[Federal Register Volume 66, Number 250 (Monday, December 31, 2001)]
[Notices]
[Pages 67610-67614]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-32032]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45178; File No. SR-PHLX-00-68]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of a Proposed Rule Change and Amendment 
Nos. 1, 2, and 3 by the Philadelphia Stock Exchange, Inc. Related to 
Generic Listing Standards Applicable to Trust Shares Pursuant to Rule 
19-4(e) Under the Securities Exchange Act of 1934

December 20, 2001.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that on September 7, 2000, the Philadelphia Stock Exchange, Inc. 
(``PHLX'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by the PHLX. The PHLX filed Amendment Nos. 1, 2, and 3 to the proposal 
on September 7, 2000,\3\ September 12, 2001,\4\ and December 18, 
2001,\5\ respectively. The Commission is

[[Page 67611]]

publishing this notice to solicit comments on the proposed rule change 
and on Amendment Nos. 1, 2, and 3 from interested persons and to 
approve the proposal, as amended, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Carla Behnfeldt, Director, Legal Department 
New Product Development Group, PHLX, to Nancy Sanow, Division of 
Market Regulation (``Division''), Commission, dated September 26, 
2000 (``Amendment No. 1''). In Amendment No. 1, the PHLX indicated 
that in the event the PHLX proposes to list and trade a series of 
Trust Shares that do not satisfy the generic criteria provided in 
the proposal, the PHLX will submit to the Commission a proposed rule 
change pursuant to Rule 19b-4 with respect to the series.
    \4\ See letter from Carla Behnfeldt, Director, Legal Department 
New Product Development Group, PHLX, to Yvonne Fraticelli, Special 
Counsel, Division, Commission, dated September 12, 2001 (``Amendment 
No. 2''). Amendment No. 2 indicates that: (1) The PHLX currently 
does not list any Trust Shares, although it trades shares of the 
Nasdaq 100 Trust pursuant to unlisted trading privileges (``UTP''); 
(2) the PHLX is amending PHLX Rule 803(i)(11)(e) to indicate that 
the minimum trading increment for a series of Trust Shares will be 
$0.01; (3) the PHLX will issue a circular to members for each Trust 
Shares series listed pursuant to Rule 19b-4(e) under the Act, which 
will describe the unique characteristics and risks of Trust Shares, 
and inform members of any obligation to deliver a written product 
description or prospectus, as applicable to purchasers of Trust 
Shares, and inform members of their responsibilities under PHLX 
Rules 746, ``Diligence as to Accounts,'' and 747, ``Approval of 
Accounts,'' in connection with customer transactions in Trust 
Shares; (4) Trust Shares are subject to, among others, the PHLX's 
general agency-auction rules, trading rules, clearance and 
settlement rules, equity margin rules, priority, parity, and 
precedence rules, rules governing the responsibilities of 
specialists, trading halt rules and procedures, and account opening 
requirements; (5) any series of Trust Shares traded pursuant to the 
standards in PHLX Rule 803(i)(11) must meet the eligibility criteria 
in PHLX Rule 803(i)(11) as of the date of the initial deposit of 
securities and cash into the trust; (6) the initial deposit of a 
specified portfolio of securities in connection with the issuance of 
shares of a series of Trust Shares must be made before the start of 
trading on the PHLX; (7) unless the PHLX maintains an index, the 
current index value will be disseminated every 15 seconds over the 
Consolidated Tape Association's (``CTA'') Network B by or through 
the primary exchange or an entity working with that exchange; and 
(8) Trust Shares are subject to PHLX Rules 133, ``Trading Halts Due 
to Extraordinary Market Volatility,'' and 136, ``Trading Halts in 
Certain Exchange Traded Funds.''
    \5\ See letter from Carla Behnfeldt, Director, Legal Department 
New Product Development Group, PHLX, to Yvonne Fraticelli, Special 
Counsel, Division, Commission, dated December 17, 2001 (``Amendment 
No. 3''). In Amendment No. 3, the PHLX revised the text of PHLX Rule 
803(i)(11) to indicate: (1) that the provisions of PHLX Rule 
803(i)(11) apply to Trust Shares listed or traded pursuant to UTP; 
and (2) that the minimum trading increment for Trust Shares will be 
$0.01. In addition, in Amendment No. 3 the PHLX represented that it 
will use its existing surveillance procedures for Trust Shares to 
monitor trading in Trust Shares traded pursuant to Rule 19b-4(e). 
Amendment No. 3 also stated that the PHLX will issue a circular to 
members for each Trust Shares series listed or traded on a UTP basis 
pursuant to Rule 19b-4(e) under the Act, and reiterated the 
statements made in Amendment No. 2 concerning the information that 
the circular will provide.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The PHLX proposes to amend PHLX Rule 803(i), ``Trust Shares,'' by 
adopting PHLX Rule 803(i)(11), which will provide standards to permit 
the trading, whether by listing or pursuant to UTP, of Trust Shares 
pursuant to Rule 19b-4(e) under the Act.\6\
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    \6\ 17 CFR 240.19b-4(e). Rule 19b-4(e) under the Act permits 
self-regulatory organizations (``SROs'') to list and trade new 
derivatives products that comply with existing SRO trading rules, 
procedures, surveillance programs and listing standards without 
submitting a proposed rule change under section 19(b) of the Act. 
See Securities Exchange Act Release No. 40761 (December 8, 1998), 63 
FR 70952 (December 22, 1998) (``1998 Release'').
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    The text of the proposed rule change is available at the PHLX 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 PHLX 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 PHLX 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
    PHLX Rule 803(i) accommodates the trading on the PHLX of Trust 
Shares, which represent interests in a unit investment trust 
(``Trust'') that operates on an open-end basis and holds a portfolio of 
securities. Each Trust is designed to provide investors with an 
instrument that closely tracks the underlying securities portfolio, 
trades like a share of common stock, and pays to holders of Trust 
Shares periodic dividends proportionate to those paid with respect to 
the underlying portfolio of securities, less expenses, as described in 
the applicable Trust prospectus.
    The PHLX proposes to amend PHLX Rule 803(i) by adopting proposed 
PHLX Rule 803(i)(11), which will provide standards to permit the 
listing and trading, including trading on a UTP basis, of Trust Shares 
pursuant to rule 19b-4(e) under the Act. Rule 19b-4(e) states that the 
listing and trading of a new derivative securities product by a SRO 
shall not be deemed a proposed rule change if the Commission has 
approved, pursuant to Section 19(b) of the Act,\7\ the SRO's trading 
rules, procedures, and listing standards for the product class that 
would include the new derivative securities product and the SRO has a 
surveillance program for the product class.\8\
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    \7\ 15 U.S.C. 78s(b).
    \8\ See 1998 Release, supra note 6.
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    The PHLX adopted PHLX Rule 803(i) to permit the listing and trading 
of Trust Shares.\9\ Under PHLX Rule 803(i), the PHLX had anticipated 
filing proposed rule changes pursuant to Rule 19b-4 under the Act for 
each series of Trust Shares to be traded on the PHLX. The PHLX now 
believes, however, that the adoption of proposed PHLX Rule 803(i)(11) 
will further the intent of PHLX Rule 803(i) by facilitating the 
commencement of trading in Trust Shares, subject to the generic 
standards for Trust Shares in proposed PHLX Rule 803(i)(11), without 
the need for notice and comment and Commission approval under Section 
19(b) of the Act. The PHLX believes that this has the potential to 
reduce the time frame for bringing Trust Shares to market.
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    \9\ See Securities Exchange Act Release No. 43717 (December 13, 
2000), 65 FR 80976 (December 22, 2000) (order approving File No. SR-
PHLX-00-54) (``Trust Shares Order''). The PHLX currently does not 
list any Trust Shares. The PHLX trades shares of the Nasdaq 100 
Trust on a UTP basis pursuant to the Trust Shares Order. See 
Amendment No. 2, supra note 4.
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    The PHLX proposes that Trust Shares listed or traded on a UTP basis 
pursuant to Rule 19b-4(e) be subject to the specific generic criteria 
set forth in proposed PHLX Rule 803(i)(11). The PHLX notes that all 
other provisions of PHLX Rule 803(i) would continue to apply to such 
securities.
    Proposed PHLX Rule 803(i)(11) sets forth generic listing criteria 
that are intended to ensure that a substantial portion of the weight of 
an index or portfolio underlying Trust Shares is accounted for by 
stocks with substantial market capitalization and trading volume. 
Proposed PHLX Rule 803(i)(11) provides that, upon the initial listing 
of a series of Trust Shares pursuant to Rule 19b-4(e), the component 
stocks that in the aggregate account for at least 90% of the weight of 
the index or portfolio must have minimum market value of at least $75 
million. In addition, the component stocks in the index or portfolio 
must have a minimum monthly trading volume during each of the last six 
months of at least 250,000 shares for stocks representing at least 90% 
of the weight of the index or portfolio.
    The most heavily weighted component stock in an underlying index 
cannot exceed 25% of the weight of the index or portfolio, and the five 
most heavily weighted component stocks cannot exceed 65% of the weight 
of the index or portfolio. The underlying index or portfolio must 
include a minimum of 13 stocks, which is the minimum number to permit 
qualification as a regulated investment company under subchapter M of 
the Internal Revenue Code. All securities in an underlying index or 
portfolio must be listed on a national securities exchange or the 
Nasdaq Stock Market (including the Nasdaq SmallCap Market).
    Any series of Trust Shares traded pursuant to the standards in 
proposed PHLX Rule 803(i)(11) must meet the eligibility criteria in 
proposed PHLX Rule 803(i)(11) as of the date of the initial deposit of 
securities and cash into the trust.\10\ The PHLX will request issuers 
of a series of Trust Shares listed under PHLX Rule 803(i)(11) to 
represent to the PHLX that the index or portfolio of securities 
underlying the series will comply with the applicable eligibility 
criteria as of the date of the initial deposit.\11\
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    \10\ See Amendment No. 2, supra note 4.
    \11\ See Amendment No. 2, supra note 4.
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    Proposed PHLX Rule 803(i)(11) provides that the underlying index 
will be calculated based on either the market capitalization, modified 
market capitalization, price, equal-dollar, or modified equal-dollar 
weighting methodology. In addition, if the index is maintained by a 
broker-dealer, the broker-dealer must erect a ``fire wall'' around the 
personnel who have access to information concerning changes and 
adjustments to the index, and the index shall be calculated by a third 
party who is not a broker-dealer. The current index value must be 
disseminated every 15 seconds over the CTA's Network B.\12\
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    \12\ Unless the PHLX maintains the index, the PHLX understands 
that the primary exchange or another entity working with that 
exchange will disseminate the current value of the index. See 
Amendment No. 2, supra note 4.
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    The Reporting Authority \13\ will disseminate for each series of 
Trust

[[Page 67612]]

Shares an estimate, updated every 15 seconds, of the value of a share 
of each series. This may be based, for example, upon the index value or 
upon current information regarding the required deposit of securities 
and cash to permit creation of new shares of the series.
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    \13\ The Reporting Authority with respect to a series of Trust 
Shares is the PHLX, a wholly-owned subsidiary of the PHLX, an 
institution (including the Trustee for Trust Shares), or a reporting 
service designated by the PHLX or its subsidiary or by the exchange 
that lists a particular series of Trust Shares (if the PHLX is 
trading a series of Trust Shares pursuant to UTP) as the official 
source for calculating and reporting information relating to the 
series, including any current index or portfolio value; the current 
value of the portfolio of securities required to be deposited to the 
Trust in connection with the issuance of Trust Shares; the amount of 
any dividend equivalent payment or cash distribution to holders of 
Trust Shares, net asset value or other information relating to the 
creation, redemption, or trading of Trust Shares. See PHLX Rule 
803(i)(1)(ii).
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    Proposed PHLX Rule 803(i)(11)(d) provides that a minimum of 100,000 
shares of a series of Trust Shares must be outstanding at the start-up 
of trading.\14\ The PHLX believes that this minimum number will be 
sufficient to establish a liquid PHLX market at the start of trading.
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    \14\ The initial deposit of a specified portfolio of securities 
in connection with the issuance of the minimum of 100,000 shares of 
a series of Trust Shares must be made before the start of trading on 
the PHLX. See Amendment No. 2, supra note 4.
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    The minimum trading increment for a series of Trust Shares will be 
$0.01.\15\
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    \15\ See Amendment Nos. 2 and 3, supra notes 4 and 5.
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    The original listing fee for each series of Trust Shares will be 
$7,500, with an annual maintenance listing fee of $1,250.
    The PHLX represents that it will implement written surveillance 
procedures for Trust Shares and that it will use its existing 
surveillance procedures for Trust Shares to monitor trading in Trust 
Shares traded pursuant to Rule 19b-4(e).\16\ In addition, the PHLX 
states that it will comply with all of the recordkeeping requirements 
of Rule 19b-4(e) and that it will file Form 19b-4(e) for each series of 
Trust Shares listed under Rule 19b-4(e) within five business days of 
the commencement of trading.
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    \16\ See Amendment No. 3, supra note 5.
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    The provisions of PHLX Rule 803(i)(11) will apply to all series of 
Trust Shares listed or traded on a UTP basis pursuant to Rule 19b-4(e). 
In addition to the requirements of proposed PHLX Rule 803(i)(11), Trust 
Shares also will be subject to other PHLX rules. Specifically, the PHLX 
notes that dealings in Trust Shares on the PHLX are conducted pursuant 
to the PHLX's general agency-auction trading rules.\17\ In addition, 
Trust Shares are subject to, among others, the general dealing and 
settlement rules of the PHLX, including the PHLX's rules on clearance 
and settlement of securities transactions and the PHLX's equity margin 
rules; the PHLX's rules governing priority, parity, and precedence of 
orders; the PHLX's rules regarding responsibilities of the specialist; 
and the PHLX's account opening requirements.\18\
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    \17\ See Amendment No. 2, supra note 4.
    \18\ See Amendment No. 2, supra note 4.
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    Trust Shares also are subject to PHLX Rule 133, ``Trading Halts due 
to Extraordinary Market Volatility,'' and PHLX Rule 136, ``Trading 
Halts in Certain Exchange Traded Funds.'' \19\ In exercising discretion 
under PHLX Rule 136, PHLX officials may consider a variety of factors, 
including the extent to which trading has been halted or suspended in 
the market that is the primary market for a plurality of the underlying 
stocks, and whether other unusual conditions or circumstances 
detrimental to the maintenance of a fair and orderly market are 
present.\20\
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    \19\ See Amendment No. 2, supra note 4.
    \20\ See Amendment No. 2, supra note 4.
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    The PHLX will issue a circular to members for each series of Trust 
Shares listed, or traded on a UTP basis, pursuant to Rule 19b-4(e).\21\ 
The circular will describe the unique characteristics and risks of 
Trust Shares and will inform members of any obligation to deliver a 
written product description or prospectus, as applicable, to purchasers 
of Trust Shares.\22\ The circular will inform members of their 
responsibilities under PHLX Rule 746, ``Diligence as to Accounts,'' and 
PHLX Rule 747, ``Approval of Accounts,'' in connection with customer 
transactions in Trust Shares.\23\
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    \21\ See Amendment Nos. 2 and 3, supra notes 4 and 5.
    \22\ See Amendment Nos. 2 and 3, supra notes 4 and 5.
    \23\ See Amendment Nos. 2 and 3, supra notes 4 and 5.
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(2) Basis
    The PHLX believes that the proposed rule change is consistent with 
Section 6(b) of the Act, in general, and furthers the objectives of 
Section 6(b)(5) of the Act, 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 transactions in 
securities, and, in general, to protect investors and the public 
interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The PHLX does not believe that the proposed rule change will impose 
any inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor 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 and Amendment Nos. 1, 2, and 3 are 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 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 PHLX. All 
submissions should refer to file number SR-PHLX-00-68 and should be 
submitted by January 22, 2002.

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

    The PHLX has asked the Commission to approve the proposal on an 
accelerated basis because the PHLX has proposed standards for Trust 
Shares that are substantially similar to those adopted by the American 
Stock Exchange, LLC (``Amex'') for the listing and trading of Portfolio 
Depository Receipts (``PDRs'') pursuant to Rule 19b-4(e).\24\ The PHLX 
does not believe that its proposal presents any new investor protection 
issues that were not addressed during the notice and comment period for 
the Amex's

[[Page 67613]]

proposal to provide standards to permit the listing and trading of PDRs 
pursuant to Rule 19b-4(e).
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    \24\ See Amex Rule 1000, Commentary .03. See also Securities 
Exchange Act Release No. 42787 (May 15, 2000), 65 FR 33598 (May 24, 
2000) (order approving File No. SR-Amex-00-14) (``Amex Order''). The 
Amex Order also approved standards to permit the listing and trading 
of Index Fund Shares pursuant to the Rule 19b-4(e).
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    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 \25\ in 
that it is designed 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, and, in general, to 
protect investors and the public interest.\26\
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    \25\ 15 U.S.C. 78f(b)(5).
    \26\ In approving the proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
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    Trust Shares are securities that are interests in a Trust that 
holds a portfolio of securities linked to an index. Each Trust is 
designed to provide investors with an instrument that closely tracks 
the underlying portfolio of securities, trades like a share of common 
stock, and pays holders of the instrument periodic dividends 
proportionate to those paid with respect to the underlying portfolio of 
securities, less certain expenses, as described in the Trust 
prospectus.\27\
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    \27\ See Trust Shares Order, supra note 9.
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    As noted above, the Commission previously approved a PHLX proposal 
that permits the listing and trading, or trading pursuant to UTP, of 
Trust Shares on the PHLX.\28\ In approving these securities of trading, 
the Commission considered the structure of these securities, their 
usefulness to investors and to the markets, and the PHLX rules that 
govern their trading. The Commission's approval of the current 
proposal, which establishes generic listing standards for Trust Shares, 
will allow series of Trust Shares that satisfy the generic listing 
standards in PHLX Rule 803(i)(11) to begin trading under Rule 19b-4(e) 
without the need for notice and comment and Commission approval. As 
noted above, Rule 19b-4(e) provides that the listing and trading of a 
new derivative securities product by a SRO shall not be deemed a 
proposed rule change pursuant to Rule 19b-4(c)(1) if the Commission has 
approved, pursuant to Section 19(b) of the Act, the SRO's trading 
rules, procedures and listing standards for the product class that 
includes the new derivative securities product class, and the SRO has a 
surveillance program for the product class.\29\ The PHLX's ability to 
rely on Rule 19b-4(e) for Trust Shares potentially reduces the time 
frame for bringing Trust Shares to the market or for permitting the 
trading of Trust Shares pursuant to UTP, and thus enhances investors' 
opportunities. The Commission notes that while the proposal will reduce 
the PHLX's regulatory burden, the Commission maintains regulatory 
oversight over any products listed under the generic standards through 
regular inspection oversight.
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    \28\ See Trust Shares Order, supra note 9.
    \29\ See 1998 Release, supra note 6.
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    The Commission also finds that the proposal contains adequate rules 
and procedures to govern the trading of Trust Shares under rule 19b-
4(e). All series of Trust Shares listed under the generic standards 
will be subject to the full panoply of PHLX rules and procedures that 
would govern the trading of Trust Shares listed on the PHLX or traded 
pursuant to UTP. Accordingly, any series of Trust Shares listed and 
traded, or traded on a UTP basis, under rule 19b-4(e) would be subject 
to the PHLX rules governing the trading of equity securities including, 
among others, rules and procedures governing trading halts, disclosures 
to members, responsibilities of the specialist, account opening and 
customer suitability requirements, and margin.\30\
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    \30\ See Amendment No. 2, supra note 4.
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    In addition, the PHLX has developed specific listing criteria for 
series of Trust Shares qualifying for rule 19b-4(e) treatment that will 
help to ensure that a minimum level of liquidity will exist to allow 
for the maintenance of fair and orderly markets. The Commission 
believes that the proposed generic listing standards ensure that the 
securities composing the indexes and portfolios underlying Trust Shares 
are well capitalized and actively traded. These capitalization and 
liquidity criteria should serve to prevent fraudulent or manipulative 
acts involving Trust Shares.
    In addition, all series of Trust Shares listed or traded under the 
generic standards will be subject to the PHLX's existing continuing 
listing criteria. This requirement will allow the PHLX to consider the 
suspension of trading and the delisting of a series if an event occurs 
that makes further dealing in such securities inadvisable. The 
Commission believes that this will give the PHLX flexibility to delist 
Trust Shares if circumstances warrant such action.
    The PHLX will use its existing surveillance procedures for Trust 
Shares to monitor trading in Trust Shares traded pursuant to Rule 19b-
4(e).\31\ The Commission believes that these surveillance procedures 
are adequate to address concerns associated with listing and trading 
Trust Shares under the generic standards. In addition, the PHLX 
represents that it will file Form 19b-4(e) with the Commission within 
five business days of the commencement of trading a series under the 
generic standards, and will comply with all Rule 19b-4(e) recordkeeping 
requirements.
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    \31\ See Amendment No. 3, supra note 5.
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    The Commission also notes that certain concerns are raised when a 
broker-dealer is involved in both the development and the maintenance 
of a stock index upon which a product such as Trust Shares is based. 
The proposal provides that, in such circumstances, the broker-dealer 
must have procedures in place to prevent the misuse of material, non-
public information regarding changes and adjustments to the index and 
that the index value must be calculated by a third party who is not a 
broker-dealer. The Commission believes that these requirements should 
help to address concerns raised by a broker-dealer's involvement in the 
management of such an index.
    Finally, the Commission believes that the PHLX's rules will ensure 
that investors have information that will allow them to be apprised 
adequately of the terms, characteristics, and risks of trading Trust 
Shares. The PHLX will require members and member organizations to 
provide all purchasers of Trust Shares with a written description of 
the terms and characteristics of Trust Shares, to include this written 
description in sales materials provided to customers or the public, to 
include a specific statement relating to the availability of the 
description in other types of materials distributed to customers or the 
public, and to provide a copy of the prospectus when requested by a 
customer.\32\ A PHLX member or member organization carrying an omnibus 
account for a non-member broker-dealer must inform a non-member that 
the execution of an order to purchase a series of Trust Shares for such 
omnibus account will be deemed to constitute an agreement by the non-
member to make the written description available to its customers.\33\
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    \32\ See PHLX Rule 803(i)(3).
    \33\ See PHLX Rule 803(i)(3).
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    The Commission also notes that upon the initial listing, or trading 
pursuant to UTP, of any Trust Shares under the generic standards, the 
PHLX will issue a circular to its members explaining the

[[Page 67614]]

unique characteristics and risks of this type of security.\34\ The 
circular also will note the PHLX members' prospectus or product 
description delivery requirements, and highlight the characteristics of 
purchases in a particular series of Trust Shares.\35\ The circular also 
will inform members of their responsibility under PHLX Rules 746 and 
747 in connection with customer transactions in Trust Shares.\36\ The 
Commission believes that these requirements will help to ensure 
adequate disclosure to investors about the terms and characteristics of 
a particular series of Trust Shares.
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    \34\ See Amendment Nos. 2 and 3, supra notes 4 and 5.
    \35\ See Amendment Nos. 2 and 3, supra notes 4 and 5.
    \36\ See Amendment Nos. 2 and 3, supra notes 4 and 5.
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    The Commission finds good cause for approving the proposed rule 
change and Amendment Nos. 1, 2, and 3 prior to the thirtieth day after 
the date of publication of notice of filing thereof in the Federal 
Register. The Commission notes that the proposed rule change is based 
on the generic listing standards in Amex Rule 1000 et seq., which the 
Commission approved after soliciting public comment pursuant to Section 
19(b)(1) of the Act.\37\ The Commission does not believe that the 
PHLX's proposal raises novel regulatory issues that were not addressed 
previously. Accordingly, the Commission believes it is appropriate to 
permit investors to benefit from the flexibility afforded by these new 
instruments by trading them as soon as possible. Amendment No. 1 
strengthens the PHLX's proposal by indicating that the PHLX will file a 
proposed rule change pursuant to rule 19b-4 if the PHLX proposes to 
list and trade a series of Trust Shares that do not satisfy the 
proposed generic criteria. Amendment No. 2 strengthens the PHLX's 
proposal by clarifying, among other things, that the PHLX will 
distribute an information circular to members for each series of Trust 
Shares describing the characteristics and risks of Trust Shares and by 
indicating that Trust Shares will be subject to PHLX rules governing 
the trading of equity securities, including, among others, rules and 
procedures governing trading halts, responsibilities of specialists, 
account opening requirements, and margin. Amendment No. 3 clarifies the 
text of PHLX Rule 803(i)(11) and indicates that the PHLX will use its 
existing surveillance procedures for Trust Shares to monitor trading in 
Trust Shares traded pursuant to Rule 19b-4(e). Accordingly, the 
Commission believes that there is good cause, consistent with Sections 
6(b)(5) and 19(b)(2) of the Act,\38\ to approve the proposal and 
Amendment Nos. 1, 2, and 3 to the proposal on an accelerated basis.
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    \37\ See Amex Order, supra notes 24.
    \38\ 15 U.S.C. 78f(b)(5) and 78s(b)(2).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (SR-PHLX-00-68), as amended, is approved.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\39\
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    \39\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-32032 Filed 12-28-01; 8:45 am]
BILLING CODE 8010-01-M