Document ID: SEC-2007-1624-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NYSE Arca, Inc.
Posted Date: 2007-11-30T05:00Z

[Federal Register: November 30, 2007 (Volume 72, Number 230)]
[Notices]               
[Page 67774-67776]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30no07-101]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56838; File No. SR-NYSEArca-2007-118]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change To 
Amend Certain Requirements Relating o Indexes Underlying Equity Index-
Linked Securities

November 26, 2007.
    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 November 13, 2007, 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. 
This order provides notice of the proposed rule change and approves 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 proposes to amend NYSE Arca Equities Rule 5.2(j)(6) to 
amend certain requirements relating to indexes underlying Equity Index-
Linked Securities.\3\ The text of the proposed rule change is available 
at the Exchange, the Commission's Public Reference Room, and 
http://www.nyse.com.

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    \3\ The Exchange defines Equity Index-Linked Securities as 
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 (each such index, an ``Equity Reference Asset''). See 
NYSE Arca Equities Rule 5.2(j)(6).
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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 Equities Rule 5.2(j)(6)(B)(I)(2)(d) currently provides 
that each Equity Reference Asset (i) must be calculated based on either 
a capitalization, modified capitalization, price, equal-dollar, or 
modified equal-dollar weighting methodology, and (ii) if based upon the 
equal-dollar or modified equal-dollar weighting method, must be 
rebalanced at least quarterly. The Exchange proposes to amend NYSE Arca 
Equities Rule 5.2(j)(6)(B)(I)(2)(d) to delete the requirement that the 
Equity Reference Asset used in connection with an issuance of Equity 
Index-Linked Securities must be calculated based on either a 
capitalization, modified capitalization, price, equal-dollar, or 
modified equal-dollar weighting

[[Page 67775]]

methodology. In addition, the Exchange proposes to provide that Equity 
Reference Assets based upon the equal-dollar or modified equal-dollar 
weighting method must be rebalanced at least semiannually, rather than 
quarterly, as is currently the case.
    The Exchange states that the elimination of the limitations as to 
weighting methodologies permitted for Equity Reference Assets 
underlying Equity Index-Linked Securities would make NYSE Arca Equities 
Rule 5.2(j)(6) consistent with the Equity Index-Linked Securities 
listing standards of other national securities exchanges, such as the 
New York Stock Exchange LLC (``NYSE''),\4\ which has no such 
requirements. The Exchange further states that a significant number of 
currently existing equity indexes that utilize the equal-dollar or 
modified equal-dollar weighting methodology are rebalanced semiannually 
rather than quarterly. Because 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 possible currently to list Equity Index-Linked Securities under 
NYSE Arca Equities Rule 5.2(j)(6) based on such indexes. The Exchange 
believes, however, that, because 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 Internet 
Web site, it would be appropriate to allow investors to make their own 
decisions as to the sufficiency of a semiannual rebalancing of an 
equal-dollar or modified equal-dollar index underlying an issuance of 
Equity Index-Linked Securities. The Exchange further states that 
investors and issuers would benefit from NYSE Arca's ability to list, 
without delay, Equity Index-Linked Securities based on a broader group 
of such indexes.
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    \4\ See Section 703.22 of the NYSE Listed Company Manual.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\5\ in general, and furthers the 
objectives of 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 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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    \5\ 15 U.S.C. 78f(b).
    \6\ 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.

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-2007-118 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-2007-118. 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-2007-118 and should 
be submitted on or before December 21, 2007.

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 \7\ and, in particular, the requirements of Section 6 of the 
Act.\8\ Specifically, the Commission finds that the proposed rule 
change is consistent with Section 6(b)(5) of the Act,\9\ 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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    \7\ 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).
    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(5).
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    The Commission notes that the proposal to delete the requirement 
that the Equity Reference Asset be calculated based on certain 
specified methodologies would conform the Exchange's requirements to 
the current listing standards for Equity Index-Linked Securities of 
another national securities exchange.\10\ The Commission further 
believes that the proposal to require Equity Reference Assets that are 
based on the equal-dollar or modified equal-dollar weighting methods to 
be rebalanced at least semiannually should benefit investors by 
providing a wider

[[Page 67776]]

selection of derivative products based on such Equity Reference Assets. 
The Commission believes that the proposal to adjust the minimum 
rebalancing frequency requirement is reasonable, given the increasing 
number of equal-dollar or modified equal-dollar weighted indexes that 
are rebalanced on a semiannual-basis, and should allow for the listing 
and trading of certain Equity Index-Linked Securities that would 
otherwise not be able to be listed and traded on the Exchange.
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    \10\ See supra note 4.
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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. With respect to the 
deletion of the provision requiring Equity Reference Assets to be based 
on certain specified calculation methodologies, the Commission notes 
that it has approved the deletion of a similar requirement under NYSE 
listing standards for Equity Index-Linked Securities \11\ and does not 
believe that this proposal raises any novel regulatory issues. With 
respect to the Exchange's proposal to adjust the minimum rebalancing 
frequency for certain Equity Reference Assets, accelerating approval of 
this proposal should benefit investors by providing, without undue 
delay, additional Equity Index-Linked Securities products for investors 
and fostering competition in the market for such products. Therefore, 
the Commission finds good cause, consistent with Section 19(b)(2) of 
the Act,\12\ to approve the proposed rule change on an accelerated 
basis.
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    \11\ Id.
    \12\ 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,\13\ that the proposed rule change (SR-NYSEArca-2007-118) be, and 
it hereby is, approved on an accelerated basis.
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    \13\ Id.
    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Nancy M. Morris,
Secretary.
[FR Doc. E7-23204 Filed 11-29-07; 8:45 am]

BILLING CODE 8011-01-P