Federal Register / Vol. 66, No. 105 / Thursday, May 31, 2001 / Notices 29613

10 17 CFR 24.0.11Aa3–2. OPRA requested that the

Commission approve the amendment prior to May

26, 2001, to avoid disrupting the markets of the two

exchanges that are now operating under the

previously granted temporary exemptions, which

are scheduled to expire on that date. However, in

order to allow for a full comment period on this

proposal, the Commission has extended the

previously granted temporary exemptions for

another 90 days. See note 5, supra.

11 17 CFR 200.30–3(a)(29).

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

2 17 CFR 240.19b–4.

3The initial portfolio of securities comprising the

Select Ten Index for the first year will be the

highest dividend yielding stocks as of May 1, 2001,

and are as follows: Philip Morris Co., Inc.; Eastman

Kodak Co.; General Motors Corp.; DuPont El De

Nemours; J.P. Morgan Chase & Co.; Caterpillar Inc.;

International Paper Co.; SBC Communications, Inc.;

Proctor & Gamble Co.; and Minnesota Mining &

Manufacturing Co. The portfolio of securities will

include the ten highest dividend yielding stocks in

the DJIA for that year and the Amex will not have

any discretion in the selection process.

4See Securities Exchange Act Release No. 27753

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

approving File No. SR–Amex–89–29).

5Subject to the criteria in the prospectus

regarding the construction of the Index, the

Exchange has sole discretion regarding changes to

the Index due to annual reconstitutions and

adjustments to the Index and the multipliers of the

individual components.

6The initial listing standards for Select Ten Notes

require: (1) A minimum public distribution of one

million units; (2) a minimum of 400 shareholders;

(3) a market value of at least $4 million; and (4) a

term of at least one year. In addition, the listing

guidelines provide that the issuer have assets in

excess of $100 million, stockholder’s equity of at

least $10 million, and pre-tax income of at least

$750,000 in the last fiscal year or in two of the three

prior fiscal years. In the case of an issuer which is

unable to satisfy the earning criteria stated in

Section 101 of the Company Guide, the Exchange

will require the issuer to have the following: (1)

Assets in excess of $200 million and stockholders’

equity of at least $10 million; or (2) assets in excess

of $100 million and stockholder’s equity of at least

$20 million.

7The Exchange’s continued listing guidelines are

set forth in Sections 1001 through 1003 of Part 10

Continued

quotation vendors through the OPRA

System.

By modifying the OPRA Plan to

incorporate the previously granted

exemptions from the OPRA Plan’s

exclusivity clause, OPRA believes that

the proposed amendment would place

all of the parties to the OPRA Plan on

equal footing with respect to the right to

disseminate their market data to their

members. OPRA believes that this

would allow any of the parties to the

OPRA Plan to make market information

available to those of its members who

enter or transmit orders or quotes in or

to its market, while at the same time

assuring that all persons who have

access to market information also have

equal access to consolidated market

information disseminated by OPRA.

OPRA represents that because parties

that operate an electronic market or an

electronic trading facility must be

allowed to disseminate market

information to their members who enter

orders or quotes in their markets, the

proposed amendment would provide

parties who do not maintain such

electronic facilities with the same right

to disseminate market information to

their members, thereby fostering fair

and equal competition among all of the

parties.

II. Implementation of Amendment

The proposed amendment will be

effective upon its approval by the

Commission pursuant to Rule 11Aa3–2

of the Act.10

III. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposed OPRA

Plan Amendment 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, and all written

statements with respect to the proposed

OPRA Plan amendment that are filed

with the Commission, and all written

communications relating to the

proposed OPRA Plan amendment

between the Commission and any

person, other than those 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 the filing also will be

available at the principal offices of

OPRA. All submissions should refer to

File No. SR–OPRA–2001–02 and should

be submitted by June 21, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–13635 Filed 5–30–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44342; File No. SR–Amex–

2001–28]

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 Listing

and Trading of Select Ten Notes

May 23, 2001.

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 May 7,

2001, 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 is

approving the proposal on an

accelerated basis.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Amex proposes to list and trade

notes, the return on which is based

upon an equal-dollar weighted portfolio

of securities representing the ten highest

dividend yielding stocks in the Dow

Jones Industrial Average (‘‘DJIA’’) from

year to year (the ‘‘Select Ten Index’’ or

‘‘Index’’).3

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

Under section 107A of the Amex

Company Guide (‘‘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.4

The Amex proposes to list for trading

under section 107A of the Company

Guide notes based on the Select Ten

Index (the ‘‘Select Ten Notes’’ or

‘‘Notes’’). The Select Ten Index will be

determined, calculated and maintained

solely by the Amex.5

The Select Ten Notes will conform to

the initial listing guidelines under

Section 107 6 and continued listing

guidelines under sections 1001–1003 7

29614 Federal Register / Vol. 66, No. 105 / Thursday, May 31, 2001 / Notices

to the Exchange’s Company Guide. Section 1002(b)

of the Company Guide states that the Exchange will

consider removing from listing any security where,

in the opinion of the Exchange, it appears that the

extent of public distribution or aggregate market

value has become so reduced to make further

dealings on the Exchange inadvisable. With respect

to continued listing guidelines for distribution of

the Select Ten Notes, the Exchange will rely, in

part, on the guidelines for bonds in Section

1003(b)(iv). Section 1003(b)(iv)(A) provides that the

Exchange will normally consider suspending

dealings in, or removing from the list, a security if

the aggregate market value or the principal amount

of bonds publicly held is less than $400,000.

8See Securities Exchange Act Release No. 37533

(August 7, 1996), 61 FR 42075 (August 13, 1996)

(order granting accelerated approval to File No. SR–

Amex–96–28).

9At the end of each day, the Index will be

reduced by a pro rata portion of the annual index

adjustment factor, 1.5% (i.e., 1.5%/365 days =

0.0041% daily). Telephone conversation between

Jeffrey P. Burns, Senior Counsel, Amex, and Sapna

C. Patel, Attorney, Division of Market Regulation,

Commission, on May 22, 2001. This reduction to

the value of the Index will reduce the total return

to investors upon redeeming Select Ten Notes at

maturity. The Amex represents that an explanation

of this deduction will be included in any marketing

materials, fact sheets, or any other materials

circulated to investors regarding the trading of this

product.

of the Company Guide. Select Ten Notes

are senior non-convertible debt

securities of Merrill Lynch & Co., Inc.

(‘‘Merrill Lynch’’) that provide for a

single payment at maturity. The Select

Ten Notes will have a term of not less

than one, nor more than ten, years.

Select Ten Notes will entitle the owner

at maturity to receive an amount based

upon the percentage change between the

‘‘Starting Index Value’’ and the ‘‘Ending

Index Value’’ (the ‘‘Redemption

Amount’’). The ‘‘Starting Index Value’’

is the value of the Select Ten Index on

the date on which the issuer prices the

Select Ten Notes issue for the initial

offering to the public. The ‘‘Ending

Index Value’’ is the value of the Select

Ten Index over a period shortly prior to

the expiration of the Select Ten Notes.

The Ending Index Value will be used in

calculating the amount owners will

receive upon maturity. The Select Ten

Notes may not have a minimum

principal amount that will be repaid

and, accordingly, payments on the

Notes prior to or at maturity may be less

than the original issue price of the

Select Ten Notes. During the designated

month each year, the investors may

have the right to require the issuer to

repurchase the Select Ten Notes at a

redemption amount based on the value

of the Select Ten Index at such

repurchase date. Select Ten Notes are

not callable by the issuer.

Select Ten Notes are cash-settled in

U.S. dollars and do not give the holder

any right to receive a portfolio security

or any other ownership right or interest

in the portfolio securities, although the

return on the investment is based on the

aggregate portfolio value of the Select

Ten Index securities.

The Select Ten Index will consist of

the ten stocks with the highest dividend

yields among the thirty stocks that

comprise the DJIA, adjusted as

described below. The Index will be

composed and calculated in a similar

manner as the Top Ten Yield Index

previously approved by the

Commission.8

Components of the Select Ten Index

approved pursuant to this filing will

meet the following criteria: (1) A

minimum market value of at least $75

million, except that up to 10% of the

component securities in the Select Ten

Index may have a minimum market

value of $50 million; (2) average

monthly trading volume in the last six

months of not less than 1,000,000

shares, except that up to 10% of the

component securities in the Select Ten

Index may have an average monthly

trading volume of 500,00 shares or more

in the last six months; (3) 90% of the

Select Ten Index’s numerical value and

at least 80% of the total number of

component securities will meet the then

current criteria for standardized option

trading set forth in Exchange Rule 915;

and (4) all component stocks will either

be listed on the Amex, the New York

Stock Exchange, Inc. (‘‘NYSE’’), or

traded through the facilities of the

National Association of Securities

Dealers Automated Quotation System

(‘‘NASDAQ’’) and reported National

Market System securities.

As of May 1, 2001, the market

capitalization of the initial portfolio of

securities representing the Select Ten

Index ranged from a high of $145 billion

to a low of $12.8 billion. The average

monthly trading volume for the last six

months, as of the same date, ranged

from a high of 188 million shares to a

low of 34 million shares. Moreover, as

of May 1, 2001, all of the components

comprising the initial portfolio of

securities representing the Select Ten

Index were eligible for standardized

options trading pursuant to Amex Rule

915.

At the outset, each of the securities in

Select Ten Index will represent

approximately an equal percentage of

the starting value of the Select Ten

Index. Specifically, each security

included in the portfolio will be

assigned a multiplier on the date of

issuance so that the security represents

approximately an equal percentage of

the value of the entire portfolio on the

date of issuance. The multiplier

indicates the number of shares (or

fraction of one share) of a security, given

its market price on an exchange or

through NASDAQ, to be included in the

calculation of the portfolio.

Accordingly, initially each of the ten

companies included in the Select Ten

Index will represent approximately ten

percent of the total portfolio at the time

of issuance. The Select Ten Index will

initially be set to provide a benchmark

value of 100.00 at the close of trading

on the day the Select Ten Notes are

priced for initial sale to the public.

The value of the Select Ten Index at

any time will equal: (1) The sum of the

products of the current market price for

each stock underlying the Select Ten

Index and the applicable share

multiplier, plus (2) an amount reflecting

current calendar quarter dividends, and

less (3) a pro rata portion of the annual

index adjustment factor.9 Current

quarter dividends for any day will be

determined by the Amex and will equal

the sum of each dividend paid by the

issuer on one share of stock during the

current calendar quarter multiplied by

the share multiplier applicable to such

stock on the ex-dividend date.

As of the first day of the start of each

calendar quarter, the Amex will allocate

the current quarter dividends as of the

end of the immediately preceding

calendar quarter to each then

outstanding components of the Select

Ten Index. The amount of the current

quarter dividends allocated to each

stock will equal the percentage of the

value of such stock contained in the

portfolio of securities comprising the

Select Ten Index relative to the value of

the entire portfolio based on the closing

market price of such stock on the last

day in the immediately preceding

calendar quarter. The share multiplier of

each stock will be increased to reflect

the number of shares, or portion of a

share, that the amount of the current

quarter dividend allocated to each stock

can purchase of each stock based on the

closing market price on the last day in

the immediate preceding calendar

quarter.

As of the close of business on each

anniversary date (anniversary of the

date of the initial issuance of Select Ten

Notes) through the applicable

anniversary date in the year preceding

the maturity of the Select Ten Notes, the

portfolio of securities comprising the

Select Ten Index will be reconstituted

by the Amex so as to include the ten

common stocks in the DJIA having the

highest dividend yield on the second

scheduled index business day prior to

such anniversary date. The Exchange

will announce such changes to investors

Federal Register / Vol. 66, No. 105 / Thursday, May 31, 2001 / Notices 29615

10The Exchange will publish a notice to advise

investors of changes to the securities underlying the

Index if any such changes are made following an

annual reconstitution.

11 If the issuer of a component security in the

Select Ten Index issues to all of its shareholders

publicly traded stock of another issuer, such new

securities will be added to the portfolio comprising

the Select Ten Index until the subsequent

anniversary date. The multiplier for the new

component will equal the product of the original

issuer’s multiplier and the number of shares of the

new component issued with respect to one share of

the original issuer.

12Ammex Rule 411 requires that every member,

member firm or member corporation use due

diligence to learn the essential facts relative to

every customer to every order or account accepted.

13See Amex Rule 462 and section 107B of the

Company Guide.

14 15 U.S.C. 78f(b).

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

at least one day prior to the anniversary

date.10

The portfolio will be reconstituted

and rebalanced on the anniversary date

so that each stock in the Select Ten

Index will represent 10% of the value of

the Index. To effectuate this, the share

multiplier for each new stock will be

determined by the Amex and will

indicate the number of shares or

fractional portion thereof of each new

stock, given the closing market price of

such new stock on the anniversary date,

so that each new stock represents an

equal percentage of the Select Ten Index

value at the close of business on such

anniversary date. For example, if the

Select Ten Index value at the close of

business on an anniversary date was

200, then each of the ten new stocks

comprising the Select Ten Index would

be allocated a portion of the value of the

Index equal to 20, and if the closing

market price of one such new stock on

the anniversary date was 40, the

applicable share multiplier would be

0.5. Conversely, if the Select Ten Index

value was 80, then each of the ten new

stocks comprising the Select Ten Index

would be allocated a portion of the

value of the Select Ten Index equal to

8, and if the closing market price of one

such new stock on the anniversary was

40, the applicable share multiplier

would be 0.2. The last anniversary date

on which such reconstitution will occur

will be the anniversary date in the year

preceding the maturity of the Select Ten

Notes. As noted above, investors will

receive information on the new portfolio

of securities comprising the Select Ten

Index at least one day prior to each

anniversary date.

The multiplier of each component

stock in the Select Ten Index will

remain fixed unless adjusted for

quarterly dividend adjustments, annual

reconstitutions or certain corporate

events, such as payment of a dividend

other than an ordinary cash dividend, a

distribution of stock of another issuer to

its shareholders,11 stock split, reverse

stock split, and reorganization.

The multiplier of each component

stock may be adjusted, if necessary, in

the event of a merger, consolidation,

dissolution or liquidation of an issuer or

in certain other events such as the

distribution of property by an issuer to

shareholders. If the issuer of a stock

included in the Select Ten Index were

to no longer exist, whether by reason of

a merger, acquisition or similar type of

corporate transaction, a value equal to

the stock’s final value will be assigned

to the stock for the purpose of

calculating the Select Ten Index value

prior to the subsequent anniversary

date. For example, if a company

included in the Select Ten Index were

acquired by another company, a value

will be assigned to the company’s stock

equal to the value per share at the time

the acquisition occurred. If the issuer of

stock included in the Select Ten Index

is in the process of liquidation or

subject to a bankruptcy proceeding,

insolvency, or other similar

adjudication, such security will

continue to be included in the Select

Ten Index so long as a market price for

such security is available or until the

subsequent anniversary date. If a market

price is no longer available for an Index

stock due to circumstances including

but not limited to, liquidation,

bankruptcy, insolvency, or any other

similar proceeding, then the security

will be assigned a value of zero when

calculating the Select Ten Index for so

long as no market price exists for that

security or until the subsequent

anniversary date. If the stock remains in

the Select Ten Index, the multiplier of

that security in the Select Ten Index

may be adjusted to maintain the

component’s relative weight in the

Select Ten Index at the level

immediately prior to the corporate

action. In all cases, the multiplier will

be adjusted, if necessary, to ensure

Select Ten Index continuity.

The Exchange will calculate the

Select Ten Index and, similar to other

stock index values published by the

Exchange, the value of the Index will be

calculated continuously and

disseminated every fifteen seconds over

the Consolidated Tape Association’s

Network B. The Index value will equal

the sum of the products of the most

recently available market prices and the

applicable multipliers for the

component securities.

Because Select Ten Notes are linked

to a portfolio of equity securities, the

Amex’s existing equity floor trading

rules will apply to the trading of Select

Ten Notes. First, pursuant to Amex Rule

411, the Exchange will impose a duty of

due diligence on its members and

member firms to lean the essential facts

relating to every customer prior to

trading Select Ten Notes.12 Second,

Select Ten Notes will be subject to the

equity margin rules of the Exchange.13

Third, the Exchange, will, prior to

trading Select Ten Notes, distribute a

circular to the membership providing

guidance with regard to member firm

compliance responsibilities (including

suitability recommendations) when

handling transactions in Select Ten

Notes and highlighting the special risks

and characteristics of the Select Ten

Notes.

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 corporation 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.

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 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

29616 Federal Register / Vol. 66, No. 105 / Thursday, May 31, 2001 / Notices

16 Id.

17See Securities Exchange Act Release Nos.

42582 (March 27, 2000), 65 FR 17685 (April 4,

2000) (accelerated approval order for the listing and

trading of notes linked to a basket of no more than

twenty equity securities) (File No. SR–Amex–99–

42); 41546 (June 22, 1999), 64 FR 35222 (June 30,

1999) (accelerated approval order for the listing and

trading of notes linked to a narrow based index

with a non-principal protected put option) (File No.

SR-Amex–99–15); 39402 (December 4, 1997), 62 FR

65459 (December 12, 1997) (notice of immediate

effectiveness for the listing and trading nonprincipal protected commodity preferred securities

linked to certain commodities indices) (File No.

SR–Amex–97–47); 37533 (August 7, 1996), 61 FR

42075 (August 13, 1996) (accelerated approval order

for the listing and trading of the Top Ten Yield

Market Index Target Term Securities (‘‘MITTS’’))

(File No. SR–Amex–96–28); 33495 (January 19,

1994), 59 FR 3883 (January 27, 1994) (accelerated

approval order for the listing and trading of Stock

Upside Note Securities) (File No. SR–Amex–93–40);

32840 (September 2, 1993), 58 FR 47485 (September

9, 1993) (accelerated approval order for the listing

and trading of MITTS on the NYSE) (File No. SR–

NYSE–93–31); and 32343 (May 20, 1993), 58 FR

30833 (May 27, 1993) (accelerated approval order

for the listing and trading on non-principal

protected notes linked to a single equity security)

(File No. SR–Amex–92–42).

18 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).

19See Company Guide section 107A.

20The companies that comprise the Select Ten

Index are reporting companies under the Act.

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–2001–28 and should be

submitted by June 21, 2001.

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 finds that this proposal is

similar to several approved instruments

currently listed and traded on the Amex

and the NYSE.17 Accordingly, the

Commission finds that the listing and

trading of Select Ten Notes is consistent

with the Act and 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.18

Select Ten Notes are not leveraged

instruments; however, their price will

still be derived and based upon the

underlying linked security.

Accordingly, the level of risk involved

in the purchase or sale of a Select Ten

Notes is similar to the risk involved in

the purchase or sale of traditional

common stock. Nonetheless, because

the final rate of return of a Select Ten

Notes is derivatively priced, based on

the performance of a portfolio of

securities, and the components of the

Select Ten Index are more likely to

change each year, over the term of the

Select Ten Notes, than products

previously issued, there are several

issues regarding the trading of this type

of product.

The Commission notes that the

Exchange’s rules and procedures that

address the special concerns attendant

to the trading of hybrid securities will

be applicable to Select Ten Notes. In

particular, by imposing the hybrid

listing standards, suitability, disclosure,

and compliance requirements noted

above, the Commission believes the

Exchange has addressed adequately the

potential problems that could arise from

the hybrid nature of Select Ten Notes.

Moreover, the Exchange will distribute

a circular to its membership calling

attention to the specific risks associated

with Select Ten Notes.

In approving the product, the

Commission recognizes that the

components are likely to change each

year over the life of the product.

Nevertheless, the Commission believes

that this is acceptable because the Amex

has clearly stated its guidelines and

formula for replacing components from

a specific group of thirty well-known,

and highly capitalized securities. Each

year, as noted above, the portfolio of

securities comprising the Select Ten

Index will represent the ten highest

dividend yielding securities in the DJIA.

Amex will do the calculation for

replacements based on a set formula to

determine which of the DJIA securities

will be in the Index for the following

year. The Commission believes that

within these confines the potential

frequent changes in the components of

the Select Ten Index are reasonable and

will meet the expectation of investors.

In addition, the Commission notes

that the Select Ten Notes are nonprincipal protected. The Notes may not

have a minimum principal amount that

will be repaid and that payments on the

Notes prior to or at maturity may be less

than the original issue price of the

Select Ten Notes. The Commission also

recognizes the during the designated

month each year, the investors may

have the right to require the issuer to

repurchase the Select Ten Notes at a

redemption amount based on the value

of the Select Ten Index at such

repurchase date.

The Commission notes that Select Ten

Notes are dependent upon the

individual credit of the issuer, Merrill

Lynch. To some extent this credit risk

is minimized by the Exchange’s listing

standards in Section 107A of the

Company Guide which provide the only

issuers satisfying substantial asset and

equity requirements may issue

securities as Select Ten Notes. In

addition, the Exchange’s hybrid listing

standards further require that Select Ten

Notes have at least $4 million in market

value.19 In any event, financial

information regarding Merrill Lynch, in

addition to the information on the

issuers of the underlying securities

comprising the Select Ten Index, will be

publicly available.20

The Commission also has a systemic

concern, however, that a broker-dealer,

such as Merrill Lynch, or a subsidiary

providing a hedge for the issuer will

incur position exposure. As discussed

in the prior approval orders for similar

instruments (e.g., the MITTS), the

Commission believes this concern is

minimal given the size of Select Ten

Notes issuance is relation to the net

worth of Merrill Lynch.

The Commission also believes that the

listing and trading of Select Ten Notes

should not unduly impact the market

for the underlying securities comprising

the Select Ten Index. First, the

underlying securities comprising the

DJIA, from which the Select Ten Index

components are selected, are wellcapitalized, highly liquid stocks.

Second, because all of the components

of the Select Ten Index will be equally

weighted, initially and immediately

following each annual reconstitution of

the Select Ten Index, no single stock or

group of stocks will likely dominate the

Select Ten Index. Finally, the issues of

the underlying securities comprising the

Select Ten Index, are subject to

reporting requirements under the Act,

and all of the portfolio securities are

either listed or traded on, or traded

through the facilities of, U.S. securities

markets. Additionally, the Amex’s

surveillance procedures will serve to

deter as well as detect any potential

manipulation.

Finally, the Commission notes that

the value of the Select Ten Index will

Federal Register / Vol. 66, No. 105 / Thursday, May 31, 2001 / Notices 29617

21See supra note 17.

22 15 U.S.C. 78f(b).

23 15 U.S.C. 78s(b)(2).

24 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3 15 U.S.C. 78s(b)(3)(A).

4 17 CFR 240.19b–4(f)(6).

5 ISE provided written notice to the Commission

on May 14, 2001 of its intent to file this proposal.

See Rule 19b–4(f)(6)(iii). 17 CFR 240.19b–4(f)(6)(iii). 6 15 U.S.C. 78f(b)(5).

be disseminated at least once every

fifteen seconds throughout the trading

day. The Commission believes that

providing access to the value of the

Select Ten Index at least once every

fifteen seconds throughout the trading

day is extremely important and will

provide benefits to investors in the

product.

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 Amex has

requested accelerated approval because

this produce is similar to several other

instruments currently listed and traded

on the Amex and the NYSE.21 In

determining to grant the accelerated

approval for good cause, the

Commission notes that the Select Ten

Index is a portfolio of highly capitalized

and actively traded securities similar to

hybrid securities products that have

been approved by the Commission for

U.S. exchange trading. Additionally,

Select Ten Notes will be listed pursuant

to existing hybrid security listing

standards as described below. Moreover,

the Index’s applicable equal-dollar

weighting methodology is a commonly

applied index calculation method.

Based on the above, the Commission

finds, consistent with section 6(b) of the

Act,22 that there is good cause for

accelerated approval of the product.

V. Conclusion

It Is Therefore Ordered, pursuant to

section 19(b)(2) of the Act,23 that the

proposed rule change (SR–Amex–2001–

28), is hereby approved on an

accelerated basis.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.24

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–13634 Filed 5–30–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44349; File No. SR–ISE–

2001–14]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

International Securities Exchange LLC

to Conform Its Rules to Reflect

Decimal Pricing

May 24, 2001.

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 May 23,

2001, the International Securities

Exchange LLC (‘‘ISE’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I, II and III below, which Items

have been prepared by the ISE. The

Exchange filed the proposal pursuant to

section 19(b)(3)(A) of the Act,3 and Rule

19b–4(f)(6) thereunder,4 which renders

the proposal effective upon filing with

the Commission.5 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 ISE proposes to amend its rules

to conform to decimal pricing. The text

of the proposed rule change is available

at the ISE 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

ISE included statements concerning the

purpose of and basis for its proposal and

discussed any comments it received

regarding the proposal. The text of these

statements may be examined at the

places specified in Item IV below. The

ISE 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 options markets (along with the

markets for the underlying equity

securities) have completed their

conversion to decimal pricing. The ISE

is proposing amendments to its rules to

reflect the fact that is has phased out

fractional increments and that all

pricing is now in decimals. The ISE is

not proposing any changes to the

current trading increments.

2. Statutory Basis

The ISE believes that the proposal is

consistent with the provisions of section

6(b)(5) of the Act 6 which requires that

an exchange have rules that are

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 transactions in securities, to

remove impediments to and perfect the

mechanism for a free and open market

and a national market system, and, in

general, to protect investors and the

public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The ISE does not believe that the

proposed rule change will impose any

burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received from

Members, Participants or Others

The Exchange has not solicited, and

does not intend to solicit, comments on

this proposed rule change. The

Exchange has not received any

unsolicited written comments from

members or other interested parties.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Because the foregoing proposed rule

change does not:

(i) Significantly affect the protection

of investors or the public interest;

(ii) impose any significant burden on

competition; and

(iii) become operative for 30 days

from the date on which it was filed, or

such shorter time as the Commission