[Federal Register Volume 65, Number 193 (Wednesday, October 4, 2000)]
[Notices]
[Pages 59235-59240]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-25438]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-4338; File No. SR-Amex-00-53]


Self Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of a Proposed Rule Change by the American 
Stock Exchange LLC Relating to the streetTracks \sm\ Dow Jones Global 
Titans Index Fund

September 25, 2000.
    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 September 13, 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. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons and to approve the 
proposal on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Amex proposes to list and trade under Amex Rules 1000A et seq. 
(``Index Fund Shares''), shares of the streetTracks \sm\ Dow Jones 
Global Titans Index Fund. The text of the proposed rule change is 
available upon request from the Office of the Secretary, the Amex or 
the Commission.

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 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
    On March 8, 1996, the Commission approved Amex's listing and 
trading of Index Fund Shares under Rules 1000A et seq.\3\ Index Fund 
Shares are shares issued by an open-end management investment company 
that seeks to provide investment results that correspond generally to 
the price and yield performance of a specified foreign or domestic 
equity market index. The Exchange currently trades the following Index 
Fund Shares under Amex Rules 1000A et seq.: Select Sector SPDRs based 
on industry sectors in the S&P 500 Index;\4\ iShares MSCI Index Funds 
(formerly ``WEBS'') based on Morgan Stanley Capital International 
foreign indexes;\5\ series of the iShares Trust based on domestic stock 
indexes; \6\ and

[[Page 59236]]

series of the iShares Trust based on the S&P Europe 350 Index and the 
S&P/TSE 60 Index.\7\
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    \3\ See Securities Exchange Act Release No. 36947 (March 8, 
1996), 61 FR 10606 (March 14, 1996).
    \4\ See Securities Exchange Act Release No. 40749 (December 4, 
1998), 63 FR 68483 (December 11, 1998).
    \5\ See Securities Exchange Act Release Nos. 42748 (May 2, 
2000), 65 FR 30155 (May 10, 2000); and 36947 (March 8, 1996), 61 FR 
10606 (March 14, 1996).
    \6\ See Securities Exchange Act Release No. 42787 (May 15, 
2000), 65 FR 33598 (May 24, 2000).
    \7\ See Securities Exchange Act Release No. 42786 (May 15, 
2000), 65 FR 33586 (May 24, 2000).
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    The Exchange proposes to list and trade under Amex Rules 1000A et 
seq. shares (``Shares'') of the streetTracks\sm\ Dow Jones Global 
Titans Index Fund (``Fund'').\8\ The Fund is a series of the 
streetTracks\sm\ Series Trust (``Trust''), an open-end management 
investment company.\9\ State Street Bank and Trust Company (``State 
Street''), through its State Street Global Advisors (SSgA) division, 
acts as investment adviser to the Trust and, subject to the supervision 
of the Trust's Board of Trustees, is responsible for the management of 
the Fund. State Street also is the administrator and transfer agent for 
the Fund and is custodian for the Fund's assets. State Street Capital 
Markets LLC is the distributor for the Fund's shares.
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    \8\ ``streetTracks''\sm\ is a service mark of State Street 
Corporation.
    \9\ The Fund has filed with the Commission an Application for 
Orders (``Application'') under Sections 6(c) and 17(b) of the 
Investment Company Act of 1940 (``1940 Act'') as amended for the 
purpose of exempting the Fund, together with other funds specified 
in the Application, from various provisions of the 1940 Act and 
rules thereunder. (File No. 812-11882) (Investment Company Act 
Release No. 24631 (September 1, 2000), 65 FR 54327 (September 7, 
2000)).
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a. The Global Titans Index \10\
    The Global Titans index is composed of 50 common stocks, which are 
chosen by Dow. The stock must, in the opinion of Dow, meet all four of 
the following criteria to qualify as a candidate for the Index: (1) it 
must be a well established company with a solid financial situation and 
a broad client base; (2) it must be well known to global investors for 
either its long history of success or its widely used products or 
services; (3) it must be a market leader in its industry with either a 
dominant position or a competitive advantage; and (4) it must be among 
the largest of blue-chip companies in the global arena. In constructing 
the Global Titans Index, a multi-factor methodology is adopted. First, 
the 3,000 stocks of the Dow Jones Global Indexes are used as the 
Initial Pool with a view towards ensuring that all candidates are 
investable, liquid and representative of the global markets. Market 
capitalization is then used as the first screen to create the Final 
Pool by selecting the top 100 companies. Dow's rationale for this step 
is that market value is a universal measurement across industries, and 
also that its use is most appropriate for an index built for investment 
purposes. Every company in the Final Pool of 100 must derive some 
revenue from outside its home country. This screen is instituted to 
ensure that all stocks in the Index are truly global companies. The 
next step in Index construction is to combine the Final Pool 
components' market capitalization rankings with their rankings 
according to four other indicators of size and leadership. These four 
indicators, two from the balance sheet and two from the income 
statement, are assets, book value, sales/revenue, and net profit. The 
combined rankings of these four factors determine the fundamental rank 
of each company. The fundamental rank and the market capitalization 
rank are used equally as the basis for selecting the Index components.
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    \10\ Information relating to the Global Titans Index methodology 
is based on materials prepared by Dow Jones and Company (``Dow'').
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    The Index methodology described in the preceeding paragraph is 
subject to an annual review. A three-month window--March through June--
is used for stock evaluation. The steps described above are repeated to 
build the Final Pool and to calculate the final ranking with respect to 
the four fundamental measures and weighted average market value. Any 
non-components that fall into the top 25 of the new final ranking are 
added to the Index, automatically replacing the lowest ranked 
components. A 20% buffer zone rule is applied, meaning that any 
component stocks ranked higher than 20% above the Index's target number 
of stocks are retained, while those ranked lower than 20% above the 
target number are replaced by the top ranked non-component stocks.
    For purposes of calculation of the Index Value, securities for 
which the primary market is outside of the U.S. are valued based on the 
last sale price on the primary market. During periods when the primary 
market is closed, these securities are valued based on the last sale 
price of the corresponding American Depositary Receipts (``ADR''), if 
any.
    The Fund will invest in foreign securities, including non-U.S. 
dollar-denominated securities traded outside the United States and 
dollar-denominated securities of foreign issuers traded in the United 
States. Foreign securities also include investments such as ADRs which 
are U.S. dollar-denominated receipts representing shares of foreign-
based corporations. ADRs are issued by the U.S. banks or trust 
companies and entitle the holder to all dividends and capital gains 
that are paid out on the underlying foreign shares.
    As of August 31, 2000, the Index included 27 U.S. companies, 20 
Western European companies and 3 Japanese companies, representing 
68.17%, 27.45% and 4.38% of the Index weight, respectively. Forty-four 
Index components, representing 94.36% of the Index weight, are listed 
on the New York Stock Exchange (``NYSE'') or on the National 
Association of Securities Dealers Automated Quotations System 
(``Nasdaq''). Seventeen of the 23 non-U.S. companies in the Index have 
ADRs listed and traded on the NYSE. The following five non-U.S. 
companies in the Index, with a combined Index weight of 5.07%, have 
ADRs traded in the U.S. in the over-the counter ``Pink Sheet'' market: 
Credit Suisse Group, Lloyds/TSB Group PLC, Nestle S.A., Roche Holding 
AG, and Siemens AG. ADRs for one non-U.S. company in the Index, Allianz 
AG Holding, are not currently available.
    The Fund's investment objective is to replicate, using an 
``indexing'' investment approach, as closely as possible, before 
expenses, the performance of the Global Titans Index. The Fund uses a 
passive management strategy designed to track the performance of the 
Global Titans Index. The adviser seeks a correlation of 0.95 or better 
between the Fund's performance and the performance of the Index; a 
figure of 1.00 would represent perfect correlation. The Fund generally 
will invest in all of the stocks comprising the Index in proportion to 
their weightings in the Index. However, under various circumstances, it 
may not be possible or practicable to purchase all of those stocks in 
those weightings. In those circumstances, the Fund may purchase a 
sample of the stocks in the Index in proportions expected by the 
Adviser to replicate generally the performance of the Index as a whole. 
There may also be instances in which the Adviser may choose to 
overweight another stock in the Index, purchase securities not in the 
Index which the Adviser believes are appropriate to substitute for the 
Index Securities, or utilize various combinations of other available 
investment techniques, in seeking to track accurately the Index. In 
addition, from time to time stocks are added to or removed from the 
Index. The Fund may sell stocks that are represented in the Index, or 
purchase stocks that are not yet represented in the Index, in 
anticipation of their removal from or addition to the Index. The Fund 
will normally invest at least 95% of its total assets in common stocks 
that comprise the Index.

[[Page 59237]]

b. Purchase or Creation of Creation Unit Aggregations
    The Fund will issue and redeem Shares only in Creation Unit size 
aggregations (50,000 shares per Creation Unit). The Fund will issue and 
sell Shares through the distributor on a continuous basis at the net 
asset value per share next determined after an order to purchase Shares 
in Creation Unit size aggregations is received in proper form. 
Following issuance, Shares are traded on the Exchange like other equity 
securities by professionals, as well as retail and institutional 
investors.
    To create (i.e., purchase) Creation Units of the Fund, an investor 
must generally deposit a designated portfolio of equity securities 
constituting a substantial replication, or a representation, of the 
stocks included in the Index (the ``Deposit Securities'') and generally 
makes a small cash payment referred to as the ``Cash Component.'' The 
list of the names and the number of shares of the Deposit Securities is 
made available by the custodian through the facilities of the National 
Securities Clearing Corporation (``NSCC'') immediately prior to the 
opening of business on the Exchange. The Cash Component represents the 
difference between the net asset value of a Creation Unit and the 
market value of the Deposit Securities.
    Orders must be placed in proper form by or through either (1) a 
``Participating Party,'' i.e., a broker-dealer or other participant in 
the clearing process of the Continuous Net Settlement System of the 
NSCC (the ``Clearing Process''); or (2) a Depository Trust Company 
(``DTC'') Participant, that, in either case, has entered into an 
agreement with the Trust, the distributor and the transfer agent with 
respect to creations and redemptions of Creation Units (``Participant 
Agreement''). All orders must be placed for one or more whole Creation 
Units of Shares of the Fund and must be received by the distributor in 
proper form no later than the close of regular trading on the NYSE 
(ordinarily 4:00 p.m., New York time) to receive that day's closing net 
asset value per Share.
c. Redemption of Creation Unit Aggregations
    Shares may be redeemed only in Creation Units at their net asset 
value and only on a day the NYSE is open for business. The custodian 
makes available immediately prior to the opening of business on the 
Exchange, through the facilities of the NSCC, the list of the names and 
the number of Shares of the Fund's portfolio securities that will be 
applicable that day to redemption requests in proper form (``Fund 
Securities''). Fund Securities received on redemption may not be 
identical to Deposit Securities which are applicable to creations of 
Creation Units. Unless cash redemptions are available or specified for 
the Fund, the redemption proceeds consist of the Fund Securities, plus 
cash in an amount equal to the difference between the net asset value 
of the Shares being redeemed as next determined after receipt by the 
transfer agent of a redemption request in proper form, and the value of 
the Fund Securities (the ``Cash Redemption Amount''), less the 
applicable redemption fee. Shares cannot be redeemed individually but 
must be redeemed in Creation Unit size aggregations.
 d. Other Information
    Income dividend distributions, if any, are distributed to 
shareholders quarterly. Net capital gains are distributed at least 
annually. Dividends may be declared and paid more frequently to improve 
Index tracking or to comply with the distribution requirements of the 
Internal Revenue Code. Distributions in cash may be reinvested 
automatically in additional whole Shares if the broker through which 
the investor purchased Shares makes such option available. Broker-
dealers may make available the DTC book-entry Dividend Reinvestment 
Service for use by beneficial owners of Shares through DTC Participants 
for reinvestment of their dividend distributions. If this service is 
available and used, dividend distributions of both income and realized 
gains will be automatically reinvested in additional whole Shares 
issued by the Fund based on a payable date net asset value.
    The net asset value for the Fund is calculated by the Fund's 
custodian. After calculation, such net asset value is available to the 
public from the Fund's distributor, and is also available to NSCC 
participants through data made available from NSCC.
    Shares are registered in book entry form through the DTC. Trading 
in shares of Shares on the Exchange is effected until 4:00 p.m. (New 
York Time) each business day. The minimum trading increment for Shares 
will be \1/64\ of $1.00, pursuant to Amex Rule 127, Commentary .03 
(pending implementation of decimal pricing for all Amex equity 
securities).
    To provide updated information relating to the Fund for use by 
investors, professionals and persons wishing to create or redeem shares 
of Shares based on Index with non-U.S. components, the Amex intends to 
disseminate a variety of data with respect to the Fund on a daily basis 
by means of CTA Tape B and Consolidated Quotation High Speed Lines, 
including Shares outstanding and Cash Component per Creation Unit size 
aggregation, which will be made available prior to the opening of the 
Amex. The closing prices of the Fund's Deposit Securities are readily 
available from, as applicable, the relevant exchanges, automated 
quotation systems, or on-line information services such as Bloomberg or 
Reuters. The Amex will also disseminate over Tape B an updated 
portfolio value (``Value'') for Shares on a per Share basis every 15 
seconds during regular Amex trading hours of 9:30 a.m. to 4:00 New York 
time. This value will be based on last sale prices disseminated by U.S. 
and applicable foreign exchange markets, the price of foreign issues 
being converted into U.S. dollars based on current currency exchange 
rates, and/or reported ADR prices in the U.S. (in U.S. dollars).
e. Criteria for Initial and Continued Listing
    Shares are subject to the criteria for initial and continued 
listing of Index Fund Shares in Amex Rule 1002A. It is anticipated that 
a minimum of two Creation Units (100,000 Shares) will be required to be 
outstanding at the start of trading. This minimum number of Shares 
required to be outstanding at the start of trading will be comparable 
to requirements that have been applied to previously listed series of 
Portfolio Depositary Receipts and Index Fund Shares. It is anticipated 
that the net asset value of an individual Share will be approximately 
\1/3\ of the Index value. For example, if the Index value is 270 (the 
Index value as of September 8, 2000), the initial Share price would be 
approximately $90.
    The Exchange believes that the proposed minimum number of Shares 
outstanding at the start of trading is sufficient to provide market 
liquidity and to further the Fund's objective to seek to provide 
investment results that correspond generally to the price and yield 
performance of the Index.
f. Original and Annual Listing Fees
    The Amex original listing fee applicable to the listing of Shares 
is $5,000. In addition, the annual listing fee applicable to the Fund 
under Section 141 of the Amex Company Guide will be based upon the 
year-end aggregate number of outstanding Shares in all funds of the 
Trust listed on the

[[Page 59238]]

Exchange.\11\ As noted above, the 1940 Act Application for Orders with 
respect to the Fund encompasses a number of funds in addition to the 
Fund, as specified in the Application.
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    \11\ As noted above, the 1940 Act Application for Orders with 
respect to the Fund encompasses a number of funds in addition to the 
Fund, as specified in the Application. See supra note 9.
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g. Stop and Stop Limit Orders
    Amex Rule 154, Commentary .04(c) provides that stop and stop limit 
orders to buy or sell a security (other than an option, which is 
covered by Amex Rule 950(f) and Commentary thereto) the price of which 
is derivatively priced based upon another security or index of 
securities, may with the prior approval of a Floor Official, be elected 
by a quotation, as set forth in Commentary .04(c)(i-v). The Exchange 
has designated Index Fund Shares, including Shares, as eligible for 
this treatment.\12\
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    \12\ See Securities Exchange Act Release No. 29063 (April 10, 
1991), 56 FR 15652 (April 17, 1991), note 9, regarding Exchange 
designation of equity derivative securities as eligible for such 
treatment under Amex Rule 154, Commentary .04(c).
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h. Rule 190
    Amex Rule 190, Commentary .04 applies to Index Fund Shares listed 
on the Exchange, including Shares. Commentary .04 states that nothing 
in Amex Rule 190(a) should be construed to restrict a specialist 
registered in a security issued by an investment company from 
purchasing and redeeming the listed security, or securities that can be 
subdivided or converted into the listed security, from the issuer as 
appropriate to facilitate the maintenance of a fair and orderly market.
i. Prospectus Delivery
    The Exchange, in an Information Circular to Exchange members and 
member organizations, will inform members and member organizations, 
prior to commencement of trading, that investors purchasing Shares 
shall be required to receive a Fund prospectus prior to or concurrently 
with the confirmation of a transaction therein.
j. Trading Halts
    In addition to other factors that may be relevant, the Exchange may 
consider factors such as those set forth in Amex Rule 918C(b) in 
exercising its discretion to halt or suspend trading in Index Fund 
Shares, including Shares. These factors would include, but are not 
limited to, (1) the extent to which trading is not occurring in stocks 
underlying the index; or (2) whether other unusual conditions or 
circumstances detrimental to the maintenance of a fair and orderly 
market are present.\13\ In addition, trading in Shares will be halted 
if the circuit breaker parameters under Amex Rule 117 have been 
reached.
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    \13\ See  Amex Rule 918C.
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k. Suitability
    Prior to commencement of trading, the Exchange will issue an 
Information Circular informing members and member organizations of the 
characteristics of the Fund and of applicable Exchange rules, as well 
as of the requirements of Amex Rule 411 (Duty to Know and Approve 
Customers).
l. Purchases and Redemptions in Creation Unit Size
    In the Information Circular referenced above, members and member 
organizations will be informed that procedures for purchases and 
redemptions of Shares in Creation Unit Size are described in the Fund 
prospectus and Statement of Additional Information, and that Shares are 
not individually redeemable but are redeemable only in Creation Unit 
Size aggregations or multiples thereof.
m. Surveillance
    Exchange surveillance procedures applicable to trading in the 
proposed Shares are comparable to those applicable to other Index Fund 
Shares currently trading on the Exchange.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Act \14\ in general and furthers the objectives 
of Section 6(b)(5) \15\ 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 regulating, clearing, settling, processing 
information with respect to, and facilitating transaction in securities 
and, in general, to protect investors and the public interest.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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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

    The Exchange did not receive any written comments on 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 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 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-00-53 and 
should be submitted by October 25, 2000.

IV. Commission's Findings and Order Granting Accelerated Approval 
of Proposed Rule Change

    After careful consideration, 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, with the requirements of Section 6(b)(5) 
of the Act.\16\ The Commission believes that the Exchange's proposal to 
list and trade under Amex Rules 1000A et seq., Shares of the 
streetTracks \sm\ Dow Jones Global Titans Index Fund will provide 
investors with a convenient and efficient way of participating in the 
securities markets, including involvement with equities issued by 
foreign investors. The Exchange's proposal should provide investors 
with increased flexibility in satisfying their investment needs by 
allowing them to purchase and sell a single security, at negotiated 
prices throughout the business day, that replicates the performance of 
a portfolio of stocks.

[[Page 59239]]

Accordingly, as discussed below, the Commission finds that the 
Exchange's proposal will promote just and equitable principles of 
trade, foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, and, in general, protect 
investors and the public interest consistent with Section 6(b)(5) of 
the Act.\17\
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    \16\ 15 U.S.C. 78f(b)(5).
    \17\ 15 U.S.C. 78f(b)(5). In approving this rule, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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    Amex Rules 1000A et seq. provide for the listing and trading of 
Index Fund Shares, which are shares issue by an open-end management 
investment company that seeks to provide investment results that 
correspond generally to the price and yield performance of a specified 
foreign or domestic index. The Exchange currently lists under Amex 
Rules 1000 et seq.: Select Sector SPDRs based on industry sectors in 
the S&P 500 Index; \18\ Shares MSCI Index Funds (formerly ``WEBS'') 
based on Morgan Stanley Capital International foreign indexes; \19\ 
series of the iShares Trust based on domestic stock indexes; \20\ and 
series of the iShares Trust based on the S&P Europe 350 Index and the 
S&P/TSE 60 Index.\21\ Similar to these other types of Index Fund 
Shares, the Commission believes that the streetTracks \sm\ Dow Jones 
Global Titans Index Fund will provide investors with an alternative to 
trading a broad range of securities on an individual basis, and will 
give investors the ability to trade a product representing an interest 
in a portfolio of securities designed to reflect substantially the 
applicable underlying index. The streetTracks \sm\ Dow Jones Global 
Titans Index Fund should allow investors to: (1) respond quickly to 
market changes through intra-day trading opportunities; (2) engage in 
hedging strategies similar to those used by institutional investors; 
and (3) reduce transaction costs for trading a portfolio of securities.
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    \18\ See supra note 4.
    \19\ See supra note 5.
    \20\ See supra note 6.
    \21\ See supra note 7.
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    Although the fund is not a leveraged instrument, and, therefore, 
does not possess any of the attributes of stock index options, its 
prices will be derived and based upon the securities and the cash held 
in the Fund. Accordingly, the level of risk involved in the purchase or 
sale of this Fund is similar to the risk involved in the purchase or 
sale of traditional common stock, with the exception that the pricing 
mechanism for the Fund is based on a portfolio of securities. Based on 
these factors, the Commission believes that it is appropriate to 
regulate the Fund in a manner similar to other equity securities. 
Nevertheless, the Commission believes that the nature of the Fund 
raises certain product design, disclosure, trading, market impact and 
other issues that must be addressed adequately. As discussed in more 
detail below, the Commission believes Amex has adequately addressed 
these concerns.

A. The Global Titans Index Fund Generally

    The Commission believes that the proposed Fund is reasonably 
designed to provide investors with an investment vehicle that 
substantially reflects in value the index it is based upon. In this 
regard, the Commission notes that the Fund will use an ``indexing'' 
investment approach that attempts to replicate, before expenses, the 
performance of the Index. The Fund generally will invest in all of the 
stocks comprising the Index in proportion to their weightings in the 
Index. The Fund Adviser may, however, choose stock equivalent positions 
that the Advisor deems appropriate as an alternative to such stocks. 
The Commission also notes that the Fund will normally invest at least 
95% of its total assets in stocks that comprise the Index. The 
Commission believes that the component selection and replacement 
procedures for the Fund should help to ensure that the component 
securities generally remain highly capitalized and actively traded.

B. Disclosure

    The Commission believes that the Exchange's proposal should ensure 
that investors are adequately apprised of the terms, characteristics, 
and risks of trading the Fund. As noted above, all investors will 
receive a prospectus regarding the product, prior to or concurrently 
with the confirmation of a transaction therein. Alternatively, as 
previously noted, the Fund will be subject to the Exchange's rules and 
procedures for Index Fund Shares. This includes the provisions in 
Commentary .03 to Amex Rule 1000A, which provides for delivery 
requirements of a product description for series that have been granted 
relief from the prospectus delivery requirements of the Act.\22\ 
Because the Fund will be in continuous distribution, the prospectus 
delivery requirements of the Securities Act of 1933 will apply both to 
initial investors and to all investors purchasing such securities in 
secondary market transactions on the Amex. The prospectus or product 
description will address the special characteristics of Shares of the 
streetTracks\sm\ Dow Jones Global Titans Index Fund, including a 
statement regarding redeemability and method of creation.
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    \22\ See supra note 6 (approving delivery of product description 
in lieu of prospectus).
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    The Commission notes that the Exchange will issue an information 
circular to its members explaining the unique characteristics of this 
type of security prior to the commencement of trading in shares of the 
Fund. The Commission also notes that the circular will inform members 
of responsibilities under Amex Rule 411 in connection with customer 
transactions in this security.\23\ The circular also will address 
members' responsibility to deliver a prospectus or product description 
to all investors and highlight the characteristics of purchases in the 
Fund, including the procedures for purchases and redemptions and that 
such purchases and redemptions must be in Creation Unit size 
aggregations.
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    \23\ Amex Rule 411 generally requires that members use due 
diligence to learn the essential facts relative to every customer, 
every order or account accepted. As per telephone conversation 
between Florence E. Harmon, Senior Special Counsel, Division of 
Market Regulation, SEC, and Mike Cavalier, Associate General 
Counsel, Amex, on September 25, 2000.
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C. Listing and Trading of the Index Fund Shares

    The Commission finds that adequate rules and procedures exist to 
govern the listing and trading of the Fund. The Fund will be subject to 
the full panoply of Amex listing and delisting/suspension rules and 
procedures governing the training of Index Fund Shares on the Amex. The 
Fund will be deemed an equity security subject to all Amex rules 
governing the trading of equity securities, including, among others, 
rules governing trading halts, notices to members, responsibilities of 
the specialist, customer suitability requirements and the election of a 
stop and stop limit order. Amex surveillance procedures for Index Fund 
Shares will be applicable to the streetTracks\sm\ Dow Jones Global 
Titans Index Fund. The Commission believes that the surveillance 
procedures developed by the Amex for Index Fund Shares are adequate to 
address the concerns associated with the listing and trading of this 
Fund, including any concerns associated with purchasing and redeeming 
Creation Units.
    In addition, the Exchange has designated that a minimum of two

[[Page 59240]]

Creation Units, approximately 100,000 shares, will be required to be 
outstanding at the start of trading. The Commission believes this 
minimum number is sufficient to help to ensure that a minimum level of 
liquidity will exist at the start of trading. Furthermore, the 
Commission finds that registering the Fund shares in book-entry form 
through DTC, managing the distribution of dividends from net investment 
income, if any, and permitting beneficial owners of the Funds to offer 
the DTC book-entry Dividend Reinvestment Service are characteristics of 
the Fund that are consistent with the Act and should allow for the 
maintenance of fair and orderly markets and perfect the mechanism of a 
free and open market.
    Further, the Commission believes that the Exchange's proposal to 
trade the Fund in minimum fractional increments of \1/64\ of $1.00 is 
consistent with the Act. The Commission believes that such trading 
should enhance market liquidity, and should promote more accurate 
pricing, tighter quotations, and reduced price fluctuations. The 
Commission also believes that such trading should allow customers to 
receive the best possible execution of their transactions in the Fund. 
Additionally, the Commission believes that the proposed original 
listing fee of $5,000 is reasonable as is the proposed method for 
calculating the annual fee.

D. Dissemination of Information and Regarding the Fund

    The Commission believes that the Values and figures that the 
Exchange proposes to have disseminated for the Fund will provide 
investors with timely and useful information concerning the value of 
the Fund. The Exchange represents that the Value information will be 
disseminated, every 15 seconds during regular Amex trading hours, 
through the facilities of the CTA and will reflect currently-available 
information concerning the value for Shares of the Fund. On a daily 
basis, the Exchange represents that it will disseminate the Shares 
outstanding, the cash amount per Creation Unit Aggregation, and the net 
asset value. The Exchange represents that the closing prices of the 
Fund's Deposit Securities are readily available from, as applicable, 
the relevant exchanges, automated quotation systems, or on-line 
information services such as Bloomberg or Reuters. The intra-day value 
of the Underlying Index will be available from Dow.

E. Accelerated Approval

    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 pursuant to Section 19(b)(2) of 
the Act. The Commission notes that the proposed rule change is based on 
the listing and trading standards in Amex Rule 1000A et seq. (Index 
Fund Shares), which the Commission previously approved after soliciting 
public comment on the proposal pursuant to Section 19(b)(1) of the 
Act.\24\ The Commission does not believe that the proposed rule change 
raises novel regulatory issues that were not addressed in the Amex 
filing. Accordingly, the Commission believes it is appropriate to 
permit investors to benefit from the flexibility afforded by this new 
instrument by trading them as soon as possible. Accordingly, the 
Commission finds that there is good cause, consistent with Section 
6(b)(5) of the Act,\25\ to approve the proposal on an accelerated 
basis.
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    \24\ See supra note 6 (approving SR-Amex-00-14); Securities 
Exchange Act Release No. 42542 (March 17, 2000), 65 FR 16437 (March 
28, 2000) (noticing SR-Amex-00-14).
    \25\ 15 U.S.C. 78s(b)(5).
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V. Conclusion

    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\26\ that the proposed rule change (SR-Amex-00-53), is hereby 
approved on an accelerated basis.

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

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\27\
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    \27\ 17 U.S.C. 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-25438 Filed 10-3-00; 8:45 am]
BILLING CODE 8010-01-M