[Federal Register Volume 66, Number 100 (Wednesday, May 23, 2001)]
[Notices]
[Pages 28587-28589]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-12934]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44309; File No. SR-Amex-2001-04]


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

May 16, 2001.
    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 February 7, 2001, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change, and amended such 
proposed rule change on May 8, 2001,\3\ 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, as amended, from interested 
persons and to approve the proposal and Amendment No. 1 on an 
accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 made non-substantive changes to the text of 
proposed Commentary .02 of Amex Rule 1202. See letter from Claire P. 
McGrath, Vice President and Special Counsel, Amex, to Nancy Sanow, 
Assistant Director, Division of Market Regulation, SEC, dated May 4, 
2001.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Amex proposes to amend Amex Rule 1202 to provide eligibility 
requirements for Component Securities represented by a series of Trust 
Issued Receipts (``TIRs'') that became part of such TIR when the 
security was either: (a) Distributed by a company whose securities are 
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.

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  No change.
    .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
    In September 1999, the Exchange adopted rules for the listing and 
trading

[[Page 28588]]

of TIRs.\4\ TIRs are negotiable receipts that are issued by trusts and 
represent investors' discrete identifiable and undivided beneficial 
ownership interest in the securities deposited into the trust. Since 
that time, the Exchange has listed 15 TIRs under the trade name HOLDRS, 
representing a wide variety of industry sectors (e.g., Internet, 
biotechnology, pharmaceutical and telecommunications), and the market 
as a whole (e.g., Market 2000+HOLDRS and Eurpoe 2001 HOLDRS).
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    \4\ See Securities Exchange Act Release No. 41892 (September 21, 
1999), 64 FR 52559 (September 29, 1999).
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    In September 2000, to accommodate the listing of additional TIRs, 
the Exchange revised the existing listing criteria and trading rules to 
permit the listing and trading of TIRs pursuant to Rule 19b-4(e).\5\ 
The Exchange established the following eligibility criteria for 
Component Securities represented by a series of TIRs:
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    \5\ 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 70921 (December 22, 1998).
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     Each Component Security must be registered under section 
12 of the Exchange Act;
     Each Component Security must have a minimum public float 
of at least $150 million;
     Each Component Security must be listed on a U.S. national 
securities exchange or traded through the facilities of Nasdaq and a 
reported national market system security;
     Each Component Security must have an average daily trading 
volume of at least 100,000 shares during the preceding sixty-day 
trading period;
     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
     The most heavily weighted Component Security may not 
initially represent more than 20% of the overall value of the TIR.
    Recently, the rules relating to the distributions of securities by 
Component Securities in a trust has been revised to provide: (a) If a 
company whose securities are included in a series of TIRs distributes a 
security, the distributed security will remain in the trust as a 
Component Security if it is listed for trading on a U.S. national 
securities exchange or through the facilities of Nasdaq and its 
Standard & Poor's sector classification is the same as the sector 
classification represented by the other Component Securities in the 
trust at the time of the distribution; and (b) if the securities of a 
company that are included in a series of TIRs are no longer outstanding 
as a result of a merger, consolidation, corporate combination or other 
event, any securities received in exchange for those securities will 
remain in the trust as a Component Security if it is listed for trading 
on a U.S. national securities exchange or through the facilities of 
Nasdaq and its Standard & Poor's sector classification is the same as 
the sector classification represented by the other Component Securities 
in the trust at the time of the merger, consolidation, corporate 
combination or other event.
    As a result of this change, a security that is automatically 
deposited into the trust as a result of a distribution or a corporate 
event may remain in the trust even though it does not meet all of the 
initial eligibility requirements set forth in Commentary .01 to Amex 
Rule 1202. For example, securities distributed by an issuer or 
exchanged in a merger generally do not have measurable price and 
trading histories, and may not have a minimum public float of $150 
million. There is no requirement to review the securities that are 
represented by TIRs on an ongoing basis to determine whether Component 
Securities continue to meet the initial eligibility requirements. The 
Exchange now proposed to amend Amex Rule 1202 to provide eligibility 
requirements for a Component Security that became part of a trust when 
the security was either: (a) Distributed by a company 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 and that are no longer outstanding due to a merger, 
consolidation, corporate combination or other event. The eligibility 
requirements for such Component Securities are as follows:
     Such Component Security must be listed on national 
securities exchange or traded through the facilities of Nasdaq and a 
reported national market system security;
     Such Component Security must be registered under Section 
12 of the Exchange Act; and
     Such 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 already included in 
the TIR at the time of the distribution or exchange.
    The Exchange 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.\6\
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    \6\ 15 U.S.C. 78l.
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2. Statutory Basis
    The Exchange believes 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, 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.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change will impose no burden on competition that 
is not necessary or appropriate in furtherance of the purposes of the 
Act, as amended.

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

[[Page 28589]]

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 inspection and copying at the principal office of the 
Amex. All submissions should refer to the File No. SR-Amex-2001-04 and 
should be submitted by June 13, 2001.

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

    After careful review, the Commission finds that the proposed rule 
change, as amended, 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.\9\ 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 prevent fraudulent and manipulative acts and 
practices, 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.\10\
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    \9\ 15 U.S.C. 78f(b)(5).
    \10\ 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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    The Amex has requested that the proposed rule change be given 
accelerated approval pursuant to section 19(b)(2) of the Act.\11\
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    \11\ 15 U.S.C. 78s(b)(2).
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    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).\12\ There are TIRs currently listed and trading that have 
adopted the revised distribution provisions and such distributed or 
exchange securities may have or will shortly become Component 
Securities in one or more trusts issuing TIRs. Accordingly, the 
Commission finds that it is consistent with section 6(b)(5) of the Act 
\13\ to approve the proposal on an accelerated basis to accommodate 
such possibility.
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    \12\ 15 U.S.C. 78s(b)(2).
    \13\ 15 U.S.C. 78f(b)(5).
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    It Is Therefore Ordered, pursuant to section 19(b)(2) of the 
Act,\14\ that the proposed rule change (SR-Amex-2001-04) and Amendment 
No. 1 are hereby approved on an accelerated basis.
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    \14\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 01-12934 Filed 5-22-01; 8:45 am]
BILLING CODE 8010-01-M