Document ID: SEC-2007-0871-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2007-06-27T04:00Z

[Federal Register: June 27, 2007 (Volume 72, Number 123)]
[Notices]               
[Page 35271-35273]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27jn07-100]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55925; File No. SR-Amex-2007-44]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change, as Modified by Amendment Nos. 1 and 2 Thereto, to Amend 
Section 107D of the Company Guide

 June 20, 2007.
    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 1, 2007, the American Stock Exchange LLC (``Exchange'' or 
``Amex'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been substantially prepared by the Exchange. 
On May 21, 2007, the Exchange filed Amendment No. 1 to the proposed 
rule change. On June 14, 2007, the Exchange filed Amendment No. 2 to 
the proposed rule change. This order provides notice of the proposed 
rule change and approves the proposed rule change, as amended, on an 
accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Section 107D(g) of the Amex Company 
Guide to expand the eligibility of foreign securities and American 
Depository Receipts (``ADRs'') that may be components of an underlying 
index in connection with index-linked securities (``Index-Linked 
Securities'').\3\

[[Page 35272]]

The text of the proposed rule change is available at Amex, the 
Commission's Public Reference Room, and http://www.amex.com.

---------------------------------------------------------------------------

    \3\ See Section 107D of the Amex Company Guide (defining Index-
Linked Securities as securities that provide for the payment at 
maturity of a cash amount based on the performance of an underlying 
index or indexes (``Underlying Index'')).
---------------------------------------------------------------------------

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 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
    The purpose of the proposal is to expand the number of permissible 
securities indexes comprised of foreign securities and/or ADRs that may 
qualify under Section 107D(g) of the Amex Company Guide. Pursuant to 
Section 107D, which sets forth generic listing standards to permit the 
listing and trading of Index-Linked Securities pursuant to Rule 19b-
4(e) under the Act,\4\ the Exchange may list Index-Linked Securities 
based on an Underlying Index that meet the criteria set forth in 
paragraph (g) of Section 107D of the Amex Company Guide. Specifically, 
an Underlying Index is required to either be (i) an index meeting the 
specific criteria set forth in Section 107D(g), or (ii) an index 
previously approved for the trading of options or other derivative 
securities by the Commission under Section 19(b)(2) of the Act \5\ and 
rules thereunder.
---------------------------------------------------------------------------

    \4\ Rule 19b-4(e) provides that the listing and trading of a new 
derivative securities product by a self-regulatory organization 
(``SRO'') shall not be deemed a proposed rule change, pursuant to 
paragraph (c)(1) of Rule 19b-4, 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 would 
include the new derivatives securities product, and the SRO has a 
surveillance program for the product class. See 17 CFR 240.19b-
4(e)(1). See also Securities Exchange Act Release No. 51563 (April 
15, 2005), 70 FR 21257 (April 25, 2005) (SR-Amex-2005-001) 
(approving the adoption of generic listing standards for Index-
Linked Securities).
    \5\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

    Section 107D(g) of the Amex Company Guide provides the following 
requirements for the Underlying Index:
    (i) Each component security must have a minimum market value of at 
least $75 million, except that for each of the lowest weighted 
component securities in the Underlying Index that in the aggregate 
account for no more than 10% of the weight of the Underlying Index, the 
market value can be at least $50 million;
    (ii) Each component security must have a trading volume in each of 
the last six months of not less than 1,000,000 shares, except that for 
each of the lowest weighted securities in the Underlying Index that in 
the aggregate account for no more than 10% of the weight of the 
Underlying Index, the trading volume must be at least 500,000 shares in 
each of the last six months;
    (iii) In the case of a capitalization-weighted Underlying Index, 
the lesser of the five highest weighted component securities in the 
Underlying Index or the highest weighted component securities in the 
Underlying Index that in the aggregate represent at least 30% of the 
total number of component securities in the Underlying Index, each of 
such securities must have an average monthly trading volume of at least 
2,000,000 shares over the previous six months;
    (iv) No component security may represent more than 25% of the 
weight of the Underlying Index, and the five highest weighted component 
securities in the Underlying Index must not in the aggregate account 
for more than 50% of the weight of the Underlying Index (60% for an 
Underlying Index consisting of fewer than 25 component securities);
    (v) 90% of the Underlying Index's numerical index value and at 
least 80% of the total number of component securities must meet the 
then current criteria for standardized options trading set forth in 
Amex Rule 915;
    (vi) Each component security must be an Act reporting company which 
is listed on a national securities exchange or is traded through the 
facilities of a national securities system and is subject to last sale 
reporting; and
    (vii) Foreign country securities or ADRs that are not subject to 
comprehensive surveillance agreements must not in the aggregate 
represent more than 20% of the weight of the Underlying Index.
    The Exchange's experience to date has revealed that it is difficult 
to list and trade Index-Linked Securities based on an Underlying Index 
comprised of foreign securities and/or ADRs with respect to which the 
primary market for such securities is outside of the United States. In 
particular, subparagraph (g)(vi) of Section 107D of the Company Guide 
prohibits the inclusion of component securities unless each component 
security is an Act reporting company listed on a national securities 
exchange or traded through the facilities of a national securities 
system and is subject to last sale reporting. The Exchange believes 
that this requirement essentially eliminates the usefulness of the 
generic listing standard for Index-Linked Securities because it 
prohibits the use of foreign indexes (not already approved by the 
Commission) in connection with Index-Linked Securities, unless the 
underlying components are listed and traded on a United States national 
securities exchange. Accordingly, the Exchange believes that the 
requirements set forth in subparagraph (vi) of Section 107D(g) of the 
Amex Company Guide are unduly restrictive to the detriment of the 
marketplace, as well as the application of the generic listing 
standard.
    The proposal would revise subparagraph (vi) of Section 107D(g) and 
combine current subparagraphs (vi) and (vii) of this Section. The 
revision would permit the Exchange to list and trade Index-Linked 
Securities so long as all component securities are either (A) 
securities (other than foreign country securities and ADRs) that are 
(1) issued by a reporting company under the 1934 Act that is listed on 
a national securities exchange, and (2) ``NMS stock,'' as defined in 
Rule 600 of Regulation NMS,\6\ or (B) foreign country securities or 
ADRs, provided that the foreign country securities or foreign country 
securities underlying ADRs having their primary trading market outside 
the United States on foreign trading markets that are not members of 
the Intermarket Surveillance Group or are not parties to comprehensive 
surveillance sharing agreements with the Exchange will not, in the 
aggregate, represent more than 20% of the dollar weight of the 
Underlying Index.
---------------------------------------------------------------------------

    \6\ 17 CFR 242.600(b)(47).
---------------------------------------------------------------------------

    The Exchange submits that the expansion of the potential foreign 
country securities and ADRs that may be components of an eligible 
Underlying Index underlying Index-Linked Securities should benefit the 
marketplace and investors. The Exchange believes that the proposal will 
also enhance the market for potential foreign-based index products 
listed and traded on the Exchange.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\7\ in general, and furthers the 
objectives of Section 6(b)(5)

[[Page 35273]]

of the Act,\8\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, promote just and 
equitable principles of trade, foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, and remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. 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 an e-mail to rule-comments@sec.gov. Please include 

File Number SR-Amex-2007-44 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-2007-44. 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 offices 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-2007-44 and should be 
submitted on or before July 18, 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, as amended, is consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to a national 
securities exchange.\9\ In particular, the Commission finds that the 
proposed rule change is consistent with the requirements of Section 
6(b)(5) of the Act,\10\ which requires, among other things, that the 
Exchange's rules 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. The Commission believes that the proposal should expand the 
use of Underlying Indexes comprised of foreign securities and/or ADRs 
to the benefit of the marketplace and investors, so long as such 
component securities, having their respective primary foreign trading 
markets that are not members of ISG or parties to a comprehensive 
surveillance sharing agreement, do not represent in the aggregate more 
than 20% of the overall weight of the Underlying Index.
---------------------------------------------------------------------------

    \9\ 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).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission finds good cause for approving the proposed rule 
change, as modified by Amendment Nos. 1 and 2 thereto, before the 30th 
day after the date of publication of notice of filing thereof in the 
Federal Register.\11\ The Commission notes that it has previously 
approved substantially similar provisions with respect to the expanded 
eligibility of component securities included in indexes underlying 
index-linked securities \12\ and presently is not aware of any 
regulatory issue that should cause it to revisit that finding or would 
preclude the trading of such securities on the Exchange. Therefore, the 
Commission finds good cause, consistent with Section 19(b)(2) of the 
Act,\13\ to approve the proposed rule change on an accelerated basis.
---------------------------------------------------------------------------

    \11\ In Amendment No. 2, the Exchange requested for accelerated 
approval of the proposal.
    \12\ See Securities Exchange Act Release No. 55687 (May 1, 
2007), 72 FR 25824 (May 7, 2007) (SR-NYSE-2007-27) (approving, among 
other things, the eligibility requirements of component securities 
underlying Equity Index-Linked Securities).
    \13\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

V. Conclusion

    It is therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change (SR-Amex-2007-44), as modified 
by Amendment Nos. 1 and 2 thereto, be, and it hereby is, approved on an 
accelerated basis.
---------------------------------------------------------------------------

    \14\ Id.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-12393 Filed 6-26-07; 8:45 am]

BILLING CODE 8010-01-P