Document ID: SEC-2008-1245-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2008-09-15T04:00Z

[Federal Register: September 15, 2008 (Volume 73, Number 179)]
[Notices]               
[Page 53314-53316]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15se08-128]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58474; File No. SR-NYSEArca-2008-79]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving 
Proposed Rule Change To List and Trade ELEMENTS\SM\ Linked to the CS/RT 
Emerging Infrastructure Total Return Index Powered by HOLT\TM\ Due 2023

September 8, 2008.

I. Introduction

    On July 22, 2008, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca''), 
through its wholly owned subsidiary, NYSE Arca Equities, Inc. (``NYSE 
Arca Equities''), filed with the Securities and Exchange Commission 
(``Commission'') pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade the ELEMENTS\TM\ Linked to the 
CS/RT Emerging Infrastructure Total Return Index Powered by HOLT\TM\ 
due 2023. The proposed rule change was published for comment in the 
Federal Register on August 7, 2008.\3\ The Commission received no 
comment letters on the proposed rule change. This order approves the 
proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 58276 (July 31, 
2008), 73 FR 46126.
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II. Description of the Proposed Rule Change

    The Exchange proposed to list and trade the ELEMENTS\SM\ Linked to 
the CS/RT Emerging Infrastructure Total Return Index Powered by 
HOLT\TM\ due 2023 (the ``Notes''), which are linked to the CS/RT 
Emerging Infrastructure Total Return Index Powered by HOLT\TM\ (U.S. 
dollar) (the ``Index''), under NYSE Arca Equities Rule 5.2(j)(6), which 
includes the Exchange's listing standards for Equity Index-Linked 
Securities.\4\ The Notes are senior unsecured debt obligations of 
Credit Suisse, acting through its Nassau Branch (``Credit Suisse''). 
The Index is comprised of 50 equally-weighted exchange-listed emerging 
infrastructure-related companies that are chosen according to a rules-
based methodology for scoring stocks (each an ``Index Component'' and, 
collectively, the ``Index Components''). The Index enables investors to 
participate in the performance of a selection of companies that have a 
focus on infrastructure, power and utilities, or agriculture and derive 
at least 15% of their revenue from the Global Emerging Markets 
(``GEM''). A GEM is defined as any country except the United States, 
Canada, Australia, New Zealand, Japan, Hong Kong, Singapore, Austria, 
Belgium, Luxembourg, Denmark, Finland, France, Germany, Greece, 
Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, and 
the United Kingdom.\5\
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    \4\ Equity Index-Linked Securities are securities that provide 
for the payment at maturity of a cash amount based on the 
performance of an underlying index or indexes of equity securities 
(``Equity Reference Asset''). See NYSE Arca Equities Rule 
5.2(j)(6)(i).
    \5\ The Exchange stated that detailed descriptions of the Notes, 
the Index (including the methodology used to determine the 
composition of the Index), fees, redemption procedures and payment 
at redemption, payment at maturity, taxes, and risk factors relating 
to the Notes are available in the prospectus or on the Web site for 
the Notes (http://www.credit-suisse.com), as applicable. See Credit 
Suisse's prospectus, as amended, filed pursuant to Rule 424(b)(2) 
under the Act (File No. 333-132936-14).
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    The Exchange submitted the proposed rule change because the Index 
does not meet all of the ``generic'' listing requirements of NYSE Arca 
Equities Rule 5.2(j)(6) applicable to the listing of Equity Index-
Linked Securities. Specifically, the Index meets all such requirements 
except for those set forth in NYSE Arca Equities Rule 
5.2(j)(6)(B)(I)(1)(b)(v).\6\ The Exchange represented that: (1) Except 
for NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(v), the Notes 
currently satisfy all of the generic listing standards under NYSE Arca 
Equities Rule 5.2(j)(6) applicable to Equity Index-Linked Securities; 
(2) the continued listing standards under NYSE Arca Equities Rule 
5.2(j)(6) applicable to Equity Index-Linked Securities shall apply to 
the Notes; and (3) Credit Suisse is required to comply with Rule 10A-3 
under the Act \7\ for the initial and continued listing of the Notes. 
In addition, the Exchange represented that the Notes will comply with 
all other requirements applicable to Equity Index-Linked Securities 
including, but not limited to, requirements relating to the 
dissemination of key information such as the Equity Reference Asset 
value, rules and policies governing the trading of equity securities, 
trading hours, trading halts, surveillance, firewalls, and Information 
Bulletins to ETP Holders, as set forth in prior Commission orders 
approving the generic listing rules applicable to the listing and 
trading of Index-Linked Securities, generally, and Equity Index-Linked 
Securities, in particular.\8\
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    \6\ NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(v) provides 
that all component securities of the underlying index shall be 
either (A) securities (other than foreign country securities and 
American Depository Receipts (``ADRs'')) that are (x) issued by an 
Act reporting company or by an investment company registered under 
the Investment Company Act of 1940, which, in each case, are listed 
on a national securities exchange, and (y) an ``NMS stock'' (as 
defined in Rule 600 of Regulation NMS) or (B) foreign country 
securities or ADRs, provided that foreign country securities or 
foreign country securities underlying ADRs having their primary 
trading market outside the United States on foreign trading markets 
that are not members of the Intermarket Surveillance Group (``ISG'') 
or parties to comprehensive surveillance sharing agreements with the 
Exchange will not in the aggregate represent more than 20% of the 
dollar weight of the index. See Securities Exchange Act Release No. 
58376 (August 18, 2008), 73 FR 49726 (August 22, 2008) (SR-NYSEArca-
2008-70) (approving certain amendments to NYSE Arca Equities Rule 
5.2(j)(6)(B)(I) and, as a result, renumbering NYSE Arca Equities 
Rule 5.2(j)(6)(B)(I)(1)(b)(vi) to NYSE Arca Equities Rule 
5.2(j)(6)(B)(I)(1)(b)(v), among other subsections).
    \7\ 17 CFR 240.10A-3.
    \8\ See, e.g., Securities Exchange Act Release Nos. 52204 
(August 3, 2005), 70 FR 46559 (August 10, 2005) (SR-PCX-2005-63); 
56637 (October 10, 2007), 72 FR 58704 (October 16, 2007) (SR-
NYSEArca-2007-92); 56838 (November 26, 2007), 72 FR 67774 (November 
30, 2007) (SR-NYSEArca-2007-118); 56879 (December 3, 2007), 72 FR 
69271 (December 7, 2007) (SR-NYSEArca-2007-110); and 57132 (January 
11, 2008), 73 FR 3300 (January 17, 2008) (SR-NYSEArca-2007-125).
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    The Exchange stated that, as of April 30, 2008, the market 
capitalization of the ten largest Index Components accounting for the 
top 20% of the Index weight was approximately $873.9 billion. The 
highest weighted stock was Vodafone Group PLC, which accounted for 2% 
of the Index weight and had a market capitalization of approximately 
$209.6 billion.
    With respect to NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(v), 
which requires that at least 80% of the component stock trade on 
markets that are members of ISG or parties to comprehensive 
surveillance sharing agreements with the Exchange, the Exchange 
represented that it has attempted, but was unable, to enter into 
comprehensive surveillance sharing agreements with markets on which 
approximately 36% of the Index Components trade. Specifically, the 
Exchange does not have comprehensive surveillance sharing agreements 
with Euronext Amsterdam (2%), Euronext Lisbon (2%), Euronext Paris 
(6%), JSE Securities Exchange (Johannesburg) (6%), Borsa Italiana 
(Milan) (4%), Prague Stock Exchange (2%), Bovespa (State of S[atilde]o 
Paulo Stock Exchange)

[[Page 53315]]

(4%), Singapore Stock Exchange (2%), and Bolsa de Madrid (8%), and 
these markets are not members of ISG.
    The Exchange stated that it might be unable to obtain surveillance 
information from the above-noted exchanges regarding the relevant 
component stocks, but that it intended to utilize its existing 
surveillance procedures applicable to derivative products, including 
Equity Index-Linked Securities, to monitor trading in the Notes. The 
Exchange represented that such procedures are adequate to properly 
monitor Exchange trading of the Notes in all trading sessions and to 
deter and detect violations of Exchange rules. The Exchange's 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. The Exchange further stated that it may obtain information 
via ISG from other exchanges who are members of ISG.\9\
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    \9\ For a list of the current members and affiliate members of 
ISG, see http://www.isgportal.com.
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    Notwithstanding the Notes' inability to meet the requirements of 
NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(v), the Exchange believes 
that the underlying Index is sufficiently broad-based in scope and, as 
such, is less susceptible to manipulation: The Index contains 50 
companies, listed in 23 countries with no one exchange that is not 
covered by a comprehensive surveillance sharing agreement listing 
greater than 8% of such companies. The Exchange added that no one 
security dominates the underlying Index, thereby serving to protect the 
public interest and promote capital formation.

III. Discussion and Commission's Findings

    After careful review, the Commission finds that NYSE Arca's 
proposal to list and trade the Notes is consistent with the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange.\10\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\11\ 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, 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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    \10\ 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).
    \11\ 15 U.S.C. 78f(b)(5).
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    Although NYSE Arca Equities Rule 5.2(j)(6) permits the Exchange to 
consider Equity Index-Linked Securities for listing and trading 
pursuant to Rule 19b-4(e) under the Act,\12\ the Notes do not meet all 
of the generic listing requirements thereunder because the components 
of the Index do not meet the requirements in NYSE Arca Equities Rule 
5.2(j)(6)(B)(I)(1)(b)(v).\13\ NYSE Arca Equities Rule 
5.2(j)(6)(B)(I)(1)(b)(v) provides that that all component securities of 
the underlying index shall be either (A) securities (other than foreign 
country securities and ADRs) that are (x) issued by an Act reporting 
company or by an investment company registered under the Investment 
Company Act of 1940, which, in each case, are listed on a national 
securities exchange, and (y) an ``NMS stock'' (as defined in Rule 600 
of Regulation NMS) or (B) foreign country securities or ADRs, provided 
that foreign country securities or foreign country securities 
underlying ADRs having their primary trading market outside the United 
States on foreign trading markets that are not members of ISG or 
parties to comprehensive surveillance sharing agreements with the 
Exchange will not, in the aggregate, represent more than 20% of the 
dollar weight of the index. According to the Exchange, in the case of 
the Notes, approximately 36% of the dollar weight of the Index 
represents Index Components trading on foreign trading markets that are 
not members of ISG and with which the Exchange has not entered into any 
comprehensive surveillance sharing agreements.
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    \12\ 17 CFR 240.19b-4(e).
    \13\ See supra note 6 and accompanying text.
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    The Commission notes that the Exchange represents that it has 
attempted, but has not been able, to enter into comprehensive 
surveillance sharing agreements with Euronext Amsterdam, Euronext 
Lisbon, Euronext Paris, JSE Securities Exchange (Johannesburg), Borsa 
Italiana (Milan), Prague Stock Exchange, Bovespa (State of S[atilde]o 
Paulo Stock Exchange), Singapore Stock Exchange, and Bolsa de Madrid. 
The Commission further notes that, in certain limited circumstances, it 
has approved the listing and trading of derivative securities products 
based on indices that were composed of stocks for which a national 
securities exchange has not entered into a comprehensive surveillance 
sharing agreement with the relevant foreign exchange.\14\ The Exchange 
has represented that it intends to utilize its existing surveillance 
procedures applicable to derivative products, including Equity Index-
Linked Securities, to monitor trading in the Notes and that such 
procedures are adequate to properly monitor Exchange trading of the 
Notes in all trading sessions and to deter and detect violations of 
Exchange rules.
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    \14\ See, e.g., Securities Exchange Act Release Nos. 58437 
(August 28, 2008), 73 FR 51684 (September 4, 2008) (SR-NYSEArca-
2008-77) (approving the listing and trading of exchange-traded notes 
linked to Barclays Middle East Equities (MSCI GCC)) and 54944 
(December 15, 2006), 71 FR 77432 (December 26, 2006) (SR-NYSE-2006-
69) (approving the listing and trading of exchange-traded notes 
linked to the MSCI India Equities Index).
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    In addition, the Exchange has represented that the Notes will 
comply with all other requirements applicable to Equity Index-Linked 
Securities including, but not limited to, requirements relating to the 
dissemination of key information such as the Equity Reference Asset 
value, rules and policies governing the trading of equity securities, 
trading hours, trading halts, surveillance, firewalls, and Information 
Bulletins to ETP Holders, as set forth in prior Commission orders 
approving the generic listing rules applicable to the listing and 
trading of Index-Linked Securities, generally, and Equity Index-Linked 
Securities, in particular.\15\
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    \15\ See supra note 8 and accompanying text.
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    The Commission believes that the listing and trading of the Notes 
is consistent with the Act. The Commission notes that, based on the 
Exchange's representations, the Notes otherwise meet all of the other 
applicable generic listing standards under NYSE Arca Equities Rule 
5.2(j)(6). The Commission also notes that the Index is composed of 
securities of 50 companies listed in 23 countries. The Commission 
further notes that it has previously approved the listing and trading 
of derivative securities products based on indices that were composed 
of stocks that did not meet certain quantitative generic listing 
criteria.\16\
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    \16\ See, e.g., Securities Exchange Act Release Nos. 57349 
(February 19, 2008), 73 FR 10084 (February 25, 2008) (SR-NYSEArca-
2008-22) and 58437 (August 28, 2008), 73 FR 51684 (September 4, 
2008) (SR-NYSEArca-2008-77). See also Securities Exchange Act 
Release Nos. 55953 (June 25, 2007), 72 FR 36084 (July 2, 2007) (SR-
NYSE-2007-46) and 56695 (October 24, 2007), 72 FR 61413 (October 30, 
2007) (SR-NYSEArca-2007-111).
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    For the foregoing reasons, the Commission believes that the 
proposal to list and trade the Notes is consistent with the Act and 
finds good cause for approving the proposed rule change.

[[Page 53316]]

This order is based on the Exchange's representations.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\17\ that the proposed rule change (SR-NYSEArca-2008-79) be, and it 
hereby is, approved.
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    \17\ 15 U.S.C. 78s(b)(1).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-21331 Filed 9-12-08; 8:45 am]

BILLING CODE 8010-01-P