Document ID: SEC-2005-0340-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2005-12-08T05:00Z

[Federal Register: December 8, 2005 (Volume 70, Number 235)]
[Notices]               
[Page 73039-73042]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08de05-114]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52870; File No. SR-Amex-2005-091]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change and Amendment No. 1 Thereto Relating to the Trading 
Pursuant to Unlisted Trading Privileges of the iShares[supreg] Lehman 
TIPS Bond Fund

December 1, 2005.
    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 September 13, 2005, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
On November 22, 2005, Amex filed Amendment No. 1 to the proposed rule 
change.\3\ The Commission is publishing this notice to solicit comments 
on the proposed rule change, as amended, from interested persons and is 
approving the proposal 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 and supplemented 
certain aspects of its proposal.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Amex proposes to trade shares (the ``Fund Shares'' or 
``Shares'') of the iShares[supreg] Lehman TIPS Bond Fund (ticker 
symbol: TIP) (the ``Fund''),\4\ pursuant to unlisted trading privileges 
(``UTP'').
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    \4\ iShares[supreg] is a registered trademark of Barclays Global 
Investors, N.A.
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    The text of the proposed rule change is available on the Exchange's 
Internet Web site (http://www.amex.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 Amex included statements 
concerning the purpose of, and basis for, the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III below, and is set forth in sections A, B, and C below.

[[Page 73040]]

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to trade Fund Shares which are Index Fund 
Shares under Amex Rules 1000A et seq., pursuant to UTP. The Commission 
previously approved the original listing and trading of the Fund on the 
New York Stock Exchange, Inc. (``NYSE'').\5\ The Fund is a separate 
series of the iShares Trust (the ``Trust''). Lehman Brothers maintains 
and calculates the Lehman Brothers U.S. Treasury Inflation Notes Index 
(the ``Index''). The Index will not be calculated or disseminated 
intra-day because Lehman Brothers does not calculate or disseminate 
intra-day values for the Index. The value and return of the Index are 
calculated and disseminated each business day, at the end of the 
trading day, by Lehman Brothers. Additional information about the Fund 
is also available at http://www.iShares.com.

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    \5\ See Securities Exchange Act Release No. 48881 (December 4, 
2003), 68 FR 69739 (December 15, 2003) (SR-NYSE-2003-39) (``NYSE 
Order''). The Funds commenced trading on the NYSE on December 5, 
2003.
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    The investment objective of the Fund is to provide investment 
results that correspond generally to the performance of the Index. The 
Index seeks results that correspond generally to the price and yield 
performance, before fees and expenses, of the inflation-protected 
sector of the United States Treasury market, as defined by the Index. 
Inflation-protected public obligations of the U.S. Treasury, also 
called ``TIPS,'' are securities issued by the U.S. Treasury that are 
designed to provide inflation protection to investors. TIPS are income-
generating instruments whose interest and principal payments are 
adjusted for inflation.

(a) Dissemination of Information About the Fund Shares

    Quotations for and last sale information regarding the Fund are 
disseminated through the Consolidated Tape Association (``CTA''). The 
net asset value (``NAV'') of the Fund is calculated each business day, 
normally at the close of regular trading of the NYSE, and is published 
in a number of places, including http://www.iShares.com and through the 

facilities of the CTA. According to the Fund's prospectus, Investors 
Bank & Trust Company, the administrator, custodian and transfer agent 
for the Fund, determines the NAV for the Fund as of the close of 
regular trading on the NYSE (ordinarily 4 p.m., Eastern time or ``ET'') 
on each day that the NYSE is open for trading.\6\ The Fund and the 
index calculation methodology for the Index are both described in more 
detail in the NYSE Order.
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    \6\ The Web site for the Trust, http://www.iShares.com, will 

make available a variety of other relevant information about the 
Shares.
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    In order to provide updated information relating to the Fund for 
use by investors, professionals, and persons wishing to create or 
redeem Fund Shares in creation unit aggregations (``Creation Units''), 
the NYSE disseminates, through the facilities of the CTA, the 
indicative optimized portfolio value (``IOPV''), calculated by 
Bloomberg L.P., every fifteen (15) seconds during the trading hours for 
the Shares of 9:30 a.m. to 4:15 p.m. ET.

(b) Trading Rules

    The Exchange deems the Fund 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 Fund Shares on the Exchange will be 9:30 a.m. to 4:15 p.m. ET. The 
Shares trade with a minimum price variation of $0.01.
    Amex Rule 190 generally precludes certain business relationships 
between an issuer and the specialist in the issuer's securities. 
Exceptions in the rule permit specialists in Fund Shares to enter into 
Creation Unit transactions to facilitate the maintenance of a fair and 
orderly market. Commentary .04 to Amex Rule 190 specifically applies to 
Index Fund Shares listed on the Exchange, including the Shares. 
Commentary .04 states that nothing in Amex Rule 190(a) should be 
construed to restrict a specialist registered in a security issued by 
an investment company from purchasing and redeeming the listed 
security, or securities that can be subdivided or converted into the 
listed security, from the issuer as appropriate to facilitate the 
maintenance of a fair and orderly market.
    Amex Rule 154, Commentary .04(c) provides that stop and stop limit 
orders to buy or sell a security (other than an option, which is 
covered by Amex Rule 950(f) and Commentary thereto), the price of which 
is derivatively priced based upon another security or index of 
securities, may with the prior approval of a Floor Official, be elected 
by a quotation, as set forth in Commentary .04(c)(i-v). The Exchange 
has designated Index Fund Shares, including the Funds Shares, as 
eligible for this treatment.\7\
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    \7\ See Securities Exchange Act Release No. 29063 (April 10, 
1991), 56 FR 15652 (April 17, 1991) (SR-Amex-90-31) at note 9, 
regarding the Exchange's designation of equity derivative securities 
as eligible for such treatment under Amex Rule 154, Commentary 
.04(c).
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    The rules of the Exchange require its members to deliver a 
prospectus or product description to investors purchasing Shares of the 
Fund prior to or concurrently with the confirmation of a transaction in 
such Shares. The Exchange notes, however, that although Amex Rule 1000A 
provides for delivery of written descriptions to customers of funds 
that have received an exemption from section 24(d) of the Investment 
Company Act of 1940 and the Trust has received such an exemption, there 
is at this time no written description available for this Fund. The 
Exchange will advise its members and member organizations that delivery 
of a prospectus in lieu of a written description would satisfy the 
requirements of Amex Rule 1000A.
    The Exchange will cease trading in the Shares if (a) the primary 
market stops trading the Shares because of a regulatory halt akin to a 
halt based on Amex Rule 117 and/or a halt because dissemination of the 
IOPV and/or underlying index value has ceased or (b) the primary market 
delists the Shares.\8\
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    \8\ Telephone conversation between Edward Cho, Staff Attorney, 
Division of Market Regulation, Commission, and Jeffrey Burns, 
Associate General Counsel, Amex, on November 17, 2005.
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(c) Surveillance

    The Exchange notes that the Index is broad-based and has components 
with significant market capitalizations and liquidity.\9\ Nevertheless, 
the Exchange represents that its surveillance procedures are adequate 
to properly monitor the trading of the Shares. Specifically, the Amex 
will rely on its existing surveillance procedures governing Index Fund 
Shares.
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    \9\ Id.
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(d) Information Circular

    In connection with the trading of the Shares of each Fund, the Amex 
will inform its members in an Information Circular of the special 
characteristics and risks associated with trading of the Shares, such 
as, a description of the Fund and associated Shares, how Fund Shares 
are created and redeemed in Creation Units (e.g., that Fund Shares are 
not individually redeemable), applicable Exchange rules, dissemination 
information, trading information, the applicability of suitability 
rules, and a discussion of any relief provided by the Commission or the 
staff from any rules under the Act. Additionally, in the Information 
Circular, the Exchange will advise its

[[Page 73041]]

members to deliver to investors purchasing Shares of the Fund a 
prospectus, as described above, prior to or concurrently with the 
confirmation of a transaction in such Shares. The Information Circular 
will also discuss the information that will be publicly available about 
the Shares.
    The Information Circular will also remind members of their 
suitability obligations, including those under Amex Rule 411, which 
imposes a duty of due diligence on its members and member firms to 
learn the essential facts relating to every customer prior to trading 
the Shares.\10\
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    \10\ Id.
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2. Statutory Basis
    The proposed rule change, as amended, is consistent with section 
6(b) of the Act\11\ 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. In addition, the Exchange believes that the proposal is 
consistent with Rule 12f-5 under the Act\13\ because it deems the Fund 
Shares to be equity securities, thus rendering the Shares subject to 
the Exchange's existing rules governing the trading of equity 
securities.
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    \11\ 15 U.S.C. 78s(b).
    \12\ 15 U.S.C. 78s(b)(5).
    \13\ 17 CFR 240.12f-5.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change, as amended, 
will impose no 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, 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-Amex-2005-091 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.

    All submissions should refer to File Number SR-Amex-2005-091. 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 Amex. 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-Amex-2005-091 and should be submitted on or before 
December 29, 2005.

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.\14\ In particular, the Commission finds that the proposed 
rule change is consistent with section 6(b)(5) of the Act,\15\ 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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    \14\ 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).
    \15\ 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,\16\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\17\ The Commission notes that it previously approved the 
listing and trading of the Shares on the NYSE.\18\ The Commission also 
finds that the proposal is consistent with Rule 12f-5 under the 
Act,\19\ 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. Amex rules deem the Shares to be equity securities, and 
thus, trading in Shares will be subject to the Exchange's existing 
rules governing the trading of equity securities.\20\
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    \16\ 5 U.S.C. 78l(f).
    \17\ 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.
    \18\ See NYSE Order, supra note 5.
    \19\ 17 CFR 240.12f-5.
    \20\ The Commission notes that Commentary .04 to existing Amex 
Rule 190 will permit a specialist in the Shares to create or redeem 
Creation Units of this Fund to facilitate the maintenance of a fair 
and orderly market. The Commission previously has found Commentary 
.04 to Amex Rule 190 to be consistent with the Act. See Securities 
Exchange Act Release No. 36947 (March 8, 1996), 61 FR 10606, 10612 
(March 14, 1996) (SR-Amex-95-43).
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    The Commission further believes that the proposal is consistent 
with section 11A(a)(1)(C)(iii) of the Act,\21\ 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. Quotations for and last sale information regarding the 
Shares are disseminated through the Consolidated Quotation System. 
Furthermore, the NYSE disseminates through the facilities of CTA an 
updated

[[Page 73042]]

IOPV for the Shares every 15 seconds from 9:30 a.m. to 4:15 p.m. E.T.
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    \21\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    The Exchange will cease trading in the Shares if (a) the primary 
market stops trading the Shares because of a regulatory halt similar to 
a halt based on Amex Rule 117 and/or a halt because dissemination of 
the IOPV and/or underlying index value has ceased or (b) the primary 
market delists the Shares.
    In support of this proposed rule change, the Exchange has made the 
following representations:
    1. Amex has appropriate rules to facilitate transactions in this 
type of security;
    2. Amex surveillance procedures are adequate to properly monitor 
the trading of the Shares on the Exchange;
    3. Amex will distribute an Information Circular to its members 
prior to the commencement of trading of the Shares on the Exchange that 
explains the terms, characteristics, and risks of trading such shares;
    4. Amex will require a member with a customer that purchases the 
Shares on the Exchange to provide that customer with a product 
prospectus and will note this prospectus delivery requirement in the 
Information Circular; and
    5. Amex will cease trading in the Shares if (a) the primary market 
stops trading the Shares because of a regulatory halt similar to a halt 
based on Amex Rule 117 and/or a halt because dissemination of the IOPV 
and/or underlying index value has ceased or (b) the primary market 
delists the Shares.
    This approval order is conditioned on Amex's 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 earlier, the 
Commission previously found that the listing and trading of these 
Shares on the NYSE are consistent with the Act.\22\ 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 Shares.
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    \22\ 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 (SR-Amex-2005-091), as amended, is hereby 
approved on an accelerated basis.\23\
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    \23\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. E5-7057 Filed 12-7-05; 8:45 am]

BILLING CODE 8010-01-P