[Federal Register Volume 73, Number 72 (Monday, April 14, 2008)]
[Notices]
[Pages 20074-20076]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-7825]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57631; File No. SR-Amex-2008-30]


Self-Regulatory Organizations; American Stock Exchange, LLC; 
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto To 
Amend the Eligibility Criteria for Components of an Index or Portfolio 
Underlying Portfolio Depositary Receipts and Index Fund Shares

April 8, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 25, 2008, 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 substantially prepared by the 
Exchange. On April 1, 2008, the Exchange filed Amendment No. 1 to the 
proposed rule change. The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, from 
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to amend Commentary .03 to Amex Rule 1000-
AEMI (Portfolio Depositary Receipts or ``PDRs'') and Commentary .02 to 
Amex Rule 1000A-AEMI (Index Fund Shares or ``IFSs,'' and together with 
PDRs, collectively, ``ETFs'') to exclude ETFs and securities defined as 
Managed Fund Shares (Amex Rule 1000B), Trust Issued Receipts (Amex Rule 
1200), Commodity-Based Trust Shares (Amex Rule 1200A), Currency Trust 
Shares (Amex Rule 1200B), Partnership Units (Amex Rule 1500), and 
Paired Trust Shares (Amex Rule 1600) (together with ETFs, collectively, 
``Derivative Securities Products'') when applying certain quantitative 
listing requirements of Commentary .03 to Amex Rule 1000-AEMI and 
Commentary .02 to Amex Rule 1000A-AEMI. The text of the proposed rule 
change is available at the Exchange, the Commission's Public Reference 
Room, and www.amex.com.

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 aspects of such 
statements.

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

1. Purpose
    The purpose of the proposed rule change is to enable the listing 
and trading of ETFs that are linked to, or based on, Derivative 
Securities Products pursuant to Rule 19b-4(e) under the Act.\3\ To this 
end, the Exchange proposes to amend Commentary .03 to Amex Rule 1000-
AEMI and Commentary .02 to Amex Rule 1000A-AEMI.
---------------------------------------------------------------------------

    \3\ Rule 19b-4(e) under the Act provides that the listing and 
trading of a new derivative securities product by a self-regulatory 
organization (``SRO'') shall not be deemed a proposed rule change, 
pursuant to Rule 19b-4(c)(1) (17 CFR 240.19b-4(c)(1)), if the 
Commission has approved, pursuant to Section 19(b) of the Act (15 
U.S.C. 78s(b)), the SRO's trading rules, procedures, and listing 
standards for the product class that would include the new 
derivatives securities product, and the SRO has a surveillance 
program for the product class. See 17 CFR 240.19b-4(e).
---------------------------------------------------------------------------

    Amex Rules 1000-AEMI and 1000A-AEMI provide that the Exchange may 
approve a series of PDRs and IFSs, respectively, for listing and/or 
trading (including pursuant to unlisted trading privileges) pursuant to 
Rule 19b-4(e) under the Act,\4\ if such series satisfies the criteria 
set forth in such Rules. In this proposal, the Exchange seeks to 
exclude Derivative Securities Products when applying certain 
quantitative listing requirements of Commentary .03 to Amex Rule 1000-
AEMI and Commentary .02 to Amex Rule 1000A-AEMI relating to the listing 
of PDRs and IFSs, respectively, based on a U.S. index or portfolio or 
an international or global index or portfolio.
---------------------------------------------------------------------------

    \4\ See id.
---------------------------------------------------------------------------

    With respect to Commentary .03 to Amex Rule 1000-AEMI and 
Commentary .02 to Amex Rule 1000A-AEMI, the Exchange proposes to 
exclude Derivative Securities Products, as components, when applying 
the following existing component eligibility requirements: (1) 
Component stocks that, in the aggregate, account for at least 90% of 
the weight of the index or portfolio each must have a minimum market 
value of at least $75 million (Commentary .03(a)(A)(1) to Amex Rule 
1000-AEMI and Commentary .02(a)(A)(1) to Amex Rule 1000A-AEMI); (2) 
component stocks that, in the aggregate, account for at least 90% of 
the weight of the index or portfolio each must have a minimum monthly 
trading volume during each of the last six months of at least 250,000 
shares (Commentary .03(a)(A)(2) to Amex Rule 1000-AEMI and Commentary 
.02(a)(A)(2) to Amex Rule 1000A-AEMI); and (3) the most heavily 
weighted component stock must not exceed 30% of the weight of the index 
or portfolio, and the five most heavily weighted component stocks must 
not exceed 65% of the weight of the index or portfolio (Commentary 
.03(a)(A)(3) to Amex Rule 1000-AEMI and Commentary .02(a)(A)(3) to Amex 
Rule 1000A-AEMI). Component stocks, in the aggregate, excluding 
Derivative Securities Products, would still be required to meet the 
criteria of these provisions. Thus, for example, when determining 
compliance with Commentaries .03(a)(A)(1) and (2) to Amex Rule 1000-
AEMI and Commentaries .02(a)(A)(1) and (2) to Amex Rule 1000A-AEMI, 
component stocks that, in the aggregate, account for at least 90% of 
the remaining index weight, after excluding any Derivative Securities 
Products, would be required to have a minimum market value of at least 
$75 million and minimum monthly trading volume of 250,000 shares during 
each of the last six months, respectively. In addition, with respect to 
Commentary .03(a)(A)(3) to Amex Rule 1000-AEMI and Commentary 
.02(a)(A)(3) to Amex Rule 1000A-AEMI, when determining the component 
weight for the most heavily

[[Page 20075]]

weighted stock and the five most heavily weighted component stocks for 
an underlying index that includes a Derivative Securities Product, the 
weight of such Derivative Securities Products included in the 
underlying index or portfolio would not be considered.
    In addition, the Exchange proposes to modify the requirements in 
Commentary .03(a)(A)(4) to Amex Rule 1000-AEMI and Commentary 
.02(a)(A)(4) to Amex Rule 1000A-AEMI, which provide that the underlying 
index or portfolio must include a minimum of 13 component stocks. 
Specifically, the Exchange proposes that there shall be no minimum 
number of component stocks if: (1) One or more series of ETFs 
constitute, at least in part, components underlying a series of ETFs; 
or (2) one or more series of Derivative Securities Products account for 
100% of the weight of the index or portfolio. Thus, for example, if the 
index or portfolio underlying a series of ETFs includes one or more 
series of ETFs, or if it consists entirely of other Derivative 
Securities Products, then there would not be required to be any minimum 
number of component stocks (i.e., one or more components comprising the 
underlying index or portfolio would be acceptable). However, if the 
index or portfolio consists of Derivative Securities Products other 
than ETFs (e.g., Commodity-Based Trust Shares or Currency Trust 
Shares), as well as securities that are not Derivative Securities 
Products (e.g., common stocks), then there would have to be at least 13 
components in the underlying index or portfolio.
    Consistent with current Commentary .03(a)(A)(5) to Amex Rule 1000-
AEMI and Commentary .02(a)(A)(5) to Amex Rule 1000A-AEMI, all 
securities in the index or portfolio would have to be ``US Component 
Stocks'' (as defined in Amex Rules 1000-AEMI(b)(3) and 1000A-
AEMI(b)(4)) \5\ listed on a national securities exchange and NMS 
Stocks, as defined in Rule 600 of under the Act.\6\
---------------------------------------------------------------------------

    \5\ ``US Component Stock'' is an equity security that is 
registered under Section 12(b) or 12(g) of the Act or an American 
Depositary Receipt, the underlying equity security of which is 
registered under Section 12(b) or 12(g) of the Act. See Amex Rules 
1000-AEMI(b)(3) and 1000A-AEMI(b)(4).
    \6\ See 17 CFR 242.600(b)(47).
---------------------------------------------------------------------------

    With respect to Commentary .03(a)(B) to Amex Rule 1000-AEMI and 
Commentary .02(a)(B) to Amex Rule 1000A-AEMI, the Exchange proposes to 
exclude Derivative Securities Products, as components, when applying 
the following existing component eligibility requirements: (1) 
Component stocks that, in the aggregate, account for at least 90% of 
the weight of the index or portfolio each must have a minimum market 
value of at least $100 million (Commentary .03(a)(B)(1) to Amex Rule 
1000-AEMI and Commentary .02(a)(B)(1) to Amex Rule 1000A-AEMI); (2) 
component stocks that, in the aggregate, account for at least 90% of 
the weight of the index or portfolio each must have a minimum worldwide 
monthly trading volume during each of the last six months of at least 
250,000 shares (Commentary .03(a)(B)(2) to Amex Rule 1000-AEMI and 
Commentary .02(a)(B)(2) to Amex Rule 1000A-AEMI); and (3) the most 
heavily weighted component stock must not exceed 25% of the weight of 
the index or portfolio, and the five most heavily weighted component 
stocks must not exceed 60% of the weight of the index or portfolio 
(Commentary .03(a)(B)(3) to Amex Rule 1000-AEMI and Commentary 
.02(a)(B)(3) to Amex Rule 1000A-AEMI). Thus, for example, when 
determining compliance with Commentaries .03(a)(B)(1) and (2) to Amex 
Rule 1000-AEMI and Commentaries .02(a)(B)(1) and (2) to Amex Rule 
1000A-AEMI, component stocks that, in the aggregate, account for at 
least 90% of the remaining index weight, after excluding any Derivative 
Securities Products, would be required to have a minimum market value 
of at least $100 million and minimum worldwide monthly trading volume 
of 250,000 shares during each of the last six months, respectively. In 
addition, with respect to Commentary .03(a)(B)(3) to Amex Rule 1000-
AEMI and Commentary .02(a)(B)(3) to Amex Rule 1000A-AEMI, when 
determining the component weight for the most heavily weighted stock 
and the five most heavily weighted component stocks for an underlying 
index that includes a Derivative Securities Product, the weight of such 
Derivative Securities Products included in the underlying index or 
portfolio would not be considered.
    In addition, the Exchange proposes to modify the requirements in 
Commentary .03(a)(B)(4) to Amex Rule 1000-AEMI and Commentary 
.02(a)(B)(4) to Amex Rule 1000A-AEMI, which provide that the underlying 
index or portfolio must include a minimum of 20 component stocks. 
Specifically, the Exchange proposes that there shall be no minimum 
number of component stocks if: (1) One or more series of ETFs 
constitute, at least in part, components underlying a series of ETFs; 
or (2) one or more series of Derivative Securities Products account for 
100% of the weight of the index or portfolio. Thus, for example, if the 
index or portfolio underlying a series of ETFs includes one or more 
series of ETFs, or if it consists entirely of other Derivative 
Securities Products, then there would not be required to be any minimum 
number of component stocks (i.e., one or more components comprising the 
underlying index or portfolio would be acceptable). However, if the 
index or portfolio consists of Derivative Securities Products other 
than ETFs (e.g., Commodity-Based Trust Shares or Currency Trust 
Shares), as well as securities that are not Derivative Securities 
Products (e.g., common stocks), then there would have to be at least 20 
components in the underlying index or portfolio.
    Consistent with current Commentary .03(a)(B)(5) to Amex Rule 1000-
AEMI and Commentary .02(a)(B)(5) to Amex Rule 1000A-AEMI, each 
component that is a U.S. Component Stock (which would include each 
Derivative Securities Product) would be required to be listed on a 
national securities exchange and be an NMS Stock, as defined in Rule 
600 under the Act, and each component that is a Non-US Component Stock 
(as defined in Amex Rules 1000-AEMI(b)(4) and 1000A-AEMI(b)(5)) \7\ 
would be required to be listed and traded on an exchange that has last-
sale reporting.
---------------------------------------------------------------------------

    \7\ ``Non-US Component Stock'' is an equity security that is not 
registered under Section 12(b) or 12(g) of the Act and that is 
issued by an entity that (1) is not organized, domiciled, or 
incorporated in the United States, and (2) is an operating company 
(including Real Estate Investment Trusts and income trusts, but 
excluding investment trusts, unit trusts, mutual funds, and 
derivatives). See Amex Rules 1000-AEMI(b)(4) and 1000A-AEMI(b)(5).
---------------------------------------------------------------------------

    The Exchange believes it is appropriate to exclude Derivative 
Securities Products from certain index component eligibility criteria 
for ETFs insofar as Derivative Securities Products are themselves 
subject to specific quantitative listing and continued listing 
requirements of a national securities exchange on which such Derivative 
Securities Products are listed. Derivative Securities Products that are 
components of an index or portfolio underlying a series of ETFs would 
have been listed and traded on a national securities exchange pursuant 
to a proposed rule change approved by the Commission pursuant to 
Section 19(b)(2) of the Act \8\ or submitted by a national securities 
exchange pursuant to Section 19(b)(3)(A) of the Act,\9\ or would have 
been listed by a national securities exchange pursuant to the 
requirements

[[Page 20076]]

of Rule 19b-4(e) under the Act.\10\ Finally, the Exchange notes that 
Derivative Securities Products are derivatively priced, and, therefore, 
the Exchange submits that it would not be necessary to apply the 
generic quantitative criteria (e.g., market capitalization, trading 
volume, index or portfolio component weighting) applicable to non-
Derivative Securities Products (e.g., common stocks) to such products.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(2).
    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ See supra note 3.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\11\ in general, and furthers the 
objectives of Section 6(b)(5),\12\ 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 mechanisms of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. The Exchange believes that 
the proposal will facilitate the listing and trading of additional 
types of ETFs that will enhance competition among market participants, 
to the benefit of investors and the marketplace. In addition, the 
listing and trading criteria set forth in the proposed rules are 
intended to protect investors and the public interest.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange states that the proposed rule change will impose no 
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

    The Exchange states that no written comments were solicited or 
received with respect to the proposed rule change.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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. 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-2008-30 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-Amex-2008-30. 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 Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. 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-2008-30 and should be 
submitted on or before May 5, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-7825 Filed 4-11-08; 8:45 am]
BILLING CODE 8011-01-P