[Federal Register Volume 64, Number 218 (Friday, November 12, 1999)]
[Notices]
[Pages 61677-61678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29600]
[[Page 61677]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-42110; File No. SR-Amex 99-33]
Self-Regulatory Organizations; Notice of Filings and Order
Granting Accelerated Approval of Proposed Rule Change and Amendment
Numbers 1 and 2 Thereto by the American Stock Exchange LLC Relating to
Revising Section 107B of the Amex Company Guide
November 5, 1999.
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 August 19, 1999, the American Stock Exchange LLC
(``Amex'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change. The Exchange
submitted Amendment No. 1 to its proposal on October 12,
1999,3 and Amendment No. 2 on October 21, 1999.4
The proposed rule change, as amended, is 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, as amended, from interested persons and to grant accelerated
approval of the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, the Exchange made technical corrections
to its proposed rule language to reflect its current rule language;
confirmed that it has surveillance procedures in place to identify
and deter manipulative trading activity; and revised the stated
purpose of its proposed rule change. See Letter from Scott G. Van
Hatten, Legal Counsel, Derivative Securities, Amex, to Richard
Strasser, Assistant Director, Division of Market Regulation
(``Division''), Commission, dated October 8, 1999 (``Amendment No.
1'').
\4\ In Amendment No. 2, the Exchange made technical corrections
to its proposed rule language; requested accelerated approval of the
proposed rule change; and represented that it would notify the
Commission in advance if the Exchange intended to list equity linked
notes of a non-U.S. company issuer and the issue has a term of more
than three years. See Letter from Scott G. Van Hatten, Legal
Counsel, Derivative Securities, Amex, to Nancy Sanow, Senior Special
Counsel, Division, Commission, dated October 20, 1999 (``Amendment
No. 2'').
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange seeks to revise Section 107B of the Amex Company Guide
concerning the listing standards for equity linked notes (``ELNs'').
The proposal deals with the minimum term of such securities and
substitutes a one-year minimum for all ELNs for the current requirement
that the securities have a term of two to seven years (three year
maximum for those linked to non-U.S. securities).
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 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
On May 20, 1993, the Exchange received approval to adopt Section
107B of the Amex Company Guide to provide for the listing and trading
of ELNs, hybrid instruments whose values are linked to the performance
of highly capitalized, actively traded common stock.5 ELNs
are non-convertible debt of an issuer, whose value is based, at least
in part, on the value of another issuer's common stock or non-
convertible preferred stock.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 32343 (May 20,
1993), 58 FR 30833 (May 27, 1993).
---------------------------------------------------------------------------
Section 107B of the Amex Company Guide details the Exchange's
listing standards for ELNs. Among other things, these standards require
that ELNs have a term of two to seven years, but not more than three
years for ELNs based on the price of a non-U.S. issuer. The limits on
the terms for ELNs contrast with the Exchange's general requirements of
derivative instruments. Specifically, for Currency and Index Warrants
(Section 106 of the Annex Company Guide) and Other Securities (Section
107 of the Amex Company Guide), the Exchange requires that the security
have either a minimum life of between one and five years or on
specified minimum term.
The Exchange has in place surveillance procedures with respect to
ELNs and the securities linked to ELNs for the purposes of identifying
and determining manipulative trading activity.\6\ In conducting its
surveillance activities, the Exchange has not found any adverse effects
as a result of the trading of ELNs and the securities to which the ELNs
are linked. The Exchange notes that these findings are also consistent
with the findings of the New York Stock Exchange, Inc. (``NYSE'') in
which it noted similar experience with these products as discussed in
its proposal to revise term criteria for equity linked notes.\7\
---------------------------------------------------------------------------
\6\ See Amendment No. 1, supra note 3.
\7\ See Securities Exchange Act Release No. 41608 (July 8,
1999), 64 FR 38063 (July 14, 1999).
---------------------------------------------------------------------------
The Exchange believes ELNs complement the trading of underlying
stocks, and the continued popularity of the instrument demonstrates its
appeal in the market. Thus, the Exchange proposes to apply to ELNs a
one-year minimum term requirement regardless of whether the ELN is
based on a domestic or non-U.S. equity. The Exchange believes that this
rule change will provide issuers with more flexibility with more
flexibility in developing ELNs and thus provide greater investment
choices in the market. Specifically, the Exchange notes that many
corporate debt instruments have terms well in excess of seven years,
and that this rule change will allow the structuring of ELNs with terms
to maturity comparable to such debt instruments. Furthermore, extending
the term of ELNs will provide issuers with the ability to offer
variations on ELNs, such as principal protection and call features that
may not be as desirable on debt instruments with a shorter term. The
Exchange believes that this added flexibility will encourage innovation
without having an adverse effect on investor protection.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) \8\ of the
Act in general and furthers the objectives of Section 6(b)(5) \9\ in
particular in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of change, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f.
\9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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.
[[Page 61678]]
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange neither solicited nor received written comments with
respect to 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, as amended, 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, as
amended, that are filed with the Commission, and all written
communications relating to the proposed rule change, as amended,
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 in Washington, DC. Copies of such filing will
also be available for inspection and copying at the principal office of
the Amex. All submissions should refer to File No. SR-Amex-99-33 and
should be submitted by December 3, 1999.
IV. Commission's Findings and Order Granting Accelerated Approval
of Proposed Rule Change
The Commission has reviewed carefully the Amex's proposed rule
change and believes, for the reasons set forth below, that the proposal
is consistent with the requirements of Section 6 of the Act \10\ and in
particular, with the requirements of Section 6(b)(5) of the Act.\11\
Specifically, the Commission finds that providing for a minimum one-
year term for all ELNs is designed to remove impediments to and perfect
the mechanism of a free and open market and a national market
system.\12\
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f.
\11\ 15 U.S.C. 78f(b)(5).
\12\ In approving this rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------
The Commission notes that since the Exchange has traded ELNs, the
Exchange has not discovered any adverse effects of this instrument. In
addition, the Exchange has verified that it has surveillance procedures
in place for identifying and deterring manipulative trading activity of
ELNs as well as the related equity securities. The Exchange has also
agreed to notify the Commission in advance if the Exchange intends to
list ELNs of a non-U.S. company issuer and the issue has a term of more
than three years.\13\ The Exchange believes that this rule change will
provide issuers with more flexibility in developing ELNs and thus
provide greater investment choices in the market. The Commission
believes that this added flexibility will encourage innovation without
having an adverse effect on investor protection.
---------------------------------------------------------------------------
\13\ See Amendment No. 2, supra note 4.
---------------------------------------------------------------------------
The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of publication of
notice thereof in the Federal Register. The Commission notes that the
Amex is proposing the same rule change recently approved by the
Commission for the YSE.\14\ The NYSE submitted a proposed rule change
that provided for a one-year minimum term for all equity-linked debt
securities. Prior to the NYSE's proposed rule change, the NYSE required
that equity-linked debt securities have a term of two to seven years
(three year maximum for non-U.S. securities). Because Amex's proposal
is consistent with the proposal recently approved by the Commission for
the NYSE and because the Commission did not receive any comments on the
NYSE's proposal, the Commission finds that granting accelerated
approval of the proposed rule change is appropriate and consistent with
Section 6 of the Act.\15\
---------------------------------------------------------------------------
\14\ See Securities Exchange Act Release No. 41992 (October 7,
1999), 64 FR 56007 (October 15, 1999).
\15\ 15 U.S.C. 78f.
---------------------------------------------------------------------------
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\16\ that the proposed rule change (SR-Amex-99-33), as amended, is
hereby approved on an accelerated basis.
\16\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\17\
---------------------------------------------------------------------------
\17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-29600 Filed 11-10-99; 8:45 am]
BILLING CODE 8010-01-M
