[Federal Register Volume 64, Number 131 (Friday, July 9, 1999)]
[Notices]
[Pages 37178-37180]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-17464]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41593; File No. SR-AMEX-99-20]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the American Stock Exchange LLC Relating to the Listing and
Trading of Trust Issued Receipts
July 1, 1999.
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 May 28, 1999, 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.
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 Exchange proposes to adopt Rules 1200, 1201 and 1202 relating
to the listing and trading of Trust Issued Receipts. The text of the
proposed rule change follows. [Bracketing] indicates text to be deleted
and italics indicate text to be added.
Rules of General Applicability
TRUST ISSUED RECEIPTS
Rule 1200
(a) Applicability. The Rules in this Chapter (Trading of Trust
Issued Receipts) are applicable only to Trust Issued Receipts. Except
to the extent that specific Rules in this Chapter govern, or unless the
context otherwise requires, the provisions of the Constitution and all
other rules and policies of the Board of Governors shall be applicable
to the trading on the Exchange of such securities. Pursuant to the
provisions of Article 1, Section 3(i) of the Constitution, Trust Issued
Receipts are included within the definition of ``security'' or
``securities'' as such terms are used in the Constitution and Rules of
the Exchange.
(b) Definitions. The following terms as used in the Rules shall,
unless the context otherwise requires, have the meanings herein
specified:
Trust Issued Receipts. The term ``Trust Issued Receipt'' means a
security (a) that is issued by a trust (``Trust'') which holds
specified securities deposited with the Trust; (b) that, when
aggregated in some specified minimum number, may be canceled by the
beneficial owner to receive the securities; and (c) that pays
beneficial owners dividends and other distributions on the deposited
securities, if any are declared and paid to the trustee by an issuer of
the deposited securities.
Commentary
.01 The Exchange requires that members and member organizations
provide to all purchasers of newly issued Trust Issued Receipts a
prospectus for the series of Trust Issued Receipts
.02 Transactions in Trust Issued Receipts may be effected until
4:00 pm each business day.
Designation
Rule 1201
The Exchange may list and trade Trust Issued Receipts based on one
or more securities. The Trust Issued Receipts based on particular
securities shall be designated as a separate series and shall be
identified by a unique symbol. The securities that are included in a
series of Trust Issued Receipts shall be selected by the Exchange or
its agent, a wholly-owned subsidiary of the Exchange, or by such other
person as shall have a proprietary interest in such Trust Issued
Receipts, and may be revised from time to time.
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) 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
[[Page 37179]]
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 consecutive trading days; or
(ii) if such other event shall occur or condition exists which in
the opinion of the Exchange, makes further dealings on the Exchange
inadvisable.
Upon termination of a Trust, the Exchange requires that Trust
Issued Receipts issued in connection with such Trust be removed from
Exchange listing. A Trust may terminate in accordance with the
provisions of the Trust prospectus, which may provide for termination
if the value of securities in the Trust falls below a specified amount.
(c) Term--The stated term of the Trust shall be as stated in the
Trust prospectus. However, a Trust may be terminated under such earlier
circumstances as may be specified in the Trust prospectus.
(d) Trustee--The requirements of paragraph (a) of Section #811 of
the Exchange Company Guide apply.
(e) Voting--Voting rights shall be as set forth in the Trust
prospectus.
* * * * *
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 Amex proposes to add Rules 1200, 1201 and 1202 to accommodate
the trading of trust issued receipts that are intended to provide
investors with a flexible, cost-effective way of purchasing, holding
and transferring the securities of one or more specified companies.
Since trust issued receipts have many of the same features and
characteristics of Portfolio Depositary Receipts (``PDRs'') that have
been listed on the Exchange since 1993, the Exchange is proposing that
trust issued receipts have similar listing standards and rules as are
currently in place for PDRs. In addition, the Exchange proposes to
trade standardized options on the trust receipts using the listing
standards for exchange-traded fund shares.
Trust Issued Receipts
Trust issued receipts are negotiable receipts which are issued by a
Trust representing securities of issuers that have been deposited and
are held on behalf of the holders of the trust issued receipts. Trust
issued receipts are designed to allow investors to hold certain
securities investments in a single, exchange-listed and traded
instrument representing their beneficial ownership in the deposited
securities. Holders of trust issued receipts maintain beneficial
ownership of each of the deposited securities evidenced by trust issued
receipts. Holders may cancel their trust issued receipts at any time to
receive the deposited securities.
The proposed initial trust issued receipts will be formed under a
depositary trust agreement between a qualified trustee, as trustee, and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as the initial
depositor. A trust will issue trust issued receipts under a depositary
agreement. After the initial offering, a trust may issue additional
receipts on a continuous basis when an investor deposits the requisite
securities with the trust.
A round-lot of 100 trust issued receipts represents a holder's
individual and undivided ownership interest in a whole number of
securities of one or more specified companies in a specified industry.
Trust issued receipts may be acquired, held or transferred only in
round-lot amounts (or round-lot multiples) of 100 receipts. Orders for
less than a round-lot will be rejected, while orders for greater than a
round-lot, but not a round-lot, but not a round-lot multiple will be
executed to the extent of the largest round lot multiple, rejecting the
remaining odd-lot (e.g., orders for 50 trust issued receipts will be
rejected, and for orders of 1050 trust issued receipts, 1000 will be
executed and 50 will be rejected). The initial offering price for a
trust issued receipt will be established on the data the receipts are
priced for sale to the public.
Except when a reconstruction event occurs, as described below, the
securities represented in a trust issued receipt will not change. Under
no circumstances will a new security be added to the list of securities
after a particular receipt program is established. An investor in trust
issued receipts will be permitted to withdraw its deposited securities
upon delivery to the trustee of one or more round-lots of 100 trust
issued receipts and to deposit such securities to receive trust issued
receipts.
The amounts of deposited securities for each round-lot of 100 trust
issued receipts will be determined on the pricing date and will be
disclosed in the prospectus to investors.
Maintenance of Trust Issued Receipts
The amounts of deposited securities specified in the prospectus
will not change, except for changes due to certain corporate events
such as stock splits or reverse stock splits on the deposited
securities. The relative weighings among the deposited securities will
change based on the current market price of the deposited securities.
Once established, the component securities held by the trust and
represented by trust issued receipts will not change unless an event
described below occurs.
The trust agreement provides for the automatic distribution of
specified deposited securities to the beneficial owner of such receipts
in three circumstances referred to in the prospectus as
``reconstitution events.'' A reconstitution event occurs if:
(1) A company with deposited securities evidenced by a trust issued
receipt no longer has a class of common stock registered under Section
12 of the Securities Exchange Act of 1934. In such instance, its
securities will no longer be a deposited security and the trustee will
distribute the securities of that company to the owners of the trust
receipts;
(2) The Commission finds that a company with deposited securities
evidenced by the trust issued receipts is a company that should be
registered as an investment company under the Investment Company Act of
1940, and the trustee has actual knowledge of the Commission's finding.
In this situation, the trustee will distribute the securities of that
company to the owners of the trust issued receipts; and
(3) The deposited securities of a company evidenced by a trust
issued receipt are no longer outstanding because the securities were
acquired by another company. Under this scenario, the trustee will
distribute the consideration paid by and received from the acquiring
company to the beneficial owners of trust issued receipts, unless the
consideration is additional deposited securities (i.e., the acquiring
company's securities are already included in the trust issued receipt
as
[[Page 37180]]
deposited securities), in which case such additional securities will be
deposited into the trust.
If the trustee removes a deposited security from the trust due to
the occurrence of one of the reconstitution events described above, the
trustee will deliver the deposited security to the investor within
three calendar days from the occurrence of the reconstitution event.
Investors in the trust issued receipts will receive dividends and other
distributions paid in respect of the deposited securities.
The trust will issue and cancel, and an investor may obtain, hold,
trade or surrender, receipts only in a round-lot of 100 trust issued
receipts and round-lot multiples. While investors will only be able to
acquire, hold, transfer and surrender the receipts in round-lots of 100
trust issued receipts, the bid and asked prices will be quoted on a per
receipt basis.\3\ The trust will issue additional receipts on a
continuous basis when an investor deposits the required securities with
the trust.
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\3\ The per share amount will be disseminated by the Amex every
15 seconds over the Consolidated Tape Association's Network B.
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An investor may obtain trust issued receipts by delivering to the
trust the requisite securities evidencing a trust issued receipt, the
trustee will charge an issuance fee of up to $10.00 per 100 trust
issued receipts. If an investor wants to cancel trust issued receipts
and withdraw the deposited securities, the trustee will charge a
cancellation fee of up to $10.00 per 100 trust issued receipts.
Criteria for Initial and Continued Listing
Because of the continuous issuance and cancellation of trust issued
receipts, the Exchange believes it is necessary to maintain appropriate
flexibility in connection with listing a specific trust. In connection
with initial listing, the Exchange proposes that, for each trust, the
Exchange will establish a minimum number of receipts required to be
outstanding at the time of commencement of Exchange trading, and such
minimum number will be filed with the Commission in connection with any
required submission under Rule 19b-4 for each trust. It is anticipated
that a minimum of 150,000 receipts will be required to be outstanding
when trading begins.
Because of the continuous issuance and cancellation of trust issued
receipts, and because the number of holders is subject to substantial
fluctuations depending on market conditions, the Exchange believes it
would be inappropriate and burdensome on trust issued receipt holders
to consider suspending trading in or delisting a series of receipts
with the consequent termination of the trust, unless the number of
holders remains severely depressed over an extended time period.
Therefore, after twelve months from the formation of a trust and
commencement of Exchange trading, the Exchange will consider suspension
of trading in, or removal from listing of a trust when, in its opinion,
further dealing in such securities appears unwarranted under the
following circumstances:
(a) if the trust has more than 60 days remaining until termination
and there have been fewer than 50 record and/or beneficial holders of
the trust issued receipts for 30 or more consecutive trading days; or
(b) if such other event shall occur or condition exists which in
the opinion of the Exchange, makes further dealings on the Exchange
inadvisable.
Exchange Rules Applicable to the Trading of Trust Issued Receipts
Trust issued receipts will be deemed equity securities subject to
all Amex rules governing the trading of equity securities, including,
among others, rules governing priority, parity and precedence of
orders, market volatility related trading halt provisions pursuant to
Amex Rule 117, and responsibilities of the specialist. Exchange equity
margin rules and the regular equity trading hours of 9:30 a.m. to 4
p.m. will apply to transactions in trust issued receipts. However,
trading rules pertaining to the availability of odd-lot trading in Amex
equities will not apply to the trading of trust issued receipts, since
they can only be traded in round-lots.
2. Statutory Basis
The proposed rule change is consistent with Section 6(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 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.
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(5).
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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 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 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-99-20 and
should be submitted by July 30, 1999.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-17464 Filed 7-9-99; 8:45 am]
BILLING CODE 8010-01-M