
[Federal Register: July 28, 2008 (Volume 73, Number 145)]
[Notices]               
[Page 43799-43801]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28jy08-115]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58199; File No. SR-Amex-2008-44]

 
Self-Regulatory Organizations; American Stock Exchange LLC; Order 
Approving a Proposed Rule Change Modifying the Provisions Governing 
Contacts Between Specialists and Issuers

 July 21, 2008.

I. Introduction

    On May 20, 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 
proposal to amend

[[Page 43800]]

Amex Rule 27 to (i) modify the provisions governing contacts between 
specialists and issuers or, in the case of exchange traded funds 
(``ETFs'') and structured products, sponsors, and (ii) clarify other 
procedures applicable to the allocation of securities to specialists. 
The proposed rule change was published for comment in the Federal 
Register on June 18, 2008.\3\ The Commission received no comments 
regarding the proposal. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 57952 (June 11, 2008), 
73 FR 34809.
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II. Description

    The purpose of the proposed rule change is to revise Amex Rule 27 
in order to better reflect the different treatment that is afforded 
ETFs and structured products in connection with the allocation of 
securities to specialists. This is reflected in the fact that ETFs and 
structured products are typically allocated to a specialist within a 
few days after approval of the issuer's application for listing on the 
Exchange. However, in the case of other equity securities, the 
allocation process may take a longer period of time so that allocation 
to a specialist may not occur within a few days of approval of the 
issuer's listing application.
    Amex Rule 27 sets forth the procedures and policies pursuant to 
which the Allocations Committee allocates securities listing on the 
Exchange to specialists. In particular, paragraph (e) describes the 
Exchange's ``issuer choice'' program under which issuers or, in the 
case of an ETF or structured product, sponsors, select their 
specialists from a list of the most qualified specialists prepared by 
the Allocations Committee and is designed to be read in conjunction 
with Commentaries .02 and .03 thereto.
    Commentaries .02 and .03 contain guidelines for communications 
between specialists and issuers or, in the case of ETFs and structured 
products, sponsors that have not yet listed a security on the Exchange, 
have applied to list a security on the Exchange and/or have a security 
that has been approved for listing on the Exchange.

(i) Commentary .02

    Commentary .02 applies to equity securities other than ETFs and 
structured products, and prohibits specialists and other members from 
making direct or indirect contact with an issuer that has requested a 
listing qualification review \4\ for the purpose of influencing the 
issuer's choice of a specialist. In addition, any communication between 
equity specialists and issuers is prohibited once an issuer has been 
approved for listing and the Allocations Committee has prepared the 
list of qualified specialists. The exception to such prohibition is 
Exchange-arranged interviews between an issuer approved for listing and 
any specialist(s) the issuer requests to interview.
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    \4\ The listing qualification review is the process whereby an 
issuer undergoes review by the Exchange's Listing Qualifications 
Department. The listing qualification review will commence once the 
listing application is submitted to the Exchange.
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    The interviews are closely monitored by the Exchange and the 
Exchange will take appropriate action in the event an inappropriate 
communication is deemed by the Exchange to have occurred during the 
interview. The Exchange proposes to clarify that such appropriate 
action may include the disqualification of a specialist for the 
allocation.
    The Exchange also proposes adding a provision to Commentary .02 
addressing post-interview communications between specialists and 
issuers approved for listing on the Exchange. The proposed rule change 
would prohibit post-interview contacts between specialists and issuers 
and provide a means for issuers to obtain further information from the 
specialists through the Exchange's Equity Sales Group.
    Finally, the Exchange proposes to simplify the description of the 
procedures set forth in Commentary .02 by adding defined terms and 
moving the provision concerning an issuer's ability to request 
specialists to be placed on the list of qualified specialists to 
paragraph (e)(i) of Rule 27.

(ii) Commentary .03

    Current Commentary .03 applies only to ETFs and structured products 
and contains provisions governing contacts between specialists and 
other members and sponsors and issuers prior to such sponsor or issuer 
deciding to list a security on the Exchange. Pursuant to current 
Commentary .03, specialists and other members must notify the Exchange 
in writing before any planned contact with a potential sponsor or 
issuer for the purpose of listing the ETFs or structured products of 
such sponsor or issuer on the Exchange, or within five (5) business 
days of unanticipated contact where discussions regarding the listing 
occur. Exchange approval of planned contact is required and the 
Exchange will grant such approval where it appears that the contact 
will assist rather than impede the Exchange's effort to list the new 
ETF or structured product.
    ETF and structured product specialists are also currently required 
to promptly report to the Exchange any representations or commitments 
that they, or an individual acting on their behalf, have made to an 
employee of, or any individual acting on behalf of, an issuer or 
sponsor. The Exchange proposes to amend Commentary .03 to require 
specialists to only disclose in their applications to be allocated an 
ETF or structured product representations or commitments that relate to 
the prospective listing of the ETF or structured product and that are 
made within the six (6) months preceding the date allocation 
applications are solicited with respect to that ETF or structured 
product. The Exchange further proposes, in the event an ETF or 
structured product is not allocated within five (5) days of the 
allocation application, to require specialists and other members to 
update their applications accordingly to report all representations or 
commitments since last reported to the Exchange.
    Commentary .03 also includes procedures related to the interview 
process. The Exchange proposes to clarify that such procedures apply to 
issuers and sponsors whose securities have been approved for listing on 
the Exchange in accordance with Rule 27(e)(i).

(iii) Other Changes

    Finally, the Exchange proposes to make technical revisions to 
paragraphs (c) and (e)(i) of Rule 27 in order to consistently use the 
term ``issuer'' as opposed to ``company'', clarify the applicability of 
the provisions to equity, ETF and structured product listings and, in 
general, to simplify the reading of the text.

III. Discussion

    After careful review, 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.\5\ 
In particular, the Commission finds that the proposal is consistent 
with Section 6(b)(5) of the Act,\6\ which requires, among other things, 
that a national securities exchange's rules be designed to promote just 
and equitable principles of trade, to remove impediments to and to 
perfect the mechanism of a free and open

[[Page 43801]]

market and a national market system, and, in general, to protect 
investors and the public interest.
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    \5\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Exchange is proposing, among other things, to 
amend Commentary .03 to Amex Rule 27 to eliminate the requirement that 
specialists and other members notify the Exchange in writing before any 
planned contact with a potential sponsor or issuer for the purpose of 
listing the ETFs or structured products of such sponsor or issuer on 
the Exchange, or within five business days of unanticipated contact 
where discussions regarding the listing occur. As noted above, under 
current Commentary .03, the Exchange will grant such approval where it 
appears that the contact will assist rather than impede the Exchange's 
effort to list the new ETF or structured product. The Exchange has 
stated that it no longer believes this restriction is necessary because 
it is unlikely that such contact would impede the Exchange's effort to 
list an issuer. The Commission believes this is a reasonable 
modification of the Exchange's allocation procedures. As discussed 
below, representations or commitments that relate to the prospective 
listing still must be disclosed on the listing application.
    The Exchange also proposes to shorten the disclosure timeframe in 
Commentary .03 to require specialists to only disclose in their 
applications to be allocated an ETF or structured product 
representations or commitments that relate to the prospective listing 
of the ETF or structured product and that are made within the six 
months preceding the date allocation applications are solicited with 
respect to that ETF or structured product. The Commission believes that 
this shorter timeframe should be sufficient to enable the Exchange to 
continue to monitor the appropriateness of such representations and/or 
commitments, without impairing the allocation process by requiring 
specialists to disclose every representation or commitment that they 
have ever made to the issuer or sponsor. The Commission also notes that 
ETFs and structured products are generally allocated to the specialist 
very quickly after approval of the listing application. However, in the 
event an ETF or structured product is not allocated within five days of 
the allocation application, specialists and other members would be 
required to update their applications to report all representations or 
commitments since last reported to the Exchange, which should help to 
ensure the integrity of the allocation process.
    In addition, the Exchange proposes a change to Commentary .03 to 
clarify that the Exchange may arrange telephone or in-person interviews 
on the Exchange's premises, if an issuer or sponsor wishes to interview 
one or more specialists once the Allocation Committee has prepared the 
list of qualified specialists. Because ETFs and structured products are 
typically allocated to a specialist within a few days after (and often 
the same day as) approval of the issuer's application for listing on 
the Exchange, the Commission would expect such interviews to occur 
infrequently. Should an interview occur, the Commission notes that 
Commentary .03 permits the Performance Committee to disqualify any 
specialist that has made inappropriate representations.
    Finally, in addition to other minor changes to Rule 27 and 
Commentaries .02 and .03 thereto, the proposal amends Commentary .02 to 
clarify that the Exchange's Performance Committee may disqualify for 
allocation any specialist that is deemed to have made an inappropriate 
communication to an issuer of an equity security that has been approved 
for listing on the Exchange. The Commission notes that this proposed 
change would make Commentary .02 more consistent with Commentary .03. 
The Exchange also proposes adding a provision to Commentary .02 that 
would prohibit post-interview contacts between specialists and issuers 
and provide a means for issuers to obtain further information from the 
specialists through the Exchange's Equity Sales Group. The Commission 
believes that these proposed changes to Commentary .02 are reasonable 
modifications of, and should further the public interest by helping to 
promote the integrity of, the allocation process.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (SR-Amex-2008-44) is approved.
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    \7\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-17141 Filed 7-25-08; 8:45 am]

BILLING CODE 8010-01-P
