Document ID: SEC-2009-0551-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Change: NYSE Arca, Inc.
Posted Date: 2009-04-20T04:00Z

[Federal Register: April 20, 2009 (Volume 74, Number 74)]
[Notices]               
[Page 18012-18013]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20ap09-124]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59747; File No. SR-NYSEArca-2009-20]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Accelerated Approval of a Proposed Rule Change Relating to the Listing 
and Trading of the Safety First Trust Certificates Linked to the S&P 
500[supreg] Index

April 10, 2009.
    On March 6, 2009, 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'') 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 Safety First Trust Series 
2009-1, Principal-Protected Trust Certificates Linked to the S&P 
500[supreg] Index (``Certificates'').\3\ The proposed rule change was 
published in the Federal Register on March 19, 2009.\4\ The Commission 
received no comments on the proposal. This order 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.
    \3\ \\ See Registration Statement, Safety First Trust Series 
2009-1, dated October 31, 2008 (Nos. 333-154914, 154914-08, and 
154914-11); Registration Statement for Safety First Trust Series 
2009-1, dated February 18, 2009 (Nos. 333-157386 and 333-157386-01) 
(collectively, ``Registration Statement'').
    \4\ See Securities Exchange Act Release No. 59562 (March 12, 
2009), 74 FR 11794 (``Notice'').
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I. Description of the Proposal

    NYSE Arca proposes to list and trade the Certificates under NYSE 
Arca Equities Rule 5.2(j)(7), which governs the listing of Trust 
Certificates.\5\ The Certificates are preferred securities of Safety 
First Trust Series 2009-1 (``Trust'') and will mature on a specified 
date in 2014 (``Maturity Date''). Investors will receive at maturity 
for each certificate held intact an amount in cash equal to $10 plus a 
``Supplemental Distribution Amount,'' which may be positive or zero. 
The Supplemental Distribution Amount will be based on the percentage 
change of the value of the S&P 500 Index (``Index'') during the term of 
the Certificates. The Supplemental Distribution Amount for each 
Certificate will equal the product of (a) $10, (b) the percentage 
change in the value of the Index, and (c) the Participation Rate, which 
is 90%-100%,\6\ provided that the Supplemental Distribution Amount will 
not be less than zero.\7\ A holder of the Certificates has an interest 
in two separate securities of Citigroup Funding Inc., the issuer of the 
Certificates: (1) Equity index participation securities; and (2) equity 
index warrants.
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    \5\ Trust Certificates pay an amount at maturity based upon the 
performance of an underlying index or indexes of equity securities 
(``Equity Index Reference Asset''); instruments that are direct 
obligations of the issuing company, either exercisable throughout 
their life (i.e., American style) or exercisable only on their 
expiration date (i.e., European style), entitling the holder to a 
cash settlement in U.S. dollars to the extent that the foreign or 
domestic index has declined below (for a put warrant) or increased 
above (for a call warrant) the pre-stated cash settlement value of 
the index (``Index Warrants''); or a combination of two or more 
Equity Index Reference Assets or Index Warrants. See NYSE Arca 
Equities Rules 5.2(j)(7)(i)-(iii).
    \6\ The Participation Rate will be determined at the time of 
issuance of the Certificates.
    \7\ The Trust payments will not be guaranteed pursuant to a 
financial guaranty insurance policy. See Commentary .10 to NYSE Arca 
Equities Rule 5.2(j)(7).
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    Additional information about the Trust and the Certificates, 
including without limitation, the Maturity Date, valuation and pricing 
dates, equity index participation securities, equity index warrants, 
and risks can be found in the Notice and the Registration Statement.

II. Discussion and Commission's Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of Section 6 of the 
Act \8\ and the rules and regulations thereunder applicable to a 
national securities exchange.\9\ In particular, the Commission finds 
that the proposal is consistent with Section 6(b)(5) of the Act,\10\ 
which requires, among other things, that the Exchange's rules be 
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, 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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    \8\ 15 U.S.C. 78f.
    \9\ 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).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Commission finds that the proposal to list and trade the 
Certificates on the Exchange is consistent with

[[Page 18013]]

Section 11A(a)(1)(C)(iii) of the Act,\11\ 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. The Exchange will disseminate quotation and last-sale data 
information via the Consolidated Tape. The value of the Index is 
calculated on at least a 15-second basis and is widely disseminated by 
major market data vendors and financial publications.
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    \11\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    The Commission further believes that the proposal to list and trade 
the Certificates is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Certificates. If the 
value of the Index is not being disseminated as required, the Exchange 
may halt trading during the day on which the interruption first occurs. 
If such interruption persists past the trading day in which it 
occurred, the Exchange will halt trading no later than the beginning of 
the trading day following the interruption. The Exchange may consider 
all relevant factors in exercising its discretion to halt or suspend 
trading in Trust Certificates.\12\ Standard & Poor's (``S&P''),\13\ 
which publishes the Index, is not a registered broker-dealer, and 
Citigroup Funding, Inc. is not affiliated with S&P. With respect to any 
index upon which the value of an issue of Trust Certificates is based 
and that is maintained by a broker-dealer, the Exchange would require 
that such broker-dealer erect a ``firewall'' around personnel 
responsible for the maintenance of such index or who have access to 
information concerning adjustments to the index, and the index would be 
required to be calculated by a third party who is not a broker-dealer. 
In addition, the Exchange states that it has a general policy 
prohibiting the distribution of material, non-public information by its 
employees.
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    \12\ Trading may be halted because of market conditions or for 
reasons that, in the view of the Exchange, make trading in Trust 
Certificates inadvisable. These may include: (1) The extent to which 
trading is not occurring in the underlying securities; or (2) 
whether other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present.
    \13\ S&P is a division of The McGraw-Hill Companies, Inc.
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    The Certificates will be subject to the requirements of NYSE Arca 
Equities Rule 5.2(j)(7), including the continued listing criteria. 
Additionally, NYSE Arca states that: (1) At least one million publicly 
held trading units will be issued prior to listing and trading on the 
Exchange, with at least 400 public beneficial holders; (2) the issuer, 
Citigroup Funding, Inc., has total assets of at least $100 million and 
a net worth of at least $10 million; and (3) the issuer will be 
required to have either (a) a minimum tangible net worth of 
$250,000,000, or (b) a minimum tangible net worth of $150,000,000 and 
the original issue price of the Certificates, combined with all of the 
issuer's other Trust Certificates listed on a national securities 
exchange or otherwise publicly traded in the United States, must not be 
greater than 25% of the issuer's tangible net worth at the time of 
issuance.\14\
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    \14\ The Commission notes that the foregoing criteria relating 
to the issuance and the issuer are substantially similar to the 
requirements applicable to Index-Linked Securities. See NYSE Arca 
Equities Rule 5.2(j)(6)(A).
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    Further, the Exchange has represented that the Certificates are 
equity securities subject to the Exchange's rules governing the trading 
of equity securities, including the Exchange's equity margin rules. In 
support of this proposal, the Exchange has made the following 
representations:
    (1) The Exchange's surveillance procedures are adequate to properly 
monitor Exchange trading of the Certificates in all trading sessions 
and to deter and detect violations of Exchange rules and applicable 
federal securities laws. The Exchange may obtain information via the 
Intermarket Surveillance Group (``ISG'') from other exchanges who are 
members of the ISG.
    (2) Prior to the commencement of trading, the Exchange will inform 
its ETP Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Certificates. 
Specifically, the Information Bulletin will discuss the following: (a) 
The procedures for purchases and exchanges of Trust Certificates; (b) 
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence 
on its ETP Holders to learn the essential facts relating to every 
customer prior to trading an issue of Trust Certificates; (c) trading 
hours; and (d) trading information. In addition, the Information 
Bulletin will reference that an issue of Trust Certificates is subject 
to various fees and expenses described in the applicable prospectus.
    This approval order is based on the Exchange's representations.

III. Accelerated Approval

    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\15\ for approving the proposal prior to the thirtieth day 
after the date of publication of the Notice in the Federal Register. 
The Commission notes that it has previously approved for listing and 
trading on the Exchange other issues of Trust Certificates issued by 
Citigroup Funding, Inc. based on the Index that have similar 
characteristics and payout provisions to the Certificates.\16\ In 
addition, no comments were received on the proposed rule change during 
the 21-day comment period, and the Commission believes that the 
Exchange's proposal to list and trade the Certificates under NYSE Arca 
Equities Rule 5.2(j)(7) does not present any novel or significant 
regulatory issues. The Commission believes that accelerating approval 
of this proposal should benefit investors by creating, without undue 
delay, additional competition in the market for Trust Certificates.
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    \15\ 15 U.S.C. 78s(b)(2).
    \16\ See Securities Exchange Act Release No. 59051 (December 4, 
2008), 73 FR 75155 (December 10, 2008) (SR-NYSEArca-2008-123) (order 
approving NYSE Arca Equities Rule 5.2(j)(7) and listing on the 
Exchange of 14 issues thereunder).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\17\ that the proposed rule change (SR-NYSEArca-2009-20) be, and it 
hereby is, approved on an accelerated basis.
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    \17\ 15 U.S.C. 78s(b)(2).

    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,
Deputy Secretary.
[FR Doc. E9-8961 Filed 4-17-09; 8:45 am]

BILLING CODE 8010-01-P