Document ID: SEC-2007-1442-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2007-10-16T04:00Z

[Federal Register: October 16, 2007 (Volume 72, Number 199)]
[Notices]               
[Page 58689-58691]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16oc07-118]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56629; File No. SR-Amex-2007-87]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change, as Modified by Amendment No. 1, To Amend Section 107 of 
the Amex Company Guide To Provide an Exception to the Initial Minimum 
Public Distribution Listing Requirement

October 9, 2007.
    Pursuant to Section 19(b)(1)\1\ of the Securities Exchange Act of 
1934 (``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on August 9, 2007, American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule changes as described in Items I and 
II below, which items have been prepared by the Exchange. On October 4, 
2007, the Exchange submitted Amendment No. 1 to the proposed rule 
change. The Commission is publishing this notice to solicit comments on 
the proposed rule change, as amended, from interested persons, and is 
granting accelerated approval to the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Sections 107A, 107C, 107D, 107E, and 
107F of the Amex Company Guide (``Company Guide'') to provide an 
exception to the initial minimum public distribution listing 
requirement of one million trading units for certain equity linked term 
notes (``Equity-Linked Notes''), index-linked exchangeable notes 
(``Index-Linked Exchangeable Notes''), index-linked securities 
(``Index-Linked Securities''), commodity-linked securities 
(``Commodity-Linked Securities''), and currency-linked securities 
(``Currency-Linked Securities'') (collectively, ``Section 107 
Securities'').
    The text of the proposed rule change is available at the Exchange, 
the Commission's Public Reference Room, and http://www.amex.com.

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 III below. The Amex has prepared summaries, set forth in Sections 
A, B and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange states that the purpose of this proposal is to permit 
the listing of certain Section 107 Securities even though the minimum 
public distribution requirement of one million trading units has not 
been met at the time of listing. This exception would be conditioned on 
whether the particular issue provides for the redemption of securities 
at the option of the holders on at least a weekly basis. In addition, 
the Exchange proposes to revise the text of the ``General Criteria'' in 
each of Sections 107C(a), 107D(a), 107E(a) and 107F(a) to eliminate 
repetitive rule text that is incorporated by reference to Section 107A 
of the Company Guide.
    Pursuant to Section 107 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 
securities, bonds, debentures, or warrants.\4\ The general listing 
criteria relating to issuers and the issuance are set forth in Section 
107A of the Company Guide. The Exchange in connection with a potential 
listing of Section 107 Securities evaluates each security against the 
following criteria in Section 107A: (1) A market value of at least $4 
million; and (2) a minimum

[[Page 58690]]

public distribution requirement of one million trading units with a 
minimum of 400 public shareholders. Two exceptions to these initial 
listing requirements exist. First, the minimum public distribution 
requirement is not applicable to an issue traded in thousand dollar 
denominations. Second, the minimum public shareholder requirement does 
not apply to securities redeemable at the option of the holder on at 
least a weekly basis.
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    \4\ See Securities Exchange Act Release No. 27753 (March 1, 
1990), 55 FR 8626 (March 8, 1990) (SR-Amex-89-29).
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    The listing criteria also provides that the issuer must have assets 
in excess of $100 million and 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 stockholders' equity of at least $20 million.
    The Exchange over the past several years added several different 
generic listing standards in Section 107 for Equity Linked Notes, 
Index-Linked Exchangeable Notes, Index-Linked Securities, Commodity-
Linked Securities, Currency-Linked Securities, and trust certificate 
securities. These requirements are set forth in Sections 107B,\5\ 
107C,\6\ 107D,\7\ 107E,\8\ 107F,\9\ and 107G\10\ of the Company Guide, 
respectively. In each case, an initial minimum public distribution of 
at least one million trading units is required, except where a security 
is traded in thousand dollar denominations. The Exchange submits that 
an exception to the minimum public distribution requirement of one 
million trading units is necessary for the successful listing of 
Section 107 Securities that provide for redemption at the option of the 
holders on at least a weekly basis.
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    \5\ See Securities Exchange Act Release No. 32343 (May 20, 
1993), 58 FR 30833 (May 27, 1993) (SR-Amex-92-42). See also 
Securities Exchange Act Release Nos. 42582 (March 27, 2000), 65 FR 
17685 (April 4, 2000) (SR-Amex-99-42) and 47055 (December 19, 2002), 
67 FR 79669 (December 30, 2002) (SR-Amex-2002-110).
    \6\ See Securities Exchange Act Release No. 44621 (July 30, 
2001), 66 FR 41064 (August 6, 2001) (SR-Amex-2001-23).
    \7\ See Securities Exchange Act Release No. 51258 (February 25, 
2005), 70 FR 10700 (March 4, 2005) (SR-Amex-2005-001).
    \8\ See Securities Exchange Act Release No. 55794 (May 22, 
2007), 72 FR 29558 (May 29, 2007) (SR-Amex-2007-45).
    \9\ Id.
    \10\ See Securities Exchange Act Release No. 50355 (September 
13, 2004), 69 FR 56252 (September 20, 2004).
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    Sections 107A(b), 107B(a), 107C(a), 107D(a), 107E(a) and 107F(a) 
currently provide an exception to new listings of Section 107 
Securities from the otherwise applicable requirement that the issue 
have 400 public shareholders upon listing, but only if the issue 
provides for the redemption of securities at the option of the holders 
on at least at weekly basis.\11\ The Exchange believes that, where 
there is a weekly redemption right, the same justification exists for 
an exception from the minimum public distribution requirement to have 
one million units issued at the time of listing.
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    \11\ See Securities Exchange Act Release No. 55733 (May 10, 
2007), 72 FR 27602 (May 16, 2007) (SR-Amex-2007-34).
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    The Exchange believes that a weekly redemption right will ensure a 
strong correlation between the market price of Section 107 Securities 
and the performance of the underlying asset, such as a single security, 
basket of securities and/or securities index, as holders will be 
unlikely to sell their securities for less than their redemption value 
if they have a weekly right to be redeemed for their full value. In 
addition, in the case of certain Section 107 Securities with a weekly 
redemption feature, the issuer may have the ability to issue new 
securities from time to time at market prices prevailing at the time of 
sale, at prices related to market prices or at negotiated prices. This 
provides a ready supply of new securities, thereby reducing the 
potential that Section 107 Security market prices will be affected by a 
scarcity of available securities. In addition, the ability to issue new 
securities may assist in maintaining a strong correlation between the 
market price and indicative value of such securities during the trading 
day, as investors will unlikely be willing to pay more than the 
indicative value in the open market if they can acquire the securities 
from the issuer at such price. The Exchange states that this is based 
largely on potential arbitrage opportunities that should mitigate the 
effect of any price differentials.
    The Exchange believes that the ability to list Section 107 
Securities with these characteristics without an initial minimum holder 
and initial minimum public distribution requirement is important to the 
successful listing of such securities. Issuers issuing these types of 
Section 107 Securities generally do not intend to do so by way of an 
underwritten offering, but instead, initially distribute the securities 
similar to the manner in which exchange-traded funds, or ``ETFs,'' are 
brought to market. In the case of an ETF, shares are initially launched 
or distributed without a significant distribution event with the share 
float increasing over time as securities in creation unit size are 
issued from the issuer at net asset value (``NAV''). Because of market 
dynamics and the purchasing behavior of investors, it is difficult for 
an issuer to be able to guarantee a specific number of units on the 
date of listing in order to meet the initial minimum one million 
trading unit requirement. However, the Exchange believes that this 
difficulty in ensuring the sale of one million units on the listing 
date is not indicative of a likely long-term lack of liquidity in the 
securities or, for the reasons set forth in the prior paragraph, of a 
difficulty in establishing a pricing equilibrium in the securities or a 
successful two-sided market.
    Accordingly, the Exchange submits that the existence of a weekly 
redemption option justifies this limited exception to the minimum 
public distribution requirement.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\12\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\13\ in particular in that it 
is designed to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaging in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, to remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition 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

    No written comments were solicited, or received, with respect to 
the proposed rule change, by Amex.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing,

[[Page 58691]]

including whether the proposed rule change is consistent with the Act. 
Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
 ); or     Send e-mail to rule-comments@sec.gov. Please include File 

Number SR-Amex-2007-87 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC, 20549-1090.

All submissions should refer to File Number SR-Amex-2007-87. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml 

). 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, 100 F Street, NE., Washington, DC 
20549, on official business days between the hours of 10 a.m. and 3 
p.m. Copies of such filing also will be available for inspection and 
copying at the principal office of the Exchange. All comments received 
will be posted without change; the Commission does not edit personal 
identifying information from submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File number SR-Amex-2007-87 and should be submitted by 
November 6, 2007.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the 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 \14\ and, in particular, the requirements of Section 6 of the 
Act.\15\ Specifically, the Commission finds that the proposed rule 
change is consistent with Section 6(b)(5) of the Act,\16\ which 
requires, among other things, that the rules of a national securities 
exchange be 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, to remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest.
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    \14\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \15\ 15 U.S.C. 78f.
    \16\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that this proposal should benefit investors 
by providing an exception to the minimum public distribution 
requirements for Section 107 Securities with a weekly redemption right. 
The Commission believes that the market price of Section 107 Securities 
with a weekly redemption right should exhibit a strong correlation to 
the performance of the relevant underlying index or asset, since 
holders of such securities will be unlikely to sell them for less than 
their redemption value if they have a weekly right to be redeemed for 
their full value. The Commission believes that this exception is 
reasonable and should allow for the listing and trading of certain 
Section 107 Securities that would otherwise not be able to be listed 
and traded on the Exchange.
    The Commission finds good cause for approving the proposed rule 
change prior to the 30th day after the date of publication of the 
notice of filing thereof in the Federal Register. The Commission does 
not believe that the Exchange's proposal raises any novel regulatory 
issues.\17\ In addition, the Commission believes that accelerating 
approval of this proposal should benefit investors by creating, without 
undue delay, additional competition in the market for Section 107 
securities.
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    \17\ See Securities Exchange Act Release No. 56271 (August 16, 
2007), 72 FR 47107 (August 22, 2007) (SR-NYSE-2007-74).
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    Therefore the Commission finds good cause, consistent with Section 
19(b)(2) of the Act,\18\ to approve the proposed rule change on an 
accelerated basis.
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    \18\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\19\ that the proposed rule change, as amended (SR-Amex-2007-87), 
be, and it hereby is, approved on an accelerated basis.
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    \19\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-20359 Filed 10-15-07; 8:45 am]

BILLING CODE 8011-01-P