Document ID: SEC-2007-0632-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2007-05-03T04:00Z

[Federal Register: May 3, 2007 (Volume 72, Number 85)]
[Notices]               
[Page 24638-24639]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03my07-108]                         

[[Page 24638]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55675; File No. SR-Amex-2006-114]

 
Self-Regulatory Organizations; American Stock Exchange LLC; Order 
Granting Approval to a Proposed Rule Change as Modified by Amendment 
No. 1 Thereto Clarifying the Continued Listing Standards for Units

April 26, 2007.

I. Introduction

    On December 4, 2006, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change pursuant to Section 19(b)(1) 
of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder.\2\ On February 22, 2007, Amex filed Amendment No. 1 to the 
proposed rule change. The proposed rule change, as amended, was 
published for comment in the Federal Register on March 22, 2007 for a 
21-day comment period.\3 \The Commission received no comments on the 
proposal. This order approves the proposed rule change, as modified by 
Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 55479 (March 15, 
2007), 72 FR 13540 (``Notice'').
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II. Description of the Proposal

    Section 1003(g) of the Amex Company Guide currently provides that 
the Exchange will ``normally consider'' suspending or delisting units 
if any of their component parts do not meet the applicable continued 
listing standards. However, if one or more of the components is 
otherwise qualified for listing, such component may remain listed. For 
example, a unit comprised of both a common stock component and a debt 
component would face suspension or delisting procedures if either the 
common stock or the debt component no longer met its applicable 
continued listing standards. As a result, if the debt component failed 
to meet the continued listing standards for bonds, both the unit and 
such debt component would be subject to suspension or delisting 
procedures, but the common stock component could independently remain 
listed and continue to trade on the Exchange, provided such common 
stock component met the continued listing standards for equity 
securities.
    The Exchange proposes to amend Section 1003(g) of the Amex Company 
Guide so that, in the event a component of a unit does not meet its 
continued listing standards, the Exchange would no longer ``consider'' 
suspending or delisting the unit, but would commence a formal continued 
listing evaluation of such component and unit in accordance with 
Section 1009 of the Amex Company Guide.\4\
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    \4\ See Section 1009(j) of the Amex Company Guide. Section 1009 
generally sets forth the suspension and delisting procedures, 
timelines, and requirements applicable to issuers identified as 
being below certain continued listing standards. For example, an 
issuer of particular securities that receives notification from the 
Exchange that it is below the continued listing criteria for such 
securities must publicly announce receipt of such notification and 
the policies and standards upon which the determination is based.
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    The Exchange also proposes to add language to Section 1003(g) on 
the applicability of certain continued listing standards relating to 
components of units that have separated. Under the proposal, when units 
in good standing begin to separate into their component securities, the 
remaining units that are still intact and the components of those units 
which have separated may all be separately listed and continue to 
trade, provided that they meet the applicable continued listing 
standards. The proposal specifies that, in determining whether an 
individual component meets the continued listing distribution standards 
(i.e., number of shares publicly held, number of public shareholders, 
and aggregate market value of shares publicly held) set forth in 
Section 1003(b) of the Company Guide,\5\ the units that are intact and 
freely separable into their component parts will be aggregated with the 
separately-traded components. For example, Amex stated that if 120,000 
shares of common stock are publicly held after their separation from 
their units, and 210,000 intact and freely separable units are publicly 
held, the common stock would be credited with having 330,000 shares 
publicly held, enabling it to satisfy one of the distribution standards 
for common stock, which requires at least 200,000 shares of common 
stock to be publicly held.\6\ If the units are no longer freely 
separable and/or listed on the Exchange, the separately-traded 
components would still be required to meet their applicable continued 
listing standards, but the distribution values would not be 
aggregated.\7\
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    \5\ See, e.g., Section 1003(b)(i) of the Amex Company Guide (in 
the case of common stock, requiring the number of shares publicly 
held to be no less than 200,000, the total number of public 
shareholders to be no less than 300, and the aggregate market value 
of shares publicly held to be no less than $1,000,000 for more than 
90 consecutive days). See also Sections 1003(b)(ii)-(v) of the Amex 
Company Guide (setting forth the applicable distribution and market 
value requirements for warrants, preferred stock, bonds, and closed-
end funds, respectively).
    \6\ See Section 1003(b)(i)(A) of the Amex Company Guide.
    \7\ See proposed Section 1003(g) of the Amex Company Guide. The 
Commission notes that under proposed Section 1003(g), if in the 
above example the units are no longer freely separable into common 
stock, there would be no aggregation of units with the common stock 
for purposes of evaluating whether the units and common stock meet 
the continued listing standards.
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    Despite the fact that the aggregated distribution values satisfy 
the continued listing distribution standards, under the proposal, the 
Exchange would also consider suspending trading in, or removing from 
listing, an individual component or unit when the public distribution 
or aggregate market value of such component or unit becomes so reduced 
as to make continued listing inadvisable. In its review of the 
advisability of the continued listing of an individual component or 
unit under such circumstances, the Exchange proposes to take into 
account the trading characteristics of the component or unit and 
whether it would be in the public interest for trading in such 
component or unit to continue.
    The Exchange also proposes to make technical revisions to Sections 
1003(a), (c), (d) and (f) to consistently use the term ``issuer'' as 
opposed to ``company.''

III. Discussion and Commission's Findings

    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.\8\ In particular, the Commission finds that the proposed rule 
change, as amended, is consistent with the requirements of Section 
6(b)(5) of the Act,\9\ which requires, among other things, that the 
Exchange's rules be designed to promote just and equitable principles 
of trade, 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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    \8\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposal strengthens the 
procedures applicable to units when their components fall below 
continued listing standards, by providing that, in such instances, the 
Exchange would commence a formal evaluation of the components and unit 
pursuant to

[[Page 24639]]

Section 1009 of the Amex Company Guide.
    In addition, the proposal sets forth the application of continued 
listing standards to individual components comprising units once some, 
but not all, of the units have separated into their component parts, by 
specifying that the units that are intact and freely separable into 
their component parts will be counted toward the total distribution 
numbers \10\ required for continued listing of the component. The rule 
change recognizes the practical situation that as investors decide 
whether to separate their unit, there may be a period of time at the 
outset of the separation period when there may be less components 
outstanding than necessary to meet the distribution requirements. 
However, to immediately delist these components during the separation 
period may be unfair to those investors who still have an opportunity 
to separate their components and want to trade them in a public market. 
The rule ensures that to be able to count the units for purposes of the 
distribution requirements for the component parts, the units must be 
freely separable into the components, so there is a reasonable basis 
for assuming that as more units are separated, which adds liquidity to 
the components, the distribution requirements for the components can, 
in fact, be separately met.
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    \10\ See supra note 5 and accompanying text.
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    Under the rule however, if it appears that not enough units will be 
separated to allow the components to meet the public distribution and 
aggregate market value requirements independently or there are other 
concerns, the rule makes clear that Amex should consider delisting the 
components or unit. This recognizes the fact that although the rule 
allows the aggregation of units and components for purposes of 
distribution standards, Amex will need to ensure that there is some 
minimal level of liquidity in each component and unit and should 
consider delisting if the public distribution or the aggregate market 
value of the components or unit has become so reduced as to make 
continued listing on the Exchange inadvisable. In this regard, the 
Exchange will take into account the individual distribution values and 
the trading characteristics of the component or unit and whether it 
would be in the public interest for continued trading of such component 
or unit.\11\
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    \11\ The Commission notes that minimum distribution requirements 
are extremely important to ensure, among other things, the liquidity 
of a security and an active public market. The changes being 
approved for meeting the distribution standards applicable to units 
and their components recognize the unique trading characteristics 
and challenges that can occur in meeting the minimum standards 
during the separation period of the units, while containing certain 
protections to ensure certain minimum standards will be met.
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    As Amex noted in its filing, the proposal should help to promote 
transparency of the Exchange rules relating to the continued listing of 
units and their components and provide clearer guidance for members and 
investors trading in such units and/or components. Finally, the 
technical changes to Section 1003 of the Company Guide ensure that the 
rule's language will be consistent throughout. Based on the above, the 
Commission believes the proposal promotes just and equitable principles 
of trade in such securities and is designed to protect investors and 
the public interest, consistent with Section 6(b)(5) of the Act.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (SR-Amex-2006-114), as modified by 
Amendment No. 1, be, and it hereby is, approved.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Deputy Secretary.
 [FR Doc. E7-8397 Filed 5-2-07; 8:45 am]

BILLING CODE 8010-01-P