Document ID: SEC-2008-1211-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2008-09-04T04:00Z

[Federal Register: September 4, 2008 (Volume 73, Number 172)]
[Notices]               
[Page 51684-51686]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04se08-75]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58437; File No. SR-NYSEArca-2008-77]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving 
Proposed Rule Change To List and Trade the Barclays Middle East 
Equities (MSCI GCC) Non Exchange Traded Notes Due 2038

August 28, 2008.

I. Introduction

    On July 17, 2008, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca''), 
through its wholly owned subsidiary, NYSE Arca Equities, Inc. (``NYSE 
Arca Equities''), 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 list and trade the Barclays Middle East 
Equities (MSCI GCC) Non Exchange Traded Notes Due 2038. The proposed 
rule change was published for comment in the Federal Register on July 
29, 2008.\3\ The Commission received no comment letters on the proposed 
rule change. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 58208 (July 22, 
2008), 73 FR 43968.
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II. Description of the Proposed Rule Change

    The Exchange proposed to list and trade shares of the Barclays 
Middle East Equities (MSCI GCC) Non Exchange Traded Notes Due 2038 
(``Notes''), which are linked to the MSCI Gulf Cooperation Council 
(GCC) Countries ex-Saudi Arabia Net Total Return Index\SM\ (U.S. 
dollar) (``Index''), under NYSE Arca Equities Rule 5.2(j)(6), which 
includes the Exchange's listing standards for Equity Index-Linked 
Securities.\4\ The Notes are senior unsecured debt obligations of 
Barclays Bank PLC (``Barclays''). The Index is comprised of all of the 
equity securities (each an ``Index Component'' and, collectively, the 
``Index Components'') that are included in the following five 
individual country indices (each a ``Country Index'' and, collectively, 
the ``Country Indices''): (1) MSCI Bahrain Index\SM\; (2) MSCI Kuwait 
Index\SM\; (3) MSCI Oman Index\SM\; (4) MSCI Qatar Index\SM\; and (5) 
MSCI United Arab Emirates Index\SM\. Each Country Index is a free 
float-adjusted market capitalization index that is designed to measure 
the market performance, including price performance and income from 
dividend payments, of equity securities in the country it represents. 
The Index and the Country Indices are calculated and maintained by 
MSCI, Inc.
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    \4\ Equity Index-Linked Securities are securities that provide 
for the payment at maturity of a cash amount based on the 
performance of an underlying index or indexes of equity securities 
(``Equity Reference Asset'').
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    The Exchange submitted the proposed rule change because the Index 
does not meet all of the ``generic'' listing requirements of NYSE Arca 
Equities Rule 5.2(j)(6) applicable to the listing of Equity Index-
Linked Securities. Specifically, the Index meets all such requirements 
except for those set forth in NYSE Arca Equities Rules 
5.2(j)(6)(B)(I)(1)(b)(ii) \5\ and (v).\6\ The Exchange represented 
that: (1) Except for NYSE Arca Equities Rules 5.2(j)(6)(B)(I)(1)(b)(ii) 
and (v), the Notes currently satisfy all of the generic listing 
standards under NYSE Arca Equities Rule 5.2(j)(6) applicable to Equity 
Index-Linked Securities; (2) the continued listing standards under NYSE 
Arca Equities Rule 5.2(j)(6) applicable to Equity Index-Linked 
Securities shall apply to the Notes; and (3) Barclays is required to 
comply with Rule 10A-3 under the Act \7\ for the initial and continued 
listing of the Notes. In addition, the Exchange represented that the 
Notes will comply with all other requirements applicable to Equity 
Index-Linked Securities including, but not limited to, requirements 
relating to the dissemination of key information such as the Equity 
Reference Asset value and Intraday Indicative Value, rules and policies 
governing the trading of equity securities, trading hours, trading 
halts, surveillance, firewalls, and Information Bulletin to ETP 
Holders, as set forth in prior Commission orders approving the generic 
listing rules applicable to the listing and trading of Index-Linked

[[Page 51685]]

Securities, generally, and Equity Index-Linked Securities, in 
particular.\8\
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    \5\ NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(ii) provides 
that each component security of the underlying index shall have 
trading volume in each of the last six months of not less than 
1,000,000 shares per month, except that for each of the lowest 
dollar weighted component securities in the index that, in the 
aggregate, account for no more than 10% of the dollar weight of the 
index, the trading volume shall be at least 500,000 shares per month 
in each of the last six months. The Exchange represented that as of 
July 17, 2008, in each of the prior six months, 87.995% of the Index 
had a trading volume of 1,000,000 shares, and 8.79% of the bottom 
10% of the Index had a trading volume of 500,000 shares.
    \6\ NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(v) provides 
that all component securities of the underlying index shall be 
either (A) securities (other than foreign country securities and 
American Depositary Receipts (``ADRs'')) that are (x) issued by an 
Act reporting company or by an investment company registered under 
the Investment Company Act of 1940, which in each case is listed on 
a national securities exchange, and (y) an ``NMS stock'' (as defined 
in Rule 600 of Regulation NMS) or (B) foreign country securities or 
ADRs, provided that foreign country securities or foreign country 
securities underlying ADRs having their primary trading market 
outside the United States on foreign trading markets that are not 
members of the Intermarket Surveillance Group (``ISG'') or parties 
to comprehensive surveillance sharing agreements with the Exchange 
will not, in the aggregate, represent more than 20% of the dollar 
weight of the index. See Securities Exchange Act Release No. 58376 
(August 18, 2008), 73 FR 49726 (August 22, 2008) (SR-NYSEArca-2008-
70) (approving certain amendments to NYSE Arca Equities Rule 
5.2(j)(6)(B)(I) and, as a result, the renumbering of NYSE Arca 
Equities Rule 5.2(j)(6)(B)(I)(1)(b)(vi) to NYSE Arca Equities Rule 
5.2(j)(6)(B)(I)(1)(b)(v), among other subsections).
    \7\ 17 CFR 240.10A-3.
    \8\ See, e.g., Securities Exchange Act Release Nos. 56637 
(October 10, 2007), 72 FR 58704 (October 16, 2007) (SR-NYSEArca-
2007-92); 57132 (January 11, 2008), 73 FR 3300 (January 17, 2008) 
(SR-NYSEArca-2007-125); 56838 (November 26, 2007), 72 FR 67774 
(November 30, 2007) (SR-NYSEArca-2007-118); 56879 (December 3, 2007) 
72 FR 69271 (December 7, 2007) (SR-NYSEArca-2007-110); and 52204 
(August 3, 2005), 70 FR 46559 (August 10, 2005) (SR-PCX-2005-63).
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    The Exchange stated that it might be unable to obtain surveillance 
information from the Middle East Exchanges regarding the component 
stocks, but that it intended to use its existing surveillance 
procedures applicable to derivative products to monitor trading in the 
Notes. The Exchange represented that such procedures are adequate to 
properly monitor Exchange trading of the Notes in all trading sessions 
and to deter and detect violations of Exchange rules. The Exchange also 
noted that its current trading surveillance focuses on detecting 
securities trading outside their normal patterns. When such situations 
are detected, surveillance analysis follows and investigations are 
opened, where appropriate, to review the behavior of all relevant 
parties for all relevant trading violations. The Exchange added that it 
may obtain information via ISG from other exchanges that are members of 
ISG.\9\
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    \9\ For a list of the current members and affiliate members of 
ISG, see http://www.isgportal.com.
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    Notwithstanding the Notes' inability to meet the requirements of 
NYSE Arca Equities Rules 5.2(j)(6)(B)(I)(1)(b)(ii) and (v), the 
Exchange stated that the Index is sufficiently broad-based in scope 
and, as such, less susceptible to potential manipulation, insofar as 
the Index contains 105 companies, listed in five countries, with no one 
Middle East Exchange listing greater than 50% of the Index Components. 
The Exchange further stated that no one Index Component dominates the 
underlying Index.
    Detailed descriptions of the Notes, the Index (including the 
methodology used to determine the composition of the Index), fees, 
redemption procedures and payment at redemption, payment at maturity, 
taxes, and risk factors relating to the Notes are available in the 
Prospectus \10\ or on the Web site for the Notes (http://
www.barclays.com), as applicable.
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    \10\ See Barclay's Prospectus, as amended, filed pursuant to 
Rule 424(b)(2) under the Act (File No. 333-145845).
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III. Discussion and Commission's Findings

    After careful review, the Commission finds that NYSE Arca's 
proposal to list and trade the Notes is consistent with the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange.\11\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\12\ 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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    \11\ In approving this 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).
    \12\ 15 U.S.C. 78f(b)(5).
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    Although NYSE Arca Equities Rule 5.2(j)(6)(B)(I) permits the 
Exchange to approve the listing and trading of Equity Index-Linked 
Securities, the Notes do not meet all of the generic listing 
requirements thereunder because the components of the Index do not meet 
the requirements in NYSE Arca Equities Rules 5.2(j)(6)(B)(I)(1)(b)(ii) 
and (v).\13\ NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(ii) provides 
that each component security of the underlying index shall have trading 
volume in each of the last six months of not less than 1,000,000 shares 
per month, except that for each of the lowest dollar weighted component 
securities in the index that, in the aggregate, account for no more 
than 10% of the dollar weight of the index, the trading volume shall be 
at least 500,000 shares per month in each of the last six months. 
According to the Exchange, as of July 17, 2008, in each of the prior 
six months, 87.995% of the Index had a trading volume of 1,000,000 
shares, and 8.79% of the bottom 10% of the Index had a trading volume 
of 500,000 shares. Such percentages do not meet the minimum required 
thresholds and, therefore, the Notes cannot be listed and traded 
pursuant to the generic listing standards of NYSE Arca Equities Rule 
5.2(j)(6)(B)(I) applicable to Equity Index-Linked Securities.
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    \13\ See supra notes 5 and 6, respectively, and accompanying 
text.
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    In addition, NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(v) 
provides that all component securities of the underlying index shall be 
either (A) securities (other than foreign country securities and ADRs) 
that are (x) issued by an Act reporting company or by an investment 
company registered under the Investment Company Act of 1940, which, in 
each case, is listed on a national securities exchange, and (y) an 
``NMS stock'' (as defined in Rule 600 of Regulation NMS) or (B) foreign 
country securities or ADRs, provided that foreign country securities or 
foreign country securities underlying ADRs having their primary trading 
market outside the United States on foreign trading markets that are 
not members of ISG or parties to comprehensive surveillance sharing 
agreements with the Exchange will not, in the aggregate, represent more 
than 20% of the dollar weight of the index. According to the Exchange, 
in the case of the Notes, the components underlying the Index are 
foreign country securities that trade on foreign trading markets with 
which the Exchange has not entered into any comprehensive surveillance 
sharing agreements. In addition, the Exchange stated that none of the 
Middle East Exchanges are members of ISG.
    The Commission notes that the Exchange represents that it has 
attempted, but to date has not been able, to enter into comprehensive 
surveillance sharing agreements with the Middle East Exchanges. The 
Commission further notes that, in certain limited circumstances, it has 
previously approved the listing and trading of derivative securities 
products based on indices that were composed of stocks for which a 
national securities exchange has not entered into a comprehensive 
surveillance sharing agreement with the relevant foreign exchange.\14\ 
The Exchange has represented that it intends to utilize its existing 
surveillance procedures applicable to derivative products to monitor 
trading in the Notes and that such procedures are adequate to properly 
monitor Exchange trading of the Notes in all trading sessions and to 
deter and detect violations of Exchange rules.
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    \14\ See, e.g., Securities Exchange Act Release No. 54944 
(December 15, 2006), 71 FR 77432 (December 26, 2006) (SR-NYSE-2006-
69) (approving the listing and trading of exchange-traded notes 
linked to the MSCI India Equities Index).
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    In addition, the Exchange has represented that the Notes will 
comply with all other requirements applicable to Equity Index-Linked 
Securities including, but not limited to, requirements relating to the 
dissemination of key information such as the Equity Reference Asset 
value and Intraday Indicative Value, rules and policies governing the 
trading of equity securities, trading hours, trading halts, 
surveillance, firewalls, and Information Bulletin to ETP Holders, as 
set forth in prior Commission orders approving the generic listing 
rules applicable to the listing and trading of Index-Linked

[[Page 51686]]

Securities, generally, and Equity Index-Linked Securities, in 
particular.\15\
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    \15\ See supra note 8.
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    The Commission believes that the listing and trading of the Notes 
is consistent with the Act. The Commission notes that, based on the 
Exchange's representations, the Notes otherwise meet all of the other 
applicable generic listing standards under NYSE Arca Equities Rule 
5.2(j)(6). The Commission notes that the Index is composed of all of 
the equity securities (103 stocks) that are included in five separate 
Country Indices and has a total market capitalization of over $100 
billion. The Commission further notes that it has previously approved 
the listing and trading of derivative securities products based on 
indices that were composed of stocks that did not meet certain 
quantitative generic listing criteria.\16\
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    \16\ See Securities Exchange Act Release No. 57349 (February 19, 
2008), 73 FR 10084 (February 25, 2008) (SR-NYSEArca-2008-22). See 
also Securities Exchange Act Release Nos. 55953 (June 25, 2007), 72 
FR 36084 (July 2, 2007) (SR-NYSE-2007-46); and 56695 (October 24, 
2007), 72 FR 61413 (October 30, 2007) (SR-NYSEArca-2007-111).
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    For the foregoing reasons, the Commission believes that the 
proposal to list and trade the Notes is consistent with the Act and 
finds good cause for approving the proposed rule change. This order is 
based on the Exchange's representations.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (SR-NYSEArca-2008-77) be, and it hereby 
is, approved.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-20470 Filed 9-3-08; 8:45 am]

BILLING CODE 8010-01-P