Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change and Amendment No. 1 Thereto Relating to the Trading of the Index-Linked Securities of Barclays Bank PLC Linked to the Performance of the Dow Jones-AIG Commodity Index Total Return Pursuant to Unlisted Trading Privileges, 43263-43268 [E6-12148]

Download as PDF Federal Register / Vol. 71, No. 146 / Monday, July 31, 2006 / Notices In particular, the Commission believes that the proposed rule changes are consistent with Section 6(b)(5) of the Exchange Act,22 which requires that the rules of the exchange be designed, among other things, to remove impediments to and perfect the mechanisms of a free and open market, and, in general, to protect investors and the public interest. The Commission finds that amending Exchange Rules 104 and 123E is consistent with the requirements of Section 6(b)(5) because the amendments are designed to more closely align net liquid asset requirements with a specialist organization’s risks. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Exchange Act,23 that the proposed rule change (File No. SR–NYSE–2005–38), as amended, be, and it hereby is, approved. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.24 Jill M. Peterson, Assistant Secretary. [FR Doc. E6–12183 Filed 7–28–06; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54189; File No. SR– NYSEArca–2006–17] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change and Amendment No. 1 Thereto Relating to the Trading of the Index-Linked Securities of Barclays Bank PLC Linked to the Performance of the Dow Jones—AIG Commodity Index Total Return Pursuant to Unlisted Trading Privileges sroberts on PROD1PC70 with NOTICES July 21, 2006. 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 May 16, 2006, NYSE Arca, Inc. (the ‘‘Exchange’’), through its wholly owned subsidiary, NYSE Arca Equities, Inc. (‘‘NYSE Arca Equities’’ or the ‘‘Corporation’’), filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have 22 15 U.S.C. 78f(b)(5). U.S.C. 78s(b)(2). 24 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 23 15 VerDate Aug<31>2005 17:34 Jul 28, 2006 Jkt 208001 43263 Market Maker, or affiliate of such Market Maker, engages in Other Business Activities. For purposes of Commodity Index-Linked Securities, Other Business Activities shall include acting as a Market Maker or functioning in any capacity involving marketmaking responsibilities in the Index components, the commodities underlying the Index components, or I. Self-Regulatory Organization’s options, futures or options on futures on Statement of the Terms of Substance of the Index, or any other derivatives the Proposed Rule Change (collectively, ‘‘derivative instruments’’) Through NYSE Arca Equities, the based on the Index or based on any Exchange proposes to amend its rules Index component or any physical governing NYSE Arca, LLC (also commodity underlying an Index referred to as the ‘‘NYSE Arca component. However, an approved Marketplace’’), the equities trading person of an ETP Holder acting as a facility of NYSE Arca Equities. Pursuant registered Market Maker in Commodity to NYSE Arca Equities Rule 5.2(j)(6), the Index-Linked Securities that has Exchange proposes to trade pursuant to established and obtained Corporation unlisted trading privileges (‘‘UTP’’) the approval of procedures restricting the Index-Linked Securities (‘‘Securities’’) flow of material, non-public market of Barclays Bank PLC (‘‘Barclays’’), information between itself and the ETP which are linked to the performance of Holder pursuant to Rule 7.26, and any the Dow Jones—AIG Commodity Index member, officer or employee associated Total Return (‘‘Index’’). The Exchange therewith, may act in a market making also proposes new Commentary .01 to capacity, other than as a Market Maker NYSE Arca Equities Rule 5.2(j)(6) to in the Commodity Index-Linked accommodate the trading of the Securities on another market center, in Securities. The text of the proposed rule the Index components, the commodities change is included below. Proposed underlying the Index components, or new language is italicized. any derivative instruments based on the * * * * * Index or based on any Index component or any physical commodity underlying Rule 5.2(j)(6) an Index component. Index-Linked Securities (b) The ETP Holder acting as a Introductory Paragraph and Sections registered Market Maker in Commodity (a)–(k)—No change. Index-Linked Securities must file with Commentary: the Corporation, in a manner prescribed .01 The provisions of this by the Corporation, and keep current a Commentary apply only to Index-Linked list identifying all accounts for trading Securities listed and/or traded under in the Index components, the this Rule where the price of such Index- commodities underlying the Index Linked Securities is based in whole or components, or any derivative part on the price of (i) a commodity or instruments based on the Index or based commodities; (ii) any futures contracts on any Index component or any or other derivatives based on a physical commodity underlying an commodity or commodities; or (iii) any Index component, which the ETP index based on either (i) or (ii) above (an Holder acting as registered Market ‘‘Index’’) (‘‘Commodity Index-Linked Maker may have or over which it may Securities’’). Commodity Index-Linked exercise investment discretion. No ETP Securities listed and/or traded under Holder acting as registered Market this Rule may have a term of up to 30 Maker in the Commodity Index-Linked years. Securities shall trade in the Index (a) An ETP Holder acting as a components, the commodities registered Market Maker in Commodity underlying the Index components, or Index-Linked Securities is obligated to any derivative instruments based on the comply with Rule 7.26 pertaining to Index or based on any Index component limitations on dealings when such or any physical commodity underlying an Index component, in an account in 3 In Amendment No. 1, the Exchange revised the which an ETP Holder acting as a proposed rule text and amended the purpose registered Market Maker, directly or section to provide (i) that the Securities have a term of 30 years; (ii) that the Information Bulletin will indirectly, controls trading activities, or include a description of the Commission’s no-action has a direct interest in the profits or relief; and (iii) an amended description of the losses thereof, which has not been Exchange’s surveillance procedures regarding the reported to the Corporation as required Securities. The changes in Amendment No. 1 have been incorporated into this Notice and Order. by this Rule. been prepared by the Exchange. On July 20, 2006, the Exchange filed Amendment No. 1 to the proposed rule change.3 The Commission is publishing this notice and order to solicit comments on the proposed rule change, as amended, from interested persons and is approving the proposal on an accelerated basis. PO 00000 Frm 00170 Fmt 4703 Sfmt 4703 E:\FR\FM\31JYN1.SGM 31JYN1 43264 Federal Register / Vol. 71, No. 146 / Monday, July 31, 2006 / Notices (c) In addition to the existing obligations under Corporation rules regarding the production of books and records (See, e.g. Rule 4.4), the ETP Holder acting as a registered Market Maker in Commodity Index-Linked Securities shall make available to the Corporation such books, records or other information pertaining to transactions by such entity or any limited partner, officer or approved person thereof, registered or nonregistered employee affiliated with such entity for its or their own accounts in the Index components, the commodities underlying the Index components, or any derivative instruments based on the Index or based on any Index component or any physical commodity underlying an Index component, as may be requested by the Corporation. (d) In connection with trading in the Index components, the commodities underlying the Index components, or any derivative instruments based on the Index or based on any Index component or any physical commodity underlying an Index component (including the Commodity Index-Linked Securities), the ETP Holder acting as a registered Market Maker in Commodity IndexLinked Securities shall not use any material nonpublic information received from any person associated with an ETP Holder or employee of such person regarding trading by such person or employee in the Index components, the commodities underlying the Index components, or any derivative instruments based on the Index or based on any Index component or any physical commodity underlying an Index component. * * * * * sroberts on PROD1PC70 with NOTICES 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. VerDate Aug<31>2005 17:34 Jul 28, 2006 Jkt 208001 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Pursuant to NYSE Arca Equities Rule 5.2(j)(6), the Exchange proposes to trade pursuant to UTP the Securities of Barclays, which are linked to the performance of the Index. Barclays intends to issue the Securities under the name ‘‘iPathSM Exchange-Traded Notes.’’ The Exchange also proposes new Commentary .01 to NYSE Arca Equities Rule 5.2(j)(6) to accommodate the trading of the Securities. The New York Stock Exchange, Inc. (‘‘NYSE’’) filed with the Commission a rule proposal for the original listing and trading of the Securities,4 and the proposal was approved on May 25, 2006.5 (a) The Securities and the Index (i) The Securities In August 2005, the Commission approved NYSE Arca Equities Rule 5.2(j)(6), which provides general standards for the listing and trading of ‘‘Index-Linked Securities.’’ 6 IndexLinked Securities are securities that provide for the payment at maturity of a cash amount based on the performance of an underlying index or indexes. Such securities may or may not provide for the repayment of the original principal investment amount. As permitted in NYSE Arca Equities Rule 5.2(j)(6), the Exchange is submitting this rule proposal to the Commission pursuant to Section 19(b)(2) of the Act,7 to obtain Commission approval to trade the Securities pursuant to UTP. A description of the Securities and the Index is set forth in the NYSE Proposal.8 The Securities are a series of medium-term debt securities of Barclays that provide for a cash payment at maturity or upon earlier exchange at the holder’s option, based on the performance of the Index, subject to the adjustments described below. The Securities will not have a minimum principal amount that will be repaid and, accordingly, payment on the Securities prior to or at maturity may be 4 See Securities Exchange Act Release No. 53639 (April 12, 2006), 71 FR 20741 (April 21, 2006) (SR– NYSE–2006–16) (the ‘‘NYSE Proposal’’). 5 See Securities Exchange Act Release No. 53876 (May 25, 2006), 71 FR 32158 (June 2, 2006) (SR– NYSE–2006–16) (the ‘‘NYSE Order’’). 6 See Securities Exchange Act Release No. 52204 (August 3, 2005), 70 FR 46559 (August 10, 2005) (SR–PCX–2005–63). 7 15 U.S.C. 78s(b)(2). 8 See supra note 4. PO 00000 Frm 00171 Fmt 4703 Sfmt 4703 less than the original issue price of the Securities. In fact, the value of the Index must increase for the investor to receive at least the $50 principal amount per Security at maturity or upon exchange or redemption. If the value of the Index decreases or does not increase sufficiently to offset the investor fee,9 the investor will receive less, and possibly significantly less, than the $50 principal amount per Security. In addition, holders of the Securities will not receive any interest payments from the Securities. The Securities will have a term of 30 years and are not callable.10 Holders who have not previously redeemed their Securities will receive a cash payment at maturity equal to the principal amount of their Securities times the index factor 11 on the Final Valuation Date 12 minus the investor fee on the Final Valuation Date. Prior to maturity, holders may, subject to certain restrictions, redeem their Securities on any Redemption Date 13 during the term of the Securities provided that they present at least 50,000 Securities for redemption, or they act through a broker or other financial intermediaries (such as a bank or other financial institution not required to register as a broker-dealer to engage in securities transactions) that are willing to bundle their Securities for redemption with other investors’ Securities. If a holder chooses to redeem 9 The investor fee is equal to 0.75% per year times the principal amount of a holder’s Securities times the index factor, calculated on a daily basis in the following manner. The investor fee on the date of issuance of the Securities will equal zero. On each subsequent calendar day until maturity or early redemption, the investor fee will increase by an amount equal to 0.75% times the principal amount of a holder’s Securities times the index factor on that day (or, if such day is not a trading day, the index factor on the immediately preceding trading day) divided by 365. The investor fee is the only fee holders will be charged in connection with their ownership of the Securities. 10 Telephone conversation between Florence Harmon, Senior Special Counsel, Division of Market Regulation, Commission and John Carey, Assistant General Counsel, NYSE Group, Inc. on July 12, 2006 (‘‘July 12 Telephone Conference’’) (confirming the Securities are not callable). 11 The ‘‘index factor’’ on any given day will be equal to the closing value of the Index on that day divided by the initial index level. The index factor on the Final Valuation Date will be equal to the final index level divided by the initial index level. The ‘‘initial index level’’ is the closing value of the Index on the date of issuance of the Securities (the ‘‘Trade Date’’) and the ‘‘final index level’’ is the closing value of the Index on the Final Valuation Date. 12 The ‘‘Final Valuation Date’’ is the last Thursday before maturity of the Securities. 13 A ‘‘Redemption Date’’ is the third business day following a Valuation Date (other than the Final Valuation Date). A ‘‘Valuation Date’’ is each Thursday from the first Thursday after issuance of the Securities until the last Thursday before the Final Valuation Date inclusive (or, if such date is not a trading day, the next succeeding trading day). E:\FR\FM\31JYN1.SGM 31JYN1 Federal Register / Vol. 71, No. 146 / Monday, July 31, 2006 / Notices such holder’s Securities, the holder will receive a cash payment on the applicable Redemption Date equal to the principal amount of such holder’s Securities times the index factor on the applicable Valuation Date minus the investor fee on the applicable Valuation Date. To redeem their Securities, holders must instruct their broker or other person through whom they hold their Securities to follow certain procedures as described in the NYSE Proposal.14 If an event of default occurs and the maturity of the Securities is accelerated, Barclays will pay the default amount in respect of the principal of the Securities at maturity. More information regarding default procedures, including a quotation period and an objection period, is set forth in the NYSE Proposal. (ii) The Index The Index, which was introduced in July 1998, is designed to be a diversified benchmark for commodities as an asset class. The Index reflects the returns that are potentially available through an unleveraged investment in the futures contracts on physical commodities traded on trading facilities in major industrialized countries comprising the Index plus the rate of interest that could be earned on cash collateral invested in specified Treasury Bills.15 The Index currently is composed of the prices of 19 exchange-traded futures contracts on physical commodities, namely aluminum, coffee, copper, corn, cotton, crude oil, gold, heating oil, hogs, live cattle, natural gas, nickel, silver, soybeans, soybean oil, sugar, unleaded gasoline, wheat, and zinc. Futures contracts on the Index are currently listed for trading on the Chicago Board of Trade (‘‘CBOT’’). The Index is a proprietary index that AIGI International Inc. developed and that Dow Jones & Company, Inc. (‘‘Dow Jones’’), in conjunction with AIG Financial Products Corp. (‘‘AIG–FP’’), calculates. More information regarding the operation, calculation methodology, sroberts on PROD1PC70 with NOTICES 14 If holders elect to redeem their Securities, Barclays may request that Barclays Capital Inc. (a broker-dealer) purchase the Securities for the cash amount that would otherwise have been payable by Barclays upon redemption. In this case, Barclays will remain obligated to redeem the Securities if Barclays Capital Inc. fails to purchase the Securities. Any Securities purchased by Barclays Capital Inc. may remain outstanding. 15 These returns are calculated by using the 91day U.S. Treasury Bill auction rate, designated as ‘‘High Rate’’ as published in the ‘‘Treasury Security Auction Results’’ report, published by the Bureau of the Public Debt currently available on its Web site (www.publicdebt.treas.gov/AI/AIGateway), which is generally published once per week on Monday. VerDate Aug<31>2005 17:34 Jul 28, 2006 Jkt 208001 weighting, and historical performance of the Index is set forth in the NYSE Proposal. (b) Dissemination and Availability of Information (i) The Intraday Indicative Value According to the NYSE Proposal, an ‘‘Intraday Indicative Value’’ ( or ‘‘IIV’’) meant to approximate the intrinsic economic value of the Securities will be calculated and published via the facilities of the Consolidated Tape Association every 15 seconds from 9:30 a.m. to 4 p.m. Eastern Time (‘‘ET’’) on each day on which the Securities are traded on the NYSE.16 Additionally, Barclays or an affiliate will calculate and publish the closing IIV of the Securities on each trading day at http://www.ipathetn.com. In connection with the Securities, the term ‘‘IIV’’ refers to the value at a given time determined based on the following equation: IIV = Principal Amount per Unit ($50) multiplied by (Current Index Level divided by Initial Index Level ) 17 minus Current Investor Fee.18 The IIV will not reflect price changes to the price of an underlying commodity between the close of trading of the futures contract at the relevant futures exchange and 4 p.m. ET. The value of the Securities may accordingly be influenced by non-concurrent trading hours between the Exchange and the various futures exchanges on which the futures contracts based on the Index commodities are traded. While the market for futures trading for each of the Index commodities is open, the IIV can be expected to closely approximate the redemption value of the Securities. However, during NYSE Arca Marketplace trading hours when the futures contracts have ceased IIV calculation will be provided for reference purposes only. It is not intended as a price or quotation, or as an offer or solicitation for the purchase, sale, redemption or termination of the Securities, nor does it reflect hedging or transaction costs, credit considerations, market liquidity, or bid-offer spreads. Published Index levels from the index sponsors may occasionally be subject to delay or postponement. Any such delays or postponements will affect the Current Index Level (defined below) and therefore the IIV of the Securities. Index levels provided by the index sponsors will not necessarily reflect the depth and liquidity of the underlying commodities markets. For this reason and others, the actual trading price of the Securities may be different from their IIV. 17 The Current Index Level is the most recent published level of the Index as reported by Dow Jones and AIG–FP, whereas the Initial Index Level is the Index level on the trade date for the Securities. 18 The Current Investor Fee is the most recent daily calculation of the investor fee with respect to the Securities, determined as described above (which, during any trading day, will be the investor fee determined on the preceding calendar day). PO 00000 16 The Frm 00172 Fmt 4703 Sfmt 4703 43265 trading, spreads and resulting premiums or discounts may widen, and therefore, increase the difference between the price of the Securities and their redemption value. The Exchange stated that the IIV should not be viewed as a real time update of the redemption value. (ii) The Index According to the NYSE Proposal, Dow Jones disseminates the updated Index value approximately every 15 seconds (assuming the Index value has changed within such 15 second interval) from 8 a.m. to 3 p.m. ET and publishes a daily Index value at approximately 4 p.m. ET, on each DJ–AIG Business Day 19 on Reuters page AIGCII.20 The Index value can still be retrieved after 3 p.m. ET until the end of the Exchange trading day. Its value is generally static after 3 p.m. ET, although it may change if settlement values for Index components become available after that time. (c) UTP Trading Criteria The Exchange will cease trading in the Securities during the listing market’s trading hours if: (i) The listing market stops trading the Securities because of a regulatory halt similar to a halt based on NYSE Arca Equities Rule 7.12 or a halt because the IIV or the value of the underlying Index is no longer available; or (ii) the listing market delists the Securities. In the event that the Exchange is open for business on a day that is not a DJ–AIG Business Day, the Exchange will not permit trading of the Securities on that day. Additionally, the Exchange may cease trading the Securities if such other event shall occur or condition exists which, in the opinion of the Exchange, makes further dealings on the Exchange inadvisable. (d) Trading Rules The Exchange deems the Securities to be equity securities, thus rendering trading in the Securities subject to the Exchange’s existing rules governing the trading of equity securities. Trading in 19 A DJ–AIG Business Day is a day on which the sum of the commodity index percentages (as set forth in the NYSE Proposal) for the Index commodities that are available to trade is greater than 50%. 20 The Index’s Oversight Committee (defined and described in more detail in the NYSE Proposal) may exclude any otherwise eligible contract from the Index if it determines that it has an inadequate trading window. The Index currently includes contracts traded on the London Metal Exchange (‘‘LME’’), which is located in London. During the hours where the LME is closed, Dow Jones uses the last price and uses the settlement price once it is available in order to publish the Index value through the end of the trading day. The Index value does not reflect any after-hours or overnight trading in contracts traded on the LME. E:\FR\FM\31JYN1.SGM 31JYN1 43266 Federal Register / Vol. 71, No. 146 / Monday, July 31, 2006 / Notices sroberts on PROD1PC70 with NOTICES the Securities on the Exchange will occur from 4 a.m. to 8 p.m. ET in accordance with NYSE Arca Equities Rule 7.34(a).21 The Exchange has appropriate rules to facilitate transactions in the Securities during all trading sessions. The minimum trading increment for Securities on the Exchange will be $0.01. Further, the Exchange is proposing new Commentary .01 to NYSE Arca Equities Rule 5.2(j)(6), which sets forth certain restrictions on ETP Holders acting as registered Market Makers in the Securities to facilitate surveillance. Commentary .01(b)–(c) to NYSE Arca Equities Rule 5.2(j)(6) will require that the ETP Holder acting as a registered Market Maker in the Securities provide the Exchange with necessary information relating to its trading in the Index components, the commodities underlying the Index components, or options, futures or options on futures on the Index, or any other derivatives (collectively, ‘‘derivative instruments’’) based on the Index or based on any Index component or any physical commodity underlying an Index component. Commentary .01(d) to NYSE Arca Equities Rule 5.2(j)(6) will prohibit the ETP Holder acting as a registered Market Maker in the Securities from using any material nonpublic information received from any person associated with an ETP Holder or employee of such person regarding trading by such person or employee in the Index components, the commodities underlying the Index components, or any derivative instruments based on the Index or based on any Index component or any physical commodity underlying an Index component (including the Securities). In addition, Commentary .01(a) to NYSE Arca Equities Rule 5.2(j)(6) will prohibit the ETP Holder acting as a registered Market Maker in the Securities from being affiliated with a market maker in the Index 21 During all NYSE Arca Equities trading sessions, the Exchange represents that if the official Index Sponsor calculates an updated Index value, then such value will be updated and disseminated at least every 15 seconds during such trading session, and always will be so during the Exchange’s core trading session (although during this session, the Exchange may rely on the listing exchange to monitor such calculation and dissemination). The Exchange represents that the official Index Sponsor calculates and disseminates the Index value from 8 a.m. to 4 p.m. ET. Because this product is not in continuous distribution, an IIV is not required to be disseminated at least every 15 seconds in all trading sessions; however, because of the weekly redemption process for this product, such dissemination of the IIV is required during the Exchange’s core trading session. The Exchange may rely on the listing market to monitor such dissemination of the IIV during the Exchange’s core trading session. July 12 Telephone Conference. VerDate Aug<31>2005 17:34 Jul 28, 2006 Jkt 208001 components, the commodities underlying the Index components, or any derivative instruments based on the Index or based on any Index component or any physical commodity underlying an Index component unless adequate information barriers are in place, as provided in NYSE Arca Equities Rule 7.26. With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Securities. Trading in the Securities may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Securities inadvisable. These may include: (i) The extent to which trading is not occurring in the Index components; or (ii) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. In addition, trading in Securities will be subject to trading halts caused by extraordinary market volatility pursuant to the Exchange’s ‘‘circuit breaker’’ rule 22 or by the halt or suspension of the trading of the Index components.23 The Securities will be deemed ‘‘Eligible Listed Securities,’’ as defined in NYSE Arca Equities Rule 7.55, for purposes of the Intermarket Trading System (‘‘ITS’’) Plan and therefore will be subject to the trade through provisions of NYSE Arca Equities Rule 7.56, which require that ETP Holders avoid initiating trade-throughs for ITS securities. (e) Surveillance The Exchange’s surveillance procedures will incorporate and rely upon existing Exchange surveillance procedures governing equities. The Exchange believes that these procedures are adequate to monitor Exchange trading of the Securities in all trading sessions and to detect violations of Exchange rules, thereby deterring manipulation. 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 will be able to obtain information regarding trading in the Securities and the Index components NYSE Arca Equities Rule 7.12. ‘‘UTP Trading Criteria’’ above for specific instances when the Exchange will cease trading the Securities. PO 00000 22 See 23 See Frm 00173 Fmt 4703 Sfmt 4703 through ETP Holders in connection with such ETP Holders’ proprietary or customer trades which they effect on any relevant market. In addition, the Exchange can obtain market surveillance information with respect to transactions occurring on the LME, including customer identity information, pursuant to a memorandum of understanding with the LME. The Exchange has access to transaction information, including customer identity information, with respect to all contracts traded on the New York Mercantile Exchange (‘‘NYMEX’’) pursuant to the Exchange’s information sharing agreement with NYMEX. All of the other trading venues on which current Index components are traded, such as CBOT, are members of the Intermarket Surveillance Group, and the Exchange therefore has access to all relevant trading information with respect to those contracts without any further action being required on the part of the Exchange. (f) Information Bulletin 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 Securities. Specifically, the Information Bulletin will discuss the following: (i) The procedures for redemptions of Securities (and that Securities are not individually redeemable but are redeemable only in aggregations of at least 50,000 Securities); (ii) NYSE Arca Equities Rule 9.2(a),24 which imposes a duty of due diligence on its ETP Holders to learn the essential facts relating to every customer prior to trading the Securities; (iii) how information regarding the IIV is disseminated; (iv) the requirement that ETP Holders deliver a prospectus to investors purchasing newly issued Securities prior to or concurrently with the confirmation of a transaction (either in the initial distribution or during any 24 The Exchange recently amended NYSE Arca Equities Rule 9.2(a) (‘‘Diligence as to Accounts’’) to provide that EPT Holders, before recommending a transaction, must have reasonable grounds to believe that the recommendation is suitable for the customer based on any facts disclosed by the customer as to his other security holdings and as to his financial situation and needs. Further, the proposed rule amendment provides, with a limited exception, that prior to the execution of a transaction recommended to a non-institutional customer, the ETP Holders shall make reasonable efforts to obtain information concerning the customer’s financial status, tax status, investment objectives, and any other information that they believe would be useful to make a recommendation. See Securities Exchange Act Release No. 54045 (June 26, 2006), 71 FR 37971 (July 3, 2006) (SR– PCX–2005–115). E:\FR\FM\31JYN1.SGM 31JYN1 Federal Register / Vol. 71, No. 146 / Monday, July 31, 2006 / Notices subsequent distribution); and (v) trading information. The Information Bulletin will also reference the fact that there is no regulated source of last sale information regarding physical commodities, and that the Commission has no jurisdiction over the trading of physical commodities such as aluminum, gold, crude oil, heating oil, corn and wheat, or the futures contracts on which the value of the Securities is based. The Information Bulletin will also detail the terms of no-action positions taken by the Commission staff in connection with the Securities with respect to Section 11(d)(1) of the Act, Rule 10a–1 under the Act, Rule 200(g) of Regulation SHO and Rules 101 and 102 of Regulation M. 2. Statutory Basis The Exchange believes that the basis for this proposed rule change is consistent with the requirements under Section 6(b)(5) of the Act 25 that an exchange have rules that are 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 transaction in securities, to remove impediments and perfect the mechanisms of a free and open market, 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 26 because it deems the Securities to be equity securities, thus rendering the Securities subject to the Exchange’s rules governing the trading of equity securities for the Securities.27 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 sroberts on PROD1PC70 with NOTICES Written comments on the proposed rule change were neither solicited nor received. 25 15 U.S.C. 78s(b)(5). CFR 240.12f–5. 27 July 12 Telephone Conference (the Exchange requested that the Commission delete the word ‘‘existing’’ to clarify that the Securities will be subject to all applicable Exchange rules governing the trading of equity securities for the Securities). 26 17 VerDate Aug<31>2005 17:34 Jul 28, 2006 Jkt 208001 43267 thereunder applicable to a national securities exchange.28 In particular, the Interested persons are invited to Commission finds that the proposed submit written data, views, and rule change is consistent with Section arguments concerning the foregoing, 6(b)(5) of the Act,29 which requires that including whether the proposed rule an exchange have rules designed, among change, as amended, is consistent with the Act. Comments may be submitted by other things, to promote just and equitable principles of trade, to remove any of the following methods: impediments to and perfect the Electronic Comments mechanism of a free and open market and a national market system, and in • Use the Commission’s Internet general to protect investors and the comment form (http://www.sec.gov/ public interest. rules/sro.shtml); or In addition, the Commission finds • Send an e-mail to rulethat the proposal is consistent with comments@sec.gov. Please include File Section 12(f) of the Act,30 which permits Number SR–NYSEArca-2006–17 on the an exchange to trade, pursuant to UTP, subject line. a security that is listed and registered on Paper Comments another exchange.31 The Commission notes that it previously approved the • Send paper comments in triplicate listing and trading of the Securities on to Nancy M. Morris, Secretary, NYSE.32 The Commission also finds that Securities and Exchange Commission, the proposal is consistent with Rule 100 F Street, NE., Washington, DC 12f–5 under the Act,33 which provides 20549–1090. that an exchange shall not extend UTP All submissions should refer to File to a security unless the exchange has in Number SR–NYSEArca–2006–17. This effect a rule or rules providing for file number should be included on the transactions in the class or type of subject line if e-mail is used. To help the security to which the exchange extends Commission process and review your UTP. NYSE Arca Equities rules deem comments more efficiently, please use the Securities to be equity securities, only one method. The Commission will thus trading in the Securities will be post all comments on the Commission’s subject to the Exchange’s rules Internet Web site (http://www.sec.gov/ governing the trading of equity rules/sro.shtml). Copies of the securities and the specific rules set forth submission, all subsequent herein for this product class. amendments, all written statements The Commission further believes that with respect to the proposed rule the proposal is consistent with Section change that are filed with the 11A(a)(1)(C)(iii) of the Act,34 which sets Commission, and all written forth Congress’s finding that it is in the communications relating to the public interest and appropriate for the proposed rule change between the protection of investors and the Commission and any person, other than maintenance of fair and orderly markets those that may be withheld from the to assure the availability to brokers, public in accordance with the dealers, and investors of information provisions of 5 U.S.C. 552, will be with respect to quotations for and available for inspection and copying in transactions in securities. the Commission’s Public Reference In support of the portion of the Room. Copies of such filing also will be proposed rule change regarding UTP of available for inspection and copying at the Securities, the Exchange has made the principal offices of the Exchange. the following representations: All comments received will be posted 28 In approving this rule change, the Commission without change; the Commission does notes that it has considered the proposed rule’s not edit personal identifying impact on efficiency, competition, and capital information from submissions. You formation. See 15 U.S.C. 78c(f). should submit only information that 29 15 U.S.C. 78f(b)(5). you wish to make available publicly. All 30 15 U.S.C. 78l(f). 31 Section 12(a) of the Act, 15 U.S.C. 78l(a), submissions should refer to File generally prohibits a broker-dealer from trading a Number SR–NYSEArca–2006–17 and security on a national securities exchange unless should be submitted on or before the security is registered on that exchange pursuant August 21, 2006. to Section 12 of the Act. Section 12(f) of the Act III. Solicitation of Comments 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 PO 00000 Frm 00174 Fmt 4703 Sfmt 4703 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. 32 See NYSE Order, supra note 5. 33 17 CFR 240.12f–5. 34 15 U.S.C. 78k–1(a)(1)(C)(iii). E:\FR\FM\31JYN1.SGM 31JYN1 43268 Federal Register / Vol. 71, No. 146 / Monday, July 31, 2006 / Notices 1. NYSE Arca Equities has appropriate rules to facilitate transactions in this type of security in all trading sessions. 2. NYSE Arca Equities surveillance procedures are adequate to properly monitor the trading of the Securities on the Exchange. 3. NYSE Arca Equities will distribute an Information Bulletin to its members prior to the commencement of trading of the Securities on the Exchange that explains the terms, characteristics, and risks of trading such securities. 4. NYSE Arca Equities will require a member with a customer who purchases newly issued Securities on the Exchange to provide that customer with a product prospectus and will note this prospectus delivery requirement in the Information Bulletin. 5. The Exchange will cease trading in the Securities if: (1) The primary market stops trading the securities because of a regulatory halt similar to a halt based on NYSE Arca Equities Rule 7.12 and/or a halt because an updated dissemination of the IIV or Index value at least every 15 seconds has ceased; or (2) if such other event occurs or condition exists which, in the opinion of the Exchange, makes further dealings on the Exchange inadvisable; or (3) the primary market delists the Securities. This approval order is conditioned on NYSE Arca Equities’ 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 Securities on the NYSE is consistent with the Act.35 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 Securities. sroberts on PROD1PC70 with NOTICES V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,36 that the proposed rule change (NYSEArca– 2006–17), as amended, is hereby approved on an accelerated basis. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.37 SMALL BUSINESS ADMINISTRATION Jill M. Peterson, Assistant Secretary. [FR Doc. E6–12148 Filed 7–28–06; 8:45 am] California Disaster #CA–00037 Declaration of Economic Injury BILLING CODE 8010–01–P ACTION: SMALL BUSINESS ADMINISTRATION Harbert Mezzanine Partners II SBIC, L.P. (License No. 04/04–0298); Notice Seeking Exemption Under 312 of the Small Business Investment Act, Conflicts of Interest Notice is hereby given that Harbert Mezzanine Partners II SBIC, L.P. One Riverchase Parkway South, Birmingham, Alabama, 35244, a Federal Licensee under the Small Business Investment Act of 1958, as amended (‘‘the Act’’), in connection with the financing of a small concern, has sought an exemption under section 312 of the Act and section 107.730, Financings Which Constitute Conflicts of Interest of the Small Business Administration (‘‘SBA’’) rules and regulations (13 CFR 107.730 (2003)). Harbert Mezzanine Partners II SBIC, L.P. proposes to provide loans to APC Work Force Solutions, LLC (DBA Zero Chaos), 111 N. Orange Ave, Suite 1400, Orlando FL, 32801. The financing is contemplated for the acquisition of another staffing company. The financing is brought within the purview of Sec. 107.730 (a) (1) of the Regulations because Harbinger Mezzanine Partners, L.P., an Associate of Harbert Mezzanine Partners II SBIC, L.P., currently owns greater than 10 percent of APC Work Force Solutions, LLC (DBA Zero Chaos), and therefore, APC Work Force Solutions, LLC (DBA Zero Chaos), is considered an Associate of Harbert Mezzanine Partners II SBIC, L.P. as defined in Sec. 105.50 of the regulations. Notice is hereby given that any interested person may submit written comments on the transaction, within 15 days, to the Associate Administrator for Investment, U.S. Small Business Administration, 409 Third Street, SW., Washington, DC 20416. [Disaster Declaration #10535] Small Business Administration. Notice. AGENCY: SUMMARY: This is a notice of an Economic Injury Disaster Loan (EIDL) declaration for the State of California, dated 07/21/2006. Incident: Ferguson Rockslide. Incident Period: 04/29/2006 and continuing. Effective Date: 07/21/2006. EIDL Loan Application Deadline Date: 04/23/2007. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, National Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the Administrator’s EIDL declaration applications for economic injury disaster loans may be filed at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: Primary Counties: Mariposa. Contiguous Counties: California, Madera, Merced, Stanislaus, Tuolumne. The Interest Rate is: 4.000 percent. The number assigned to this disaster for economic injury is 105350. The State which received an EIDL Declaration # is California. (Catalog of Federal Domestic Assistance Number 59002) Steven C. Preston, Administrator. [FR Doc. E6–12150 Filed 7–28–06; 8:45 am] BILLING CODE 8025–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #10538] Dated: July 13, 2006. Jaime Guzman-Fournier, Associate Administrator for Investment. [FR Doc. E6–12145 Filed 7–28–06; 8:45 am] Delaware Disaster #DE–00002 BILLING CODE 8025–01–P SUMMARY: This is a Notice of the Presidential declaration of a major disaster for Public Assistance Only for 35 See NYSE Order, supra note 5. 36 15 U.S.C. 78s(b)(2). VerDate Aug<31>2005 17:34 Jul 28, 2006 37 17 Jkt 208001 PO 00000 CFR 200.30–3(a)(12). Frm 00175 Fmt 4703 Sfmt 4703 Small Business Administration. Notice. AGENCY: ACTION: E:\FR\FM\31JYN1.SGM 31JYN1

Agencies

[Federal Register Volume 71, Number 146 (Monday, July 31, 2006)]
[Notices]
[Pages 43263-43268]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-12148]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54189; File No. SR-NYSEArca-2006-17]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change and 
Amendment No. 1 Thereto Relating to the Trading of the Index-Linked 
Securities of Barclays Bank PLC Linked to the Performance of the Dow 
Jones--AIG Commodity Index Total Return Pursuant to Unlisted Trading 
Privileges

July 21, 2006.
    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 May 16, 2006, NYSE Arca, Inc. (the ``Exchange''), through its wholly 
owned subsidiary, NYSE Arca Equities, Inc. (``NYSE Arca Equities'' or 
the ``Corporation''), filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. On July 20, 
2006, the Exchange filed Amendment No. 1 to the proposed rule 
change.\3\ The Commission is publishing this notice and order to 
solicit comments on the proposed rule change, as amended, from 
interested persons and is 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 revised the proposed rule 
text and amended the purpose section to provide (i) that the 
Securities have a term of 30 years; (ii) that the Information 
Bulletin will include a description of the Commission's no-action 
relief; and (iii) an amended description of the Exchange's 
surveillance procedures regarding the Securities. The changes in 
Amendment No. 1 have been incorporated into this Notice and Order.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Through NYSE Arca Equities, the Exchange proposes to amend its 
rules governing NYSE Arca, LLC (also referred to as the ``NYSE Arca 
Marketplace''), the equities trading facility of NYSE Arca Equities. 
Pursuant to NYSE Arca Equities Rule 5.2(j)(6), the Exchange proposes to 
trade pursuant to unlisted trading privileges (``UTP'') the Index-
Linked Securities (``Securities'') of Barclays Bank PLC (``Barclays''), 
which are linked to the performance of the Dow Jones--AIG Commodity 
Index Total Return (``Index''). The Exchange also proposes new 
Commentary .01 to NYSE Arca Equities Rule 5.2(j)(6) to accommodate the 
trading of the Securities. The text of the proposed rule change is 
included below. Proposed new language is italicized.
* * * * *

Rule 5.2(j)(6)

Index-Linked Securities

    Introductory Paragraph and Sections (a)-(k)--No change.
    Commentary:
    .01 The provisions of this Commentary apply only to Index-Linked 
Securities listed and/or traded under this Rule where the price of such 
Index-Linked Securities is based in whole or part on the price of (i) a 
commodity or commodities; (ii) any futures contracts or other 
derivatives based on a commodity or commodities; or (iii) any index 
based on either (i) or (ii) above (an ``Index'') (``Commodity Index-
Linked Securities''). Commodity Index-Linked Securities listed and/or 
traded under this Rule may have a term of up to 30 years.
    (a) An ETP Holder acting as a registered Market Maker in Commodity 
Index-Linked Securities is obligated to comply with Rule 7.26 
pertaining to limitations on dealings when such Market Maker, or 
affiliate of such Market Maker, engages in Other Business Activities. 
For purposes of Commodity Index-Linked Securities, Other Business 
Activities shall include acting as a Market Maker or functioning in any 
capacity involving market-making responsibilities in the Index 
components, the commodities underlying the Index components, or 
options, futures or options on futures on the Index, or any other 
derivatives (collectively, ``derivative instruments'') based on the 
Index or based on any Index component or any physical commodity 
underlying an Index component. However, an approved person of an ETP 
Holder acting as a registered Market Maker in Commodity Index-Linked 
Securities that has established and obtained Corporation approval of 
procedures restricting the flow of material, non-public market 
information between itself and the ETP Holder pursuant to Rule 7.26, 
and any member, officer or employee associated therewith, may act in a 
market making capacity, other than as a Market Maker in the Commodity 
Index-Linked Securities on another market center, in the Index 
components, the commodities underlying the Index components, or any 
derivative instruments based on the Index or based on any Index 
component or any physical commodity underlying an Index component.
    (b) The ETP Holder acting as a registered Market Maker in Commodity 
Index-Linked Securities must file with the Corporation, in a manner 
prescribed by the Corporation, and keep current a list identifying all 
accounts for trading in the Index components, the commodities 
underlying the Index components, or any derivative instruments based on 
the Index or based on any Index component or any physical commodity 
underlying an Index component, which the ETP Holder acting as 
registered Market Maker may have or over which it may exercise 
investment discretion. No ETP Holder acting as registered Market Maker 
in the Commodity Index-Linked Securities shall trade in the Index 
components, the commodities underlying the Index components, or any 
derivative instruments based on the Index or based on any Index 
component or any physical commodity underlying an Index component, in 
an account in which an ETP Holder acting as a registered Market Maker, 
directly or indirectly, controls trading activities, or has a direct 
interest in the profits or losses thereof, which has not been reported 
to the Corporation as required by this Rule.

[[Page 43264]]

    (c) In addition to the existing obligations under Corporation rules 
regarding the production of books and records (See, e.g. Rule 4.4), the 
ETP Holder acting as a registered Market Maker in Commodity Index-
Linked Securities shall make available to the Corporation such books, 
records or other information pertaining to transactions by such entity 
or any limited partner, officer or approved person thereof, registered 
or non-registered employee affiliated with such entity for its or their 
own accounts in the Index components, the commodities underlying the 
Index components, or any derivative instruments based on the Index or 
based on any Index component or any physical commodity underlying an 
Index component, as may be requested by the Corporation.
    (d) In connection with trading in the Index components, the 
commodities underlying the Index components, or any derivative 
instruments based on the Index or based on any Index component or any 
physical commodity underlying an Index component (including the 
Commodity Index-Linked Securities), the ETP Holder acting as a 
registered Market Maker in Commodity Index-Linked Securities shall not 
use any material nonpublic information received from any person 
associated with an ETP Holder or employee of such person regarding 
trading by such person or employee in the Index components, the 
commodities underlying the Index components, or any derivative 
instruments based on the Index or based on any Index component or any 
physical commodity underlying an Index component.
* * * * *

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
    Pursuant to NYSE Arca Equities Rule 5.2(j)(6), the Exchange 
proposes to trade pursuant to UTP the Securities of Barclays, which are 
linked to the performance of the Index. Barclays intends to issue the 
Securities under the name ``iPathSM Exchange-Traded Notes.'' 
The Exchange also proposes new Commentary .01 to NYSE Arca Equities 
Rule 5.2(j)(6) to accommodate the trading of the Securities. The New 
York Stock Exchange, Inc. (``NYSE'') filed with the Commission a rule 
proposal for the original listing and trading of the Securities,\4\ and 
the proposal was approved on May 25, 2006.\5\
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    \4\ See Securities Exchange Act Release No. 53639 (April 12, 
2006), 71 FR 20741 (April 21, 2006) (SR-NYSE-2006-16) (the ``NYSE 
Proposal'').
    \5\ See Securities Exchange Act Release No. 53876 (May 25, 
2006), 71 FR 32158 (June 2, 2006) (SR-NYSE-2006-16) (the ``NYSE 
Order'').
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(a) The Securities and the Index
(i) The Securities
    In August 2005, the Commission approved NYSE Arca Equities Rule 
5.2(j)(6), which provides general standards for the listing and trading 
of ``Index-Linked Securities.'' \6\ 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. Such 
securities may or may not provide for the repayment of the original 
principal investment amount. As permitted in NYSE Arca Equities Rule 
5.2(j)(6), the Exchange is submitting this rule proposal to the 
Commission pursuant to Section 19(b)(2) of the Act,\7\ to obtain 
Commission approval to trade the Securities pursuant to UTP.
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    \6\ See Securities Exchange Act Release No. 52204 (August 3, 
2005), 70 FR 46559 (August 10, 2005) (SR-PCX-2005-63).
    \7\ 15 U.S.C. 78s(b)(2).
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    A description of the Securities and the Index is set forth in the 
NYSE Proposal.\8\ The Securities are a series of medium-term debt 
securities of Barclays that provide for a cash payment at maturity or 
upon earlier exchange at the holder's option, based on the performance 
of the Index, subject to the adjustments described below.
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    \8\ See supra note 4.
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    The Securities will not have a minimum principal amount that will 
be repaid and, accordingly, payment on the Securities prior to or at 
maturity may be less than the original issue price of the Securities. 
In fact, the value of the Index must increase for the investor to 
receive at least the $50 principal amount per Security at maturity or 
upon exchange or redemption. If the value of the Index decreases or 
does not increase sufficiently to offset the investor fee,\9\ the 
investor will receive less, and possibly significantly less, than the 
$50 principal amount per Security. In addition, holders of the 
Securities will not receive any interest payments from the Securities. 
The Securities will have a term of 30 years and are not callable.\10\
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    \9\ The investor fee is equal to 0.75% per year times the 
principal amount of a holder's Securities times the index factor, 
calculated on a daily basis in the following manner. The investor 
fee on the date of issuance of the Securities will equal zero. On 
each subsequent calendar day until maturity or early redemption, the 
investor fee will increase by an amount equal to 0.75% times the 
principal amount of a holder's Securities times the index factor on 
that day (or, if such day is not a trading day, the index factor on 
the immediately preceding trading day) divided by 365. The investor 
fee is the only fee holders will be charged in connection with their 
ownership of the Securities.
    \10\ Telephone conversation between Florence Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission and John 
Carey, Assistant General Counsel, NYSE Group, Inc. on July 12, 2006 
(``July 12 Telephone Conference'') (confirming the Securities are 
not callable).
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    Holders who have not previously redeemed their Securities will 
receive a cash payment at maturity equal to the principal amount of 
their Securities times the index factor \11\ on the Final Valuation 
Date \12\ minus the investor fee on the Final Valuation Date.
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    \11\ The ``index factor'' on any given day will be equal to the 
closing value of the Index on that day divided by the initial index 
level. The index factor on the Final Valuation Date will be equal to 
the final index level divided by the initial index level. The 
``initial index level'' is the closing value of the Index on the 
date of issuance of the Securities (the ``Trade Date'') and the 
``final index level'' is the closing value of the Index on the Final 
Valuation Date.
    \12\ The ``Final Valuation Date'' is the last Thursday before 
maturity of the Securities.
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    Prior to maturity, holders may, subject to certain restrictions, 
redeem their Securities on any Redemption Date \13\ during the term of 
the Securities provided that they present at least 50,000 Securities 
for redemption, or they act through a broker or other financial 
intermediaries (such as a bank or other financial institution not 
required to register as a broker-dealer to engage in securities 
transactions) that are willing to bundle their Securities for 
redemption with other investors' Securities. If a holder chooses to 
redeem

[[Page 43265]]

such holder's Securities, the holder will receive a cash payment on the 
applicable Redemption Date equal to the principal amount of such 
holder's Securities times the index factor on the applicable Valuation 
Date minus the investor fee on the applicable Valuation Date. To redeem 
their Securities, holders must instruct their broker or other person 
through whom they hold their Securities to follow certain procedures as 
described in the NYSE Proposal.\14\
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    \13\ A ``Redemption Date'' is the third business day following a 
Valuation Date (other than the Final Valuation Date). A ``Valuation 
Date'' is each Thursday from the first Thursday after issuance of 
the Securities until the last Thursday before the Final Valuation 
Date inclusive (or, if such date is not a trading day, the next 
succeeding trading day).
    \14\ If holders elect to redeem their Securities, Barclays may 
request that Barclays Capital Inc. (a broker-dealer) purchase the 
Securities for the cash amount that would otherwise have been 
payable by Barclays upon redemption. In this case, Barclays will 
remain obligated to redeem the Securities if Barclays Capital Inc. 
fails to purchase the Securities. Any Securities purchased by 
Barclays Capital Inc. may remain outstanding.
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    If an event of default occurs and the maturity of the Securities is 
accelerated, Barclays will pay the default amount in respect of the 
principal of the Securities at maturity. More information regarding 
default procedures, including a quotation period and an objection 
period, is set forth in the NYSE Proposal.
(ii) The Index
    The Index, which was introduced in July 1998, is designed to be a 
diversified benchmark for commodities as an asset class. The Index 
reflects the returns that are potentially available through an 
unleveraged investment in the futures contracts on physical commodities 
traded on trading facilities in major industrialized countries 
comprising the Index plus the rate of interest that could be earned on 
cash collateral invested in specified Treasury Bills.\15\ The Index 
currently is composed of the prices of 19 exchange-traded futures 
contracts on physical commodities, namely aluminum, coffee, copper, 
corn, cotton, crude oil, gold, heating oil, hogs, live cattle, natural 
gas, nickel, silver, soybeans, soybean oil, sugar, unleaded gasoline, 
wheat, and zinc. Futures contracts on the Index are currently listed 
for trading on the Chicago Board of Trade (``CBOT''). The Index is a 
proprietary index that AIGI International Inc. developed and that Dow 
Jones & Company, Inc. (``Dow Jones''), in conjunction with AIG 
Financial Products Corp. (``AIG-FP''), calculates. More information 
regarding the operation, calculation methodology, weighting, and 
historical performance of the Index is set forth in the NYSE Proposal.
---------------------------------------------------------------------------

    \15\ These returns are calculated by using the 91-day U.S. 
Treasury Bill auction rate, designated as ``High Rate'' as published 
in the ``Treasury Security Auction Results'' report, published by 
the Bureau of the Public Debt currently available on its Web site 
(www.publicdebt.treas.gov/AI/AIGateway), which is generally 
published once per week on Monday.
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(b) Dissemination and Availability of Information
(i) The Intraday Indicative Value
    According to the NYSE Proposal, an ``Intraday Indicative Value'' ( 
or ``IIV'') meant to approximate the intrinsic economic value of the 
Securities will be calculated and published via the facilities of the 
Consolidated Tape Association every 15 seconds from 9:30 a.m. to 4 p.m. 
Eastern Time (``ET'') on each day on which the Securities are traded on 
the NYSE.\16\ Additionally, Barclays or an affiliate will calculate and 
publish the closing IIV of the Securities on each trading day at http:/
/www.ipathetn.com. In connection with the Securities, the term ``IIV'' 
refers to the value at a given time determined based on the following 
equation: IIV = Principal Amount per Unit ($50) multiplied by (Current 
Index Level divided by Initial Index Level ) \17\ minus Current 
Investor Fee.\18\
---------------------------------------------------------------------------

    \16\ The IIV calculation will be provided for reference purposes 
only. It is not intended as a price or quotation, or as an offer or 
solicitation for the purchase, sale, redemption or termination of 
the Securities, nor does it reflect hedging or transaction costs, 
credit considerations, market liquidity, or bid-offer spreads. 
Published Index levels from the index sponsors may occasionally be 
subject to delay or postponement. Any such delays or postponements 
will affect the Current Index Level (defined below) and therefore 
the IIV of the Securities. Index levels provided by the index 
sponsors will not necessarily reflect the depth and liquidity of the 
underlying commodities markets. For this reason and others, the 
actual trading price of the Securities may be different from their 
IIV.
    \17\ The Current Index Level is the most recent published level 
of the Index as reported by Dow Jones and AIG-FP, whereas the 
Initial Index Level is the Index level on the trade date for the 
Securities.
    \18\ The Current Investor Fee is the most recent daily 
calculation of the investor fee with respect to the Securities, 
determined as described above (which, during any trading day, will 
be the investor fee determined on the preceding calendar day).
---------------------------------------------------------------------------

    The IIV will not reflect price changes to the price of an 
underlying commodity between the close of trading of the futures 
contract at the relevant futures exchange and 4 p.m. ET. The value of 
the Securities may accordingly be influenced by non-concurrent trading 
hours between the Exchange and the various futures exchanges on which 
the futures contracts based on the Index commodities are traded.
    While the market for futures trading for each of the Index 
commodities is open, the IIV can be expected to closely approximate the 
redemption value of the Securities. However, during NYSE Arca 
Marketplace trading hours when the futures contracts have ceased 
trading, spreads and resulting premiums or discounts may widen, and 
therefore, increase the difference between the price of the Securities 
and their redemption value. The Exchange stated that the IIV should not 
be viewed as a real time update of the redemption value.
(ii) The Index
    According to the NYSE Proposal, Dow Jones disseminates the updated 
Index value approximately every 15 seconds (assuming the Index value 
has changed within such 15 second interval) from 8 a.m. to 3 p.m. ET 
and publishes a daily Index value at approximately 4 p.m. ET, on each 
DJ-AIG Business Day \19\ on Reuters page AIGCII.\20\ The Index value 
can still be retrieved after 3 p.m. ET until the end of the Exchange 
trading day. Its value is generally static after 3 p.m. ET, although it 
may change if settlement values for Index components become available 
after that time.
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    \19\ A DJ-AIG Business Day is a day on which the sum of the 
commodity index percentages (as set forth in the NYSE Proposal) for 
the Index commodities that are available to trade is greater than 
50%.
    \20\ The Index's Oversight Committee (defined and described in 
more detail in the NYSE Proposal) may exclude any otherwise eligible 
contract from the Index if it determines that it has an inadequate 
trading window. The Index currently includes contracts traded on the 
London Metal Exchange (``LME''), which is located in London. During 
the hours where the LME is closed, Dow Jones uses the last price and 
uses the settlement price once it is available in order to publish 
the Index value through the end of the trading day. The Index value 
does not reflect any after-hours or overnight trading in contracts 
traded on the LME.
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(c) UTP Trading Criteria
    The Exchange will cease trading in the Securities during the 
listing market's trading hours if: (i) The listing market stops trading 
the Securities because of a regulatory halt similar to a halt based on 
NYSE Arca Equities Rule 7.12 or a halt because the IIV or the value of 
the underlying Index is no longer available; or (ii) the listing market 
delists the Securities. In the event that the Exchange is open for 
business on a day that is not a DJ-AIG Business Day, the Exchange will 
not permit trading of the Securities on that day. Additionally, the 
Exchange may cease trading the Securities if such other event shall 
occur or condition exists which, in the opinion of the Exchange, makes 
further dealings on the Exchange inadvisable.
(d) Trading Rules
    The Exchange deems the Securities to be equity securities, thus 
rendering trading in the Securities subject to the Exchange's existing 
rules governing the trading of equity securities. Trading in

[[Page 43266]]

the Securities on the Exchange will occur from 4 a.m. to 8 p.m. ET in 
accordance with NYSE Arca Equities Rule 7.34(a).\21\ The Exchange has 
appropriate rules to facilitate transactions in the Securities during 
all trading sessions. The minimum trading increment for Securities on 
the Exchange will be $0.01.
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    \21\ During all NYSE Arca Equities trading sessions, the 
Exchange represents that if the official Index Sponsor calculates an 
updated Index value, then such value will be updated and 
disseminated at least every 15 seconds during such trading session, 
and always will be so during the Exchange's core trading session 
(although during this session, the Exchange may rely on the listing 
exchange to monitor such calculation and dissemination). The 
Exchange represents that the official Index Sponsor calculates and 
disseminates the Index value from 8 a.m. to 4 p.m. ET. Because this 
product is not in continuous distribution, an IIV is not required to 
be disseminated at least every 15 seconds in all trading sessions; 
however, because of the weekly redemption process for this product, 
such dissemination of the IIV is required during the Exchange's core 
trading session. The Exchange may rely on the listing market to 
monitor such dissemination of the IIV during the Exchange's core 
trading session. July 12 Telephone Conference.
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    Further, the Exchange is proposing new Commentary .01 to NYSE Arca 
Equities Rule 5.2(j)(6), which sets forth certain restrictions on ETP 
Holders acting as registered Market Makers in the Securities to 
facilitate surveillance. Commentary .01(b)-(c) to NYSE Arca Equities 
Rule 5.2(j)(6) will require that the ETP Holder acting as a registered 
Market Maker in the Securities provide the Exchange with necessary 
information relating to its trading in the Index components, the 
commodities underlying the Index components, or options, futures or 
options on futures on the Index, or any other derivatives 
(collectively, ``derivative instruments'') based on the Index or based 
on any Index component or any physical commodity underlying an Index 
component. Commentary .01(d) to NYSE Arca Equities Rule 5.2(j)(6) will 
prohibit the ETP Holder acting as a registered Market Maker in the 
Securities from using any material nonpublic information received from 
any person associated with an ETP Holder or employee of such person 
regarding trading by such person or employee in the Index components, 
the commodities underlying the Index components, or any derivative 
instruments based on the Index or based on any Index component or any 
physical commodity underlying an Index component (including the 
Securities). In addition, Commentary .01(a) to NYSE Arca Equities Rule 
5.2(j)(6) will prohibit the ETP Holder acting as a registered Market 
Maker in the Securities from being affiliated with a market maker in 
the Index components, the commodities underlying the Index components, 
or any derivative instruments based on the Index or based on any Index 
component or any physical commodity underlying an Index component 
unless adequate information barriers are in place, as provided in NYSE 
Arca Equities Rule 7.26.
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Securities. Trading in the Securities may be halted 
because of market conditions or for reasons that, in the view of the 
Exchange, make trading in the Securities inadvisable. These may 
include: (i) The extent to which trading is not occurring in the Index 
components; or (ii) whether other unusual conditions or circumstances 
detrimental to the maintenance of a fair and orderly market are 
present. In addition, trading in Securities will be subject to trading 
halts caused by extraordinary market volatility pursuant to the 
Exchange's ``circuit breaker'' rule \22\ or by the halt or suspension 
of the trading of the Index components.\23\
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    \22\ See NYSE Arca Equities Rule 7.12.
    \23\ See ``UTP Trading Criteria'' above for specific instances 
when the Exchange will cease trading the Securities.
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    The Securities will be deemed ``Eligible Listed Securities,'' as 
defined in NYSE Arca Equities Rule 7.55, for purposes of the 
Intermarket Trading System (``ITS'') Plan and therefore will be subject 
to the trade through provisions of NYSE Arca Equities Rule 7.56, which 
require that ETP Holders avoid initiating trade-throughs for ITS 
securities.
(e) Surveillance
    The Exchange's surveillance procedures will incorporate and rely 
upon existing Exchange surveillance procedures governing equities. The 
Exchange believes that these procedures are adequate to monitor 
Exchange trading of the Securities in all trading sessions and to 
detect violations of Exchange rules, thereby deterring manipulation.
    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 will be able to obtain information regarding trading 
in the Securities and the Index components through ETP Holders in 
connection with such ETP Holders' proprietary or customer trades which 
they effect on any relevant market. In addition, the Exchange can 
obtain market surveillance information with respect to transactions 
occurring on the LME, including customer identity information, pursuant 
to a memorandum of understanding with the LME. The Exchange has access 
to transaction information, including customer identity information, 
with respect to all contracts traded on the New York Mercantile 
Exchange (``NYMEX'') pursuant to the Exchange's information sharing 
agreement with NYMEX. All of the other trading venues on which current 
Index components are traded, such as CBOT, are members of the 
Intermarket Surveillance Group, and the Exchange therefore has access 
to all relevant trading information with respect to those contracts 
without any further action being required on the part of the Exchange.
(f) Information Bulletin
    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 Securities. Specifically, the 
Information Bulletin will discuss the following: (i) The procedures for 
redemptions of Securities (and that Securities are not individually 
redeemable but are redeemable only in aggregations of at least 50,000 
Securities); (ii) NYSE Arca Equities Rule 9.2(a),\24\ which imposes a 
duty of due diligence on its ETP Holders to learn the essential facts 
relating to every customer prior to trading the Securities; (iii) how 
information regarding the IIV is disseminated; (iv) the requirement 
that ETP Holders deliver a prospectus to investors purchasing newly 
issued Securities prior to or concurrently with the confirmation of a 
transaction (either in the initial distribution or during any

[[Page 43267]]

subsequent distribution); and (v) trading information.
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    \24\ The Exchange recently amended NYSE Arca Equities Rule 
9.2(a) (``Diligence as to Accounts'') to provide that EPT Holders, 
before recommending a transaction, must have reasonable grounds to 
believe that the recommendation is suitable for the customer based 
on any facts disclosed by the customer as to his other security 
holdings and as to his financial situation and needs. Further, the 
proposed rule amendment provides, with a limited exception, that 
prior to the execution of a transaction recommended to a non-
institutional customer, the ETP Holders shall make reasonable 
efforts to obtain information concerning the customer's financial 
status, tax status, investment objectives, and any other information 
that they believe would be useful to make a recommendation. See 
Securities Exchange Act Release No. 54045 (June 26, 2006), 71 FR 
37971 (July 3, 2006) (SR-PCX-2005-115).
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    The Information Bulletin will also reference the fact that there is 
no regulated source of last sale information regarding physical 
commodities, and that the Commission has no jurisdiction over the 
trading of physical commodities such as aluminum, gold, crude oil, 
heating oil, corn and wheat, or the futures contracts on which the 
value of the Securities is based.
    The Information Bulletin will also detail the terms of no-action 
positions taken by the Commission staff in connection with the 
Securities with respect to Section 11(d)(1) of the Act, Rule 10a-1 
under the Act, Rule 200(g) of Regulation SHO and Rules 101 and 102 of 
Regulation M.
2. Statutory Basis
    The Exchange believes that the basis for this proposed rule change 
is consistent with the requirements under Section 6(b)(5) of the Act 
\25\ that an exchange have rules that are 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 transaction in securities, to 
remove impediments and perfect the mechanisms of a free and open 
market, and, in general, to protect investors and the public interest.
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    \25\ 15 U.S.C. 78s(b)(5).
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    In addition, the Exchange believes that the proposal is consistent 
with Rule 12f-5 under the Act \26\ because it deems the Securities to 
be equity securities, thus rendering the Securities subject to the 
Exchange's rules governing the trading of equity securities for the 
Securities.\27\
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    \26\ 17 CFR 240.12f-5.
    \27\ July 12 Telephone Conference (the Exchange requested that 
the Commission delete the word ``existing'' to clarify that the 
Securities will be subject to all applicable Exchange rules 
governing the trading of equity securities for the Securities).
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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

    Written comments on the proposed rule change were neither solicited 
nor received.

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-NYSEArca-2006-17 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-2006-17. 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 offices 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-2006-17 and should be submitted on or before 
August 21, 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.\28\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\29\ 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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    \28\ 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).
    \29\ 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,\30\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\31\ The Commission notes that it previously approved the 
listing and trading of the Securities on NYSE.\32\ The Commission also 
finds that the proposal is consistent with Rule 12f-5 under the 
Act,\33\ 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. NYSE Arca Equities rules deem the Securities to be equity 
securities, thus trading in the Securities will be subject to the 
Exchange's rules governing the trading of equity securities and the 
specific rules set forth herein for this product class.
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    \30\ 15 U.S.C. 78l(f).
    \31\ 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.
    \32\ See NYSE Order, supra note 5.
    \33\ 17 CFR 240.12f-5.
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    The Commission further believes that the proposal is consistent 
with Section 11A(a)(1)(C)(iii) of the Act,\34\ 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.
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    \34\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    In support of the portion of the proposed rule change regarding UTP 
of the Securities, the Exchange has made the following representations:

[[Page 43268]]

    1. NYSE Arca Equities has appropriate rules to facilitate 
transactions in this type of security in all trading sessions.
    2. NYSE Arca Equities surveillance procedures are adequate to 
properly monitor the trading of the Securities on the Exchange.
    3. NYSE Arca Equities will distribute an Information Bulletin to 
its members prior to the commencement of trading of the Securities on 
the Exchange that explains the terms, characteristics, and risks of 
trading such securities.
    4. NYSE Arca Equities will require a member with a customer who 
purchases newly issued Securities on the Exchange to provide that 
customer with a product prospectus and will note this prospectus 
delivery requirement in the Information Bulletin.
    5. The Exchange will cease trading in the Securities if: (1) The 
primary market stops trading the securities because of a regulatory 
halt similar to a halt based on NYSE Arca Equities Rule 7.12 and/or a 
halt because an updated dissemination of the IIV or Index value at 
least every 15 seconds has ceased; or (2) if such other event occurs or 
condition exists which, in the opinion of the Exchange, makes further 
dealings on the Exchange inadvisable; or (3) the primary market delists 
the Securities.
    This approval order is conditioned on NYSE Arca Equities' 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 
Securities on the NYSE is consistent with the Act.\35\ 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 Securities.
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    \35\ See NYSE Order, supra note 5.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\36\ that the proposed rule change (NYSEArca-2006-17), as amended, 
is hereby approved on an accelerated basis.
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    \36\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\37\
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    \37\ 17 CFR 200.30-3(a)(12).

Jill M. Peterson,
Assistant Secretary.
 [FR Doc. E6-12148 Filed 7-28-06; 8:45 am]
BILLING CODE 8010-01-P