I. Introduction
On June 10, 1999, the American Stock Exchange LLC (“Exchange” or “Amex”), submitted to the Securities Exchange Act of 1934 (“Act”) and Rule 19b-4 thereunder, a proposed rule change amending Section 106 of the Amex Company Guide. The Exchange filed Amendments No. 1 and No. 2 to the proposed rule change on June 14, 1999 and December 1, 1999, respectively. The proposed rule change, as amended, was published for comment in the Federal Register on January 24, 2000. The Commission received no comments on the proposal. This order approves the proposal, as amended.
17 CFR 240.19b-4.
Letter from Scott Van Hatten, Amex, to Richard Strasser, Assistant Director, Division of Market Regulation (“Division”), Commission, dated June 11, 1999 (“Amendment No. 1”). The Exchange originally filed the proposed rule change under Section 19(b)(3)((A) of the Act. Pursuant to Commission staff's request, the Exchange refiled the proposed rule change under Section 199b)(2) of the Act.
Letter from Scott Van Hatten, Amex, to Nancy Sanow, Assistant Director, Division, Commission, dated December 1, 1999 (“Amendment No. 2”). Amendment No. 2 states that the Exchange will issue a circular prior to trading any new index warrant pursuant to Rule 19b-4(e) to (i) highlight specific risks associated with warrants on new indexes and remind members that index warrants are direct obligations of the issuer, which are not subject to a clearing house guarantee, (ii) clarify that index warrants may only be sold to accounts approved for standardized options trading, and (iii) clarify that the Exchange's options suitability standards apply to index warrants. Amendment No. 2 also states that Amex Rules 1100 through 1110, which govern issuer eligibility, margin requirements, discretionary accounts, supervision of accounts, position and exercise limits, reportable positions, and trading halts and suspensions, will apply to index warrants. Finally, Amendment No. 2 states that the Exchange's enhanced surveillance procedures will continue to apply to surveillance of index warrants traded pursuant to rule 19b-4(e).
Securities Exchange Act Release No. 42342 (Jan. 14, 2000), 65 FR 3750.
II. Description of the Proposal
The Exchange proposes to amend Section 106 of the Amex Company guide to provide for the trading of stock index industry group warrants pursuant to new Rule 19b-4(e) under the Act. Section 106 of the Amex Company Guide currently authorizes the Exchange to trade warrants on a stock index industry group pursuant to Section 19(b)(3)(A) of the Act provided that the index meets the generic criteria set forth in Commentary .02 to Amex Rule 901C. As discussed in the New Products Release, however, the Exchange would no longer be required to submit, pursuant to new Rule 19b-4(e) under the Act, a proposed rule change to trade warrants on a new stock index industry group provided the index meets the generic criteria set forth in Commentary .02 to Amex Rule 901C.
Amex Rule 900C defines “Stock Index Industry Group” as a stock index group relating to a stock index which reflects representative stock market values or prices of a particular industry or related industries (also referred to as a “narrow based index”).
See Securities Exchange Act Release No. 40761 (Dec. 8, 1998), 63 FR 70952 (Dec. 22, 1998) (“New Products Release“).
The Commission granted approval to list and trade narrow-based index warrants pursuant to Section 19(b)(3)(A) in Securities Exchange Act Release No. 37007 (March 21, 1996), 61 FR 14165 (March 29, 1996).
In the New Products Release, the Commission noted that in order to rely on the amendment and not submit filings pursuant to Section 19(b)(3)(A) for warrants that satisfy the criteria of rule 901C, a self-regulatory organization would be required to submit a proposed rule change for Commission approval to eliminate the Section 19(b)(3)(A) rule filing requirement from its existing rules. Accordingly, to enable the Exchange to use new Rule 19b-4(e), the Exchange proposes to eliminate the Section 19(b)(3)(A) rule filing requirement from Section 106 of the Amex Company Guide. Amex Rule 901c will remain unchanged. The Exchange represents that the use of new Rule 19b-4(e) will be in accordance with the terms and conditions set forth in the New Products Release.
See supra n. 7, at n. 89.
The Commission approved a similar change to Amex Rule 901C to permit the trading of narrow-based index options pursuant to new Rule 19b-4(e). See Securities Exchange Act Release No. 41091 (Feb. 23, 1999), 64 FR 10515 (March 4, 1999).
III. Discussion
The Commission finds that the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act and the rules and regulations thereunder applicable to a national securities exchange, in that it is designed to facilitate securities transactions and to remove impediments to and perfect the mechanism of a free and open market. The Commission believes that proposed rule change will significantly reduce the Exchange's regulatory burden and allow it to compete more effectively in today's marketplace by facilitating the listing and trading of stock index industry group warrants that meet the generic criteria of Commentary .02 to Exchange Rule 901c. The commission also believes that the proposed rule change will benefit investors by enabling the Exchange to more quickly provide them with tailored products that directly meet their evolving investment needs. The Commission notes that the New Products Release authorizes the Exchange to list and trade certain derivative securities without first riling with the Commission a proposed rule change pursuant to Section 19(b)(3)(A) of the Act, but requires the Exchange to eliminate references to these filing requirements before it can rely on Rule 19b-4(e). The Commission also notes that the Exchange's existing trading rules, procedures, surveillance programs, and listing standards will apply to generic stock index industry group warrants listed and traded on the Exchange and that the Exchange has represented that it will comply with the terms and conditions of the New Product Release.
In approving this rule change, the Commission has considered the proposal's impact on efficiency, competition, and capital formation, consistent with Section 3 of the Act. 15 U.S.C. 78c(f).
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that the proposed rule change (SR-Amex-99-21), as amended, is approved.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 00-6008 Filed 3-10-00; 8:45 am]
BILLING CODE 8010-01-M