[Federal Register Volume 68, Number 100 (Friday, May 23, 2003)]
[Notices]
[Pages 28305-28309]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-12941]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47884; File No. SR-Amex-2003-37]


Self-Regulatory Organizations; Notice of Filing and Accelerated 
Approval of Proposed Rule Change by American Stock Exchange LLC 
Relating to Trust Certificates Linked to a Basket of Investment Grade 
Fixed Income Securities

May 16, 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 April 29, 2003, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') 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 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 Exchange proposes to approve for listing and trading under 
Section 107A of the Amex Company Guide (``Company Guide''), trust 
certificates linked to a basket of investment grade fixed income debt 
instruments.

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 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Under Section 107A of the 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, asset-backed securities (the ``ABS 
Securities'') representing ownership interest in the Select Income 
Trust 2003-03 (``Trust''), a special purpose entity to be formed by 
Structured Obligations Corporation (``SOC''),\4\ and the trustee of the 
Trust pursuant to a trust agreement, which will be entered into on the 
date that the ABS Securities are issued. The assets of the Trust will 
consist primarily of a basket or portfolio of up to

[[Page 28306]]

approximately twenty-five investment-grade fixed-income securities (the 
``Underlying Corporate Bonds'') and the United States Department of 
Treasury STRIPS or securities issued by the United States Department of 
Treasury (the ``Treasury Securities'') or government sponsored entity 
securities (the ``GSE Securities''). In the aggregate, component 
securities will be referred to as the ``Underlying Securities.''
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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\ SOC is a wholly-owned special purpose entity of J.P. Morgan 
Securities Holdings Inc. and the registrant under the Form S-3 
Registration Statement (No. 333-70730) under which the securities 
will be issued.
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    The ABS Securities will conform to the initial listing guidelines 
under Section 107A \5\ and continued listing guidelines under Sections 
1001-1003 \6\ of the Company Guide, except for the assets and 
stockholder equity characteristics of the Trust. At the time of 
issuance, the ABS Securities will receive an investment grade rating 
from a nationally recognized securities rating organization (an 
``NRSRO''). The issuance of the ABS Securities will be a repackaging of 
the Underlying Corporate Bonds together with the addition of either 
Treasury Securities or GSE Securities,\7\ with the obligation of the 
Trust to make distributions to holders of the ABS Securities depending 
on the amount of distributions received by the Trust on the Underlying 
Securities. Due to the pass-through and passive nature of the ABS 
Securities, the Exchange intends to rely on the assets and stockholder 
equity of the issuers of the Underlying Corporate Bonds as well as GSE 
Securities, rather than the Trust to meet the requirement in Section 
107A of the Company Guide. The corporate issuers of the Underlying 
Corporate Bonds and GSE Securities will meet or exceed the requirements 
of Section 107A of the Company Guide. The distribution and principal 
amount/aggregate market value requirements found in Sections 107A(b) 
and (c), respectively, will otherwise be met by the Trust as issuer of 
the ABS Securities.\8\ In addition, the Exchange for purposes of 
including Treasury Securities will rely on the fact that the issuer is 
the U.S. Government rather than the asset and stockholder tests found 
in Section 107A.
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    \5\ The initial listing standards for the ABS Securities 
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. However, if traded in 
thousand dollar denominations, then there is no minimum holder 
requirement. 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 ABS Securities, 
the Exchange will rely 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.
    \7\ A GSE Security is a security that is issued by a government-
sponsored entity such as Federal National Mortgage Association 
(Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), 
Student Loan Marketing Association (Sallie Mae), the Federal Home 
Loan Banks and the Federal Farm Credit Banks. All GSE debt is 
sponsored but not guaranteed by the federal government, whereas 
government agencies such as Government National Mortgage Association 
(Ginnie Mae) are divisions of the U.S. government whose securities 
are backed by the full faith and credit of the U.S.
    \8\ Telephone Conversation between Eric Van Allen, Assistant 
General Counsel, Amex, and Geoffrey Pemble, Special Counsel, 
Division, Commission, on May 16, 2003.
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    The basket of Underlying Securities will not be managed and will 
generally remain static over the term of the ABS Securities. Each of 
the Underlying Securities provide for the payment of interest on a 
semi-annual basis, but the ABS Securities will provide for monthly or 
quarterly distributions of interest. Neither the Treasury Securities or 
GSE Securities will make periodic payments of interest.\9\ The Exchange 
represents that, to alleviate this cash flow timing issue, the Trust 
will enter into an interest distribution agreement (the ``Interest 
Distribution Agreement'') as described in the prospectus supplement 
related to the ABS Securities (the ``Prospectus Supplement'').\10\ 
Principal distributions on the ABS Securities are expected to be made 
on dates that correspond to the maturity dates of the Underlying 
Securities (i.e., the Underlying Corporate Bonds and Treasury 
Securities or GSE Securities). However, some of the Underlying 
Securities may have redemption provisions and in the event of an early 
redemption or other liquidation (e.g., upon an event of default) of the 
Underlying Securities, the proceeds from such redemption (including any 
make-whole premium associated with such redemption) or liquidation will 
be distributed pro rata to the holders of the ABS Securities. Each 
Underlying Corporate Bond will be issued by a corporate issuer and 
purchased in the secondary market.
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    \9\ A stripped fixed income security, such as a Treasury 
Security or GSE Security, is a security that is separated into its 
periodic interest payments and principal repayment. The separate 
strips are then sold individually as zero coupon securities 
providing investors with a wide choice of alternative maturities.
    \10\ Pursuant to the Interest Distribution Agreement, shortfalls 
in the amounts available to pay monthly or quarterly interest to 
holders of the ABS Securities due to the Underlying Securities 
paying interest semi-annually will be made to the Trust by JP Morgan 
Chase Bank or one of its affiliates and will be repaid out of future 
cash flow received by the Trust from the Underlying Securities.
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    In the case of Treasury Securities, the trust will either purchase 
the securities directly from primary dealers or in the secondary market 
which consists of primary dealers, non-primary dealers, customers, 
financial institutions, non-financial institutions and individuals. 
Similarly, in the case of GSE Securities, the trust will either 
purchase the securities directly from the issuer or in the secondary 
market.
    Holders of the ABS Securities generally will receive interest on 
the face value in an amount to be determined at the time of issuance of 
the ABS Securities and disclosed to investors. The rate of interest 
payments will be based upon prevailing interest rates at the time of 
issuance and interest payments will be made to the extent that coupon 
payments are received from the Underlying Securities. Distributions of 
interest will be made monthly or quarterly. Investors will also be 
entitled to be repaid the principal of their ABS Securities from the 
proceeds of the principal payments on the Underlying Securities.\11\ 
The payout or return to investors on the ABS Securities will not be 
leveraged.
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    \11\ The Underlying Securities may drop out of the basket upon 
maturity or upon payment default or acceleration of the maturity 
date for any default other than payment default. See Prospectus for 
a schedule of the distribution of interest and of the principal upon 
maturity of each Underlying Security and for a description of 
payment default and acceleration of the maturity date.
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    The ABS Securities will mature on the latest maturity date of the 
Underlying Securities. Holders of the ABS Securities will have no 
direct ability to exercise any of the rights of a holder of an 
Underlying Corporate Bond; however, holders of the ABS Securities as a 
group will have the right to direct the Trust in its exercise of its 
rights as holder of the Underlying Securities.
    The proposed ABS Securities are virtually identical to a product 
currently listed and traded on the Exchange,\12\

[[Page 28307]]

with the only difference being the actual Underlying Securities in the 
basket of investment-grade fixed-income securities. Furthermore, 
publicly issued asset backed securities that repackage a single 
underlying corporate debt obligation are currently listed and traded on 
the New York Stock Exchange, Inc. (``NYSE'').\13\ The proposed ABS 
Securities also are similar to those repackaging transactions, except 
that the Trust will own more than one corporate debt obligation and, in 
the single repackaging transactions, there is no need for an Interest 
Distribution Agreement because the timing of the payment of interest on 
the underlying debt obligation matches the obligation to distribute 
interest on the repackaged securities. Accordingly, the Exchange 
proposes to provide for the listing and trading of the ABS Securities 
where the Underlying Securities meet the Exchange's Bond and Debenture 
Listing Standards set forth in Section 104 of the Company Guide. The 
Exchange represents that all of the Underlying Securities in the 
proposed basket will meet or exceed these listing standards.
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    \12\ See Securities Exchange Act Release Nos. 46835 (November 
14, 2002), 67 FR 70271 (November 21, 2002) (File No. SR-Amex-2002-
70); 46923 (November 27, 2002), 67 FR 72247 (December 4, 2002) (File 
No. SR-Amex-2002-92).
    \13\ See e.g., Structured Asset Trust Unit Repackagings 
(SATURNS), CSFB USA Debenture Backed Series 2002-10, 1,330,000 of 
7.00% Class A Callable Units dated August 15, 2002 and trading under 
the symbol ``MKK''; 1,380,000 PreferredPlus 8.375% Trust 
Certificates underlying 7.05% Debentures of Citizens Communications 
Company dated August 24, 2001 and trading under the symbol ``PIY''; 
and 1,980,000 Corporate Backed Trust Certificates, Royal & Sun 
Alliance Bond Backed Series 2002-2 underlying securities 8.95% 
subordinated guaranteed bonds issued by Royal & Sun Alliance 
Insurance Group plc dated February 11, 2002 and trading under the 
symbol ``CCS.''
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    The Exchange's Bond and Debenture Listing Standards in Section 104 
of the Company Guide provide for the listing of individual bond or 
debenture issuances provided the issue has an aggregate market value or 
principal amount of at least $5 million and any of: (1) The issuer of 
the debt security has equity securities listed on the Exchange (or on 
the NYSE or on the Nasdaq National Market (``Nasdaq'')); (2) an issuer 
of equity securities listed on the Exchange (or on the NYSE or on 
Nasdaq) directly or indirectly owns a majority interest in, or is under 
common control with, the issuer of the debt security; (3) an issuer of 
equity securities listed on the Exchange (or on the NYSE or on Nasdaq) 
has guaranteed the debt security; (4) a NRSRO has assigned a current 
rating to the debt security that is no lower than an S&P Corporation 
(``S&P'') ``B'' rating or equivalent rating by another NRSRO; or (5) or 
if no NRSRO has assigned a rating to the issue, an NRSRO has currently 
assigned (i) an investment grade rating to an immediately senior issue 
or (ii) a rating that is no lower than a S&P ``B'' rating or an 
equivalent rating by another NRSRO to a pari passu or junior issue.
    In addition to the Exchange's Bond and Debenture Listing Standards, 
an Underlying Security must also be of investment grade quality as 
rated by a NRSRO and at least 75% of the underlying basket is required 
to contain Underlying Securities from issuances of $100 million or 
more. The maturity of each Underlying Security is expected to match the 
payment of principal of the ABS Securities with the maturity date of 
the ABS Securities being the latest maturity date of the Underlying 
Securities. Amortization of the ABS Securities will be based on: (1) 
The respective maturities of the Underlying Securities, including 
Treasury Securities or GSE Securities; (2) principal payout amounts 
reflecting the pro-rata principal amount of maturing Underlying 
Securities; and (3) any early redemption or liquidation of the 
Underlying Securities, including Treasury Securities or GSE Securities.
    Investors will be able to obtain the prices for the Underlying 
Securities through Bloomberg L.P. or other market vendors, including 
the broker-dealer through whom the investor purchased the ABS 
Securities. In addition, The Bond Market Association (``TBMA'') 
provides links to price and other bond information sources on its 
investor Web site at http://www.investinginbonds.com. Transaction 
prices and volume data for the most actively-traded bonds on the 
exchanges are also published daily in newspapers and on a variety of 
financial Web sites. The National Association of Securities Dealers, 
Inc. (``NASD'') Trade Reporting and Compliance Engine (``TRACE'') will 
also help investors obtain transaction information for most corporate 
debt securities, such as investment grade corporate bonds.\14\ For a 
fee, investors can have access to intra-day bellwether quotes.\15\
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    \14\ See Securities Exchange Act Release No. 43873 (January 23, 
2001), 66 FR 8131 (January 29, 2001) (File No. SR-NASD-99-65). 
Investors are able to access TRACE information at http://www.nasdbondinfo.com/.
    \15\ Corporate prices are available at 20-minute intervals from 
Capital Management Services at http://www.bondvu.com/.
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    Price and transaction information for Treasury Securities and GSE 
Securities may also be obtained at http://publicdebt.treas.gov and 
http://www.govpx.com, respectively. Price quotes are also available to 
investors via proprietary systems such as Bloomberg, Reuters and Dow 
Jones Telerate. Valuation prices \16\ and analytical data may be 
obtained through vendors such as Bridge Information Systems, Muller 
Data, Capital Management Sciences, Interactive Data Corporation and 
Barra.
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    \16\ ``Valuation Prices'' refer to an estimated price that has 
been determined based on an analytical evaluation of a bond in 
relation to similar bonds that have traded. Valuation prices are 
based on bond characteristics, market performance, changes in the 
level of interest rates, market expectations and other factors that 
influence a bond's value.
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    The ABS Securities will be listed in $1,000 denominations with the 
Exchange's existing debt floor trading rules applying to trading. 
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 ABS 
Securities.\17\ Second, the ABS Securities will be subject to the debt 
margin rules of the Exchange.\18\ Third, the Exchange will, prior to 
trading the ABS Securities, distribute a circular to the membership 
providing guidance with regard to member firm compliance 
responsibilities (including suitability recommendations) when handling 
transactions in the ABS Securities and highlighting the special risks 
and characteristics of the ABS Securities. With respect to suitability 
recommendations and risks, the Exchange will require members, member 
organizations and employees thereof recommending a transaction in the 
ABS Securities: (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.
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    \17\ 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.
    \18\ See Amex Rule 462.
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    The Exchange represents that its surveillance procedures are 
adequate to properly monitor the trading of the ABS Securities. 
Specifically, the Amex will rely on its existing surveillance 
procedures governing debt, 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 \19\ in general and furthers the objectives 
of section

[[Page 28308]]

6(b)(5) \20\ 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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    \19\ 15 U.S.C. 78f(b).
    \20\ 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 
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 the File No. SR-Amex-2003-37 and 
should be submitted by June 13, 2003.

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.\21\ The Commission finds that this proposal is similar to 
several approved equity-linked instruments currently listed and traded 
on the Amex,\22\ as well as to asset-backed securities listed and 
traded on the NYSE.\23\ Accordingly, the Commission finds that the 
listing and trading of the ABS Securities 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.\24\
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    \21\ Id.
    \22\ See Securities Exchange Act Release Nos. 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).
    \23\ See, e.g., supra note 13.
    \24\ 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, the ABS securities are asset-backed 
securities and represent a repackaging of the Underlying Corporate 
Bonds together with the addition of either Treasury Securities or GSE 
Securities, subject to certain distribution of interest obligations of 
the Trust. The ABS Securities are not leveraged instruments. The ABS 
Securities are debt instruments whose price will still be derived and 
based upon the value of the Underlying Securities. The Exchange 
represents that the value of the Underlying Securities will be 
determined by one or more market makers, in accordance with Exchange 
rules and generally accepted principles of accounting regarding the 
valuation of securities. Investors are guaranteed at least the 
principal amount that they paid for the Underlying Securities. In 
addition, each of the Underlying Corporate Bonds will pay interest on a 
semi-annual basis while the ABS securities themselves will pay interest 
on a monthly or quarterly basis, pursuant to the Interest Distribution 
Agreement. Neither the Treasury Securities or GSE Securities will make 
periodic payments of interest.\25\ In addition, the ABS securities will 
mature on the latest maturity date of the Underlying Securities.\26\ 
However, due to the pass-through nature of the ABS Securities, the 
level of risk involved in the purchase or sale of the ABS Securities is 
similar to the risk involved in the purchase or sale of traditional 
common stock. The Commission notes that asset-backed securities that 
repackage a single underlying debt instrument are currently listed and 
traded on the NYSE. However, because the ABS Securities are similar to 
those repackaging transaction, except that the Trust will own more than 
one corporate debt obligation (in this case, also Treasury Securities 
or GSE Securities) and, in the single repackaging transactions, there 
is no need for an Interest Distribution Agreement because the timing of 
the payment of interest on the underlying debt obligation matches the 
obligation to distribute interest on the repackaged securities, there 
are several issues regarding the trading of this type of product that 
the Exchange must address.
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    \25\ See supra n. 9.
    \26\ The Commission notes, however, that the Exchange has 
represented that the Underlying Securities may drop out of the 
basket upon maturity or upon payment default or acceleration of the 
maturity date for any default other than payment default. See 
Prospectus for a schedule of the distribution of interest and of the 
principal upon maturity of each Underlying Security and for a 
description of payment default and acceleration of the maturity 
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 ABS Securities. 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 ABS Securities. Moreover, the 
Commission notes that

[[Page 28309]]

the Exchange will distribute a circular to its membership calling 
attention to the specific risks associated with the ABS Securities.
    The Commission notes that the ABS Securities are dependent upon the 
individual credit of the issuers of the Underlying Securities. To some 
extent this credit risk is minimized by the Exchange's listing 
standards in Section 107A of the Company Guide which provide that only 
issuers satisfying asset and equity requirements may issue securities 
such as the ABS Securities. In addition, the Exchange's ``Other 
Securities'' listing standards further provide that there is no minimum 
holder requirement if the securities are traded in thousand dollar 
denominations.\27\ The Commission notes that the Exchange has 
represented that the ABS Securities will be listed in $1000 
denominations with its existing debt floor trading rules applying to 
the trading. In any event, financial information regarding the issuers 
of the Underlying Securities will be publicly available.\28\
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    \27\ See Company Guide Section 107A.
    \28\ The ABS Securities will be registered under section 12 of 
the Act.
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    Due to the pass-through and passive nature of the ABS Securities, 
the Commission does not object to the Exchange's reliance on the assets 
and stockholder equity of the Underlying Securities rather than the 
Trust to meet the requirement in Section 107A of the Company Guide. The 
Commission notes that the distribution and principal amount/aggregate 
market value requirements found in Sections 107A(b) and (c), 
respectively, will otherwise be met by the Trust as issuer of the ABS 
Securities. Thus, the ABS Securities will conform to the initial 
listing guidelines under Section 107A and continued listing guidelines 
under Sections 1001-1003 of the Company Guide, except for the assets 
and stockholder equity characteristics of the Trust. At the time of 
issuance, the Commission also notes that the ABS Securities will 
receive an investment grade rating from an NRSRO.
    The Commission also believes that the listing and trading of the 
ABS Securities should not unduly impact the market for the Underlying 
Securities or raise manipulative concerns. As discussed more fully 
above, the Exchange represents that, in addition to requiring the 
issuers of the Underlying Securities meet the Exchange's Section 107A 
listing requirements (in the case of Treasury securities, the Exchange 
will rely on the fact that the issuer is the U.S. Government rather 
than the asset and stockholder tests found in Section 107A), the 
Underlying Securities will be required to meet or exceed the Exchange's 
Bond and Debenture Listing Standards pursuant to Section 104 of the 
Amex's Company Guide, which among other things, requires that 
underlying debt instrument receive at least an investment grade rating 
of ``B'' or equivalent from an NRSRO. Furthermore, at least 75% of the 
basket is required to contain Underlying Securities from issuances of 
$100 million or more. The Amex also represents that the basket of 
Underlying Securities will not be managed and will remain static over 
the term of the ABS securities. In addition, the Amex's surveillance 
procedures will serve to deter as well as detect any potential 
manipulation.
    The Commission notes that the investors may obtain price 
information on the Underlying Securities through market venders such 
Bloomberg, L.P., or though Web sites such as http://www.investinbonds.com (for Underlying Corporate Bonds) and http://publicdebt.treas.gov and http://www.govpx.com (for Treasury Securities 
and GSE Securities, respectively).
    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 thereof in the Federal Register. The Amex has 
requested accelerated approval because this product is similar to 
several other equity-linked instruments currently listed and traded on 
the Amex,\29\ and other asset-backed securities currently listed and 
traded on the NYSE.\30\ The Commission believes that the ABS Securities 
will provide investors with an additional investment choice and that 
accelerated approval of the proposal will allow investors to begin 
trading the ABS Securities promptly. Additionally, the ABS Securities 
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 \31\ to approve the proposal, as amended, on an 
accelerated basis.
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    \29\ See supra note 10.
    \30\ See, e.g., supra note 11.
    \31\ 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,\32\ that the proposed rule change (SR-Amex-2003-25) is hereby 
approved on an accelerated basis.
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    \32\ 15 U.S.C. 78o-3(b)(6) and 78s(b)(2).

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 03-12941 Filed 5-22-03; 8:45 am]
BILLING CODE 8010-01-P