77408 Federal Register / Vol. 65, No. 238 / Monday, December 11, 2000 / Notices

8 15 U.S.C. 78s(b)(3)(A).

9 17 CFR 240.19b–4(f)(6).

10As required under Rule 19b–4(f)(6)(iii), the

Exchange provided the Commission with written

notice of its intent to file the proposed rule change

at least five business days prior to the filing date

or such shorter time as designated by the

Commission.

11 17 CFR 240.19b–4(f)(6).

12 17 CFR 240.19b–4(f)(6)(iii).

13 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3The Fund will be listed and traded pursuant to

Section 703.16, Investment Company Units, of the

Exchange’s Listed Company Manual (‘‘LCM’’).

4The 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).

5The 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.

19(b)(3)(A) 8 of the Act and Rule 19b–

4(f)(6) 9 thereunder.10

A proposed Rule change filed under

rule 19b–4(f)(6) 11 normally does not

become operative prior to 30 days after

the date of filing. However, Rule 19b–

4(f)(6)(iii) 12 permits the Commission to

designate a shorter time if such action

is consistent with the protection of

investors and public interest. The

Exchange seeks to have the proposed

rules change become operative on or

before November 30, 2000, in order to

allow the Pilot to continue in effect on

an uninterrupted basis.

The Commission, consistent with the

protection of investors and the public

interest, has determined to make the

proposed rule change operative

immediately through November 30,

2000. The extension of the Pilot will

provide the Commission with additional

time to review and evaluate the 3-Year

Extension Proposal.

The Commission notes that unless the

Pilot is extended, the Pilot will expire

and the provisions in Sections 312.01,

312.03 and 312.04 of the Exchange’s

Listed Company Manual that were

amended in the Pilot will revert to that

which were effective prior to June 4,

1999. The Commission believes that

such a result could lead to confusion.

Based on these reasons, the

Commission believes that it is

consistent with the protection of

investors and the public interest that the

proposed rule change become operative

immediately through February 28, 2001.

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.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning the foregoing,

including whether the proposal 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 Exchange. All

submissions should refer to File No.

SR–NYSE–00–52 and should be

submitted by January 2, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.13

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–31385 Filed 12–8–00; 8:45 am]

BILLING CODE 8010–01–M

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.

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.

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

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

Federal Register / Vol. 65, No. 238 / Monday, December 11, 2000 / Notices 77409

6The 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.

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.)

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.

‘‘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.

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

77410 Federal Register / Vol. 65, No. 238 / Monday, December 11, 2000 / Notices

8By 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.

9The 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.

10When 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.

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

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 1⁄64th of

$1.00.10

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 bookentry 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.

Federal Register / Vol. 65, No. 238 / Monday, December 11, 2000 / Notices 77411

11As 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.

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

13 15 U.S.C. 78f(b)(5).

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).

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

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.

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 abovementioned 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

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 intraday 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.

77412 Federal Register / Vol. 65, No. 238 / Monday, December 11, 2000 / Notices

16 15 U.S.C. 78s(b)(1).

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 bookentry 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 intraday 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

Federal Register / Vol. 65, No. 238 / Monday, December 11, 2000 / Notices 77413

17 15 U.S.C. 78s(b)(5).

18 17 CFR 200.30–3(a)(12).

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

2Securities Exchange Act Release No. 43276,

(September 11, 2000), 65 FR 56015.

3 17 CFR 240.8c–1 and 240.15c2/1.

4See also no-action letter from Michael A.

Macchiaroli, Associate Director, Division of Market

Regulation, Commission, to William H. Navin,

Executive Vice President and General Counsel,

OCC, (June 15, 2000).

5Non-conforming subordination agreements are

subordination agreements that do not meet the

requirements of Appendix D of Rule 15c3–1.

6As defined, a Related Person is essentially a

person whose account would be a ‘‘proprietary

account’’ under the rules of the Commodity Futures

Trading Commission, but who is nevertheless a

‘‘customer’’ for purposes of the Commission’s

hypothecation rules cited above. Market Makers

who are Related Persons of a clearing member are

deemed to be Associated Market Makers and are

excluded from the Combined Market Maker

Account under Article VI, Section 3(c) of OCC’s ByLaws.

7 15 U.S.C. 78q–1(b)(3)(F).

8 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

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.

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.

[FR Doc. 00–31386 Filed 12–8–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43668; File No. SR–OCC–

99–15]

Self-Regulatory Organizations; The

Options Clearing Corporation; Order

Granting Approval of Proposed Rule

Change Relating to Clearing Member

Affiliates

December 4, 2000.

On November 2, 1999, The Options

Clearing Corporation (‘‘OCC’’) filed with

the Securities and Exchange

Commission (‘‘Commission’’) a

proposed rule change (File No. SR–

OCC–99–15) and on August 11, 2000,

amended the proposed rule change

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

Securities Exchange Act of 1934

(‘‘Act’’)1 Notice of the proposal was

published in the Federal Register on

September 15, 2000.2 No comment

letters were received. For the reasons

discussed below, the Commission is

granting approval of the proposed rule

change.

I. Description

The principal purpose of the

proposed rule change is allow certain

affiliates of a clearing member to be

designated as non-customers under the

Commission’s hypothecation rules 3 so

that the affiliates may have their

transactions and positions commingled

in their clearing member’s firm account

and/or proprietary X–M account at OCC

for the purpose of receiving more

favorable clearing margin treatment.4

The proposed rule change creates a

definition of Member Affiliates that

consists of the relevant portion of the

existing definition of Related Person in

OCC’s By-Laws. (For the sake of

economy of expression and consistency,

OCC proposes a replace that portion of

the Related Person definition used to

define Member Affiliate with the term

Member Affiliate.) The proposed rule

change then modifies the definition of

Non-Customer to include a Member

Affiliate that has executed a nonconforming subordination agreement 5

that has been approved by the clearing

member’s designated examining

authority.

Additionally, the proposed rule

change modifies the definition of

Related Person to eliminate

redundancies and to more closely

parallel 17 CFR 1.3(y), which defines

‘‘proprietary account’’ for the purposes

of the Commodity Exchange Act’s

regulations.6 The proposed rule no

longer refers to spouses of ‘‘any such

person’’ (i.e., any officer, director, or

general or special partner) which was

redundant because the rule already

covers spouses of ‘‘any non-customer of

the clearing member,’’ and the

definition of Non-Customer includes

officers, directors, or general or special

partners. Additionally, in order to

conform OCC rules with Section 1.3(y)’s

definition of ‘‘proprietary account,’’ the

proposed rule change clarifies that not

only are spouses and minor dependents

of non-customers Related Persons but

also that the spouses and minor

dependents of certain employees are

also Related Persons.

II. Discussion

Section 17A(b)(3)(F) 7 of the Act

requires that the rules of a clearing

agency be designed to assure the

safeguarding of securities and funds

which are in the custody or control of

the clearing agency or for which it is

responsible. For the reasons set forth

below, the Commission believes that

OCC’s proposed rule change is

consistent with OCC’s obligations under

the Act.

The proposed rule change to add and

modify several definitions so that

affiliates may have their transactions

and positions commingled in their

clearing member’s firm account and/or

proprietary X–M account at OCC should

result in a more accurate assessment of

risk and a more appropriate margin

requirement thus further assuring the

safeguarding the securities and funds

within OCC’s control. In addition the

proposed rule change should provide

more consistency with respect to the

interplay of the Commodity Exchange

Act’s regulations with OCC’s rules.

III. Conclusion

On the basis of the foregoing, the

Commission finds that the proposed

rule change is consistent with the

requirements of the Act and in

particular Section 17A of the Act and

the rules and regulations thereunder.

It is therefore ordered, pursuant to

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

proposed rule change (File No. SR–

OCC–99–15) be and hereby is approved.

For the Commission by the Division of

Market Regulations, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–31380 Filed 12–8–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43645; File No. SR–Phlx–

00–92]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

Concerning Reporting, Examination,

Recordkeeping, and Disclosure

Requirements Related to Off-Floor

Trading Organizations and Their

Affiliated Traders

November 30, 2000.

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

Securities Exchange Act of 1934

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

notice is hereby given that on October

11, 2000, the Philadelphia Stock

Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in