[Federal Register Volume 65, Number 113 (Monday, June 12, 2000)]
[Notices]
[Pages 36853-36855]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-14721]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42895; File No. SR-AMEX-00-10]


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

June 2, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

[[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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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).

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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
    \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.
---------------------------------------------------------------------------

    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

[[Page 36855]]

consecutive 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\
---------------------------------------------------------------------------

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

    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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 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

    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.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-14721 Filed 6-9-00; 8:45 am]
BILLING CODE 8010-01-M