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]

Download as PDF 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 (http://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. VerDate Aug<31>2005 17:19 Aug 04, 2006 Jkt 208001 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 (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the 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 PO 00000 CFR 200.30–3(a)(12). Frm 00148 Fmt 4703 Sfmt 4703 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 E:\FR\FM\07AUN1.SGM 07AUN1 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 sroberts on PROD1PC70 with NOTICES 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 VerDate Aug<31>2005 17:19 Aug 04, 2006 Jkt 208001 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 Frm 00149 Fmt 4703 Sfmt 4703 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. E:\FR\FM\07AUN1.SGM 07AUN1 44754 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 http://www.ipathetn.com. In connection with the Securities, the term ‘‘IIV’’ refers to the value at a given time determined based on the following equation: IIV = Principal Amount per Unit ($50) multiplied by (Current Index 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. VerDate Aug<31>2005 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. PO 00000 Frm 00150 Fmt 4703 Sfmt 4703 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). E:\FR\FM\07AUN1.SGM 07AUN1 sroberts on PROD1PC70 with NOTICES 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 VerDate Aug<31>2005 17:19 Aug 04, 2006 Jkt 208001 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 PO 00000 Frm 00151 Fmt 4703 Sfmt 4703 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. E:\FR\FM\07AUN1.SGM 07AUN1 44756 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 (http://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 (http://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 (http://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 (http://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). E:\FR\FM\07AUN1.SGM 07AUN1

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]


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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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange clarified certain aspects 
of its proposal regarding the Securities and surveillance.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Through NYSE Arca Equities, the Exchange proposes to amend its 
rules governing NYSE Arca, 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\
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    \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'').
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(a) The Securities and the Index
(i) The Securities
    In August 2005, the Commission approved NYSE Arca Equities Rule 
5.2(j)(6), which provides general standards for the listing and trading 
of ``Index-Linked Securities.'' \6\ Index-Linked Securities are 
securities that provide for the payment at maturity of a cash amount 
based on the performance of an underlying index or indexes. Such 
securities may or may not provide for the repayment of the original 
principal investment amount. As permitted in NYSE Arca Equities Rule 
5.2(j)(6), the Exchange is submitting this rule proposal to the 
Commission pursuant to Section 19(b)(2) of the Act, 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 http://www.ipathetn.com. In connection with the Securities, the 
term ``IIV'' refers to the value at a given time determined based on 
the following equation: IIV = Principal Amount per Unit ($50) 
multiplied by (Current Index Level divided by Initial Index Level ) 
\19\ minus Current Investor Fee.\20\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

(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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

(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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \25\ See Securities Exchange Act Release No. 54189 (July 21, 
2006), 71 FR 43263 (July 31, 2006) (SR-NYSEArca-2006-17).
---------------------------------------------------------------------------

    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.
    \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 (http://
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 (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room. Copies of such 
filing also will be available for inspection and copying at the 
principal offices of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NYSEArca-2006-18 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