[Federal Register Volume 65, Number 238 (Monday, December 11, 2000)]
[Notices]
[Pages 77408-77413]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-31386]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43658; File No. SR-NYSE-00-53]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of a Proposed Rule Change by the New York 
Stock Exchange, Inc. Relating to the Listing and Trading of an Exchange 
Traded Fund Based on the S&P Global 100 Index

December 1, 2000.
    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 November 29, 2000, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission's is publishing this notice to solicit 
comments on the proposed rule change from interested persons and to 
approve the proposal on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to list and trade shares of an exchange 
traded fund (the ``Fund'') based on the S&P Global 100 Index.\3\ The 
Exchange is also proposing the amend NYSE Rule 13 to reflect procedures 
with respect to stop and stop limit orders for Investment Company Units 
traded on the Exchange. The text of the proposed rule change is 
available at the Office of the Secretary, the Exchange or the 
Commission.
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    \3\ The Fund will be listed and traded pursuant to Section 
703.16, Investment Company Units, of the Exchange's Listed Company 
Manual (``LCM'').
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II. Self-Regulatory Organization's Statement of the Proposed 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 
test of these statements may be examined at the places specified in 
item IV 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 proposes to list and trade under Section 703.16, 
Investment Company Units of the LCM, shares of the Fund based on the 
S&P Global 100 Index (the ``Index'' or the ``Underlying Index''). The 
Fund is included in the Share Trust (the ``Trust''),\4\ and Barclays 
Global Fund Advisors (``BGFA''), a subsidiary of Barclays Global 
Investors, N.A. (``BGI''), acts as the advisor (the ``Advisor'') to the 
Fund. Standard & Poor's (``S&P''), a division of The McGraw-Hill 
Companies, Inc., is the Index provider. The Index is sponsored by S&P 
and the Exchange, with the additional collaboration of several major 
exchanges from around the world.\5\
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    \4\ The Trust is registered under the Investment Company Act of 
1940, as amended (``1940 Act''). The Trust has filed with the 
Commission a Registration Statement on the Form N-1/A under the 
Securities Act of 1933, as amended and under the 1940 Act relating 
to the Fund (File No. 333-92935 and 811-09729).
    \5\ The Index was developed jointly by S&P and the Exchange, and 
the Exchange is represented on, although it does not control, the 
S&P committee responsible for Index maintenance. The Commission 
notes that the firewall provisions proposed in SR-NYSE-00-46 will 
apply to this Investment Company Unit.
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    The underlying index. A detailed description of the Underlying 
Index for the Fund prepared by S&P was filed as Exhibit 2. This 
description includes, but

[[Page 77409]]

is not limited to, information regarding index description, component 
selection criteria, country representation, Index maintenance and 
industry group distribution by market capitalization. The Index 
description, including any changes thereto, may be found on the S&P 
Global web site at http://www.spglobal.com/ssindexmainglobal100.html.
    General description of the fund. The Fund offers and issues shares 
(``Fund Shares'') at their net asset value (``NAV'') only in 
aggregations of a specified number of Fund Shares (referred to as a 
``Creation Unit''), generally in exchange for a basket of equity 
securities included in the Underlying Index (the ``Deposit 
Securities''), together with the deposit of a specified cash payment 
(the ``Cash Component'').\6\ Fund Shares are redeemable only in 
Creation Unit aggregations, and, generally, in exchange for portfolio 
securities and a specified cash payment. Creation Units are 
aggregations of 50,000 Fund Shares. The Trust reserves the right to 
offer a ``cash'' option for creations and redemptions of Fund Shares.
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    \6\ The Cash Component is an amount equal to the Balancing 
Amount. The ``Balancing Amount'' is an amount equal to the 
difference between the NAV of the Fund Shares (per Creation Unit) 
and the ``Deposit Amount.'' The ``Deposit Amount'' is an amount 
equal to the market value of the Deposit Securities. If the 
Balancing Amount is a positive number (i.e., the NAV per Creation 
Unit exceeds the Deposit Amount), the Cash Component will be paid to 
the Trust by the creator. If the Balancing Amount is a negative 
number (i.e., the NAV per Creation Unit is less than the Deposit 
Amount), the creator will receive cash in an amount equal to the 
differential.
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    ``Passive'' or indexing investment approach. The Fund seeks 
investment results that before expenses correspond generally to the 
price and yield performance of companies in the Index.
    The Advisor uses a ``passive'' or indexing approach in seeking to 
achieve the Fund's investment objective.
    Representative sampling. The Fund uses representatives sampling to 
track the Underlying Index. This means that the Fund is invested in a 
representative sample of stocks in the Underlying Index, which have a 
similar investment profile as the Underlying Index. Stocks selected 
have aggregate investment characteristics (based on market 
capitalization and industry weightings), fundamental characteristics 
(such as return variability, earnings valuation and yield), and 
liquidity measures similar to those of the relevant Underlying Index. A 
fund that uses representatives sampling generally does not hold all of 
the stocks included in its underlying index.
    The Fund will invest at least 90% of its total assets in the stocks 
of the Underlying Index. The Fund may hold up to 10% of its total 
assets in stocks not included in the Underlying Index. For example, the 
Advisory may invest in stocks not included in the Underlying Index in 
order to reflect various corporate actions (such as mergers) and other 
changes in the Underlying Index (such as reconstitutions, additions and 
deletions). The Fund may also invest in stocks outside the underlying 
Index to meet the diversification requirements of a regulated 
investment company under the Internal Revenue Code (the ``Code'').\7\ 
As long as the Fund invests at least 90% of its total assets in the 
stocks of the Underlying Index, it may also invest its other assets in 
futures contracts, options on futures contracts, options, and swaps 
related to the Underlying Index, as well as cash and cash equivalents.
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    \7\ In order for the Fund to qualify for tax treatment as a 
regulated investment company, it must meet several requirements 
under the Code. Among these is the requirement that, at the close of 
each quarter of the Fund's taxable year, (1) at least 50 percent of 
the market value of the Fund's total assets must be represented by 
cash items, U.S. government securities, securities of other 
regulated investment companies and other securities, with such other 
securities limited for the purpose of this calculation in respect to 
any one issuer to an amount not greater than 5 percent of the value 
of the Fund's assets and not greater than 10 percent of the 
outstanding voting securities of such issuer, and (2) not more than 
25 percent of the value of its total assets may be invested in 
securities of any one issuer, or two or more issuers that are 
controlled by the Fund (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 regulated 
investment companies.)
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    Correlation. An index is a theoretical financial calculation while 
the ETF is an actual investment portfolio. The performance of the Fund 
and the Underlying Index will vary somewhat due to transaction costs, 
market impact, corporate actions (such as mergers and spin-offs) and 
timing variances. It is expected that over time, the correlation 
between the Fund's performance and that of the Underlying Index, before 
fees and expenses, will be 95% or better. A figure of 100% would 
indicate perfect correlation. Any correlation of less than 100% is 
called a ``tracking error.''
    Industry concentration policy. The 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). However, the Fund 
will concentrate to approximately the same extent that the Underlying 
Index concentrates in the stocks of a particular 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 
of state or municipal governments and their political subdivisions are 
not considered to be issued by members of any industry.
    Creations and redemptions of fund shares. The Fund Shares are 
``created'' at their NAV by specialists, large investors and 
institutions only in Creation Units of 50,000 Shares. A ``creator'' 
deposits into the Fund a specified portfolio of stocks closely 
approximating the holdings of the Fund (the ``Deposit Securities'') and 
a specified amount of cash (the ``Cash Component'') in exchange for 
50,000 Fund Shares.
    Similarly, the Fund Shares can only be redeemed in Creation Units 
of 50,000 Fund Shares, principally in-kind for a specified portfolio of 
stocks held by the Fund then comprising the Deposit Securities and the 
then applicable Cash Component. Except when aggregated in Creation 
Units, Fund Shares are not redeemable. The prices at which creations 
and redemptions occur are based on the next calculation of NAV after an 
order is received in proper form.
    Creations and redemptions must be made through a firm that is 
either a member of the Continuous Net Settlement System of the National 
Securities Clearing Corporation (``NSCC'') or a Depository Trust 
Company (``DTC'') participant and, in each case, must have executed an 
agreement with the Distributor with respect to creations and 
redemptions of Creation Unit aggregations (``Participant Agreement''). 
The Trust will impose transaction fees in connection with creation and 
redemption transactions.
    Availability of information regarding fund shares and underlying 
indices. The list of names and amount of each security constituting the 
current Deposit Securities, and the Cash Component effective as of the 
previous business day, per outstanding share of the Fund, will be made 
available each business day. In addition, an amount representing the 
sum of the estimated Cash Component effective through and including the 
previous business day, plus the current value of the Deposit Securities 
in U.S. dollars, on a per share basis is expected to be disseminated 
every 15 seconds during the Exchange's regular trading hours, through 
the facilities of the Consolidated Tape Association (``CTA'').
    The value of the Underlying Index will be updated intra-day on a 
real-time basis as individual component securities of the Underlying 
Index

[[Page 77410]]

change in price. These intra-day values of the Underlying Index will be 
disseminated every 15 seconds throughout the trading day. In addition, 
there will be disseminated a value for the Underlying Index once each 
trading day, based on closing prices in the relevant exchange market.
    The Fund will make available on a daily basis the names and 
required number of shares of each of the Deposit Securities in a 
Creation Unit aggregation, as well as information regarding the cash-
balancing amount. The NAV for the Fund will be calculated and 
disseminated daily. In addition, the Adviser maintains a website that 
provides information about the returns and methodology of various 
indices, and will include the Underlying Index for the Fund. The Trust 
also intends to maintain a website that will include the Fund 
prospectus and additional quantitative information that is updated on a 
daily basis, including daily trading volume and closing price for the 
Fund. There will also be disseminated a variety of data with respect to 
the Index on a daily basis by means of CTA including shares outstanding 
and cash amount per Creation Unit aggregation, which will be made 
available prior to the opening of the trading on the Exchange. The 
closing prices of the Fund's Deposit Securities are readily available 
from, as applicable, the relevant exchanges, automated quotation 
systems, or on-line information services such as Bloomberg or Reuters.
    Dissemination of indicative portfolio value. To provide updated 
information relating to the Fund for use by investors, professionals 
and persons wishing to create or redeem Fund Shares, and because the 
Fund is based on the Index which includes non-U.S. components, it is 
expected that there will be disseminated through the facilities of the 
CTA an updated indicative portfolio value (``Value'') for the Fund 
traded on the Exchange as calculated by a securities information 
provider (``Value Calculator''). The Value will be disseminated on a 
per Fund Shares basis every 15 seconds during regular NYSE trading 
hours for the Fund. The equity securities values included in the Value 
are the values of the Deposit Securities, which are the same as the 
portfolio that is to be utilized generally in connection with creations 
and redemptions of the Fund Shares Creation Unit aggregations on that 
day. The equity securities included in the Value reflect the same 
market capitalization weighting as the Deposit Securities in the 
portfolio for the Fund. In addition to the value of the Deposit 
Securities for the Fund, the Value includes the Cash Component. The 
Value also reflects changes in currency exchange rates between the U.S. 
dollar and the applicable home foreign currency.
    The Value may not reflect the value of all securities included in 
the applicable Underlying Index. In addition, the Value does not 
necessarily reflect the precise composition of the current portfolio of 
securities held by the Fund at a particular point in time. Therefore, 
the Value on a per Fund Shares basis disseminated during the Exchange's 
trading hours should not be viewed as a real-time update of the NAV of 
the Fund, which is calculated only once a day. While the Value that 
will be disseminated at 9:30 a.m. is expected to be generally very 
close to the most recently calculated NAV on a per Fund Shares basis, 
it is possible that the value of the portfolio of securities held by 
the Fund may diverge from the Deposit Securities Values during any 
trading day. In such case, the Value will not precisely reflect the 
value of the Fund portfolio.
    However, during the trading day, the Value can be expected to 
closely approximate the value per Fund share of the portfolio of 
securities for the Fund except under unusual circumstances (e.g., in 
the case of extensive rebalancing of multiple securities in the Fund at 
the same time by the Advisor). The circumstances that might cause the 
Value to be based on calculations different from the valuation per Fund 
share of the actual portfolio of the Fund would not be different than 
circumstances causing any index fund or trust to diverge from an 
underlying benchmark index.
    The Exchange believes that dissemination of the Value based on the 
Deposit Securities provides additional information regarding the Fund 
that would not otherwise be 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.
    For the Fund, the Value Calculator will utilize closing prices (in 
applicable foreign currency prices) in the principal foreign market(s) 
for securities in the Fund portfolio, and convert the price to U.S. 
dollars. This Value will be updated every 15 seconds during the 
Exchange's trading hours to reflect change in currency exchange rates 
between the U.S. dollar and the applicable foreign currency. The Value 
will also include the applicable Cash Component for the Fund.
    For foreign stocks, the principal foreign markets that have trading 
hours overlapping regular trading hours on the Exchange, the Value 
Calculator will update the applicable Value 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 current currency exchange 
rate. When the foreign market or markets are closed but the Exchange is 
open, the Value will be updated every 15 seconds to reflect changes in 
currency exchange rates after the foreign markets close.
    Other characteristics of the fund. The Exchange represents that a 
minimum of two Creation Unit aggregations for the Fund, based on the 
S&P Global 100 Index, will be outstanding at the commencement of 
trading on the Exchange. The number of shares per Creation Unit 
aggregation will be 50,000 shares.\8\
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    \8\ By virtue of the Exchange's File No. SR-NYSE-00-46, 
submitted to the Commission for notice and approval, the number of 
Units required to be outstanding at the commencement of trading 
under Section 703.16(A)(4) will be established by the Exchange for 
each series. At the commencement of trading of Fund Shares based on 
the S&P Global 100 Index on the Exchange, there will be required to 
be at least 100,000 Fund Shares outstanding. The Commission believes 
that in light of the Exchange's proposed rule change in SR-NYSE-00-
46, and the commission's approval of a minimum number of 100,000 
Fund Shares outstanding on other exchanges, it is reasonable for the 
Exchange to require a minimum of 100,000 Fund Shares outstanding on 
the S&P Global 100 Index.
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    Fund Shares will be registered in book-entry form through the DTC. 
Trading in Fund Shares on the Exchange will be effected until 4:00 p.m. 
each business day.\9\ The minimum trading increment for Fund Shares on 
the Exchange initially will be \1/64\th of $1.00.\10\
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    \9\ The Exchange expects to extend its regular hours for the 
trading of the Fund to 4:15 p.m. at such time that a futures 
contract on the Index becomes available for trading on a futures 
exchange in the U.S.
    \10\ When decimal pricing is extended to all securities traded 
on the Exchange, the minimum trading increment for Fund Shares based 
on the S&P Global 100 on the Exchange will be expressed in decimals.
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    Dividends from net investment income will be declared and paid at 
least annually by the Fund. Distributions of realized securities gains, 
if any, generally will be declared and paid at least once a year, but 
the Fund may make distributions on a more frequent basis to comply with 
distribution requirements of the Code. The Fund may make the DTC book-
entry Dividend Reinvestment Service available for use by beneficial 
owners of the Fund through DTC Participants for reinvestment of their 
cash proceeds.
    Original and annual listing fees. The Exchange original listing fee 
applicable to the listing of the Fund will be $5,000.

[[Page 77411]]

The annual continued listing fee for the Fund will be $2,000.
    Stop and stop limit orders. Since Investment Company Units issued 
pursuant to Section 703.16, Investment Company Units, of the LCM are 
derivatively priced based upon another security or index of securities, 
the Exchange is proposing to amend NYSE Rule 13 to provide that stop 
and stop limit orders to buy or sell Investment Company Units shall, 
with the prior approval of a Floor Governor or two Floor Officials, be 
elected by a quotation. Fund Shares will be eligible for this 
treatment. The proposed rule change would require a Floor Governor or 
two Floor Officials to give approval for this treatment. The Exchange 
believes this is an appropriate precaution given the newness of the 
rule to the Exchange. After a month or two of experience with the new 
rule, the Exchange anticipates that it will file an additional rule 
change to allow approval by only one Floor Official to suffice.
    Trading halts. The Exchange may consider all relevant factors in 
exercising its discretion to halt or suspend trading in the Fund. 
Trading on the Exchange in the Fund Shares may be halted because of 
market conditions or for reasons that, in the view of the Exchange, 
make trading in the Fund Shares inadvisable. These may include (1) the 
extent to which trading is not occurring in stocks in the Index or (2) 
other unusual conditions or circumstances detrimental to maintenance of 
a fair and orderly market. In addition, trading in Fund Shares is 
subject to trading halts caused by extraordinary market volatility 
pursuant to Exchange's ``circuit breaker'' rules (NYSE Rule 80A).
    Surveillance procedures. The Exchange's written Surveillance 
procedures for Fund Shares will be similar to the procedures utilized 
for other Investment Company Units.
    Prospectus delivery and information circular. Prior to commencement 
of trading in the Fund on the Exchange, the Exchange will issue an 
information circular informing members and member firms that investors 
purchasing Fund Shares shall be required to receive a prospectus prior 
to or concurrently with the confirmation of a transaction in Fund 
Shares. The information circular will also inform members and member 
firms of the characteristics of the Fund and of applicable Exchange 
Rules, including suitability rules.\11\
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    \11\ As per telephone conversation between James F. Duffy, 
Senior Vice President and Associate General Counsel, Office of the 
General Counsel, NYSE, and Heather Traeger, Attorney, Division of 
Market Regulation, Commission, November 30, 2000.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Act \12\ in general and furthers the objectives 
of Section 6(b)(5) of the Act \13\ in particular in that it is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, 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.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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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.

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 any 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 Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street NW, Washington, DC 20549-0609. 
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 will also be 
available for inspection and copying at the principal office of the 
above-mentioned self-regulatory organization. All submissions should 
refer to File No. SR-NYSE-00-53 and should be submitted by January 2, 
2001.

IV. Commission's Findings and Order Granting Accelerated Approval 
of Proposed Rule Change

    After careful consideration, 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, and, in particular, with the requirements and of Section 
6(b)(5) of the Act.\14\ The Commission believes that the Exchange's 
proposal to list and trade shares of the Fund based on S&P Global Index 
will provide investors with a convenient and efficient way of 
participating in the securities markets, including involvement with 
equities issued by foreign investors. The Exchange's proposal should 
also provide investors with increased flexibility in satisfying their 
investment needs by allowing them to purchase and sell a single 
security, at negotiated prices throughout the business day that 
replicates the performance of a portfolio of stocks. Accordingly, as 
discussed below, the Commission finds that the Exchange's proposal will 
promote just and equitable principles of trade, foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, and, in general, protect investors and the public 
interest consistent with Section 6(b)(5) of the Act.\15\
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    \14\ 15 U.S.C. 78f(b)(5). In approving this rule, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
    \15\ 15 U.S.C. 78f(b)(5).
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    Section 703.16 of the LCM provides for the listing and trading of 
Investment Company Units, which are shares that represent an interest 
in a registered investment company that could be organized as a unit 
investment trust, an open-end management investment company, or similar 
entity. The Commission believes that the listing and trading Fund 
Shares based on the S&P Global 100 Index will provide investors with an 
alternative to trading a broad range of securities on an individual 
basis, and will give investors the ability to trade a product 
representing an interest in a portfolio of securities designed to 
reflect substantially the applicable underlying index. The Fund should 
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.

[[Page 77412]]

    Although the Fund is not a leveraged instrument, and, therefore, 
does not possess any of the attributes of stock index options, its 
prices will be derived and based upon the securities and the cash held 
in the Fund. Accordingly, the level of risk involved in the purchase or 
sale of this Fund is similar to the risk involved in the purchase or 
sale of traditional common stock, with the exception that the pricing 
mechanism for the Fund is based on a portfolio of securities. Based on 
these factors, the Commission believes that it is appropriate to 
regulate the Fund in a manner similar to other equity securities. 
Nevertheless, the Commission believes that the nature of the Fund 
raises certain product design, disclosure, trading, market impact and 
other issues that must be addressed adequately. As discussed in more 
detail below, the Commission believes the Exchange has adequately 
addressed these concerns.

A. The Fund Generally

    The Commission believes that the proposed Fund is reasonably 
designed to provide investors with an investment vehicle that 
substantially reflects in value the index it is based upon. In this 
regard, the Commission notes that the Fund will use an ``indexing'' 
investment approach that attempts to replicate, before expenses, the 
performance of the Index. The Commission notes that the Fund uses 
representative sampling to track the Underlying Index. The Commission 
also notes that the Fund will normally invest at least 90% of its total 
assets in stocks that comprise the Underlying Index. The Commission 
believes that the component selection and replacement procedures for 
the Fund should help to ensure that the component securities generally 
remain highly capitalized and actively traded.

B. Disclosure

    The Commission believes that the Exchange's proposal should help to 
ensure that investors are adequately apprised of the terms, 
characteristics, and risks of trading the Fund. As noted above, all 
investors will receive a prospectus regarding the product, prior to or 
concurrently with the confirmation of a transaction therein. In 
addition, the Trust intends to maintain a website that will include the 
Fund prospectus and additional quantitative information that is updated 
on a daily basis.
    The Commission notes that the Fund would be subject to the 
Exchange's rules and procedures for Investment Company Units. Because 
the Fund will be in continuous distribution, the delivery requirements 
of the Securities Act of 1933 will apply both to initial investors and 
to all investors purchasing such securities in secondary market 
transactions on the Exchange. The Commission also notes that the 
Exchange will issue an information circular to its members explaining 
the unique characteristics of this type of security prior to the 
commencement of trading in shares of the Fund. The circular also will 
address members' responsibility to deliver a prospectus or product 
description to all investors.

C. Listing and Trading of the Index Fund Shares

    The Commission finds that adequate rules and procedures exist to 
govern the listing and trading of the Fund. The Fund will be subject to 
the full panoply of the Exchange's listing, delisting or suspension 
rules and procedures governing the trading of Investment Company Units. 
The Fund will be deemed an equity security subject to all rules 
governing the trading of equity securities, including, among others, 
rules governing trading halts, notices to members, responsiblities of 
the specialist, customer suitability requirements, and the election of 
a stop and stop limit order. The Exchange's surveillance procedures for 
Investment Company Units will be applicable to the Fund. The Commission 
believes that the Exchange's surveillance procedures are adequate to 
address the concerns associated with the listing and trading of this 
Fund, including any concerns associated with purchasing and redeeming 
Creation Units. The Commission further finds that permitting stop and 
stop limit orders to be elected by a quotation for Investment Company 
Units is consistent with the Act and should facilitate the trading of 
such securities.
    In addition, the Exchange has designated that a minimum of two 
Creation Units, at approximately 50,000 shares each, will be required 
to be outstanding at the start of trading. The Commission believes this 
minimum number will be sufficient to help to ensure that a minimum 
level of liquidity will exist at the start of trading. Furthermore, the 
Commission finds that registering the Fund shares in book-entry form 
through DTC, managing the distribution of dividends from net investment 
income, if any, and permitting beneficial owners of the Fund to offer 
the DTC book-entry Dividend Reinvestment Service are characteristics of 
the Fund that are consistent with the Act and should allow for the 
maintenance of fair and orderly markets and perfect the mechanism of a 
free and open market.
    Furthermore, the Commission believes that the Exchange's proposal 
to trade the Fund in minimum fractional increments of \1/64\ of $1.00 
is consistent with the Act. The Commission believes that such trading 
should enhance market liquidity, and should promote more accurate 
pricing, tighter quotations, and reduced price fluctuations. The 
Commission also believes that such trading should allow customers to 
receive the best possible execution of their transactions in the Fund. 
Additionally, the Commission believes that the proposed original 
listing fee of $5,000 is reasonable as is the proposed annual fee of 
$2,000.

D. Dissemination of Information Regarding the Fund

    The Commission believes that the Values and figures that the 
Exchange proposes to have disseminated for the Fund will provide 
investors with timely and useful information concerning the value of 
the Fund. The Exchange represents that the value information will be 
disseminated, every 15 seconds during regular trading hours, through 
the facilities of the CTA and will reflect currently available 
information concerning the value for Shares of the Fund. On a daily 
basis, the Exchange represents that it will disseminate the Shares 
outstanding, the cash amount per Creation Unit Aggregation, and the net 
asset value. The Exchange represents that the closing prices of the 
Fund's Deposit Securities are readily available from, as applicable, 
the relevant exchanges, automated quotation systems, or on-line 
information services such as Bloomberg or Reuters. The intra-day value 
of the Underlying Index will be available from S&P.

E. Accelerated Approval

    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice thereof in the Federal Register pursuant to Section 19(b)(2) of 
the Act. The Commission notes that the proposed rule change is based on 
the listing and trading standards in Section 703.16, Investment Company 
Unites, of the LCM, which the Commission previously approved after 
soliciting public comment on the proposal pursuant to Section 19(b)(1) 
of the Act.\16\ The Commission does not believe that the proposed rule 
change raises novel regulatory issues that were not addressed in the 
filing. Accordingly, the Commission believes it is appropriate to 
permit investors to benefit from the flexibility afforded by

[[Page 77413]]

this new product by trading them as soon as possible. Accordingly, the 
Commission finds that there is good cause, consistent with Section 
6(b)(5) of the Act,\17\ to approve the proposal on an accelerated 
basis.
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    \16\ 15 U.S.C. 78s(b)(1).
    \17\ 15 U.S.C. 78s(b)(5).
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V. Conclusion

    It is Therefore Ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (SR-NYSE-00-53), is hereby approved on an 
accelerated basis.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
Margaret H. McFarland,
Deputy Secretary.
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    \18\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 00-31386 Filed 12-8-00; 8:45 am]
BILLING CODE 8010-01-M