regulatory organizations; proposed rule changes: American Stock Exchange LLC,
[Federal Register: June 4, 2001 (Volume 66, Number 107)]
[Notices]
[Page 30031-30033]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04jn01-97]
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-44354; File No. SR-Amex-2001-25]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the American Stock Exchange LLC Relating to Generic Listing Standards for Portfolio Depository Receipts and Index Fund Shares
May 25, 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 than on May 3, 2001, the American Stock Exchange LLC (``Amex'' or ``Exchange'') filedwith the Securities and Exchange Commission
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(``Commission'') the proposed rule change as described in Items I, II, and III 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.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Amex proposes to amend Amex Rule 1000, Commentary .03 and Rule 1000A, Commentary .02 regarding generic listing standards for Portfolio Depositary Receipts (``PDRs'') and Index Fund Shares. Below is the text of the proposed rule change. Text in brackets indicates material to be deleted, and text in italics indicates material to be added. * * * * *
Portfolio Depositary Receipts
Rule 1000 No change.
* * * * * Commentary * * * * *
.03 The Exchange may approve a series of Portfolio Depositary Receipts for listing and trading pursuant to Rule 19b-4(e) under the Securities Exchange Act of 1934 provided each of the following criteria is satisfied:
(a) Eligibility Criteria for Index Components. Upon the initial listing of a series of Portfolio Depositary Receipts on the Exchange, the component stocks of an index or portfolio underlying such series of Portfolio Depositary Receipts shall meet the following criteria:
(1) No change
(2) No change
(3) The most heavily weighted component stock cannot exceed
[25%] 30% 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.
No further change. * * * * *
Index Fund Shares
Rule 1000A
* * * * * Commentary * * * * *
.02 The Exchange may approve a series of Index Fund Shares for listing pursuant to Rule 19b-4(e) under the Securities Exchange Act of 1934 provided each of the following criteria is satisfied:
(a) Eligibility Criteria for Index Components. Upon the intital listing of a series of Index Fund Shares, each component of an index or portfolio underlying a series of Index Fund Shares shall meet the following criteria: (1) No change. (2) No change. (3) The most heavily weighted component stock cannot exceed
[25%] 30% 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.
No further change. * * * * *
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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 IV below. The Amex has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
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Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
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Purpose
Amex Rule 1000, Commentary .03 and Rule 1000A, Commentary .02 provide generic listing standards for PDRs and Index Fund Shares, respectively, to permit listing and trading of these securities pursuant to Rule 19b-4(e) under the Act.\3\ Rule 19b-4(e) \4\ provides that the listing and trading of a new derivative securities product by a self-regulatory organization shall not be deemed a proposed rule change, pursuant to paragraph (c)(1) of Rule 19b-4,\5\ if the Commission has approved, pursuant to section 19(b) of the Act,\6\ the self-regulatory organization's trading rules, procedures and listing standards for the product class that would include the new derivative securities product, and the self-regulatory organization has a surveillance program for the product class.\7\ The Commission has approved Rule 1000, Commentary .02 and Rule 1000A, Commentary .03.\8\
\3\ 17 CFR 240.19b-4(e).
\4\ 17 CFR 240.19b-4(e).
\5\ 17 CFR 240.19b-4(c)(1).
\6\ 15 U.S.C. 78s(b).
\7\ See Securities Exchange Act Release No. 40761 (December 8, 1998), 63 FR 70952 (December 22, 1998).
\8\ See Securities Exchange Act Release No. 42787 (May 15, 2000), 65 FR 33598 (May 24, 2000).
These generic listing standards are intended to ensure that a substantial portion of the weight of an index or portfolio is accounted for by stocks with substantial market capitalization and trading volume. Rule 1000, Commentary .03 and Rule 1000A, Commentary .02 provide that, upon the initial listing of a series of PDRs or Index Fund Shares under rule 19b-4(e),\9\ component stocks that in the aggregate account for at least 90 percent of the weight of the index or portfolio must have a minimum market value of at least $75 million. In addition, the component stocks in the index 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 percent of the weight of the index or portfolio.
\9\ 17 CFR 240.19b-4(e).
Currently, Rule 1000, Commentary .03(a)93), and Rule 1000A, Commentary .02(a)(3) provide that the most heavily weighted component stock in an underlying index cannot exceed 25 percent of the weight of the index or portfolio, and the five most heavily weighted component stocks cannot exceed 65 percent of the weight of the index or portfolio. The Exchange proposes to increase from 25 percent to 30 percent the permissible weight of the most heavily weighted component stock in an underlying index. The Exchange is not amending the existing requirement that the five most heavily weighted stocks cannot exceed 65 percent of the weight of the index or portfolio. This change will provide additional flexibility to unit investment trusts or mutual funds to be listed pursuant to Rule 19b-4(e) \10\ in structuring their products and will help reduce possible concerns associated with a single stock exceeding the 25 percent threshold immediately prior to initial listing and trading due to a spike in the price of the most heavily weighted index stock. The Exchange notes that, notwithstanding this change, unit investment trusts (including PDRs) and mutual funds (including Index Fund Shares) are subject to Internal Revenue Code Subchapter M requirements applicable to regulated investment companies. In order to maintain regulated investment company status, these entities would be required to rebalance their portfolios quarterly to avoid any one stock exceeding a 25 percent weighting in the trust's or fund's portfolio.\11\
\10\ 17 CFR 240.19b-4(e).
\11\ Under Subchapter M of the Internal Revenue Code, for a fund to qualify as a regulated investment company, the securities of a single issuer can account for no more than 25 percent of a fund's total assets, and at least 50 percent of a fund's total assets must be comprised of cash (including government securities) and securities of single issuers whose securities account for less than 5 percent of such fund's total assets.
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Statutory Basis
The proposed rule change is consistent with section 6(b) of the Act \12\ in general, and furthers the objective of
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section 6(b)(5) of the Act \13\ 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 facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, to protect investors and the public interest and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers.
\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5)
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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.
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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.
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Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will:
(A) By order approve such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule change should be disapproved.
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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. 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 filedwith 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 Amex. All submissions should refer to File No. SR-Amex-2001-25 and should be submitted by June 25, 2001.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\14\
\14\ 17 CFR 200.30-3(a)(12).
Margaret H. McFarland, Deputy Secretary.
[FR Doc. 01-13883Filed6-1-01; 8:45 am]
BILLING CODE 8010-01-M
