[Federal Register Volume 59, Number 193 (Thursday, October 6, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24795]
[[Page Unknown]]
[Federal Register: October 6, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34758; File No. SR-NASD-94-49]
Self-Regulatory Organizations; Filing and Order Granting
Accelerated Approval of a Proposed Rule Change and Amendment Nos. 1 and
2 to the Proposed Rule Change by the National Association of Securities
Dealers, Inc., Relating to Listing Standards for Selected Equity-Linked
Debt Securities (``SEEDS'').
September 30, 1994.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on August
31, 1994, the National Association of Securities Dealers, Inc.
(``NASD'') 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 NASD. The
NASD filed Amendment No. 1 to the proposed rule change on September 2,
1994, and Amendment No. 2 on September 9, 1994.\1\ The Commission is
publishing this notice to solicit comments on the proposed rule change,
as amended, from interested persons.
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\1\In Amendment Nos. 1 and 2, the NASD proposed to make certain
clarifying amendments to the proposed rule language, as more fully
discussed herein, to more closely conform the listing standards for
SEEDS to the listing standards for equity-linked debt in place on
the New York Stock Exchange (``NYSE'') and the American Stock
Exchange (``Amex''). Amendment No. 1 also eliminates the minimum
holder requirement for securities that are listed pursuant to
Article III, Section 2 of the NASD Rules of Fair Practice but which
are traded in thousand dollar denominations. See Letter from Robert
Aber, Vice President and General Counsel, NASD, to Brad Ritter,
Attorney, Office of Market Supervision (``OMS''), Division of Market
Regulation (``Division''), Commission, dated September 2, 1994
(``Amendment No. 1''); and Letter from Robert Aber, Vice President
and General Counsel, NASD, to Brad Ritter, Attorney, OMS, Division,
Commission, dated September 9, 1994 (``Amendment No. 2'').
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The NASD is proposing amendments to Schedule D of the NASD By-Laws
to provide listing standards for the designation of Selected Equity-
Linked Debt Securities (``SEEDS'')\2\ as Nasdaq National Market
securities. The NASD also proposes to amend the Policy of the NASD
Board of Governors issued under Article III, section 2, of the NASD
Rules of Fair Practice to highlight members' obligations to deal fairly
with their customers when making recommendations or accepting orders
concerning SEEDS. The text of the proposed rule change is available at
the Office of the Secretary, NASD, and at the Commission.
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\2\``SEEDS'' and ``Selected Equity-Linked Debt Securities'' are
service marks of the NASD.
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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 NASD 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 NASD 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
Under section 2(e) of Part III of Schedule D to the NASD By-Laws,
the NASD may designate as Nasdaq National Market securities financial
instruments which can not be readily categorized under traditional
listing guidelines for, among other instruments, common and preferred
stock, bonds, debentures, and warrants.\3\ The NASD is now proposing to
amend Section 2 of Part III of Schedule D to the NASD By-Laws to
provide listing standards for SEEDS, a specific type of hybrid
security. As with the more general hybrid product listing standards,
all SEEDS will be designated as Nasdaq National Market securities.\4\
In addition, SEEDS will be treated as equity instruments for, among
other purposes, margin requirements.
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\3\See Securities Exchange Act Release No. 32988 (September 29,
1993), 58 FR 52124 (October 6, 1993).
\4\The NASD notes that the Commission already has approved
comparable listing standards for Equity-Linked Debt Securities
(``ELDS'') listed and traded on the New York Stock Exchange
(``NYSE'') and Equity-Linked Term Notes (``ELNs'') listed and traded
on the American Stock Exchange (``Amex''). The NASD states that with
two exceptions, as discussed herein, the NASD's proposed standards
are virtually identical to the NYSE's and Amex's listing standards
for ELDS and ELNs, respectively. See Securities Exchange Act Release
Nos. 32343 (May 20, 1993), 58 FR 30833 (May 27, 1993) (order
originally approving the listing of ELNs); 33328 (December 13,
1993), 58 FR 66041 (December 17, 1993) (order approving revised
market capitalization and trading volume requirements for the
listing of ELNs); 33468 (January 13, 1994), 59 FR 3387 (January 21,
1994) (order originally approving the listing of ELDS); 33841 (March
31, 1994), 59 FR 16671 (April 7, 1994) (order approving revised
market capitalization and trading volume requirements for the
listing of ELDS); 34545 (August 18, 1994), 59 FR 43877 (August 25,
1994) (order approving the listing of ELDS linked to securities
issued by non-U.S. companies) (``Exchange Act Release No. 34545'');
and 34549 (August 18, 1994), 59 FR 43873 (August 25, 1994) (order
approving the listing of ELNs linked to securities issued by non-
U.S. companies) (``Exchange Act Release No. 34549'') (collectively,
``Equity-Linked Note Approval Orders'').
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SEEDS are intermediate-term, hybrid securities, the value of which
is based, at least in part, on the value of another issuer's common
stock, non-convertible preferred stock, or certain sponsored American
Depositary Receipts (``ADRs''). SEEDS may pay periodic interest or may
be issued as zero-coupon instruments with no payments to holders prior
to maturity. SEEDS may be subject to a ``cap'' on the maximum principal
amount to be repaid to holders upon maturity, and they may feature a
``floor'' on the minimum principal amount paid to holders upon
maturity. A specific issue of SEEDS, for example, may provide holders
with a fixed semi-annual interest payment, while capping the maximum
amount to be repaid upon maturity at 135% of the issuance price, with
no minimum floor guarantee on the principal to be repaid at maturity.
Another issue of SEEDS might offer lower semi-annual payments based
upon a floating interest rate\5\ with a minimum floor for the repayment
of principal of 75% of the issuance price. According to the NASD the
flexibility available to an issuer of SEEDS permits the creation of
securities which offer issuers and investors the opportunity to more
precisely focus on a specific investment strategy.
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\5\The NASD will notify the Commission if an issue of SEEDS
provides for periodic interest payments to holders based on a
floating rate. The Commission, at that time, may require the NASD to
submit a rule filing pursuant to section 19(b) of the Act prior to
permitting Nasdaq to list SEEDS with such terms.
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The NASD generally believes that the level of risk involved in the
purchase or sale of a SEEDS is similar to the risk involved in the
purchase or sale of traditional common stock. Nevertheless, the unique
nature and characteristics of SEEDS raises several concerns: (1)
Investor protection concerns; (2) dependence on the creditworthiness of
the issuer of a SEEDS to meet its obligations under the instruments;
(3) systemic concerns regarding the position exposure of issues with
partially hedged or dynamically hedged positions; and (4) the impact on
the market for the underlying linked security. The NASD believes its
proposal adequately addresses these concerns.
Specifically, there are four components to the NASD's proposed
listing standards for SEEDS: (1) Standards applicable to issuers of
SEEDS; (2) standards applicable to the SEEDS offerings themselves; (3)
standards applicable to the underlying linked security; and (4)
limitations on the size of a particular SEEDS offering.
Issuer Listing Standards
The proposal provides that an issuer of a SEEDS must be a entity
that is listed on Nasdaq or the NYSE, or an affiliate of a company
listed on Nasdaq or the NYSE.\6\ Each issuer of a SEEDS must also have
a minimum net worth of $150 million. In addition, the market value of a
SEEDS offering, when combined with the market value of all other SEEDS
offerings previously completed by the issuer and traded through Nasdaq
or on a national securities exchange, may not be greater that 25% of
the issuer's net worth at the time of issuance.
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\6\For the numerical listing criteria for securities eligible to
be listed as Nasdaq National Market securities, see Section 2 of
Part III of Schedule D to the NASD By-Laws. For the numerical
listing criteria for securities eligible to be listed on the NYSE
see sections 102.01-102.03 and 103.01-103.05 of the NYSE's Listed
Company Manual.
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Standard Applicable to SEEDS Offerings
In order to ensure adequate liquidity in the markets for SEEDS each
issuance of a SEEDS must have: (1) A minimum public distribution of one
million SEEDS; (2) a minimum of 400 holders of the SEEDS; (3) a minimum
market value of $4 million; and (4) a term of two to seven years
(although a SEEDS on a sponsored ADR can not have a term longer than
three years).
Standards Applicable to the Underlying Linked Security
In order to help ensure that SEEDS will not have a disruptive
effect on the markets for the securities underlying the SEEDS, the NASD
proposes that the securities underlying SEEDS must have sufficiently
large market capitalizations and high trading volumes. Specifically, a
security underlying a SEEDS must have: (1) A market capitalization of
at least $3 billion and a trading volume in the United States of at
least 2.5 million shares in the one-year period preceding the listing
of the SEEDS; or (2) a market capitalization of at least $1.5 billion
and a trading volume in the United States of at least 20 million shares
in the one-year period preceding the listing of the SEEDS; or (3) a
market capitalization of at least $500 million and a trading volume in
the United States of at least 80 million shares in the one-year period
preceding the listing of the SEEDS. In addition, if an issuer proposes
to issue SEEDS on a security that does not meet the market
capitalization and trading volume standards set forth above, the NASD,
with the concurrence of the staff of the Commission, may evaluate the
trading volume, public float, and market capitalization of that
security, as well as other relevant factors, and determine on a case-
by-case basis that it is appropriate to list SEEDS overlying that
security.\7\
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\7\See Amendment No. 1, supra note 1. Depending on the proposed
facts, the Commission may require the NASD to submit a rule filing
to the Commission pursuant to section 19(b) of the Act to address
the regulatory issues raised by any proposed offering of SEEDS that
does not satisfy the market capitalization and/or trading volume
requirements discussed above. In this connection, the Commission
notes that any proposal to list a SEEDS linked to a security with a
market capitalization of less than $500 million would raise
significant regulatory concerns for which a section 19(b) rule
filing would be required.
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The NASD believes that the $500 million market capitalization/80
million share trading volume standard and the flexibility, with the
concurrence of the Commission, to list issues of SEEDS that do not
satisfy the market capitalization and trading volume requirements, are
the only significant modifications to the SEEDS listing standards from
those currently in place for the listing of ELDS at the NYSE and for
the listing of ELNs at the Amex.\8\ The additional tier for trading
volume and market capitalization is warranted, the NASD believes,
because trading volume is a better barometer for market liquidity than
market capitalization. Accordingly, the NASD believes imposing a higher
trading volume standard and a lower market capitalization standard will
not jeopardize the integrity of the market for the linked security.
Moreover, the NASD notes that the minimum market capitalization
requirement will still be $500 million, assuring that the linked
security is issued by a sufficiently large company capable of
underlying SEEDS without any disruption to the market for its common
stock. The NASD also believes that the flexibility to list issues of
SEEDS not satisfying the objective criteria is appropriate for those
cases where the NASD, with the concurrence of the staff of the
Commission, determines, based on factors including, among others,
public float and affiliations between the issuer of the SEEDS and the
issuer of the linked security, in addition to market capitalization and
trading volume, that the listing of the SEEDS does not raise any
material market manipulation or investor protection concerns.
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\8\See Equity-Linked Note Approval Orders, supra note 4.
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In addition to the market capitalization and trading volume
requirements, the issuer of the linked security must be a reporting
company under the Act. The underlying linked security also must be
traded through Nasdaq or on a national securities exchange and be
subject to last sale reporting pursuant to Rule 11Aa3-1 under the Act.
In addition, consistent with the Amex and NYSE proposals recently
approved by the Commission,\9\ the NASD proposes to permit SEEDS on
certain non-U.S. companies\10\ subject to reporting requirements under
the Act whose securities are traded in the United States either as
ordinary shares or sponsored ADRs, provided there are at least 2,000
holders of the underlying linked security.\11\
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\9\See Exchange Act Release Nos. 34545 and 34549, supra note 4.
\10\The NASD defines a non-U.S. company as any company formed or
incorporated outside of the U.S.
\11\Specifically, a SEEDS could be listed on a non-U.S. company
that is subject to reporting requirements in the U.S. when ordinary
shares or sponsored ADRs representing that company are traded in the
United States if: (1) The NASD has a comprehensive surveillance
sharing agreement in place with the primary exchange in the country
where the security is primarily traded (in the case of an ADR, the
primary exchange on which the security underlying the ADR is
traded); or (2) the combined trading volume of the underlying
security and other related securities occurring in the U.S. market
represents (on a share equivalent basis for any ADRs) at least 50%
of the combined worldwide trading volume in the underlying security,
other related securities, and other classes of common stock related
to the underlying security over the six-month period preceding the
date of designation. See Exchange Act Release Nos. 34545 and 34549,
supra note 4; and Amendment No. 1, supra note 1.
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Limitations of the Size of Particular SEEDS Offerings
Without the approval of the Commission, the issuance of SEEDS
relating to any underlying U.S. security may not exceed five percent of
the total outstanding shares of such underlying security. Without the
approval of the Commission, the issuance of SEEDS relating to any
security (including sponsored ADRs) that is traded in the United States
and is issued by a non-U.S. company subject to U.S. reporting
requirements may not exceed: (A) Two percent of the total shares
outstanding worldwide if at least 30 percent of the worldwide trading
volume in the underlying security occurs in the U.S. market during the
six-month period preceding the date of designation; (B) three percent
of the total shares outstanding worldwide if at least 50 percent of the
worldwide trading volume in the underlying security occurs in the U.S.
market during the six-month period preceding the date of designation;
or (C) five percent of the total shares outstanding worldwide if at
least 70 percent of the worldwide trading volume in the underlying
security occurs in the U.S. market during the six-month period
preceding the date of designation.\12\ If an issuer proposes to issue
SEEDS that relate to more than the allowable percentages of the
underlying security specified above, however, then the NASD, with the
concurrence of the staff of the Commission, will evaluate, on a case-
by-case basis, the maximum percentage of SEEDS that may be issued.\13\
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\12\In no event may a SEEDS be linked to a security issued by a
non-U.S. company (including a sponsored ADR) subject to reporting
requirements under the Act where less than 30 percent of the
worldwide trading volume in the underlying security and all related
securities occurs in the U.S. market. See Amendment No. 2, supra
note 1. As with the market capitalization and trading volume
requirements, the Commission notes that based on the proposed facts,
the NASD may be required to submit a rule filing to the Commission
pursuant to section 19(b) of the Act to address regulatory issues
raised by any NASD proposal to list a SEEDS related to more than the
allowable percentages of outstanding shares of the underlying
security.
\13\See Amendment No. 1, supra note 1.
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Finally, because SEEDS are linked to price movements in another
security, the NASD proposes three safeguards that are designed to
satisfy the investor protection concerns raised by the trading of
SEEDS. First, for each SEEDS, the NASD will distribute a circular to
the membership providing guidance concerning member firm compliance
responsibilities (including suitability recommendations and account
approval) when handling transactions in SEEDS. Second, the NASD
reiterates that, pursuant to the NASD's customer suitability rule found
at Section 2, Article III of the NASD Rules of Fair Practice, members
will have a duty of due diligence to learn the essential facts relating
to every customer trading SEEDS prior to their first SEEDS transaction.
In addition, consistent with Section 2, Article III, of the NASD Rules
of Fair Practice, the NASD will require that a member specifically
approve a customers's account for trading SEEDS prior to, or promptly
after, the completion of its first SEEDS transaction. In this
connection the NASD has also proposed to amend the Policy of the NASD
Board of Governors issued under Article III, section 2 of the NASD
Rules of Fair Practice to highlight members' obligations to deal fairly
with their customers when making recommendations or accepting orders
concerning SEEDS.
Therefore, the NASD believes the proposed rule change is consistent
with section 15A(b)(6) of the Act. Section 15A(b)(6) requires that the
rules of a national securities association be 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 regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system and in general to
protect investors and the public interest. Specifically, the NASD
believes the proposal strikes an appropriate balance between the NASD's
need to adapt and respond to innovations in the securities markets and
the NASD's concomitant need to ensure the protection of investors and
the maintenance of fair and orderly markets. The NASD believes the
proposed numerical, quantitative listing standards should ensure that
only substantial companies capable of meeting their contingent
obligations created by SEEDS are able to list such products on Nasdaq.
Similarly, by providing for the distribution of circulars to the
membership concerning member firm compliance responsibilities and
requirements, the NASD believes the proposal addresses any potential
sales practice concerns that may arise in connection with SEEDS. The
NASD also believes that the trading of SEEDS will provide investors
with important investment and hedging benefits that will serve to
satisfy better their investment and portfolio management needs.
Moreover, the NASD believes that SEEDS represent innovative financing
techniques that provide issuers with increased flexibility to raise
capital at potentially lower costs, in return for assuming some market
volatility risk. Finally, the NASD believes that listing SEEDS on
Nasdaq will also facilitate members and investors desiring to trade
SEEDS in a dealer environment.
B. Self-Regulatory Organization's Statement on Burden on Competition
The NASD 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
No written comments were either solicited or received with respect
to the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The NASD has requested that the proposed rule changes be given
accelerated effectiveness pursuant to Section 19(b)(2) of the Act.
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, the requirements of section 15A(b)(6) of the Act.\14\
Specifically, the Commission believes that providing for the listing
and trading of SEEDS will offer a new and innovative means of
participating in the securities markets. In particular, the Commission
believes that the availability of SEEDS will permit investors to more
closely approximate their desired investment objectives through, for
example, shifting some of the opportunity for upside gain in return for
additional income.\15\ Accordingly, for these reasons, as well as the
reasons stated in the Commission's Equity-Linked Note Approval
Orders,\16\ the Commission finds that the NASD standards for the
listing and trading of SEEDS are consistent with the Act and that the
listing and trading of SEEDS is in the public interest.
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\14\15 U.S.C. 78o(b)(6) (1982).
\15\Pursuant to section 15A(b) of the Act the Commission must
predicate approval of trading for new products upon a finding that
the introduction of the product is in the public interest. Such a
finding would be difficult with respect to a product that served no
investment, hedging, or other economic function, because any
benefits that might be derived by market participants would likely
be outweighed by the potential for manipulation, diminished public
confidence in the integrity of the markets, and other valid
regulatory concerns.
\16\See Equity-Linked Note Approval Orders, supra note 4. The
discussions articulated in the Equity-Linked Note Approval Orders
are incorporated herein.
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As with ELNs and ELDS, SEEDS are not leveraged instruments. Their
price, however, will still be derived and based upon the underlying
linked security. Accordingly, the level of risk involved in the
purchase or sale of a SEEDS is similar to the risk involved in the
purchase or sale of traditional common stock. Nonetheless, in
considering the Amex's and the NYSE's respective proposals to list and
trade ELNs and ELDS, the Commission had several specific concerns with
this type of product because the final rate of return of an ELN is
derivatively priced, based on the performance of the underlying
security. The concerns included: (1) Investor protection concerns, (2)
dependence on the credit of the issuer of the instrument, (3) systemic
concerns regarding position exposure of issuers with partially hedged
positions or dynamically hedged positions, and (4) the impact on the
market for the underlying linked security.\17\ The Commission
concluded, however, that the Amex and the NYSE proposals adequately
addressed each of these issues such that the Commission's regulatory
concerns were adequately minimized.\18\ Similarly, in this proposal,
the NASD has proposed safeguards, as described above, which the
Commission finds to be equivalent to those approved for the trading of
ELNs and ELDS. In particular, by imposing the listing standards,
suitability, disclosure, and compliance requirements noted above, the
NASD has adequately addressed the potential public customer concerns
that could arise from the hybrid nature of SEEDS. Further, the
Commission believes that the listing standards and issuance
restrictions should help to reduce the likelihood of any adverse market
impact on the securities underlying SEEDS.
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\17\Id.
\18\Id.
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Except in two respects, the Commission finds that the proposal and
Amendment Nos. 1 and 2 to the proposal are substantially identical to
rule changes already approved by the Commission with respect to the
listing and trading of ELNs on the Amex and ELDS on the NYSE.\19\ The
two new items included in this proposal are: (1) The new requirement
that allows the listing of SEEDS linked to an underlying security with
a minimum market capitalization of $500 million and a trading volume in
the year prior to listing of at least 80 million shares; and (2)
allowing flexibility for the NASD, with the concurrence of the staff of
the Commission, to determine on a case-by-case basis to list SEEDS that
do not satisfy one of the three objective listing tiers with respect to
market capitalization and trading volume. The Commission believes that
neither of these proposals raises any significant regulatory issues
that were not addressed in the Equity-Linked Note Approval Orders. The
Commission finds that the proposal to add an additional market
capitalization and trading volume requirement for eligible linked
securities will expand the number of securities that can be linked to
these equity-linked products while maintaining the requirement that the
linked security be an actively traded common stock issued by a highly
capitalized issuer. While the proposal introduces a third alternative
for ELN eligibility that reduces the minimum market capitalization
requirement for the linked security, the stock of such an issuer (or
sponsored ADR related thereto) could only be linked to a SEEDS issue if
its trading volume for the prior one-year period is at least 80 million
shares, which is four times higher than the current minimum trading
volume for these products as currently allowed on the Amex and the
NYSE. Moreover, in recently approving proposals by the NYSE and the
Amex to list and trade ELDS and ELNs, respectively, linked to
securities (including sponsored ADRs) issued by non-U.S. companies
subject to reporting requirements under the Act, the NYSE and the Amex
represented to the Commission that no problems had been reported to
either exchange regarding the listing and trading of these
products.\20\ Furthermore, the Commission believes that together, the
new capitalization and trading volume requirements will continue to
ensure that SEEDS are only issued on highly liquid securities of
broadly capitalized companies and that these requirements should help
to reduce the likelihood of any adverse market impact on the securities
underlying SEEDS.
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\19\Id.
\20\See Exchange Act Release Nos. 34545 and 34549, supra note 4.
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Additionally, allowing the NASD, with the concurrence of the staff
of the Commission, to approve, on a case-by-case basis, an issue of
SEEDS that does not satisfy one of the existing requirements regarding
market capitalization and trading volume,\21\ or that exceeds the
maximum allowable percentage of shares of the underlying security,\22\
merely adds flexibility to the proposed rule change. The Commission
believes that this portion of the proposal does not raise any
regulatory concerns, particularly given the requirement of obtaining
the concurrence of the staff of the Commission prior to listing.\23\
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\21\See supra note 7.
\22\See supra note 12.
\23\If the NASD proposed a SEEDS that raised unique or
significant regulatory concerns, the staff of the Commission would
require the NASD to submit a rule filing to the Commission pursuant
to section 19(b) of the Act.
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Finally, the NASD represents that a number of issuers, including
Nasdaq listed companies, have expressed an interest in listing SEEDS on
Nasdaq. In light of the Commission's approval of the listing of ELNs on
the Amex and ELDS on the NYSE, accelerating approval of this proposal
will ensure that the NASD is allowed to compete on an equal basis with
the Amex and NYSE with regard to these equity-linked products.
The Commission finds good cause for approving the proposed rule
change and Amendment Nos. 1 and 2 to the proposed rule change prior to
the thirtieth day after the date of publication of notice thereof in
the Federal Register in order to allow the NASD to begin listing SEEDS
without delay. As discussed above, except for two aspects the proposal
merely provides the NASD with the ability to list equity-linked debt
securities on the same basis as the NYSE and the Amex. Moreover, the
Commission notes that the proposals by the NYSE and the Amex to list
and trade equity-linked debt securities were published by the
Commission for the full comment period without any comments being
received by the Commission. With respect to the two aspects of the
SEEDS proposal which expand on the standards previously approved for
the NYSE and the Amex, for the reasons discussed above, the Commission
believes that no significant regulatory issues are raised that were not
adequately address in the Equity-Linked Note Approval Orders.\24\
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\24\See Equity-Linked Note Approval Orders, supra note 4.
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Finally, Amendment No. 1 to the proposal also eliminates the
minimum holder requirement for securities which are listed pursuant to
Article III, Section 2 of the NASD Rules of Fair Practice but which
trade in thousand dollar denominations. The Commission notes that this
amendment merely conforms the NASD's rules to those of the NYSE which
do not contain a minimum holder requirement for hybrid debt
securities.\25\ Accordingly, the Commission believes that this
amendment does not raise any significant regulatory issues.
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\25\See section 703.19 of the NYSE Listed Company Manual.
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For the above reasons, the Commission believes it is consistent
with section 15A(b)(6)\26\ and 19(b)(2)\27\ of the Act to approve the
proposed rule change and Amendment Nos. 1 and 2 to the proposal on an
accelerated basis.
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\26\15 U.S.C. 78o-3(b)(6) (1988).
\27\15 U.S.C. 78s(b)(2) (1988).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549.
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. Copies of such filing will also be available for
inspection and copying at the principal office of the NASD. All
submissions should refer to File Number SR-NASD-94-49 and should be
submitted by October 27, 1994.
It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\28\ that the proposed rule change (SR-NASD-94-49), as amended, is
approved.
\28\15 U.S.C. 78s(b)(2) (1982).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\29\
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\29\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-24795 Filed 10-5-94; 8:45 am]
BILLING CODE 8010-01-M
