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Notice

Self-Regulatory Organizations; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change by the Chicago Stock Exchange, Incorporated Relating to the Listing and Trading of Trust Issued Receipts

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Start Preamble Start Printed Page 1385 January 4, 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 10, 2001, the Chicago Stock Exchange, Incorporated (“CHX” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change, described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons and to approve the proposal on an accelerated basis.

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

The Exchange proposes to add an Interpretation and Policy relating to Article XXVIII, Rule 27 of the CHX Rules, which governs the listing of Trust Issued Receipts (“TIRs”) on the CHX. The new Interpretation and Policy will confirm the eligibility requirements for Component Securities represented by a series of TIRs that became part of such TIR when the security was either: (a) Distributed by a company whose securities were already included as a Component Security in the series of TIRs; or (b) received in exchange for the securities of a company previously included as a Component Security that are no longer outstanding due to a merger, consolidation, corporate combination or other event. The text of the proposed rule filing is below. Additions are in italics; deletions are in brackets.

Chicago Stock Exchange Rules

Article XXVIII

* * * * *

Trust Issued Receipts

Rule 27 No change to text

Interpretation s and Polic ies[y]

.01 No change in text.

.02 The eligibility requirements for Component Securities that are represented by a series of Trust Issued Receipts and that became part of the Trust Issued Receipt when the security was either: (a) Distributed by a company already included as a Component Security in the series of Trust Issued Receipts; or (b) received in exchange for the securities of a company previously included as a Component Security that is no longer outstanding due to a merger, consolidation, corporate combination or other event, shall be as follows:

(i) the Component Security must be listed on a national securities exchange or traded through the facilities of Nasdaq and a reported national market system security;

(ii) the Component Security must be registered under section 12 of the Exchange Act; and

(iii) the Component Security must have a Standard & Poor's Sector Classification that is the same as the Standard & Poor's Sector Classification represented by Component Securities included in the Trust Issued Receipt at the time of the distribution or exchange.

* * * * *

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 III 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 add an Interpretation and Policy relating to Article XXVIII, Rule 27 of the CHX Rules, which governs the listing of TIRS on the CHX. The new Interpretation and Policy will confirm the eligibility requirements for Component Securities represented by a series of TIRs that became part of such TIR when the security was either: (a) Distributed by a company whose securities were already included as a Component Security in the series of TIRs; or (b) received in exchange for the securities of a company previously included as a Component Security that are no longer outstanding due to a merger, consolidation, corporate combination or other event.

Article XXVIII, Rule 27 of the CHX Rules set forth the eligibility criteria for Component Securities represented by a series of TIRs. The current version of the rule does not contain eligibility criteria for Component Securities that are automatically deposited into a TIR as a result of a distribution or corporate event. Accordingly, the CHX proposes the following eligibility requirements for such Component Securities: (i) The Component Security must be listed on a national securities exchange or traded through the facilities of Nasdaq and a reported national market system security; (ii) the Component security must be registered under section 12 of the Act; and (iii) the Component Security & Poor's Sector Classification represented by Component Securities included in the TIR at the time of the distribution or exchange.

The CHX believes that it is appropriate in these limited situations to provide alternate eligibility criteria for Component Securities. To reduce the number of distributions of securities from the TIR which cause inconvenience and increased transaction and administrative costs for investors, it is useful to allow certain securities that are received as part of a distribution from a company or as the result of a merger, consolidation, corporate combination or other event to remain in the TIR. The proposed eligibility requirements ensure that Component Securities included in a TIR as a result of a distribution or exchange event are widely held (having been distributed to all of the shareholders holding the original Component Security), traded through the facilities of an exchange or Nasdaq and registered under section 12 of the Act.

Notably, the Exchange believes that the proposed rule change is substantially similar to rule filings previously approved on an accelerated basis by the Commission.[3]

2. Statutory Basis

The Exchange believes the proposed rule change is consistent with section Start Printed Page 13866(b) of the Act [4] in general, and furthers the objectives of section 6(b)(5) [5] in particular, in that it is designed to promote just and equitable principles of trade, remove impediments to and perfect the mechanisms 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 believes that the proposed rule change will impose no 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

No written comments were solicited or received with respect to 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. 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 inspecation and copying at the principal office of the CHX. All submissions should refer to the File No. SR-CHX-2001-29 and should be submitted by January 31, 2002.

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

After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange, and in particular, the requirements of section 6(b)(5) of the Act.[6] Specifically, the Commission finds that the proposal to provide an alternate eligibility criteria for Component Securities received as part of a distribution or as a result of a merger, consolidation, corporate combination or other event to remain in the trust will promote just and equitable principles of trade, facilitate transactions in securities, 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, and is not designed to permit unfair discrimination between customers issuers, brokers, or dealers.[7]

The CHX has requested that the proposed rule change be given accelerated approval pursuant to section 19(b)(2) of the Act.[8]

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 pursuant to section 19(b)(2).[9] As noted above, the Commission has previously approved proposed rule changes by other exchanges that provided similar eligibility requirement.[10] The Commission does not believe that the proposed rule change raises novel regulatory issues that were not addressed in the previous filings. Accordingly, the Commission finds that it is consistent with section 6(b)(5) of the Act[11] to approve the proposal on an accelerated basis.

V. Conclusion

It is therefore ordered, pursuant to section 19(b)(2) of the Act,[12] that the proposed rule change (SR-CHX-2001-29) is hereby approved on an accelerated basis.

Start Signature

For the Commission, by the Divsiion of Market Regulation, pursuant to delegated authority.[13]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  See Securities Exchange Act Release Nos. 44309 (May 16, 2001), 66 FR 28587 (May 23, 2001) (File No. SR-Amex-2001-04); 44928 (October 12, 2001), 66 FR 53457 (October 22, 2001) (File No. SR-BSE-2001-05); and 44826 (September 20, 2001, 66 FR 49990 (October 1, 2001) (File No. SR-Phlx-2001-75).

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7.  In approving this proposed rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f)

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10.  See supra note 3.

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[FR Doc. 02-634 Filed 1- 9-02; 8:45 am]

BILLING CODE 8010-01-M