Document ID: SEC-2007-0034-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NYSE Arca, Inc.
Posted Date: 2007-01-09T05:00Z

[Federal Register: January 9, 2007 (Volume 72, Number 5)]
[Notices]               
[Page 1042-1044]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09ja07-74]                         

[[Page 1042]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55032; File No. SR-NYSEArca-2006-36]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change To 
Trade the streetTRACKS[supreg] Dow Jones STOXX 50 Fund and the 
streetTRACKS[supreg] Dow Jones EURO STOXX 50 Fund Pursuant to Unlisted 
Trading Privileges

December 29, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 18, 2006, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been substantially prepared by the Exchange. The Commission is 
publishing this notice and order to solicit comments on the proposal 
from interested persons and to approve the proposal on an accelerated 
basis.
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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, through its wholly owned subsidiary NYSE Arca 
Equities, Inc. (``NYSE Arca Equities'') proposes to trade shares 
(``Shares'') of the following index funds (``Funds'') pursuant to 
unlisted trading privileges (``UTP'') based on NYSE Arca Equities Rule 
5.2(j)(3):
     streetTRACKS Dow Jones STOXX 50 Fund (Symbol: FEU); and
     streetTRACKS Dow Jones EURO STOXX 50 Fund (FEZ)
    The text of the proposed rule change is available on the Exchange's 
Web site (http://www.nysearca.com), at the principal office of the 

Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to trade the Shares pursuant to UTP. Each 
Fund represents the performance of the 50 largest companies, across all 
components of the 18 Dow Jones STOXX 600 and Dow Jones EURO STOXX 600 
market sector indexes (each, an ``Index''). Each Index is a subset of 
the pan-European Dow Jones STOXX Total Market Index and contains the 
600 largest stocks traded on the major exchanges in Europe or the 
Eurozone (i.e., the countries of the European Monetary Union). Each 
Fund's components have a high degree of liquidity and represent the 
largest companies across all 18 market sectors defined by the Dow Jones 
Global Classification Standard. Each Fund seeks to replicate as closely 
as possible, before expenses, the price and yield of the underlying 
Index and uses a passive or indexing approach in seeking to achieve its 
investment objectives.
    The Commission previously approved the original listing and trading 
of the Shares of the Funds on the New York Stock Exchange 
(``NYSE'').\3\ The Exchange deems the Shares to be equity securities, 
thus rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. The trading hours for 
the Shares on the Exchange are the same as those set forth in NYSE Arca 
Equities Rule 7.34, except that the Shares will not trade during the 
Opening Session (4 a.m. to 9:30 a.m. Eastern Time) unless the 
Indicative Optimized Portfolio Value (``IOPV'') is calculated and 
disseminated during that time.
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    \3\ See Securities Exchange Act Release No. 46686 (October 18, 
2002), 67 FR 65388 (October 24, 2002) (SR-NYSE-2002-51). The Funds 
were originally listed on NYSE as the Fresco Dow Jones STOXX 50 Fund 
and the Fresco Dow Jones Euro STOXX 50 Fund, respectively. As of 
July 1, 2004, SsgA Management, Inc. replaced UBS Global Asset 
Management (U.S.) Inc. as investment advisor for the Funds. At that 
time, the name of the Funds was changed from Fresco to 
streetTRACKS[supreg].
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    Quotations for and last sale information regarding the Shares for 
each Fund are disseminated through the Consolidated Quotation System. 
The value of each underlying Index is updated intra-day on a real-time 
basis as individual component securities of the underlying Index change 
in price. The intra-day values of the underlying Indexes are 
disseminated every 15 seconds throughout the NYSE trading day. In 
addition, a value for each underlying Index is disseminated once each 
trading day, based on closing prices of the Index components in the 
relevant foreign market. The net asset value (``NAV'') of each Fund is 
calculated by the Fund's custodian and disseminated each business day, 
normally at the close of regular trading on NYSE.
    To provide updated information relating to the Shares for use by 
investors, professionals, and persons wishing to create or redeem them, 
NYSE disseminates the IOPV for each Fund as calculated by a securities 
information provider. The IOPV is disseminated on a per-share basis 
every 15 seconds during regular NYSE trading hours of 9:30 a.m. to 4:15 
p.m. Eastern Time.
    Each Fund includes companies trading in markets with trading hours 
overlapping regular NYSE trading hours. During the overlap period, an 
IOPV calculator updates an IOPV every 15 seconds to reflect price 
changes in the principal foreign markets, and converts such prices into 
U.S. dollars based on the currency exchange rates. When the foreign 
market or markets are closed but the NYSE is open for trading, the IOPV 
is updated every 15 seconds to reflect changes in currency exchange 
rates.
    The IOPV may not reflect the value of all securities included in 
the applicable underlying Index. In addition, the IOPV does not 
necessarily reflect the precise composition of the current portfolio of 
securities held by each Fund at a particular point in time. Therefore, 
the IOPV on a per-share basis disseminated during NYSE's regular 
trading hours should not be viewed as a real-time update of the NAV of 
a particular Fund, which is calculated only once a day. The IOPV is 
intended to closely approximate the value per-share of the portfolio of 
securities for a Fund and provide for a close proxy of the NAV at a 
greater frequency for investors.
    The Commission has granted each Fund an exemption from certain 
prospectus delivery requirements under Section 24(d) of the Investment 
Company Act of 1940 (``1940 Act'').\4\ Any product description used in 
reliance on the Section 24(d) exemptive order will comply with all 
representations made and all conditions contained in the application 
for orders under the 1940 Act.\5\
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    \4\ 15 U.S.C. 87a-24(d).
    \5\ See Investment Company Act Release No. 25738 (October 11, 
2002).

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[[Page 1043]]

    In connection with the trading of the Shares, the Exchange would 
inform ETP Holders in an Information Circular of the special 
characteristics and risks associated with trading the Shares, including 
how they are created and redeemed, the prospectus or product 
description delivery requirements applicable to the Shares, applicable 
Exchange rules, how information about the value of each underlying 
Index is disseminated, and trading information. In addition, before an 
ETP Holder recommends a transaction in the Shares, the ETP Holder must 
determine that the Shares are suitable for the customer, as required by 
NYSE Arca Equities Rule 9.2(a)-(b).
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products to monitor trading in the 
Shares. The Exchange represents that these procedures are adequate to 
monitor Exchange trading of the Shares.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \6\ in general and Section 6(b)(5) of the Act \7\ in 
particular in that it is designed to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, to remove 
impediments and perfect the mechanisms of a free and open market, and 
to protect investors and the public interest. In addition, the Exchange 
believes that the proposal is consistent with Rule 12f-5 under the Act 
\8\ because it deems the Shares to be equity securities, thus rendering 
trading in the Shares subject to the Exchange's existing rules 
governing the trading of equity securities.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 17 CFR 240.12f-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 that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments on the proposed rule change were neither solicited 
nor received.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File Number SR-NYSEArca-2006-36 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2006-36. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments, 

all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NYSEArca-2006-36 and should be submitted on or before 
January 30, 2007.

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

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\9\ 
In particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\10\ which requires that an 
exchange have rules designed, among other things, to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and 
in general to protect investors and the public interest. The Commission 
believes that this proposal should benefit investors by increasing 
competition among markets that trade the Shares.
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    \9\ In approving this rule change, the Commission notes that it 
has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(5).
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    In addition, the Commission finds that the proposal is consistent 
with Section 12(f) of the Act,\11\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\12\ The Commission notes that it previously approved the 
listing and trading of the Shares on NYSE.\13\ The Commission also 
finds that the proposal is consistent with Rule 12f-5 under the 
Act,\14\ which provides that an exchange shall not extend UTP to a 
security unless the exchange has in effect a rule or rules providing 
for transactions in the class or type of security to which the exchange 
extends UTP. The Exchange has represented that it meets this 
requirement because it deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities.
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    \11\ 15 U.S.C. 78l(f).
    \12\ Section 12(a) of the Act, 15 U.S.C. 78l(a), generally 
prohibits a broker-dealer from trading a security on a national 
securities exchange unless the security is registered on that 
exchange pursuant to Section 12 of the Act. Section 12(f) of the Act 
excludes from this restriction trading in any security to which an 
exchange ``extends UTP.'' When an exchange extends UTP to a 
security, it allows its members to trade the security as if it were 
listed and registered on the exchange even though it is not so 
listed and registered.
    \13\ See supra note 3.
    \14\ 17 CFR 240.12f-5.
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    The Commission further believes that the proposal is consistent 
with Section 11A(a)(1)(C)(iii) of the Act,\15\ which sets forth 
Congress' finding that it is in the public interest and appropriate for 
the protection of investors and the maintenance of fair and orderly 
markets to assure the availability to brokers, dealers, and investors 
of information with respect to quotations for and transactions in 
securities. Quotations for

[[Page 1044]]

and last sale information regarding the Shares are disseminated through 
the Consolidated Quotation System. Furthermore, an IOPV calculator 
updates the applicable IOPV every 15 seconds to reflect price changes 
in the principal foreign markets, and converts such prices into U.S. 
dollars based on the current currency exchange rate. When the foreign 
market or markets are closed but NYSE is open for trading, the IOPV is 
updated every 15 seconds to reflect changes in currency exchange rates. 
Furthermore, NYSE Arca Equities Rule 7.34 describes the situations when 
the Exchange would halt trading when the IOPV or the value of the Index 
underlying one of the Funds is not calculated or widely available.
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    \15\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    The Commission notes that, if the Shares should be delisted by 
NYSE, the original listing exchange, the Exchange would no longer have 
authority to trade the Shares pursuant to this order.
    In support of this proposal, the Exchange has made the following 
representations:
    1. The Exchange's surveillance procedures are adequate to monitor 
the trading of the Shares.
    2. In connection with the trading of the Shares, the Exchange would 
inform ETP Holders in an Information Circular of the special 
characteristics and risks associated with trading the Shares.
    3. The Information Circular would inform participants of the 
prospectus or product delivery requirements applicable to the Shares.

This approval order is conditioned on the Exchange's adherence to these 
representations.
    The Commission finds good cause for approving this proposal before 
the thirtieth day after the publication of notice thereof in the 
Federal Register. As noted previously, the Commission previously found 
that the listing and trading of the Shares on NYSE is consistent with 
the Act. The Commission presently is not aware of any regulatory issue 
that should cause it to revisit that earlier finding or preclude the 
trading of Shares on the Exchange pursuant to UTP. Therefore, 
accelerating approval of this proposal should benefit investors by 
creating, without undue delay, additional competition in the market for 
the Shares.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the proposed rule change (SR-NYSEArca-2006-36) is 
approved on an accelerated basis.
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    \16\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E7-59 Filed 1-8-07; 8:45 am]

BILLING CODE 8011-01-P