6338 Federal Register / Vol. 74, No. 24 / Friday, February 6, 2009 / Notices 

40See Caruso Letter. 

41 Id. 

42See FINRA Letter. 

43 In approving this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition and capital formation. See 

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

44 15 U.S.C. 78o–3(b)(6). 

45 15 U.S.C. 78s(b)(2). 

46 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 59146 

(December 22, 2008), 73 FR 80504. 

arbitration claim.40 This commenter 

suggested that the economic benefits 

that will inure to FINRA from reduced 

arbitration costs should be passed 

through to public investors in terms of 

reduced filing fees.41

FINRA responded by stating that it 

considered the effect of the proposal on 

all fees imposed by the forum. FINRA 

indicated that the significant cost 

savings for hearing sessions with a 

single arbitrator represent the greatest 

impact of the proposal to users of the 

forum. For example, under the proposal 

the forum fees for a dispute involving 

$75,000 will decrease from $750 to $450 

per four-hour hearing session. FINRA 

has not proposed to amend the initial 

filing fees, which are already based on 

the amount in dispute, and which may 

be reallocated by the panel at the end of 

the case. The Codes will continue to 

provide that the Director of Arbitration 

may defer payment of all or part of the 

filing fee if a claimant has demonstrated 

a financial hardship. Moreover, parties 

will continue to be able to request that 

the panel consider assessing all or part 

of any filing fee on other parties in the 

case. For these reasons, FINRA declined 

to revise the forum’s filing fees.42

IV. Discussion and Findings 

After careful review of the proposed 

rule change, the comments, and 

FINRA’s response to the comments, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act, and the rules 

and regulations thereunder that are 

applicable to a national securities 

association.43 In particular, the 

Commission believes the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,44 which 

requires, among other things, that 

FINRA rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest. The Commission 

believes that the proposed rule change 

will reduce costs for participants in 

FINRA arbitration proceedings with 

claims of greater than $25,000 but no 

more than $100,000 who have their 

matters heard before a single arbitrator, 

while preserving the parties’ ability to 

agree to have their case heard by a panel 

of three arbitrators. 

The Commission believes that FINRA 

has responded adequately to the 

comments regarding increasing the 

monetary threshold under which 

disputes would be heard by a single 

arbitrator. The Commission agrees that 

the proposal, as filed, balances offering 

users an efficient and cost-effective 

forum for disputes of $100,000 or less 

and providing three-arbitrator panels for 

disputes that involve greater amounts or 

that do not specify an amount in 

controversy. The Commission also 

agrees that parties in these cases will 

experience reduced case processing 

times because of the flexibility 

associated with scheduling conference 

calls and hearing dates with one 

arbitrator rather than three, and that 

FINRA would benefit from a more 

efficient use of its arbitrator roster. 

The Commission also believes that 

FINRA has adequately responded to 

comments regarding the aggregation of 

claims in calculating whether the 

$100,000 threshold has been met. The 

Commission notes that FINRA is not 

changing its current practice with 

respect to aggregating claims, and 

clarifying this practice in the Regulatory 

Notice announcing the rule change 

should help to resolve any ambiguity 

about how FINRA will determine 

whether a matter may be heard by a 

single arbitrator. 

The Commission also believes that 

FINRA has adequately responded to 

comments regarding the requirement 

that single arbitrators be chair-qualified 

arbitrators. The Commission agrees that 

appointing chair-qualified arbitrators to 

resolve claims up to $100,000 would 

ensure that parties have experienced 

arbitrators resolving their disputes. 

The Commission also believes that 

FINRA has adequately responded to 

comments regarding filing fees that 

investors would pay to bring a claim. 

The Commission agrees that parties will 

realize cost savings for hearing sessions 

with a single arbitrator. 

V. Conclusions 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,45 that the 

proposed rule change (SR–FINRA– 

2008–047) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.46

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–2531 Filed 2–5–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59332; File No. SR– 

NYSEArca–2008–136] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Approving Proposed 

Rule Change Amending NYSE Arca 

Equities Rule 5.2(j)(6) Relating to the 

Initial Listing Standards for Equity 

Index-Linked Securities, CommodityLinked Securities, Currency-Linked 

Securities, Fixed Income Index-Linked 

Securities, Futures-Linked Securities 

and Multifactor Index-Linked Securities 

January 30, 2009. 

I. Introduction 

On December 10, 2008, NYSE Arca, 

Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to amend NYSE Arca Equities 

Rule 5.2(j)(6), which sets forth listing 

standards for Equity Index-Linked 

Securities, Commodity-Linked 

Securities, Currency-Linked Securities, 

Fixed Income Index-Linked Securities, 

Futures-Linked Securities and 

Multifactor Index-Linked Securities 

(‘‘Index-Linked Securities’’). The 

proposed rule change was published in 

the Federal Register on December 31, 

2008.3 The Commission received no 

comments on the proposal. This order 

approves the proposed rule change. 

II. Description of the Proposal 

The Exchange proposes to amend one 

of the requirements of NYSE Arca 

Equities Rule 5.2(j)(6), which sets forth 

the listing standards for Index-Linked 

Securities. Rule 5.2(j)(6) permits the 

Exchange to consider for listing and 

trading Index-Linked Securities 

pursuant to Rule 19b–4(e) under the 

Act, provided that, among other things, 

in no event will a loss or negative 

payment at maturity be accelerated by a 

multiple that exceeds twice the 

performance of an underlying Reference 

Asset. The Exchange proposes to amend 

Rule 5.2(j)(6)(A)(d) to provide that in no 

event will a loss or negative payment at 

maturity be accelerated by a multiple 

that exceeds three times the 

performance of an underlying Reference 

Asset. The Exchange proposes this 

change to allow it to list and trade 

Index-Linked Securities that employ 


dwashington3 on PROD1PC60 with NOTICES
Federal Register / Vol. 74, No. 24 / Friday, February 6, 2009 / Notices 6339 

4See Securities Exchange Act Release No. 58825 

(October 21, 2008), 73 FR 63756 (October 27, 2008) 

(SR–NYSEArca–2008–89). 

5 15 U.S.C. 78s(b)(2). See e-mail dated January 29, 

2009 from Tim Malinowski, Director, NYSE 

Euronext to Mitra Mehr, Special Counsel, Division 

of Trading and Markets, Commission (‘‘NYSE Arca 

e-mail’’). 

6 17 CFR 240.19b–4(e). See NYSE Arca e-mail. 

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

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

9 In approving the proposed rule change the 

Commission has considered the proposed rule’s 

impact on efficiency, competition and capital 

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

10 15 U.S.C. 78f(b)(5). 

11See supra note 4. 

12 15 U.S.C. 78s(b)(2). 

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

14 15 U.S.C. 78s(b)(2). 

15 17 CFR 200.30–3(a)(12). 

investment strategies similar or 

analogous to certain exchange-traded 

funds which list and trade on the 

Exchange pursuant to NYSE Arca 

Equities Rule 5.2(j)(3).4 Currently, 

exchange-traded funds are able to seek 

daily investment results, before fees and 

expenses, that correspond to three times 

the inverse or opposite of the daily 

performance (¥300%) of the underlying 

indexes. 

For Index-Linked Securities that are 

structured to allow a loss or negative 

payment at maturity that may be 

accelerated by a multiple that exceeds 

three times the performance of an 

underlying Reference Asset, the 

Exchange’s proposal would continue to 

require specific Commission approval 

pursuant to Section 19(b)(2) of the Act.5

In particular, NYSE Arca Equities Rule 

5.2(j)(6) would expressly prohibit such 

Index-Linked Securities from being 

approved by the Exchange for listing 

and trading pursuant to Rule 19b–4(e) 

under the Act.6

III. Discussion and Commission’s 

Findings 

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, in particular, with 

Section 6(b) of the Act 7 and the rules 

and regulations thereunder. 

Specifically, the Commission finds that 

the proposal is consistent with Section 

6(b)(5) of the Act,8 which requires, 

among other things, that the Exchange’s 

rules be designed 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.9

The Commission believes that the 

proposal reasonably balances the 

removal of impediments to a free and 

open market with the protection of 

investors and the public interest, two 

principles set forth in Section 6(b)(5) of 

the Act.10 The Commission notes that it 

has previously approved a proposed 

rule change that would permit the 

Exchange to list and trade, pursuant to 

Rule 19b–4(e) under the Act, exchangetraded funds that seek daily investment 

results, before fees and expenses, that 

correspond to three times the inverse or 

opposite of the daily performance 

(¥300%) of the underlying indexes.11

With respect to the listing and trading 

of Index-Linked Securities that would 

allow a loss or negative payment at 

maturity that is accelerated by a 

multiple that exceeds three times the 

performance of an underlying Reference 

Asset, the Commission further notes 

that the Exchange would be required to 

obtain prior Commission approval 

pursuant to Section 19(b)(2) of the 

Act.12

The Commission also notes that 

Index-Linked Securities must comply 

with all of the applicable provisions 

under NYSE Arca Equities Rule 5.2(j)(6), 

as proposed to be amended, and all 

other requirements applicable to IndexLinked Securities including, without 

limitation, requirements relating to 

initial and continued listing standards, 

the dissemination of index value and 

related information, rules and policies 

governing the trading of equity 

securities, trading hours, trading halts, 

surveillance, firewalls, and Information 

Bulletins to ETP Holders, as set forth in 

prior Commission orders approving the 

generic listing rules applicable to the 

listing and trading of Index-Linked 

Securities. 

The Commission also notes that NYSE 

Arca Equities Rule 9.2(a), which sets 

forth the Exchange’s suitability 

requirements, would apply to the 

trading of Index-Linked Securities. 

Specifically, before recommending a 

transaction to a non-institutional 

customer in such securities, ETP 

Holders must have reasonable grounds 

to believe that the recommendation is 

suitable for the customer, based on facts 

disclosed by the customer after 

reasonable inquiry concerning the 

customer’s investment objectives, 

financial situation, needs, and any other 

information that such ETP Holder 

believes would be useful to make a 

recommendation. ETP Holders must 

also have a reasonable basis to believe 

that the customer can evaluate the 

special characteristics, and is able to 

bear the financial risks, of investments 

in Index-Linked Securities. An 

Information Bulletin would inform ETP 

Holders of the suitability requirements 

of NYSE Arca Equities Rule 9.2(a) prior 

to the commencement of trading in such 

securities. 

In sum, the Commission believes that 

the Exchange’s amendment to NYSE 

Arca Equities Rule 5.2(j)(6) relating to 

the listing and trading of Index-Linked 

Securities should fulfill the intended 

objective of Rule 19b–4(e) under the Act 

by allowing such derivative securities 

products to be listed and traded without 

separate Commission approval. The 

Commission believes that the proposed 

rule change should facilitate the listing 

and trading of additional types of IndexLinked Securities and reduce the time 

frame for bringing these securities to 

market. 

For the foregoing reasons, the 

Commission finds that the proposed 

rule change is consistent with the Act.13

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,14 that the 

proposed rule change (SR–NYSEArca– 

2008–136) be, and it hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–2529 Filed 2–5–09; 8:45 am] 

BILLING CODE 8011–01–P 

DEPARTMENT OF STATE 

[Public Notice 6489] 

Overseas Security Advisory Council 

(OSAC) Meeting Notice; Closed 

Meeting 

The Department of State announces a 

meeting of the U.S. State Department— 

Overseas Security Advisory Council on 

February 26, 2009 at the Boeing 

Company, Arlington, Virginia. Pursuant 

to Section 10(d) of the Federal Advisory 

Committee Act (5 U.S.C. Appendix), 5 

U.S.C. 552b(c)(4), and 5 U.S.C. 

552b(c)(7)(E), it has been determined 

that the meeting will be closed to the 

public. The meeting will focus on an 

examination of corporate security 

policies and procedures and will 

involve extensive discussion of 

proprietary commercial information that 

is considered privileged and 

confidential, and will discuss law 

enforcement investigative techniques 

and procedures. The agenda will 

include updated committee reports, a 


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