Document ID: SEC-2007-0030-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NYSE Arca, Inc.
Posted Date: 2007-01-09T05:00Z

[Federal Register: January 9, 2007 (Volume 72, Number 5)]
[Notices]               
[Page 1047-1049]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09ja07-76]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55019; File No. SR-NYSEArca-2006-35]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change To 
Trade the iShares[supreg] S&P Global 100 Index Fund Pursuant to 
Unlisted Trading Privileges

December 28, 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 October 18, 2006, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been substantially prepared by the Exchange. The Commission is 
publishing this notice and order to solicit comments on the proposal 
from interested persons and to approve 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 trade shares 
(``Shares'') of the iShares[supreg] S&P Global 100 Index Fund 
(``Fund'') (Symbol: IOO) pursuant to unlisted trading privileges 
(``UTP'') based on NYSE Arca Equities Rule 5.2(j)(3).
    The text of the proposed rule change is available on the Exchange's 
Web site (http://www.nysearca.com), at the principal office of the 

Exchange, 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 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 is proposing to trade the Shares pursuant to UTP. The 
Fund measures the performance of 100 multinational companies that 
comprise the S&P Global 100 Index (``Index'') that are also part of the 
S&P Global 1200. Their businesses are global in nature and they derive 
a substantial portion of their operating income from multiple 
countries. The Fund represents an effort to meet the needs of investors 
wishing to track the performance of global companies. With 100 highly 
liquid components, the Index is designed to support low-cost, index-
investment products, including exchange-traded funds. The Fund will use 
an ``indexing'' investment approach that attempts to replicate, before 
expenses, the performance of the Index.
    The Commission previously approved the original listing and trading 
of the Fund on the New York Stock Exchange (``NYSE'').\3\ The Exchange 
deems the Shares to be equity securities, thus rendering trading in the 
Shares subject to the Exchange's existing rules governing the trading 
of equity securities. The trading hours for the Shares on the Exchange 
would be the same as those set forth in NYSE Arca Equities Rule 7.34, 
except that the Shares will not trade during the Opening Session (4 
a.m. to 9:30 a.m. Eastern Time) unless the Indicative Optimized 
Portfolio Value (``IOPV'') is calculated and disseminated during that 
time.
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    \3\ See Securities Exchange Act Release No. 43658 (December 1, 
2000), 65 FR 77408 (December 11, 2000) (SR-NYSE-2000-53).
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    Quotations for and last sale information regarding the Shares are 
disseminated through the Consolidated Quotation System. The value of 
the underlying Index is updated intra-day on a real-time basis as 
individual component securities of the underlying Index change in 
price. These intra-day values of the underlying Index are disseminated 
every 15 seconds throughout the trading day. In addition, a value for 
the underlying Index is disseminated once each trading day, based on 
closing prices of the Index components in the relevant foreign markets. 
The net asset value (``NAV'') of the Fund is calculated and 
disseminated each business day, normally at the close of regular 
trading of NYSE.
    To provide updated information relating to the Shares for use by 
investors, professionals, and persons wishing to create or redeem them, 
NYSE disseminates the IOPV for the Fund as calculated by a securities 
information provider. The IOPV is disseminated on a per-share basis 
every 15 seconds during regular NYSE trading hours of 9:30 a.m. to 4:15 
p.m. Eastern Time.
    The IOPV will be calculated utilizing closing prices in the 
principal foreign markets for securities in the Fund portfolio, 
converted to U.S. dollars. The IOPV is updated during NYSE's trading 
hours to reflect changes in currency exchange rates between the U.S. 
dollar and the applicable foreign currency and includes the applicable 
cash component for the Fund. The Index includes companies trading in 
markets with trading hours overlapping NYSE's. During the overlap 
period, the IOPV calculator updates the IOPV every 15 seconds to 
reflect price changes of the Index components in the principal foreign 
markets, and converts such prices into U.S. dollars based on the 
currency exchange rate. When the foreign market or markets are closed 
but NYSE is open for trading, the IOPV is updated every 15 seconds to 
reflect changes in currency exchange rates.
    The IOPV may not reflect the value of all securities included in 
the applicable underlying Index. In addition, the IOPV does not 
necessarily reflect the precise composition of the current portfolio of 
securities held by the Fund at a particular point in time. Therefore, 
the IOPV on a per-share basis disseminated during NYSE's regular 
trading hours should not be viewed as a real-time update of the NAV of 
the Fund, which is calculated only once a day. The IOPV is intended to 
closely approximate the value per-share of the portfolio of securities 
for the Fund and provide for a close proxy of the NAV at a greater 
frequency for investors.
    The Commission has granted the Fund an exemption from certain 
prospectus delivery requirements under Section 24(d) of the Investment 
Company Act of 1940 (``1940 Act'').\4\ Any product description used in 
reliance on the Section 24(d) exemptive order will comply with all 
representations made and all conditions

[[Page 1048]]

contained in the Fund's application for orders under the 1940 Act.\5\
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    \4\ 15 U.S.C. 80a-24(d).
    \5\ See In the Matter of iShares, Inc., et al., Investment 
Company Act Release No. 25623 (June 25, 2002).
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    In connection with the trading of the Fund, the Exchange would 
inform ETP Holders in an Information Circular of the special 
characteristics and risks associated with trading the Shares, including 
how they are created and redeemed, the prospectus or product 
description delivery requirements applicable to the Shares, applicable 
Exchange rules, how information about the value of the underlying Index 
is disseminated, and trading information. In addition, before an ETP 
Holder recommends a transaction in the Shares, the ETP Holder must 
determine the Fund is suitable for the customer, as set forth in NYSE 
Arca Equities Rule 9.2(a)-(b).
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products to monitor trading in the 
Shares. The Exchange represents that these procedures are adequate to 
monitor Exchange trading of the Shares.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \6\ in general and Section 6(b)(5) of the Act \7\ in 
particular in that it is designed 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 and perfect the mechanisms of a free and open market 
and to protect investors and the public interest. In addition, the 
Exchange believes that the proposal is consistent withRule 12f-5 under 
the Act \8\ because it deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 17 CFR 240.12f-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

    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 is consistent with the Exchange 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 e-mail to rule-comments@sec.gov. Please include File 

Number SR-NYSEArca-2006-35 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-2006-35. 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 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-2006-35 and should be submitted on or before 
January 30, 2007.

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

    After careful review, 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.\9\ 
In particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act \10\ 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. The Commission 
believes that this proposal should benefit investors by increasing 
competition among markets that trade the Shares.
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    \9\ 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).
    \10\ 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,\11\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\12\ The Commission notes that it previously approved the 
listing and trading of the Shares on NYSE.\13\ The Commission also 
finds that the proposal is consistent with Rule 12f-5 under the 
Act,\14\ 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. The Exchange has represented that it meets this 
requirement because it deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities.
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    \11\ 15 U.S.C. 78l(f).
    \12\ 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.
    \13\ See supra note 3.
    \14\ 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,\15\ which sets forth 
Congress' finding that it is in the

[[Page 1049]]

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. Quotations for and last 
sale information regarding the Shares are disseminated through the 
Consolidated Quotation System. Furthermore, an IOPV calculator updates 
an IOPV for the Fund every 15 seconds to reflect price changes of the 
Index components in the principal foreign markets, and converts such 
prices into U.S. dollars based on the current currency exchange rate. 
When the foreign market or markets are closed but NYSE is open for 
trading, the IOPV is updated every 15 seconds to reflect changes in 
currency exchange rates. Furthermore, NYSE Arca Equities Rule 7.34 
describes the circumstances where the Exchange would halt trading when 
the IOPV or the value of the underlying Index is not calculated or 
widely available.
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    \15\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    The Commission notes that, if the Shares should be delisted by 
NYSE, the original listing exchange, the Exchange would no longer have 
authority to trade the Shares pursuant to this order.
    In support of this proposal, the Exchange has made the following 
representations:
    1. The Exchange's surveillance procedures are adequate to monitor 
the trading of the Shares.
    2. In connection with the trading of the Shares, the Exchange would 
inform ETP Holders in an Information Circular of the special 
characteristics and risks associated with trading the Shares.
    3. The Information Circular would inform participants of the 
prospectus or product delivery requirements applicable to the Shares.
    This approval order is conditioned on the Exchange's adherence to 
these representations.
    The Commission finds good cause for approving this proposal 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 the Shares on NYSE is consistent with 
the Act. The Commission presently is not aware of any regulatory issue 
that should cause it to revisit that earlier finding or preclude the 
trading of Shares on the Exchange pursuant to UTP. Therefore, 
accelerating approval of this proposal should benefit investors by 
creating, without undue delay, additional competition in the market for 
the Shares.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the proposed rule change (SR-NYSEArca-2006-35) is 
approved on an accelerated basis.
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    \16\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
 [FR Doc. E7-64 Filed 1-8-07; 8:45 am]

BILLING CODE 8011-01-P