Document ID: SEC-2008-1275-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2008-09-18T04:00Z

[Federal Register: September 18, 2008 (Volume 73, Number 182)]
[Notices]               
[Page 54194-54196]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18se08-94]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58502; File No. SR-NYSEArca-2008-93]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change 
Relating to the Listing of the iShares Lehman Agency Bond Fund

September 10, 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 August 25, 2008, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
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. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons and approves the proposed rule change 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 list and trade 
shares (``Shares'') of the following fund of iShares Lehman Agency Bond 
Fund. 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 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

[[Page 54195]]

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 proposes to list and trade the Shares of the following 
fund under NYSE Arca Equities Rule 5.2(j)(3), the Exchange's listing 
standards for Investment Company Units (``ICUs''): \3\ iShares Lehman 
Agency Bond Fund (the ``Fund''), a series of the iShares Trust 
(``Trust'').
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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).
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    The Fund seeks investment results that correspond generally to the 
price and yield, before fees and expenses, of the agency sector of the 
U.S. government bond market as defined by the Lehman Brothers U.S. 
Agency Index (``Index''). The Index measures the performance of the 
agency sector of the U.S. government bond market and is comprised of 
investment grade U.S. dollar-denominated debentures issued by 
government and government-related agencies.
    The Exchange is submitting this proposed rule change because the 
Index for the Fund does not meet all of the ``generic'' listing 
requirements of Commentary .02 to NYSE Arca Equities Rule 5.2(j)(3) 
applicable to listing of ICUs based on Fixed Income Securities.\4\ The 
Index meets all such requirements except for those set forth in 
Commentary .02(a)(5).\5\ The Exchange represents that: (1) Except for 
the requirement under Commentary .02(a)(5) to NYSE Arca Equities Rule 
5.2(j)(3) that an underlying index or portfolio (excluding one 
consisting entirely of exempted securities) must include a minimum of 
13 non-affiliated issuers, the Shares of the Fund currently satisfy all 
of the applicable generic listing standards under NYSE Arca Equities 
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 ICUs shall apply 
to the Shares; and (3) the Trust is required to comply with Rule 10A-3 
\6\ under the Act for the initial and continued listing of the Shares. 
In addition, the Exchange represents that the Shares will comply with 
all other requirements applicable to ICUs 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 ICUs.\7\
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    \4\ Fixed Income Securities are described in NYSE Arca Equities 
Rule 5.2(j)(3), Commentary .02 as debt securities that are notes, 
bonds, debentures or evidence of indebtedness that include, but are 
not limited to, U.S. Department of Treasury securities, government-
sponsored entity securities, municipal securities, trust preferred 
securities, supranational debt and debt of a foreign country or a 
subdivision thereof.
    \5\ The Exchange states that, as of August 8, 2008, the Index 
included securities of 10 non-affiliated issuers. Approximately 
0.59% of the Index weight consisted of non-exempted securities. The 
Exchange notes that all 10 non-affiliated issuers of issues in the 
Index are U.S. government or government-related agencies. The 
Exchange believes that, under these circumstances, having 10 non-
affiliated issuers rather than 13 non-affiliated issuers, as 
required by Commentary .02(a)(5) to NYSE Arca Equities Rule 
5.2(j)(3), will have no negative impact on investor protection or on 
competition among market participants. E-mail from Tim Malinowski, 
Director, NYSE Euronext, Exchange, to Edward Cho, Special Counsel, 
Division of Trading and Markets, Commission, dated September 3, 
2008.
    \6\ 17 CFR 240.10A-3.
    \7\ 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 ICUs 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 ICUs 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 ICUs).
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    Detailed descriptions of the Fund, the 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 Trust's 
Registration Statement \8\ or on the Web site for the Fund (http://
www.ishares.com), as applicable.
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    \8\ See the Trust's Registration Statement on Form N-1A, dated 
July 16, 2008 (File Nos. 333-92935 and 811-09729).
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \9\ of the 
Act, in general, and furthers the objectives of Section 6(b)(5),\10\ 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 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.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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. 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-2008-93 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-2008-93. 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

[[Page 54196]]

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 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-2008-93 and should be submitted 
on or before October 9, 2008.

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

    After careful consideration, 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.\11\ In particular, the Commission believes that the proposal 
is consistent with Section 6(b)(5) of the Act,\12\ which requires, 
among other things, that the rules of a national securities exchange be 
designed 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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    \11\ 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).
    \12\ 15 U.S.C. 78f(b)(5).
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    Although NYSE Arca Equities Rule 5.2(j)(3) permits the Exchange to 
list ICUs based on Fixed Income Securities pursuant to Rule 19b-4(e) 
under the Act,\13\ the Index for the Fund does not meet all of the 
generic listing requirements applicable to ICUs based on Fixed Income 
Securities. Specifically, the Index does not satisfy Commentary 
.02(a)(5) to NYSE Arca Equities Rule 5.2(j)(3), which requires that an 
underlying index or portfolio (excluding one consisting entirely of 
exempted securities) include a minimum of 13 non-affiliated issuers. 
According to the Exchange, as of August 8, 2008, the Index included 
securities of only 10 non-affiliated issuers, all of which are U.S. 
government or government-related agencies. The Exchange has noted that 
approximately 0.59% of the weight of the Index consists of non-exempted 
securities.\14\
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    \13\ See 17 CFR 240.19b-4(e). See also Commentary .02 to NYSE 
Arca Equities Rule 5.2(j)(3).
    \14\ See supra note 5.
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    The Commission believes that the listing and trading of the Shares 
is consistent with the Act. The Commission notes that all of the 
issuers of the Fixed Income Securities comprising the Index are either 
U.S. government or other government-related agencies. In addition, the 
Commission notes that, based on the Exchange's representations: (1) the 
Shares will meet all of the applicable generic listing standards under 
NYSE Arca Equities Rule 5.2(j)(3), except for the requirement under 
Commentary .02(a)(5) thereto that the Index include a minimum of 13 
non-affiliated issuers; (2) the Shares will be subject to all of the 
continued listing standards under NYSE Arca Equities Rules 5.2(j)(3) 
and 5.5(g)(2) applicable to ICUs; and (3) the Trust is required to 
comply with Rule 10A-3 under the Act.\15\ The Commission also notes 
that Shares of the Fund will comply with all other requirements of NYSE 
Arca Equities Rule 5.2(j)(3), applicable to ICUs including, but not 
limited to, requirements relating to the dissemination of key 
information such as the Index value and Intraday Indicative Value and 
rules governing the trading of equity securities, trading hours, 
trading halts, surveillance, firewalls, and Information Bulletins to 
ETP Holders, as set forth in prior Commission orders approving the 
generic listing rules applicable to the listing and trading of 
ICUs.\16\
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    \15\ See 17 CFR 240.10A-3.
    \16?\ See, e.g., Securities Exchange Act Release Nos. 41983 
(October 6, 1999), 64 FR 56008 (October 15, 1999) (SR-PCX-98-29) 
(approving the adoption of rules governing the listing and trading 
of ICUs); 44551 (July 12, 2001), 66 FR 37716 (July 19, 2001) (SR-
PCX-2001-14) (approving generic listing standards for ICUs and 
portfolio depositary receipts); 55783 (May 17, 2007), 72 FR 29194 
(May 24, 2007) (SR-NYSEArca-2007-36) (approving generic listing 
standards for ICUs based on fixed income indexes); and 56625 
(October 5, 2007), 72 FR 58144 (October 12, 2007) (SR-NYSEArca-2007-
73) (approving a proposal relating to extended hours trading for 
ICUs and portfolio depository receipts).
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    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\17\ for approving the proposal prior to the thirtieth day 
after the date of publication of the Notice in the Federal Register. 
The Commission notes that, because the Shares comply with all of NYSE 
Arca Equities' generic listing standards for ICUs based on Fixed Income 
Securities (except for the requirement relating to the minimum number 
of non-affiliated issuers), the listing and trading of the Shares by 
the Exchange does not appear to present any novel or significant 
regulatory issues, significantly affect the protection of investors or 
the public interest, or impose any significant burden on competition. 
The Commission further notes that it has previously approved the 
listing and trading of derivative securities products based on 
underlying assets that did not meet certain quantitative generic 
listing criteria \18\ and, more specifically, the listing and trading 
of an exchange-traded fund based on an underlying index of Fixed Income 
Securities, which similarly did not satisfy the generic listing 
requirement relating to minimum number of non-affiliated issuers.\19\ 
The Commission believes that accelerating approval of this proposal 
should benefit investors by creating, without undue delay, additional 
competition in the market for ICUs. Therefore, the Commission finds 
good cause, consistent with Section 19(b)(2) of the Act, to approve the 
proposed rule change on an accelerated basis. This order is based on 
the Exchange's representations.
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    \17\ 15 U.S.C. 78s(b)(2).
    \18\ See, e.g., Securities Exchange Act Release Nos. 58437 
(August 28, 2008), 73 FR 51684 (September 4, 2008) (SR-NYSEArca-
2008-77); 57349 (February 19, 2008), 73 FR 10084 (February 25, 2008) 
(SR-NYSEArca-2008-22); 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).
    \19\ See Securities Exchange Act Release No. 57356 (February 20, 
2008), 73 FR 10314 (February 26, 2008) (SR-Amex-2007-115) (approving 
the listing and trading of shares of the SPDR[supreg] Barclays 
Capital Global Inflation Linked Exchange-Traded Fund).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\20\ that the proposed rule change (SR-NYSEArca-2008-93) be, and it 
hereby is, approved on an accelerated basis.
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    \20\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-21758 Filed 9-17-08; 8:45 am]

BILLING CODE 8010-01-P