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 GSCI® Total Return Index Pursuant to Unlisted Trading Privileges, 44339-44344 [E6-12635]
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Federal Register / Vol. 71, No. 150 / Friday, August 4, 2006 / Notices
Nasdaq IM–9216 and IM–11110 to
correct typographical errors.
2. Statutory Basis
Nasdaq believes that the proposed
rule change is consistent with the
provisions of Section 6 of the Act,8 in
general, and with Section 6(b)(5) of the
Act,9 in particular, in that it is designed
to promote just and equitable principles
of trade, to foster cooperation and
coordination with persons engaged in
regulating, clearing, settling, processing
information with respect to, and
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest; and is not designed to
permit unfair discrimination between
customers, issuers, brokers, or dealers.
Nasdaq believes that the proposed
rule change conforms the Nasdaq Rules
6000, 9000, and 11000 Series of
Nasdaq’s rules to certain changes made
to the corresponding rule series of the
rules of NASD since approval of
Nasdaq’s rules by the Commission in
January 2006 and corrects certain errors
in the approved rules.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Nasdaq does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
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Nasdaq has designated the foregoing
rule change as a ‘‘non-controversial’’
rule change pursuant to Section
19(b)(3)(A) of the Act10 and Rule 19b–
4(f)(6) thereunder11 because the
foregoing proposed rule change does
not: (i) Significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate if
U.S.C. 78f.
U.S.C. 78f(b)(5).
10 15 U.S.C. 78s(b)(3)(A).
11 17 CFR 240.19b–4(f)(6).
22:39 Aug 03, 2006
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change, is consistent with the Act.
Comments may be submitted by any of
the following methods:
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NASDAQ–2006–022 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–NASDAQ–2006–022. This
file number should be included on the
12 For purposes only of waiving the operative date
of this proposal, he Commission has considered the
proposed rule’s impact on efficiency, competition
and capital formation. See 15 U.S.C. 78c(f).
9 15
VerDate Aug<31>2005
IV. Solicitation of Comments
Electronic Comments
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
8 15
consistent with the protection of
investors and the public interest.
Nasdaq has requested that the
Commission waive the 30-day preoperative period requirement for ‘‘noncontroversial’’ proposals, based upon a
representation that such waiver will
allow Nasdaq to implement the rule
changes, which have either recently
been made effective as changes to NASD
rules or are technical in nature, prior to
the time when Nasdaq begins to operate
as a national securities exchange. The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest. Waiver of the 30-day
operative period will allow Nasdaq to
implement these changes immediately
so that they can be in place prior to the
time Nasdaq begins to operate as a
national securities exchange.
Accordingly, the Commission has
determined to waive the operative
delay, and the proposed rule change has
become effective upon filing with the
Commission.12
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
Jkt 208001
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44339
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 (https://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
Section, 100 F Street, NE., Washington,
DC 20549. Copies of such filing also will
be available for inspection and copying
at the principal office of the Nasdaq. 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–NASDAQ–2006–022 and
should be submitted on or before
August 25, 2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.13
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6–12613 Filed 8–3–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54231; File No. SR–
NYSEArca-2006–19]
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
GSCI Total Return Index Pursuant to
Unlisted Trading Privileges
July 27, 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. (‘‘Exchange’’),
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 71, No. 150 / Friday, August 4, 2006 / Notices
through its wholly owned subsidiary
NYSE Arca Equities, Inc. (‘‘NYSE Arca
Equities’’ or ‘‘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
from interested persons and is
approving the proposal, as amended, on
an accelerated basis.
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, L.L.C. (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 GSCI Total Return Index (‘‘Index’’).
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.
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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.’’ A rule proposal for the original
listing and trading of the Securities was
3 In Amendment No. 1, the Exchange clarified
certain aspects of its proposal regarding trading
rules and surveillance.
VerDate Aug<31>2005
22:39 Aug 03, 2006
Jkt 208001
filed with the Commission by the New
York Stock Exchange LLC (‘‘NYSE’’) 4
and approved by the Commission.5 In
SR–NYSEArca–2006–17, the Exchange
proposed new Commentary .01 to NYSE
Arca Equities Rule 5.2(j)(6) to
accommodate trading in the Securities.6
(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.’’ 7 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, 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
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
4 See Securities Exchange Act Release No. 53658
(April 14, 2006), 71 FR 21064 (April 24, 2006) (SR–
NYSE–2006–20) (the ‘‘NYSE Proposal’’).
5 See Securities Exchange Act Release No. 53849
(May 22, 2006), 71 FR 30706 (May 30, 2006) (SR–
NYSE–2006–20) (the ‘‘NYSE Order’’).
6 See Securities Exchange Act Release No. 54189
(July 21, 2006) (SR–NYSEArca–2006–17).
7 See Securities Exchange Act Release No. 52204
(August 3, 2005), 70 FR 46559 (August 10, 2005)
(SR–PCX–2005–63).
8 See supra note 4.
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
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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.
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 10 on the Final
Valuation Date 11 minus the investor fee
on the Final Valuation Date.
Prior to maturity, holders may, subject
to certain restrictions,12 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
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
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 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. Telephone conference between John Carey,
Assistant General Counsel, NYSE Group, Inc., and
Florence Harmon, Senior Special Counsel, Division,
Commission, on July 14, 2006.
11 The ‘‘Final Valuation Date’’ is the last Thursday
before maturity of the Securities.
12 Telephone conference between John Carey,
Assistant General Counsel, NYSE Group, Inc., and
Florence Harmon, Senior Special Counsel, Division
of Market Regulation (‘‘Division’’), Commission, on
July 13, 2006.
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).
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Federal Register / Vol. 71, No. 150 / Friday, August 4, 2006 / Notices
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
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The Index was established in May
1991 and is designed to be a diversified
benchmark for physical commodities as
an asset class. The Index reflects the
excess returns that are potentially
available through an unleveraged
investment in the contracts comprising
the GSCI plus the Treasury Bill rate of
interest that could be earned on funds
committed to the trading of the
underlying contracts.15 The value of the
Index, on any given day, reflects: (i) The
price levels of the contracts included in
the GSCI (which represents the value
of the GSCI; (ii) the ‘‘contract daily
return,’’ which is the percentage change
in the total dollar weight of the GSCI
from the previous day to the current
day; and (iii) the Treasury Bill rate of
interest that could be earned on funds
committed to the trading of the
underlying contracts.
The GSCI, upon which the Index is
based, is a proprietary index on a
production-weighted basket of futures
contracts on physical commodities
traded on trading facilities in major
industrialized countries. The value of
the GSCI has been normalized such
that its hypothetical level on January 2,
1970 was 100. Futures contracts on the
GSCI, and options on such futures
contracts, are currently listed for trading
on the Chicago Mercantile Exchange.
More information regarding the
operation, calculation methodology,
weighting, and historical performance of
the Index is set forth in the NYSE
Proposal.
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 The Treasury Bill rate of interest used for
purposes of calculating the index on any day is the
91-day auction high rate for U.S. Treasury Bills, as
reported on Telerate page 56, or any successor page,
on the most recent of the weekly auction dates prior
to such day.
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22:39 Aug 03, 2006
Jkt 208001
(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 (‘‘CTA’’) at least 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 https://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
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 IIV should not be
viewed as a real-time update of the
redemption value.
(ii) The Index
According to the NYSE Proposal, the
Index Sponsor makes the official
calculations of the GSCI. At present,
this calculation is performed
continuously and is reported on Reuters
page GSCI (or any successor or
16 The IIV calculation will be provided for
reference purposes only.
17 The Current Index Level is the most recent
published level of the Index as reported by the
Index Sponsor, whereas the Initial Index Level is
the Index level on the initial 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).
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44341
replacement page) and is updated on
Reuters 19 at least every 15 seconds 20
during business hours on each day on
which the offices of the Index Sponsor
in New York City are open for business
(a ‘‘GSCI Business Day’’).21 The
settlement price for the Index is also
reported on Reuters page GSCI (or any
successor or replacement page) on each
GSCI Business Day between 4 p.m. and
6 p.m., New York time.
(c) UTP Trading Criteria
The Exchange will cease trading in
the Securities if: (1) 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
on at least a 15-second delayed basis; or
(2) the listing market delists the
Securities.22 In the event that the
Exchange is open for business on a day
that is not a GSCI 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 rules governing the trading
19 The intraday information with respect to the
Index reported on Reuters is derived solely from
trading prices on the principal trading markets for
the various Index components. For example, the
Index currently includes contracts traded on the
Intercontinental Exchange (formerly known as the
International Petroleum Exchange, which now
operates its futures business through ICE Futures)
and the London Metal Exchange (‘‘LME’’), both of
which are located in London and consequently
have trading days that end several hours before
those of the U.S.-based markets on which the rest
of the Index components are traded. During the
portion of the New York trading day when ICE
Futures and LME are closed, the last reported prices
for Index Components traded on ICE Futures or
LME are used to calculate the intraday Index
information disseminated on Reuters.
20 Telephone conference between John Carey,
Assistant General Counsel, NYSE Group, Inc., and
Florence Harmon, Senior Special Counsel, Division,
Commission, on July 27, 2006 (clarifying that the
Index value will be disseminated at least every 15
seconds, not every 3 minutes, during the time the
Securities trade on the Exchange).
21 NYSE, as the listing exchange, will not permit
trading in the Securities if certain information about
the Index value is not disseminated on, for
example, a date that is not a GSCI Business Day.
In such event, NYSE Arca would not permit trading
in the Securities. See supra.
22 E-mail between Janet Kissane, Assistant
General Counsel, NYSE Group, Inc., and Florence
Harmon, Senior Special Counsel, Division,
Commission, dated July 31, 2006 (clarifying that the
Securities will cease trading during all trading
hours).
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Federal Register / Vol. 71, No. 150 / Friday, August 4, 2006 / Notices
of equity securities. Trading in the
Securities on the NYSE Arca
Marketplace will occur from 4 a.m. to 8
p.m. ET in accordance with NYSE Arca
Equities Rule 7.34(a).23 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, Commentary .01 to NYSE
Arca Equities Rule 5.2(j)(6) sets forth
certain restrictions on ETP Holders
acting as registered Market Makers in
the Securities to facilitate
surveillance.24 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
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23 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. Telephone conference between
John Carey, Assistant General Counsel, NYSE
Group, Inc., and Florence Harmon, Senior Special
Counsel, Division, Commission, on July 12, 2006.
24 See Securities Exchange Act Release No. 54189
(July 21, 2006) (SR–NYSEArca–2006–17).
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22:39 Aug 03, 2006
Jkt 208001
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: (1) The extent to which trading
is not occurring in the Index
components or (2) 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 25 or by the halt or suspension of
the trading of the Index components.26
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
25 See
NYSE Arca Equities Rule 7.12.
‘‘UTP Trading Criteria’’ above for specific
instances when the Exchange will cease trading the
Securities.
26 See
PO 00000
Frm 00089
Fmt 4703
Sfmt 4703
all relevant parties for all relevant
trading violations.
The Exchange is 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 affect on
any relevant market. In addition, with
regard to the Index components, the
Exchange can obtain market
surveillance information, including
customer identity information, with
respect to transactions occurring on the
New York Mercantile Exchange
(‘‘NYMEX’’), the Kansas City Board of
Trade, ICE Futures, and the LME,
pursuant to its comprehensive
information sharing agreements with
each of those exchanges. All of the other
trading venues on which current Index
components are traded are members of
the Intermarket Surveillance Group
(‘‘ISG’’), 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: (1) 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); (2) NYSE Arca
Equities Rule 9.2(a),27 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; (3) how information
regarding the IIV is disseminated; (4) the
requirement that ETP Holders deliver a
prospectus to investors purchasing
newly issued Securities prior to or
27 The Exchange recently amended NYSE Arca
Equities Rule 9.2(a) (‘‘Diligence as to Accounts’’) to
provide that ETP 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 that prior to the
execution of a transaction recommended to a noninstitutional customer, the ETP Holders should
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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Federal Register / Vol. 71, No. 150 / Friday, August 4, 2006 / Notices
concurrently with the confirmation of a
transaction; and (5) 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
discuss terms of no-action or exemptive
relief by the Commission staff in
connection with the Securities under
the Act.
2. Statutory Basis
The Exchange believes that the basis
under the Act for this proposed rule
change is consistent with the
requirements under Section 6(b)(5) 28
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 29 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.30
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.
28 15
U.S.C. 78s(b)(5).
CFR 240.12f–5.
30 Telephone conference between John Carey,
Assistant General Counsel, NYSE Group, Inc., and
Florence Harmon, Senior Special Counsel, Division,
Commission, on July 12, 2006 (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).
gechino on PROD1PC61 with NOTICES
29 17
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22:39 Aug 03, 2006
Jkt 208001
44343
thereunder applicable to a national
securities exchange.31 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,32 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 (https://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,33 which permits
Number SR–NYSEArca–2006–19 on the
an exchange to trade, pursuant to UTP,
subject line.
a security that is listed and registered on
Paper Comments
another exchange.34 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,
the NYSE.35 The Commission also finds
Securities and Exchange Commission,
that the proposal is consistent with Rule
100 F Street, NE., Washington, DC
12f–5 under the Act,36 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–2006–19. 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 (https://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,37 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
31 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
32 15 U.S.C. 78f(b)(5).
you wish to make available publicly. All
33 15 U.S.C. 78l(f).
34 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–2006–19 and
security on a national securities exchange unless
should be submitted on or before
the security is registered on that exchange pursuant
August 25, 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 00090
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.
35 See NYSE Order, supra note 5.
36 17 CFR 240.12f–5.
37 15 U.S.C. 78k–1(a)(1)(C)(iii).
E:\FR\FM\04AUN1.SGM
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Federal Register / Vol. 71, No. 150 / Friday, August 4, 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 the updated IIV or Index
value are not disseminated at least every
15 seconds; 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.38 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.
gechino on PROD1PC61 with NOTICES
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act, that the
proposed rule change (NYSEArca–
2006–19), as amended, is hereby
approved on an accelerated basis.39
BILLING CODE 8010–01–P
UNITED STATES SENTENCING
COMMISSION
Sentencing Guidelines for United
States Courts
United States Sentencing
Commission.
ACTION: Notice of proposed priorities;
request for public comment.
AGENCY:
SUMMARY: As part of its statutory
authority and responsibility to analyze
sentencing issues, including operation
of the Federal sentencing guidelines,
and in accordance with Rule 5.2 of its
Rules of Practice and Procedure, the
Commission is seeking comment on
possible priority policy issues for the
amendment cycle ending May 1, 2007.
DATES: Public comment should be
received on or before September 1,
2006.
Send comments to: United
States Sentencing Commission, One
Columbus Circle, NE., Suite 2–500,
South Lobby, Washington, DC 20002–
8002, Attention: Public Affairs-Priorities
Comment.
FOR FURTHER INFORMATION CONTACT:
Michael Courlander, Public Affairs
Officer, Telephone: (202) 502–4590.
SUPPLEMENTARY INFORMATION: The
United States Sentencing Commission is
an independent agency in the judicial
branch of the United States
Government. The Commission
promulgates sentencing guidelines and
policy statements for Federal sentencing
courts pursuant to 28 U.S.C. 994(a). The
Commission also periodically reviews
and revises previously promulgated
guidelines pursuant to 28 U.S.C. 994(o)
and submits guideline amendments to
the Congress not later than the first day
of May each year pursuant to 28 U.S.C.
994(p).
The Commission provides this notice
to identify tentative priorities for the
amendment cycle ending May 1, 2007.
The Commission recognizes, however,
that other factors, such as the enactment
of any legislation requiring Commission
action, may affect the Commission’s
ability to complete work on any of the
tentative priorities by the statutory
deadline of May 1, 2007. Accordingly, it
ADDRESSES:
38 See
39 15
NYSE Order, supra note 5.
U.S.C. 78s(b)(2).
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.40
Nancy M. Morris,
Secretary.
[FR Doc. E6–12635 Filed 8–3–06; 8:45 am]
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22:39 Aug 03, 2006
40 17
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Frm 00091
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may be necessary to continue work on
some of these issues beyond the
amendment cycle ending on May 1,
2007.
As so prefaced, the Commission has
identified the following tentative
priorities:
(1) Implementation of crime
legislation enacted during the 109th
Congresses warranting a Commission
response, including (A) the Stop
Counterfeiting in Manufactured Goods
Act, Pub. L. 109–181; (B) the USA
PATRIOT Improvement and
Reauthorization Act of 2005, Pub. L.
109–177; (C) the Violence Against
Women and Department of Justice
Reauthorization Act of 2005, Pub. L.
109–162; (D) the Trafficking Victims
Protection Reauthorization of 2005, Pub.
L. 109–164; (E) the Safe, Accountable,
Flexible, Efficient Transportation Equity
Act: A Legacy for Users, Pub. L. 109–59;
and (F) other legislation authorizing
statutory penalties, creating new
offenses, or pertaining to victims, that
requires incorporation into the
guidelines;
(2) Continuation of its work with the
congressional, executive, and judicial
branches of the government and other
interested parties on appropriate
responses to United States v. Booker,
including any appropriate guideline
changes in light of the Commission’s
2006 report to Congress, Final Report on
the Impact of United States v. Booker on
Federal Sentencing, as well as its
continued analysis of post-Booker data,
case law, and other feedback, including
reasons for departures and variances
stated by sentencing courts;
(3) Continuation of its policy work
regarding immigration offenses,
specifically, offenses sentenced under
2L1.1 (Smuggling, Transporting, or
Harboring an Unlawful Alien) and 2L1.2
(Unlawfully Entering or Remaining in
the United States) and implementation
of any immigration legislation that may
be enacted;
(4) Continuation of its work with the
congressional, executive, and judicial
branches of the government and other
interested parties on cocaine sentencing
policy, to possibly include a hearing on
this issue and a reevaluation of the
Commission’s 2002 report to Congress,
Cocaine and Federal Sentencing Policy;
(5) Consideration and possible
development of guideline simplification
options that might improve the
operation of the sentencing guidelines;
(6) Continuation of its policy work, in
light of the Commission’s prior research
on criminal history, to develop and
consider possible options that might
improve the operation of Chapter Four
(Criminal History);
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]]>Agencies
[Federal Register Volume 71, Number 150 (Friday, August 4, 2006)]
[Notices]
[Pages 44339-44344]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-12635]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54231; File No. SR-NYSEArca-2006-19]
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
GSCI[supreg] Total Return Index Pursuant to Unlisted Trading Privileges
July 27, 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. (``Exchange''),
[[Page 44340]]
through its wholly owned subsidiary NYSE Arca Equities, Inc. (``NYSE
Arca Equities'' or ``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 from
interested persons and is approving the proposal, as amended, on an
accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, the Exchange clarified certain aspects
of its proposal regarding trading rules and surveillance.
---------------------------------------------------------------------------
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, L.L.C. (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 GSCI[supreg] Total Return
Index (``Index'').
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.''
A rule proposal for the original listing and trading of the Securities
was filed with the Commission by the New York Stock Exchange LLC
(``NYSE'') \4\ and approved by the Commission.\5\ In SR-NYSEArca-2006-
17, the Exchange proposed new Commentary .01 to NYSE Arca Equities Rule
5.2(j)(6) to accommodate trading in the Securities.\6\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 53658 (April 14,
2006), 71 FR 21064 (April 24, 2006) (SR-NYSE-2006-20) (the ``NYSE
Proposal'').
\5\ See Securities Exchange Act Release No. 53849 (May 22,
2006), 71 FR 30706 (May 30, 2006) (SR-NYSE-2006-20) (the ``NYSE
Order'').
\6\ See Securities Exchange Act Release No. 54189 (July 21,
2006) (SR-NYSEArca-2006-17).
---------------------------------------------------------------------------
(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.'' \7\ 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, to obtain
Commission approval to trade the Securities pursuant to UTP.
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 52204 (August 3,
2005), 70 FR 46559 (August 10, 2005) (SR-PCX-2005-63).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\8\ See supra note 4.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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 \10\ on the Final Valuation
Date \11\ minus the investor fee on the Final Valuation Date.
---------------------------------------------------------------------------
\10\ 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. Telephone conference between John Carey, Assistant
General Counsel, NYSE Group, Inc., and Florence Harmon, Senior
Special Counsel, Division, Commission, on July 14, 2006.
\11\ The ``Final Valuation Date'' is the last Thursday before
maturity of the Securities.
---------------------------------------------------------------------------
Prior to maturity, holders may, subject to certain
restrictions,\12\ 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 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
[[Page 44341]]
procedures as described in the NYSE Proposal.\14\
---------------------------------------------------------------------------
\12\ Telephone conference between John Carey, Assistant General
Counsel, NYSE Group, Inc., and Florence Harmon, Senior Special
Counsel, Division of Market Regulation (``Division''), Commission,
on July 13, 2006.
\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.
---------------------------------------------------------------------------
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 was established in May 1991 and is designed to be a
diversified benchmark for physical commodities as an asset class. The
Index reflects the excess returns that are potentially available
through an unleveraged investment in the contracts comprising the
GSCI[supreg] plus the Treasury Bill rate of interest that could be
earned on funds committed to the trading of the underlying
contracts.\15\ The value of the Index, on any given day, reflects: (i)
The price levels of the contracts included in the GSCI[supreg] (which
represents the value of the GSCI[supreg]; (ii) the ``contract daily
return,'' which is the percentage change in the total dollar weight of
the GSCI[supreg] from the previous day to the current day; and (iii)
the Treasury Bill rate of interest that could be earned on funds
committed to the trading of the underlying contracts.
---------------------------------------------------------------------------
\15\ The Treasury Bill rate of interest used for purposes of
calculating the index on any day is the 91-day auction high rate for
U.S. Treasury Bills, as reported on Telerate page 56, or any
successor page, on the most recent of the weekly auction dates prior
to such day.
---------------------------------------------------------------------------
The GSCI,[supreg] upon which the Index is based, is a proprietary
index on a production-weighted basket of futures contracts on physical
commodities traded on trading facilities in major industrialized
countries. The value of the GSCI[supreg] has been normalized such that
its hypothetical level on January 2, 1970 was 100. Futures contracts on
the GSCI[supreg], and options on such futures contracts, are currently
listed for trading on the Chicago Mercantile Exchange. More information
regarding the operation, calculation methodology, 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 (``CTA'') at least 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 https://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.
\17\ The Current Index Level is the most recent published level
of the Index as reported by the Index Sponsor, whereas the Initial
Index Level is the Index level on the initial 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).
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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 IIV should not be viewed as a real-time
update of the redemption value.
(ii) The Index
According to the NYSE Proposal, the Index Sponsor makes the
official calculations of the GSCI[supreg]. At present, this calculation
is performed continuously and is reported on Reuters page GSCI[supreg]
(or any successor or replacement page) and is updated on Reuters \19\
at least every 15 seconds \20\ during business hours on each day on
which the offices of the Index Sponsor in New York City are open for
business (a ``GSCI Business Day'').\21\ The settlement price for the
Index is also reported on Reuters page GSCI[supreg] (or any successor
or replacement page) on each GSCI Business Day between 4 p.m. and 6
p.m., New York time.
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\19\ The intraday information with respect to the Index reported
on Reuters is derived solely from trading prices on the principal
trading markets for the various Index components. For example, the
Index currently includes contracts traded on the Intercontinental
Exchange (formerly known as the International Petroleum Exchange,
which now operates its futures business through ICE Futures) and the
London Metal Exchange (``LME''), both of which are located in London
and consequently have trading days that end several hours before
those of the U.S.-based markets on which the rest of the Index
components are traded. During the portion of the New York trading
day when ICE Futures and LME are closed, the last reported prices
for Index Components traded on ICE Futures or LME are used to
calculate the intraday Index information disseminated on Reuters.
\20\ Telephone conference between John Carey, Assistant General
Counsel, NYSE Group, Inc., and Florence Harmon, Senior Special
Counsel, Division, Commission, on July 27, 2006 (clarifying that the
Index value will be disseminated at least every 15 seconds, not
every 3 minutes, during the time the Securities trade on the
Exchange).
\21\ NYSE, as the listing exchange, will not permit trading in
the Securities if certain information about the Index value is not
disseminated on, for example, a date that is not a GSCI Business
Day. In such event, NYSE Arca would not permit trading in the
Securities. See supra.
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(c) UTP Trading Criteria
The Exchange will cease trading in the Securities if: (1) 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 on at least a 15-second delayed basis; or (2) the listing
market delists the Securities.\22\ In the event that the Exchange is
open for business on a day that is not a GSCI 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.
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\22\ E-mail between Janet Kissane, Assistant General Counsel,
NYSE Group, Inc., and Florence Harmon, Senior Special Counsel,
Division, Commission, dated July 31, 2006 (clarifying that the
Securities will cease trading during all trading hours).
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(d) Trading Rules
The Exchange deems the Securities to be equity securities, thus
rendering trading in the Securities subject to the Exchange's rules
governing the trading
[[Page 44342]]
of equity securities. Trading in the Securities on the NYSE Arca
Marketplace will occur from 4 a.m. to 8 p.m. ET in accordance with NYSE
Arca Equities Rule 7.34(a).\23\ 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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\23\ 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. Telephone conference between John Carey, Assistant
General Counsel, NYSE Group, Inc., and Florence Harmon, Senior
Special Counsel, Division, Commission, on July 12, 2006.
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Further, Commentary .01 to NYSE Arca Equities Rule 5.2(j)(6) sets
forth certain restrictions on ETP Holders acting as registered Market
Makers in the Securities to facilitate surveillance.\24\ 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.
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\24\ See Securities Exchange Act Release No. 54189 (July 21,
2006) (SR-NYSEArca-2006-17).
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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: (1) The extent to which trading is not occurring in the Index
components or (2) 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 \25\ or by the halt or suspension
of the trading of the Index components.\26\
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\25\ See NYSE Arca Equities Rule 7.12.
\26\ 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 is 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 affect
on any relevant market. In addition, with regard to the Index
components, the Exchange can obtain market surveillance information,
including customer identity information, with respect to transactions
occurring on the New York Mercantile Exchange (``NYMEX''), the Kansas
City Board of Trade, ICE Futures, and the LME, pursuant to its
comprehensive information sharing agreements with each of those
exchanges. All of the other trading venues on which current Index
components are traded are members of the Intermarket Surveillance Group
(``ISG''), 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: (1) 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); (2) NYSE Arca Equities Rule 9.2(a),\27\ 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; (3) how
information regarding the IIV is disseminated; (4) the requirement that
ETP Holders deliver a prospectus to investors purchasing newly issued
Securities prior to or
[[Page 44343]]
concurrently with the confirmation of a transaction; and (5) trading
information.
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\27\ The Exchange recently amended NYSE Arca Equities Rule
9.2(a) (``Diligence as to Accounts'') to provide that ETP 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 that prior to the execution of a
transaction recommended to a non-institutional customer, the ETP
Holders should 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 discuss terms of no-action or
exemptive relief by the Commission staff in connection with the
Securities under the Act.
2. Statutory Basis
The Exchange believes that the basis under the Act for this
proposed rule change is consistent with the requirements under Section
6(b)(5) \28\ 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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\28\ 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 \29\ 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.\30\
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\29\ 17 CFR 240.12f-5.
\30\ Telephone conference between John Carey, Assistant General
Counsel, NYSE Group, Inc., and Florence Harmon, Senior Special
Counsel, Division, Commission, on July 12, 2006 (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 (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2006-19 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-2006-19. 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 (https://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-2006-19 and should be submitted on or before
August 25, 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.\31\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\32\ 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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\31\ 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).
\32\ 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,\33\ which permits an exchange to trade,
pursuant to UTP, a security that is listed and registered on another
exchange.\34\ The Commission notes that it previously approved the
listing and trading of the Securities on the NYSE.\35\ The Commission
also finds that the proposal is consistent with Rule 12f-5 under the
Act,\36\ 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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\33\ 15 U.S.C. 78l(f).
\34\ 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.
\35\ See NYSE Order, supra note 5.
\36\ 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,\37\ 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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\37\ 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 44344]]
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 the updated IIV or Index value are not disseminated at
least every 15 seconds; 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.\38\ 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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\38\ 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,
that the proposed rule change (NYSEArca-2006-19), as amended, is hereby
approved on an accelerated basis.\39\
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\39\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\40\
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\40\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-12635 Filed 8-3-06; 8:45 am]
BILLING CODE 8010-01-P
