[Federal Register Volume 68, Number 98 (Wednesday, May 21, 2003)]
[Notices]
[Pages 27874-27876]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-12735]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47862; File No. SR-Amex-2003-38]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the American Stock Exchange 
LLC Relating to the Withdrawal of Approval for Securities Underlying 
Options Traded on the Exchange

May 14, 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 May 1, 2003, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
proposed rule change has been filed by the Amex as a ``non-
controversial'' rule change under Rule 19b-4(f)(6) under the Act.\3\ 
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.
    \3\ 17 CFR 240.19b-4(f)(6).
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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 Exchange Rule 916, which governs the 
withdrawal of approval for securities underlying options traded on the 
Exchange. Below is the text of the proposed rule change. Proposed new 
language is in italics.
* * * * *
Rule 916. Withdrawal of Approval of Underlying Securities
No Change
Commentary.

    01 The Board of Governors has established guidelines to be 
considered by the Exchange in determining whether an underlying 
security previously approved for Exchange option transactions no longer 
meets its requirements for the continuance of such approval. Absent 
exceptional circumstances, with respect to items 1, 2, or 3 listed 
below, an underlying security will not be deemed to meet the Exchange's 
requirements for continued approval whenever any of the following 
occur:
    1. There are fewer than 6,300,000 shares of the underlying security 
held by persons other than those who are required to report their 
security holdings under section 16(a) of the Securities Exchange Act of 
1934.
    2. There are fewer than 1,600 holders of the underlying security.
    3. The trading volume (in all markets in which the underlying 
security is traded) was less than 1,800,000 shares in the preceding 
twelve months.
    4. Subject to Commentary .02 below, the market price per share of 
the underlying security closed below $3 on the previous trading day as 
measured by the highest closing price reported in the primary market 
(as that term is defined in Rule 900(26)) in which the underlying 
security traded.
    5. The issuer has failed to make timely reports as required by 
applicable requirements of the Securities Exchange Act of 1934, and 
such failure has not been corrected within 30 days after the date the 
report was due to be filed.
    6. The issue, in the case of an underlying security that is 
principally traded on a national securities exchange, is delisted from 
trading on that exchange and neither meets NMS criteria nor is traded 
through the facilities of a national securities association, or the 
issue, in the case of an underlying security that is principally traded 
through the facilities of a national securities association, is no 
longer designated as an NMS security.
    7. If an underlying security is approved for options listing and 
trading under the provisions of Commentary .05 of Rule 915, the trading 
volume and price history of the Original Security (as therein defined) 
prior to but not after the commencement of trading in the Restructured 
Security (as therein defined), including ``when issued'' trading, may 
be taken into account in determining whether the trading volume and 
market price requirements of paragraphs 3. and 4. of the Commentary .01 
are satisfied, provided however, that in the case of a Restructured 
Security approved for options listing and trading under paragraph (d) 
of Commentary .05 under Rule 915, such trading volume requirements must 
be satisfied based on the trading volume history of the Restructured 
Security.
.02-.09 No Change
    .10 In determining whether any of the events specified in 
Commentary .01(1) or (2) of this Rule have occurred, the Exchange will 
monitor on a daily basis news sources for information of corporate 
actions, including stock splits, mergers and acquisitions, distribution 
of special cash dividends, recapitalizations, and stock buy-backs. If a 
corporate action indicates that an underlying security no longer meets 
the Exchange's requirements for continued approval under Commentary .01 
(1) or (2) of this Rule, the Exchange will not open additional series 
of option contracts of the class covering the underlying security. If, 
however, information of a corporate action does not indicate that any 
of the events specified in Commentary .01(1) or (2) have occurred, the 
Exchange shall consider the events specified in Commentary .01(1) and 
(2) to have been satisfied.
* * * * *

[[Page 27875]]

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 parts of such 
statements.

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

1. Purpose
    Exchange Rule 916 sets forth the guidelines to be considered by the 
Exchange in determining whether an underlying security previously 
approved for Exchange option transactions no longer meets its 
requirements for the continuance of such approval. Specifically, 
Commentary .01(1) to Exchange Rule 916 provides that, absent 
exceptional circumstances, the Exchange may not list additional series 
on an option class if there are fewer than 6,300,000 shares of the 
underlying security held by persons other than those who are required 
to report their security holdings under section 16(a) of Act \4\ (the 
``float'' requirement). Commentary .01(2) to Exchange Rule 916 provides 
that, absent exceptional circumstances, the Exchange may not list 
additional series on an option class if there are fewer than 1,600 
holders of the underlying security (the ``holders'' requirement). The 
Exchange is now proposing to add Commentary .10 to Exchange Rule 916 to 
clarify the manner in which the Exchange determines whether the 
``float'' and ``holders'' requirements found in Commentary .01 to 
Exchange Rule 916 are met.\5\
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    \4\ 15 U.S.C. 78p(a).
    \5\ Proposed Commentary .10 to Exchange Rule 916 will clarify 
how the Exchange will determine whether the float of an underlying 
security is less than 6.3 million shares or the number of holders of 
the underlying security is fewer than 1,600.
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    The Exchange proposes to expressly state that in determining 
whether any of the events specified in Commentary .01(1) or (2) to 
Exchange Rule 916 have occurred, the Exchange would monitor on a daily 
basis news sources for information of corporate actions, including 
stock splits, mergers and acquisitions, distribution of special cash 
dividends, recapitalizations, and stock buy backs. If a corporate 
action indicates that an underlying security no longer meets the 
Exchange's requirements for continued approval under Commentary .01(1) 
or (2) to Exchange Rule 916, the Exchange would not open additional 
series of option contracts of the class covering the underlying 
security. If, however, information of a corporate action does not 
indicate that any of the events specified in Commentary .01(1) or (2) 
to Exchange Rule 916 have occurred, the Exchange shall consider the 
events specified in Commentary .01(1) and (2) to have been 
satisfied.\6\
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    \6\ The Exchange represents that existing Commentary .03 to 
Exchange Rule 916 would continue to apply when the Exchange 
considers whether any of the events specified in Commentary .01 have 
occurred with respect to an underlying security. Specifically, 
Commentary .03 to Exchange Rule 916 provides that the Exchange shall 
ordinarily rely on information made publicly available by the issuer 
and/or markets in which such security is traded.
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2. Statutory Basis
    The Exchange believes that 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) of the Act \8\ 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.
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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 Exchange believes that the proposed rule change will impose no 
burden on competition.

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 with respect 
to the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because, the foregoing proposed rule change (1) does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms, does not become operative until 30 days from the 
date on which it was filed, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest, and the exchange provided the Commission with written notice 
of its intent to file the proposed rule change at least five business 
days prior to the date of filing of the proposed rule change,\9\ it has 
become effective pursuant to section 19(b)(3)(A) of the Act \10\ and 
Rule 19b-4(f)(6) thereunder.\11\
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    \9\ See e-mail from Jeffrey P. Burns, Associate General Counsel, 
Amex, to Nancy Sanow, Assistant Director, Division of Market 
Regulation, Commission, dated April 15, 2003.
    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    The Amex has requested that the Commission waive the usual 30-day 
pre-operative waiting period. The Commission notes that this proposal 
is the same in all material respects to another proposal submitted by 
the Chicago Board Options Exchange, Inc. (``CBOE'') and recently 
approved by the Commission.\12\ As a result, the Commission believes 
that it is consistent with the protection of investors and the public 
interest to accelerate the operative date because the proposal raises 
no new regulatory issues. Therefore, the Commission designates that the 
proposal become operative immediately.\13\
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    \12\ See Securities Exchange Act Release No. 47400 (February 25, 
2003), 68 FR 10286 (March 4, 2003).
    \13\ For purposes only of accelerating the operative date of 
this proposal, 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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    At any time within 60 days of the filing of this proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

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

[[Page 27876]]

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 Section. 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-2003-38 and should be 
submitted by June 11, 2003.

    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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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 03-12735 Filed 5-20-03; 8:45 am]
BILLING CODE 8010-01-P