Document ID: SEC-2009-0351-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2009-03-16T04:00Z

[Federal Register: March 16, 2009 (Volume 74, Number 49)]
[Notices]               
[Page 11167-11169]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16mr09-113]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59542; File No. SR-NYSEArca-2009-14]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to the Leverage Factor Applicable to 
the MacroShares Major Metro Housing Trusts

March 9, 2008.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on March 3, 2009, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 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

    Pursuant to the provisions of Section 19(b)(1) of the Act,\4\ the 
Exchange, through its wholly-owned subsidiary NYSE Arca Equities, Inc. 
(``NYSE Arca Equities'' or the ``Corporation'') proposes to modify the 
representation made in SR-NYSEArca-2008-92 regarding the leverage 
factor applicable to the MacroShares Major Metro Housing Up Trust (``Up 
Trust'') and the MacroShares Major Metro Housing Down Trust (``Down 
Trust'') (collectively, the ``Trusts''), and, specifically, to indicate 
that the leverage factor to be applied will be 3 rather than 2. The 
shares of the Up Trust are referred to as the Up MacroShares, and the 
shares of the Down Trust are referred to as the Down MacroShares 
(collectively, the ``Shares''). 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 Public Reference Room of the 
Commission.
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    \4\ 15 U.S.C. 78s(b)(1).
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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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Commission has approved pursuant to Section 19(b)(2) of the Act 
the Exchange's proposal to list and trade the Up MacroShares and the 
Down MacroShares under NYSE Arca Equities Rule 8.400.\5\ As described 
in the Approval Order and Notice, the Up

[[Page 11168]]

Trust and the Down Trust intend to issue Up MacroShares and Down 
MacroShares, respectively, on a continuous basis. The Up MacroShares 
and the Down MacroShares represent undivided beneficial interests in 
the Up Trust and the Down Trust, respectively.
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    \5\ See Securities Exchange Act Release Nos. 58704 (October 1, 
2008), 73 FR 59026 (October 8, 2008) (order approving listing and 
trading on the Exchange of the Trusts (``Approval Order'')); 58469 
(September 5, 2008), 73 FR 53306 (September 15, 2008) (SR-NYSEArca-
2008-92) (notice of proposed rule change to list and trade the 
Trusts on the Exchange (``Notice'')). The Shares are being offered 
by the Trusts under the Securities Act of 1933, 15 U.S.C. 77a. On 
February 17, 2009, the depositor filed with the Commission 
preliminary Registration Statements on Form S-1 (Amendment No. 3) 
for the Up MacroShares (File No. 333-151522) and for the Down 
MacroShares (File No. 333-151523) (``Registration Statements''). The 
descriptions herein relating to the operation of the Trusts is based 
on the Registration Statements.
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    The assets of the Down Trust will consist of an income distribution 
agreement and settlement contracts entered into with the Up Trust. 
Similarly, the assets of the Up Trust will consist of an income 
distribution agreement and settlement contracts entered into with the 
Down Trust.\6\ Each Trust will also hold U.S. Treasuries, repurchase 
agreements on U.S. Treasuries and cash to secure its obligations under 
the income distribution agreement and the settlement contracts. The 
trustee for the Trusts is State Street Bank and Trust Company.
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    \6\ The income distribution agreement and applicable settlement 
contracts are attached as exhibits to the Registration Statements.
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    As described in the Notice, the Trusts will make quarterly 
distributions of net income, if any, on the treasuries and a final 
distribution of all assets they hold on deposit on the final scheduled 
termination date, an early termination date or a redemption date. Each 
quarterly and final distribution will be based on the value of the S&P/
Case-Shiller Composite-10 Home Price Index (``Index''), as well as on 
prevailing interest rates on U.S. Treasury obligations. The last 
published value of the S&P/Case-Shiller Composite-10 Home Price Index 
is referred to as the ``Reference Value of the Index'' or ``Reference 
Value'', as discussed in the Notice.\7\
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    \7\ The Reference Value of the Index is the Reference Price for 
purposes of NYSE Arca Equities Rule 8.400.
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    If the Reference Value rises above its specified starting level, 
the Up Trust's Underlying Value (as described in the Notice) will 
increase to include all of its assets plus a portion of the assets of 
the paired Down Trust. This portion of assets due from the Down Trust 
will be multiplied by a specified ``leverage factor''. Conversely, if 
the level of the Reference Value of the Index falls below its starting 
level on and after the closing date, the Up Trust's Underlying Value 
will decrease, because a portion of its assets will be included in the 
Underlying Value of its paired Down Trust, such portion being 
multiplied by the leverage factor.
    Thus, an increase in the Reference Value of the Index results in a 
proportionate decrease in the Underlying Value of the Down Trust, 
multiplied by the leverage factor. A decrease in the Reference Value of 
the Index results in a proportionate increase in the Underlying Value 
of the Down Trust, multiplied by the leverage factor.
    The Notice stated that the leverage factor would be 2, as initially 
described in the Registration Statements. The Trusts now intend to 
utilize a leverage factor of 3.\8\ The effect of this will be to triple 
any increase or decrease in the Underlying Value of the Up Trust or the 
Down Trust, depending upon whether there is an increase or decrease in 
the Reference Value of the Index. This would make the per share 
Underlying Value and the market price of Up MacroShares and Down 
MacroShares more volatile than the housing prices which those shares 
reference.
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    \8\ With the exception of the proposed change to the leverage 
factor, and a change in the distribution date from a date in 2018 to 
a date in 2014, all representations made by the Exchange in the 
Notice continue to apply.
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    With the exception of U.S. Treasuries, repurchase agreements on 
U.S. Treasuries and cash, the Trusts will not hold assets (e.g., common 
stocks, swaps or options) upon which payment to investors is based. 
Rather, the portion of Trust assets due from one Trust to another 
changes as a result of changes to the Reference Value. This amount will 
be multiplied by the leverage factor of 3, but applying the leverage 
factor does not otherwise affect the assets held by the Trusts or the 
value of the Index.
    Additional information relating to the Trusts and Shares is 
available in the Registration Statements, the Notice and the Approval 
Order.\9\
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    \9\ See note 5, supra.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \10\ of 
the Act in general and furthers the objectives of Section 6(b)(5) \11\ 
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 proposal will facilitate the 
listing and trading of additional types of exchange-traded products 
that will enhance competition among market participants, to the benefit 
of investors and the marketplace. In addition, the listing and trading 
criteria set forth in NYSE Arca Equities Rule 8.400 are intended to 
protect investors and the public interest.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 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.
    The Exchange has requested accelerated approval of this proposed 
rule change prior to the 30th day after the date of publication of the 
notice in the Federal Register. The Commission is considering granting 
accelerated approval of the proposed rule change at the end of a 15-day 
comment period.

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

[[Page 11169]]

     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2009-14 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2009-14. 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-2009-14 and should 
be submitted on or before March 31, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-5568 Filed 3-13-09; 8:45 am]

BILLING CODE 8011-01-P