Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change and Amendment No. 1 Relating to the Trading of the Index-Linked Securities of Barclays Bank PLC Linked to the Performance of the Goldman Sachs Crude Oil Total Return Index TM, 44752-44757 [E6-12699]
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44752
Federal Register / Vol. 71, No. 151 / Monday, August 7, 2006 / Notices
forum for the resolution of their
disputes.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
a. By order approve the proposed rule
change, or
b. Institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. 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. We solicit specific comment on
whether the language of the proposed
rule, as amended, clearly indicates that
conflicts arising after the
commencement of the hearing could
give rise to removal of an arbitrator by
the Director of Arbitration. Comments
may be submitted by any of the
following methods:
Electronic Comments
sroberts on PROD1PC70 with NOTICES
• 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–NYSE–2004–56 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.
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17:19 Aug 04, 2006
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All submissions should refer to File
Number SR–NYSE–2004–56. 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 office of the NYSE. 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–NYSE–2004–56 and should
be submitted on or before August 28,
2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.5
Nancy M. Morris,
Secretary.
[FR Doc. E6–12702 Filed 8–4–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54251; File No. SR–
NYSEArca–2006–18]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and Order
Granting Accelerated Approval of a
Proposed Rule Change and
Amendment No. 1 Relating to the
Trading of the Index-Linked Securities
of Barclays Bank PLC Linked to the
Performance of the Goldman Sachs
Crude Oil Total Return Index TM
Pursuant to Unlisted Trading
Privileges
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 16,
2006, NYSE Arca, Inc. (‘‘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
27, 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 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 Goldman Sachs Crude Oil Total
Return Index TM (‘‘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 the
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
July 31, 2006
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
5 17
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CFR 200.30–3(a)(12).
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1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 In Amendment No. 1, the Exchange clarified
certain aspects of its proposal regarding the
Securities and surveillance.
2 17
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Federal Register / Vol. 71, No. 151 / Monday, August 7, 2006 / Notices
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, Inc. (‘‘NYSE’’) 4
and approved by the Commission.5
(a) The Securities and the Index
(i) The Securities
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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, 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.7 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,8
4 See Securities Exchange Act Release No. 53967
(June 9, 2006), 71 FR 34976 (June 16, 2006) (SR–
NYSE–2006–19) (the ‘‘NYSE Proposal’’).
5 See Securities Exchange Act Release No. 54177
(July 19, 2006), 71 FR 54177 (July 27, 2006) (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 See supra note 4.
8 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
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17:19 Aug 04, 2006
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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 and are not callable.9
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
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.
9 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 12, 2006.
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,
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).
PO 00000
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44753
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.15 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 is a sub-index of the GSCI
and reflects the excess returns that are
potentially available through an
unleveraged investment in the contracts
comprising the relevant components of
the Index (which currently includes
only the West Texas Intermediate
(‘‘WTI’’) crude oil futures contract
traded on the New York Mercantile
Exchange (‘‘NYMEX’’)), plus the
Treasury Bill rate of interest that could
be earned on funds committed to the
trading of the underlying contracts.16
The value of the Index, on any given
day, reflects: (i) The price levels of the
contracts included in the Goldman
Sachs Crude Oil Total Return Index TM
(which represents the value of the
Goldman Sachs Crude Oil Total Return
Index TM); (ii) the ‘‘contract daily
return,’’ which is the percentage change
in the total dollar weight of the
Goldman Sachs Crude Oil Total Return
Index TM 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.
In addition to other criteria described
in the NYSE Proposal, in order to
qualify for inclusion in the Index the
contract must be related to WTI crude
oil. As presently constituted, the only
contract used to calculate the Index is
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 That cost will equal: (i) The lowest amount that
a qualified financial institution would charge to
effect this assumption or undertaking, plus (ii) the
reasonable expenses, including reasonable
attorneys’ fees, incurred by the holders of the
Securities in preparing any documentation
necessary for this assumption or undertaking.
16 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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Federal Register / Vol. 71, No. 151 / Monday, August 7, 2006 / Notices
the WTI crude oil futures contract
traded on the NYMEX.
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 GSCI is
designed to be a measure of the
performance over time of the markets
for these commodities. The
commodities represented in the GSCI
are weighted, on a production basis, to
reflect their relative significance (in the
view of the Index Sponsor, in
consultation with the Policy
Committee) 17 to the world economy.
The fluctuations in the value of the
GSCI are intended generally to
correlate with changes in the prices of
such physical commodities in global
markets. 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.
(b) Dissemination and Availability of
Information
(i) The Intraday Indicative Value
sroberts on PROD1PC70 with NOTICES
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’’) 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.18
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
17 The Index Sponsor has established a Policy
Committee to assist it with the operation of the
GSCI . The Policy Committee is described in more
detail in the NYSE Proposal.
18 The IIV calculation will be provided for
reference purposes only.
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17:19 Aug 04, 2006
Jkt 208001
Level divided by Initial Index Level ) 19
minus Current Investor Fee.20
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
NYMEX. The WTI crude oil futures (the
futures contracts underlying the Index)
will trade on the NYMEX from 10 a.m.
to 2:30 p.m. ET.
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
replacement page) and is updated on
Reuters at least once every 15 seconds 21
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’’).22 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
19 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 trade date for the Securities.
20 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).
21 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).
22 Both NYSE, as the listing exchange, and NYSE
Arca, 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. See supra.
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Fmt 4703
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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.23 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 existing rules governing the
trading 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).24 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 has recently
adopted 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.25 Commentary .01(b)–(c)
to NYSE Arca Equities Rule 5.2(j)(6)
23 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).
24 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.
25 See Securities Exchange Act Release No. 54189
(July 21, 2006), 71 FR 43263 (July 31, 2006) (SR–
NYSEArca–2006–17).
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Federal Register / Vol. 71, No. 151 / Monday, August 7, 2006 / Notices
requires 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) prohibits 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) prohibits 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 26 or by the halt or suspension of
the trading of the Index components.27
26 See
NYSE Arca Equities Rule 7.12.
‘‘UTP Trading Criteria’’ above for specific
instances when the Exchange will cease trading the
Securities.
27 See
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17:19 Aug 04, 2006
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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 will incorporate and
rely upon existing surveillance
procedures applicable to equities to
monitor trading in the Securities. The
Exchange believes that these procedures
are adequate to monitor Exchange
trading of the Securities in all trading
sessions and 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 that they effect on any
relevant market. In addition, the
Exchange has access to transaction
information, including customer
identity information with respect to all
contracts traded on NYMEX and the
COMEX, a subsidiary of the NYMEX,
pursuant to the Exchange’s information
sharing agreement with NYMEX.
(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 purchases and
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),28 which imposes a duty of due
28 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
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44755
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 concurrently with
the confirmation of a transaction; and
(5) trading information. For example,
the Information Bulletin will advise ETP
Holders, prior to the commencement of
trading, of the prospectus delivery
requirements applicable to the
Securities. The Exchange notes that
investors purchasing Securities directly
from Barclays will receive a prospectus.
ETP Holders purchasing Securities from
Barclays for resale to investors will
deliver a prospectus to such investors.
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 crude oil, or the
futures contracts on which the value of
the Securities is based.
The Information Bulletin will also
discuss any exemptive or no-action
relief, if granted, by the Commission
staff from any rules under the Act.
2. Statutory Basis
The Exchange believes that the basis
for this proposed rule change is
consistent with the requirements under
Section 6(b)(5) 29 of the Act 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 30 because it deems
the Securities to be equity securities,
thus rendering the Securities subject to
Rule 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).
29 15 U.S.C. 78s(b)(5).
30 17 CFR 240.12f–5.
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Federal Register / Vol. 71, No. 151 / Monday, August 7, 2006 / Notices
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–2006–18 and
should be submitted on or before
August 28, 2006.
effect a rule or rules providing for
transactions in the class or type of
security to which the exchange extends
B. Self-Regulatory Organization’s
UTP. NYSE Arca Equities rules deem
Statement on Burden on Competition
the Securities to be equity securities,
The Exchange does not believe that
thus trading in the Securities will be
the proposed rule change will impose
subject to the Exchange’s rules
any burden on competition that is not
governing the trading of equity
necessary or appropriate in furtherance
securities and the specific rules set forth
of the purposes of the Act.
herein for this product class.
The Commission further believes that
C. Self-Regulatory Organization’s
the proposal is consistent with Section
Statement on Comments on the
11A(a)(1)(C)(iii) of the Act,38 which sets
Proposed Rule Change Received From
forth Congress’s finding that it is in the
Members, Participants or Others
public interest and appropriate for the
Written comments on the proposed
protection of investors and the
rule change were neither solicited nor
maintenance of fair and orderly markets
received.
to assure the availability to brokers,
dealers, and investors of information
III. Solicitation of Comments
IV. Commission’s Findings and Order
with respect to quotations for and
Granting Accelerated Approval of
Interested persons are invited to
transactions in securities.
Proposed Rule Change
submit written data, views, and
In support of the portion of the
The Commission finds that the
arguments concerning the foregoing,
proposed rule change regarding UTP of
proposed rule change, as amended, is
including whether the proposed rule
the Securities, the Exchange has made
consistent with the requirements of the
change is consistent with the Act.
the following representations:
Act and the rules and regulations
Comments may be submitted by any of
1. NYSE Arca Equities has
thereunder applicable to a national
the following methods:
appropriate rules to facilitate
securities exchange.32 In particular, the
transactions in this type of security in
Electronic Comments
Commission finds that the proposed
all trading sessions.
rule change is consistent with Section
• Use the Commission’s Internet
2. NYSE Arca Equities surveillance
33 which requires that
6(b)(5) of the Act,
comment form (https://www.sec.gov/
procedures are adequate to properly
an exchange have rules designed, among monitor the trading of the Securities on
rules/sro.shtml); or
other things, to promote just and
• Send an e-mail to rulethe Exchange.
equitable principles of trade, to remove
3. NYSE Arca Equities will distribute
comments@sec.gov. Please include File
an Information Bulletin to its members
Number SR–NYSEArca–2006–18 on the impediments to and perfect the
mechanism of a free and open market
prior to the commencement of trading of
subject line.
and a national market system, and in
the Securities on the Exchange that
Paper Comments
general to protect investors and the
explains the terms, characteristics, and
public interest.
• Send paper comments in triplicate
risks of trading such securities.
In addition, the Commission finds
4. NYSE Arca Equities will require a
to Nancy M. Morris, Secretary,
that the proposal is consistent with
member with a customer who purchases
Securities and Exchange Commission,
Section 12(f) of the Act,34 which permits newly issued Securities on the
100 F Street, NE., Washington, DC
an exchange to trade, pursuant to UTP,
Exchange to provide that customer with
20549–1090.
a security that is listed and registered on a product prospectus and will note this
All submissions should refer to File
another exchange.35 The Commission
prospectus delivery requirement in the
Number SR–NYSEArca–2006–18. This
notes that it previously approved the
Information Bulletin.
file number should be included on the
trading of the Securities on
5. The Exchange will cease trading in
subject line if e-mail is used. To help the listing and36
the NYSE. The Commission also finds the Securities if: (1) The primary market
Commission process and review your
that the proposal is consistent with Rule stops trading the securities because of a
comments more efficiently, please use
37
regulatory halt similar to a halt based on
only one method. The Commission will 12f–5 under the Act, which provides
NYSE Arca Equities Rule 7.12 and/or a
post all comments on the Commission’s that an exchange shall not extend UTP
to a security unless the exchange has in
halt because the IIV or Index value are
Internet Web site (https://www.sec.gov/
not disseminated at least every 15
rules/sro.shtml). Copies of the
32 In approving this rule change, the Commission
seconds; or (2) if such other event
submission, all subsequent
notes that it has considered the proposed rule’s
occurs or condition exists which, in the
amendments, all written statements
impact on efficiency, competition, and capital
opinion of the Exchange, makes further
formation. See 15 U.S.C. 78c(f).
with respect to the proposed rule
33 15 U.S.C. 78f(b)(5).
dealings on the Exchange inadvisable;
change that are filed with the
34 15 U.S.C. 78l(f).
or (3) the primary market delists the
Commission, and all written
35 Section 12(a) of the Act, 15 U.S.C. 78l(a),
Securities.
communications relating to the
generally prohibits a broker-dealer from trading a
This approval order is conditioned on
proposed rule change between the
security on a national securities exchange unless
Commission and any person, other than the security is registered on that exchange pursuant NYSE Arca Equities’ adherence to these
representations.
to Section 12 of the Act. Section 12(f) of the Act
The Commission finds good cause for
excludes from this restriction trading in any
31 Telephone conference between John Carey,
security to which an exchange ‘‘extends UTP.’’
approving this proposed rule change, as
Assistant General Counsel, NYSE Group, Inc., and
Florence Harmon, Senior Special Counsel, Division, When an exchange extends UTP to a security, it
amended, before the thirtieth day after
allows its members to trade the security as if it were
Commission, on July 12, 2006 (the Exchange
the publication of notice thereof in the
listed and registered on the exchange even though
requested that the Commission delete the word
Federal Register. As noted previously,
it is not so listed and registered.
‘‘existing’’ to clarify that the Securities will be
sroberts on PROD1PC70 with NOTICES
the Exchange’s rules governing the
trading of equity securities.31
subject to all applicable Exchange rules governing
the trading of equity securities for the Securities).
VerDate Aug<31>2005
17:19 Aug 04, 2006
Jkt 208001
36 See
37 17
PO 00000
NYSE Order, supra note 5.
CFR 240.12f–5.
Frm 00152
Fmt 4703
Sfmt 4703
38 15
E:\FR\FM\07AUN1.SGM
U.S.C. 78k–1(a)(1)(C)(iii).
07AUN1
Federal Register / Vol. 71, No. 151 / Monday, August 7, 2006 / Notices
the Commission previously found that
the listing and trading of these
Securities on the NYSE is consistent
with the Act.39 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.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act, that the
proposed rule change (NYSEArca–
2006–18), is hereby approved, as
amended, on an accelerated basis.40
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.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.41
Nancy M. Morris,
Secretary.
[FR Doc. E6–12699 Filed 8–4–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54230; File No. SR–
NYSEArca–2006–41]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and Order
Granting Accelerated Approval of
Proposed Rule Change To Extend the
Linkage Fee Pilot Program
July 27, 2006.
sroberts on PROD1PC70 with NOTICES
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 7,
2006, the NYSE Arca, Inc. (‘‘NYSE
Arca’’ or ‘‘Exchange’’) 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. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons and is
approving the proposal on an
accelerated basis for a pilot period
through July 31, 2007.
39 See
NYSE Order, supra note 5.
U.S.C. 78s(b)(2).
41 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
40 15
VerDate Aug<31>2005
17:19 Aug 04, 2006
Jkt 208001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The NYSE Arca is proposing to
amend the NYSE Arca Options, TradeRelated Charges section of the Schedule
of Fees and Charges (‘‘Schedule’’) in
order to extend until July 31, 2007, the
current pilot program regarding
transaction fees charged for trades
executed through the intermarket
options linkage plan (‘‘Linkage’’). The
text of the proposed rule change is
available on the NYSE Arca’s Web site
at (https://www.archipelago.com), at the
Exchange’s Office of the Secretary, and
at the Commission’s Public Reference
Room.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this proposed rule
change is to extend for one year the
pilot program establishing NYSE Arca
fees for Principal (‘‘P’’) Orders and
Principal Acting as Agent (‘‘P/A’’)
Orders executed through Linkage. The
fees currently are effective for a pilot
program set to expire on July 31, 2006,
and this filing would extend the fees
through July 31, 2007. Executions on
NYSE Arca resulting from Linkage
orders are subject to the same billing
treatment as other broker-dealer (‘‘BD’’)
executions. The present execution fee is
$0.26, which is comprised of a $0.21
transaction fee and a $0.05 per contract
comparison fee. These are the same fees
that all NYSE Arca Option Trading
Permit Holders pay for non-customer
transactions executed on the Exchange.
The Exchange does not charge for the
execution of Satisfaction Orders sent
through Linkage and is not proposing to
charge for such orders.
BD orders that are entered and
executed electronically on NYSE Arca
are presently subject to a $0.25 BD
PO 00000
Frm 00153
Fmt 4703
Sfmt 4703
44757
surcharge. Linkage orders that are
electronically executed on the Exchange
are subject to the same billing treatment
as other BD transactions. The Exchange
recently filed NYSEArca–2006–20,3
which proposes a change to the
Schedule to reflect that the $0.25 BD
surcharge will also be applied to
Linkage orders submitted and executed
electronically on the Exchange. The
extension of the existing Linkage fee
pilot program proposed with this filing
does not reflect the changes proposed to
the Schedule pursuant to NYSEArca–
2006–20.
2. Statutory Basis
The Exchange believes that the
proposal is consistent with Section 6(b)
of the Act,4 in general, and Section
6(b)(4) of the Act,5 in particular, in that
the proposed rule change provides for
the equitable allocation of reasonable
dues, fees and other charges among its
members and other persons using its
facilities.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange believes that the
proposed rule change does not impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has neither solicited
nor received comments on the proposed
rule change.
III. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSEArca–2006–41 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
3 See Securities Exchange Act Release No. 54130
(July 11, 2006) 71 FR 41305 (July 20, 2006).
4 15 U.S.C. 78f(b).
5 15 U.S.C. 78f(b)(4).
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]]>Agencies
[Federal Register Volume 71, Number 151 (Monday, August 7, 2006)]
[Notices]
[Pages 44752-44757]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-12699]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54251; File No. SR-NYSEArca-2006-18]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Order Granting Accelerated Approval of a Proposed Rule Change and
Amendment No. 1 Relating to the Trading of the Index-Linked Securities
of Barclays Bank PLC Linked to the Performance of the Goldman Sachs
Crude Oil Total Return Index TM Pursuant to Unlisted Trading
Privileges
July 31, 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''), 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 27,
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 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 the Securities 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 Goldman Sachs Crude Oil
Total Return Index TM (``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 the
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
[[Page 44753]]
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, Inc. (``NYSE'') \4\ and approved by the Commission.\5\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 53967 (June 9,
2006), 71 FR 34976 (June 16, 2006) (SR-NYSE-2006-19) (the ``NYSE
Proposal'').
\5\ See Securities Exchange Act Release No. 54177 (July 19,
2006), 71 FR 54177 (July 27, 2006) (the ``NYSE Order'').
---------------------------------------------------------------------------
(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, to obtain
Commission approval to trade the Securities pursuant to UTP.
---------------------------------------------------------------------------
\6\ 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.\7\ 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.
---------------------------------------------------------------------------
\7\ 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,\8\ 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.\9\
---------------------------------------------------------------------------
\8\ 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.
\9\ 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 12, 2006.
---------------------------------------------------------------------------
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 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, 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.\15\ More information regarding
default procedures, including a quotation period and an objection
period, is set forth in the NYSE Proposal.
---------------------------------------------------------------------------
\15\ That cost will equal: (i) The lowest amount that a
qualified financial institution would charge to effect this
assumption or undertaking, plus (ii) the reasonable expenses,
including reasonable attorneys' fees, incurred by the holders of the
Securities in preparing any documentation necessary for this
assumption or undertaking.
---------------------------------------------------------------------------
(ii) The Index
The Index is a sub-index of the GSCI [supreg] and reflects the
excess returns that are potentially available through an unleveraged
investment in the contracts comprising the relevant components of the
Index (which currently includes only the West Texas Intermediate
(``WTI'') crude oil futures contract traded on the New York Mercantile
Exchange (``NYMEX'')), plus the Treasury Bill rate of interest that
could be earned on funds committed to the trading of the underlying
contracts.\16\ The value of the Index, on any given day, reflects: (i)
The price levels of the contracts included in the Goldman Sachs Crude
Oil Total Return Index TM (which represents the value of the
Goldman Sachs Crude Oil Total Return Index TM); (ii) the
``contract daily return,'' which is the percentage change in the total
dollar weight of the Goldman Sachs Crude Oil Total Return Index
TM 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.
---------------------------------------------------------------------------
\16\ 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.
---------------------------------------------------------------------------
In addition to other criteria described in the NYSE Proposal, in
order to qualify for inclusion in the Index the contract must be
related to WTI crude oil. As presently constituted, the only contract
used to calculate the Index is
[[Page 44754]]
the WTI crude oil futures contract traded on the NYMEX.
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 GSCI [supreg] is designed to be a measure of the
performance over time of the markets for these commodities. The
commodities represented in the GSCI [supreg] are weighted, on a
production basis, to reflect their relative significance (in the view
of the Index Sponsor, in consultation with the Policy Committee) \17\
to the world economy. The fluctuations in the value of the GSCI [reg]
are intended generally to correlate with changes in the prices of such
physical commodities in global markets. The value of the GSCI [reg] 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.
---------------------------------------------------------------------------
\17\ The Index Sponsor has established a Policy Committee to
assist it with the operation of the GSCI [supreg]. The Policy
Committee is described in more detail 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'') 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.\18\ 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 )
\19\ minus Current Investor Fee.\20\
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\18\ The IIV calculation will be provided for reference purposes
only.
\19\ 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 trade date for the Securities.
\20\ 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 NYMEX. The WTI crude oil futures (the
futures contracts underlying the Index) will trade on the NYMEX from 10
a.m. to 2:30 p.m. ET.
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 at least once every 15 seconds \21\ 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'').\22\ 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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\21\ 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).
\22\ Both NYSE, as the listing exchange, and NYSE Arca, 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. 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.\23\ 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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\23\ 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 existing
rules governing the trading 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).\24\ 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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\24\ 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, the Exchange has recently adopted 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.\25\ Commentary .01(b)-(c) to
NYSE Arca Equities Rule 5.2(j)(6)
[[Page 44755]]
requires 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) prohibits 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) prohibits 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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\25\ See Securities Exchange Act Release No. 54189 (July 21,
2006), 71 FR 43263 (July 31, 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 \26\ or by the halt or suspension
of the trading of the Index components.\27\
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\26\ See NYSE Arca Equities Rule 7.12.
\27\ 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 will incorporate and rely upon existing surveillance
procedures applicable to equities to monitor trading in the Securities.
The Exchange believes that these procedures are adequate to monitor
Exchange trading of the Securities in all trading sessions and 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 that they effect
on any relevant market. In addition, the Exchange has access to
transaction information, including customer identity information with
respect to all contracts traded on NYMEX and the COMEX, a subsidiary of
the NYMEX, pursuant to the Exchange's information sharing agreement
with NYMEX.
(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
purchases and 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),\28\ 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 concurrently with the
confirmation of a transaction; and (5) trading information. For
example, the Information Bulletin will advise ETP Holders, prior to the
commencement of trading, of the prospectus delivery requirements
applicable to the Securities. The Exchange notes that investors
purchasing Securities directly from Barclays will receive a prospectus.
ETP Holders purchasing Securities from Barclays for resale to investors
will deliver a prospectus to such investors.
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\28\ 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
Rule 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 crude oil, or the futures
contracts on which the value of the Securities is based.
The Information Bulletin will also discuss any exemptive or no-
action relief, if granted, by the Commission staff from any rules under
the Act.
2. Statutory Basis
The Exchange believes that the basis for this proposed rule change
is consistent with the requirements under Section 6(b)(5) \29\ of the
Act 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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\29\ 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 \30\ because it deems the Securities to
be equity securities, thus rendering the Securities subject to
[[Page 44756]]
the Exchange's rules governing the trading of equity securities.\31\
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\30\ 17 CFR 240.12f-5.
\31\ 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 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-2006-18 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-2006-18. 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-2006-18 and should be submitted on or before
August 28, 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.\32\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\33\ 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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\32\ 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).
\33\ 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,\34\ which permits an exchange to trade,
pursuant to UTP, a security that is listed and registered on another
exchange.\35\ The Commission notes that it previously approved the
listing and trading of the Securities on the NYSE.\36\ The Commission
also finds that the proposal is consistent with Rule 12f-5 under the
Act,\37\ 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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\34\ 15 U.S.C. 78l(f).
\35\ 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.
\36\ See NYSE Order, supra note 5.
\37\ 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,\38\ 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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\38\ 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:
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 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,
[[Page 44757]]
the Commission previously found that the listing and trading of these
Securities on the NYSE is consistent with the Act.\39\ 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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\39\ 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-2006-18), is hereby approved,
as amended, on an accelerated basis.\40\
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\40\ 15 U.S.C. 78s(b)(2).
\41\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\41\
Nancy M. Morris,
Secretary.
[FR Doc. E6-12699 Filed 8-4-06; 8:45 am]
BILLING CODE 8010-01-P
