[Federal Register Volume 68, Number 49 (Thursday, March 13, 2003)]
[Notices]
[Pages 12116-12120]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-6071]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47464; File No. SR-NASD-2003-22]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the National 
Association of Securities Dealers, Inc. Relating to the Listing and 
Trading of Market Recovery Notes Linked to the S&P 500 Index

March 7, 2003.
    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 26, 2003, the National Association of Securities Dealers, 
Inc. (``NASD'' or ``Association''), through its subsidiary, The Nasdaq 
Stock Market, Inc. (``Nasdaq''), filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') the proposed rule change as 
described in Items I and II below, which Items have been prepared by 
Nasdaq. 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 the 
Substance of the Proposed Rule Change

    Nasdaq proposes to list and trade Market Recovery 
NotesSM Linked to the S&P 500[reg] Index (``Notes'') issued 
by Merrill Lynch & Co., Inc. (``Merrill Lynch'').

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, Nasdaq 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. Nasdaq 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
    Nasdaq proposes to list and trade notes, the return on which is 
based upon the S&P 500 Index (``Index'').\3\
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    \3\ The Index is published by Standard & Poor's, a division of 
The McGraw-Hill Companies, Inc. (``Standard & Poor's'' or S&P'') and 
is intended to provide an indication of the pattern of common stock 
price movement. The Index is a capitalization-weighted index, with 
each stock's weight in the Index proportionate to its market value. 
The value of the Index is based on the relative value of the 
aggregate market value of the common stocks of 500 companies as of a 
particular time compared to the aggregate average market value of 
the common stocks of 500 similar companies during the base period of 
the years 1941 through 1943. The market value for the common stock 
of a company is the product of the market price per share of the 
common stock and the number of outstanding shares of common stock. 
As of January 31, 2003, 424 companies, or 85.5% of the market 
capitalization of the Index, traded on the New York Stock Exchange 
(``NYSE''); 74 companies, or 14.3% of the market capitalization of 
the Index traded on The Nasdaq Stock Market; and 2 companies, or 
0.2% of the market capitalization of the Index, traded on the 
American Stock Exchange (``AMEX''). As of January 31, 2003, the 
aggregate market value of the 500 companies included in the Index 
represented approximately 79% of the aggregate market value of 
stocks included in the Standard & Poor's Stock Guidance Database of 
domestic common stocks traded in the U.S., excluding American 
depositary receipts, limited partnerships and mutual funds. Standard 
& Poor's chooses companies for inclusion in the Index with the aim 
of achieving a distribution by broad industry groupings that 
approximates the distribution of these groupings in the common stock 
population of the Standard & Poor's Stock Guide Database, which 
Standard & Poor's uses as an assumed model for the composition of 
the total market. Relevant criteria employed by Standard & Poor's 
include the viability of the particular company, the extent to which 
that company represents the industry group to which it is assigned, 
the extent to which the market price of that company's common stock 
is generally responsive to changes in the affairs of the respective 
industry and the market value and trading activity of the common 
stock of that company. Ten main groups of companies comprise the 
Index with the percentage weight of the companies included in each 
group indicated in parentheses as of February 18, 2003: Consumer 
Discretionary (13.4%), Consumer Staples (9.4%), Energy (6.0%), 
Financials (20.6%), Health Care (15.3%), Industrials (11.3%), 
Information Technology (14.4%), Materials (2.8%), Telecommunication 
Services (4.0%), and Utilities (2.8%).

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[[Page 12117]]

    Under NASD Rule 4420(f), Nasdaq may approve for listing and trading 
innovative securities that cannot be readily categorized under 
traditional listing guidelines.\4\ Nasdaq proposes to list for trading 
the, as described below, under NASD Rule 4420(f).
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    \4\ See Securities Exchange Act Release No. 32988 (September 29, 
1993); 58 FR 52124 (October 6, 1993) (order approving File No. SR-
NASD-93-15), (``1993 Order'').
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Description of the Notes
    The Notes are a series of senior non-convertible debt securities 
that will be issued by Merrill Lynch and will not be secured by 
collateral. The Notes will have a term of not less than one and not 
more than four years. The Notes will be issued in denominations of 
whole units (``Unit''), with each Unit representing a single Note. The 
original public offering price will be $10 per Unit. The Notes will not 
pay interest and are not subject to redemption by Merrill Lynch or at 
the option of any beneficial owner before maturity in 2004.\5\
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    \5\ The actual maturity date will be determined on the day the 
Notes are priced for initial sale to the public.
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    At maturity, if the value of the S&P 500 Index has increased, a 
beneficial owner will be entitled to receive a payment on the Notes 
based on triple the amount of that percentage increase, not to exceed a 
maximum payment per Unit (the ``Capped Value'') that is expected to be 
between $11.60 and $12.00.\6\ Thus, the Notes provide investors the 
opportunity to obtain leveraged returns based on the S&P 500 Index 
subject to a cap that is expected to represent an appreciation of 16% 
to 20% over the original public offering price of the Notes. Unlike 
ordinary debt securities, the Notes do not guarantee any return of 
principal at maturity. Therefore, if the value of the S&P 500 Index has 
declined at maturity, a beneficial owner will receive less, and 
possibly significantly less, than the original public offering price of 
$10 per Unit.\7\
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    \6\ The actual Capped Value will be determined at the time of 
issuance of the Notes.
    \7\ Any amount the beneficial owner would receive at maturity 
(which is less than the original offering price) would correspond to 
any decline in value of the S&P 500. Telephone conversation between 
John D. Nachmann, Senior Attorney, Nasdaq, and Florence E. Harmon, 
Senior Special Counsel, Division of Market Regulation 
(``Division''), Commission, on March 7, 2003.
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    The payment that a beneficial owner will be entitled to receive 
(the ``Redemption Amount'') depends entirely on the relation of the 
average of the values of the S&P 500 Index at the close of the market 
on five business days shortly before the maturity of the Notes (the 
``Ending Value'') and the closing value of the S&P 500 Index on the 
date the Notes are priced for initial sale to the public (the 
``Starting Value'').
    If the Ending Value is less than or equal to the Starting Value, 
the Redemption Amount per Unit will equal:
[GRAPHIC][TIFF OMITTED]TN13MR03.002

    If the Ending Value is greater than the Starting Value, the 
Redemption Amount per Unit will equal:
[GRAPHIC][TIFF OMITTED]TN13MR03.003

provided, however, the Redemption Amount cannot exceed the Capped 
Value.
    The Notes are cash-settled in U.S. dollars and do not give the 
holder any right to receive a portfolio security, dividend payments or 
any other ownership right or interest in the portfolio or index of 
securities comprising the S&P 500 Index. The Notes are designed for 
investors who want to participate or gain exposure to the S&P 500 
Index, subject to a cap, and who are willing to forego market interest 
payments on the Notes during such term. The Commission has previously 
approved the listing of options on, and securities the performance of 
which have been linked to or based on, the S&P 500 Index.\8\
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    \8\ See Securities Exchange Act Release No. 19907 (June 24, 
1983), 48 FR 30814 (July 5, 1983) (approving the listing and trading 
of options on the S&P 500 Index); Securities Exchange Act Release 
No. 31591 (December 11, 1992), 57 FR 60253 (December 18, 1992) 
(approving the listing and trading of Portfolio Depositary Receipts 
based on the S&P 500 Index); Securities Exchange Act Release No. 
27382 (October 26, 1989), 54 FR 45834 (October 31, 1989) (approving 
the listing and trading of Exchange Stock Portfolios based on the 
value of the S&P 500 Index); and Securities Exchange Act Release No. 
30394 (February 21, 1992), 57 FR 7409 (March 2, 1992) (approving the 
listing and trading of a unit investment trust linked to the S&P 500 
Index).
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Criteria for Initial and Continued Listing
    The Notes, which will be registered under section 12 of the Act, 
will initially be subject to Nasdaq's listing criteria for other 
securities under NASD Rule 4420(f). Specifically, under NASD Rule 
4420(f)(1):
    (A) The issuer shall have assets in excess of $100 million and 
stockholders' equity of at least $10 million. In the case of an issuer 
which is unable to satisfy the income criteria set forth in paragraph 
(a)(1), Nasdaq generally will require the issuer to have the following: 
(i) assets in excess of $200 million and stockholders' equity of at 
least $10 million; or (ii) assets in excess of $100 million and 
stockholders' equity of at least $20 million;
    (B) There must be a minimum of 400 holders of the security, 
provided, however, that if the instrument is traded in $1,000 
denominations, there must be a minimum of 100 holders;
    (C) For equity securities designated pursuant to this paragraph, 
there must be a minimum public distribution of 1,000,000 trading units;
    (D) The aggregate market value/principal amount of the security 
will be at least $4 million.
    In addition, Nasdaq notes that Merrill Lynch satisfies the listed 
marketplace requirement set forth in NASD Rule

[[Page 12118]]

4420(f)(2).\9\ Lastly, pursuant to NASD Rule 4420(f)(3), prior to the 
commencement of trading of the Notes, Nasdaq will distribute a circular 
to members providing guidance regarding member firm compliance 
responsibilities and requirements, including suitability 
recommendations, and highlighting the special risks and characteristics 
of the Notes. In particular, Nasdaq will advise members recommending a 
transaction in the Notes to: (1) Determine that such transaction is 
suitable for the customer; and (2) 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.
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    \9\ NASD Rule 4420(f)(2) generally requires that issuers of 
securities designated pursuant to this paragraph [sic] to be listed 
on The Nasdaq National Market or the NYSE or be an affiliate of a 
company listed on The Nasdaq National Market or the NYSE; provided, 
however, that the provisions of NASD Rule 4450 will be applied to 
sovereign issuers of ``other'' securities on a case-by-case basis. 
The Commission notes that there is a typographical error in NASD 
Rule 4420(f)(2), which the NASD, through its subsidiary, Nasdaq, 
will have to submit a filing, pursuant to the provisions of section 
19(b) under the Act, to delete any reference to paragraph (e) under 
this Rule.
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    The Notes will be subject to Nasdaq's continued listing criterion 
for other securities pursuant to NASD Rule 4450(c). Under this 
criterion, the aggregate market value or principal amount of publicly-
held units must be at least $1 million. The Notes also must have at 
least two registered and active market makers as required by NASD Rule 
4450(a)(6). Nasdaq will also consider prohibiting the continued listing 
of the Notes if Merrill Lynch is not able to meet its obligations on 
the Notes.
Rules Applicable to the Trading of the Notes
    Since the Notes will be deemed equity securities for the purpose of 
NASD Rule 4420(f), the NASD and Nasdaq's existing equity trading rules 
will apply to the Notes. First, pursuant to NASD Rule 2310, 
``Recommendations to Customers (Suitability),'' and NASD IM-2310-2, 
``Fair Dealing with Customers,'' NASD members must have reasonable 
grounds for believing that a recommendation to a customer regarding the 
purchase, sale or exchange of any security is suitable for such 
customer upon the basis of the facts, if any, disclosed by such 
customer as to his other security holdings and as to his financial 
situation and needs.\10\ In addition, as previously described, Nasdaq 
will distribute a circular to members providing guidance regarding 
compliance responsibilities and requirements, including suitability 
recommendations, and highlighting the special risks and characteristics 
of the Notes. Furthermore, the Notes will be subject to the equity 
margin rules. Lastly, the regular equity trading hours of 9:30 a.m. to 
4 p.m. will apply to transactions in the Notes.
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    \10\ NASD Rule 2310(b) requires members to make reasonable 
efforts to obtain information concerning a customer's financial 
status, a customer's tax status, the customer's investment 
objectives, and such other information used or considered to be 
reasonable by such member or registered representative in making 
recommendations to the customer.
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    Nasdaq represents that NASD's surveillance procedures are adequate 
to properly monitor the trading of the Notes. Specifically, NASD will 
rely on its current surveillance procedures governing equity 
securities, and will include additional monitoring on key pricing 
dates. In addition, Nasdaq has a general policy that prohibits the 
distribution of material, non-public information by it employees.
Disclosure and Dissemination of Information
    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. In addition, Nasdaq will issue a circular 
to NASD members explaining the unique characteristics and risks of the 
Notes.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of section 15A of the Act,\11\ in general, and with 
section 15A(b)(6) of the Act,\12\ in particular, in that the proposal 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and, 
in general, to protect investors and the public interest.
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    \11\ 15 U.S.C. 78o-3.
    \12\ 15 U.S.C. 78o-3(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. 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 
NASD. All submissions should refer to file number SR-NASD-2003-22 and 
should be submitted by April 3, 2003.

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

    Nasdaq has asked the Commission to approve the proposal, on an 
accelerated basis to accommodate the timetable for listing the Notes. 
The Commission notes that it has previously approved the listing of 
options on, and securities the performance of which have been linked to 
or based on, the S&P 500 Index.\13\ The Commission has also previously 
approved the listing of securities with a structure identical to that 
of the Notes.\14\
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    \13\ See note 7, supra.
    \14\ See Securities Exchange Act Release Nos. 47009 (December 
16, 2002), 67 FR 78540 (December 24, 2002) (approving the listing 
and trading of Market Recovery Notes linked to the Nasdaq-100 
Index); and 46883 (November 21, 2002), 67 FR 71216 (November 29, 
2002) (approving the listing and trading of Market Recovery Notes 
linked to the Dow Jones Industrial Average).
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    After care 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 
association, and, in particular, with the requirements of

[[Page 12119]]

section 15A(b)(6) of the Act \15\ in that it is designed to promote 
just and equitable principles of trade, to remove impediments to and 
perfect the mechanism of a free and open market, and, in general, to 
protect investors and the public interest.\16\ The Commission believes 
that the Notes will provide investors with a means to participate in 
any percentage increase in the Index that exist at the maturity of the 
Notes, subject to the Capped Value. Specifically, as described more 
fully above, if the value of the S&P 500 Index has increased, a 
beneficial owner will be entitled to receive at maturity a payment of 
the Notes based on triple the amount of any percentage increase in the 
S&P 500 Index, not to exceed the Capped Value.
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    \15\ 15 U.S.C. 78o-3(b)(6).
    \16\ In approving the proposed rule, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
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    The Notes are leveraged debts instruments whose price will be 
derived from and based upon the value of the Index. In addition, as 
discussed more fully above, the Notes do not guarantee any return of 
principal at maturity. Thus, if the S&P 500 Index has declined at 
maturity, a beneficial owner may receive significantly less than the 
original public offering price of the Notes.\17\ 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 on the Notes is derivatively priced 
and based upon the performance of an index of securities, because the 
Notes are debt instruments that do not guarantee a return of principal, 
and because investors' potential return is limited by the Capped Value, 
there are several issues regarding trading of this type of product. For 
the reasons discussed below, the Commission believes that Nasdaq's 
proposal adequately addresses the concerns raised by this type of 
product.
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    \17\ Any amount the beneficial owner would receive at maturity 
(which is less than the original offering price) would correspond to 
any decline in value of the S&P 500. Telephone conversation between 
John D. Nachmann, Senior Attorney, Nasdaq, and Florence E. Harmon, 
Senior Special Counsel, Division of Market Regulation 
(``Division''), Commission, on March 7, 2003.
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    First, the Commission notes that the protections of NASD Rule 
4420(f) were designed to address the concerns attendant to the trading 
of hybrid securities like the Notes.\18\ In particular, by imposing the 
hybrid listing standards, heightened suitability for 
recommendations,\19\ and compliance requirements, noted above, the 
Commission believes that Nasdaq has adequately addressed the potential 
problems that could arise from the hybrid nature of the Notes. The 
Commission notes that Nasdaq will distribute a circular to its 
membership that provides guidance regarding member firm compliance 
responsibilities and requirements, including suitability 
recommendations, and highlights the special risks and characteristics 
associated with the Notes. Specifically, among other things, the 
circular will indicate that the Notes do not guarantee any return of 
principal at maturity, that the maximum return on the Notes is limited 
to $11.60 and $16 per unit,\20\ that the Notes will not pay interest, 
and that the Notes will provide exposure in the Index. Distribution of 
the circular should help to ensure that only customers with an 
understanding of the risks attendant to the trading of the Notes and 
who are able to bear the financial risks associated with transactions 
in the Notes will trade the Notes. In addition, the Commission notes 
that Merrill Lynch will deliver a prospectus in connection with the 
initial purchase of the Notes.
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    \18\ See 1993 Order, supra note 4.
    \19\ As discussed above, Nasdaq will advise members recommending 
a transaction in the Notes to: (1) Determine that the transaction is 
suitable for the customer; and (2) have a reasonable basis for 
believing that the customer can evaluate the special characteristics 
of, and is able to bear the financial risks of, the transaction.
    \20\ The actual Capped Value will be determined at the time of 
issuance of the Notes.
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    Second, the Commission notes that the final rate of return on the 
Notes depends, in part, upon the individual credit of the issuer, 
Merrill Lynch. To some extent this credit risk is minimized by the 
NASD's listing standards in NASD Rule 4420(f), which provide that only 
issuers satisfying substantial asset and equity requirements may issue 
these types of hybrid securities. In addition, the NASD's hybrid 
listing standards further require that the Notes have at least $4 
million in market value. Financial information regarding Merrill Lynch, 
in addition to information concerning the issuers of the securities 
comprising the S&P 500 Index, will be publicly available.\21\
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    \21\ The companies comprising the Index are reporting companies 
under the Act.
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    Third, the Notes will be registered under section 12 of the Act. As 
noted above, the NASD's and Nasdaq's existing equity trading rules will 
apply to the Notes, which will be subject to equity margin rules and 
will trade during the regular equity trading hours of 9:30 a.m. to 4 
p.m. NASD Regulation's surveillance procedures for the Notes will be 
the same as its current surveillance procedures for equity securities, 
and will include additional monitoring on key pricing dates.
    Fourth, the Commission has a systemic concern 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 the hybrid instruments issued by 
broker-dealers, \22\ the Commission believes that this concern is 
minimal given the size of the Notes issuance in relation to the net 
worth of Merrill Lynch.
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    \22\ See, e.g., Securities Exchange Act Release Nos. 44913 
(October 9, 2001), 66 FR 52469 (October 15, 2001) (order approving 
File No. SR-NASD-2001-73) (approving the listing and trading of 
notes issued by Morgan Stanley Dean Witter & Co. whose return is 
based on the performance of the Index); 44483 (June 27, 2001), 66 FR 
35677 (July 6, 2001) (order approving File No. SR-Amex-2001-40) 
(approving the listing and trading of notes issued by Merrill Lynch 
whose return is based on a portfolio of 20 securities selected from 
the Amex Institutional Index); and 37744 (September 27, 1996), 61 FR 
52480 (October 7, 1996) (order approving File No. SR-Amex-96-27) 
(approving the listing and trading of notes issued by Merrill Lynch 
whose return is based on a weighted portfolio of healthcare/
biotechnology industry securities).
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    Finally, the Commission believes that the listing and trading of 
the proposed Notes should not unduly impact the market for the 
securities underlying the Index or raise manipulative concerns. In 
approving the product, the Commission recognizes that the S&P 500 Index 
is a capitalization-weighted index of 500 companies listed on Nasdaq, 
the NYSE and the AMEX. The Commission notes that the Index is 
determined, composed, and calculated by Standard & Poor's. As of 
January 31, 2003, the aggregate market value of the 500 companies 
included in the Index represented approximately 79% of the aggregate 
market value of stocks included in the Standard & Poor's Stock Guidance 
Database of domestic common stocks traded in the U.S., excluding 
American depositary receipts, limited partnerships and mutual funds. 
Standard & Poor's chooses companies for inclusion in the Index with the 
aim of achieving a distribution by broad industry groupings that 
approximates the distribution of these groupings in the common stock 
population of the Standard & Poor's Stock Guide Database. Furthermore, 
as of February 18, 2003, ten main groups of companies comprise the 
Index with the percentage weight of the companies included in each 
group indicated in parentheses as follows: Consumer Discretionary 
(13.4%), Consumer Staples (9.4%),

[[Page 12120]]

Energy (6.0%), Financials (20.6%), Health Care (15.3%), Industrials 
(11.3%), Information Technology (14.4%), Materials (2.8%), 
Telecommunication Services (4.0%), and Utilities (2.8%).
    Given the large diversification, capitalization, and relative 
percentage weightings of the companies included in each group of 
companies comprising the Index, the Commission continues to believe, as 
it has concluded previously, that the listing and trading of securities 
that are linked to the S&P 500 Index, should not unduly impact the 
market for the underlying securities comprising the S&P 500 Index or 
raise manipulative concerns.\23\ As discussed more fully above, the 
Commission also believes that the relative percentage weightings of the 
ten groups of companies comprising the Index should ensure that no one 
stock or group of stocks significantly minimize the potential for 
manipulation of the Index. Moreover, the issuers of the underlying 
securities comprising the S&P 500 Index, are subject to reporting 
requirements under the Act, and all of the component stocks are with 
listed on Nasdaq, the NYSE, or the Amex. In addition, Nasdaq's 
surveillance procedures should serve to deter as well as detect any 
potential manipulation.
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    \23\ See note 7, supra.
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    The Commission finds good cause for approving the proposed rule 
change, as amended, prior to the thirtieth day after the date of 
publication of notice of filing thereof in the Federal Register. 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. In 
addition, the Commission notes that it has previously approved the 
listing and trading of similar Notes and other hybrid securities based 
on the S&P 500 Index.\24\ Accordingly, the Commission believes that 
there is good cause, consistent with sections 15A(b)(6) and 19(b)(2) of 
the Act,\25\ to approve the proposal, on an accelerated basis.
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    \24\ See note 13, supra.
    \25\ 15 U.S.C. 78o-3(b)(6) and 78s(b)(2).
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V. Conclusion

    It is therefore Ordered, pursuant to section 19(b)(2) of the 
Act,\26\ that the proposed rule change (SR-NASD-2003-22) is hereby 
approved on an accelerated basis.
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    \26\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-6071 Filed 3-12-03; 8:45 am]
BILLING CODE 8010-01-P