[Federal Register Volume 67, Number 61 (Friday, March 29, 2002)]
[Notices]
[Pages 15258-15262]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-7608]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45639; File No. SR-Amex-2002-18]


Self Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of a Proposed Rule Change by the American 
Stock Exchange LLC Relating to the Listing and Trading of Oil and 
Natural Gas Notes

March 25, 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 March 8, 2002, 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 and is approving the 
proposal on an accelerated basis.
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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 list and trade notes, the return on which is 
based upon the Oil and Natural Gas Index. The Oil and Natural Gas Index 
is based upon the blended performance of the Amex Oil Index (the ``Oil 
Index'') and the Amex Natural Gas Index (the ``Natural Gas Index'') 
(each, an ``Underlying Index'' and together, the ``Underlying 
Indices''), discussed more fully below. Initially, the Underlying 
Indices will each have a weighting of 50% of the Oil and Natural Gas 
Index,

[[Page 15259]]

and the Oil and Natural Gas Index will be rebalanced annually to reset 
the weighting of the Underlying Indices to approximately 50% each.

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 III 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
    Under Section 107A of the Amex Company Guide (``Company Guide''), 
the Exchange may approve for listing and trading securities which 
cannot be readily categorized under the listing criteria for common and 
preferred stocks, bonds, debentures, or warrants. \3\ The Amex proposes 
to list for trading under Section 107A of the Company Guide notes based 
on the Oil and Natural Gas Index (the ``Notes''). The Oil and Natural 
Gas Index will be determined, calculated, and maintained solely by the 
Amex. \4\
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    \3\ See Securities Exchange Act Release No. 27753 (March 1, 
1990), 55 FR 8626 (March 8, 1990) (order approving File No. SR-Amex-
89-29).
    \4\ Subject to the criteria described in the prospectus 
supplement regarding the construction of the Oil and Natural Gas 
Index, the Exchange has sole discretion regarding changes to the Oil 
and Natural Gas Index.
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    The Notes will conform to the initial listing guidelines under 
Section 107 \5\ and continued listing guidelines under Sections 1001-
1003 \6\ of the Company Guide. The Notes are senior non-convertible 
debt securities of Merrill Lynch & Co., Inc. (``Merrill Lynch'') that 
provide for single payment at maturity. The Notes will have a term of 
not less than one nor more than ten years and will entitle the owner at 
maturity to receive an amount based upon the percentage change between 
the ``Starting Index Value'' and the ``Ending Index Value'' (the 
``Redemption Amount''). The ``Starting Index Value'' is the value of 
the Oil and Natural Gas Index on the date on which the issuer prices 
the Notes issued for the initial offering of sale to the public. The 
``Ending Index Value'' is the value of the Oil and Natural Gas Index 
over a period shortly prior to the expiration of the Notes. The Ending 
Index Value will be used in calculating the amount owners will receive 
upon maturity. The Notes will not have a minimum principal amount that 
will be repaid and, accordingly, payments on the Notes prior to or at 
maturity may be less than the original issue price of the Notes. During 
a two-week period in the designated month each year, the investors will 
have the right to require the issuer to repurchase the Notes at a 
redemption amount based on the value of the Oil and Natural Gas Index 
at such repurchase date. The Notes are not callable by the issuer.
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    \5\ The initial listing standards for will require: (1) a 
minimum public distribution of one million units; (2) a minimum of 
400 shareholders; (3) a market value of at least $4 million; and (4) 
a term of at least one year. In addition, the listing guidelines 
provide that the issuer have assets in excess of $100 million, 
stockholder's equity of at least $10 million, and pre-tax income of 
at least $750,000 in the last fiscal year or in two of the three 
prior fiscal years. In the case of an issuer which is unable to 
satisfy the earning criteria stated in Section 101 of the Company 
Guide, the Exchange will require the issuer to have the following: 
(1) assets in excess of $200 million and stockholders' equity of at 
least $10 million; or (2) assets in excess of $100 million and 
stockholders' equity of at least $20 million.
    \6\ The Exchange's continued listing guidelines are set forth in 
Sections 1001 through 1003 of Part 10 to the Exchange's Company 
Guide. Section 1002(b) of the Company Guide states that the Exchange 
will consider removing from listing any security where, in the 
opinion of the Exchange, it appears that the extent of public 
distribution or aggregate market value has become so reduced to make 
further dealings on the Exchange inadvisable. With respect to 
continued listing guidelines for distribution of the Notes, the 
Exchange will rely, in part, on the guidelines for bonds in Section 
1003(b)(iv). Section 1003(b)(iv)(A) provides that the Exchange will 
normally consider suspending dealings in, or removing from the list, 
a security if the aggregate market value or the principal amount of 
bonds publicly held is less than $400,000.
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    The Notes are cash-settled in U.S. dollars. The holder of a Note 
does not have any right to receive any of the securities comprising the 
Underlying Indices or any other ownership right or interest in the 
Underlying Securities. The Notes are designed for investors who want to 
participate or gain exposure to the U.S. oil and natural gas industries 
and who are willing to forgo market interest payments on the Notes 
during such term. \7\
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    \7\ Telephone conversation between Jeffrey P. Burns, Assistant 
General Counsel, Amex, and Steven G. Johnston, Attorney, Division of 
Market Regulation, Commission, on March 3, 2002. (``March 3, 2002 
Telephone Conversation'').
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    The Oil and Natural Gas Index is based upon the combined 
performance of the Oil Index and the Natural Gas Index. The Oil Index 
is an index comprised of fourteen (14) stocks of large, widely-held oil 
companies. The Oil Index is a price-weighted index that measures the 
performance of the oil industry through changes in the sum of the 
prices of its component stocks. The Index was developed with a 
benchmark level of 125.00 on August 27, 1984. The current component 
securities in the Oil Index are listed on the New York Stock Exchange 
Inc. (the ``NYSE''). As of March 1, 2002, the market capitalization of 
the securities included in the Oil Index ranged from a high of $291.2 
billion to a low of $3.1 billion. The average daily trading volume for 
these index securities over the last six (6) months ended March 1, 
2002, ranged from a high of 10.01 million shares to a low of .41 
million shares. The Commission has previously approved the listing and 
trading of options on the Oil and Gas Index, which was later modified 
and re-named the Oil Index. \8\
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    \8\ See Securities Exchange Act Release No. 20075 (August 12, 
1983), 48 FR 37556 (August 18, 1983) (approving the listing and 
trading of options on the Oil and Gas Index)(``Oil and Gas Index 
Approval Order''); Securities Exchange Act Release No. 21409 
(October 19, 1984), 49 FR 43011 (October 25, 1984) (approving change 
of index from market-weighted to price-weighted index; reduction in 
number of component stocks by eliminating companies engaged in 
substantial gas exploration, drilling, and production activities; 
and changing name to the Oil Index).
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    The Natural Gas Index is an index comprised of fifteen (15) 
securities of highly-capitalized companies in the natural gas industry. 
The Natural Gas Index is calculated using an equal dollar-weighting 
methodology designed to ensure that each of the component securities 
are represented in equal dollar amounts in the Index. A benchmark level 
of 300.00 for the Index was initially established at the close of 
trading on October 15, 1993. The index portfolio consists of fifteen 
(15) natural gas industry stocks or American Depositary Receipts 
(``ADRs'') which are listed on the Amex, the NYSE or traded through the 
facilities of the National Association of Securities Dealers, Inc. 
Automated Quotation System (``NASDAQ'') and reported National Market 
System securities. As of March 1, 2002, the market capitalization of 
the securities included in the Natural Gas Index ranged from a high of 
$21.2 billion to a low of $1.5 billion. The average daily trading 
volume for these index securities over the last six (6) months ended 
March 1, 2002 ranged from a high of 5.85 million shares to a low of 
.151 million shares. The Exchange has previously listed options on the 
Natural Gas Index. \9\
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    \9\ See Securities Exchange Act Release No. 33720 (March 7, 
1994), 59 FR 11630 (March 11, 1994) (approving listing and trading 
of options based on the Natural Gas Index)(``Natural Gas Index 
Approval Order'').

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[[Page 15260]]

    At the outset, the Underlying Indices will each represent 50% of 
the Starting Index Value. Specifically, both the Oil Index and Natural 
Gas Index will be assigned a multiplier on the date of issuance so that 
each Underlying Index represents an equal percentage of the value of 
the Oil and Natural Gas Index on the date the Notes are priced for 
initial sale to the public. The multiplier indicates the percentage of 
the Underlying Index, given its current value, to be included in the 
calculation of the Oil and Natural Gas Index. The Oil and Natural Gas 
Index will initially be set to provide a benchmark value of 100.00 at 
the close of trading on the day the Notes are priced for initial sale 
to the public.
    The value of the Oil and Natural Gas Index at any time will equal: 
(1) the sum of the values of each Underlying Index multiplied by their 
respective multiplier, plus (2) an amount reflecting current calendar 
quarter dividends, and less (3) a pro rata portion of the annual index 
adjustment factor.\10\ Current quarter dividends for any day will be 
determined by the Amex and will equal the sum of each dividend paid by 
an issuer represented in the Underlying Indices, multiplied by the 
number of shares of stock in the respective Underlying Index on the ex-
dividend date, divided by the index divisor applicable to such 
Underlying Index, multiplied by the multiplier applicable to such 
Underlying Index on the ex-dividend date.\11\
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    \10\ March 3, 2002 Telephone Conversation. At the end of each 
day, the Oil and Natural Gas Index will be reduced by a pro rata 
portion of the annual index adjustment factor, expected to be 1.5% 
(i.e., 1.5% /
365 days = 0.0041% daily). This reduction to the value of the Oil 
and Natural Gas Index will reduce the total return to investors upon 
the exchange or at maturity. The Amex represents that an explanation 
of this deduction will be included in any marketing materials, fact 
sheets, or any other materials circulated to investors regarding the 
trading of this product.
    \11\ March 3, 2002 Telephone Conversation.
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    As of the first day of the start of each calendar quarter, the Amex 
will allocate the current quarter dividends as of the end of the 
immediately preceding calendar quarter to each respective Underlying 
Index in the Oil and Natural Gas Index. Thus, the value of the 
dividends is allocated to each respective Underlying Index. The share 
multiplier of each Underlying Index will be adjusted to reflect a 
reinvestment of such current quarter dividends into each Underlying 
Index based on the closing market price of the Underlying Index on the 
last day in the immediate preceding calendar quarter.\12\
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    \12\ March 3, 2002 Telephone Conversation.
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    As of the close of business each anniversary date (anniversary of 
the day the Index was initially calculated and set to 100), the Index 
will be rebalanced by the Amex so that each Underlying Index will 
represent approximately 50% of the value of the Index. To effectuate 
this result, the multiplier for each Underlying Index will be 
determined by the Amex and will indicate the percentage allocated to 
each Underlying Index, given their respective closing values on the 
anniversary date, so that each Underlying Index represents an equal 
percentage of the Oil and Natural Gas Index value at the close of 
business on an anniversary date. For example, if the Oil and Natural 
Gas Index value at the close of business on an anniversary date was 
200, then each of the Underlying Indices would be allocated a portion 
of the value of the Oil and Natural Gas Index equal to 100, and if the 
closing market price of one Underlying Index on the anniversary date 
was 160, the applicable share multiplier would be reset to 0.625. 
Conversely, if the Oil and Natural Gas Index value was 80, then each of 
the Underlying Indices would be allocated the value of the Index equal 
to 40 and if the closing market price of one Underlying Index on the 
anniversary date was 20, the applicable share multiplier would be reset 
to 2.
    The Exchange will calculate the Oil and Natural Gas Index and, 
similar to other stock index values published by the Exchange, the 
value of the Oil and Natural Gas Index will be calculated continuously 
and disseminated every fifteen seconds over the Consolidated Tape 
Association's Network B.
    Because the Notes are linked to a portfolio of equity indices, the 
Amex's existing equity floor trading rules will apply to the trading of 
the Notes. First, pursuant to Amex Rule 411, the Exchange will impose a 
duty of due diligence on its members and member firms to learn the 
essential facts relating to every customer prior to trading the 
Notes.\13\ Second, the Notes will be subject to the equity margin rules 
of the Exchange.\14\ Third, the Exchange will, prior to trading the 
Notes, distribute a circular to the membership providing guidance with 
regard to member firm compliance responsibilities (including 
suitability recommendations) when handling transactions in the Notes 
and highlighting the special risks and characteristics of the Notes. 
With respect to suitability recommendations and risks, the Exchange 
will require members, member organizations and employees thereof 
recommending a transaction in the Notes: (1) to determine that such 
transaction is suitable for the customer, and (2) to have a reasonable 
basis for believing that the customer can evaluate the special 
characteristics of, and is able to bear the financial risks of such 
transaction. Furthermore, Merrill Lynch will deliver a prospectus in 
connection with the initial purchase of the Notes. The procedure for 
the delivery of a prospectus will be the same as Merrill Lynch's 
current procedure involving primary offerings.\15\
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    \13\ Amex Rule 411 requires that every member, member firm or 
member corporation use due diligence to learn the essential facts 
relative to every customer and to every order or account accepted.
    \14\ See Amex Rule 462 and Section 107B of the Company Guide.
    \15\ March 3, 2002 Telephone Conversation.
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    The Exchange represents that its surveillance procedures are 
adequate to properly monitor the trading of the Notes. Specifically, 
the Amex will rely on its existing surveillance procedures governing 
equities, which have been deemed adequate under the Act. In addition, 
the Exchange also has a general policy which prohibits the distribution 
of material, non-public information by its employees.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Act \16\ in general and furthers the objectives 
of Section 6(b)(5) \17\ 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, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 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

    The Exchange did not receive any written comments on the proposed 
rule change.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and

[[Page 15261]]

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-2002-18 and 
should be submitted by April 19, 2002.

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

    After careful consideration, 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, with the requirements of Section 6(b)(5) 
of the Act.\18\ The Commission finds that this proposal is similar to 
several approved instruments currently listed and traded on the 
Amex.\19\ Accordingly, the Commission finds that the listing and 
trading of the Notes based on the Oil and Natural Gas Index is 
consistent with the Act and will promote just and equitable principles 
of trade, foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, and, in general, protect 
investors and the public interest consistent with Section 6(b)(5) of 
the Act.\20\
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    \18\ Id.
    \19\ See Securities Exchange Act Release Nos. 45305 (January 17, 
2002), 67 FR 3753 (January 25, 2002) (approving the listing and 
trading of non-principal protected notes linked to the Bio-Tech 
Pharmaceutical Index); 45160 (December 17, 2001), 66 FR 66485 
(December 26, 2001) (approving the listing and trading of non-
principal protected notes linked to the Balanced Strategy Index) 
(File No. SR-Amex-2001-91); 44483 (June 27, 2001), 66 FR 35677 (July 
6, 2001) (approving the listing and trading of non-principal 
protected notes linked to the Institutional Holdings Index) (File 
No. SR-Amex-2001-40); 44437 (June 18, 2001), 66 FR 33585 (June 22, 
2001) (approving the listing and trading of non-principal protected 
notes linked to the Industrial 15 Index) (File No. SR-Amex-2001-39); 
44342 (May 23, 2001), 66 FR 29613 (May 31, 2001) (accelerated 
approval order for the listing and trading of Select Ten Notes) 
(File No. SR-Amex-2001-28); 42582 (March 27, 2000), 65 FR 17685 
(April 4, 2000) (accelerated approval order for the listing and 
trading of notes linked to a basket of no more than twenty equity 
securities) (File No. SR-Amex-99-42); 41546 (June 22, 1999), 64 FR 
35222 (June 30, 1999) (accelerated approval order for the listing 
and trading of notes linked to a narrow based index with a non-
principal protected put option) (File No. SR-Amex-99-15); 39402 
(December 4, 1997), 62 FR 65459 (December 12, 1997) (notice of 
immediate effectiveness for the listing and trading non-principal 
protected commodity preferred securities linked to certain 
commodities indices) (File No. SR-Amex-97-47); 37533 (August 7, 
1996), 61 FR 42075 (August 13, 1996) (accelerated approval order for 
the listing and trading of the Top Ten Yield Market Index Target 
Term Securities (``MITTS'')) (File No. SR-Amex-96-28); 33495 
(January 19, 1994), 59 FR 3883 (January 27, 1994) (accelerated 
approval order for the listing and trading of Stock Upside Note 
Securities) (File No. SR-Amex-93-40); and 32343 (May 20, 1993), 58 
FR 30833 (May 27, 1993) (accelerated approval order for the listing 
and trading of non-principal protected notes linked to a single 
equity security) (File No. SR-Amex-92-42).
    \20\ 15 U.S.C. 78f(b)(5). In approving this rule, 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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    As described more fully above, at maturity, or upon exchange, the 
holder of a Note will receive an amount based upon the percentage 
change in the value of the Oil and Natural Gas Index, less the index 
adjustment factor. The Notes will provide investors who are willing to 
forego market interest payments during the term of the Notes with a 
means to participate in the U.S. oil and natural gas industries. As 
described by the Amex, the value of the dividends is allocated to each 
respective Underlying Index.
    The Notes are not-leveraged, non-principal protected instruments. 
The Notes are debt instruments whose price will be derived and based 
upon the value of the Oil and Natural Gas Index. The Notes do not have 
a minimum principal amount that will be repaid at maturity and the 
payments on the Notes prior to or at maturity may be less than the 
original issue price of the Notes.\21\ Thus, if the Oil and Natural Gas 
Index has declined at maturity, the holder of the Note may receive 
significantly less than the original public offering price of the Note. 
Accordingly, the level of risk involved in the purchase or sale of the 
Notes is similar to the risk involved in the purchase or sale of 
traditional common stock. Because the final rate of return of the Notes 
is derivatively priced, based on the performance of the Underlying 
Indices, and because the Notes are instruments that do not guarantee a 
return of principal, there are several issues regarding the trading of 
this type of product.
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    \21\ The Commission recognizes that during a two-week period in 
the designated month investors will have the right to require the 
issuer to repurchase the Notes at a redemption amount based on the 
value of the Oil and Natural Gas Index at such repurchase date.
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    The Commission notes that the Exchange's rules and procedures that 
address the special concerns attendant to the trading of hybrid 
securities will be applicable to the Notes. In particular, by imposing 
the hybrid listing standards, suitability, disclosure, and compliance 
requirements noted above, the Commission believes the Exchange has 
addressed adequately the potential problems that could arise from the 
hybrid nature of the Notes. Moreover, the Commission notes that the 
Exchange will distribute a circular to its membership calling attention 
to the specific risks associated with the Notes. The Commission also 
notes that Merrill Lynch will deliver a prospectus in connection with 
the initial purchase of the Notes.
    The Commission notes that the Notes are dependent upon the 
individual credit of the issuer, Merrill Lynch. To some extent this 
credit risk is minimized by the Exchange's listing standards in Section 
107A of the Company Guide which provide the only issuers satisfying 
substantial asset and equity requirements may issue securities such as 
the Notes. In addition, the Exchange's ``Other Securities'' listing 
standards further require that the Notes have at least $4 million in 
market value.\22\ In any event, financial information regarding Merrill 
Lynch, in addition to the information on the Underlying Indices 
comprising the Oil and Natural Gas Index, will be publicly 
available.\23\
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    \22\ See Company Guide Section 107A.
    \23\ The companies that comprise the Oil and Natural Gas Index 
are reporting companies under the Act, and the Notes will be 
registered under Section 12 of the Act.
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    The Commission also has a systemic concern, however, that a broker-
dealer, such as Merrill Lynch, or a subsidiary providing a hedge for 
the issuer will incur position exposure. However, as the Commission has 
concluded in previous approval orders for other hybrid instruments 
issued by broker-dealers,\24\ the Commission believes that

[[Page 15262]]

this concern is minimal given the size of the Notes issuance in 
relation to the net worth of Merrill Lynch.
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    \24\ See, e.g., Securities Exchange Act Release Nos. 44913 
(October 9, 2001), 66 FR 52469 (October 15, 2001) (order approving 
the listing and trading of notes whose return is based on the 
performance of the Nasdaq-100 Index) (File No. SR-NASD-2001-73); 
44483 (June 27, 2001), 66 FR 35677 (July 6, 2001) (order approving 
the listing and trading of notes whose return is based on a 
portfolio of 20 securities selected from the Amex Institutional 
Index) (File No. SR-Amex-2001-40); and 37744 (September 27, 1996), 
61 FR 52480 (October 7, 1996) (order approving the listing and 
trading of notes whose return is based on a weighted portfolio of 
healthcare/biotechnology industry securities) (File No. SR-Amex-96-
27).
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    The Commission also believes that the listing and trading of the 
Notes should not unduly impact the market for the component securities 
of the Underlying Indices of the Oil and Natural Gas Index or raise 
manipulative concerns. As discussed more fully above, the Oil and 
Natural Gas Index is based upon the return of the Underlying Indices. 
Each of the Underlying Indices will have a weighting of 50% of the 
weight of the Oil and Natural Gas Index, initially, and immediately 
following each annual rebalancing of the Oil and Natural Gas Index. In 
addition, the Oil Index's price-weighting and the Natural Gas Index's 
equal dollar-weighting methodologies are commonly applied index 
calculation methods. Moreover, Amex's listing and trading of other 
products on both of the Underlying Indices have been previously 
approved by the Commission.\25\ In approving the listing and trading of 
these other products on the Underlying Indices, the Commission noted in 
its approval orders that the Amex has developed several composition and 
maintenance criteria for the Underlying Indices that the Commission 
believes will minimize the potential for manipulation of the Underlying 
Indices.\26\ In addition, the Amex's surveillance procedures will serve 
to deter as well as detect any potential manipulation.
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    \25\ See Oil and Gas Index Approval Order, supra note 9; and 
Natural Gas Approval Order, supra note 10.
    \26\ Among other things, the Amex would be required to submit a 
rule filing with the Commission pursuant to Section 19(b) of the Act 
prior to expanding either of the Underlying Indices to greater than 
twenty stocks or reducing either of the Underlying Indices to less 
than ten stock. The Commission finds that this requirement will 
protect against the design of the Underlying Indices from being 
materially changed without Commission review and approval, and that 
it is unlikely that attempted manipulations of prices of the issues 
in the Underlying Indices would affect significantly the Underlying 
Indices' value. See Securities Exchange Act Release No. 31245 
(September 28, 1992, 57 FR 45844 (October 5, 1992) (approving the 
listing and trading of long-term options (``LEAPS'') based on the 
Biotech Index and a reduced value Biotech Index).
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    Finally, the Commission notes that the value of the Oil and Natural 
Gas Index will be disseminated at least once every fifteen seconds 
throughout the trading day. The Commission believes that providing 
access to the value of the Oil and Natural Gas Index at least once 
every fifteen seconds throughout the trading day is extremely important 
and will provide benefits to investors in the product.
    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice thereof in the Federal Register. The Amex has requested 
accelerated approval because this product is similar to several other 
instruments currently listed and traded on the Amex.\27\ The Commission 
believes that the Notes will provide investors with an additional 
investment choice and that accelerated approval of the proposal will 
allow investors to begin trading the Notes promptly. Additionally, the 
Notes will be listed pursuant to Amex's existing hybrid security 
listing standards as described above. Based on the above, the 
Commission believes that there is good cause, consistent with Sections 
6(b)(5) and 19(b)(2) of the Act\28\ to approve the proposal on an 
accelerated basis.
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    \27\ See supra note 20.
    \28\ 15 U.S.C. 78f(b)(5) and 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\29\ that the proposed rule change (SR-Amex-2002-18), is hereby 
approved on an accelerated basis.
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    \29\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\30\
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    \30\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-7608 Filed 3-28-02; 8:45 am]
BILLING CODE 8010-01-P