AMEX aims to smooth listing process for structured products; SEC seeks feedback on proposal

By Kenneth Lim

Boston, March 26 - The American Stock Exchange is proposing rules aimed at making it easier for issuers to list more complex structured products.

The changes were proposed by the Exchange to the Securities and Exchange Commission on Feb. 29 and amended on March 20. The SEC is currently seeking comments on the proposed rule changes.

The thrust of the proposed rules is to address the fact that "current listing standards do not allow for mixing different asset classes in one security," AMEX representative Mary Chung told Prospect News.

"If we want to list and trade a product that does not fit within already approved rules on our books, we need to get approval from the SEC to list those kinds of products, and amend our rules accordingly."

The new rules will "allow the listing of structured products linked to fixed income securities, futures and indexes comprised of various asset classes under 'generic' listing standards," Chung said.

"Generic listing standards allow for products to be listed and traded without petitioning the SEC for regulatory approval as long as the products meet predefined criteria described in our rules."

Under the proposed rules, issuers who wish to list such structured products must have a tangible net worth of at least $250 million. Alternatively, they must meet earnings requirements, have a minimum tangible net worth of at least $150 million and must not have outstanding structured offerings that exceed 25% of their net worth.

Each new linked security to be listed must have a minimum public distribution of at least 1 million trading units and a minimum of 400 public shareholders, although those requirements will not be applicable if the notes are traded in $1,000 denominations or if they are redeemable weekly at the holder's option.

The issue must have a principal amount of at least $4 million, have a term of between one to 30 years and be non-convertible debt of the issuer. No loss or negative payment at maturity may be accelerated at more than twice the performance of the underlying asset.

There are also individual rules that pertain to products that are linked each of the asset classes.

The changes will affect both issuers and investors, Chung said.

"Issuers will be allowed to bring to market more complex hybrid structures without having to wait for specific SEC approval," she said. "This should increase the number of potential listings by the exchange. And customers, who will have greater variety of products to invest in."

The response from issuers has been positive so far, she said.

"They are very excited about it," Chung said. "It was because of interest that some of our issuers expressed in issuing certain hybrid products that we decided to expand on our current generic listing standards for structured products to meet their needs."

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