[Federal Register: May 6, 2008 (Volume 73, Number 88)]
[Notices]
[Page 25061-25066]
[DOCID:fr06my08-120]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57739; File No. SR-Amex-2008-17]

Self-Regulatory Organizations; American Stock Exchange LLC; Order
Granting Approval of Proposed Rule Change, as Modified by Amendment No.
1 Thereto, to Adopt Listing Rules for Fixed Income-Linked Securities,
Futures-Linked Securities, and Combination-Linked Securities

April 30, 2008.

I. Introduction

    On February 29, 2008, the American Stock Exchange LLC (``Amex'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to adopt generic listing standards for Fixed
Income-Linked Securities, Futures-Linked Securities, and Combination-
Linked Securities. On March 20, 2008, the Exchange 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 27, 2008.\3\
The Commission received no comments on the proposal. This order
approves the proposed rule change, as modified by Amendment No. 1
thereto.
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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. 57539 (March 20,
2008), 73 FR 16395.
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II. Description of the Proposal

    The Exchange proposes to add new Sections 107G, 107H, and 107I of
the Amex Company Guide to provide generic listing standards for Fixed
Income-Linked Securities, Futures-Linked Securities, and Combination-
Linked Securities (collectively, the ``New Linked Securities''). The
primary purpose of the proposed rule change is to enable the listing
and trading of the New Linked Securities pursuant to Rule 19b-4(e) \4\
under the Act, without individual Commission approval of each such
product pursuant to section 19(b)(2) of the Act.\5\ The Exchange
represents that within five business days after commencement of trading
of a series of New Linked Securities under proposed Sections 107G,
107H, and 107I of the Amex Company Guide, as applicable, the Exchange
will file a Form 19b-4(e).\6\
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    \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
section (c)(1) of Rule 19b-4 (17 CFR 240.19b-4(c)(1)), if the
Commission has approved, pursuant to section 19(b) of the Act (15
U.S.C. 78s(b)), 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).
    \5\ 15 U.S.C. 78s(b)(2). The Exchange also seeks to make a
technical change to Section 107D of the Amex Company Guide as part
of the proposal. See infra note 7.
    \6\ 17 CFR 240.19b-4(e)(2)(ii); 17 CFR 249.820.
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General Issuer and Issue Eligibility

    As with Index-Linked Securities under current Section 107D of the
Amex Company Guide,\7\ Commodity-Linked Securities under Section
107E,\8\ and Currency-Linked Securities under Section 107F of the Amex
Company Guide,\9\ the New Linked Securities do not give the holder any
right to receive a portfolio component or any other ownership right or
interest in the portfolio or underlying components comprising the
applicable Reference Asset (as defined herein) and may or

may not provide for the repayment of the original principal investment
amount. Likewise, the general standards set forth in Section 107D(a)-
(f), Section 107E(a)-(f), and Section 107F(a)-(f) of the Amex Company
Guide will similarly apply to the New Linked Securities.\10\
Specifically, the Exchange will apply the following requirements to all
issuers of New Linked Securities:
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    \7\ Index-Linked Securities are securities that provide for the
payment at maturity of a cash amount based on the performance of an
underlying index or indexes. As part of this proposed rule change,
the Exchange seeks to make a technical change to Section 107D of the
Amex Company Guide to define such underlying index or indexes as the
``Equity Reference Asset.'' Such securities may or may not provide
for the repayment of the original principal investment amount. See
Section 107D and Section 107D(d) of the Amex Company Guide.
    \8\ Commodity-Linked Securities are securities that provide for
the payment at maturity of a cash amount based on the performance of
one or more commodities, commodity futures, options or other
commodity derivatives or Commodity-Based Trust Shares (as defined in
Amex rule 1200A), or a basket or index of any of the foregoing (the
``Commodity Reference Asset''). Such securities may or may not
provide for the repayment of the original principal investment
amount. See Section 107E of the Amex Company Guide.
    \9\ Currency-Linked Securities are securities that provide for
the payment at maturity of a cash amount based on the performance of
one or more currencies, or options or currency futures or other
currency derivatives or Currency Trust Shares (as defined in Amex
Rule 1200B), or a basket or index of any of the foregoing (the
``Currency Reference Asset''). Such securities may or may not
provide for the repayment of the original principal investment
amount. See Section 107F of the Amex Company Guide.
    \10\ See Section 107A of the Amex Company Guide (setting forth
the ``General Criteria'' relating to minimum issuer eligibility
requirements based on assets, earnings, and stockholders' equity,
and minimum issue requirements based on public distribution, public
shareholders, and principal amount/aggregate market value).
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     The issuer will be expected to have a minimum tangible net
worth of $250,000,000 and to otherwise exceed certain earnings
requirements. In the alternative, the issuer will be expected: (1) To
have a minimum tangible net worth of $150,000,000; and (2) not to have
issued index-linked note offerings (including the New Linked
Securities), the original issue price of which, combined with all the
issuer's other index-linked note offerings listed on a national
securities exchange, exceeds 25% of the issuer's tangible net worth at
the time of issuance.
     The issuer must be in compliance with Rule 10A-3 under the
Act.\11\
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    \11\ See 17 CFR 240.10A-3.
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    In addition, the Exchange will apply the following requirements to
each issue of New Linked Securities:
     The issue must have a minimum public distribution of at
least 1,000,000 trading units with a minimum of 400 public
shareholders. This minimum public distribution and minimum public
shareholders requirements will not be applicable to an issue traded in
thousand dollar denominations or if the securities are redeemable at
the option of the holders thereof on at least a weekly basis.
     The issue must have a principal amount/aggregate market
value of not less than $4 million.
     The issue must have a term of at least one year, but not
greater than 30 years.
     The issue must be the nonconvertible debt of the issuer.
     The payment at maturity may or may not provide for a
multiple of the direct or inverse performance of the underlying
Reference Asset; however, in no event will a loss or negative payment
at maturity be accelerated by a multiple that exceeds twice the
performance of the underlying Reference Asset.

Fixed Income-Linked Securities

    Fixed Income-Linked Securities will be subject to the criteria
proposed in new Section 107G of the Amex Company Guide for initial and
continued listing. Fixed Income-Linked Securities are securities that
provide for the payment at maturity of a cash amount based on the
performance of one or more indexes or portfolios of debt securities
that are notes, bonds, debentures or evidence of indebtedness that
include, but are not limited to, U.S. Department of Treasury securities
(``Treasury Securities''), government-sponsored entity securities
(``GSE Securities''), municipal securities, trust preferred securities,
supranational debt and debt of a foreign country or subdivision
thereof, or a basket or index of any of the foregoing (collectively,
``Fixed Income Reference Asset'').
    For the initial listing of Fixed Income-Linked Securities, the
Fixed Income Reference Asset must either: (1) Have been approved for
the trading of options or other derivatives by the Commission under
Section 19(b)(2) of the Act and the rules thereunder, and the
conditions set forth in the Commission's approval order, including
comprehensive surveillance sharing agreements, continue to be
satisfied; or (2) meet the following requirements: \12\
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    \12\ The Exchange notes that the quantitative criteria for Fixed
Income Reference Assets are substantially similar to those set forth
under Commentary .04 to Amex Rule 1000-AEMI and Commentary .03 to
Amex Rule 1000A-AEMI, relating to Portfolio Depositary Receipts and
Index Fund Shares, respectively, based on a fixed income index or
portfolio. See Securities Exchange Act Release No. 55437 (March 9,
2007), 72 FR 12233 (March 15, 2007) (SR-Amex-2006-118) (approving
the adoption of ``fixed income'' and ``combination'' generic listing
standards for exchange-traded funds).
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     Components of the Fixed Income Reference Asset that, in
the aggregate, account for at least 75% of the weight of the Fixed
Income Reference Asset must each have a minimum original principal
amount outstanding of $100 million or more;
     A component of the Fixed Income Reference Asset may be a
convertible security; however, once the convertible security component
converts to the underlying equity security, the component is removed
from the Fixed Income Reference Asset;
     No component of the Fixed Income Reference Asset
(excluding Treasury Securities and GSE Securities) may represent more
than 30% of the weight of the Fixed Income Reference Asset, and the
five highest weighted components in the Fixed Income Reference Asset
may not, in the aggregate, account for more than 65% of the weight of
the Fixed Income Reference Asset;
     An underlying Fixed Income Reference Asset (excluding one
consisting entirely of exempted securities) \13\ must include a minimum
of 13 non-affiliated issuers;
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    \13\ ``Exempted securities'' is defined in Section 3(a)(12) of
the Act (15 U.S.C. 78c(a)(12)). The Exchange notes that, for
purposes of a Fixed Income Reference Asset, an ``exempted security''
may include Treasury Securities, municipal securities and/or GSE
Securities.
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     Component securities that, in the aggregate, account for
at least 90% of the weight of the Fixed Income Reference Asset must be
one of the following: (1) From issuers that are required to file
reports pursuant to Sections 13 and 15(d) of the Act; \14\ (2) from
issuers that have a worldwide market value of their outstanding common
equity held by non-affiliates of $700 million or more; (3) from issuers
that have outstanding securities that are notes, bonds, debentures, or
evidence of indebtedness having a total remaining principal amount of
at least $1 billion; (4) exempted securities as defined in Section
3(a)(12) of the Act; \15\ or (5) from issuers that are a government of
a foreign country or a political subdivision of a foreign country; and
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    \14\ See 15 U.S.C. 78m; 15 U.S.C. 78o(d).
    \15\ See 15 U.S.C. 78c(a)(12).
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     The Fixed Income Reference Asset must be widely
disseminated to the public by one or more major market vendors at least
once per trading day.
    The Exchange will commence delisting or removal proceedings: \16\
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    \16\ The Exchange notes that the proposed continued listing
standards for each of Fixed Income-Linked Securities, Futures-Linked
Securities, and Combination-Linked Securities are substantially
similar to those standards under Sections 107D, 107E, and 107F
currently applicable to Index-Linked Securities, Commodity-Linked
Securities, and Currency-Linked Securities, respectively. See
Sections 107D, 107E, and 107F of the Amex Company Guide.
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     If any of the initial listing criteria for Fixed Income-
Linked Securities are not continuously maintained;
     If the aggregate market value or the principal amount of
the Fixed Income Index-Linked Securities publicly held is less than
$400,000;
     The value of the Fixed Income Reference Asset is no longer
calculated or available, and a new Fixed Income Reference is
substituted, unless the new Fixed Income Reference Asset meets the
requirements of proposed Section 107G of the Company Guide; or
     If such other event shall occur or condition exists that,
in the opinion of the Exchange, makes further dealings on the Exchange
inadvisable.

Futures-Linked Securities

    Futures-Linked Securities will be subject to the criteria in
proposed

Section 107H of the Amex Company Guide for initial and continued
listing. Futures-Linked Securities are securities that provide for the
payment at maturity of a cash amount based on the performance of one or
more indexes or portfolios of: (1) Futures on Treasury Securities, GSE
Securities, supranational debt and debt of a foreign country or a
subdivision thereof, or options or other derivatives on any of the
foregoing; or (2) interest rate futures or options or derivatives on
the foregoing (collectively, ``Futures Reference Asset'').
    The issue must meet one of the initial listing standards set forth
below:
     The Futures Reference Asset must have been reviewed and
approved for the trading of Futures Securities or options or other
derivatives by the Commission under Section 19(b)(2) of the Act and
rules thereunder, and the conditions set forth in the Commission's
approval order, including with respect to comprehensive surveillance
sharing agreements, continue to be satisfied; or
     The pricing information for components of a Futures
Reference Asset must be derived from a market which is an Intermarket
Surveillance Group (``ISG'') member or affiliate member or with which
the Exchange has a comprehensive surveillance sharing agreement. A
Futures Reference Asset may include components representing not more
than 10% of the dollar weight of such Futures Reference Asset for which
the pricing information is derived from markets that do not meet the
specified requirements; provided, however, that no single component
subject to this exception exceeds 7% of the dollar weight of the
Futures Reference Asset.
    In addition, the issue must meet both of the following initial
listing criteria: (1) The value of the Futures Reference Asset must be
calculated and widely disseminated by one or more major market data
vendors on at least a 15-second basis during trading on the Exchange;
and (2) in the case of Futures-Linked Securities that are periodically
redeemable, the indicative value of the subject Futures-Linked
Securities must be calculated and widely disseminated by one or more
major market data vendors on at least a 15-second basis during trading
on the Exchange.
    The Exchange will commence delisting or removal proceedings:
     If any of the initial listing criteria for Futures-Linked
Securities are not continuously maintained;
     If the aggregate market value or the principal amount of
the Futures-Linked Securities publicly held is less than $400,000;
     The value of the Futures Reference Asset is no longer
calculated or available, and a new Futures Reference Asset is
substituted, unless the new Futures Reference Asset meets the
requirements of proposed Section 107H of the Amex Company Guide; or
     If such other event shall occur or condition exists that,
in the opinion of the Exchange, makes further dealings on the Exchange
inadvisable.

Combination-Linked Securities

    Combination-Linked Securities will be subject to the criteria in
proposed Section 107I of the Amex Company Guide for initial and
continued listing. Combination-Linked Securities are securities that
provide for the payment at maturity of a cash amount based on the
performance of any combination of two or more Equity Reference Assets,
Commodity Reference Assets, Currency Reference Assets, Fixed Income
Reference Assets, or Futures Reference Assets (collectively,
``Combination Reference Asset,'' and together with Equity Reference
Assets, Commodity Reference Assets, Currency Reference Assets, Fixed
Income Reference Assets, and Futures Reference Assets, collectively,
``Reference Assets''). In addition, a Combination Reference Asset may
include as a component a notional investment in cash or a cash
equivalent based on a widely accepted overnight loan interest rate,
London Interbank Offered Rate (``LIBOR''), Prime Rate, or an implied
interest rate based on observed market spot and foreign currency
forward rates. The Exchange states that, for purposes of a notional
investment as a component of a Multifactor Reference Asset, a long
LIBOR weighting would represent a leverage charge offsetting long
positions in the underlying Reference Assets.
    For the initial listing of a series of Combination-Linked
Securities, each component of the Combination Reference Asset must: (1)
Have been reviewed and approved for the trading of options or other
derivatives by the Commission under Section 19(b)(2) of the Act and
rules thereunder, and the conditions set forth in the Commission's
approval order, including with respect to comprehensive surveillance
sharing agreements, continued to be satisfied; or (2) meet the
following requirements:
     Each Reference Asset included in the Combination Reference
Asset must meet the applicable initial and continued listing criteria
set forth in Sections 107D, 107E, 107F, 107G and/or 107H of the Amex
Company Guide;
     The value of the Combination Reference Asset must be
calculated and widely disseminated to the public on at least a 15-
second basis during the time the Combination-Linked Securities trade on
the Exchange; and
     In the case of Combination-Linked Securities that are
periodically redeemable, the indicative value of the Combination-Linked
Securities must be calculated and widely disseminated by one or more
major market data vendors on at least a 15-second basis during the time
the Combination-Linked Securities trade on the Exchange.
    The Exchange will commence delisting or removal proceedings:
     If any of the initial listing criteria for Combination-
Linked Securities are not continuously maintained;
     If the aggregate market value or the principal amount of
the Combination-Linked Securities publicly held is less than $400,000;
     The value of the Combination Reference Asset is no longer
calculated or available, and a new Combination Reference is
substituted, unless the new Combination Reference Asset meets the
requirements of Section 107I of the Amex Company Guide; or
     If such other event shall occur or condition exists that,
in the opinion of the Exchange, makes further dealings on the Exchange
inadvisable.

Applicable Exchange Rules

    The New Linked Securities traded on the Exchange's equity trading
floor will be subject to all Exchange rules governing the trading of
equity securities. The Exchange's equity margin rules and the
Exchange's regular trading hours (9:30 a.m. to 4 p.m. Eastern Time)
will apply to transactions in the New Linked Securities. New Linked
Securities listed and traded as bond or debt securities will be subject
to the rules applicable to bond or debt securities, however, those New
Linked Securities redeemable at the option of the holders thereof on at
least a weekly basis will be subject to the trading rules applicable to
exchange-traded funds.\17\
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    \17\ See proposed Sections 107G(k), 107H(k), and 107I(k) of the
Amex Company Guide.
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Information Circular

    Upon evaluating the nature and complexity of each New Linked
Security, the Exchange represents that it will prepare and distribute,
if appropriate, an Information Circular to member organizations
describing the products. Accordingly, the particular structure and
corresponding risks of a New Linked Security will be highlighted and
disclosed. The Information Circular will disclose whether the New
Linked Security will trade as equity or debt, subject to

appropriate trading rules including, among others, rules governing
priority, parity and precedence of orders, specialist responsibilities,
account opening, and margin.
    The Information Circular will also detail the Exchange's
suitability rule that requires a member organization recommending a
transaction in these Securities: (1) To determine that such transaction
is suitable for the customer (Amex Rule 411); and (2) to have a
reasonable basis for believing that the customer can evaluate the
special characteristics, and is able to bear the financial risks, of
such transaction. In addition, the Information Circular will reference
the requirement that Amex member organizations must deliver a
prospectus to investors purchasing newly issued New Linked Securities
prior to or concurrently with the confirmation of a transaction.

Surveillance

    The Exchange states that it will closely monitor activity in the
New Linked Securities to identify and deter any potential improper
trading activity. Additionally, the Exchange represents that its
surveillance procedures are adequate to properly monitor the trading of
the New Linked Securities. Specifically, the Exchange will rely on its
existing surveillance procedures governing equities, options, and
exchange-traded funds.\18\ The Exchange has developed procedures to
closely monitor activity in the New Linked Securities and the
underlying indexes and/or portfolios to identify and deter potential
improper trading activity. To the extent applicable, the Exchange will
be able to obtain trading and beneficial holder information from the
primary trading markets for the portfolio components in relation to the
New Linked Securities, either pursuant to bilateral information sharing
agreements with those markets or because those markets are SRO members
or affiliate members of ISG.
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    \18\ See proposed Sections 107G(j), 107H(j), and 107I(j) of the
Amex Company Guide.
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Firewall Procedures

    If an underlying index is maintained by a broker-dealer, the
broker-dealer is required to erect a ''firewall'' around the personnel
responsible for the maintenance of such underlying index or who have
access to information concerning changes and adjustments to the
underlying index, and the underlying index must be calculated by a
third party who is not a broker-dealer. Any advisory committee,
supervisory board, or similar entity that advises an index license
provider or that makes decisions regarding the underlying index or
portfolio composition, methodology, and related matters must implement
and maintain, or be subject to, procedures designed to prevent the use
and dissemination of material, non-public information regarding the
applicable underlying index or portfolio.\19\ The Exchange further
proposes to apply Amex Rules 1203A and 1203B \20\ and 1204A and 1204B
\21\ to Futures-Linked Securities and Combination-Linked Securities, to
the extent such Combination-Linked Securities are comprised in part of
Futures, Commodity, or Currency Reference Assets.
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    \19\ See proposed Sections 107G(i), 107H(i), and 107I(i) of the
Amex Company Guide.
    \20\ Amex Rules 1203A and 1203B restrict the ability of the
specialist firm for any issue of Commodity-Based Trust Shares and
Currency Trust Shares or its affiliates to make markets in and trade
the Commodity Reference Asset and/or Currency Reference Asset
components, the commodities or currencies underlying the Commodity
Reference Asset or Currency Reference Asset components, or options,
futures, or options on futures on the Commodity Reference Asset or
Currency Reference Asset, or any other derivatives based on the
Commodity Reference Asset or Currency Reference Asset, any Commodity
Reference Asset or Currency Reference Asset component, or any
physical commodity or commodities underlying a Commodity Reference
Asset component or any currency or currencies underlying a Currency
Reference Asset component. See Amex Rules 1203A and 1203B. The
Exchange maintains that these rules would similarly apply to the
trading of the New Linked Securities to the extent such New Linked
Securities are comprised in part of a Futures, Commodity, or
Currency Reference Asset.
    \21\ Amex Rules 1204A and 1204B provide that specialists
handling Commodity-Based Trust Shares and Currency Trust Shares
provide the Exchange with all necessary information relating to
their trading in underlying physical assets, commodities or
currencies, related futures or options on futures, or any other
related derivatives. See Amex Rules 1204A and 1204B. The Exchange
maintains that these rules would similarly apply to the trading of
New Linked Securities to the extent such New Linked Securities are
comprised in part of a Futures, Commodity, or Currency Reference
Asset.
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Trading Halts

    If the indicative value or the Reference Asset value applicable to
a series of New Linked Securities is not being disseminated as
required, the Exchange may halt trading during the day on which such
interruption first occurs. If such interruption persists past the
trading day in which it occurred, the Exchange will halt trading no
later than the beginning of the trading day following the
interruption.\22\
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    \22\ See proposed Sections 107G(h)(3), 107H(h)(3), and
107I(h)(3) of the Amex Company Guide.
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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.\23\ In particular, the Commission finds that the proposed
rule change is consistent with the requirements of Section 6(b)(5) of
the Act,\24\ 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.
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    \23\ 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).
    \24\ 15 U.S.C. 78f(b)(5).
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A. Generic Listing Standards for the New Linked Securities

    To list and trade the New Linked Securities, the Exchange currently
must file a proposed rule change with the Commission pursuant to
Section 19(b)(1) of the Act \25\ and Rule 19b-4 thereunder.\26\
However, Rule 19b-4(e) provides that the listing and trading of a new
derivative securities product by an SRO will not be deemed a proposed
rule change pursuant to Rule 19b-4(c)(1) 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 derivative securities product, and the SRO has a
surveillance program for the product class.
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    \25\ 15 U.S.C. 78s(b)(1).
    \26\ 17 CFR 240.19b-4.
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    The Commission notes that it has previously approved substantively
identical generic listing standards applicable to the same types of
securities as proposed by Amex for another exchange.\27\ With respect
to Fixed Income-Linked Securities, in particular, the Commission has
approved generic listing standards pursuant to Rule 19b-4(e) for
Portfolio Depositary Receipts and Index Fund Shares based on the
performance of fixed income securities that are substantially similar
to those proposed to be applicable to Fixed Income-Linked

Securities.\28\ With respect to the proposed generic listing standards
for Combination-Linked Securities, the Commission has previously
approved generic listing standards pursuant to Rule 19b-4(e) for
Portfolio Depositary Receipts and Index Fund Shares based on the
performance of a combination of assets.\29\ The Commission also notes
that the proposed generic standards applicable to Futures-Linked
Securities are substantively identical to those currently applicable to
Commodity-Linked Securities with respect to the pricing information for
the respective underlying assets.\30\ Lastly, the Commission notes that
the proposed continued listing standards for each of the New Linked
Securities are substantively identical to those existing standards
applicable to Index-Linked Securities, Commodity-Linked Securities, and
Currency-Linked Securities.\31\
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    \27\ See Securities Exchange Act Release No. 57701 (April 23,
2008) (SR-NYSEArca-2008-20) (approving generic listing standards for
Fixed Income Index-Linked Securities, Futures-Linked Securities, and
Multifactor Index-Linked Securities).
    \28\ See Commentary .04 to Amex Rule 1000-AEMI and Commentary
.03 to Amex Rule 1000A-AEMI (setting forth the generic listing and
trading standards for Portfolio Depositary Receipts and Index Fund
Shares based on an index or portfolio comprised of fixed income
securities, respectively); see supra note 12 and accompanying text.
    \29\ See Commentary .05 to Amex Rule 1000-AEMI and Commentary
.04 to Amex Rule 1000A-AEMI (setting forth the generic listing and
trading standards for Portfolio Depositary Receipts and Index Fund
Shares, respectively, based on a combination of assets representing
equity and fixed income securities and requiring that each index or
portfolio of equity or fixed income component securities separately
satisfy its own applicable generic criteria for listing and trading
pursuant to Rule 19b-4(e)).
    \30\ See Section 107E of the Amex Company Guide; see also infra
note 42 and accompanying text.
    \31\ See supra note 16.
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    In approving the New Linked Securities for Exchange trading, the
Commission considered applicable Exchange rules that govern their
trading. The Commission believes that generic listing standards for the
New Linked Securities should fulfill the intended objective of Rule
19b-4(e) and allow securities that satisfy the proposed generic listing
standards to commence trading without the need for public comment and
Commission approval.\32\ The Exchange's ability to rely on Rule 19b-
4(e) to list and trade the New Linked Securities that meet the
applicable requirements and minimum standards should reduce the time
frame for bringing these securities to market and thereby reduce the
burdens on issuers and other market participants, while also promoting
competition and making such securities available to investors more
quickly.
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    \32\ The Commission notes that the failure of a particular
product or index to comply with the proposed generic listing
standards under Rule 19b-4(e), however, would not preclude the
Exchange from submitting a separate filing pursuant to Section
19(b)(2) of the Act, requesting Commission approval to list and
trade a particular series of the New Linked Securities.
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B. Listing and Trading the New Linked Securities

    Taken together, the Commission finds that the proposal contains
adequate rules and procedures to govern the listing and trading of the
New Linked Securities pursuant to Rule 19b-4(e) on the Exchange.
Products listed and traded under the proposed generic standards will be
subject to the full panoply of Amex rules and procedures that currently
govern the trading of equity securities on the Exchange.
    The general listing requirements under Section 107D(a)-(f), Section
107E(a)-(f), and Section 107F(a)-(f) of the Amex Company Guide,
applicable to Index-Linked Securities, Commodity-Linked Securities, and
Currency-Linked Securities, respectively, will similarly apply to the
New Linked Securities under the proposed rule change.\33\ With respect
to Fixed Income-Linked Securities, the definition of Fixed Income
Reference Asset includes the same types of fixed income securities that
may underlie Portfolio Depositary Receipts under Commentary .04 to Amex
Rule 1000-AEMI and Index Fund Shares under Commentary .03 to Amex Rule
1000A-AEMI.\34\ In addition, the Exchange's proposed eligibility
criteria for Fixed Income Reference Assets, which are substantively
identical to the criteria applicable to fixed income-based Portfolio
Depositary Receipts and Index Fund Shares, include, among other things,
minimum standards relating to original principal amount outstanding for
each component of the Fixed Income Reference Asset, maximum
concentration limits for each such component, and minimum number of
non-affiliated issuers of such components.\35\ The Commission believes
that these requirements should help to ensure that the underlying
components of a Fixed Income Reference Asset are adequately
capitalized, sufficiently liquid, and diversified. In addition, the
Fixed Income Reference Asset must be widely disseminated to the public
by one or more major market vendors at least once per business day
during the time the Fixed Income-Linked Securities trade on the
Exchange.
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    \33\ See supra note 10 and accompanying text.
    \34\ Compare proposed Sections 107G, 107H, and 107I of the Amex
Company Guide with Commentary .04 to Amex Rule 1000-AEMI and
Commentary .03 to Amex Rule 1000A-AEMI.
    \35\ See supra note 12.
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    In the case of Futures-Linked Securities, the underlying asset must
either be an index of (1) futures on Treasury Securities, GSE
Securities, supranational debt and debt of a foreign country or a
subdivision thereof, or options or other derivatives on any of the
foregoing, or (2) interest rate futures, or options on, or derivatives
of, such interest rate futures. In addition, as with Commodity
Reference Assets, Futures Reference Assets to which Futures-Linked
Securities are linked must either have been reviewed and approved for
trading by the Commission or the pricing information of their
underlying components must be derived from certain required sources,
subject to exceptions.\36\ These requirements should help to ensure
that the components comprising a Futures Reference Asset are adequately
transparent and subject to rules and standards of applicable exchanges
that trade such components and that the Exchange is able to obtain
information with respect to disruptions in, or unusual trading of, such
components.\37\ To enhance the transparency of such Futures-Linked
Securities, the proposal also would require (1) the value of the
Futures Reference Asset to be calculated and widely disseminated by one
or more major market data vendors on at least a 15-second basis during
the time the Futures-Linked Securities trade on the Exchange, and (2)
in the case of Futures-Linked Securities that are periodically
redeemable, the indicative value of such securities to be calculated
and widely disseminated by the Exchange or one or more major market
data vendors on at least a 15-second basis during the time the Futures-
Linked Securities trade on the Exchange.
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    \36\ See infra note 42 and accompanying text.
    \37\ See id.
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    In the case of Combination-Linked Securities, the Combination
Reference Asset may be comprised of any combination of two or more
Reference Assets and a notional investment in cash or a cash equivalent
based on a widely accepted overnight loan interest rate, LIBOR, Prime
Rate, or an implied interest rate based on observed market spot and
foreign currency forward rates. As stated earlier, the Commission notes
that the proposed generic standards applicable to Combination-Linked
Securities are substantially similar to those standards applicable to
Portfolio Depositary Receipts and Index Fund Shares that are based on a
combination of equity and fixed income securities in that each
underlying Reference Asset must satisfy its own applicable minimum
criteria and standards for the listing and trading of a series of

Combination-Linked Securities.\38\ In addition, under the proposed rule
change, (1) the value of the Combination Reference Asset must be
calculated and widely disseminated on at least a 15-second basis during
the time such securities trade on the Exchange, and (2) in the case of
Combination-Linked Securities that are periodically redeemable, the
indicative value must be calculated and widely disseminated on at least
a 15-second basis during the time such securities trade on the
Exchange.
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    \38\ See supra note 28.
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    The Exchange has also developed continued listing criteria that
would require it to commence delisting or removal proceedings in
circumstances that make further dealings in the New Linked Securities
inadvisable.\39\ The Commission notes that such standards are
substantively identical to those continued listing standards currently
applicable to Index-Linked Securities, Commodity-Linked Securities, and
Currency-Linked Securities,\40\ and the Commission believes that such
delisting criteria should help ensure the maintenance of fair and
orderly markets for the New Linked Securities. The Commission further
notes that, under the proposal, if the indicative value or Reference
Asset value applicable to a series of the New Linked Securities is not
disseminated as required, the Exchange may halt trading of such New
Linked Securities during the day on which the interruption first
occurs; however, if the interruption persists past the trading day on
which it occurred, the Exchange will halt trading no later than the
beginning of the trading day following the interruption. Such
provisions relating to trading halts currently apply to Index-Linked
Securities, Commodity-Linked Securities, and Currency-Linked
Securities, and the Commission believes that the trading halt
requirements should promote the availability of key information
relating to the New Linked Securities for the benefit investors and
other market participants.\41\
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    \39\ See proposed Sections 107G(h), 107H(h), and 107I(h) of the
Amex Company Guide (providing that the Exchange will commence
delisting or removal proceedings for any series of Fixed Income-
Linked Securities, Futures-linked Securities, and Combination-Linked
Securities, respectively, if: (a) Any of the applicable initial
listing criteria are not continuously maintained; (b) the aggregate
market value or the principal amount of the applicable security
publicly held is less than $400,000; (c) the value of the applicable
Reference Asset is no longer calculated or available and a new
Reference Asset is substituted, unless such new Reference Asset
meets the requirements under Sections 107G, 107H, or 107I, as
applicable; and (d) such other event shall occur or condition exists
that, in the opinion of the Exchange, makes further dealings
inadvisable).
    \40\ See supra note 16.
    \41\ Compare Sections 107D(h)(4), 107E(h)(4), and 107F(h)(4) of
the Amex Company Guide with proposed Sections 107G(h)(3),
107H(h)(3), and 107I(h)(3) of the Amex Company Guide.
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C. Surveillance

    The Commission notes that the New Linked Securities would be
subject to the Exchange's existing surveillance procedures applicable
to equities, options, and exchange-traded funds. The Exchange has
represented that its surveillance procedures are adequate to properly
monitor the trading of the New Linked Securities listed pursuant to
these proposed generic listing standards and stated that it has
developed such procedures to closely monitor activity in the New Linked
Securities and their respective underlying indexes and/or portfolios to
identify and deter any potential improper trading activity. In
addition, the Commission notes that, with respect to the proposed New
Linked Securities, the Exchange has represented that it will be able to
obtain trading and beneficial holder information from the primary
trading markets either pursuant to bilateral information sharing
agreements with those markets or because those markets are SRO members
or affiliate members of ISG. The Commission further notes that, for
Futures-Linked Securities, the pricing information for components of a
Futures Reference Asset must be derived from a market that is an ISG
member or affiliate member or with which the Exchange has a
comprehensive surveillance sharing agreement, subject to certain
exceptions.\42\
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    \42\ See proposed Section 107H(g)(ii) of the Amex Company Guide
(providing that the Futures Reference Asset may not include
components representing more than 10% of the dollar weight of such
Futures Reference Asset for which the pricing information is derived
from markets that are neither ISG members or parties to a
comprehensive surveillance sharing agreement with the Exchange and
that no such single component may exceed 7% of the dollar weight of
the Futures Reference Asset).
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D. Information Circular

    The Exchange has represented that it will prepare and distribute,
if appropriate, an Information Circular to member organizations
describing the New Linked Securities. Accordingly, the particular
structure and corresponding risks of a New Linked Security will be
highlighted and disclosed. The Information Circular will disclose
whether the New Linked Security will trade as equity or debt, subject
to appropriate trading rules including, among others, rules governing
priority, parity and precedence of orders, specialist responsibilities,
account opening, and margin. The Information Circular will also detail
the Exchange's suitability rule and reference the requirement that Amex
member organizations must deliver a prospectus to investors purchasing
newly issued New Linked Securities prior to or concurrently with the
confirmation of a transaction.

E. Firewall Procedures

    With respect to a series of New Linked Securities, if an underlying
index is maintained by a broker-dealer, the broker-dealer is required
to erect a ``firewall'' around the personnel responsible for the
maintenance of such underlying index or who have access to information
concerning changes and adjustments to the underlying index, and the
underlying index must be calculated by a third party who is not a
broker-dealer. Any advisory committee, supervisory board, or similar
entity that advises an index license provider or that makes decisions
regarding the underlying index or portfolio composition, methodology,
and related matters must implement and maintain, or be subject to,
procedures designed to prevent the use and dissemination of material,
non-public information regarding the applicable underlying index or
portfolio.\43\ The Exchange further proposes to apply Amex Rules 1203A
and 1203B \44\ and 1204A and 1204B \45\ to Futures-Linked Securities
and Combination-Linked Securities, to the extent such Combination-
Linked Securities are comprised in part of Futures, Commodity, or
Currency Reference Assets.
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    \43\ See supra note 19.
    \44\ See supra note 20.
    \45\ See supra note 21.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\46\ that the proposed rule change (SR-Amex-2008-17), as modified
by Amendment No. 1 thereto, be, and it hereby is, approved.
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    \46\ 15 U.S.C. 78s(b)(2).
    \47\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\47\
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-9892 Filed 5-5-08; 8:45 am]

BILLING CODE 8010-01-P