55248 Federal Register / Vol. 71, No. 183 / Thursday, September 21, 2006 / Notices 

4The Commission has modified the text of the 

summaries prepared by NSCC. 

5Annual audited financial statements are 

provided to members after the last calendar quarter 

of the year. 

6 15 U.S.C. 78q–1. 

7 15 U.S.C. 78s(b)(3)(A)(i). 

8 17 CFR 240.19b–4(f)(1). 

9For purposes of calculating the 60-day period 

within which the Commission may summarily 

abrogate the proposed rule change under Section 

19(b)(3)(C) of the Act, the Commission considers 

the period to commence on August 18, 2006, the 

date on which the last amendment to the proposed 

rule change was filed with the Commission. 15 

U.S.C. 78s(b)(3)(C). 

10 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. NSCC has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements.4

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

The purpose of the proposed rule 

change is to further harmonize and 

clarify the rules of The Depository Trust 

& Clearing Corporation’s clearing agency 

subsidiaries. In this filing, NSCC 

proposes to conform NSCC Rule 35 

concerning providing financial reports 

to its members to the equivalent rule of 

The Depository Trust Company 

(‘‘DTC’’), DTC Rule 15. Specifically, the 

rule change would clarify NSCC’s 

longstanding practice of providing 

unaudited quarterly financial statements 

to its members for the first three 

quarters of the calendar year only.5

NSCC believes that the proposed rule 

change is consistent with the 

requirements of Section 17A of the Act 6

and the rules and regulations 

thereunder because it constitutes a 

stated policy, practice, or interpretation 

with respect to the meaning, 

administration, or enforcement of an 

existing rule of NSCC and as such does 

not adversely affect the safeguarding of 

securities or funds in the custody or 

control of NSCC or for which it is 

responsible. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

NSCC does not believe that the 

proposed rule change will have any 

impact or impose any burden on 

competition. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

NSCC has not solicited or received 

written comments relating to the 

proposed rule change. NSCC will notify 

the Commission of any written 

comments it receives. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(i) 7 of the Act and Rule 19b–

4(f)(1) 8 thereunder because it 

constitutes a stated policy, practice, or 

interpretation with respect to the 

meaning, administration, or 

enforcement of an existing rule. At any 

time within 60 days of the filing of the 

proposed rule change, the Commission 

may summarily abrogate such rule 

change if it appears to the Commission 

that such action is necessary or 

appropriate in the public interest, for 

the protection of investors, or otherwise 

in furtherance of the purposes of the 

Act.9

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change, as amended, is consistent with 

the Act. Comments may be submitted by 

any of the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

No. SR–NSCC–2006–02 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

No. SR–NSCC–2006–02. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Section, 100 F Street, NE., Washington, 

DC 20549. Copies of such filing also will 

be available for inspection and copying 

at NSCC’s principal office and on 

NSCC’s Web site at http:// 

www.nscc.com/legal/index.html. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File No. 

SR–NSCC–2006–02 and should be 

submitted on or before October 12, 

2006. 

For the Commission by the Division of 

Market Regulation, pursuant to delegated 

authority.10

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 06–7838 Filed 9–20–06; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–54458; File No. SR–NYSE–

2006–60] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing and Order Granting Accelerated 

Approval of Proposed Rule Change 

Relating to iShares S&P Global Index 

Funds 

September 15, 2006. 

Pursuant to section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on 

September 14, 2006, the New York 

Stock Exchange LLC (‘‘NYSE’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’ or ‘‘SEC’’) the proposed 

rule changes as described in Items I and 

II below, which items have been 

substantially prepared by the Exchange. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons, and is granting accelerated 

approval to the proposed rule change. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The NYSE proposes to list and trade 

the following: iShares S&P Global 

Consumer Discretionary Sector Index 


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Federal Register / Vol. 71, No. 183 / Thursday, September 21, 2006 / Notices 55249 

3 iShares is a registered trademark of Barclays 

Global Investors, N.A. 

4 In 1996, the Commission approved Section 

703.16 of the Listed Company Manual, which sets 

forth the rules related to the listing of ICUs. 

Securities Exchange Act Release No. 36923 (March 

5, 1996), 61 FR 10410 (March 13, 1996). 

5The Trust is registered under the Investment 

Company Act of 1940 (15 U.S.C. 80a), (the 

‘‘Investment Company Act’’). On April 15, 2005, the 

Trust filed with the Commission a Registration 

Statement for the Funds on Form N–1A under the 

Securities Act of 1933 (15 U.S.C. 77a), and under 

the Investment Company Act relating to the Funds 

(File Nos. 333–92935 and 811–09729) (as amended, 

the ‘‘Registration Statement’’). 

6 17 CFR 240.19b–4(e). 

7 17 CFR 240.19b–4. 

8 15 U.S.C. 80b–1. 

9 15 U.S.C. 80a–1. 

10The Exchange states that the information 

provided herein is based on information included 

in the Registration Statement; however, the 

Commission notes that its approval of the listing 

and trading of these ICUs is subject to the continued 

operation of the Funds and their related Indexes as 

described herein by the Exchange. The Exchange 

also states that while the Advisor would manage the 

Funds, the Funds’ Board of Directors would have 

overall responsibility for the Funds’ operations. The 

composition of the Board is, and would be, in 

compliance with the requirements of Section 10 of 

the Investment Company Act. The Funds are 

subject to and must comply with Section 303A.06 

of the Manual, which requires that the Funds have 

an audit committee that complies with SEC Rule 

10A–3, 17 CFR 240.10A–3. 

Fund; iShares S&P Global Consumer 

Staples Sector Index Fund; iShares S&P 

Global Industrials Sector Index Fund; 

iShares S&P Global Utilities Sector 

Index Fund; iShares S&P Global 

Materials Sector Index Fund 

(collectively, the Funds’’).3 The Funds 

are exchange-traded funds, which are a 

type of Investment Company Unit 

(‘‘ICU’’). 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of, and basis for, 

the proposed rule change. The text of 

these statements may be examined at 

the places specified in Item III below. 

The NYSE has prepared summaries, set 

forth in Sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange has adopted listing 

standards applicable to Investment 

Company Units (‘‘ICUs’’) that it states 

are consistent with the listing criteria 

currently used by other national 

securities exchanges, and trading 

standards pursuant to which the 

Exchange may either list and trade ICUs 

or trade such ICUs on the Exchange on 

an unlisted trading privileges (‘‘UTP’’) 

basis.4

The Exchange now proposes to list 

and trade under Section 703.16 of the 

NYSE Listed Company Manual 

(‘‘Manual’’) and NYSE Rule 1100 et seq. 

shares of the following, each a series of 

the iShares Trust (the ‘‘Trust’’): 5 (1) 

iShares S&P Global Consumer 

Discretionary Sector Index Fund; (2) 

iShares S&P Global Consumer Staples 

Sector Index Fund; (3) iShares S&P 

Global Industrials Sector Index Fund; 

(4) iShares S&P Global Utilities Sector 

Index Fund; and (5) iShares S&P Global 

Materials Sector Index Fund. Because 

the Funds invest in non-U.S. securities 

not listed on a national securities 

exchange or the Nasdaq Stock Market, 

the Funds do not meet the ‘‘generic’’

listing requirements of Section 703.16 of 

the Manual applicable to listing of ICUs 

(permitting listing in reliance upon Rule 

19b–4(e) 6 under the Act and cannot be 

listed without a filing pursuant to Rule 

19b–4 under the Act). Therefore, to list 

the Funds (or trade pursuant to UTP), 

the Exchange must file, and obtain 

Commission approval of, a proposed 

rule change pursuant to Rule 19b–4 

under the Act.7

As set forth in detail below, the Funds 

will hold certain securities 

(‘‘Component Securities’’) selected to 

correspond generally to the performance 

of the following indexes, (‘‘Underlying 

Indexes’’), respectively: (1) S&P Global 

Consumer Discretionary Index; (2) S&P 

Global Consumer Staples Index; (3) S&P 

Global Industrials Index; (4) S&P Global 

Utilities Index; and (5) S&P Global 

Materials Index. 

Each Fund intends to qualify as a 

‘‘regulated investment company’’ (a 

‘‘RIC’’) under the Internal Revenue Code 

(the ‘‘Code’’). Barclays Global Fund 

Advisors (the ‘‘Advisor’’ or ‘‘BGFA’’) is 

the investment advisor to the Funds. 

The Advisor is registered under the 

Investment Advisers Act of 1940.8 The 

Advisor is the wholly owned subsidiary 

of Barclays Global Investors, N.A. 

(‘‘BGI’’), a national banking association. 

BGI is an indirect subsidiary of Barclays 

Bank PLC of the United Kingdom. SEI 

Investments Distribution Co. (‘‘SEI’’ or 

‘‘Distributor’’), a Pennsylvania 

corporation and broker-dealer registered 

under the Act, is the principal 

underwriter and distributor of Creation 

Unit Aggregations of iShares. The 

Distributor is not affiliated with the 

Exchange or the Advisor. The Trust has 

appointed Investors Bank & Trust Co. 

(‘‘IBT’’) to act as administrator 

(‘‘Administrator’’), custodian, fund 

accountant, transfer agent, and dividend 

disbursing agent for the Funds. The 

Exchange expects that performance of 

the Administrator’s duties and 

obligations will be conducted within the 

provisions of the Investment Company 

Act 9 and the rules thereunder. There is 

no affiliation between the Administrator 

and the Trust, the Advisor, or the 

Distributor. 

Operation of the Funds.10

The investment objective of the Funds 

will be to provide investment results 

that correspond generally to the price 

and yield performance of the 

Underlying Indexes. In seeking to 

achieve their investment objective, the 

Funds will utilize ‘‘passive’’ indexing 

investment strategies. The Funds may 

fully replicate their respective 

Underlying Index, but currently intend 

to use a ‘‘representative sampling’’

strategy to track the applicable 

Underlying Index. A Fund utilizing a 

representative sampling strategy 

generally will hold a basket of the 

Component Securities of its Underlying 

Index, but it may not hold all of the 

Component Securities of its Underlying 

Index. 

Each Fund will invest at least 90% of 

its assets in the securities of its 

Underlying Index or in American 

Depositary Receipts (‘‘ADRs’’), Global 

Depositary Receipts (‘‘GDRs’’), or 

European Depositary Receipts (‘‘EDRs’’) 

(collectively ‘‘Depositary Receipts’’) 

representing securities in the 

Underlying Index. A Fund may invest 

the remainder of its assets in securities 

not included in its Underlying Index, 

but which BGFA believes will help the 

Fund track its Underlying Index. For 

example, a Fund may invest in 

securities not included in its Underlying 

Index in order to reflect various 

corporate actions (such as mergers) and 

other changes in its Underlying Index 

(such as reconstitutions, additions and 

deletions). A Fund also may invest its 

other assets in futures contracts, options 

on futures contracts, options, and swaps 

related to its Underlying Index, as well 

as cash and cash equivalents, including 

shares of money market funds affiliated 

with BGFA. 

From time to time, adjustments may 

be made in the portfolio of the Funds in 

accordance with changes in the 

composition of the Underlying Indexes 

or to maintain compliance with 

requirements applicable to a RIC under 


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55250 Federal Register / Vol. 71, No. 183 / Thursday, September 21, 2006 / Notices 

11 In order for the Funds to qualify for tax 

treatment as a RIC, they must meet several 

requirements under the Code. Among these is a 

requirement that, at the close of each quarter of the 

Funds’ taxable year, (1) at least 50% of the market 

value of the Funds’ total assets must be represented 

by cash items, U.S. government securities, 

securities of other RICs and other securities, with 

such other securities limited for the purpose of this 

calculation with respect to any one issuer to an 

amount not greater than 5% of the value of the 

Funds’ assets and not greater than 10% of the 

outstanding voting securities of such issuer; and (2) 

not more than 25% of the value of their total assets 

may be invested in securities of any one issuer, or 

two or more issuers that are controlled by the Funds 

(within the meaning of Section 851(b)(4)(B) of the 

Code) and that are engaged in the same or similar 

trades or business (other than U.S. government 

securities of other RICs). 

Compliance with the above referenced RIC asset 

diversification requirements are monitored by the 

Advisor and any necessary adjustments to portfolio 

issuer weights will be made on a quarterly basis or 

as necessary to ensure compliance with RIC 

requirements. When an iShares Fund’s Underlying 

Index itself is not RIC compliant, the Advisor 

generally employs a representative sampling 

indexing strategy (as described in the Funds’

prospectus) in order to achieve the Fund’s 

investment objective. The Funds’ prospectus also 

gives the Funds additional flexibility to comply 

with the requirements of the Code and other 

regulatory requirements and to manage future 

corporate actions and index changes in smaller 

markets by investing a percentage of fund assets in 

securities that are not included in the Fund’s 

Underlying Index or in ADRs and GDRs 

representing such securities. 

12S&P determines a stock’s domicile based on a 

number of criteria, including the headquarters of 

the issuer, its registration, its stock listing, its place 

of operations, the residence of the senior officers, 

and other criteria. Each region’s Index Committee 

reviews all criteria before deciding on the domicile 

of a stock. Telephone conversation between 

Michael Cavalier, Associate General Counsel, 

NYSE, and Florence Harmon, Senior Special 

Counsel, Division of Market Regulation, 

Commission, on September 15, 2006 (‘‘September 

15 Telephone Conference’’). 13September 15 Telephone Conference. 

the Code.11 For example, if at the end 

of a calendar quarter a Fund would not 

comply with the RIC diversification 

tests, the Advisor would make 

adjustments to the portfolio to ensure 

continued RIC status. 

To the extent the Funds invest in 

ADRs, they will be listed on a national 

securities exchange or Nasdaq, and to 

the extent the Funds invest in other 

Depositary Receipts, they will be listed 

on a foreign exchange. The Funds will 

not invest in any unlisted Depositary 

Receipts or any listed Depositary 

Receipts that the Advisor deems to be 

illiquid or for which pricing information 

is not readily available. In addition, all 

Depositary Receipts must be sponsored 

(with the exception of certain pre-1984 

ADRs that are listed and unsponsored 

because they are grandfathered). 

Each Fund will not concentrate its 

investments (i.e., hold 25% or more of 

its total assets in the stocks of a 

particular industry or group of 

industries), except that a Fund will 

concentrate to approximately the same 

extent that its Underlying Index 

concentrates in the stocks of such 

particular industry or group of 

industries. In such case, a Fund could 

hold 25% or more of its total assets in 

the stocks of such industry or group of 

industries. For purposes of this 

limitation, securities of the U.S. 

Government (including its agencies and 

instrumentalities), repurchase 

agreements collateralized by U.S. 

Government securities, and securities or 

state or municipal governments and 

their political subdivisions are not 

considered to be issued by members of 

any industry. 

The Exchange believes that these 

requirements and policies prevent the 

Funds from being excessively weighted 

in any single security or small group of 

securities and significantly reduce 

concerns that trading in the Funds 

could become a surrogate for trading in 

unregistered securities. 

Description of the Index Methodology 

Each of the Indexes is a subset of the 

Standard & Poor’s Global 1200 Index 

and thus contains the securities of both 

domestic and international companies 

as Index components. The Indexes are 

free float adjusted and market 

capitalization weighted. The Standard & 

Poor’s Index Committee (which does not 

include employees of broker-dealers or 

their affiliates) is responsible for the 

overall management of these S&P 

Indices. 

Selection Criteria for Domestic 

Components. Companies (i.e., the 

‘‘Components’’) selected for the 

investments represent a broad range of 

industry segments within the U.S. 

economy. The starting universe, all 

publicly traded U.S. companies (i.e., 

companies listed and traded on a 

national securities exchange or the 

Nasdaq Stock Market), is screened to 

eliminate ADRs, mutual funds, limited 

partnerships and royalty trusts. The 

following criteria are then analyzed to 

determine a company’s eligibility for 

inclusion in the investments: (1) 

Ownership of a company’s outstanding 

common shares, in order to screen out 

closely held companies; (2) trading 

volume of a company’s stock, in order 

to ensure ample liquidity and efficient 

share pricing; and (3) the financial and 

operating condition of a company. 

Selection Criteria for International 

Components.12 With respect to non-U.S. 

components of the Underlying Indexes, 

the eligible universe of Index 

components that are considered for 

inclusion are from the following S&P 

Indexes: (1) The S&P/Toronto Stock 

Exchange (‘‘TSX’’) 60 Index, which 

represents the liquid, large-cap stocks of 

the publicly listed companies in the 

Canadian equities market; (2) the S&P 

Tokyo Stock Price (‘‘TOPIX’’) 150 Index, 

which represents the liquid, large-cap 

stocks of the publicly listed companies 

in the Japanese equities market; (3) the 

S&P/ Australia Stock Exchange (‘‘ASX’’) 

50 Index, which represents the liquid, 

large-cap stocks in the Australian 

equities market; (4) the S&P Asia 50 

Index, which represents the liquid, 

large-cap stocks of four major equities 

markets in Asia (Hong Kong, Korea, 

Taiwan and Singapore); (5) the S&P 

Latin America 40 Index, which 

represents the liquid, large-cap stocks 

from major sectors of the Mexico, Brazil, 

Argentina and Chile equity markets; and 

(6) the S&P Europe 350 Index, which 

represents the liquid, large-cap stocks of 

the publicly listed companies in the 

region, covering approximately 70% of 

the region’s market capitalization and 

spanning 17 exchanges. All stocks 

included in these S&P Indexes are in the 

S&P Global 1200 Index.13

Where there were multiple classes of 

a particular equity, all classes were 

deemed eligible if they met the criteria 

for size, liquidity and sector 

representation. The specific securities 

are then screened for industry sector 

classification; thus, the eligible 

securities are ranked according to 

Global Industry Classification Standards 

(‘‘GICS’’). Then, the Index components, 

now determined, are weighted on the 

basis of S&P’s free float, market 

capitalization methodology. Generally, 

S&P observes a prospective constituent’s 

liquidity over a period of at least 6 

months before consideration for 

inclusion. However, it is recognized that 

there may be extraordinary situations 

when companies should be added 

immediately (e.g., certain 

privatizations). When a particular 

company dominates its home market, it 

may be excluded from the Index if 

analysis of the sectors reveals that its 

securities are not as liquid as those of 

similar companies in other countries. 

The International Index components 

may include ADRs and GDRs. 

Issue Changes. General oversight 

responsibility for the S&P Indices, 

including overall policy guidelines and 

methodology, is handled by the S&P 

Global Index Committee (which does 

not include employees of broker-dealers 

or their affiliates). Maintenance of 

component investments, including 

additions and deletions to these 

investments, is the responsibility of 

separate regional index committees 


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composed of S&P staff specialized in the 

various regional equity markets and, in 

some cases with the assistance of local 

stock exchanges. Public announcements 

of index changes as the result of 

committee decisions will generally be 

made two business days in advance of 

the anticipate effective date whenever 

possible, although for exceptional 

corporate events announcements may be 

made earlier. 

Index Maintenance. Maintaining the 

S&P Indices includes monitoring and 

completing the adjustments for 

company additions and deletions, share 

changes, stock splits, stock dividends, 

and stock price adjustments due to 

restructuring and spin-offs. Share 

changes of less than 5% are only 

updated on a quarterly basis on the 

Friday near the end of the calendar 

quarter. 

A company will be removed from the 

S&P Indices as a result of mergers/ 

acquisitions, bankruptcy, restructuring, 

or if it is no longer representative of its 

industry group. A company is removed 

from the relevant Index as close as 

possible to the actual date on which the 

event occurred. A company can be 

removed from an Index because it no 

longer meets current criteria for 

inclusion and/or is no longer 

representative of its industry group. All 

replacement companies are selected 

based on the above component section 

criteria. 

When calculating index weights, 

individual constituents’ shares held by 

governments, corporations, strategic 

partners, or other control groups are 

excluded from the company’s shares 

outstanding. Shares owned by other 

companies are also excluded regardless 

of whether they are index constituents. 

In countries with regulated 

environments, where a foreign 

investment limit exists at the sector or 

company level, the constituent’s weight 

will reflect either the foreign investment 

limit or the percentage float, whichever 

is the more restrictive. 

Once a year, the float adjustments will 

be reviewed and potentially changed 

based on such review. Each company’s 

financial statements will be used to 

update the major shareholders’

ownership for the float adjustments 

calculation, as the Indexes are free float 

adjusted, market capitalization weighted 

for each company’s shares. However, 

during the course of the year, S&P also 

monitors each company’s Investable 

Weight Factor (IWF), which is S&P’s 

term for the mathematical float factor 

used to calculate the float adjustment. If 

a change in the IWF is caused by a 

major corporate action (i.e., 

privatization, merger, takeover, or share 

offering) and the change is equal to or 

greater than 5%, a float adjustment will 

be implemented as soon as reasonably 

possible. 

Changes in the number of shares 

outstanding driven by corporate events 

such as stock dividends, splits, and 

rights issues will be adjusted on the exdate. Share changes of 5% or greater are 

implemented when they occur. All 

share changes of less than 5% are 

updated on a quarterly basis (third 

Friday of March, June, September, and 

December or at the close of the 

expiration of futures contracts). 

Implementation of new additions, 

deletions, and changes to the float 

adjustment, due to corporate actions, 

will be made available at the close of the 

third Friday in March, June, September 

and December. Generally, index changes 

due to rebalancing are announced two 

days before the effective date by way of 

a news release posted on http:// 

www.spglobal.com. 

The S&P Indices are calculated 

continuously and are available from 

major data vendors. A current list of the 

Index components is attached as Exhibit 

3 to the NYSE’s filing. 

Index Descriptions 

The S&P Global Consumer 

Discretionary Index measures the 

performance of companies that Standard 

& Poor’s deems to be part of the 

consumer discretionary sector of the 

economy and that Standard & Poor’s 

believes are important to global markets. 

Component companies include 

manufacturing and service companies. 

As of the close of business on January 

31, 2006, the Index was comprised of 

stocks of companies in the following 

countries: Australia, Belgium, Canada, 

Chile, France, Germany, Hong Kong, 

Italy, Japan, Korea, Mexico, 

Netherlands, Singapore, Spain, Sweden, 

Switzerland, United Kingdom, and the 

United States. 

The S&P Global Consumer Staples 

Index measures the performance of 

companies that Standard & Poor’s 

deems to be part of the consumer staples 

sector of the economy and that Standard 

& Poor’s believes are important to global 

markets. Component companies include 

manufacturers and distributors of food, 

producers of non-durable household 

goods, and food and drug retailing 

companies. As of the close of business 

on January 31, 2006, the Index was 

comprised of stocks of companies in the 

following countries: Australia, Belgium, 

Brazil, Canada, Chile, Germany, Japan, 

Korea, Mexico, Netherlands, Norway, 

Spain, Sweden, Switzerland, United 

Kingdom, and the United States. 

The S&P Global Industrials Index 

measures the performance of companies 

that Standard & Poor’s deems to be part 

of the industrials sector of the economy 

and that Standard & Poor’s believes are 

important to global markets. Component 

companies include manufacturers and 

distributors of capital goods, providers 

of commercial services and supplies, 

and transportation service providers. As 

of the close of business on January 31, 

2006, the Index was comprised of stocks 

of companies in the following countries: 

Australia, Brazil, Canada, Chile, 

Denmark, France, Germany, Hong Kong, 

Ireland, Italy, Japan, Korea, Mexico, 

Netherlands, Norway, Portugal, 

Singapore, Spain, Sweden, Switzerland, 

United Kingdom and the United States. 

The S&P Global Utilities Index 

measures the performance of companies 

that Standard & Poor’s deems to be part 

of the Utilities sector of the economy 

and that Standard & Poor’s believes are 

important to global markets. Component 

companies include providers of electric, 

gas or water utilities, or companies that 

operate as independent producers and/ 

or distributors of power. As of the close 

of business on January 31, 2006, the 

Index was comprised of stocks of 

companies in the following countries: 

Australia, Brazil, Canada, Chile, 

Finland, France, Germany, Hong Kong, 

Italy, Japan, Portugal, Spain, United 

Kingdom, and the United States. 

The S&P Global Materials Index 

measures the performance of companies 

that Standard & Poor’s deems to be part 

of the materials sector of the economy 

and that Standard & Poor’s believes are 

important to global markets. Component 

companies include those companies 

engaged in a wide variety of 

commodity-related manufacturing. As of 

the close of business on January 31, 

2006, the Index was comprised of stocks 

of companies in the following countries: 

Australia, Belgium, Brazil, Canada, 

Chile, Finland, France, Germany, 

Ireland, Japan, Korea, Luxembourg, 

Mexico, Netherlands, Portugal, Spain, 

Sweden, Switzerland, Taiwan, United 

Kingdom, and the United States. 

As of May 31, 2006, the iShares S&P 

Global Consumer Discretionary Sector 

Index’s top three holdings were Toyota 

Motor Corp., Home Depot, Time Warner 

Inc.; the Index’s top three industries 

were Consumer Discretionary and Index 

components had a total market 

capitalization of approximately $2.8 

trillion. The average total market 

capitalization was approximately $14.6 

billion. The 10 largest constituents 

represented approximately 28.4% of the 

Index weight. The five highest weighted 

stocks, which represented 18.2% of the 

Index weight, had an average daily 


jlentini on PROD1PC65 with NOTICES
55252 Federal Register / Vol. 71, No. 183 / Thursday, September 21, 2006 / Notices 

14The Fund utilizes foreign exchange rates of 

major market data vendors, such as WM/Reuters. 

September 15 Telephone Conference. 

15Each Creation Unit Aggregation will have an 

estimated initial value of approximately $2,500,000. 

trading volume in excess of 66.1 million 

shares during the period April 1 through 

May 31, 2006. 99.98% of the component 

stocks traded at least 250,000 shares 

monthly from December 2005 through 

May 2006. 

As of May 31, 2006, the iShares S&P 

Global Consumer Staples Sector Index’s 

top three holdings were Procter & 

Gamble, Altria Group, Inc., Wal-Mart 

Stores; the Index’s top three industries 

were Consumer Staples and Index 

components had a total market 

capitalization of approximately $2.3 

trillion. The average total market 

capitalization was approximately $23.5 

billion. The 10 largest constituents 

represented approximately 48.3% of the 

Index weight. The five highest weighted 

stocks, which represented 34.6% of the 

Index weight, had an average daily 

trading volume in excess of 32.3 million 

shares during the period April 1 through 

May 31, 2006. 99.6% of the component 

stocks traded at least 250,000 shares 

monthly from December 2005 through 

May 2006. 

As of May 31, 2006, the iShares S&P 

Global Industrials Sector Index’s top 

three holdings were General Electric, 

United Parcel Service, Siemens AG; the 

Index’s top three industries were 

Industrials and Index components had a 

total market capitalization of 

approximately $2.7 trillion. The average 

total market capitalization was 

approximately $15.3 billion. The 10 

largest constituents represented 

approximately 37.1% of the Index 

weight. The five highest weighted 

stocks, which represented 27.2% of the 

Index weight, had an average daily 

trading volume in excess of 38.6 million 

shares during the period April 1 through 

May 31, 2006. 99.65% of the component 

stocks traded at least 250,000 shares 

monthly from December 2005 through 

May 2006. 

As of May 31, 2006, the iShares S&P 

Global Materials Sector Index’s top 

three holdings were BHP Billiton 

Limited, Anglo American, Rio Tinto; the 

Index’s top three industries were 

Materials and Index components had a 

total market capitalization of 

approximately $1.6 trillion. The average 

total market capitalization was 

approximately $12.9 billion. The 10 

largest constituents represented 

approximately 30.7% of the Index 

weight. The five highest weighted 

stocks, which represented 19.5% of the 

Index weight, had an average daily 

trading volume in excess of 66.5 million 

shares during the period April 1 through 

May 31, 2006. 99.31% of the component 

stocks traded at least 250,000 shares 

monthly from December 2005 through 

May 2006. 

As of May 31, 2006, the iShares S&P 

Global Utilities Sector Index’s top three 

holdings were E.On AG, Suez SA, RWE 

AG; the Index’s top three industries 

were Utilities and Index components 

had a total market capitalization of 

approximately $1.2 trillion. The average 

total market capitalization was 

approximately $16.9 billion. The 10 

largest constituents represented 

approximately 41.5% of the Index 

weight. The five highest weighted 

stocks, which represented 25.0% of the 

Index weight, had an average daily 

trading volume in excess of 47.8 million 

shares during the period April 1 through 

May 31, 2006. 100% of the component 

stocks traded at least 250,000 shares 

monthly from December 2005 through 

May 2006. 

Additional information regarding the 

Funds’ holdings is available at http:// 

www.ishares.com. 

Determination of Net Asset Value 

IBT calculates the NAV for each Fund 

generally once daily Monday through 

Friday generally as of the regularly 

scheduled close of business of the NYSE 

(normally 4 p.m. Eastern time) on each 

day that the NYSE is open for trading, 

based on prices at the time of closing, 

provided that (a) any assets or liabilities 

denominated in currencies other than 

the U.S. dollar shall be translated into 

U.S. dollars at the prevailing market 

rates on the date of valuation as quoted 

by one or more major banks or dealers 

that makes a two-way market in such 

currencies (or a major market data 

service provider based on quotations 

received from such banks or dealers); 

and (b) U.S. fixed-income assets may be 

valued as of the announced closing time 

for trading in fixed-income instruments 

on any day that the Bond Market 

Association announces an early closing 

time. The NAV of each Fund is 

calculated by dividing the value of the 

net assets of such Fund (i.e., the value 

of its total assets less total liabilities) by 

the total number of outstanding shares 

of the Fund, generally rounded to the 

nearest cent. In calculating a Fund’s 

NAV, a Fund’s investments are 

generally valued using market 

valuations. In the event that current 

market valuations are not readily 

available or such valuations do not 

reflect current market values, the 

affected investments will be valued 

using fair value pricing pursuant to the 

pricing policy and procedures approved 

by the Board of Trustees. The frequency 

with which a Fund’s investments are 

valued using fair value pricing is 

primarily a function of the types of 

securities and other assets in which the 

Fund invests pursuant to its investment 

objective, strategies and limitations. 

According to the Funds’ prospectus, 

valuing the Fund’s investments using 

fair value pricing will result in using 

prices for those investments that may 

differ from current market prices. 

Accordingly, fair value pricing could 

result in a difference between the prices 

used to calculate the Fund’s net asset 

value and the prices used by the Fund’s 

benchmark index, which, in turn, could 

result in a difference between the 

Fund’s performance and the 

performance of the Fund’s benchmark 

index. 

Because foreign markets may be open 

on different days than the days during 

which a shareholder may purchase the 

Fund’s shares, the value of the Fund’s 

investments may change on days when 

shareholders are not able to purchase 

the Fund’s shares. 

The value of assets denominated in 

foreign currencies is converted into U.S. 

dollars using exchange rates deemed 

appropriate by BGFA as investment 

advisor.14

Issuance of Creation Unit Aggregations 

In General. Shares of the Funds (the 

‘‘iShares’’) will be issued on a 

continuous offering basis in groups of 

iShares, or multiples thereof. These 

‘‘groups’’ of shares are called ‘‘Creation 

Unit Aggregations.’’ The Funds will 

issue and redeem iShares only in 

Creation Unit Aggregations of 50,000 

iShares.15

As with other open-end investment 

companies, iShares will be issued at the 

net asset value (‘‘NAV’’) per share next 

determined after an order in proper 

form is received. The anticipated price 

at which the iShares will initially trade 

is approximately $50. 

The NAV per share of the Funds is 

determined as of the close of the regular 

trading session on the Exchange on each 

day that the Exchange is open. The 

Trust sells Creation Unit Aggregations of 

the Funds only on business days at the 

next determined NAV of the Fund. 

Creation Unit Aggregations generally 

will be issued by the Funds in exchange 

for the in-kind deposit of equity 

securities designated by the Advisor to 

correspond generally to the price and 

yield performance of the Fund’s 

Underlying Index (the ‘‘Deposit 

Securities’’) and a specified cash 

payment. Creation Unit Aggregations 

generally will be redeemed by the Fund 

in exchange for portfolio securities of 


jlentini on PROD1PC65 with NOTICES
Federal Register / Vol. 71, No. 183 / Thursday, September 21, 2006 / Notices 55253 

the Fund (‘‘Fund Securities’’) and a 

specified cash payment. Fund Securities 

received on redemption may not be 

identical to Deposit Securities deposited 

in connection with creations of Creation 

Unit Aggregations for the same day. 

All orders to purchase iShares in 

Creation Unit Aggregations must be 

placed through an Authorized 

Participant. An Authorized Participant 

must be either a ‘‘Participating Party,’’

i.e., a broker-dealer or other participant 

in the clearing process through the 

National Securities Clearing Corporation 

(‘‘NSCC’’) Continuous Net Settlement 

System (the ‘‘Clearing Process’’), a 

clearing agency that is registered with 

the SEC, or a Depository Trust Company 

(‘‘DTC’’) participant, and in each case, 

must enter into a Participant Agreement. 

The Funds impose a transaction fee in 

connection with the issuance and 

redemption of iShares to offset transfer 

and other transaction costs. The 

transaction fee in connection with the 

issuance and redemption of Creation 

Unit Aggregations of the Funds are 

estimated to be approximately between 

$2,200 and $8,800. 

In-Kind Deposit of Portfolio 

Securities. Payment for Creation Unit 

Aggregations will be made by the 

purchasers generally by an in-kind 

deposit with the applicable Fund of the 

Deposit Securities together with an 

amount of cash (the ‘‘Balancing 

Amount’’) specified by the Advisor in 

the manner described below. The 

Balancing Amount is an amount equal 

to the difference between (1) the NAV 

(per Creation Unit Aggregation) of the 

Fund and (2) the total aggregate market 

value (per Creation Unit Aggregation) of 

the Deposit Securities (such value 

referred to herein as the ‘‘Deposit 

Amount’’). The Balancing Amount 

serves the function of compensating for 

differences, if any, between the NAV per 

Creation Unit Aggregation and that of 

the Deposit Amount. The deposit of the 

requisite Deposit Securities and the 

Balancing Amount are collectively 

referred to herein as a ‘‘Fund Deposit.’’

The Advisor will make available to the 

market through the NSCC on each 

business day, prior to the opening of 

trading on the Exchange (currently 9:30 

a.m. Eastern Time), the list of the names 

and the required number of shares of 

each Deposit Security included in the 

current Fund Deposit (based on 

information at the end of the previous 

business day) for each Fund. The Fund 

Deposit will be applicable to the 

relevant Fund (subject to any 

adjustments to the Balancing Amount, 

as described below) in order to effect 

purchases of Creation Unit Aggregations 

of such Fund until such time as the 

next-announced Fund Deposit 

composition is made available. 

The identity and number of shares of 

the Deposit Securities required for the 

Fund Deposit for each Fund will change 

from time to time. The composition of 

the Deposit Securities may change in 

response to adjustments to the 

weighting or composition of the 

Component Securities in the Underlying 

Index. In addition, the Trust reserves 

the right to permit or require the 

substitution of an amount of cash—i.e., 

a ‘‘cash in lieu’’ amount—to be added to 

the Balancing Amount to replace any 

Deposit Security that may not be 

available in sufficient quantity for 

delivery or that may not otherwise be 

eligible for transfer. The Trust also 

reserves the right to permit or require a 

‘‘cash in lieu’’ amount where the 

delivery of the Deposit Security by the 

Authorized Participant would be 

restricted under the securities laws or 

where the delivery of the Deposit 

Security to the Authorized Participant 

would result in the disposition of the 

Deposit Security by the Authorized 

Participant becoming restricted under 

the securities laws, or in certain other 

situations. The adjustments described 

above will reflect changes known to the 

Advisor on the date of announcement to 

be in effect by the time of delivery of the 

Fund Deposit, in the composition of the 

applicable Underlying Index or 

resulting from certain corporate actions. 

Redemption of iShares 

Creation Unit Aggregations of the 

Funds will be redeemable at the NAV 

next determined after receipt of a 

request for redemption. Creation Unit 

Aggregations of the Funds generally will 

be redeemed in-kind, together with a 

balancing cash payment (although, as 

described below, Creation Unit 

Aggregations may sometimes be 

redeemed for cash). The value of the 

Funds’ redemption payments on a 

Creation Unit Aggregation basis will 

equal the NAV per the appropriate 

number of iShares of the Funds. Owners 

of iShares may sell their iShares in the 

secondary market but must accumulate 

enough iShares to constitute a Creation 

Unit Aggregation in order to redeem 

through the Funds. Redemption orders 

must be placed by or through an 

Authorized Participant. 

Creation Unit Aggregations of the 

Funds generally will be redeemable on 

any business day in exchange for 

applicable Fund Securities and the Cash 

Redemption Payment (defined below) in 

effect on the date a request for 

redemption is made. The Advisor will 

publish daily through NSCC the list of 

securities which a creator of Creation 

Unit Aggregations must deliver to the 

Fund (the ‘‘Creation List’’) and which a 

redeemer will receive from the Funds 

(the ‘‘Redemption List’’). The Creation 

List is identical to the list of the names 

and the required numbers of shares of 

each Deposit Security included in the 

current Fund Deposit. 

In addition, just as the Balancing 

Amount is delivered by the purchaser of 

Creation Unit Aggregations to the 

Funds, the Trust will also deliver to the 

redeeming beneficial owner in cash the 

‘‘Cash Redemption Payment.’’ The Cash 

Redemption Payment on any given 

business day will be an amount 

calculated in the same manner as that 

for the Balancing Amount, although the 

actual amounts may differ if the Fund 

Securities received upon redemption are 

not identical to the Deposit Securities 

applicable for creations on the same 

day. To the extent that the Fund 

Securities have a value greater than the 

NAV of iShares being redeemed, a cash 

payment equal to the differential is 

required to be paid by the redeeming 

beneficial owner to the applicable Fund. 

The Trust may also make redemptions 

in cash in lieu of transferring one or 

more Fund Securities to a redeemer if 

the Trust determines, in its discretion, 

that such method is warranted due to 

unusual circumstances. An unusual 

circumstance could arise, for example, 

when a redeeming entity is restrained 

by regulation or policy from transacting 

in certain Fund Securities, such as the 

presence of such Fund Securities on a 

redeeming investment banking firm’s 

restricted list. 

Availability of Information Regarding 

iShares and the Underlying Index 

On each business day the list of 

names and amount of each security 

constituting the current Deposit 

Securities of the Fund Deposit and the 

Balancing Amount effective as of the 

previous business day, per outstanding 

share of each Fund, will be made 

available. An amount per iShare 

representing the sum of the estimated 

Balancing Amount effective through and 

including the previous business day, 

plus the current value of the Deposit 

Securities in U.S. dollars, on a per 

iShare basis (the ‘‘Intra-day Optimized 

Portfolio Value’’ or ‘‘IOPV’’) will be 

calculated by an independent third 

party that is a major market data vendor 

(the ‘‘Value Calculator’’), such as 

Bloomberg L.P., every 15 seconds 

during the Exchange’s regular trading 

hours and disseminated every 15 

seconds on the Consolidated Tape. 

The IOPV reflects the current value of 

the Deposit Securities and the Balancing 

Amount. The IOPV also reflects changes 


jlentini on PROD1PC65 with NOTICES
55254 Federal Register / Vol. 71, No. 183 / Thursday, September 21, 2006 / Notices 

16The IOPV ticker is available at 

www.ishares.com and Intra-day IOPV is publicly 

available utilizing this ticker through various 

financial Web sites such as http:// 

finance.yahoo.com. 

17The Exchange will immediately contact the 

Commission staff to discuss measures that may be 

appropriate under the circumstances. September 15 

Telephone Conference. 

in currency exchange rates between the 

U.S. dollar and the applicable home 

foreign currency.16

Since the Funds will utilize a 

representative sampling strategy, the 

IOPV may not reflect the value of all 

securities included in the Underlying 

Indexes. In addition, the IOPV does not 

necessarily reflect the precise 

composition of the current portfolio of 

securities held by the Funds at a 

particular point in time. Therefore, the 

IOPV on a per Fund share basis 

disseminated during the Exchange’s 

trading hours should not be viewed as 

a real time update of the NAV of the 

Funds, which is calculated only once a 

day. 

While the IOPV disseminated by the 

Exchange at 9:30 a.m. is expected to be 

generally very close to the most recently 

calculated Fund NAV on a per Fund 

share basis, it is possible that the value 

of the portfolio of securities held by 

each Fund may diverge from the Deposit 

Securities values during any trading 

day. In such case, the IOPV will not 

precisely reflect the value of each 

Fund’s portfolio. However, during the 

trading day, the IOPV can be expected 

to closely approximate the value per 

Fund share of the portfolio of securities 

for each Fund except under unusual 

circumstances (e.g., in the case of 

extensive rebalancing of multiple 

securities in a Fund at the same time by 

the Advisor). 

The Exchange believes that 

dissemination of the IOPV based on the 

Deposit Securities provides additional 

information regarding the Funds that is 

not otherwise available to the public 

and is useful to professionals and 

investors in connection with Fund 

shares trading on the Exchange or the 

creation or redemption of Fund shares. 

There is an overlap in trading hours 

between the foreign and U.S. markets 

with respect to the Funds. Therefore, 

the Value Calculator will update the 

applicable IOPV every 15 seconds to 

reflect price changes in the applicable 

foreign market or markets, and convert 

such prices into U.S. dollars based on 

the currency exchange rate. When the 

foreign market or markets are closed but 

U.S. markets are open, the IOPV will be 

updated every 15 seconds to reflect 

changes in currency exchange rates after 

the foreign market closes. The IOPV will 

also include the applicable cash 

component for each Fund. 

In addition, there will be 

disseminated a value for the Underlying 

Indexes once each trading day, based on 

closing prices in the relevant exchange 

market, utilizing the WM/Reuters (or 

other major market information vendor) 

currency exchange rates. In each S&P 

Index, the prices used to calculate the 

S&P Indices are the official exchange 

closing prices or those figures accepted 

as such. S&P reserves the right to use an 

alternative pricing source on any given 

day. 

The NAV for the Fund will be 

calculated and disseminated daily. The 

Funds’ NAV will be calculated by IBT. 

IBT will disseminate the information to 

BGI, SEI and others, including the 

NYSE. The Funds’ NAV will be 

published in a number of places, 

including, http://www.iShares.com and 

on the Consolidated Tape. The Advisor 

for the Funds has informed the 

Exchange that the Funds will make the 

NAV for the Funds available to all 

market participants at the same time. If 

the NAV is not disseminated to all 

market participants at the same time, 

the Exchange will halt trading in the 

Shares of the Funds.17

Closing prices of the Funds’ Deposit 

Securities are readily available from, as 

applicable, the relevant exchanges, 

automated quotation systems, published 

or other public sources in the relevant 

country, or on-line information services 

such as Bloomberg or Reuters. The 

exchange rate information required to 

convert such information into U.S. 

dollars is also readily available in 

newspapers and other publications and 

from a variety of on-line services. 

In addition, the Web site for the Trust, 

http://www.iShares.com, which will be 

publicly accessible at no charge, will 

contain the following information, (1) 

the prior business day’s NAV and the 

mid-point of the bid-ask price at the 

time of calculation of such NAV (‘‘Bid/ 

Ask Price’’), and a calculation of the 

premium or discount of such price 

against such NAV; and (2) data in chart 

format displaying the frequency 

distribution of discounts and premiums 

of the Bid/Ask Price against the NAV, 

within appropriate ranges, for each of 

the four previous calendar quarters. 

Dividends and Distributions 

Dividends are accrued daily from net 

investment income and will be declared 

and paid to beneficial owners of record 

at least annually by the Funds. 

Distributions of realized securities 

gains, if any, generally will be declared 

and paid once a year, but the Funds may 

make distributions on a more frequent 

basis to comply with the distribution 

requirements of the Code and consistent 

with the Investment Company Act. 

Dividends and other distributions on 

iShares of the Funds will be distributed 

on a pro rata basis to beneficial owners 

of such iShares. Dividend payments will 

be made through the Depository and the 

DTC Participants to beneficial owners 

then of record with amounts received 

from the Fund. 

The Trust currently does not intend to 

make the DTC book-entry Dividend 

Reinvestment Service (the ‘‘Service’’) 

available for use by beneficial owners 

for reinvestment of their cash proceeds, 

but certain individual brokers may make 

the Service available to their clients. 

The Statement of Additional 

Information (‘‘SAI’’) will inform 

investors of this fact and direct 

interested investors to contact such 

investor’s broker to ascertain the 

availability and a description of the 

Service through such broker. The SAI 

will also caution interested beneficial 

owners that they should note that each 

broker may require investors to adhere 

to specific procedures and timetables in 

order to participate in the Service and 

such investors should ascertain from 

their broker such necessary details. The 

Funds acquired pursuant to the Service 

will be held by the beneficial owners in 

the same manner and subject to the 

same terms and conditions, as for 

original ownership of the Funds. 

Beneficial owners of the Funds will 

receive all of the statements, notices, 

and reports required under the 

Investment Company Act and other 

applicable laws. They will receive, for 

example, annual and semi-annual 

reports, written statements 

accompanying dividend payments, 

proxy statements, annual notifications 

detailing the tax status of distributions, 

IRS Form 1099–DIVs, etc. Because the 

Trust’s records reflect ownership of 

iShares by DTC only, the Trust will 

make available applicable statements, 

notices, and reports to the DTC 

Participants who, in turn, will be 

responsible for distributing them to the 

beneficial owners. 

Other Issues 

Criteria for Initial and Continued 

Listing. The Funds are subject to the 

criteria for initial and continued listing 

of Investment Company Units in Section 

703.16 of the Manual. A minimum of 

two Creation Units (100,000 iShares) 

will be required to be outstanding at the 

start of trading. This minimum number 

of shares of each Fund required to be 

outstanding at the start of trading will 

be comparable to requirements that have 


jlentini on PROD1PC65 with NOTICES
Federal Register / Vol. 71, No. 183 / Thursday, September 21, 2006 / Notices 55255 

18See In the Matter of iShares, Inc., et al., 

Investment Company Act Release No. 25623 (June 

25, 2002). 

19Under such circumstances, the Exchange 

would immediately contact the Commission staff to 

discuss appropriate measures that may be 

appropriate under the circumstances. September 15 

Telephone Conference. 

20See Securities Exchange Act Release Nos. 

44990 (October 25, 2001), 66 FR 56869 (November 

13, 2001) (SR–Amex–2001–45); 42748 (May 2, 

2000), 65 FR 30155 (May 10, 2000) (SR–Amex–98–

49); and 36947 (March 8, 1996), 61 FR 10606 

(March 14, 1996) (SR–Amex–95–43). 

21The Exchange states that it submitted such 

surveillance procedures to the Commission staff in 

the past. September 15 Telephone Conference. 22 15 U.S.C. 78f(b)(5). 

been applied to previously traded series 

of ICUs. 

Prospectus Delivery. The Commission 

has granted the Trust an exemption 

from certain prospectus delivery 

requirements under section 24(d) of the 

Investment Company Act.18 Any 

product description used in reliance on 

a section 24(d) exemptive order will 

comply with all representations made 

therein and all conditions thereto. The 

Exchange, in an Information Memo to 

Exchange members and member 

organizations, will inform members and 

member organizations, prior to 

commencement of trading, of the 

prospectus or product description 

delivery requirements applicable to the 

Funds and will refer members and 

member organizations to NYSE Rule 

1100(b). There is not currently a product 

description available for the Funds. The 

Information Memo will also advise 

members and member organizations that 

delivery of a prospectus to customers in 

lieu of a product description would 

satisfy the requirements of Rule 1100(b). 

Information Memo. The Exchange 

will distribute an Information Memo to 

its members in connection with the 

trading of the Funds. The Memo will 

discuss the special characteristics and 

risks of trading this type of security. 

Specifically, the Memo, among other 

things, will discuss what the Funds are, 

how the Funds’ shares are created and 

redeemed, the requirement that 

members and member firms deliver a 

prospectus or product description to 

investors purchasing shares of the 

Funds prior to or concurrently with the 

confirmation of a transaction, applicable 

Exchange rules, dissemination 

information, trading information and 

the applicability of suitability rules 

(including Exchange Rule 405). The 

Memo will also discuss exemptive, noaction and interpretive relief, if granted 

by the Commission from certain rules 

under the Act. 

Trading Halts. In order to halt the 

trading of the Funds, the Exchange may 

consider, among other things, factors 

such as the extent to which trading is 

not occurring in underlying security(s) 

and whether other unusual conditions 

or circumstances detrimental to the 

maintenance of a fair and orderly 

market are present. In addition, trading 

in the Funds’ shares is subject to trading 

halts caused by extraordinary market 

volatility pursuant to Exchange Rule 

80B. The Exchange will halt trading in 

a Fund if the Index Value or IOPV 

applicable to such Fund is no longer 

calculated or disseminated or the NAV 

is not disseminated to all market 

participants at the same time.19

Due Diligence. The Information Memo 

to members will note, for example, 

Exchange responsibilities including that 

before an Exchange member, member 

organization, or employee thereof 

recommends a transaction in the Funds, 

a determination must be made that the 

recommendation is in compliance with 

all applicable Exchange and Federal 

rules and regulations, including due 

diligence obligations under Exchange 

Rule 405 (Diligence as to Accounts). 

Purchases and Redemptions in 

Creation Unit Size. In the Memo 

referenced above, members and member 

organizations will be informed that 

procedures for purchases and 

redemptions of shares of the Funds in 

Creation Unit Size are described in the 

Funds’ Prospectus and SAI 20 and that 

Funds’ shares are not individually 

redeemable but are redeemable only in 

Creation Unit Size aggregations or 

multiples thereof. 

Surveillance. The Exchange will 

utilize its existing surveillance 

procedures applicable to ICUs monitor 

trading of the shares of the Funds. 

Surveillance procedures applicable to 

trading in the proposed iShares are 

comparable to those applicable to other 

ICUs currently trading on the Exchange. 

The Exchange represents that these 

surveillance procedures are adequate to 

properly monitor the trading of the 

Funds.21 The Exchange’s current trading 

surveillances focus on detecting 

securities trading outside their normal 

patterns. When such situations are 

detected, surveillance analysis follows 

and investigations are opened, where 

appropriate, to review the behavior of 

all relevant parties for all relevant 

trading violations. The Exchange may 

obtain trading information via the 

Intermarket Surveillance Group (‘‘ISG’’) 

from other exchanges who are members 

or affiliates of the ISG. For a list of the 

current members and affiliate members 

of ISG, see http://www.isgportal.com. 

Hours of Trading/Minimum Price 

Variation. The Funds will trade on the 

Exchange until 4:15 p.m. (Eastern time). 

The minimum price variation for 

quoting will be $.01. 

2. Statutory Basis 

NYSE believes that the proposed rule 

change is consistent with section 6(b)(5) 

of the Act 22 requiring that an exchange 

have rules that are designed, among 

other things, to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to remove impediments to, and 

perfect the mechanism of a free and 

open market and, in general, to protect 

investors and the public interest. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

The Exchange has neither solicited 

nor received written comments on the 

proposed rule change. 

III. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Exchange 

Act. Comments may be submitted by 

any of the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send e-mail to rulecomments@sec.gov. Please include File 

Number SR–NYSE–2006–60 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris Secretary, Securities 

and Exchange Commission, Station 

Place, 100 F Street, NE., Washington, 

DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSE–2006–60. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro/shtml). Copies of the 

submission, all subsequent 


jlentini on PROD1PC65 with NOTICES
55256 Federal Register / Vol. 71, No. 183 / Thursday, September 21, 2006 / Notices 

23 In approving this proposal, the Commission has 

considered its impact on efficiency, competition, 

and capital formation. 15 U.S.C. 78c(f). 

24 15 U.S.C. 78f(b)(5). 

25 15 U.S.C. 78s(b)(2). 

26Substitution of an underlying index or 

significant alteration of the index methodology 

described herein would be a material change. 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Room. Copies of such filing will also be 

available for inspection and copying at 

the principal office of the NYSE. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File number 

SR–NYSE–2006–60 and should be 

submitted on or before October 12, 

2006. 

IV. Commission’s Findings and Order 

Granting Accelerated Approval of 

Proposed Rule Change 

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 section 

6(b)(5) of the Act 24 and will promote 

just and equitable principles of trade, 

and facilitate transactions in securities, 

and, in general, protect investors and 

the public interest. 

The Commission believes that the 

NYSE’s proposal should advance the 

public interest by providing investors 

with increased flexibility in satisfying 

their investment needs and by allowing 

them to purchase and sell Fund shares 

at negotiated prices throughout the 

business day that generally track the 

price and yield performance of the 

Underlying Index. 

Furthermore, the Commission 

believes that the proposed rule change 

raises no issues that have not been 

previously considered by the 

Commission. The Fund is similar in 

structure and operation to exchangetraded funds that the Commission has 

previously approved for listing and 

trading on national securities exchanges 

under section 19(b)(2) of the Act.25

Further, with respect to each of the 

following issues, the Commission 

believes that the listing and trading of 

the Funds’ shares satisfies established 

standards. 

A. Fund Characteristics 

The Commission believes that the 

proposed Funds are reasonably 

designed to provide investors with an 

investment vehicle that substantially 

reflects in value the performance of the 

respective Underlying Indexes and will 

provide investors with an alternative to 

trading a range of securities on an 

individual basis. Investors will be able 

to trade shares in the Fund continuously 

throughout the business day in 

secondary market transactions at 

negotiated prices. Accordingly, the 

proposed Fund will allow investors to: 

(1) Respond quickly to market changes 

through intra-day trading opportunities; 

(2) engage in hedging strategies similar 

to those used by institutional investors; 

and (3) reduce transaction costs for 

trading a portfolio of securities. 

The Commission also notes that the 

market capitalization and liquidity of 

the underlying Indexes’ component 

securities is also a deterrent to 

manipulation of the Fund shares. 

Because each Fund’s Underlying Index 

is broad-based and well diversified, the 

Exchange represents that it does not 

believe that the Fund will be so highly 

concentrated such that it becomes a 

surrogate for trading unregistered 

foreign securities on the Exchange. 

While the Commission believes that 

these requirements should help to 

reduce concerns that the Funds could 

become a surrogate for trading in a 

single or a few unregistered stocks, if 

the characteristics of the Funds, or their 

underlying Indexes, changed materially 

from the characteristics described the 

Exchange,26 the Fund would not be in 

compliance with the listing and trading 

standards approved herein, and the 

Commission would expect the NYSE to 

file a proposed rule change pursuant to 

Rule 19b–4 of the Act, which must be 

approved to permit continued trading of 

the Funds’ shares. 

B. Disclosure 

The Exchange represents that it will 

circulate an information memo detailing 

applicable prospectus and product 

description delivery requirements. The 

memo will also discuss any exemptive, 

no-action and interpretive relief granted 

by the Commission from certain rules 

under the Act. The memo also will 

address NYSE members’ responsibility 

to deliver a prospectus or product 

description to all investors (in 

accordance with NYSE Rule 1100(b)) 

and highlight the characteristics of the 

Funds. The memo will also remind 

members of their suitability obligations, 

including NYSE Rule 405 (Diligence as 

to Accounts). Additionally, for example, 

the information memo will also inform 

members and member organizations that 

Funds’ shares are not individually 

redeemable, but are redeemable only in 

Creation-Unit-size aggregations or 

multiples thereof as set forth in the 

Fund Prospectus and SAI. The 

Commission believes that the disclosure 

included in the information memo is 

appropriate and consistent with the Act. 

C. Dissemination of Fund Information 

With respect to pricing, once each 

day, the NAV for the Fund will be 

calculated and disseminated by IBT, to 

various sources, including the NYSE, 

and made available on http:// 

www.iShares.com and the Consolidated 

Tape. The Exchange represents that the 

NAV will be made available to all 

market participants at the same time; 

otherwise, the Exchange will halt 

trading in the Funds’ shares. Also, 

during the Exchange’s regular trading 

hours, the IOPV Calculator will 

determine and disseminate every 15 

seconds the IOPV for each Fund. The 

IOPV will reflect price changes in the 

applicable foreign market or markets 

and changes in currency exchange rates. 

The Exchange also represents that the 

value of the underlying Indexes will be 

calculated and disseminated at least 

every 15 seconds during the time the 

Funds’ shares trade on the Exchange. If 

the IOPV and underlying Index values 

are not so disseminated, the Exchange 

will halt trading in the Funds’ shares. 

The Commission notes that a variety 

of additional information about each 

Fund will be readily available. 

Information with respect to recent NAV, 

shares outstanding, estimated cash 

amount and total cash amount per 

Creation Unit Aggregation will be made 

available prior to the opening of the 

Exchange. In addition, the Web site for 

the Trust, http://www.iShares.com, 

which will be publicly accessible at no 

charge, will contain relevant 

information about the Funds and their 

shares. Also, the closing prices of the 

Fund’s Deposit Securities are available 

from, as applicable, the relevant 

exchanges, automated quotation 

systems, published or other public 

sources in the relevant country, or online information services, such as 

Bloomberg or Reuters. The exchange 

rate information required to convert 

such information into U.S. dollars is 


jlentini on PROD1PC65 with NOTICES
Federal Register / Vol. 71, No. 183 / Thursday, September 21, 2006 / Notices 55257 

27 15 U.S.C. 78s(b)(2). 

28See Securities Exchange Act Release Nos. 

44990 (October 25, 2001), 66 FR 56869 (November 

13, 2001) (SR–Amex–2001–45); 42748 (May 2, 

2000), 65 FR 30155 (May 10, 2000) (SR–Amex–98–

49); and 36947 (March 8, 1996), 61 FR 10606 

(March 14, 1996) (SR–Amex–95–43). 

29See Securities Exchange Act Release No. 52178 

(July 29, 2005), 70 FR 46244 (August 9, 2005) (SR–

NYSE–2005–41) 

30 15 U.S.C. 78s(b)(2). 

31 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Form 19b–4 dated July 7, 2006 

(‘‘Amendment No. 3’’). Amendment No. 3 replaced 

and superseded the original filing and Amendments 

No. 1 and 2 in their entirety. 

4See Securities Exchange Act Release No. 54130 

(July 11, 2006), 71 FR 41305. 

5See letter from Arthur J. Gross, Arthur J. Gross 

SP, dated August 9, 2006, and letter from Gennaro 

J. Lettera, dated August 9, 2006. The Exchange 

believes that these commenters intended to address 

a separate proposed rule change, SR–NYSE–2006–

46, not the instant proposed rule change. See e-mail 

from Janet Angstadt, Acting General Counsel, NYSE 

Arca, to Timothy Fox, Special Counsel, Division of 

Market Regulation, Commission, dated August 16, 

2006. The Commission believes that the 

commenters’ concerns do not relate to the instant 

proposed rule change and, as such, these letters are 

not addressed in this order. 

6Amendment No. 4 was filed to reconcile the 

original filing, as amended, with the subsequent 

immediately effective rule filing, as discussed infra 

note 9 and accompanying text. Amendment No. 4 

replaces and supersedes the original filing and 

subsequent amendments in their entirety. 

7 ‘‘Linkage Orders’’ are immediate or cancel 

orders containing certain information that are 

routed through the Intermarket Linkage System 

(‘‘Linkage’’). See Section 2(16) of the Plan for the 

Purpose of Creating and Operating an Intermarket 

Option Linkage (‘‘Linkage Plan’’). As used in this 

approval order, the term, ‘‘Linkage Orders,’’ refers 

only to Principal Acting as Agent Orders and 

Principal Orders. See Sections 2(16)(a) and 2(16)(b) 

of the Linkage Plan. 

8These fees are applicable through an Exchange 

Pilot Program due to expire on July 31, 2007. See 

Securities Exchange Act Release No. 54230 (July 27, 

2006), 71 FR 44757 (August 7, 2006) (SR–

NYSEArca–2006–41). 

9See Securities Exchange Act Release No. 54309 

(August 11, 2006), 71 FR 48571 (August 21, 2006) 

(SR–NYSEArca–2006–25). 

also readily available in newspapers and 

other publications and from a variety of 

on-line services. 

Based on the representations made in 

the NYSE proposal, the Commission 

believes that pricing and other 

important information about the Fund is 

adequate and consistent with the Act. 

D. Listing and Trading 

The Commission finds that adequate 

rules and procedures exist to govern the 

listing and trading of the Funds’ shares. 

Fund shares will be deemed equity 

securities subject to NYSE rules 

governing the trading of equity 

securities, including, among others, 

rules governing trading halts, 

responsibilities of the specialist, 

account opening and customer 

suitability requirements, and the 

election of stop and stop limit orders. In 

addition, the Exchange states that 

iShares are subject to the criteria for 

initial and continued listing of ICUs in 

Section 703.16 of the NYSE Manual. 

E. Surveillance 

The Exchange represents that its 

surveillance procedures are adequate to 

properly monitor the trading of the 

Funds. The Exchange states that it is 

able to obtain trading information from 

ISG from other exchanges that are 

members or affiliates of the ISG. 

F. Accelerated Approval 

The Commission finds good cause, 

pursuant to section 19(b)(2) of the Act,27

for approving the proposed rule change 

prior to the thirtieth day after the date 

of publication of notice in the Federal 

Register. The Commission notes that the 

proposal is consistent with the listing 

and trading standards in NYSE Rule 

703.16 (ICUs), and the Commission has 

previously approved similar products 

based on foreign indices.28 The Funds 

are substantially identical in structure to 

other iShares Funds based on foreign 

stock indexes, including the iShares 

S&P Global 1200 Index Fund, which has 

an established and active trading history 

on the NYSE and other exchanges.29

The Commission does not believe that 

the proposed rule change, as amended, 

raises novel regulatory issues. 

Consequently, the Commission believes 

that it is appropriate to permit investors 

to benefit from the flexibility afforded 

by trading these products as soon as 

possible. 

V. Conclusion 

It is therefore ordered, pursuant to 

section 19(b)(2) of the Act, that the 

proposed rule change (SR–NYSE–2006–

60) is hereby approved on an 

accelerated basis.30

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.31

J. Lynn Taylor, 

Assistant Secretary. 

[FR Doc. 06–7896 Filed 9–20–06; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–54430; File No. SR–

NYSEArca–2006–20] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and Order 

Granting Accelerated Approval to 

Amendment No. 4 to a Proposed Rule 

Change Relating to the Exchange’s 

Schedule of Fees and Charges 

September 12, 2006. 

I. Introduction 

On May 17, 2006, NYSE Arca, Inc. 

(‘‘NYSE Arca’’ 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 the proposed 

rule change to amend the Trade Related 

Charges portion of its Schedule of Fees 

and Charges (‘‘Schedule’’). On May 26, 

2006, the Exchange filed Amendment 

No. 1 to the proposed rule change. On 

June 30, 2006, the Exchange filed 

Amendment No. 2 to the proposed rule 

change. On July 7, 2006, the Exchange 

filed Amendment No. 3 to the proposed 

rule change.3 The proposed rule change, 

as amended, was published for 

comment in the Federal Register on July 

20, 2006.4 Two comment letters were 

submitted in connection with this 

filing.5

On August 31, 2006, the Exchange 

filed Amendment No. 4.6 This order 

grants accelerated approval of 

Amendment No. 4, and solicits 

comments from interested persons on 

Amendment No. 4. 

I. Description of the Proposal 

A. Fees for Manually Executed Linkage 

Orders 

NYSE Arca proposes to combine two 

existing fees associated with certain 

Linkage Orders.7 Presently, the 

Exchange assesses on Linkage Orders a 

$0.21 transaction fee and a $0.05 

comparison fee.8 To simplify the 

Schedule, the Exchange proposes 

combining these fees into one 

transaction fee of $0.26 for Linkage 

Orders executed manually. This fee is 

equal to the fee for manually executed 

orders from broker-dealers. 

B. Fees for Electronically Executed 

Linkage Orders 

Under the current NYSE Arca 

Schedule, electronically executed orders 

from broker-dealers are charged $0.50 

per contract (‘‘BD Electronic 

Transaction Fee’’). The BD Electronic 

Transaction Fee was recently revised to 

combine a previously assessed 

transaction fee of $0.26 and a BD 

Surcharge of $0.25.9 The current $0.50 

BD Electronic Transaction Fee 

represents a $0.01 reduction in the total 

fee for electronic executions of orders 

from broker-dealers. In Amendment No. 

4, the Exchange proposes to modify its 

Schedule to make clear that 


jlentini on PROD1PC65 with NOTICES