Document ID: SEC-2008-1609-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2008-11-28T05:00Z

[Federal Register: November 28, 2008 (Volume 73, Number 230)]
[Notices]               
[Page 72546-72547]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28no08-130]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58984; File No. SR-NYSEArca-2008-121]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Amending Rule 5.2(j)(6) To Increase the 
Permissible Aggregate Weight of Underlying Foreign Country Securities

November 20, 2008.
    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 29, 2008, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange''), 
through its wholly owned subsidiary, NYSE Arca Equities, Inc. (``NYSE 
Arca Equities''), filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by NYSE Arca. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 5.2(j)(6) in order to permit 
foreign country securities whose primary foreign markets are not 
subject to a comprehensive surveillance sharing agreement to account 
for up to 50% of the aggregate weight of the index. The text of the 
proposed rule change is available on the Exchange's Web site at http://
www.nyse.com, at the Exchange's principal office, 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 self-regulatory organization 
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 those 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 parts of such statements.

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

1. Purpose
    Currently, the Exchange's listing standards for equity index linked 
securities (``Equity Index-Linked Securities'') limit the permissible 
aggregate weight of underlying foreign country securities to 20% of the 
overall index where the primary trading markets of the foreign country 
securities or American Depository Receipts (``ADRs'') are not members 
of the Intermarket Surveillance Group (``ISG'') or are not otherwise 
parties to comprehensive surveillance sharing agreements (``CSSA'') 
with the Exchange. The Exchange proposes to amend NYSE Arca Equities 
Rule 5.2(j)(6)(B)(I)(1)(b)(v) to increase the permissible aggregate 
weight of such underlying foreign country securities up to 50% of the 
overall index.\3\ According to the proposal, the Exchange will permit 
the listing and trading of Equity Index-Linked Securities where the 
underlying foreign country securities or ADRs, which trade on foreign 
markets that are not ISG members or are not otherwise subject to a CSSA 
agreement with the Exchange, account for up to 50% of the aggregate 
dollar weight of the index, so long as: (i) The securities of any one 
primary foreign market which is not an ISG member or does not have a 
CSSA with the Exchange do not represent more than 20% of the dollar 
weight of the index, and (ii) the securities of any two primary foreign 
markets which are not ISG members or do not have a CSSA with the 
Exchange do not represent more than 33% of the dollar weight of the 
index. As a result

[[Page 72547]]

of the proposed amendment, the Exchange also seeks to make additional 
minor modifications to Rule 5.2(j)(6)(B)(I)(1)(b)(v) relating to 
punctuation and format and other non-substantive changes.\4\
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    \3\ E-mail from Andrew Stevens, Chief Counsel, NYSE Euronext, to 
Christopher W. Chow, Special Counsel, Commission, dated November 20, 
2008.
    \4\ E-mail from Tim Malinowski, Director, NYSE Euronext, to 
Edward Cho, Special Counsel, Division of Trading and Markets, 
Commission, dated November 5, 2008.
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    This amendment is consistent with NYSE Arca Options Rule 
5.3(g)(2)(A), which establishes the standards for the listing and 
trading of options on Exchange-Traded Funds. Approved in 2001, the 
Commission specifically noted in its order that requiring comprehensive 
surveillance agreement to be in place between the Exchange and the 
primary markets for foreign securities that comprise 50% or more of the 
weight of the underlying index ``provides an adequate mechanism for the 
exchange of surveillance sharing information necessary to detect and 
deter possible market manipulation.'' \5\ The Commission also 
recognized that the additional conditions regarding the concentration 
of foreign securities in any one or more uncovered countries, ensure 
that a ``significant percentage of the portfolio is not made up of 
securities from uncovered countries.'' \6\
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    \5\ See Securities Exchange Act Release No. 44025 (February 28, 
2001), 66 FR 13986 (March 8, 2001) (SR-PCX-01-12). This rule change 
is also consistent with Commentary .06 of Rule 915 of the American 
Stock Exchange, Inc. [sic] (``Amex''). See Securities Exchange Act 
Release No. 40157 (July 1, 1998), 63 FR 37426 (July 10, 1998) (SR-
Amex-96-44) (order approving Commentary .06 to Amex Rule 915, 
establishing the 50% / 20% / 33% standards for purposes of listing 
and trading options on Exchange Traded Funds).
    \6\ Id. See also Securities Exchange Act Release No. 40761 
(December 8 1998), 63 FR 70952 (December 22, 1998) (S7-13-98) (in 
its guidance to self-regulatory organizations on new derivative 
securities products, the Commission noted the then recent approval 
of Commentary .06 to Amex Rule 915 for its discussion of an 
appropriate percentage of CSSA coverage (as it pertained to the 
specific product class of options)).
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    The Exchange believes that the proposed amendment does not impose 
any burden on competition or significantly affect the protection of 
investors. The revised standard allows for increased flexibility with 
respect to listing and trading Equity Index-Linked Securities, while 
also providing an adequate mechanism for the exchange of surveillance 
sharing information necessary to detect and deter possible market 
manipulation.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \7\ of the 
Act, in general, and furthers the objectives of Section 6(b)(5) \8\ 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, and to 
remove impediments to and perfect the mechanisms of a free and open 
market and a national market system. The proposed standard, which is 
consistent with NYSE Arca Options Rule 5.3(g)(2)(A), provides an 
appropriate mechanism for the exchange of surveillance sharing 
information necessary to detect and deter possible market manipulation.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition 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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve the proposed rule change; or
    B. institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. 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-2008-121 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2008-121. 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, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of the 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-2008-121 and should 
be submitted on or before December 19, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-28220 Filed 11-26-08; 8:45 am]

BILLING CODE 8011-01-P