2322 Federal Register / Vol. 72, No. 11 / Thursday, January 18, 2007 / Notices 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 44990 

(October 25, 2001), 66 FR 55712 (November 2, 2001) 

(SR–Amex–2001–45). 

4See e-mail dated January 9, 2007 from Michael 

Cavalier, Assistant General Counsel, NYSE Group, 

Inc. to Mitra Mehr, Special Counsel, Division of 

Market Regulation, Commission. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55083; File No. SR–

NYSEArca-2006–39] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and Order 

Granting Accelerated Approval of 

Proposed Rule Change To Trade 

Certain iShares MSCI Index Funds 

Pursuant to Unlisted Trading 

Privileges 

January 10, 2007. 

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 October 

18, 2006, NYSE Arca, Inc. (‘‘NYSE 

Arca’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been 

substantially prepared by the Exchange. 

The Commission is publishing this 

notice and order to solicit comments on 

the proposal from interested persons 

and to approve the proposal on an 

accelerated basis. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange through its wholly 

owned subsidiary NYSE Arca Equities, 

Inc. (‘‘NYSE Arca Equities’’) proposes to 

trade shares (‘‘Shares’’) of the following 

index funds (‘‘Funds’’) pursuant to 

unlisted trading privileges (‘‘UTP’’) 

based on NYSE Arca Equities Rule 

5.2(j)(3): 

• iShares MSCI Emerging Markets 

Index Fund (Symbol: EEM); and 

• iShares MSCI Pacific Free Ex Japan 

Index Fund (EPP). 

The text of the proposed rule change 

is available from the Exchange’s Web 

site (http://www.nysearca.com), at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 

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 and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item III below. The 

Exchange 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 is proposing to trade 

the Shares pursuant to UTP. The 

objective of each Fund is to seek to 

provide investment results that 

correspond generally to the price and 

yield performance of public securities 

traded in the aggregate in particular 

markets, as represented by specific 

MSCI benchmark indices (each, an 

‘‘Index’’). Each Fund utilizes a passive 

or indexing investment approach which 

attempts to approximate the investment 

performance of its benchmark index 

through quantitative analytical 

procedures. Each Fund normally invests 

at least 95% of its total assets in 

component securities that are 

represented in the underlying Index and 

at all times invests at least 90% of its 

total assets in such stocks, except that 

the MSCI Emerging Markets Index is 

subject to the 80%/20% investment 

flexibility. 

The Commission previously approved 

the original listing and trading of the 

Shares on the American Stock 

Exchange, LLC (‘‘Amex’’).3 The 

Exchange deems the Shares to be equity 

securities, thus rendering trading in the 

Shares subject to the Exchange’s 

existing rules governing the trading of 

equity securities. The trading hours for 

the Shares on the Exchange are the same 

as those set forth in NYSE Arca Equities 

Rule 7.34, except that the iShares MSCI 

Emerging Markets Index Fund will not 

trade during the Opening Session (4 

a.m. to 9:30 a.m. Eastern Time) unless 

the Indicative Optimized Portfolio 

Value (‘‘IOPV’’, as described below) is 

calculated and disseminated during that 

time. The iShares MSCI Pacific Free Ex 

Japan Index Fund will trade during the 

Opening Session since there is no 

overlap in trading hours of the Opening 

Session and the foreign markets trading 

the securities in that Index. In addition, 

the last calculated IOPV is available to 

investors during the Opening Session by 

means of the consolidated tape or major 

market data vendors and remains 

unchanged during the Opening Session. 

Quotations for and last sale 

information regarding the Shares are 

disseminated through the Consolidated 

Quotation System. The Index on which 

each Fund is based is calculated by 

MSCI for each trading day in the 

applicable foreign market based on 

official closing prices in such market. 

The value of each underlying Index is 

updated intra-day on a real-time basis as 

individual component securities of the 

underlying Index change in price. The 

intra-day value of each Index is 

disseminated every 15 seconds 

throughout the trading day by 

organizations authorized by MSCI. The 

net asset value (‘‘NAV’’) of each Fund is 

calculated by each Fund’s administrator 

and disseminated daily by Amex. The 

Funds’ administrator calculates the 

NAV for each Fund generally once daily 

Monday through Friday generally as of 

the regularly scheduled close of 

business of the New York Stock 

Exchange (‘‘NYSE’’) (normally 4 p.m. 

Eastern Time) on each day the NYSE is 

open for trading, based on prices at the 

time of closing.4

To provide updated information 

relating to the Shares for use by 

investors, professionals, and persons 

wishing to create or redeem them, Amex 

disseminates through the facilities of the 

Consolidated Tape Association (‘‘CTA’’) 

the IOPV for each Fund as calculated by 

Bloomberg, L.P. The IOPV is 

disseminated on a per-share basis every 

15 seconds during regular Amex trading 

hours of 9:30 a.m. to 4 p.m. or 4:15 p.m. 

Eastern Time, depending on the time 

Amex specifies for the trading of the 

Shares. 

The IOPV may not reflect the value of 

all securities included in the applicable 

underlying Index and does not 

necessarily reflect the precise 

composition of the current portfolio of 

securities held by each Fund at a 

particular point in time. Therefore, the 

IOPV on a per-share basis disseminated 

during Amex’s regular trading hours 

should not be viewed as a real-time 

update of the NAV of a particular Fund, 

which is calculated only once a day. 

The IOPV is intended to closely 

approximate the value per-share of the 

portfolio of securities for a Fund and 

provide for a close proxy of the NAV at 

a greater frequency for investors. 

For the iShares MSCI Pacific Free Ex 

Japan Index, there is no overlap in 

trading hours between the foreign 

markets trading the Index’s component 

stocks and Amex. Therefore, for the 

iShares MSCI Pacific Free Ex Japan 

Index Fund, the IOPV is calculated 

based on closing prices in the principal 

foreign market for securities in the Fund 


pwalker on PROD1PC71 with NOTICES
Federal Register / Vol. 72, No. 11 / Thursday, January 18, 2007 / Notices 2323 

5 15 U.S.C. 80a–24(d). 

6See In the Matter of iShares, Inc., et al., 

Investment Company Act Release No. 25623 (June 

25, 2002). 

7 15 U.S.C. 78f(b). 

8 15 U.S.C. 78f(b)(5). 

9 17 CFR 240.12f–5. 

10 In approving this rule change, the Commission 

notes that it has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

11 15 U.S.C. 78f(b)(5). 

12 15 U.S.C. 78l(f). 

portfolio, which are then converted 

from the applicable foreign currency to 

U.S. dollars. The IOPV for this Fund is 

updated every 15 seconds during 

Amex’s regular trading hours of 9:30 

a.m. to 4 p.m. Eastern Time to reflect 

changes in currency exchange rates 

between the U.S. dollar and the 

applicable foreign currency. 

The MSCI Emerging Markets Index 

includes companies trading in markets 

with trading hours overlapping regular 

Amex trading hours. For the iShares 

MSCI Emerging Markets Index Fund, 

the IOPV calculator updates the IOPV 

during the overlap period every 15 

seconds to reflect price changes in the 

principal foreign market, and converts 

such prices into U.S. dollars based on 

the currency exchange rates. When the 

foreign market or markets are closed but 

Amex is open for trading, the IOPV is 

updated every 15 seconds to reflect 

changes in currency exchange rates. 

The Commission has granted each 

Fund an exemption from certain 

prospectus delivery requirements under 

Section 24(d) of the Investment 

Company Act of 1940 (‘‘1940 Act’’).5

Any product description used in 

reliance on the Section 24(d) exemptive 

order will comply with all 

representations made and all conditions 

contained in each Fund’s application for 

orders under the 1940 Act.6

In connection with the trading of the 

Shares, the Exchange would inform ETP 

Holders in an Information Circular of 

the special characteristics and risks 

associated with trading the Shares, 

including how they are created and 

redeemed, the prospectus or product 

description delivery requirements 

applicable to the Shares, applicable 

Exchange rules, how information about 

the value of each underlying Index is 

disseminated, and trading information. 

In addition, before an ETP Holder 

recommends a transaction in the Shares, 

the ETP Holder must determine that the 

Shares are suitable for the customer as 

required by NYSE Arca Equities Rule 

9.2(a)–(b). 

The Exchange intends to utilize its 

existing surveillance procedures 

applicable to derivative products to 

monitor trading in the Shares. The 

Exchange represents that these 

procedures are adequate to monitor 

Exchange trading of the Shares. 

2. Statutory Basis 

The Exchange believes that the 

proposal is consistent with Section 6(b) 

of the Act 7 in general and Section 

6(b)(5) of the Act 8 in particular in that 

it is designed to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in facilitating 

transactions in securities, to remove 

impediments and perfect the 

mechanisms of a free and open market, 

and to protect investors and the public 

interest. In addition, the Exchange 

believes that the proposal is consistent 

with Rule 12f–5 under the Act 9 because 

it deems the Shares to be equity 

securities, thus rendering trading in the 

Shares subject to the Exchange’s 

existing rules governing the trading of 

equity securities. 

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 

Written comments on the proposed 

rule change were neither solicited nor 

received. 

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 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 

Number SR–NYSEArca–2006–39 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 

Number SR–NYSEArca–2006–39. 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 

Room. Copies of such filing also will be 

available for inspection and copying at 

the principal office of the Exchange. 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–NYSEArca–2006–39 and 

should be submitted on or before 

February 8, 2007. 

IV. Commission’s Findings and Order 

Granting Accelerated Approval of the 

Proposed Rule Change 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.10 In particular, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,11 which requires that 

an exchange have rules designed, among 

other things, to promote just and 

equitable principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and in 

general to protect investors and the 

public interest. The Commission 

believes that this proposal should 

benefit investors by increasing 

competition among markets that trade 

the Shares. 

In addition, the Commission finds 

that the proposal is consistent with 

Section 12(f) of the Act,12 which permits 

an exchange to trade, pursuant to UTP, 

a security that is listed and registered on 


pwalker on PROD1PC71 with NOTICES
2324 Federal Register / Vol. 72, No. 11 / Thursday, January 18, 2007 / Notices 

13Section 12(a) of the Act, 15 U.S.C. 78l(a), 

generally prohibits a broker-dealer from trading a 

security on a national securities exchange unless 

the security is registered on that exchange pursuant 

to Section 12 of the Act. Section 12(f) of the Act 

excludes from this restriction trading in any 

security to which an exchange ‘‘extends UTP.’’

When an exchange extends UTP to a security, it 

allows its members to trade the security as if it were 

listed and registered on the exchange even though 

it is not so listed and registered. 

14 See supra note 3. 

15 17 CFR 240.12f–5. 

16 15 U.S.C. 78k–1(a)(1)(C)(iii). 

17See supra note 3. 

18 15 U.S.C. 78s(b)(2). 

19 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Phlx Rule 1014(b)(ii)(A). 

4See Phlx Rule 1014(b)(ii)(B). 

5See Securities Exchange Act Release No. 54859 

(December 1, 2006), 71 FR 71605. 

6See Phlx By-Law Article X, Section 10–7. 

another exchange.13 The Commission 

notes that it previously approved the 

listing and trading of the Shares on 

Amex.14 The Commission also finds that 

the proposal is consistent with Rule 

12f–5 under the Act,15 which provides 

that an exchange shall not extend UTP 

to a security unless the exchange has in 

effect a rule or rules providing for 

transactions in the class or type of 

security to which the exchange extends 

UTP. The Exchange has represented that 

it meets this requirement because it 

deems the Shares to be equity securities, 

thus rendering trading in the Shares 

subject to the Exchange’s existing rules 

governing the trading of equity 

securities. 

The Commission further believes that 

the proposal is consistent with Section 

11A(a)(1)(C)(iii) of the Act,16 which sets 

forth Congress’ finding that it is in the 

public interest and appropriate for the 

protection of investors and the 

maintenance of fair and orderly markets 

to assure the availability to brokers, 

dealers, and investors of information 

with respect to quotations for and 

transactions in securities. Quotations for 

and last sale information regarding the 

Shares are disseminated through the 

Consolidated Quotation System. 

Furthermore, the IOPV calculator 

updates the applicable IOPV every 15 

seconds to reflect price changes in the 

principal foreign markets, and converts 

such prices into U.S. dollars based on 

the currency exchange rate. When the 

foreign market or markets are closed but 

Amex is open for trading, the IOPV is 

updated every 15 seconds to reflect 

changes in currency exchange rates. 

NYSE Arca Equities Rule 7.34 describes 

the situations when the Exchange would 

halt trading when the IOPV or the value 

of the Index underlying one of the 

Funds is not calculated or widely 

available. 

The Commission notes that, if the 

Shares should be delisted by Amex, the 

original listing exchange, the Exchange 

would no longer have authority to trade 

the Shares pursuant to this order. 

In support of this proposal, the 

Exchange has made the following 

representations: 

1. The Exchange’s surveillance 

procedures are adequate to monitor the 

trading of the Shares. 

2. In connection with the trading of 

the Shares, the Exchange would inform 

ETP Holders in an Information Circular 

of the special characteristics and risks 

associated with trading the Shares. 

3. The Information Circular would 

inform participants of the prospectus or 

product delivery requirements 

applicable to the Shares. 

This approval order is conditioned on 

the Exchange’s adherence to these 

representations. 

The Commission finds good cause for 

approving this proposal before the 

thirtieth day after the publication of 

notice thereof in the Federal Register. 

As noted previously, the Commission 

previously found that the listing and 

trading of the Shares on Amex is 

consistent with the Act.17 The 

Commission presently is not aware of 

any regulatory issue that should cause it 

to revisit that earlier finding or preclude 

the trading of Shares on the Exchange 

pursuant to UTP. Therefore, accelerating 

approval of this proposal should benefit 

investors by creating, without undue 

delay, additional competition in the 

market for the Shares. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,18 that the 

proposed rule change (SR–NYSEArca–

2006–39) is approved on an accelerated 

basis. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.19

Nancy M. Morris, 

Secretary. 

[FR Doc. E7–614 Filed 1–17–07; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55080; File No. SR–Phlx–

2006–51] 

Self-Regulatory Organizations; 

Philadelphia Stock Exchange, Inc.; 

Order Granting Approval to Proposed 

Rule Change Relating to Performance 

Evaluations for Streaming Quote 

Traders and Remote Streaming Quote 

Traders 

January 10, 2007. 

I. Introduction 

On November 22, 2006, the 

Philadelphia Stock Exchange, Inc. 

(‘‘Phlx’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’),1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

adopt Phlx Rule 510, SQT and RSQT 

Performance Evaluation, to establish 

performance requirements for Streaming 

Quote Traders (‘‘SQTs’’) 3 and Remote 

Streaming Quote Traders (‘‘RSQTs’’).4

The proposed rule change was 

published for comment in the Federal 

Register on December 11, 2006.5 The 

Commission received no comments 

regarding the proposal. This order 

approves the proposed rule change. 

II. Description of the Proposal 

The purpose of the proposed rule 

change is to adopt new Phlx Rule 510 

to: (1) Establish performance 

requirements for SQTs and RSQTs; (2) 

authorize the Exchange to conduct 

performance evaluations periodically; 

and (3) authorize the Exchange’s 

Options Allocation, Evaluation and 

Securities Committee (‘‘OAESC’’) 6 to 

take corrective action where minimum 

requirements are not met. 

Proposed Phlx Rule 510 would 

provide for monthly performance 

evaluations of SQTs and RSQTs to 

determine whether they have fulfilled 

performance standards relating to, 

among other things, quality of markets, 

efficient quote submission to the 

Exchange (including quotes submitted 

through a third party vendor), 

competition, observance of ethical 

standards, and administrative factors. 

The proposal would permit the 

Exchange to consider requests for relief 

from established quote spread 


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