September 29, 1999), respectively.

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8.  See Securities Exchange Act Release No. 41892 (September 21, 1999), 64 FR 52559 (September 29, 1999).

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[FR Doc. 00-14721 Filed 6-9-00; 8:45 am]

BILLING CODE 8010-01-M