[Federal Register Volume 69, Number 139 (Wednesday, July 21, 2004)]
[Notices]
[Pages 43635-43639]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-16554]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50019; File No. SR-Amex-2004-48]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of a Proposed Rule Change and Amendment 
No. 1 Thereto by American Stock Exchange LLC Relating to the Listing 
and Trading of Notes Linked to the Performance of the Standard and 
Poor's 500 Index

July 14, 2004.
    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 June 14, 2004, 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. 
On July 12, 2004, the Amex filed Amendment No. 1 to the proposed rule 
change.\3\ 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.
    \3\ See letter from Jeffrey Burns, Associate General Counsel, 
Amex, to Nancy J. Sanow, Assistant Director, Division of Market 
Regulation (``Division''), Commission, dated July 7, 2004 
(``Amendment No. 1''). In Amendment No. 1, the Amex elaborated on 
the size of the initial issuance and clarified that the 
dissemination of the value of the S&P 500 would be over the 
Consolidated Tape Association's Network B. In addition, in Amendment 
No. 1, the Amex clarified certain adjustments that will be made to 
the methodology of calculating the value of the S&P 500.

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[[Page 43636]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade notes, the performance of 
which is linked to the Standard and Poor's 500 Index (``S&P 500'' or 
``Index''). The text of the proposed rule change, as amended, is 
available at the Office of the Secretary, the Amex and at the 
Commission.

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, as 
amended, 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 the 
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.\4\ The Amex proposes 
to list for trading under Section 107A of the Company Guide notes 
linked to the performance of the S&P 500 (the ``S&P 500 Notes'' or 
``Notes'').\5\ Morgan Stanley will issue the Notes under the name 
``PLUSSM.'' The S&P 500 is determined, calculated and 
maintained solely by Standard and Poor's.\6\ At maturity, the Notes 
will provide for a multiplier of any positive performance of the S&P 
500 (the ``Upside Leverage Factor'') during such term subject to a 
maximum payment amount or ceiling to be determined at the time of 
issuance (the ``Capped Value'').
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    \4\ See Securities Exchange Act Release No. 27753 (March 1, 
1990). 55 FR 8626 (March 8, 1990) (order approving File No. SR-Amex-
89-29).
    \5\ Morgan Stanley and Standard & Poor's, a division of the 
McGraw-Hill Companies, Inc. (``S&P'') have entered into a non-
exclusive license agreement providing for the use of the S&P 500 by 
Morgan Stanley and certain affiliates and subsidiaries in connection 
with certain securities including these Notes. S&P is not 
responsible for and will not participate in the issuance and 
creation of the Notes.
    \6\ The S&P 500 Index is a broad-based stock index, which 
provides an indication of the performance of the U.S. equity market. 
The Index is a capitalization-weighted index reflecting the total 
market value of 500 widely-held component stocks relative to a 
particular base period. The Index is computed by dividing the total 
market value of the 500 stocks by an Index divisor. The Index 
Divisor keeps the Index comparable over time to its base period of 
1941-1943 and is the reference point for all maintenance 
adjustments. The securities included in the Index are listed on the 
Amex, New York Stock Exchange, Inc. (``NYSE'') or traded through 
NASDAQ. The Index reflects the price of the common stocks of 500 
companies without taking into account the value of the dividend paid 
on such stocks.
    The S&P indices are presently a ``full'' market-capitalization 
weighted index. That is, the value of the Index is calculated by, 
for each component, multiplying the total number of shares 
outstanding of the component by the price per share of the 
component. The result is then divided by the divisor. S&P announced 
on March 1, 2004 that it intends to shift its major indexes to 
``float-adjusted'' market capitalization weights. That is, the value 
of the Index will be calculated by, for each component, multiplying 
the number of shares in the public float of the component by the 
price per share of the component. The result is then divided by the 
divisor. Thus, the ``float adjusted'' market capitalization 
methodology will exclude blocks of stocks that do not trade from the 
weighting determination for a stock in the index.
    The transition from full market-cap weighting to float-adjusted 
weighting will be implemented over an 18 month period. In September 
2004, S&P will publish procedures and float adjustment factors, and 
begin calculation of provisional float adjusted indexes. The float 
adjustment factors will include, among other things, information 
regarding the adjustments that will be made to each component in 
order to determine what each component's float will be. At that 
time, S&P will start calculating a provisional index alongside of 
the regular index. It is not expected that any securities or futures 
exchange will trade products on this or any provisional index during 
the transition period. S&P has stated that, notwithstanding the 
simultaneous calculation of provisional indexes, there will still be 
only one official set of S&P indexes. In March 2005, the non-
provisional S&P indexes will shift to partial float adjustment, 
using float adjustment factors that represent half of the total 
adjustment, based on the information published in September 2004. In 
September 2005, the shift to float adjustment will be completed, the 
official indexes will be fully float-adjusted, and the provisional 
indexes will be discontinued. Float adjustment factors will be 
reviewed annually in September. During the transition period, S&P 
will adjust the divisor of the indexes in order to maintain 
continuity across the adjustments. Therefore, as a result of the 
divisor adjustments, the Index value will maintain continuity 
immediately following both adjustments (in March 2005 and September 
2005). S&P does not expect any companies to be removed from the 
Index as a result of the adjustments. Also S&P does not expect a 
change in the value of the derivative based on the index, due to 
adjustments S&P can make to the index divisor; however, none of this 
is guaranteed.
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    The S&P 500 Notes will conform to the initial listing guidelines 
under Section 107A \7\ and continued listing guidelines under Sections 
1001-1003 \8\ of the Company Guide. The Notes are senior non-
convertible debt securities of Morgan Stanley. The Notes will have a 
term of no more than ten (10) years. Morgan Stanley will issue the 
Notes in denominations of whole units (a ``Unit''), with each Unit 
representing a single Note. The original public offering price will be 
$10 per Unit, and the size of the initial issuance will be $77.18 
million.\9\ The Notes will entitle the owner at maturity to receive an 
amount based upon the percentage change of the S&P 500. The Notes will 
not have a minimum principal amount that will be repaid, and 
accordingly, payment on the Notes prior to or at maturity may be less 
than the original issue price of the Notes.\10\ The Notes are also not 
callable by the issuer, Morgan Stanley, or redeemable by the holder.
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    \7\ The initial listing standards for the Notes 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 has 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 1010 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.
    \8\ 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.
    \9\ See Amendment No. 1.
    \10\ A negative return of the S&P 500 will reduce the redemption 
amount at maturity with the potential that the holder of the Note 
could lose his entire investment amount.
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    The payment that a holder or investor of a Note will be entitled to 
receive (the ``Redemption Amount'') will depend on the relation of the 
level of the S&P 500 at the close of the market on the second scheduled 
trading day prior to maturity of the Notes (the ``Final Level'') and 
the closing value of the Index on the date the Notes are priced for 
initial sale to the public (the ``Initial Level''). If there is a 
``market disruption event \11\ when

[[Page 43637]]

determining the Final Level of the Index, the Final Level will be 
determined on the next available trading day during which no ``market 
disruption event'' occurs.
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    \11\ A ``market disruption event'' is defined as (i) the 
occurrence of a suspension, absence or material limitation of 
trading of 20% or more of the component stocks of the Index on the 
primary market for more than two hours of trading or during the one-
half hour period preceding the close of the principal trading 
session on such primary market; (ii) a breakdown or failure in the 
price and trade reporting systems of any primary market as a result 
of which the reported trading prices for 20% or more of the 
component stocks of the Index during the last one-half hour 
preceding the close of the principal trading session on such primary 
market are materially inaccurate; (iii) the suspension, material 
limitation or absence of trading on any major securities market for 
trading in futures or options contracts or exchange traded funds 
related to the Index for more than two hours of trading or during 
the one-half hour period preceding the close of the principal 
trading session on such market, and (iv) a determination by Morgan 
Stanley & Co., Incorporated that any event described in clauses (i)-
(iii) above materially interfered with the ability of Morgan Stanley 
or any of its affiliates to unwind or adjust all or a material 
portion of the hedge position with respect to the Notes.
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    If the percentage change of the Index is positive (i.e., the Final 
Level is greater than the Initial Level), the Redemption Amount per 
Unit will equal:
[GRAPHIC] [TIFF OMITTED] TN21JY04.002

The Upside Leverage Factor, determined at the time of issuance, is 
expected to be 200% of the percent increase in the Final Level of the 
S&P 500, which will be subject to the Capped Value of approximately 
$11.80 or 118% of the issue price.
    If the percentage change of the Index is zero or negative (i.e., 
the Final Level is less than or equal to the Initial Level), the 
Redemption Amount per Unit will equal:
[GRAPHIC] [TIFF OMITTED] TN21JY04.003

    Thus, if the Final Level of the S&P 500 is less than the Initial 
Level, an investor would receive less than his initial $10 per share 
investment. However, the Notes are not leveraged on the downside; the 
return would be directly proportional to the decline in the S&P 500. 
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. The Notes are designed for investors 
who want to participate in or gain enhanced upside exposure to the S&P 
500, subject to the Capped Value, and who are willing to forego 
principal protection and market interest payments on the Notes during 
such term. The Commission has previously approved the listing of 
securities and related options linked to the performance of the S&P 500 
Index.\12\
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    \12\ See e.g., Securities Exchange Act Release Nos. 19907 (June 
24, 1983), 48 FR 30814 (July 5, 1983) (approving the listing and 
trading of options on the S&P 500 Index); 31591 (December 18, 1992), 
57 FR 60253 (December 18, 1992) (approving the listing and trading 
of Portfolio Depositary Receipts based on the S&P 500 Index); 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); 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) (SPDR); 47911 (May 22, 2003), 68 
FR 32558 (May 30, 2003) (approving the listing and trading of notes 
(Wachovia TEES) linked to the S&P 500); 47983 (June 4, 2003), 68 FR 
35032 (June 11, 2003) (approving the listing and trading of a CSFB 
Accelerated Return Notes linked to S&P 500); 48152 (July 10, 2003), 
68 FR 42435 (July 17, 2003) (approving the listing and trading of a 
UBS Partial Protection Note linked to the S&P 500) and 48486 
(September 11, 2003), 68 FR 54758 (September 18, 2003) (approving 
the listing and trading of CSFB Contingent Principal Protection 
Notes on the S&P 500).
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    As of June 9, 2004, the market capitalization of the securities 
included in the S&P 500 ranged from a high of $318 billion to a low of 
$757 million. The average daily trading volume for these same 
securities for the last six (6) months ranged from a high of 62.4 
million shares to a low of 130,000 shares. The Index value will be 
disseminated at least once every fifteen (15) seconds throughout the 
trading day.
    Because the Notes are issued in $10 denominations, 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. In addition, Morgan Stanley will deliver a prospectus in 
connection with initial sales of the Notes.
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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.
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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, as amended, is 
consistent with section 6 \15\ of the Act in general and furthers the 
objectives of section 6(b)(5) \16\ 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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    \15\ 15 U.S.C. 78f(b).
    \16\ 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

[[Page 43638]]

change, as amended, is consistent with the Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-Amex-2004-48 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-Amex-2004-48. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 Section, 450 Fifth 
Street, NW., Washington, DC 20549-0609. Copies of such filing also will 
be available for inspection and copying at the principal office of the 
Amex. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
Amex-2004-48 and should be submitted on or before August 11, 2004.

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

    After careful consideration, the Commission finds that the proposed 
rule change, as amended, 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.\17\ The Commission has approved the listing 
of securities with a structure similar to that of the Notes.\18\ 
Accordingly, the Commission finds that the listing and trading of the 
Notes based on the 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 
securities, and, in general, protect investors and the public interest 
consistent with section 6(b)(5) of the Act.\19\
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    \17\ 15 U.S.C. 78f(b)(5).
    \18\ See Securities Exchange Act Release Nos. 48152 (July 10, 
2003), 68 FR 42435 (July 17, 2003) (approving the listing and 
trading of the UBS Partial Protection Note linked to the Index); 
47983 (June 4, 2003), 68 FR 35032 (June 11, 2003) (approving the 
listing and trading of a CSFB Accelerated Return Notes linked to 
Index); 47911 (May 22, 2003), 68 FR 32558 (May 30, 2003) (approving 
the listing and trading of notes (Wachovia TEES) linked to the 
Index); 31591 (December 18, 1992), 57 FR 60253 (December 18, 1992) 
(approving the listing and trading of Portfolio Depositary Receipts 
based on the Index); 30394 (February 21, 1992), 57 FR 7409 (March 2, 
1992) (approving the listing and trading of a unit investment trust 
linked to the Index)(SPDR); 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 Index); and 19907 (June 
24, 1983), 48 FR 30814 (July 5, 1983) (approving the listing and 
trading of options on the Index).
    \19\ 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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    The Notes will provide investors who are willing to forego market 
interest payments during the term of the Notes with a means to 
participate or gain exposure to the Index, subject to the Capped Value. 
The Notes are non-convertible debt securities whose price will be 
derived and based upon the Initial Level. The Commission notes that the 
Notes will not have a minimum principal investment amount that will be 
repaid, and payment on the Notes prior to or at maturity may be less 
than the original issue price of the Notes. At maturity, if the Final 
Value of the S&P 500 is greater than the Initial Value, the performance 
of the Note is leveraged on the ``upside.'' In other words, the 
investor will receive, for each $10 principal amount, a payment equal 
to $10 plus 200% of the percent increase in the value of the S&P 500, 
subject to the Capped Value of approximately $11.80 or 118% of the 
issue price. However, if the S&P 500 declines from the Initial Value, 
then the investors will receive proportionately less than the original 
issue price of the Notes. The return on the notes, however, is not 
leveraged on the downside.
    Thus, the Notes are non-principal protected instruments, but are 
not leveraged on the downside. 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 level 
of return of 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, if the 
value of the Index has increased over the term of such Note, there are 
several issues regarding the trading of this type of product. However, 
for the reasons discussed below, the Commission believes the Exchange's 
proposal adequately addresses the concerns raised by this type of 
product.
    The Commission notes that the protections of Amex Rule 107A were 
designed to address the concerns attendant on the trading of hybrid 
securities like the Notes. In particular, by imposing the hybrid 
listing standards, suitability, disclosure and compliance requirements 
noted above, the Commission believes that Amex has addressed adequately 
the potential problems that could arise from the hybrid nature of the 
Notes. The Commission notes that Amex will distribute a circular to its 
membership calling attention to the specific risks associated with the 
Notes. The Commission also notes that Morgan Stanley will deliver a 
prospectus in connection with the initial sales of the notes. In 
addition, the Commission notes that Amex will incorporate and rely upon 
its existing surveillance procedures governing equities, which have 
been deemed adequate under the Act.
    In approving the product, the Commission recognizes that the Index 
is a capitalization-weighted index \20\ of 500 companies listed on 
Nasdaq, the NYSE, and the Amex. The Exchange represents that the Index 
will be determined, calculated, and maintained by S&P. As of June 9, 
2004, the market capitalization of the securities included in the S&P 
500 ranged from a high of $757 billion to a low of $318 million. The 
average daily trading volume for these same securities for the last six 
(6) months ranged from a high of 62.4 million shares to a low of 
130,000 shares.
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    \20\ See supra note 6.
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    Given the large trading volume and capitalization of the 
compositions of the stocks underlying the Index, the Commission 
believes that the listing and

[[Page 43639]]

trading of the Notes that are linked to the Index should not unduly 
impact the market for the underlying securities comprising the Index or 
raise manipulative concerns.\21\ As discussed more fully above, the 
underlying stocks comprising the Index are well-capitalized, highly 
liquid stocks. Moreover, the issuers of the underlying securities 
comprising the Index are subject to reporting requirements under the 
Act, and all of the component stocks are either listed or traded on, or 
traded through the facilities of, U.S. securities markets. 
Additionally, the Amex's surveillance procedures will serve to deter as 
well as detect any potential manipulation.
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    \21\ The issuer Morgan Stanley disclosed in the prospectus that 
the original issue price of the notes includes commissions (and the 
secondary market prices are likely to exclude commissions) and 
Morgan Stanley's costs of hedging its obligations under the notes. 
These costs could increase the initial value of the Notes, thus 
affecting the payment investors receive at maturity. The Commission 
expects such hedging activity to be conducted in accordance with 
applicable regulatory requirements.
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    Furthermore, the Commission notes that the Notes are depending upon 
the individual credit of the issuer, Morgan Stanley. 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 a 
market value of at least $4 million.\22\ In any event, financial 
information regarding Morgan Stanley in addition to the information on 
the 500 common stocks comprising the Index will be publicly 
available.\23\
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    \22\ See Company Guide Section 107A.
    \23\ The Commission notes that the 500 component stocks that 
comprise the 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 Morgan Stanley, 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 this concern 
is minimal given the size of the Notes issuance in relation to the net 
worth of Morgan Stanley.
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    \24\ See 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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    Finally, the Commission notes that the value of the 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 
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, as amended, prior to the 30th day after the date of publication 
of the notice of filing thereof in the Federal Register. The Exchange 
has requested accelerated approval because this product is similar to 
several other instruments currently listed and traded on the Amex.\25\ 
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. Therefore, the 
Commission finds good cause, consistent with Section 19(b)(2) of the 
Act,\26\ to approve the proposal on an accelerated basis.
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    \25\ See supra note 18.
    \26\ 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,\27\ that the proposed rule change (SR-Amex-2004-48) and Amendment 
No. 1 thereto is hereby approved on an accelerated basis.
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    \27\ 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.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-16554 Filed 7-20-04; 8:45 am]
BILLING CODE 8010-01-P