Document ID: SEC-2006-1000-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NYSE Arca, Inc.
Posted Date: 2006-08-04T04:00Z

[Federal Register: August 4, 2006 (Volume 71, Number 150)]
[Notices]               
[Page 44339-44344]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04au06-117]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54231; File No. SR-NYSEArca-2006-19]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change and 
Amendment No. 1 Thereto Relating to the Trading of the Index-Linked 
Securities of Barclays Bank PLC Linked to the Performance of the 
GSCI[supreg] Total Return Index Pursuant to Unlisted Trading Privileges

July 27, 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 May 16, 2006, NYSE Arca, Inc. (``Exchange''),

[[Page 44340]]

through its wholly owned subsidiary NYSE Arca Equities, Inc. (``NYSE 
Arca Equities'' or ``Corporation''), filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change as 
described in Items I and II below, which Items have been prepared by 
the Exchange. On July 20, 2006, the Exchange filed Amendment No. 1 to 
the proposed rule change.\3\ The Commission is publishing this notice 
and order to solicit comments on the proposed rule change from 
interested persons and is approving the proposal, as amended, on an 
accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange clarified certain aspects 
of its proposal regarding trading rules and surveillance.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Through NYSE Arca Equities, the Exchange proposes to amend its 
rules governing NYSE Arca, L.L.C. (also referred to as the ``NYSE Arca 
Marketplace''), the equities trading facility of NYSE Arca Equities. 
Pursuant to NYSE Arca Equities Rule 5.2(j)(6), the Exchange proposes to 
trade pursuant to unlisted trading privileges (``UTP'') the Index-
Linked Securities (``Securities'') of Barclays Bank PLC (``Barclays''), 
which are linked to the performance of the GSCI[supreg] Total Return 
Index (``Index'').

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
    Pursuant to NYSE Arca Equities Rule 5.2(j)(6), the Exchange 
proposes to trade pursuant to UTP the Securities of Barclays, which are 
linked to the performance of the Index. Barclays intends to issue the 
Securities under the name ``iPathSM Exchange-Traded Notes.'' 
A rule proposal for the original listing and trading of the Securities 
was filed with the Commission by the New York Stock Exchange LLC 
(``NYSE'') \4\ and approved by the Commission.\5\ In SR-NYSEArca-2006-
17, the Exchange proposed new Commentary .01 to NYSE Arca Equities Rule 
5.2(j)(6) to accommodate trading in the Securities.\6\
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    \4\ See Securities Exchange Act Release No. 53658 (April 14, 
2006), 71 FR 21064 (April 24, 2006) (SR-NYSE-2006-20) (the ``NYSE 
Proposal'').
    \5\ See Securities Exchange Act Release No. 53849 (May 22, 
2006), 71 FR 30706 (May 30, 2006) (SR-NYSE-2006-20) (the ``NYSE 
Order'').
    \6\ See Securities Exchange Act Release No. 54189 (July 21, 
2006) (SR-NYSEArca-2006-17).
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(a) The Securities and the Index
(i) The Securities
    In August 2005, the Commission approved NYSE Arca Equities Rule 
5.2(j)(6), which provides general standards for the listing and trading 
of ``Index-Linked Securities.'' \7\ 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. Such 
securities may or may not provide for the repayment of the original 
principal investment amount. As permitted in NYSE Arca Equities Rule 
5.2(j)(6), the Exchange is submitting this rule proposal to the 
Commission pursuant to Section 19(b)(2) of the Act, to obtain 
Commission approval to trade the Securities pursuant to UTP.
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    \7\ See Securities Exchange Act Release No. 52204 (August 3, 
2005), 70 FR 46559 (August 10, 2005) (SR-PCX-2005-63).
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    A description of the Securities and the Index is set forth in the 
NYSE Proposal.\8\ The Securities are a series of medium-term debt 
securities of Barclays that provide for a cash payment at maturity or 
upon earlier exchange at the holder's option, based on the performance 
of the Index subject to the adjustments described below.
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    \8\ See supra note 4.
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    The Securities will not have a minimum principal amount that will 
be repaid and, accordingly, payment on the Securities prior to or at 
maturity may be less than the original issue price of the Securities. 
In fact, the value of the Index must increase for the investor to 
receive at least the $50 principal amount per Security at maturity or 
upon exchange or redemption. If the value of the Index decreases or 
does not increase sufficiently to offset the investor fee,\9\ the 
investor will receive less, and possibly significantly less, than the 
$50 principal amount per Security. In addition, holders of the 
Securities will not receive any interest payments from the Securities. 
The Securities will have a term of 30 years.
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    \9\ The investor fee is equal to 0.75% per year times the 
principal amount of a holder's Securities times the index factor, 
calculated on a daily basis in the following manner. The investor 
fee on the date of issuance of the Securities will equal zero. On 
each subsequent calendar day until maturity or early redemption, the 
investor fee will increase by an amount equal to 0.75% times the 
principal amount of a holder's Securities times the index factor on 
that day (or, if such day is not a trading day, the index factor on 
the immediately preceding trading day) divided by 365. The investor 
fee is the only fee holders will be charged in connection with their 
ownership of the Securities.
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    Holders who have not previously redeemed their Securities will 
receive a cash payment at maturity equal to the principal amount of 
their Securities times the index factor \10\ on the Final Valuation 
Date \11\ minus the investor fee on the Final Valuation Date.
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    \10\ The ``index factor'' on any given day will be equal to the 
closing value of the Index on that day divided by the initial index 
level. The index factor on the Final Valuation Date will be equal to 
the final index level divided by the initial index level. The 
``initial index level'' is the closing value of the Index on the 
date of issuance of the Securities (the ``Trade Date'') and the 
``final index level'' is the closing value of the Index on the Final 
Valuation Date. Telephone conference between John Carey, Assistant 
General Counsel, NYSE Group, Inc., and Florence Harmon, Senior 
Special Counsel, Division, Commission, on July 14, 2006.
    \11\ The ``Final Valuation Date'' is the last Thursday before 
maturity of the Securities.
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    Prior to maturity, holders may, subject to certain 
restrictions,\12\ redeem their Securities on any Redemption Date \13\ 
during the term of the Securities provided that they present at least 
50,000 Securities for redemption, or they act through a broker or other 
financial intermediaries (such as a bank or other financial institution 
not required to register as a broker-dealer to engage in securities 
transactions) that are willing to bundle their Securities for 
redemption with other investors' Securities. If a holder chooses to 
redeem such holder's Securities, the holder will receive a cash payment 
on the applicable Redemption Date equal to the principal amount of such 
holder's Securities times the index factor on the applicable Valuation 
Date minus the investor fee on the applicable Valuation Date. To redeem 
their Securities, holders must instruct their broker or other person 
through whom they hold their Securities to follow certain

[[Page 44341]]

procedures as described in the NYSE Proposal.\14\
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    \12\ Telephone conference between John Carey, Assistant General 
Counsel, NYSE Group, Inc., and Florence Harmon, Senior Special 
Counsel, Division of Market Regulation (``Division''), Commission, 
on July 13, 2006.
    \13\ A ``Redemption Date'' is the third business day following a 
Valuation Date (other than the Final Valuation Date). A ``Valuation 
Date'' is each Thursday from the first Thursday after issuance of 
the Securities until the last Thursday before the Final Valuation 
Date inclusive (or, if such date is not a trading day, the next 
succeeding trading day).
    \14\ If holders elect to redeem their Securities, Barclays may 
request that Barclays Capital Inc. (a broker-dealer) purchase the 
Securities for the cash amount that would otherwise have been 
payable by Barclays upon redemption. In this case, Barclays will 
remain obligated to redeem the Securities if Barclays Capital Inc. 
fails to purchase the Securities. Any Securities purchased by 
Barclays Capital Inc. may remain outstanding.
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    If an event of default occurs and the maturity of the Securities is 
accelerated, Barclays will pay the default amount in respect of the 
principal of the Securities at maturity. More information regarding 
default procedures, including a quotation period and an objection 
period, is set forth in the NYSE Proposal.
(ii) The Index
    The Index was established in May 1991 and is designed to be a 
diversified benchmark for physical commodities as an asset class. The 
Index reflects the excess returns that are potentially available 
through an unleveraged investment in the contracts comprising the 
GSCI[supreg] plus the Treasury Bill rate of interest that could be 
earned on funds committed to the trading of the underlying 
contracts.\15\ The value of the Index, on any given day, reflects: (i) 
The price levels of the contracts included in the GSCI[supreg] (which 
represents the value of the GSCI[supreg]; (ii) the ``contract daily 
return,'' which is the percentage change in the total dollar weight of 
the GSCI[supreg] from the previous day to the current day; and (iii) 
the Treasury Bill rate of interest that could be earned on funds 
committed to the trading of the underlying contracts.
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    \15\ The Treasury Bill rate of interest used for purposes of 
calculating the index on any day is the 91-day auction high rate for 
U.S. Treasury Bills, as reported on Telerate page 56, or any 
successor page, on the most recent of the weekly auction dates prior 
to such day.
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    The GSCI,[supreg] upon which the Index is based, is a proprietary 
index on a production-weighted basket of futures contracts on physical 
commodities traded on trading facilities in major industrialized 
countries. The value of the GSCI[supreg] has been normalized such that 
its hypothetical level on January 2, 1970 was 100. Futures contracts on 
the GSCI[supreg], and options on such futures contracts, are currently 
listed for trading on the Chicago Mercantile Exchange. More information 
regarding the operation, calculation methodology, weighting, and 
historical performance of the Index is set forth in the NYSE Proposal.
(b) Dissemination and Availability of Information
(i) The Intraday Indicative Value
    According to the NYSE Proposal, an ``Intraday Indicative Value'' 
(or ``IIV'') meant to approximate the intrinsic economic value of the 
Securities will be calculated and published via the facilities of the 
Consolidated Tape Association (``CTA'') at least every 15 seconds from 
9:30 a.m. to 4 p.m. Eastern Time (``ET'') on each day on which the 
Securities are traded on the NYSE.\16\ Additionally, Barclays or an 
affiliate will calculate and publish the closing IIV of the Securities 
on each trading day at http://www.ipathetn.com. In connection with the 

Securities, the term ``IIV'' refers to the value at a given time 
determined based on the following equation: IIV = Principal Amount per 
Unit ($50) multiplied by (Current Index Level divided by Initial Index 
Level) \17\ minus Current Investor Fee.\18\
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    \16\ The IIV calculation will be provided for reference purposes 
only.
    \17\ The Current Index Level is the most recent published level 
of the Index as reported by the Index Sponsor, whereas the Initial 
Index Level is the Index level on the initial trade date for the 
Securities.
    \18\ The Current Investor Fee is the most recent daily 
calculation of the investor fee with respect to the Securities, 
determined as described above (which, during any trading day, will 
be the investor fee determined on the preceding calendar day).
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    The IIV will not reflect price changes to the price of an 
underlying commodity between the close of trading of the futures 
contract at the relevant futures exchange and 4 p.m. ET. The value of 
the Securities may accordingly be influenced by non-concurrent trading 
hours between the Exchange and the various futures exchanges on which 
the futures contracts based on the Index commodities are traded.
    While the market for futures trading for each of the Index 
commodities is open, the IIV can be expected to closely approximate the 
redemption value of the Securities. However, during NYSE Arca 
Marketplace trading hours when the futures contracts have ceased 
trading, spreads and resulting premiums or discounts may widen, and 
therefore, increase the difference between the price of the Securities 
and their redemption value. The IIV should not be viewed as a real-time 
update of the redemption value.
(ii) The Index
    According to the NYSE Proposal, the Index Sponsor makes the 
official calculations of the GSCI[supreg]. At present, this calculation 
is performed continuously and is reported on Reuters page GSCI[supreg] 
(or any successor or replacement page) and is updated on Reuters \19\ 
at least every 15 seconds \20\ during business hours on each day on 
which the offices of the Index Sponsor in New York City are open for 
business (a ``GSCI Business Day'').\21\ The settlement price for the 
Index is also reported on Reuters page GSCI[supreg] (or any successor 
or replacement page) on each GSCI Business Day between 4 p.m. and 6 
p.m., New York time.
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    \19\ The intraday information with respect to the Index reported 
on Reuters is derived solely from trading prices on the principal 
trading markets for the various Index components. For example, the 
Index currently includes contracts traded on the Intercontinental 
Exchange (formerly known as the International Petroleum Exchange, 
which now operates its futures business through ICE Futures) and the 
London Metal Exchange (``LME''), both of which are located in London 
and consequently have trading days that end several hours before 
those of the U.S.-based markets on which the rest of the Index 
components are traded. During the portion of the New York trading 
day when ICE Futures and LME are closed, the last reported prices 
for Index Components traded on ICE Futures or LME are used to 
calculate the intraday Index information disseminated on Reuters.
    \20\ Telephone conference between John Carey, Assistant General 
Counsel, NYSE Group, Inc., and Florence Harmon, Senior Special 
Counsel, Division, Commission, on July 27, 2006 (clarifying that the 
Index value will be disseminated at least every 15 seconds, not 
every 3 minutes, during the time the Securities trade on the 
Exchange).
    \21\ NYSE, as the listing exchange, will not permit trading in 
the Securities if certain information about the Index value is not 
disseminated on, for example, a date that is not a GSCI Business 
Day. In such event, NYSE Arca would not permit trading in the 
Securities. See supra.
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(c) UTP Trading Criteria
    The Exchange will cease trading in the Securities if: (1) The 
listing market stops trading the Securities because of a regulatory 
halt similar to a halt based on NYSE Arca Equities Rule 7.12 or a halt 
because the IIV or the value of the underlying Index is no longer 
available on at least a 15-second delayed basis; or (2) the listing 
market delists the Securities.\22\ In the event that the Exchange is 
open for business on a day that is not a GSCI Business Day, the 
Exchange will not permit trading of the Securities on that day. 
Additionally, the Exchange may cease trading the Securities if such 
other event shall occur or condition exists which, in the opinion of 
the Exchange, makes further dealings on the Exchange inadvisable.
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    \22\ E-mail between Janet Kissane, Assistant General Counsel, 
NYSE Group, Inc., and Florence Harmon, Senior Special Counsel, 
Division, Commission, dated July 31, 2006 (clarifying that the 
Securities will cease trading during all trading hours).
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(d) Trading Rules
    The Exchange deems the Securities to be equity securities, thus 
rendering trading in the Securities subject to the Exchange's rules 
governing the trading

[[Page 44342]]

of equity securities. Trading in the Securities on the NYSE Arca 
Marketplace will occur from 4 a.m. to 8 p.m. ET in accordance with NYSE 
Arca Equities Rule 7.34(a).\23\ The Exchange has appropriate rules to 
facilitate transactions in the Securities during all trading sessions. 
The minimum trading increment for Securities on the Exchange will be 
$0.01.
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    \23\ During all NYSE Arca Equities trading sessions, the 
Exchange represents that if the official Index Sponsor calculates an 
updated Index value, then such value will be updated and 
disseminated at least every 15 seconds during such trading session, 
and always will be so during the Exchange's core trading session 
(although during this session, the Exchange may rely on the listing 
exchange to monitor such calculation and dissemination). The 
Exchange represents that the official Index Sponsor calculates and 
disseminates the Index value from 8 a.m. to 4 p.m. ET. Because this 
product is not in continuous distribution, an IIV is not required to 
be disseminated at least every 15 seconds in all trading sessions; 
however, because of the weekly redemption process for this product, 
such dissemination of the IIV is required during the Exchange's core 
trading session. The Exchange may rely on the listing market to 
monitor such dissemination of the IIV during the Exchange's core 
trading session. Telephone conference between John Carey, Assistant 
General Counsel, NYSE Group, Inc., and Florence Harmon, Senior 
Special Counsel, Division, Commission, on July 12, 2006.
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    Further, Commentary .01 to NYSE Arca Equities Rule 5.2(j)(6) sets 
forth certain restrictions on ETP Holders acting as registered Market 
Makers in the Securities to facilitate surveillance.\24\ Commentary 
.01(b)-(c) to NYSE Arca Equities Rule 5.2(j)(6) will require that the 
ETP Holder acting as a registered Market Maker in the Securities 
provide the Exchange with necessary information relating to its trading 
in the Index components, the commodities underlying the Index 
components, or options, futures or options on futures on the Index, or 
any other derivatives (collectively, ``derivative instruments'') based 
on the Index or based on any Index component or any physical commodity 
underlying an Index component. Commentary .01(d) to NYSE Arca Equities 
Rule 5.2(j)(6) will prohibit the ETP Holder acting as a registered 
Market Maker in the Securities from using any material nonpublic 
information received from any person associated with an ETP Holder or 
employee of such person regarding trading by such person or employee in 
the Index components, the commodities underlying the Index components, 
or any derivative instruments based on the Index or based on any Index 
component or any physical commodity underlying an Index component 
(including the Securities). In addition, Commentary .01(a) to NYSE Arca 
Equities Rule 5.2(j)(6) will prohibit the ETP Holder acting as a 
registered Market Maker in the Securities from being affiliated with a 
market maker in the Index components, the commodities underlying the 
Index components, or any derivative instruments based on the Index or 
based on any Index component or any physical commodity underlying an 
Index component unless adequate information barriers are in place, as 
provided in NYSE Arca Equities Rule 7.26.
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    \24\ See Securities Exchange Act Release No. 54189 (July 21, 
2006) (SR-NYSEArca-2006-17).
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    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Securities. Trading in the Securities may be halted 
because of market conditions or for reasons that, in the view of the 
Exchange, make trading in the Securities inadvisable. These may 
include: (1) The extent to which trading is not occurring in the Index 
components or (2) whether other unusual conditions or circumstances 
detrimental to the maintenance of a fair and orderly market are 
present. In addition, trading in Securities will be subject to trading 
halts caused by extraordinary market volatility pursuant to the 
Exchange's ``circuit breaker'' rule \25\ or by the halt or suspension 
of the trading of the Index components.\26\
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    \25\ See NYSE Arca Equities Rule 7.12.
    \26\ See ``UTP Trading Criteria'' above for specific instances 
when the Exchange will cease trading the Securities.
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    The Securities will be deemed ``Eligible Listed Securities,'' as 
defined in NYSE Arca Equities Rule 7.55, for purposes of the 
Intermarket Trading System (``ITS'') Plan and therefore will be subject 
to the trade through provisions of NYSE Arca Equities Rule 7.56, which 
require that ETP Holders avoid initiating trade-throughs for ITS 
securities.
(e) Surveillance
    The Exchange's surveillance procedures will incorporate and rely 
upon existing Exchange surveillance procedures governing equities. The 
Exchange believes that these procedures are adequate to monitor 
Exchange trading of the Securities in all trading sessions and to 
detect violations of Exchange rules, thereby deterring manipulation.
    The Exchange's 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 is able to obtain information regarding trading in the 
Securities and the Index components through ETP Holders in connection 
with such ETP Holders' proprietary or customer trades which they affect 
on any relevant market. In addition, with regard to the Index 
components, the Exchange can obtain market surveillance information, 
including customer identity information, with respect to transactions 
occurring on the New York Mercantile Exchange (``NYMEX''), the Kansas 
City Board of Trade, ICE Futures, and the LME, pursuant to its 
comprehensive information sharing agreements with each of those 
exchanges. All of the other trading venues on which current Index 
components are traded are members of the Intermarket Surveillance Group 
(``ISG''), and the Exchange therefore has access to all relevant 
trading information with respect to those contracts without any further 
action being required on the part of the Exchange.
(f) Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an Information Bulletin of the special characteristics 
and risks associated with trading the Securities. Specifically, the 
Information Bulletin will discuss the following: (1) The procedures for 
redemptions of Securities (and that Securities are not individually 
redeemable but are redeemable only in aggregations of at least 50,000 
Securities); (2) NYSE Arca Equities Rule 9.2(a),\27\ which imposes a 
duty of due diligence on its ETP Holders to learn the essential facts 
relating to every customer prior to trading the Securities; (3) how 
information regarding the IIV is disseminated; (4) the requirement that 
ETP Holders deliver a prospectus to investors purchasing newly issued 
Securities prior to or

[[Page 44343]]

concurrently with the confirmation of a transaction; and (5) trading 
information.
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    \27\ The Exchange recently amended NYSE Arca Equities Rule 
9.2(a) (``Diligence as to Accounts'') to provide that ETP Holders, 
before recommending a transaction, must have reasonable grounds to 
believe that the recommendation is suitable for the customer based 
on any facts disclosed by the customer as to his other security 
holdings and as to his financial situation and needs. Further, the 
proposed rule amendment provides that prior to the execution of a 
transaction recommended to a non-institutional customer, the ETP 
Holders should make reasonable efforts to obtain information 
concerning the customer's financial status, tax status, investment 
objectives and any other information that they believe would be 
useful to make a recommendation. See Securities Exchange Act Release 
No. 54045 (June 26, 2006), 71 FR 37971 (July 3, 2006) (SR-PCX-2005-
115).
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    The Information Bulletin will also reference the fact that there is 
no regulated source of last sale information regarding physical 
commodities, and that the Commission has no jurisdiction over the 
trading of physical commodities such as aluminum, gold, crude oil, 
heating oil, corn, and wheat, or the futures contracts on which the 
value of the Securities is based.
    The Information Bulletin will also discuss terms of no-action or 
exemptive relief by the Commission staff in connection with the 
Securities under the Act.
2. Statutory Basis
    The Exchange believes that the basis under the Act for this 
proposed rule change is consistent with the requirements under Section 
6(b)(5) \28\ that an exchange have rules that are 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 transaction in securities, to 
remove impediments and perfect the mechanisms of a free and open 
market, and, in general, to protect investors and the public interest.
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    \28\ 15 U.S.C. 78s(b)(5).
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    In addition, the Exchange believes that the proposal is consistent 
with Rule 12f-5 under the Act \29\ because it deems the Securities to 
be equity securities, thus rendering the Securities subject to the 
Exchange's rules governing the trading of equity securities.\30\
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    \29\ 17 CFR 240.12f-5.
    \30\ Telephone conference between John Carey, Assistant General 
Counsel, NYSE Group, Inc., and Florence Harmon, Senior Special 
Counsel, Division, Commission, on July 12, 2006 (the Exchange 
requested that the Commission delete the word ``existing'' to 
clarify that the Securities will be subject to all applicable 
Exchange rules governing the trading of equity securities for the 
Securities).
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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, as amended, 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-2006-19 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-2006-19. 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 offices 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-2006-19 and should be submitted on or before 
August 25, 2006.

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

    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\31\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\32\ 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.
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    \31\ 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).
    \32\ 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,\33\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\34\ The Commission notes that it previously approved the 
listing and trading of the Securities on the NYSE.\35\ The Commission 
also finds that the proposal is consistent with Rule 12f-5 under the 
Act,\36\ 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. NYSE Arca Equities rules deem the Securities to be equity 
securities, thus trading in the Securities will be subject to the 
Exchange's rules governing the trading of equity securities and the 
specific rules set forth herein for this product class.
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    \33\ 15 U.S.C. 78l(f).
    \34\ 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.
    \35\ See NYSE Order, supra note 5.
    \36\ 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,\37\ which sets forth 
Congress's 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.
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    \37\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    In support of the portion of the proposed rule change regarding UTP 
of the Securities, the Exchange has made the following representations:

[[Page 44344]]

    1. NYSE Arca Equities has appropriate rules to facilitate 
transactions in this type of security in all trading sessions.
    2. NYSE Arca Equities surveillance procedures are adequate to 
properly monitor the trading of the Securities on the Exchange.
    3. NYSE Arca Equities will distribute an Information Bulletin to 
its members prior to the commencement of trading of the Securities on 
the Exchange that explains the terms, characteristics, and risks of 
trading such securities.
    4. NYSE Arca Equities will require a member with a customer who 
purchases newly issued Securities on the Exchange to provide that 
customer with a product prospectus and will note this prospectus 
delivery requirement in the Information Bulletin.
    5. The Exchange will cease trading in the Securities if: (1) The 
primary market stops trading the securities because of a regulatory 
halt similar to a halt based on NYSE Arca Equities Rule 7.12 and/or a 
halt because the updated IIV or Index value are not disseminated at 
least every 15 seconds; or (2) if such other event occurs or condition 
exists which, in the opinion of the Exchange, makes further dealings on 
the Exchange inadvisable; or (3) the primary market delists the 
Securities.
    This approval order is conditioned on NYSE Arca Equities' adherence 
to these representations.
    The Commission finds good cause for approving this proposed rule 
change, as amended, 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 these 
Securities on the NYSE is consistent with the Act.\38\ The Commission 
presently is not aware of any issue that would cause it to revisit that 
earlier finding or preclude the trading of these funds on the Exchange 
pursuant to UTP. Therefore, accelerating approval of this proposed rule 
change should benefit investors by creating, without undue delay, 
additional competition in the market for these Securities.
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    \38\ See NYSE Order, supra note 5.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (NYSEArca-2006-19), as amended, is hereby 
approved on an accelerated basis.\39\
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    \39\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\40\
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    \40\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-12635 Filed 8-3-06; 8:45 am]

BILLING CODE 8010-01-P