Document ID: SEC-2009-0300-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2009-03-06T05:00Z

[Federal Register: March 6, 2009 (Volume 74, Number 43)]
[Notices]               
[Page 9860-9862]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06mr09-69]                         

[[Page 9860]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59459; File No. SR-NYSEArca-2009-12]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to SPDR Barclays Capital Convertible 
Bond ETF

February 26, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on February 18, 2009, NYSE Arca, Inc. (``NYSE Arca'' or 
``Exchange''), 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 the Exchange. 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, through its wholly-owned subsidiary NYSE Arca 
Equities, Inc. (``NYSE Arca Equities'' or ``Corporation''), proposes to 
list and trade shares of the following exchange-traded fund: 
SPDR[supreg] Barclays Capital Convertible Bond ETF. 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
    The Exchange proposes to list and trade the shares (``Shares'') of 
the following fund under NYSE Arca Equities Rule 5.2(j)(3), the 
Exchange's listing standards for Investment Company Units (``Units''): 
\3\ SPDR[supreg] Barclays Capital Convertible Bond ETF (the 
``Fund'').\4\
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    \3\ An Investment Company Unit is a security that represents an 
interest in a registered investment company that holds securities 
comprising, or otherwise based on or representing an interest in, an 
index or portfolio of securities (or holds securities in another 
registered investment company that holds securities comprising, or 
otherwise based on or representing an interest in, an index or 
portfolio of securities). See NYSE Arca Equities Rule 5.2(j)(3)(A).
    \4\ See the Registration Statement on Form N-1A of the SPDR 
Series Trust, dated January 15, 2009 (File Nos. 333-57793 and 811-
08839) (the ``Registration Statement'').
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    According to the Fund's Registration Statement, the Fund's 
investment objective is to provide investment results that, before fees 
and expenses, correspond generally to the price and yield performance 
of the Barclays Capital U.S. Convertible Bond $500MM Index (the 
``Index''), which aims to track the performance of the U.S. dollar-
denominated convertibles markets with outstanding issue sizes greater 
than $500 million. The Index includes the following major classes of 
convertible securities--cash pay bonds, zero-coupon/Original Issue 
Discount bonds, preferred securities, and mandatories.
    The Fund uses a passive management strategy designed to track the 
price and yield performance of the Index. According to the Registration 
Statement, the Index represents the market of U.S. convertible bonds. 
As of December 31, 2008, there were 156 issues included in the Index. 
Convertible bonds are bonds that can be exchanged, at the option of the 
holder, for a specific number of shares of the issuer's preferred stock 
or common stock.
    The Exchange is submitting this proposed rule change because the 
Index does not meet all of the ``generic'' listing requirements of 
Commentary .03 to NYSE Arca Equities Rule 5.2(j)(3) applicable to 
listing of Units based on an index or portfolio of component securities 
representing the U.S. equity market, the international equity market, 
and the fixed income market.\5\ The Index includes U.S. convertible 
bonds and convertible preferred equity securities. The Index components 
consisting of U.S. convertible bonds separately meet the criteria set 
forth in Commentary .02(a) of Rule 5.2(j)(3) applicable to Units based 
on a fixed income index or portfolio. However, the Index components 
consisting of convertible preferred stocks do not separately meet the 
criteria set forth in Commentary .01(a) of Rule 5.2(j)(3) applicable to 
Units based on U.S. indexes or portfolios. As of November 30, 2008, 
20.94% of the Index weight consisted of convertible preferred stocks. 
The Index does not meet the requirements of Commentary .01(a)(A)(2) in 
that convertible preferred stocks accounting for 78.56% of the weight 
of the convertible preferred portion of the Index each had a minimum 
worldwide monthly trading volume during each of the last six months of 
at least 250,000 shares, as of November 30, 2008.\6\ In addition, the 
Index does not meet the requirements of Commentary .01(a)(A)(5) in that 
six of the 31 convertible preferred stocks in the Index as of November 
30, 2008 are not listed on a national securities exchange.\7\ The 
Exchange represents that (1) except for Commentary .01(a)(A)(2) and 
.01(a)(A)(5) to Rule 5.2(j)(3), the Shares currently satisfy all other 
of the generic listing standards under Rule 5.2(j)(3); (2) the 
continued listing standards under NYSE Arca Equities Rules 5.2(j)(3) 
and 5.5(g)(2) applicable to Units shall apply to the Shares; and (3) 
the Trust is required to comply with Rule 10A-3 \8\ under the Act for 
the initial and continued listing of the Shares.
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    \5\ Commentary .03 to Rule 5.2(j)(3) provides that the 
Corporation may list a series of Units based on a combination of 
indexes or a portfolio of component securities representing the U.S. 
or domestic equity market, the international equity market, and the 
fixed income market for listing and trading pursuant to Rule 19b-
4(e) under the Securities Exchange Act of 1934 (``Act'') provided 
each index or portfolio of equity and fixed income component 
securities separately meet either the criteria set forth in 
Commentary .01(a) of Rule 5.2(j)(3) (applicable to Units based on 
U.S., international or global equity indexes or portfolios) or 
Commentary .02(a) (applicable to Units based on a fixed income index 
or portfolio).
    \6\ Commentary .01(a)(A)(2) to NYSE Arca Equities Rule 5.2(j)(3) 
provides that component stocks that in the aggregate account for at 
least 90% of the weight of the index or portfolio each shall have a 
minimum worldwide monthly trading volume during each of the last six 
months of at least 250,000 shares.
    \7\ Commentary .01(a)(A)(5) to NYSE Arca Equities Rule 5.2(j)(3) 
provides that all securities in the Index or portfolio shall be US 
Component Stocks, as defined in Rule 5.2(j)(3) listed on a national 
securities exchange and shall be NMS Stocks as defined in Rule 600 
of regulation NMS under the Act. The Index does not include non-U.S. 
securities. As of November 30, 2008, six convertible preferred 
securities in the Index, accounting for 8% of the Index weight, were 
traded over-the-counter.
    \8\ 17 CFR 240.10A-3.
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    The Exchange notes that, notwithstanding the fact that the Index 
does not satisfy all criteria of Rule 5.2(j)(3)(A) applicable to U.S. 
equity indexes, the Index components include issues with substantial 
market capitalization. As noted above, the Index aims to track the 
performance of the U.S. convertibles markets with

[[Page 9861]]

outstanding issue sizes greater than $500 million, and Index components 
representing 97.24% of the Index weight had a market capitalization of 
$100 million or more as of November 30, 2008. In addition, convertible 
preferred stocks have certain characteristics of fixed income 
securities (e.g., pricing influenced by changes in interest rates). The 
Exchange notes that the provisions in Rule 5.2(j)(3), Commentary .02(a) 
applicable to Units based on fixed income indexes include a requirement 
relating to minimum principal amount outstanding, but not a requirement 
of minimum trading volume.\9\ The Exchange believes that market 
capitalization is an appropriate measure of liquidity for such issues. 
Finally, with respect to the six convertible preferred stocks in the 
Index that are not exchange-listed, the Exchange notes that the parent 
companies for these issues are listed on the New York Stock Exchange.
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    \9\ Rule 5.2(j)(3), Commentary .02(a)(2) provides that 
components that in the aggregate account for at least 75% of the 
weight of the index or portfolio each have a minimum original 
principal amount outstanding of $100 million or more. As noted 
above, Index components representing 97.24% of the Index weight had 
a market capitalization of $100 million or more as of November 30, 
2008. The Exchange also notes that, in its proposed rule change 
proposing to adopt Commentary .02 to Rule 5.2(j)(3) (generic listing 
requirements for Units based on fixed income indexes), the Exchange 
represented that the provisions of Commentary .02 ``would not 
require a minimum trading volume, due to the lower trading volume 
that generally occurs in the fixed income markets as compared to the 
equity markets.'' See Securities Exchange Release No. 55783 (May 17, 
2007), 72 FR 29194 (May 24, 2007) (SR-NYSEArca-2007-36).
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    Detailed descriptions of the Fund, the Underlying Index, procedures 
for creating and redeeming Shares, transaction fees and expenses, 
dividends, distributions, taxes, and reports to be distributed to 
beneficial owners of the Shares can be found in the Registration 
Statement or on the Web site for the Fund (http://www.SPDRETFs.com), as 
applicable.
    In addition, the Exchange represents that the Shares will comply 
with all other requirements applicable to Units including, but not 
limited to, requirements relating to the dissemination of key 
information such as the Index value and Intraday Indicative Value, 
rules 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 Units.\10\
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    \10\ See, e.g., Securities Exchange Act Release No. 55783 (May 
17, 2007), 72 FR 29194 (May 24, 2007) (SR-NYSEArca-2007-36) (order 
approving generic listing standards for Units based on fixed income 
indexes); Securities Exchange Act Release No. 44551 (July 12, 2001), 
66 FR 37716 (July 19, 2001) (SR-PCX-2001-14) (order approving 
generic listing standards for Units and Portfolio Depositary 
Receipts); Securities Exchange Act Release No. 41983 (October 6, 
1999), 64 FR 56008 (October 15, 1999) (SR-PCX-98-29) (order 
approving rules for listing and trading of Units).
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \11\ of 
the Act in general and furthers the objectives of Section 6(b)(5) \12\ 
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 regulating, clearing, settling, processing 
information with respect to, and facilitating transaction in 
securities, and, in general to protect investors and the public 
interest. The Exchange believes that the proposed rule change will 
facilitate the listing and trading of an additional type of exchange-
traded product that will enhance competition among market participants, 
to the benefit of investors and the marketplace.\13\
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ E-mail from Sudhir Bhattacharyya, Vice President, NYSE 
Euronext, to Brian O'Neill, Attorney, Division of Trading and 
Markets, Commission, dated February 26, 2009.
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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 Exchange 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 No. SR-NYSEArca-2009-12 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2009-12. 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, on official 
business days between the hours of 10 a.m. and 3 p.m. 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-2009-12 and should be submitted on or before 
March 27, 2009.

[[Page 9862]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-4755 Filed 3-5-09; 8:45 am]

BILLING CODE 8011-01-P