[Federal Register Volume 66, Number 107 (Monday, June 4, 2001)]
[Notices]
[Pages 30031-30033]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-13883]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44354; File No. SR-Amex-2001-25]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange LLC Relating to Generic Listing 
Standards for Portfolio Depository Receipts and Index Fund Shares

May 25, 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 than 
on May 3, 2001, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission

[[Page 30032]]

(``Commission'') the proposed rule change as described in Items I, II, 
and III 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 Amex proposes to amend Amex Rule 1000, Commentary .03 and Rule 
1000A, Commentary .02 regarding generic listing standards for Portfolio 
Depositary Receipts (``PDRs'') and Index Fund Shares. Below is the text 
of the proposed rule change. Text in brackets indicates material to be 
deleted, and text in italics indicates material to be added.
* * * * *

Portfolio Depositary Receipts

Rule 1000  No change.

* * * * *
Commentary
* * * * *
    .03  The Exchange may approve a series of Portfolio Depositary 
Receipts for listing and trading pursuant to Rule 19b-4(e) under the 
Securities Exchange Act of 1934 provided each of the following 
criteria is satisfied:
    (a) Eligibility Criteria for Index Components. Upon the initial 
listing of a series of Portfolio Depositary Receipts on the 
Exchange, the component stocks of an index or portfolio underlying 
such series of Portfolio Depositary Receipts shall meet the 
following criteria:
    (1) No change
    (2) No change
    (3) The most heavily weighted component stock cannot exceed 
[25%] 30% of the weight of the index or portfolio, and the five most 
heavily weighted component stocks cannot exceed 65% of the weight of 
the index or portfolio.
    No further change.
* * * * *

Index Fund Shares

Rule 1000A

* * * * *
Commentary
* * * * *
    .02  The Exchange may approve a series of Index Fund Shares for 
listing pursuant to Rule 19b-4(e) under the Securities Exchange Act 
of 1934 provided each of the following criteria is satisfied:
    (a) Eligibility Criteria for Index Components. Upon the intital 
listing of a series of Index Fund Shares, each component of an index 
or portfolio underlying a series of Index Fund Shares shall meet the 
following criteria:
     (1) No change.
     (2) No change.
     (3) The most heavily weighted component stock cannot exceed 
[25%] 30% of the weight of the index or portfolio, and the five most 
heavily weighted component stocks cannot exceed 65% of the weight of 
the index or portfolio.
    No further change.
* * * * *

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 Amex 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 Amex 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
    Amex Rule 1000, Commentary .03 and Rule 1000A, Commentary .02 
provide generic listing standards for PDRs and Index Fund Shares, 
respectively, to permit listing and trading of these securities 
pursuant to Rule 19b-4(e) under the Act.\3\ Rule 19b-4(e) \4\ provides 
that the listing and trading of a new derivative securities product by 
a self-regulatory organization shall not be deemed a proposed rule 
change, pursuant to paragraph (c)(1) of Rule 19b-4,\5\ if the 
Commission has approved, pursuant to section 19(b) of the Act,\6\ the 
self-regulatory organization's trading rules, procedures and listing 
standards for the product class that would include the new derivative 
securities product, and the self-regulatory organization has a 
surveillance program for the product class.\7\ The Commission has 
approved Rule 1000, Commentary .02 and Rule 1000A, Commentary .03.\8\
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    \3\ 17 CFR 240.19b-4(e).
    \4\ 17 CFR 240.19b-4(e).
    \5\ 17 CFR 240.19b-4(c)(1).
    \6\ 15 U.S.C. 78s(b).
    \7\ See Securities Exchange Act Release No. 40761 (December 8, 
1998), 63 FR 70952 (December 22, 1998).
    \8\ See Securities Exchange Act Release No. 42787 (May 15, 
2000), 65 FR 33598 (May 24, 2000).
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    These generic listing standards are intended to ensure that a 
substantial portion of the weight of an index or portfolio is accounted 
for by stocks with substantial market capitalization and trading 
volume. Rule 1000, Commentary .03 and Rule 1000A, Commentary .02 
provide that, upon the initial listing of a series of PDRs or Index 
Fund Shares under rule 19b-4(e),\9\ component stocks that in the 
aggregate account for at least 90 percent of the weight of the index or 
portfolio must have a minimum market value of at least $75 million. In 
addition, the component stocks in the index must have a minimum monthly 
trading volume during each of the last six months of at least 250,000 
shares for stocks representing at least 90 percent of the weight of the 
index or portfolio.
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    \9\ 17 CFR 240.19b-4(e).
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    Currently, Rule 1000, Commentary .03(a)93), and Rule 1000A, 
Commentary .02(a)(3) provide that the most heavily weighted component 
stock in an underlying index cannot exceed 25 percent of the weight of 
the index or portfolio, and the five most heavily weighted component 
stocks cannot exceed 65 percent of the weight of the index or 
portfolio. The Exchange proposes to increase from 25 percent to 30 
percent the permissible weight of the most heavily weighted component 
stock in an underlying index. The Exchange is not amending the existing 
requirement that the five most heavily weighted stocks cannot exceed 65 
percent of the weight of the index or portfolio. This change will 
provide additional flexibility to unit investment trusts or mutual 
funds to be listed pursuant to Rule 19b-4(e) \10\ in structuring their 
products and will help reduce possible concerns associated with a 
single stock exceeding the 25 percent threshold immediately prior to 
initial listing and trading due to a spike in the price of the most 
heavily weighted index stock. The Exchange notes that, notwithstanding 
this change, unit investment trusts (including PDRs) and mutual funds 
(including Index Fund Shares) are subject to Internal Revenue Code 
Subchapter M requirements applicable to regulated investment companies. 
In order to maintain regulated investment company status, these 
entities would be required to rebalance their portfolios quarterly to 
avoid any one stock exceeding a 25 percent weighting in the trust's or 
fund's portfolio.\11\
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    \10\ 17 CFR 240.19b-4(e).
    \11\ Under Subchapter M of the Internal Revenue Code, for a fund 
to qualify as a regulated investment company, the securities of a 
single issuer can account for no more than 25 percent of a fund's 
total assets, and at least 50 percent of a fund's total assets must 
be comprised of cash (including government securities) and 
securities of single issuers whose securities account for less than 
5 percent of such fund's total assets.
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2. Statutory Basis
    The proposed rule change is consistent with section 6(b) of the Act 
\12\ in general, and furthers the objective of

[[Page 30033]]

section 6(b)(5) of the Act \13\ in particular, in that it is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, to protect investors 
and the public interest and is not designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 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 Exchange consents, the Commission will:
    (A) By order approve such 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 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 File No. SR-Amex-2001-25 and 
should be submitted by June 25, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-13883 Filed 6-1-01; 8:45 am]
BILLING CODE 8010-01-M