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20946 Federal Register / Vol. 70, No.

77 / Friday, April 22, 2005 / Notices

and, if appropriate, distribute and SECURITIES AND EXCHANGE qualify for side-by-side trading and
circulate to the membership providing COMMISSION integrated market making as set forth in
guidance regarding member firm Amex Rule 175(c)(2) and 985(e).7
[Release No. 34–51566; File No. SR–Amex–
compliance responsibilities when 2004–47]
Additionally, YUPS would be subject to
handling transactions in such securities. proposed Commentary .06 to Amex Rule
Self-Regulatory Organizations; 1202, regarding trading halts, and
(e) If the component security is to be
American Stock Exchange LLC; Notice proposed Commentary .07 to Amex Rule
selected by a broker-dealer, the broker-
of Filing of a Proposed Rule Change 1202, regarding allowable percentages
dealer should erect a ‘‘firewall’’ around set forth in Section 107B of the Amex
the personnel who have access to and Amendment No. 1 Thereto
Relating to the Listing and Trading of Company Guide.8 The text of the
information regarding such selection proposed rule change is available on the
Yield Underlying Participating
prior to listing. Amex’s Web site http://www.amex.com,
Securities (YUPS)
(f) For continued eligibility for trading at the principal office of the Amex, and
Single TIRs, the underlying equity April 18, 2005. at the Commission’s Public Reference
security of such Single TIR must be Pursuant to Section 19(b)(1) of the Room. The text of the proposed rule
eligible for standardized equity options Securities Exchange Act of 1934 change appears below. Additions are
trading pursuant to Rule 916. (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 italicized, deletions are bracketed.
notice is hereby given that on June 10, * * * * *
.04 {Reserved} 2004, the American Stock Exchange LLC
.05 Trust Issued Receipts listed (‘‘Amex’’ or ‘‘Exchange’’) filed with the Rule 1202. Initial and Continued
pursuant to Commentary .03 to Rule Securities and Exchange Commission Listing
1202 (‘‘Single TIRs’’) do not qualify for (‘‘Commission’’) the proposed rule Trust Issued Receipts will be listed
side-by-side trading and integrated change as described in Items I, II, and and traded on the Exchange subject to
market making as set forth in Rule III below, which Items have been application of the following criteria:
175(c)(2) and 958(e). prepared by the Exchange. On April 15, (a)–(e) No Change.
2005, the Exchange submitted
.06 Single TIR Trading Halts— Amendment No. 1 to the proposed rule Commentary
Trading on the Exchange in Single TIRs change.3 The Commission is publishing .01 through [–.2].03 9 No Change.
shall be halted or suspended whenever this notice to solicit comments on the .04 A series of Trust Issued Receipts
the Exchange deems such action proposed rule change, as amended, from based on a single component security
appropriate in the interests of a fair and interested persons. approved for trading pursuant to
orderly market and to protect investors. Commentary .03 of this Rule may also
Among the factors that may be I. Self-Regulatory Organization’s
include U.S. Treasury Securities
considered are that: (1) Trading in the Statement of the Terms of Substance of
(‘‘Treasury Securities’’). Up to 35% of
underlying security has been halted or the Proposed Rule Change
the Trust in such case may consist of
suspended in the primary market; (2) The Exchange proposes to approve for Treasury Securities.
the opening of such underlying security listing and trading Yield Underlying .05 through .07 No Change.10
in the primary market has been delayed Participating Securities (‘‘YUPS’’), * * * * *
because of unusual circumstances; (3) representing a beneficial ownership
interest in the common stock of a single, II. Self-Regulatory Organization’s
the Exchange has been advised that the
publicly-traded company and a series of Statement of the Purpose of, and
issuer of the underlying security is about Statutory Basis for, the Proposed Rule
to make an important announcement U.S. Treasury Securities (‘‘Treasury
Securities’’) with quarterly maturities. Change
affecting such issuer; (4) other unusual
YUPS would be eligible for listing and In its filing with the Commission, the
conditions or circumstances are present.
trading, including trading pursuant to Amex included statements concerning
To the extent that a security underlying
unlisted trading privileges, pursuant to the purpose of, and basis for, the
a Single TIR is subject to a regulatory
Rule 19b–4(e) 4 if the product satisfies proposed rule change and discussed any
halt as defined in Rule 6h–1 under the the criteria in proposed Commentary .03 comments it received on the proposed
Securities Exchange Act of 1934, the of Rule 1202 for ‘‘Single TIRs.’’ 5 YUPS rule change. The text of these statements
Exchange will halt or suspend trading in would also be subject to proposed may be examined at the placed specified
such Single TIR. Commentary .13 to Amex Rule 170 6 to in Item III below. The Amex has
.07 If an issuer proposes to list a allow a limited exception for specialist prepared summaries, set forth in Section
Single TIR that relates to more than the in Single TIRs, including the YUPS, to A, B, and C below, of the most
allowable percentages set forth in buy on plus ticks and/or sell on minus significant aspects of such statements.
Section 107B(f) of the Company Guide, ticks to bring the Single TIR/YUPS into
parity with the underlying securities. A. Self-Regulatory Organization’s
the Exchange will submit a proposed Statement of the Purpose of, and the
rule change with the Commission YUPS would also be subject to the
proposed Commentary .05 to Amex Rule Statutory Basis for, the Proposed Rule
pursuant to Section 19(b)(2) and cannot Change
list and trade such Single TIR until the 1202, which states that YUPS do not
Commission issues an approval order. 1. Purpose
1 15
U.S.C. 78s(b)(1).
[FR Doc. E5–1914 Filed 4–21–05; 8:45 am] 2 17 CFR 240.19b–4.
Under Amex Rule 1201, the Exchange
3 Amendment No. 1 makes minor typographical may approve for listing and trading trust
BILLING CODE 8010–01–P
edits to the proposed rule text.
4 17 CFR 240.19b–4(e). 7 See Single TIR Proposal.
5 See Securities Exchange Act Release No. 51567 8 See Single TIR Proposal.
(April 18, 2005) (SR–Amex 2003–66)(’’Single TIR 9 See Single TIR Proposal for text of proposed

Proposal’’). Commentary .03 to Rule 1202.


6 This new Commentary .13 to Amex Rule 170 is 10 See Single TIR Proposal for text of proposed

proposed in the Single TIR Proposal. Commentaries .05, .06, and .07 to Rule 1202.

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Federal Register / Vol. 70, No. 77 / Friday, April 22, 2005 / Notices 20947

issued receipts (‘‘TIRs’’) 11 based on one variety of industry sectors and the Listing Criteria
or more securities.12 The Amex in this market as a whole. The original HOLDR Under Amex Rule 1201, the Exchange
proposal seeks to list for trading under was the Internet HOLDR. may list and trade TIRs based on one or
Amex Rule 1202, YUPS, representing To accommodate the listing of more securities. The securities that are
ownership interests in a trust, the assets additional TIRs, the Exchange in included in a series of a TIR are
of which will consist of shares of the September 2000 revised the existing required to be selected by the Exchange
common stock of a single, publicly- listing criteria and trading rules to or its agent, a wholly owned subsidiary
traded company (the ‘‘Common Stock’’) permit the listing and trading of TIRs of the Exchange, or by such other person
and a series of Treasury Securities with pursuant to Rule 19b–4(e) under the Act as shall have a proprietary interest in
quarterly maturities in the form of strips (‘‘Generic Listing Standards’’).17 In such TIRs.19 Pursuant to Amex Rule
(‘‘U.S. Treasury Strips’’).13 The order to efficiently list TIRs without 1201, the Exchange submits that it may
Exchange proposes that the minimum submitting a separate rule filing with designate YUPS for trading.
number of receipts or YUPS required to the Commission for each TIR, the YUPS will conform to the initial and
be outstanding when trading Exchange consistent with Rule 19b–4(e) continued listing criteria under
commences is 150,000. YUPS may be requires, among other things, evidence proposed Commentary .03 for Single
approved for listing and trading on of sufficient size, liquidity and non- TIRs in Amex Rule 1202.20 Each YUPS
Common Stock that meets certain concentration of the underlying trust will be formed under a depositary
criteria identified below relating to, component securities of the TIR.18 trust agreement, among BNY, as trustee,
among other things, public float and Because of the structure of YUPS, Cantor, the depositor, and other
trading volume, required in proposed representing an interest in shares of the depositors, if any, and the holders of
Commentary .03 to Amex Rule 1202.14 Common Stock and a series of U.S. YUPS (the ‘‘YUPS Trust’’ or ‘‘Trust’’).21
The Exchange expects Cantor Fitzgerald Treasury strips, the Exchange believes The term of each YUPS Trust will
& Co. (‘‘Cantor’’), as initial depositor to that the current Generic Listing expire on or shortly after three (3) years
the trust, to offer the YUPS and Bank of Standards cannot be used by the from its date of formation.
New York (‘‘BNY’’) will act as trustee. Exchange to list this product. However, As noted above, the Exchange
Introduction based on the TIR Approval Order, the proposes to establish specific criteria in
Exchange represents that YUPS may be proposed Commentary .03 to Amex Rule
In September 1999, the Exchange listed for trading pursuant to Amex Rule 1202, for determining whether Common
adopted rules for the listing and trading 1201 and Amex Rule 1202, subject to Stock is eligible for YUPS listing and
of TIRs.15 TIRs are negotiable receipts trading. The criteria are similar to, and
Commission review and approval. As a
issued by trusts that represent investors’ based on, the existing criteria for TIRs
result, the Exchange submits this
discrete identifiable and undivided under the Generic Listing Standards.
proposed rule change for the purpose of
beneficial ownership interest in the
adding Commentary .04 to Amex Rule
securities deposited into the trust. Since 19 Cantor, the initial depositor, and BNY, the
1202 to permit the listing and trading,
that time the Exchange has listed trustee, will determine the particular underlying
including pursuant to unlisted trading
seventeen (17) TIRs under the trade Common Stock to be included in each YUPS trust.
privileges, of a series of YUPS pursuant 20 Additionally, the initial listing standards set
name of HOLDRS,16 representing a wide
to Rule 19b–4(e) under the Act when the forth in Amex Rule 1202(a) for all TIRs provide that
11 A TIR is defined in Amex Rule 1200(b) as a
product complies with proposed the Exchange must establish a minimum number of
Commentaries .03, .05, .06, and .07 to TIRs required to be outstanding at the time of the
security (a) that is issued by a trust which holds commencement of trading on the Exchange. As set
specified securities deposited with the trust; (b) Amex Rule 1202 and proposed forth above, the minimum number of YUPS
that, when aggregated in some specified minimum Commentary .13 to Amex Rule 170 in required to be outstanding at the time of trading is
number, may be surrendered to the trust by the 150,000 receipts. The continued listing guidelines
beneficial owner to receive the securities; and (c)
the Single TIR Proposal.
for all TIRs are set forth in Amex Rule 1202(b) and
that pays beneficial owners dividends and other currently state that the Exchange will consider the
distributions on the deposited securities, if any are Commission on September 23, 1999 pursuant to suspension of trading in or removal from listing of
declared and paid to the trustee by an issuer of the Rule 424(b)(4) CIK No. 00007286(2). a trust upon which a series of TIRs is based under
deposited securities. 17 Commission Rule 19b–4(e), adopted on
any of the following circumstances: (1) If the trust
12 The Exchange defines a ‘‘security’’ or
December 8, 1998, permits the Exchange to list and has more than 60 days remaining until termination
‘‘securities’’ to include stocks, bonds, options, and trade new derivative securities products without and there are fewer than 50 record and/or beneficial
other interests or instruments commonly known as submitting a proposed rule change, provided the holders of Trust Issued Receipts for 30 or more
securities. See Amex Constitution, Article I, Section Exchange has in place trading rules, procedures, a consecutive trading days; (2) if the trust has fewer
3(j). Pursuant to Commentary .01 to Amex Rule surveillance program and listing standards that than 50,000 receipts issued and outstanding; (3) if
1202, initially, no component security of a TIR may pertain to the class of securities covering the new the market value of all receipts issued and
represent more than 20% of the overall value of the product. See Securities Exchange Act Release No. outstanding is less than $1,000,000; or (4) if such
receipt. If the portfolio of securities underlying the 40761 (December 8, 1998), 63 FR 70952 (December other event shall occur or condition exists which
TIR drops to fewer than nine, the SRO will consult 22, 1998). in the opinion of the Exchange makes further
with the Commission staff to confirm the 18 Commentary .01 of Amex Rule 1202 provides dealings on the Exchange inadvisable. Upon
appropriateness of continued listing of such TIR. the eligibility criteria for component securities termination of a trust, the Exchange requires that
See Securities Exchange Act Release No. 41892 represented by a series of a TIR as follows: (1) Each any TIRs issued in connection with such trust be
(September 21, 1999), 64 FR 52559 (September 29, component security must be registered under removed from Exchange listing. In addition, a trust
1999) (‘‘TIR Approval Order’’). Section 12 of the Act; (2) each component security may terminate in accordance with the provisions of
13 A ‘‘stripped bond’’ is a bond that is separated
must have a minimum public float of at least $150 the trust prospectus, which may provide for
into its two component parts: periodic interest million; (3) each component security must be listed termination if the value of securities in the trust
payments and principal repayment. In the case of on a U.S. national securities exchange or traded falls below a specified amount.
stripped bond, each of the interest repayments and through the facilities of The Nasdaq Stock Market, 21 The trust is not a registered investment
principal repayment are stripped apart by a Inc. (‘‘Nasdaq’’) and a reported national market company under the Investment Company Act of
brokerage firm and sold individually as zero- system security; (4) each component security must 1940 (‘‘1940 Act’’). See SEC No-Action Letter dated
coupon securities. U.S. Treasury Securities that are have an average daily trading volume of at least September 3, 1999 to Merrill Lynch, Pierce, Fenner
‘‘stripped’’ are called ‘‘STRIPS,’’ which strands for 100,000 shares during the preceding sixty-day & Smith Incorporated, providing relief from
‘‘separate trading of registered interest and trading period; (5) each component security must registration as a management investment company
principal of securities.’’ have an average daily dollar value of shares traded under the 1940 Act for HOLDRS (the ‘‘HOLDRS No-
14 See Single TIR Proposal.
during the proceeding sixty-day trading period of at Action Letter’’). The depositor, Cantor, has
15 See TIR Approval Order.
least $1 million; and (6) the most heavily weighted requested similar no-action relief from the staff of
16 See HOLDRS No-Action Letter infra note 21 component security may not initially represent the Commission’s Division of Investment
and Registration No. 333–78575 filed with the more than 20% of the overall value of the TIR. Management.

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20948 Federal Register / Vol. 70, No. 77 / Friday, April 22, 2005 / Notices

Thus, the proposed eligibility criteria Securities. With respect to the U.S. The primary dealers are among the
for the underlying equity component Treasury strip component of YUPS, the most active participants in the
(‘‘Common Stock’’) represented by a Exchange notes that the market for secondary market for Treasury
series of YUPS are as follows: Treasury Securities is the largest and Securities. The primary dealers and
1. The component Common Stock most liquid securities market in the other large market participants
must be registered under Section 12 of world.24 For the year 2003, total daily frequently trade with each other, and
the Act; average transaction volume for primary most of these transactions occur through
2. The component Common Stock dealers 25 in U.S. Treasury coupon an interdealer broker.29 The interdealer
must be listed on a national securities securities was approximately $406.08 brokers provide primary dealers and
exchange or traded through the facilities billion. During this same period, other large participants in the Treasury
of Nasdaq and reported national market primary dealer average daily transaction market with electronic screens that
system security; volume in the 1–3 year range was display the bid and offer prices among
3. The component Common Stock approximately $146.58 billion; average dealers and allow trades to be
may be a security of the U.S. or foreign daily transaction volume in the 3–6 year consummated.
issuer that meets the requirements of range was approximately $130.67 Quote and trade information
Section 107B(f) 22 of the Company billion; average daily transaction regarding Treasury Securities is widely
Guide; volume in the 6–11 year range was available to market participants from a
4. The component Common Stock approximately $103.65 billion; and variety of sources. The electronic trade
must have a minimum public float of at average daily transaction volume in the and quote systems of the dealers and
least $150 million; more than 11 year range was interdealer brokers are one such source.
5. The component Common Stock approximately $25.08 billion.26 In the Groups of dealers also furnish trade and
must have an average daily trading first quarter of 2004, average daily quote information to vendors such as
volume of at least 100,000 shares during transaction volumes for the same Bloomberg LLC, Reuters, Moneyline
the preceding sixty-day trading period; duration U.S. Treasury coupon Telerate, and CQG. GovPX,30 for
and securities were $166.89 billion, $135.4 example, is a consortium of leading
6. The component Common Stock billion, $106.4 billion and $24.12 government securities dealers that
must have an average daily dollar billion, respectively. Most of this provides market data from leading
volume of shares traded during the trading volume occurs in the most government securities dealers to market
preceding sixty-day period of at least $1 recently issued security in a particular data vendors. TradeWeb, another
million. maturity class.27 example, is a consortium of 18 primary
Additionally, a minimum of 150,000 dealers that, in addition to providing a
The secondary market for Treasury
receipts are required to be outstanding trading platform, also provides market
Securities is a highly organized over-
when trading commences. For data direct to subscribers or to other
the-counter (‘‘OTC’’) market. Many
continued listing, the component stock market data vendors.31 In addition, an
dealers, and particularly the primary
must be eligible for standardized equity interdealer broker of government
dealers, make markets in Treasury
option trading pursuant to Amex Rule securities (Cantor) for many years has
Securities. Trading activity takes place
916. The eligibility criteria were provided Moneyline Telerate with
between primary dealers, non-primary
selected to ensure that the Common market data.
dealers, and customers of these dealers,
Stock available for YUPS is well In order to provide investors who
including financial institutions, non-
capitalized and actively traded. With purchase or sell YUPS with information
financial institutions and individuals.
respect to public float and trading regarding the value of the underlying
Increasingly, trading in Treasury
volume, the Exchange states the criteria Common Stock and Treasury strips, the
Securities occurs through automated
track the requirements for qualification Exchange will disseminate every 15
trading systems.28
as ‘‘actively traded securities’’ under seconds an indicative value of the
Regulation M.23 underlying portfolio.32
24 See ‘‘The Treasury Securities Market: Overview
Proposed Commentary .04 to Amex and Recent Developments,’’ The Federal Reserve Product Description
Rule 1202 provides that up to 35% of Bulletin, December 1999; which can be obtained
the YUPS Trust may consist of Treasury from the Federal Reserve’s Web site The Exchange states that YUPS are
www.federalreserve.gov/pubs/bulletin/1999/ designed to provide investors with a
22 Section 107B(f) of the Company Guide provides 99index.htm. current market yield, while also
25 Primary dealers are selected by the Federal
requirements to meet in connection with the listing providing the opportunity to share in
and trading of equity linked notes based on foreign Reserve Bank of New York as counter parties for the
New York Federal Reserve’s open market operations the appreciation, if any, of a publicly-
and U.S. underlying securities. In general, this
provision limits the amount of outstanding common (government securities transactions related to the traded share of common stock. YUPS
shares of an entity that may be linked to a Federal Reserve’s implementation of monetary represent an undivided beneficial
derivative instrument. The Exchange has also set policy). Primary dealers are required to participate interest in the underlying securities
forth, in proposed Commentary .07, that if an issuer meaningfully in both open market operations and
Treasury auctions and are required to provide held by the YUPS Trust. A holder of
proposes to list a Single TIR that relates to more
than the allowable percentages set forth in Section policy relevant market information to the Federal YUPS may exchange the YUPS to
107B(f) of the Company Guide, the Exchange will Reserve Bank of New York. receive each of the underlying
26 Primary dealers in Treasury Securities submit
submit a proposed rule change with the securities. The Exchange states that the
Commission pursuant to Section 19(b)(2) and statistics to The Federal Reserve Bank of New York
regarding their transactions in Treasuries. These
expenses associated with trading YUPS
cannot list and trade such Single TIR until the
Commission issues an approval order. See Single statistics may be obtained from the New York
29 E.g., BrokerTec Global, Cantor Fitzgerald,
TIR Proposal. Federal Reserve’s Web site http://www.ny.frb.org.
23 See Securities Exchange Act Release No. 38067 27 See supra note 24 at page 795. Garban-Intercapital, and Liberty Brokerage.
30 http://www.govpx.com.
(December 20, 1996), 62 FR 520 (January 3, 1997) 28 See ‘‘eCommerce in the Fixed-Income Markets:
31 http://www.tradeweb.com.
at 35–36. Rules 101(c) and 102(d) under Regulation The 2001 Review of Electronic Transaction
M defines ‘‘actively-traded securities’’ as those Systems,’’ December 2001. This survey of electronic 32 Because YUPS will hold multiple securities

securities that have an average daily trading volume trading systems in the bond market was prepared (e.g., an equity security and Treasury strips), the
of at least $1 million and are issued by an issuer by the staff of The Bond Market Association and is Exchange finds it useful to disseminate an
whose common equity securities have a public float available through the Association’s Web site estimated intraday valuation indicative of the
of at least $150 million. http://www.bondmarkets.com. underlying portfolio.

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Federal Register / Vol. 70, No. 77 / Friday, April 22, 2005 / Notices 20949

are expected to be less than the date, plus an underwriting fee. After the notional amount and weighting of the
expenses associated with trading each of initial public offering, each Trust may underlying U.S. Treasury Strips will
the underlying securities separately in a issue additional YUPS regarding a also be determined on the pricing date
traditional brokerage account. YUPS are specific underlying Common Stock on a and, except as a result of the maturity
also expected to provide reduced continuous basis. Investors may acquire of the U.S. Treasury Strips, will not
volatility compared to the trading of YUPS in two ways: (1) Through a change during the term of the Trust. The
each Common Stock, largely due to the purchase on the Exchange, or (2) relative weightings of the deposited
existence of downside protection through an in-kind deposit with the securities will change based on the
received through the current yield of trustee during normal business hours of current market price of the deposited
U.S. Treasury strips. the number of the underlying shares of
securities, but the component securities
YUPS are separate and distinct from Common Stock represented by the
the underlying securities comprising the held by each YUPS Trust and
specified round-lots of 100 YUPS and
portfolio of the YUPS Trust. Consistent the series of U.S. Treasury Strips represented by a YUPS will not change
with the TIR Approval Order,33 each represented by the specified round-lots except as a result of the quarterly
YUPS Trust will only issue and retire of 100 YUPS. Investors that create YUPS maturity of the U.S. Treasury Strips.
YUPS in a minimum issuance by delivery to the Trust of the requisite Investors may withdraw the
denominations,34 which is expected to underlying Common Stock and U.S. underlying securities of YUPS upon
be eight (8) round-lots of 100 YUPS Treasury Strips will be required to pay request by delivering a minimum
shares. Each Trust will only issue YUPS an issuance fee that is expected to be issuance denomination (expected to be
upon the deposit of the whole shares approximately 1% of the value of the eight (8) round lots of 100 YUPS) or
represented by the minimum issuance securities represented by the YUP integral multiple thereof to the trustee
denomination and the series U.S. receipt.36 In addition, investors will also during normal business hours. To the
Treasury strips represented by such be responsible for paying any sales extent that any exchange of YUPS
minimum issuance denomination. In commissions that are charged by a requires the delivery of a fractional
the event that a fractional share is broker in connection with any purchase share, the trustee will sell such share in
represented by the minimum issuance of the underlying securities.
denomination, the Trust may require a The initial weighting of YUPS will be the market and deliver cash in lieu of
minimum of more than one minimum approximately 70% allocated to such share. Beneficial owners of YUPS
issuance denomination for an issuance Common Stock and 30% allocated to will have the same rights and privileges
so that the Trust will always receive the U.S. Treasury Strips. The specific as they would have if they beneficially
whole share amounts for issuance of share amounts for each round-lot of 100 owned the underlying securities outside
YUPS. Thus, YUPS will trade on the YUPS will be determined on the pricing of the Trust.38 These include the right
Exchange only in round lots of 100 date. The underlying securities of YUPS of investors to instruct the trustee to
YUPS. consist of shares of a Common Stock vote the securities, the right to receive
The number of outstanding YUPS will that is registered under Section 12 of the dividends and other distributions on the
increase and decrease as a result of in- Act and meets the other listing criteria underlying securities, if any, and the
kind deposits and withdrawals of the discussed above, and a series of zero- right to exchange YUPS to receive the
underlying securities. The YUPS Trust coupon U.S. Treasury Strips, maturing underlying securities.39 However,
will stand ready to issue additional quarterly. In selecting the Common except with respect to the right to vote
YUPS on a continuous basis when an Stock, no investigation or review of the for dissolution of the Trust, holders of
investor deposits the required securities individual publicly-traded company, YUPS will not have voting rights with
with the trustee. including the public filings, will be
The initial public offering price for performed other than to the extent be $49.99 (plus a 1% issuance fee) provided a share
100 YUPS will equal the sum of the required to determine whether the per receipt ratio of 1.7825 and a current price of
closing market price on the Nasdaq company and its common stock satisfies $20.00 per share for a given stock that qualifies as
National Market (for Nasdaq stocks) or the listing criteria for YUPS. a YUP candidate and $15.00 principal amount of
the primary listed securities exchange Treasury Securities (with a current market value of
After the pricing, the ‘‘share per $14.34). If YUPS are surrendered to the trustee in
(for listed stocks) on the pricing date for receipt ratio amount’’ for an underlying a minimum issuance amount (expected to be eight
each underlying share of the Common Common Stock will not change, except (8) round lots of 100 YUPS), the investor will
Stock multiplied by the ‘‘share per for changes due to corporate events, receive 1,426 shares of the Common Stock and
receipt ratio amount’’ 35 to be such as stock splits or reverse stock $12,000 principal amount of Treasury Securities for
determined on the pricing, and the each minimum issuance denomination. In the event
splits. Under no circumstances will the a minimum issuance denomination represents
closing prices of the U.S. Treasury strips common stock of a different publicly- fractional shares due to certain corporate events
in the futures market on the pricing traded company be substituted for the such as stock splits or reverse stock splits or other
corporate distributions, the trustee will deliver cash
33 See
initial common stock established for the in lieu of such fractional share.
TIR Approval Order.
34 YUPS
YUPS. The actual number of shares and 38 The trustee will deliver proxy soliciting
will evidenced by one or more global
certificates that the trustee will deposit with DTC weighting will be determined on the materials provided by the publicly-traded company
and register in the name of Cede & Co., as nominee date of the initial capitalization of the underlying YUPS to permit holders of YUPS to give
for DTC. YUPS will be available only in book-entry Trust by the initial depositor and will the trustee instructions as to how to vote on matters
form. Owners of YUPS may hold their YUPS to be considered at any annual or special meeting
appear in the final prospectus delivered of shareholders held by that company.
through DTC, if they are participants in DTC, or
indirectly through entities that are participants in in connection with sales of YUPS.37 The 39 Dividends and distributions will generally be

DTC. passed-through to the holders of the YUPS.


35 The ‘‘share per receipt ratio amount’’ is the 36 Telephone conversation between Jeffrey Burns, However, distributions, if any, of additional shares
number of shares of the underlying Common Stock Associate General Counsel, Amex, and Florence of common stock will be retained by the Trust and
(or multiplier) for each one (1) YUP. The ‘‘share per Harmon, Senior Special Counsel, Commission, on added to the quantity of the common stock
receipt ratio’’ for each separate YUPS issue will April 15, 2005. underlying the outstanding YUPS. Telephone
depend on the price of the Common Stock and will 37 As a result of the share per receipt ratio amount conversation between Jeffrey Burns, Associate
vary from issue to issue. In general, the higher the or multiplier, the initial issue price will be a General Counsel, Amex, and Florence Harmon,
market price of the Common Stock, the lower the multiple of the current price of the Common Stock. Senior Special Counsel, Commission, on April 15,
‘‘share per receipt ratio.’’ For example, the initial issue price of a YUP may 2005.

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20950 Federal Register / Vol. 70, No. 77 / Friday, April 22, 2005 / Notices

respect to the YUPS Trust.40 The Trust Trust, investors purchasing YUPS by aggregate value of the Trust’s assets fall
will not be managed and will remain delivery to the Trust of the securities below a pre-determined amount.
static over the term of the Trust. represented by the YUPS are required to Upon termination of the Trust, the
The Trust will not publish or pay an issuance fee of 1% of the value beneficial owners will surrender the
otherwise calculate the aggregate value of the securities underlying the YUPS YUPS and the trustee will distribute the
of the underlying security represented receipt. There are no cancellation or
by YUPS. However, as noted above, the underlying securities to the YUPS
withdrawal fees.42
Exchange will disseminate every 15 holders.
Brokerage commissions may be
seconds over the Consolidated Tape charged by a securities broker for the Information Circular
Association’s Network B an indicative purchase of the underlying securities in
value of the underlying portfolio of The proposed rule change would
connection with the creation of the
YUPS. YUPS may trade in the require the Exchange to evaluate the
YUPS. In addition, purchases of YUPS
secondary market at prices that are on the Exchange may also be subject to nature and complexity of YUPS, prior to
lower than the aggregate value of the brokerage commissions. the commencement of its trading, and,
corresponding underlying security. If, in if appropriate, distribute and circulate
such case, a holder of a YUPS wishes to BNY as trustee also will charge an to the membership guidance regarding
realize the net asset value of the annual custody fee of .04% of the member firm compliance
underlying security, that owner will Trust’s assets, to be paid quarterly by responsibilities when handling
have to exchange the YUPS. Cantor (and thus will not be paid out of
transactions in such securities. In
The Exchange believes that YUPS will the assets of the Trust).
addition, prior to the commencement of
not trade at a material discount or Termination Events trading in YUPS, the Exchange will
premium to the underlying securities issue a circular to members informing
held by the Trust based on potential The YUPS Trust will be terminated if them of, among other things, Exchange
arbitrage opportunities. The arbitrage any of the following circumstances
policies regarding trading halts in such
process, which provides the opportunity occur: (1) The individual publicly-
securities. First, the circular will advise
to profit from differences in prices of the traded company of the underlying YUPS
that trading will be halted in the event
same or similar securities, increases the no longer has a class of securities
the market volatility trading halt
efficiency of the markets and serves to registered under Section 12 of the Act;
(2) the Commission finds that parameters set forth in Amex Rule 117
prevent potentially manipulative efforts.
individual publicly-traded company have been reached. Second, the circular
If the price of YUPS deviates enough
underlying the YUPS or the Trust will advise that, in addition to other
from the portfolio of the deposited
securities to create a material discount should be registered as an investment factors that may be relevant, the
or premium, an arbitrage opportunity is company under the 1940 Act, and the Exchange may consider factors such as
created allowing the arbitrageur to trustee has actual knowledge of the the extent to which trading is not
either buy the YUPS at a discount, Commission finding; (3) the securities of occurring in a deposited share(s) and
immediately cancel them in exchange the individual publicly-traded company whether other unusual conditions or
for the deposited securities and sell the underlying the YUPS cease to be circumstances detrimental to the
underlying securities in the cash market outstanding as a result of a merger, maintenance of a fair and orderly
at a profit, or sell the YUPS short at a consolidation or other corporate market are present; however, in any
premium and buy the securities combination; (4) the individual event, trading in the YUPS will be
represented by YUPS to deposit in publicly-traded company’s common halted if trading in the underlying
exchange for YUPS to deliver against stock is no longer listed for trading on equity security is halted because of a
the short position. In both instances the the Amex or New York Stock Exchange, regulatory trading halt as defined in
arbitrageur locks in a profit and the Inc. (‘‘NYSE’’) or authorized for Rule 6h–1 under the Act.43
markets move back into line. quotation on Nasdaq National Market In addition, the circular will also
System (‘‘NMS’’) for five (5) business discuss the special characteristics and
Prospectus Delivery
days from the date the securities are no risks of trading YUPS. Specially, the
In connection with the listing and longer authorized for listing or circular, among other things, will
trading of YUPS, all investors in YUPS quotation; (5) the YUPS are delisted discuss how the YUPS are issued and
who purchase in the initial offering will from the Amex and are not listed for redeemed from the trust, that shares are
receive a prospectus. In addition, trading on another U.S. national not individually redeemable, member
purchasers of YUPS directly from the securities exchange or authorized for prospectus delivery requirements, and
Trust (by delivering the underlying quotation on Nasdaq NMS within five applicable Exchange rules, such as the
securities to the Trust) will also receive (5) business days from the date the limited exception to Amex Rule 170.
a prospectus. Finally, Amex members YUPS are delisted; (6) the trustee The circular will also explain the
purchasing YUPS from the Trust for resigns and no successor trustee is
resale to customers will deliver a various fees as described in the
appointed within 60 days from the date Registration Statement. The circular will
prospectus to such customers.41 the trustee provides notice to Cantor, also advise members of their suitability
Fee Structure the initial depositor, of its intent to
obligations with respect to a
resign; (7) 50% of beneficial owners of
As set forth in the Registration recommended transaction in the YUPS
outstanding YUPS vote to dissolve and
Statement in connection with the YUPS shares.44
liquidate the trust; and/or (8) the
40 Beneficial owners of YUPS, other than Cantor,
withdrawal of such number of common 43 Telephone conversation between Jeffrey Burns,

will have the right to vote to dissolve and liquidate


stock from the Trust so that the Associate General Counsel, Amex, and Florence
the Trust. Harmon, Senior Special Counsel, Commission, on
41 Telephone conversation between Jeffrey Burns, 42 Telephone conversation between Jeffrey Burns, April 14, 2005 (regarding content of information
Associate General Counsel, Amex, and Florence Associate General Counsel, Amex, and Florence circular generally and definition of regulatory
Harmon, Senior Special Counsel, Commission, on Harmon, Senior Special Counsel, Commission, on trading halt).
April 15, 2005. April 15, 2005 (as to fee structure generally). 44 See Amex Rule 411.

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Federal Register / Vol. 70, No. 77 / Friday, April 22, 2005 / Notices 20951

Trading Rules procedures governing options and • Send an e-mail to rule-


equities. comments@sec.gov. Please include File
YUPS are equity securities subject to Number SR–Amex–2004–47 on the
Amex Rules governing the trading of 2. Statutory Basis
subject line.
equity securities, including, among The Exchange believes that the
others, rules governing priority, parity proposed rule change is consistent with Paper Comments
and precedence of orders, specialist Section 6 of the Act49 in general and
responsibilities, account opening and • Send paper comments in triplicate
furthers the objectives of Section
customer suitability (Amex Rule 411), 6(b)(5) 50 in particular in that it is to Jonathan G. Katz, Secretary,
with the prior approval of a floor designed to prevent fraudulent and Securities and Exchange Commission,
official, of a stop or limit order by a manipulative acts and practices, to 450 Fifth Street, NW., Washington, DC
quotation (Amex Rule 154, Commentary promote just and equitable principles of 20549–0609.
.04(c)). Initial equity margin trade, to foster cooperation and All submissions should refer to File
requirements of 50% and the regular coordination with persons engaged in Number SR–Amex–2004–47. This file
equity trading hours of 9:30 a.m. to 4 facilitating transactions in securities, number should be included on the
p.m. will apply to transactions in YUPS. and to remove impediments to and subject line if e-mail is used. To help the
However, trading rules pertaining to the perfect the mechanism of a free and Commission process and review your
availability of odd-lot trading in Amex open market and a national market comments more efficiently, please use
equities will not apply to the trading of system. only one method. The Commission will
YUPS, since they can only be traded in
B. Self-Regulatory Organization’s post all comments on the Commission’s
round-lots. YUPS will be deemed
Statement on Burden on Competition Internet Web site (http://www.sec.gov/
‘‘Eligible Securities,’’ as defined in
Amex Rule 230, for purposes of the The Exchange does not believe that rules/sro.shtml). Copies of the
Intermarket Trading System Plan and the proposed rule change will impose submission, all subsequent
therefore will be subject to the trade any burden on competition. amendments, all written statements
through provisions of Amex Rule 236 with respect to the proposed rule
C. Self-Regulatory Organization’s change that are filed with the
that require that Amex members avoid Statement on Comments on the
initiating trade-throughs for ITS Commission, and all written
Proposed Rule Change Received From communications relating to the
securities. Members, Participants, or Others proposed rule change between the
Specialist transactions of YUPS made
The Exchange did not receive any Commission and any person, other than
in connection with the creation and
written comments on the proposed rule those that may be withheld from the
redemption of YUPS will not be subject
change. public in accordance with the
to the prohibitions of Amex Rule 190.45
YUPS will trade in minimum fractional III. Date of Effectiveness of the provisions of 5 U.S.C. 552, will be
increments pursuant to Amex Rule 127, Proposed Rule Change and Timing for available for inspection and copying in
resulting in a minimum fractional Commission Action the Commission’s Public Reference
change of $0.01. YUPS will be subject Section, 450 Fifth Street, NW.,
Within 35 days of the date of
to the short sale rule, Rule 10a–1 under Washington, DC 20549. Copies of such
publication of this notice in the Federal
the Act and Regulation SHO under the filing also will be available for
Register or within such longer period (i)
Act.46 In addition, Proposed inspection and copying at the principal
as the Commission may designate up to
Commentary .13 of Amex Rule 170 90 days of such date if it finds such office of the Exchange. All comments
would grant a specialist in a Single TIR longer period to be appropriate and received will be posted without change;
a limited exception from Commentaries publishes its reasons for so finding or the Commission does not edit personal
.01, .02, and .07 of Amex Rule 170.47 (ii) as to which the self-regulatory identifying information from
Such exception would allow a specialist organization consents, the Commission submissions. You should submit only
in a Single TIR to buy on plus ticks and/ will: information that you wish to make
or sell on minus ticks for the purpose of (A) By order approve such proposed available publicly. All submissions
bringing the Single TIR into parity with rule change; or should refer to File Number SR–Amex–
its underlying security. The Exchange (B) Institute proceedings to determine 2004–47 and should be submitted on or
represents that its surveillance whether the proposed rule change before May 13, 2005.
procedures applicable to the YUPS are should be disapproved.
adequate to deter manipulation,48 and For the Commission, by the Division of
will be similar to those used for other IV. Solicitation of Comments Market Regulation, pursuant to delegated
TIRs and exchange-traded funds authority.51
Interested persons are invited to
(‘‘ETFs’’) and will incorporate and rely Margaret H. McFarland,
submit written data, views, and
upon existing Amex surveillance arguments concerning the foregoing, Deputy Secretary.
including whether the proposed rule [FR Doc. E5–1915 Filed 4–21–05; 8:45 am]
45 See Commentary .05 to Amex Rule 190.
change, as amended, is consistent with BILLING CODE 8010–01–P
Pursuant to Commentary .05, Amex Rule 190(a) will
not restrict the specialist in YUPS from purchasing
the Act. Comments may be submitted by
or canceling the YUP or its component securities in any of the following methods:
connection with the issuance of the YUP, from the
Trust as appropriate to facilitate the maintenance of Electronic Comments
a fair and orderly market.
46 17 CFR 240.10a–1; 17 CFR 242.200(g).
• Use the Commission’s Internet
47 See Single TIR Proposal.
comment form (http://www.sec.gov/
48 Telephone conversation between Jeffrey Burns, rules/sro.shtml); or
Associate General Counsel, Amex, and Florence
49 15 U.S.C. 78f(b).
Harmon, Senior Special Counsel, Commission, on
April 14, 2005. 50 15 U.S.C. 78f(b)(5). 51 17 CFR 200.30–3(a)(12).

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