[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Notices]
[Pages 13547-13548]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7395]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36989; File No. AR-Amex-95-48]
Self-Regulatory Organizations; American Stock Exchange, Inc.;
Order Approving Proposed Rule Change Relating to Revised Listing
Standards for Equity Linked Notes
March 20, 1996.
On December 5, 1995, the American Stock Exchange, Inc. (``Amex'' or
``Exchange'') submitted to the Securities and Exchange Commission
(``SEC'' or ``Commission''), pursuant to Section 19(b) of the
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to revise the trading volume
requirement for securities underlying Equity Linked Notes (``ELNs'').
\1\ 15 U.S.C. 78s(b)(1) (1988 & Supp. V 1993).
\2\ 17 CFR Sec. 240.19b-4 (1994).
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Notice of the proposed rule change was published for comment and
appeared in the Federal Register on December 20, 1995.\3\ No comments
were received on the proposal. This order approves the proposal.
\3\ See Securities Exchange Act Release No. 36578 (Dec. 13,
1995).
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I. Description of the Proposal
On May 20, 1993 and December 13, 1993, the SEC approved amendments
to Section 107 of the Amex Company Guide (``Section 107'') to provide
for the
[[Page 13548]]
listing and trading of ELNs.\4\ ELNs are intermediate term,
nonconvertible, hybrid debt instruments, the value of which is linked
to the performance of a highly capitalized, actively traded U.S. common
stock or non-convertible preferred stock (``linked security''). In
order to list an ELNs product, Section 107B currently requires the
linked security to meet one of the following criteria:
\4\ See Securities Exchange Act Release Nos. 32345 (May 20,
1993) and 33328 (Dec. 13, 1993).
Market Capitalization and Annual Trading Volume
$3 billion and 2.5 million shares.
$1.5 billion and 20 million shares.
$500 million and 80 million shares.
Amex now proposes to amend Section 107(B) to provide for greater
flexibility in the listing criteria for ELNs. The proposed rule change
will lower the trading volume requirements criteria for underlying
linked stocks meeting the capitalization requirements of $1.5 billion
and $500 million. Under the revised criteria, a linked stock with
market capitalization of $1.5 billion would now need an annual trading
volume of 10 million shares, as opposed to the current trading volume
requirement of 20 million shares. Securities with a market
capitalization in excess of $500 million also would be eligible for
ELNs listing if they have annual trading volume of 15 million shares,
as opposed to the 80 million shares under the current rule.\5\ The
proposal will also delete the current provision of the rule that allows
the Exchange to list ELNs that do not meet the market capitalization
and trading volume criteria if the Division of Market Regulation of the
SEC concurs.
\5\ Under the rule, as amended by this proposal, ELNs could be
listed where the linked security met any of the following criteria:
Market capitalization and Annual Trading Volume
$3 billion and 2.5 million shares.
$1.5 billion and 10 million shares.
$500 million and 15 million shares.
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The Exchange believes these revisions strike an appropriate balance
between the Exchange's responsiveness to innovations in the securities
markets and its need to ensure the protection of investors and the
maintenance of fair and orderly markets. Moreover, the Exchange
believes that these changes will not have an adverse impact on the
markets for the underlying linked security since the requirements will
continue to ensure that the linked security has a large minimum market
capitalization and a significant amount of trading volume over the
preceding twelve months. The Exchange will continue to require that the
issuer have a minimum tangible net worth of $150 million and that the
total issue price of the ELNs combined with all of the issuer's other
listed ELNs shall not be greater than 25% of the issuer's tangible net
worth at the time of issuance.
II. Discussion
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 6(b)(5).\6\ In particular, the
Commission believes the proposal is consistent with the Section 6(b)(5)
requirement that the rules of an exchange be designed to promote just
and equitable principles of trade and not to permit unfair
discrimination between customers, issuers, brokers, and dealers.
\6\ 15 U.S.C. 78f(b)(5) (1982).
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The Commission finds that the proposal to reduce the trading volume
requirement for eligible linked securities will expand the number of
securities that can be linked on ELNs while maintaining the requirement
that the linked security be an actively traded, highly capitalized
common stock or ADR. While the proposal reduces the trading volume
criteria for securities with market capitalizations in the $1.5 billion
and $500 million tiers to 10 million and 15 million shares,
respectively (from 20 and 80 million shares, respectively), the
Commission nevertheless believes that, together, the applicable
capitalization and new trading volume requirements will continue to
help ensure that ELNs are only issued on highly liquid securities of
broadly capitalized companies. Accordingly, the Commission believes
that these requirements will continue to help reduce the likelihood of
any adverse market impact on the securities underlying ELNs.
Finally, the Commission notes that the Exchange has deleted the
provision that allows it to list ELNs on securities not meeting the
market capitalization and trading volume criteria if the Division of
Market Regulation of the SEC concurs. The revised criteria will expand
the number of securities eligible for ELNs trading. The increased
flexibility in the ELNs listing criteria should effectively reduce or
eliminate the need for additional discretion in this area, in addition
to providing issuers and the Exchange with specific and clear guidance
on the applicable listing criteria for a security to be eligible to
underlie an ELN.
It therefore is ordered, pursuant to Section 19(b)(2) of the
Act,\7\ that the proposed rule change (SR-Amex-95-48) is approved.
\7\ 15 U.S.C. 78s(b)(2) (1988).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
\8\ 17 CFR Sec. 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-7395 Filed 3-26-96; 8:45 am]
BILLING CODE 8010-01-M
