Document ID: SEC-2008-0564-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2008-04-14T04:00Z

[Federal Register: April 14, 2008 (Volume 73, Number 72)]
[Notices]               
[Page 20081-20082]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14ap08-98]                         

[[Page 20081]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57634; File No. SR-NYSEArca-2008-35]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Amendment No. 1 Thereto and Order Granting Accelerated Approval of 
Proposed Rule Change, as Modified by Amendment No. 1, Relating to 
Equity Index-Linked Securities

April 8, 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 March 26, 2008, NYSE Arca, Inc. (``NYSE Arca'' or ``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. 
On April 4, 2008, the Exchange filed Amendment No. 1 to the proposed 
rule change. This order provides notice of the proposed rule change, as 
amended, and approves the proposed rule change, as modified, 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 proposes to amend its rules governing NYSE Arca, LLC 
(also referred to as the ``NYSE Arca Marketplace''), which is the 
equities trading facility of NYSE Arca Equities. The Exchange is 
proposing to amend NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(2), the 
Exchange's continued listing standard for equity index-linked 
securities (``Equity Index-Linked Securities'') to: (i) Clarify equity 
index rebalancing criteria; and (ii) amend the index rebalancing 
requirement for equal-dollar or modified equal-dollar weighed indexes. 
The text of the proposed rule change is available at the Exchange, the 
Commission's Public Reference Room, and http://www.nyse.com.

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
    NYSE Arca proposes to amend NYSE Arca Equities Rule 
5.2(j)(6)(B)(I)(2), the Exchange's continued listing standard for 
Equity Index-Linked Securities. Specifically, the Exchange proposes to: 
(i) Clarify equity index rebalancing criteria; and (ii) amend the 
semiannual index rebalancing requirement for equal-dollar or modified 
equal-dollar weighted indexes.
    For Equity Index-Linked Securities, the Exchange proposes to 
remove, in NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(2)(i), the 
requirement that only capitalization weighted, modified capitalization 
weighted, and price weighted indexes be reviewed as of the first day of 
January and July in each year. The Exchange does not believe that it is 
consistent to impose specific semiannual index reviews only to 
capitalization weighted, modified capitalization weighted, or price 
weighted indexes.
    For Equity Index-Linked Securities, the Exchange proposes to amend 
NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(2)(d), which currently requires 
that equity indexes based upon the equal-dollar, or modified equal-
dollar weighting method be rebalanced at least semiannually. The 
Exchange does not believe that it is consistent to impose a specific 
semiannual rebalancing requirement only to equal-dollar or modified 
equal-dollar weighted indexes. Instead, the Exchange proposes that all 
indexes be rebalanced at least annually. An index is rebalanced in 
accordance with its stated methodology, as determined by a third-party 
index sponsor.
    The Exchange notes that a significant number of currently existing 
equity indexes that utilize the equal-dollar or modified equal-dollar 
weighting methodology are rebalanced annually rather than semiannually. 
As the issuer of Equity Index-Linked Securities generally licenses the 
right to utilize the underlying index from a third-party index sponsor, 
it is often not within the issuer's control to have the index 
rebalanced more frequently. As such, it is not currently possible under 
Rule 5.2(j)(6)(B)(I) to list Equity Index-Linked Securities based on 
such indexes. However, as these types of indexes are relatively common 
and detailed information concerning the procedures governing the 
construction of the underlying index will be available to investors 
either in the issuer's prospectus or on the index sponsor's Web site, 
the Exchange believes that it is appropriate to allow investors to make 
their own decisions as to the sufficiency of rebalancing of an equal-
dollar or modified equal-dollar weighted index underlying an issuance 
of Equity Index-Linked Securities. Amending the generic listing 
standards for Equity Index-Linked Securities would promote competition 
and benefit investors, issuers, and third-party index sponsors since it 
would allow NYSE Arca to list, without the delay associated with a 
stand-alone rule filing, Equity Index-Linked Securities based on a 
broader group of indexes. The Exchange notes that its listing standards 
for Investment Company Units \3\ do not impose a semiannual index 
rebalancing requirement for equal-dollar or modified equal-dollar 
weighted index.
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    \3\ See NYSE Arca Rule 5.2(j)(3) Commentary .01.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\4\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\5\ 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, 
and, in general, to protect investors and the public interest.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

[[Page 20082]]

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 e-mail to rule-comments@sec.gov. Please include File 
Number SR-NYSEArca-2008-35 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-2008-35. 
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, 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-2008-35 and should 
be submitted on or before May 5, 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 \6\ and, in particular, the requirements of Section 6 of the 
Act.\7\ Specifically, the Commission finds that the proposed rule 
change is consistent with Section 6(b)(5) of the Act,\8\ which 
requires, among other things, that the rules of a national securities 
exchange be designed 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 transactions in securities, 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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    \6\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposed rule change will provide 
for consistent criteria for the rebalancing of indexes based on 
different methodologies. The Commission further believes that the 
proposal should facilitate the listing and trading of Equity Index-
Linked Securities based on indexes with different rebalancing 
requirements, thus benefiting investors by providing them with a wider 
selection of derivative products. The Commission notes that the 
proposed rule change would also conform index requirements for Equity 
Index-Linked Securities to the requirements \9\ applicable to equity-
based Investment Company Units.
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    \9\ See NYSE Arca Equities Rule 5.2(j)(3).
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    The Commission finds good cause for approving the proposed rule 
change prior to the 30th day after the date of publication of the 
notice of filing thereof in the Federal Register. The Commission notes 
that the proposed rule change is similar to a proposal related to index 
rebalancing of Equity Index-Linked Securities \10\ that was recently 
approved by the Commission and does not believe that this proposal 
raises any novel regulatory issues. Therefore, the Commission finds 
good cause, consistent with Section 19(b)(2) of the Act,\11\ to approve 
the proposed rule change on an accelerated basis.
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    \10\ See Securities Exchange Act Release No. 56838 (November 26, 
2007), 72 FR 67774 (November 30, 2007) (SR-NYSEArca-2007-118).
    \11\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change, as modified (SR-NYSEArca-2008-
35), be, and it hereby is, approved on an accelerated basis.
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    \12\ Id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-7827 Filed 4-11-08; 8:45 am]

BILLING CODE 8011-01-P