Federal Register / Vol. 65, No. 113 / Monday, June 12, 2000 / Notices 36853

26 15 U.S.C. 78s(b)(2)(B).

27See Securities Exchange Act Release Nos.

42455 (February 24, 2000), 65 FR 11388 (March 2,

2000) (approving ISE’s registration as a national

securities exchange); 42835 (May 26, 2000)

(approving File No. SR–CBOE–99–10); and 42848

(May 26, 2000) (approving File No. SR–PCX–99–

18).

28See relevant citations at supra, note 27.

29See supra, note 14.

30One modification refers to current trading floor

practices on the Amex regarding specialist

allocations, rather than to the Amex proposal that

would codify these practices, which is still pending

before the Commission. See supra, note 11.

31 15 U.S.C. 78f(b)(5).

32 15 U.S.C. 78s(b)(2). 33 17 CFR 200.30–3(a)(12).

The Commission notes that proposed

Commentary .04 is substantially similar

to current Chicago Board Options

Exchange (‘‘CBOE’’) Rule 6.9(e). The

Commission believes that it is

reasonable for the Amex to adopt a rule

that is substantially similar to CBOE

Rule 6.9(e) to provide similar

protections for the Amex’s marketplace.

In addition, Commission believes that it

is reasonable for the Amex to include

solicited, facilitated, and crossing

transactions in Amex Rule 950(d),

Commentary .04 because solicited,

facilitated, and crossing transactions

could present opportunities for misuse

of non-public information.

C. Accelerated Approval of

Amendments

The Commission finds good cause,

pursuant to Section 19(b)(2)(B) 26 of the

Act, for approving Amendment Nos. 1,

2, and 3 to the proposal prior to the

thirtieth day after the date of

publication of notice of filing thereof in

the Federal Register.

Amendment No. 1 adds the provision,

described above, that would provide an

allocation to a member firm seeking to

facilitate a customer order even when it

only matches, but does not improve

upon, the prices given by the crowd in

response to the floor broker’s initial

request for a market. The Commission

has already approved rules of the ISE,

the CBOE, and the Pacific Exchange

(‘‘PCX’’) that establish participation

guarantees for firms seeking to facilitate

orders even when they only match the

best prices offered by other market

participants.27 Thus, the addition of this

provision to the Amex proposal raises

no new regulatory issues. Further, it

should benefit options market

participants by allowing for

substantially consistent treatment of

crossing mechanisms under the rules of

the various exchanges, and will allow

the Amex to compete without

disadvantage for facilitation orders.

Amendment No. 2 reduces the

allocation to the member firm seeking to

facilitate a customer order from 50% to

40% when the firm improves the price

given by the crowd in response to the

floor broker’s request for a market. It

thus limits guaranteed participation to a

percentage that the Commission has

previously found consistent with the

Act and raises no new regulatory issues.

Amendment No. 2 also includes the

provisions described above concerning

specialist allocations, and stipulates that

the allocations guaranteed to the

member firm and the specialist in the

aggregate may not exceed 40% of the

order. It thus strengthens the proposal

by adding a necessary clarification of

priority rights pursuant to current

trading practices.

Amendment No. 2 also provides the

Exchange the authority to reduce the

size of orders to which the new

guarantee applies from 400 to 50

contracts. The Commission has already

approved ISE and CBOE rules

permitting guarantees to firms

facilitating crosses in order sizes as low

as 50 contracts.28 Thus, this

modification of the Amex proposal

raises no new regulatory issues. Further,

it will benefit options market

participants by allowing for

substantially consistent treatment of

crossing mechanisms under the rules of

the ISE, the CBOE, and the Amex, and

will allow the Amex to compete without

disadvantage for facilitation orders.

Amendment No. 2 also seeks to

establish proposed Commentary .02(d)

to Rule 950(d) as a 90-day pilot

program. The Commission finds no

reason to delay approval of this

modification.

With respect to proposed

Commentary .04, Amendment No. 2

clarifies that the restriction on trading

for a person who has knowledge of the

terms of a solicited, facilitation, or

crossing order no longer applies as long

as he disclosed all the terms of the

originating order.29 This clarification

brings the proposed rule change in

conformity with the disclosure

requirement of CBOE Rule 6.9(e) and

raises no new regulatory issue.

Amendment No. 3 includes several

modifications of the proposed new rule

text that were made for technical

purposes 30 or to clarify its meaning, and

thus strengthen the proposal.

Accordingly, the Commission finds

good cause, consistent with Sections

6(b)(5) 31 and 19(b)(2) 32 of the Act to

accelerate approval of Amendment Nos.

1, 2, and 3 to the proposed rule change.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning Amendment Nos.

1, 2, and 3, including whether they are

consistent with the Act. Persons making

written submissions should file six

copies thereof with the Secretary,

Securities and Exchange Commission,

450 Fifth Street, N.W., Washington, D.C.

20549–0609. 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. 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–99–36 and should be

submitted by July 3, 2000.

V. Conclusion

For the reasons discussed above, the

Commission finds that the proposal is

consistent with the Act and the rules

and regulations thereunder.

It Is Therefore Ordered, pursuant to

Section 19(b)(2) of the Act, that the

portion of the proposed rule change

(SR–Amex–99–36), as amended,

adopting Commentary .04 to Amex Rule

950(d) is approved, and the portion of

the proposed rule change adopting

Commentary .02(d) to Amex Rule 950(d)

is approved on a pilot basis until August

31, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.33

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–14720 Filed 6–9–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42895; File No. SR–AMEX–

00–10]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change and

Amendment No. 1 by the American

Stock Exchange LLC Relating to the

Listing and Trading of Trust Issued

Receipts

June 2, 2000.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

36854 Federal Register / Vol. 65, No. 113 / Monday, June 12, 2000 / Notices

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3 In Amendment No. 1, which has been

incorporated into the proposed rule change, the

Exchange replaced the word ‘‘companies’’ with the

term ‘‘component securities’’ throughout the

proposed rule change and the proposed rule text.

The Exchange also clarified that the Exchange, and

not the Commission, may approve a series of

HOLDRs for listing pursuant to Rule 19b–4(e)

provided each of the component securities satisfies

the proposed listing criteria. See Letter from Scott

Van Hatten, Attorney, Amex, to Nancy Sanow,

Assistant Director, Division of Market Regulation,

SEC, dated May 24, 2000.

4Rule 19b–4(e) provides that the listing and

trading of a new derivative securities product by an

SRO shall not be deemed a proposed rule change,

pursuant to paragraph (c)(1) of Rule 19b–4, if the

Commission has approved, pursuant to Section

19(b) of the Act, the SRO’s trading rules, procedures

and listing standards for the product class that

include the new derivative securities product and

the self-regulatory organization has a surveillance

program for the product class. 17 CFR 240.19b–

(4)(e).

5HOLDRs are negotiable receipts issued by trusts

that represent investors’ discrete identifiable and

undivided beneficial ownership interest in the

securities deposited into the trust. See Securities

Exchange Act Release No. 41892 (September 21,

1999), 64 FR 52559 (September 29, 1999).

6Rule 19b–4(e), adopted by the Commission on

December 8, 1998, permits the Exchange to list and

trade new derivative securities products without a

rule change provided the Exchange has in place

trading rules, procedures, a surveillance program

and listing standards that pertain to the class of

securities covering the new product. See Securities

Exchange Act Release No. 40761 (December 8,

1998), 63 FR 70952 (December 22, 1998).

7See Amendment to Rule Filing Requirements for

Self-Regulatory Organizations Regarding New

Derivative Securities Products and Order

Approving the Listing and Trading of Trust Issued

Receipts, Securities Exchange Act Release Nos.

40761 (December 8, 1998), 63 FR 70952 (December

22, 1998) and 41892 (September 21, 1999), 64 FR

52559 (September 29, 1999), respectively.

(‘‘Act’’) 1 and Rule 196–4 thereunder,2

notice is hereby given that on February

14, 2000, the American Stock Exchange

LLC (‘‘Amex’’ or ‘‘Exchange’’) filed with

the Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’)

the proposed rule change as described

in Items I and II below, which Items

have been prepared by the Exchange.

Amendment No. 1 was filed on June 2,

2000.3 The Commission is publishing

this notice to solicit comments on the

proposed rule change from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange proposes to amend

Amex Rule 1202 to provide for the

trading of Holding Company Depository

Receipts (‘‘HOLDRs’’) pursuant to Rule

19b–4(e) of the Act.4 The text of the

proposed rule change follows. Italics

indicate text to be added.

TRUST ISSUED RECEIPTS

Initial and Continued Listing

Rule 1202

Trust Issued Receipts will be listed

and traded on the Exchange subject to

application of the following criteria:

(a)–(e) No change.

Commentary .01 The Exchange may

approve a series of HOLDRs for listing

and trading on the Exchange pursuant

to Rule 19b–4(e) under the Securities

Exchange Act of 1934 (‘‘Act’’), provided

each of the component securities

satisfies the following criteria:

Eligibility Criteria for Component

Securities Represented by a series of

HOLDRs:

(i) each component security must be

registered under Section 12 of the

Exchange Act;

(ii) each component security must

have a minimum public float of at least

$150 million;

(iii) each component security must be

listed on a national securities exchange

or traded through the facilities of

Nasdaq and be a reported national

market system security;

(iv) each component security must

have an average daily trading volume of

at least 100,000 shares during the

preceding sixty-day trading period;

(v) each component security must

have an average daily dollar value of

shares traded during the preceding

sixty-day trading period of at least $1

million; and

(vi) the most heavily weighted security

may not initially represent more than

20% of the overall value of the HOLDR.

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 Exchange proposes to amend

Amex rule 1202 to provide for the

trading of HOLDRs pursuant to Rule

19b–4(e) of the Act. On September 21,

1999, the Amex received approval to

adopt new Rules 1200 et seq. to permit

the trading of Trust Issued Receipts (of

which HOLDRs are a type).5 Since that

time, the Exchange has listed Internet,

Biotechnology, Pharmaceutical,

Telecommunications, Business to

Business, Internet Architecture, Internet

Infrastructure, Broadband, and

Semiconductor HOLDRs. The Exchange

anticipates additional proposals to list

new HOLDRs products.

To accommodate the listing of

additional HOLDRs, the Exchange now

proposes to revise existing listing

criteria and trading rules to permit the

listing and trading of HOLDRs pursuant

to Rule 19b–4(e).6 The Exchange

believes listing newly proposed

HOLDRs products pursuant to Rule 19–

4(e) is appropriate because the

Commission has approved, pursuant to

Section 19(b) of the Act, trading rules,

procedures and listing standards for the

HOLDRs product class and the

Exchange has a surveillance program for

the HOLDRs’ product class.7 In

addition, the Commission has reviewed

a number of proposals to list and trade

the Internet and Biotech holders that

comprised the same product structure.

The Commission noticed these

proposed rule changes regarding the

Internet and Biotech HOLDRS in the

Federal Register and did not receive

any comments concerning the

proposals.

Amex Rule 1200 subjects HOLDRs to

all of the Exchange’s trading rules by

providing that the provisions of the

Exchange’s Constitution and all other

rules and policies of the Board of

Governors apply to the trading of

HOLDRs on the Exchange. Further,

initial and continued listing standards

applicable to HOLDRs, as set forth in

Amex Rule 1202, currently provide that

HOLDRs will be listed and traded on the

Exchange subject to application of the

following criteria: (a) Initial Listing—

For each Trust, the Exchange will

establish a minimum number of Trust

Issued Receipts required to be

outstanding at the time of

commencement of trading on the

Exchange: (b) Continued Listing—

Following the initial twelve month

period following formation of a Trust

and commencement of trading on the

Exchange, the Exchange will consider

the suspension of trading in or removal

from listing of a Trust upon which a

series of Trust Issued Receipts is based

under any of the following

circumstances: (i) if the Trust has more

than 60 days remaining until

termination and there are fewer than 50

record and/or beneficial holders of Trust

Issued Receipts for 30 or more

Federal Register / Vol. 65, No. 113 / Monday, June 12, 2000 / Notices 36855

8See Securities Exchange Act Release No. 41892

(September 21, 1999), 64 FR 52559 (September 29,

1999).

9 15 U.S.C. 78f(b).

10 15 U.S.C. 78f(b)(5).

11 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3Securities Exchange Act Release No. 42460

(February 25, 2000), 65 FR 11618.

4Securities Exchange Act Release No. 42459

(February 25, 2000). 65 FR 11619 (March 3, 2000)

(File No. SR–CHX–99–28); Securities Exchange Act

Release No. 42458 (February 25, 2000), 65 FR 11628

(March 3, 2000) (File NO. SR–Phlx–00–12).

5Securities Exchange Act Release No. 42661

(April 10, 2000), 65 FR 20497 (April 17, 2000) (File

No. SR–BSE–00–02); Securities Exchange Act

Release NO. 42660 (April 10, 2000), 65 FR 21052

(April 19, 2000) (File No. SR–PCX–00–11).

consecutive trading days; (ii) if the Trust

has fewer than 50,000 receipts issued

and outstanding; (iii) if the market value

of all receipts issued and outstanding is

less than $1,000,000; or, (iv) if such

other event shall occur or condition

exists which in the opinion of the

Exchange, makes further dealings on the

Exchange inadvisable.

In addition, the component securities

represented by the securities in the

portfolio underlying HOLDRs must meet

the following minimum criteria: (1)

Each component security must be

registered under Section 12 of the

Exchange Act; (2) the minimum public

float of each component security

included in the portfolio must be at

least $150 million; (3) each component

security must either be listed on a

national securities exchange or be

traded through the facilities of Nasdaq

and be a reported national market

system security; (4) the average daily

trading volume for each component

security must be at least 100,000 shares

during the preceding sixty-day trading

period; and (5) the average daily dollar

value of the shares traded during the

preceding sixty-day trading period must

be at least $1 million. And lastly, no

component security may initially

represent more than 20% of the overall

value of the receipt.8

The Exchange believes codifying the

abovbe listing criteria for HOLDRs listed

pursuant to Rule 19b–4(e) will ensure

that no security included in the basket

and HOLDRs will be readily susceptible

to manipulation, while permitting

sufficient flexibility in the construction

of various HOLDRs baskets to meet

investors’ needs. Additionally, the

listing criteria will further serve to

ensure sufficient liquidity for those

investors seeking to purchase and

deposit in basket securities with the

trustee to create HOLDRs.

2. Statutory Basis

The proposed rule change is

consistent with Section 6(b) of the Act 9

in general and furthers the objectives of

Section 6(b)(5)10 in particular in that it

is designed to prevent fraudulent and

manipulative acts and practices, to

promote just and equitable principles of

trade, remove impediments to and

perfect the mechanism of a free and

open market and a national market

system, and, in general, protect

investors and the public interest.

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

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 self-regulatory

organization consents, the Commission

will:

(A) by order approve the 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, 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, N.W., Washington, D.C. 20549–

0609. 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 at

the Commission’s Public Reference

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the Exchange. All

submissions should refer to File No.

SR–AMEX–00–10 and should be

submitted by July 3, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–14721 Filed 6–9–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42888; File No. SR–Amex–

00–05]

Self-Regulatory Organizations;

American Stock Exchange LLC.; Order

Approving Proposed Rule Change to

Rescind Rules 5 and 6, the Exchange’s

Off-Board Trading Rules, and to Make

Conforming Changes to Rules 25, 317,

900 and 959

June 1, 2000.

I. Introduction

On February 1, 2000, the American

Stock Exchange LLC (‘‘Amex’’ or

‘‘Exchange’’) filed with the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’), pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’) 1 and Rule 19b–4

thereunder,2 a proposed rule change to

rescind Rules 5 and 6, the Exchange’s

off-board trading rules, and to make

conforming changes to Rules 25, 317,

900 and 959. The proposed rule change

was published for comment in the

Federal Register on March 3, 2000.3

Proposed rule changes filed by thee

Chicago Stock Exchange and the

Philadelphia Stock Exchange to rescind

their off-board trading rules were

published on the same date as the Amex

proposing release.4 Shortly thereafter,

the Boston Stock Exchange and the

Pacific Exchange filed similar proposed

rule changes.5 The Commission

received no comments on any of these

proposals. Today, in separate orders, the

Commission is approving the proposed

rule changes to rescind off-board trading