Document ID: SEC-2006-1684-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NYSE Arca, Inc.
Posted Date: 2006-12-27T05:00Z

[Federal Register: December 27, 2006 (Volume 71, Number 248)]
[Notices]               
[Page 77849-77851]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27de06-121]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54967; File No. SR-NYSEArca-2006-90]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change to 
Trade Exchange-Traded Notes Linked to the MSCI India Total Return Index 
Pursuant to Unlisted Trading Privileges

December 19, 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 December 18, 2006, NYSE Arca, Inc. (the ``Exchange''), through its 
wholly owned subsidiary, NYSE Arca Equities, Inc. (``NYSE Arca 
Equities''), 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 proposal 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 NYSE Arca Equities, is proposing to trade 
Exchange-Traded Notes (``Notes'') of Barclays Bank PLC (``Barclays'') 
linked to the performance of the MSCI India Total Return Index 
(``Index'') pursuant to unlisted trading privileges (``UTP''). 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 Notes of Barclays linked to 
the performance of the Index pursuant to UTP. The Index is a free-
float-adjusted market capitalization index that is designed to measure 
the market performance, including price performance and income from 
dividend payments, of Indian equity securities. The Index is currently 
comprised of the top 68 companies by market capitalization listed on 
the National Stock Exchange of India. The Index is calculated by Morgan 
Stanley Capital International Inc. (``MSCI'') and is denominated in 
U.S. dollars. A rule proposal for the original listing and trading of 
the Notes by New York Stock Exchange LLC (``NYSE'') has been approved 
by the Commission.\3\ The Exchange deems the Notes to be an equity 
securities, thus rendering trading in the Notes subject to the 
Exchange's existing rules governing the trading of equity securities. 
The trading hours for the Notes on the Exchange would be from 9:30 a.m. 
to 8 p.m. Eastern Time (``ET'') in accordance with NYSE Arca Equities 
Rule 7.34(a).
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    \3\ See Securities Exchange Act Release No. 54944 (December 15, 
2006).
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    Quotations for and last sale information regarding the Notes are 
disseminated through the Consolidated Quotation System. Bloomberg L.P. 
disseminates the value of the Index under the ticker symbol ``NDEUSIA'' 
and this information is widely disseminated by quotation vendors. The 
Index is static during the NYSE's trading day from 9:30 a.m. ET to 4 
p.m. ET, which is equivalent to the Exchange's Core Trading Session. An 
intraday ``indicative value'' (``IIV'') meant to approximate the 
intrinsic

[[Page 77850]]

economic value of the Notes, updated to reflect changes in currency 
exchange rates, will be calculated and published by a third-party 
service provider via the facilities of the Consolidated Tape 
Association on a 15-second delayed basis throughout the regular NYSE 
trading day of 9:30 a.m. to 4 p.m. ET on each day on which the Notes 
are traded on NYSE.
    The Exchange represents that it would cease trading in the Notes 
during the listing market's trading hours if: (a) the listing market 
stops trading the Notes because:
    (i) of a regulatory halt similar to a halt based on NYSE Arca 
Equities Rule 7.12;
    (ii) MSCI ceases to maintain or calculate the value of the Index on 
a periodic basis or if the value of the Index ceases to be widely 
available; or
    (iii) the IIV is no longer calculated or disseminated; or (b) if 
the listing market delists the Notes. Additionally, the Exchange states 
that it may cease trading the Notes if such other event shall occur or 
condition exists which in the opinion of the Exchange makes further 
dealings on the Exchange inadvisable. In addition, the Exchange 
represents that it would follow any procedures with respect to trading 
halts as set forth in NYSE Arca Equities Rule 7.34.
    In connection with the trading of the Notes, NYSE Arca Equities 
represents that it would inform Exchange members in an Information 
Bulletin of the special characteristics and risks associated with 
trading the Notes. The Exchange also would require its members to 
deliver a prospectus or product description to investors purchasing 
Notes prior to or concurrently with a transaction in the Notes and will 
note this prospectus delivery requirement in the Information 
Bulletin.\4\
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    \4\ See e-mail dated December 19, 2006, from John Carey, 
Assistant General Counsel, NYSE Group, Inc. to Mitra Mehr, Special 
Counsel, Division of Market Regulation, Commission.
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    In addition, before an Exchange member recommends a transaction in 
the Notes, the member must determine that the Notes are suitable for 
the customer.
    The Exchange represents that its surveillance procedures would 
incorporate and rely upon existing Exchange surveillance procedures 
governing equities. The Exchange believes that these procedures are 
adequate to monitor Exchange trading of the Notes in all trading 
sessions and to detect violations of Exchange rules, thereby deterring 
manipulation. The Exchange states that its current trading surveillance 
focuses on detecting securities trading outside their normal patterns. 
When such situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \5\ in general and Section 6(b)(5) of the Act \6\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to remove impediments to, and perfect the 
mechanism of a free and open market 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 \7\ 
because it deems the Notes to be equity securities, thus rendering 
trading in the Notes subject to the Exchange's existing rules governing 
the trading of equity securities.
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    \5\ 15 U.S.C. 78s(b).
    \6\ 15 U.S.C. 78s(b)(5).
    \7\ 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 purpose of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
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 Number SR-NYSEArca-2006-90 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-2006-90. 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 offices 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-2006-90 and should be submitted on or before 
January 17, 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.\8\ 
In particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\9\ 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

[[Page 77851]]

competition among markets that trade the Notes.
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    \8\ 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).
    \9\ 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,\10\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\11\ The Commission notes that it previously approved the 
listing and trading of the Notes on NYSE.\12\ The Commission also finds 
that the proposal is consistent with Rule 12f-5 under the Act,\13\ 
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 Notes to be equity securities, thus 
rendering trading in the Notes subject to the Exchange's existing rules 
governing the trading of equity securities.
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    \10\ 15 U.S.C. 78l(f).
    \11\ 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.
    \12\ See supra note 3.
    \13\ 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,\14\ which sets forth 
Congress' 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 
Notes are disseminated through the Consolidated Quotation System. 
Furthermore, the IIV, updated to reflect changes in currency exchange 
rates, will be calculated and published by a third-party service 
provider via the facilities of the Consolidated Tape Association on a 
15-second delayed basis throughout the Exchange's Core Trading Session. 
In addition, if the listing market halts trading when the IIV is not 
being calculated or disseminated, the Exchange would halt trading in 
the Notes. The Exchange has represented that it would follow the 
procedures with respect to trading halts set forth in NYSE Arca 
Equities Rule 7.34.
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    \14\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    The Commission notes that, if the Notes should be delisted by the 
listing exchange, the Exchange would no longer have authority to trade 
the Notes 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 address 
any concerns associated with the trading of the Notes on a UTP basis.
    2. The Exchange would inform Exchange members in an Information 
Bulletin of the special characteristics and risks associated with 
trading the Notes.
    3. The Exchange would require its members to deliver a prospectus 
or product description to investors purchasing Notes prior to or 
concurrently with a transaction in the Notes and will note this 
prospectus delivery requirement in the information circular.
    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 Notes on NYSE is consistent with 
the Act. The Commission presently is not aware of any regulatory issue 
that should cause it to revisit that finding or would preclude the 
trading of the Notes 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 Notes.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\15\ that the proposed rule change (SR-NYSEArca-2006-90) is 
approved on an accelerated basis.
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    \15\ 15 U.S.C. 78s(b)(2).
    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
Nancy M. Morris,
Secretary.
[FR Doc. E6-22083 Filed 12-26-06; 8:45 am]

BILLING CODE 8011-01-P