Document ID: SEC-2005-0370-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2005-12-14T05:00Z

[Federal Register: December 14, 2005 (Volume 70, Number 239)]
[Notices]               
[Page 74062-74065]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14de05-107]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52904; File No. SR-Amex-2005-092]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Order Granting Accelerated Approval of a Proposed 
Rule Change and Amendment No. 1 Thereto Relating to the Trading 
Pursuant to Unlisted Trading Privileges of the iShares S&P Global 100 
Fund

December 7, 2005.
    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 September 13, 2005, the American Stock Exchange LLC (``Amex'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II and III below, which Items have been prepared by the 
Exchange. On November 22, 2005, Amex filed Amendment No. 1 to the 
proposed rule change.\3\ The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, from 
interested persons and approving the proposal on an accelerated basis.
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    \1\ 15 U.S.C 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange clarified and supplemented 
certain aspects of its proposal. Amendment No. 1 supplements the 
information provided in various sections, as indicated, of the 
Exchange's Form 19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Amex proposes to trade shares (the ``Fund Shares'' or 
``Shares'') of the iShares S&P Global 100 Fund (ticker symbol: IOO) 
(the ``Global 100 Fund'' or ``Fund'') pursuant to unlisted trading 
privileges (``UTP'').
    The text of the proposed rule change is available on the Exchange's 
Web site at (http://www.amex.com) at the principal office of the 

Exchange, and at

[[Page 74063]]

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 Amex 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 Amex 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade Fund Shares which are Index 
Fund Shares under Amex Rules 1000A et seq., pursuant to UTP. The 
Commission previously approved the original listing and trading of the 
Fund Shares on the New York Stock Exchange, Inc. (``NYSE'').\4\ The 
Fund is a separate series of the iShares Trust (the ``Trust''). 
Standard & Poor's Corporation, a division of The McGraw-Hill Companies, 
Inc. (``S&P''), calculates and maintains the S&P Global 100 Index (the 
``Index'' or ``Underlying Index'') in cooperation with the NYSE. The 
Underlying Index is governed and maintained by S&P through an Index 
Committee drawn from professionals at S&P. Additional information about 
the Funds is also available at http://www.ishares.com.

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    \4\ See Securities Exchange Act Release No. 43658 (December 1, 
2000), 65 FR 77408 (December 11, 2000) (SR-NYSE-00-53) (``NYSE 
Order''). The Fund commenced trading on the NYSE on December 8, 
2000.
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    The investment objective of the Fund is to provide investment 
results that correspond generally to the performance of the Underlying 
Index. The Underlying Index seeks results that correspond generally to 
the price and yield performance, before fees and expenses, of 100 
multinational, blue chip companies of major importance in the global 
equity markets as defined by the Index. The Index includes 100 large-
cap companies drawn from the S&P 1200 Index, whose businesses are 
global in nature and derive a substantial portion of their operating 
income, assets and employees from multiple countries.\5\ The Index 
description, including any changes thereto, may be found on the S&P 
Global Web site at http://www.spglobal.com.

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    \5\ A global company is defined as a corporation that has 
production facilities and/or other fixed assets in at least one 
nation other than its home country and makes its major management 
decisions in a global context. The degree to which sales are 
executed outside the home country is a factor in determining a 
company's global reach.
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(a) Dissemination of Information About the Fund Shares

    Quotations for and last sale information regarding the Fund is 
disseminated through the Consolidated Tape Association (``CTA''). The 
net asset value (``NAV'') of the Fund is calculated each business day, 
normally at the close of regular trading of the NYSE, and is published 
in a number of places, including http://www.iShares.com and through the 

facilities of CTA. According to the Funds' prospectus, Investors Bank & 
Trust Company, the administrator, custodian and transfer agent for the 
Fund, determines the NAV for the Funds as of the close of regular 
trading on the NYSE (ordinarily 4 p.m., Eastern time) on each day that 
the NYSE is open for trading.\6\ The Funds and the index calculation 
methodology for the Index is both described in more detail in the NYSE 
Order.
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    \6\ The Web site for the Trust, http://www.iShares.com, makes 

available a variety of other relevant information about the Shares.
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    In order to provide updated information relating to the Funds for 
use by investors, professionals, and persons wishing to create or 
redeem Fund Shares in creation unit aggregation (``Creation Units''), 
the NYSE disseminates, through the facilities of CTA, the indicative 
optimized portfolio value (``IOPV''), calculated by Bloomberg, L.P., 
every fifteen (15) seconds during the trading hours for the Shares of 
9:30 a.m. to 4:15 p.m. ET.
    As described in the Funds' prospectus, dividends are accrued daily 
from net investment income and will be declared and paid to beneficial 
owners of record at least annually by the Funds. The process for 
payment of dividends and other distributions is described in more 
detail in the Funds' Prospectus and in the NYSE Order.

(b) Trading Rules

    The Exchange deems the Fund Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. The trading hours for 
the Funds on the Exchange will be 9:30 a.m. to 4:15 p.m. Eastern Time 
(``ET''). Shares trade with a minimum price variation of $0.01.
    Amex Rule 190 generally precludes certain business relationships 
between an issuer and the specialist in the issuer's securities. 
Exceptions in the rule permit specialists in Fund Shares to enter into 
Creation Unit transactions to facilitate the maintenance of a fair and 
orderly market. Commentary .04 to Amex Rule 190 specifically applies to 
Index Fund Shares listed on the Exchange, including the Shares. 
Commentary .04 states that nothing in Amex Rule 190(a) should be 
construed to restrict a specialist registered in a security issued by 
an investment company from purchasing and redeeming the listed 
security, or securities that can be subdivided or converted into the 
listed security, from the issuer as appropriate to facilitate the 
maintenance of a fair and orderly market.
    Amex Rule 154, Commentary .04(c) provides that stop and stop limit 
orders to buy or sell a security (other than an option, which is 
covered by Rule 950(f) and Commentary thereto) the price of which is 
derivatively priced based upon another security or index of securities, 
may with the prior approval of a Floor Official, be elected by a 
quotation, as set forth in Commentary .04(c)(i-v). The Exchange has 
designated Index Fund Shares, including the Funds Shares, as eligible 
for this treatment.
    The rules of the Exchange require its members to deliver a 
prospectus or product description to investors purchasing Shares of the 
Fund prior to or concurrently with the confirmation of a transaction in 
such Shares. The Exchange notes, however, that although Exchange Rule 
1000A provides for delivery of written descriptions to customers of 
Funds that have received an exemption from section 24(d) of the 
Investment Company Act of 1940 and the Trust has received such an 
exemption, there is at this time no written description available for 
these Funds. The Exchange will advise its members and member 
organizations that delivery of a prospectus in lieu of a written 
description would satisfy the requirements of Rule 1000A.
    The Amex will cease trading in the Fund Shares if (a) the primary 
market stops trading the Fund Shares because of a regulatory halt akin 
to a halt based on Amex Rule 117 and/or a halt because dissemination of 
the indicative optimized portfolio value (``IOPV'') and/or underlying 
index value has ceased or (b) the primary market delists the Fund 
Shares.

(c) Surveillance

    The Exchange notes that the Underlying Index is broad-based and has 
components with significant market

[[Page 74064]]

capitalizations and liquidity.\7\ Nevertheless, the Exchange represents 
that its surveillance procedures are adequate to properly monitor the 
trading of the Shares. Specifically, the Amex will rely on its existing 
surveillance procedures governing Index Fund Shares, which have been 
deemed adequate under the Act.
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    \7\ Telephone conversation between Florence Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission, and 
Jeffrey Burns, Associate General Counsel, Amex, on December 6, 2005.
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(d) Information Circular

    In connection with the trading of the Shares, the Amex will inform 
its members in an Information Circular of the special characteristics 
and risks associated with trading of the Shares, such as, a description 
of the Fund and associated Shares, how the Fund Shares are created and 
redeemed in Creation Units (e.g., that Fund Shares are not individually 
redeemable), foreign currency risks, foreign securities 
characteristics, applicable foreign country laws and restrictions, 
applicable Exchange rules, dissemination information, trading 
information, the applicability of suitability rules and a discussion of 
any relief provided by the Commission or the staff from any rules under 
the Act. Additionally, in the Information Circular, the Exchange will 
advise its members to deliver a prospectus to investors purchasing 
Shares of the Fund prior to or concurrently with the confirmation of a 
transaction in such Shares. The Information Circular will also discuss 
the information that will be publicly available about the Shares.
    The Information Circular will also remind members of their 
suitability obligations, including Amex Rule 411, which impose a duty 
of the due diligence on its members and member firms to learn the 
essential facts relating to every customer prior to trading the 
Shares.\8\
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    \8\ Telephone conversation between Florence Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission, and 
Jeffrey Burns, Associate General Counsel, Amex, on December 6, 2005.
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2. Statutory Basis
    The proposed rule change, as amended, is consistent with section 
6(b) of the Act \9\ in general and furthers the objectives of section 
6(b)(5) \10\ 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 regulating, clearing, settling, processing 
information with respect to, and facilitating transaction in 
securities, 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 \11\ because it deems the Fund 
Shares to be equity securities, thus rendering the Shares subject to 
the Exchange's existing rules governing the trading of equity 
securities.
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    \9\ 15 U.S.C. 78s(b).
    \10\ 15 U.S.C. 78s(b)(5).
    \11\ 17 CFR 240.12f-5.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change, as amended, 
will impose no 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

    No written comments were solicited or received with respect to 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, as amended, 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-Amex-2005-092 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-Amex-2005-092. 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 office of the Amex. 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 publicly available. All submissions should refer to 
File Number SR-Amex-2005-092 and should be submitted on or before 
January 4, 2006.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\12\ In particular, the Commission finds that the proposed 
rule change is consistent with section 6(b)(5) of the Act,\13\ 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.
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    \12\ 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).
    \13\ 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,\14\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\15\ The Commission notes that it previously approved the 
listing and trading of the Shares on the NYSE.\16\ The Commission also 
finds that the proposal is consistent with Rule

[[Page 74065]]

12f-5 under the Act,\17\ 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. Amex rules deem the Shares to be equity 
securities, thus trading in the Shares will be subject to the 
Exchange's existing rules governing the trading of equity 
securities.\18\
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    \14\ 15 U.S.C. 78l(f).
    \15\ 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.
    \16\ See NYSE Order, supra note 4.
    \17\ 17 CFR 240.12f-5.
    \18\ The Commission notes that Commentary .04 to existing Amex 
Rule 190 will permit a specialist in the Shares to create or redeem 
creation units of these funds to facilitate the maintenance of a 
fair and orderly market. The Commission previously has found 
Commentary .04 to Amex Rule 190 to be consistent with the Act. See 
Securities Exchange Act Release No. 36947 (March 8, 1996), 61 FR 
10606, 10612 (March 14, 1996) (SR-Amex-95-43).
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    The Commission further believes that the proposal is consistent 
with Section 11A(a)(1)(C)(iii) of the Act,\19\ which sets forth 
Congress's 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 
Shares are disseminated through the Consolidated Quotation System. 
Furthermore, the NYSE disseminates through the facilities of CTA an 
updated IOPV for the Shares at least every 15 seconds from 9:30 a.m. to 
4:15 p.m. E.T.
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    \19\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    The Exchange will cease trading in the Shares if (a) the primary 
market stops trading the Shares because of a regulatory halt similar to 
a halt based on Amex Rule 117 and/or a halt because dissemination of 
the IOPV and/or underlying index value has ceased or (b) the primary 
market delists the Shares.
    In support of this proposed rule change, the Exchange has made the 
following representations:
    1. Amex has appropriate rules to facilitate transactions in this 
type of security.
    2. Amex surveillance procedures are adequate to properly monitor 
the trading of the Shares on the Exchange.
    3. Amex will distribute an Information Circular to its members 
prior to the commencement of trading of the Shares on the Exchange that 
explains the terms, characteristics, and risks of trading such shares.
    4. Amex will require a member with a customer that purchases the 
Shares on the Exchange to provide that customer with a product 
prospectus and will note this prospectus delivery requirement in the 
Information Circular.
    5. Amex will cease trading in the Shares if (a) the primary market 
stops trading the Shares because of a regulatory halt similar to a halt 
based on Amex Rule 117 and/or a halt because dissemination of the IOPV 
and/or underlying index value has ceased or (b) the primary market 
delists the Shares.
    This approval order is conditioned on Amex's adherence to these 
representations.
    The Commission finds good cause for approving this proposed rule 
change, as amended, 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 these 
Shares on the NYSE is consistent with the Act.\20\ The Commission 
presently is not aware of any issue that would cause it to revisit that 
earlier finding or preclude the trading of these funds on the Exchange 
pursuant to UTP. Therefore, accelerating approval of this proposed rule 
change should benefit investors by creating, without undue delay, 
additional competition in the market for these Shares.
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    \20\ See NYSE Order, supra note 4.
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V. Conclusion

    It Is therefore ordered, pursuant to section 19(b)(2) of the Act, 
that the proposed rule change (SR-Amex-2005-092), is hereby approved on 
an accelerated basis.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
 [FR Doc. E5-7296 Filed 12-13-05; 8:45 am]

BILLING CODE 8010-01-P