Federal Register / Vol. 65, No. 203 / Thursday, October 19, 2000 / Notices 62783

10 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See Securities Exchange Act Release No. 27753

(March 1, 1990), 55 FR 8626 (March 8, 1990).

4See Securities Exchange Act Release No. 35518

(March 21, 1995), 60 FR 15804 (March 27, 1995).

5See Securities Exchange Act Release No. 36885

(February 26, 1996), 61 FR 8315 (March 4, 1996).

6When the Amex originally filed its proposed

rule change with the SEC, the Amex was uncertain

as to whether the Securities would trade as

preferred equity securities or debt securities. The

Amex has since determined that the Securities will

trade as debt securities. As per telephone

conversation between Scott Van Hatten, Legal

Counsel, Derivative Securities, and Heather Traeger,

Attorney, Division of Market Regulation, SEC, on

September 29, 2000.

7The underwriter has advised the Amex that the

Securities will comply with the ‘‘hybrid

exemption’’ of the Commodity Futures Trading

Commission (‘‘CFTC’’), 17 CFR Part 34. The

underwriter further advised that it has presented a

description of the structure and sample termsheet

of the Securities to the staff of the CFTC in order

to facilitate the approval of the registration and

listing of the Securities.

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 NYSE. All

submissions should refer to File No.

SR–NYSE–00–42 and should be

submitted by November 9, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Jonathan G. Katz,

Secretary.

[FR Doc. 00–26802 Filed 10–18–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43427; File No. SR–AMEX–

00–40]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the American Stock

Exchange LLC Relating to the Listing

and Trading of Inflation Indexed

Securities

October 10, 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 August 3,

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

grant accelerated approval to the

proposed rule change.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange proposes to approve for

listing and trading under Section 107A

of the Amex Company Guide, index

linked debt securities based in whole or

in part on changes in the value of the

U.S. Consumer Price Index. The text of

the proposed rule change is available at

the Office of the Secretary, Amex, and

at 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

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

Under Section 107A of the Amex

Company Guide, the Exchange may

approve for listing and trading securities

which cannot be readily categorized

under the listing criteria for common

and preferred stocks, bonds, debentures,

or warrants.3 Under Section 107A, in

March of 1995, the Commission

approved the Exchange’s proposed rule

change relating to the listing and trading

of commodity linked notes (‘‘COINS’’).4

And in February of 1996, the

Commission approved the Exchange’s

proposed rule change relating to the

listing and trading of commodity

indexed securities (‘‘ComPS’’).5 The

Amex now proposes to list for trading

under Section 107A of the Company

Guide, indexed linked debt securities 6

(‘‘Securities’’) whose value in whole or

in part will be based upon the nonseasonally adjusted U.S. City Average

All Items Consumer Price Index for All

Urban Consumers (the ‘‘CPI–U’’ or

‘‘Index’’), published monthly by the

U.S. Department of Labor Bureau of

Labor Statistics (‘‘BLS’’). Holders of the

Securities receive at maturity a payment

linked to the value of the Index based

on the following formula: Face Value +

(Ending Index Value—Beginning Index

Value), but not less than zero.

The ‘‘Beginning Index Value,’’ which

is approximately equal to the forward

value of the CPI–U on the pricing date,

will be announced at the time of the

offering. The ‘‘Ending Index Value’’ will

be equal to the ending level of the CPI–

U, as published by the BLS and used by

the U.S. Treasury for its Treasury

Inflation Protected Securities (‘‘TIPS’’).

CPIS Description

The Securities will be non-convertible

and will conform to the listing

guidelines under Section 107A of the

Company Guide, which provide that

such issues have: (1) Assets in excess of

$100 million and stockholders’ equity of

at least $10 million; (2) a minimum

public distribution of 1 million trading

units with a minimum of 400 public

shareholders; except, if traded in

thousand dollar denominations, then no

minimum number of holders; (3) a

market value of not less than $4 million.

Although a specific maturity date will

not be established until the time of the

offering, the Securities will provide for

maturity of not less than one year from

the date of issue. The Securities may

provide for periodic payments and/or

payments at maturity based in whole or

in part on changes in the value of the

Index. At maturity holders of the

Securities may receive less than 100%

of the initial issue price.

The redemption price of the

Securities will be based on, in part, the

ending Reference CPI–U level for the

maturity date. At redemption, holders

will receive Face Value plus (Ending

Index Value minus Beginning Index

Value); but not less than zero. Thus, at

redemption, the holder could receive

less than the Face Value or the Issue

Price of the Securities, but never less

than zero.7 The denomination will be at

least $1000 and the redemption will be

multiplied by a gross-up factor to

produce a $1000 face value, i.e. Grossup × Face Value plus (Ending Index

Value minus Beginning Index Value).

Equity margin rules will apply to the

trading of the Securities. The Securities

are designed to produce an everVerDate 11<MAY>2000 21:53 Oct 18, 2000 Jkt 194001 PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 E:\FR\FM\19OCN1.SGM pfrm02 PsN: 19OCN1
62784 Federal Register / Vol. 65, No. 203 / Thursday, October 19, 2000 / Notices

8 31 CFR Part 356 ‘‘Department of the Treasury

Circular, Public Debt Series No. 1–93’’, see http://

www.publicdebt.treas.gov.

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

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

increasing return as inflation rises. The

Exchange represents that because

inflation returns historically have been

negatively correlated with financial

assets, the ownership of the Securities

(although their return is uncertain) are

intended to diversify a portfolio of

financial instruments.

Index Description

The Securities will be linked to a 3-

month lagged version of CPI referred to

as ‘‘Reference CPI–U.’’ This is the same

lagged version of CPI–U used by the

U.S. Treasury for its TIPS. The CPI–U is

the non-seasonally adjusted U.S. City

Average All Items Consumer Price Index

for All Urban Consumers, published

monthly by the BLS. The Index

represents prices of all goods and

services purchased for consumption by

urban households. User fees (such as

water and sewer service) and sales and

excise taxes paid by the consumer are

also included. Income taxes and

investment items (such as stocks, bonds,

and life insurance) are not included.

The CPI–U includes expenditures by

urban wage earners and clerical

workers, professional, managerial, and

technical workers, the self-employed,

short-term workers, the unemployed,

retirees and others not in the labor force.

The CPI–U is widely disseminated by

vendors of financial information and

quoted in the financial press. It is also

available at the BLS’s website: http://

www.bls.gov.

If, while a U.S. Treasury TIPS is

outstanding, the CPI–U is (1)

discontinued, (2) in the judgment of the

Secretary of the Treasury,

fundamentally altered in a manner

materially adverse to the interests of an

investor in U.S. Treasury TIPS, or (3) in

the judgment of the Secretary of the

Treasury, altered by legislation or

Executive Order in a manner materially

adverse to the interests of an investor in

U.S. Treasury TIPS, the Treasury, after

consulting with the BLS, will substitute

an appropriate alternative index. Such

alternative index will also be used in

the Securities.

In calculating the Index, price

changes for various items are averaged

together with weights that represent

their importance in the spending of

urban households in the United States.

The contents of the market basket of

goods and services and the weights

assigned to the various items are

updated periodically to take into

account changes in consumer

expenditure patterns. The CPI–U is

expressed in relative terms in relation to

a time base reference period for which

the level is set at 100 (currently the base

reference period used by the BLS is

1982–1984). For example, if the CPI–U

for the 1982–84 reference period is

100.0, an increase of 16.5 percent from

that period would be shown as 116.5.

As a matter of policy the BLS has

made numerous improvements and

changes to the Index over the last 25

years and it is likely to do so in the

future. Technical changes made by the

BLS to the Index to improve its accuracy

include, but are not limited to, changes

in: (1) The specific items (e.g., apples or

major appliances) to be priced for

inclusion in the Index; (2) the way

individual price quotations are

aggregated to construct a component

price index for these items; (3) the

method for combining these component

price indices to obtain the

comprehensive, all-items CPI–U; and (4)

the procedures for incorporating new

goods into the Index and making

adjustments for quality changes in

existing goods. Examples of recent

methodological improvements include

use of regression models to adjust for

the quality improvements in various

goods (televisions, personal computers,

etc.), introduction of geometric averages

to account for consumer substitution

within CPI–U categories, and changing

the housing/shelter formula to improve

rental equivalence estimation. These

changes and changes in the future could

reduce the level of increase in the CPI–

U and could lower the redemption value

of the Securities.

Historically, the BLS rebases the CPI–

U approximately every 10 years. The

current standard reference base period

is 1982–1984 = 100. Prior to the release

of the CPI–U for January 1988, the

standard reference base was 1967 = 100.

If the BLS rebases the CPI–U during the

time the Securities are outstanding but

continues to publish the old CPI–U, the

Reference CPI–U for the Securities will

continue to be calculated using the

existing base period in effect for the

CPI–U used at issuance of the

Securities. Although numerical

comparisons between indices with

different base periods cannot be made,

the conversion to a new reference base

does not affect the measurement of the

percent changes in a given index series

from one time period to another, except

for rounding differences. Thus rebasing

will affect the published ‘‘headline’’

number often quoted in the financial

press; however, the Reference CPI–U

calculation for the Securities should not

be adversely affected by any such

rebasing as the old-based CPI–U can be

calculated by using the percent changes

of the new rebased CPI–U to calculate

the levels of the old CPI–U series (the

two series should have the same

percentage change, but at different

levels). However, determinations of the

Secretary of Treasury in regard to all

reference CPI–U levels, and whether a

rebasing constitutes an index

contingency, and any index remedies

implemented, will be final.

Reference CPI–U

Reference CPI–U is a 3 month lagged

version of CPI–U. Reference CPI–U for

the first day of any calendar month is

the CPI–U for the third preceding

calendar month, as reported by BLS in

the second preceding calendar month.

For example, the Reference CPI–U

applicable to April 1 in any year is the

CPI–U for January of that year, which is

reported by the BLS in February of that

year. The Reference CPI–U for any date

other than the first day of the month is

the linear interpolation between the

Reference CPI–U for the first day of such

month and the first day of the

immediately following month. Thus the

Reference CPI–U for the stated maturity

is lagged 3 months and should be

determinable prior to stated maturity.

Index Contingencies

The Securities will use the same

index contingencies as the US Treasury

for its TIPS.8 Index contingencies

include how the Reference CPI–U will

be affected by (1) revisions in previously

reported CPI–U, (2) rebasing of the CPI–

U by the BLS, (3) material adverse

changes, in the judgment of the

Treasury Secretary, to the CPI–U by

legislation or Executive Order, or (4)

delays in reporting CPI–U. The

Securities will use the index

contingency remedies as pronounced by

the US Treasury. Determinations of the

Secretary of Treasury in this regard will

be final.

The Securities will be subject to the

Exchange’s equity margin rules and the

Exchange’s debt trading rules.

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, 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

Federal Register / Vol. 65, No. 203 / Thursday, October 19, 2000 / Notices 62785

11 15 U.S.C. 78f(b)(5).

12See, e.g., Securities Exchange Act Release No.

41546 (June 22, 1999), 64 FR 35222 (June 30, 1999).

13 15 U.S.C. 78s(b)(5).

14 15 U.S.C. 78s(b)(2).

15 17 CFR 200.30–3(a)(12).

open market and a national market

system.

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. 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, 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–00–40 and should be

submitted by November 9, 2000.

IV. Commission’s Findings and Order

Granting Accelerated Approval of

Proposed Rule Change

The Commission finds that the

proposed rule change is consistent with

the requirements of Section 6(b)(5) of

the Act 11 and the rules and regulations

thereunder applicable to a national

securities exchange. In particular, the

Commission believes that the

availability of the Securities will

provide an instrument for investors to

achieve desired investment objectives

through the purchase of an exchangetraded debt product linked to the CPI–

U. These objectives include receipt of an

increasing real rate of return if inflation

rises and the ability for investors to

hedge against unanticipated inflation.

For the reasons discussed below, the

Commission has concluded that the

Amex listing standards applicable to the

Securities are consistent with the Act.

The Securities are index-linked debt

securities whose value in whole or in

part will be based upon the nonseasonally adjusted CPI–U. The

Securities are non-convertible and will

conform to the Amex listing guidelines

under Section 107A of the Company

Guide. The specific maturity date will

not be established until the time of the

offering, but will be not less than one

year from the date of issue. The

Securities may provide for periodic

payments and/or payment at maturity

based in while or in part on changes in

the value of the Index. Holders of the

Securities will receive at maturity a

payment linked to the value of the Index

based on the following formula: Face

Value + (Ending Index Value—

Beginning Index Value), but not less

than zero. The denomination will be at

least $1000. In structure, the

Commission finds that the proposed

Securities are similar to previously

approved exchange-traded index-linked

securities.12

In addition, the Amex equity margin

rules and debt trading rules will apply

to the Securities. The Commission

believes that the application of these

rules should strengthen the integrity of

the Securities. The Commission also

believes that the Amex has appropriate

surveillance procedures in place to

detect and deter potential manipulation

for similar index-linked products. By

applying these procedures to the

Securities, the Commission believes that

the potential for manipulation of the

Securities is minimal, thereby

protecting investors and the public

interest. The Commission further notes

that the underlying Index is managed by

the BLS, an entity independent of both

the Exchange and the Issuer, and thus,

a factor which the Commission believes

should act to minimize the possibility of

manipulation. In addition, the CPI–U is

widely disseminated by vendors of

financial information, quoted in the

financial press, and available at the

BLS’s website.

The Commission also notes that the

Amex will issue a circular on the

Securities. The circular should include,

among other things, a discussion of the

risks which may be associated with the

Securities in addition to details on the

composition of the Index and how the

rates of return will be computed.

Further, pursuant to Exchange Rule 411,

the Exchange will impose a duty of due

diligence on its members and member

firms to learn the essential facts relating

to every customer prior to trading the

Securities.

Based on these factors, the

Commission finds that the proposal to

trade the Securities is consistent with

Section 6(b)(5) of the Act.13

Amex has requested that the

Commission find good cause for

approving the proposed rule change

prior to the thirtieth day after the date

of publication of notice in the Federal

Register. The Commission believes that

the proposal raises no new regulatory

issues that were not addressed in

similar filings for index-linked

products. Furthermore, the Commission

believes that it is appropriate to permit

investors to benefit from the flexibility

afforded by Securities by trading them

as soon as possible. Accordingly, the

Commission finds good cause to

accelerate approval of the proposed rule

change, as amended.

It is Therefore Ordered, pursuant to

Section 19(b)(2) of the Act,14 that the

proposed rule change (SR–AMEX–00–

40) is hereby approved on an

accelerated basis.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.15

Jonathan G. Katz,

Secretary.

[FR Doc. 00–26805 Filed 10–18–00; 8:45 am]

BILLING CODE 8010–01–M

DEPARTMENT OF STATE

[Public Notice 3442]

Bureau of Educational and Cultural

Affairs Request for Proposals (ECA/

PE/C/EUR–01–19): Exchanges and

Training Programs for the New

Independent States (NIS): Kazakhstan,

Kyrgyzstan, Tajikistan, Turkmenistan,

Uzbekistan, Armenia, Azerbaijan,

Georgia, Belarus, Moldova, Ukraine,

Russia

SUMMARY: The United States Department

of State, Bureau of Educational and

Cultural Affairs, Office of Citizen

Exchanges, Europe/Eurasia Division,

announces an open competition for

assistance awards in the areas of Media

Training, Women’s Leadership, Public

Advocacy Training, and Prevention of

Trafficking in Women and Girls. Public

and private non-profit organizations

meeting the provisions described in IRS

regulation 26 CFR 1.501C may apply to