Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change Relating to Trading Shares of iShares® S&P Global Index Funds Pursuant to Unlisted Trading Privileges, 56204-56208 [06-8236]

Download as PDF 56204 Federal Register / Vol. 71, No. 186 / Tuesday, September 26, 2006 / Notices NASD–2006–064), as amended, be, and it hereby is approved. proposed NASD monthly reporting requirement are consistent with the NYSE’s current program.9 III. Summary of Comment Received and NASD Response The Commission received one comment letter to the proposed rule change.10 The commenter stated that the proposed monthly reporting requirement would place an undue burden on self-clearing firms and requested that NASD amend the proposed rule to clarify that the monthly reporting requirement applies solely to clearing firms which clear for other broker-dealers. In its response, NASD stated that it did not intend for the proposed monthly reporting requirement to apply to self-clearing firms that do not clear for other brokerdealers, and that the proposed rule would not require these self-clearing firms to file the monthly report. 11 Finally, NASD stated that it will reiterate this position in the Notice to Members announcing Commission approval of the proposed rule. IV. Discussion and Commission Findings The Commission has reviewed the proposed rule filing, as amended, and finds that the proposed rule change, as amended, is consistent with the requirements of the Exchange Act, and, in particular, Section 15A(b)(6) of the Act,12 which requires, among other things, that NASD’s rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. The Commission believes that the proposed rule change will further assist NASD in ensuring that firms are complying with financial responsibility rules and preventing the excessive use of credit for the purchase or carrying of securities. pwalker on PRODPC60 with NOTICES V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,13 that the proposed rule change (File No. SR– 9 See Exchange Act Release No. 28726 (December 28, 1990), 56 FR 540 (January 7, 1991) (SR–NYSE– 89–24); and NYSE Information Memoranda 98–09 (March 5, 1998) and 94–22 (June 10, 1994); see also NYSE Information Memorandum 05–78 (October 12, 2005). 10 See supra note 5. 11 See supra note 6. 12 15 U.S.C. 78o–3(b)(6). In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 13 15 U.S.C. 78s(b)(2). VerDate Aug<31>2005 21:03 Sep 25, 2006 Jkt 208001 For the Commission, by the Division of Market Regulation, pursuant to delegated authority.14 Nancy M. Morris, Secretary. [FR Doc. 06–8239 Filed 9–25–06; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54473; File No. SR– NYSEArca–2006–60] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change Relating to Trading Shares of iShares S&P Global Index Funds Pursuant to Unlisted Trading Privileges September 20, 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 September 14, 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. 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to trade shares (‘‘Shares’’) of the following five funds of the iShares Trust (the ‘‘Trust’’): iShares S&P Global Consumer Discretionary Sector Index Fund, iShares S&P Global Consumer Staples Sector Index Fund, iShares S&P Global Industrials Sector Index Fund, iShares S&P Global Utilities Sector Index Fund and iShares S&P Global Materials Sector Index Fund (the ‘‘Funds’’) pursuant to unlisted trading privileges (‘‘UTP’’) under NYSE Arca Equities Rule 5.2(j)(3). 14 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item III below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Under NYSE Arca Equities Rule 5.2(j)(3), the Exchange may propose to list or trade pursuant to UTP ‘‘Investment Company Units.’’ 3 The Commission previously approved a proposal to list and trade the Shares of the Funds by the New York Stock Exchange, LLC (‘‘NYSE’’).4 The Exchange proposes to trade pursuant to UTP the Shares of the Funds under NYSE Arca Equities Rule 5.2(j)(3).5 Because the Funds invest in non-U.S. securities not listed on a national securities exchange or the Nasdaq Stock Market (‘‘Nasdaq’’), the Funds do not meet the ‘‘generic’’ listing requirements 3 In October 1999, the Commission approved NYSE Arca Equities Rule 5.2(j)(3), which sets forth the rules related to listing and trading criteria for Investment Company Units. See Securities Exchange Act Release No. 41983 (October 6, 1999), 64 FR 56008 (October 15, 1999) (SR–PCX–1998–29). In July 2001, the Commission also approved the Exchange’s generic listing standards for listing and trading, or the trading pursuant to UTP, of Investment Company Units under NYSE Arca Equities Rule 5.2(j)(3). See Securities Exchange Act Release No. 44551 (July 12, 2001), 66 FR 37716–01 (July 19, 2001) (SR–PCX–2001–14). The definition of an Investment Company Unit is set forth in NYSE Arca Equities Rule 5.1(b)(15), which provides that an Investment Company Unit is a security representing an interest in a registered investment company that could be organized as a unit investment trust, an open-end management investment company or a similar entity. 4 See Securities Exchange Release No. 54458 (September 15, 2006) (SR–NYSE–2006–60) (the ‘‘NYSE Proposal’’). 5 NYSE Arca Equities Rule 5.2(j)(3)(A)(i)(a) allows the listing and trading of Investment Company Units issued by a registered investment company that holds securities comprising, or otherwise based on or representing an interest in, an index or portfolio or securities. The Trust is registered under the Investment Company Act of 1940 (15 U.S.C. 80a) (the ‘‘Investment Company Act’’). On April 15, 2005, the Trust filed with the Commission a Registration Statement for the Funds on Form N– 1A under the Securities Act of 1933 (15 U.S.C. 77a), and under the Investment Company Act relating to the Funds (File Nos. 333–92935 and 811–09729). E:\FR\FM\26SEN1.SGM 26SEN1 pwalker on PRODPC60 with NOTICES Federal Register / Vol. 71, No. 186 / Tuesday, September 26, 2006 / Notices of NYSE Arca Equities Rule 5.2(j)(3), which permit listing and trading of Investment Company Units in reliance upon Rule 19b–4(e) under the Act.6 Therefore, to trade the Funds pursuant to UTP, the Exchange must file, and obtain Commission approval of, a proposed rule change pursuant to Rule 19b–4 under the Act.7 The Shares represent beneficial ownership interests in the net assets of the Funds, less expenses. As set forth in detail in the NYSE Proposal, the Funds will hold certain securities (‘‘Component Securities’’) selected to correspond generally to the performance of the following indexes, respectively: (1) S&P Global Consumer Discretionary Index; (2) S&P Global Consumer Staples Index; (3) S&P Global Industrials Index; (4) S&P Global Utilities Index; and (5) S&P Global Materials Index (each an ‘‘Underlying Index; collectively, the ‘‘Underlying Indexes’’). Each of the Underlying Indexes is a subset of the Standard & Poor’s Global 1200 Index. The Underlying Indexes are free float adjusted and market capitalization weighted. The investment objective of the Funds will be to provide investment results that correspond generally to the price and yield performance of the Underlying Indexes. In seeking to achieve their investment objective, the Funds will utilize ‘‘passive’’ indexing investment strategies. The Funds may fully replicate their respective Underlying Index, but currently intend to use a ‘‘representative sampling’’ strategy to track the applicable Underlying Index. A Fund utilizing a representative sampling strategy generally will hold a basket of the Component Securities of its Underlying Index, but it may not hold all of the Component Securities of its Underlying Index. Each Fund will invest at least 90% of its assets in the securities of its Underlying Index or in American Depositary Receipts (‘‘ADRs’’), Global Depositary Receipts, or European Depositary Receipts (collectively ‘‘Depositary Receipts’’) representing securities in the Underlying Index. A Fund may invest the remainder of its assets in securities not included in its Underlying Index, but which Barclays Global Fund Advisors (the ‘‘Advisor’’) believes will help the Fund track its Underlying Index. For example, a Fund may invest in securities not included in its Underlying Index in order to reflect various corporate actions (such as mergers) and other changes in its 6 17 CFR 240.19b–4(e); 15 U.S.C. 78s(b)(4). 7 Id. VerDate Aug<31>2005 21:03 Sep 25, 2006 Jkt 208001 Underlying Index (such as reconstitutions, additions and deletions). A Fund also may invest its other assets in futures contracts, options on futures contracts, options, and swaps related to its Underlying Index, as well as cash and cash equivalents, including shares of money market funds affiliated with the Advisor. To the extent the Funds invest in ADRs, such ADRs will be listed on a national securities exchange or Nasdaq, and to the extent the Funds invest in other Depositary Receipts, such Depositary Receipts will be listed on a foreign exchange. The Funds will not invest in any listed or unlisted Depositary Receipts that the Advisor deems to be illiquid or for which pricing information is not readily available. In addition, all Depositary Receipts must be sponsored (with the exception of certain pre-1984 ADRs that are listed and unsponsored because they are grandfathered). Each Fund will not concentrate its investments (i.e., hold 25% or more of its total assets in the stocks of a particular industry or group of industries), except that a Fund will concentrate to approximately the same extent that its Underlying Index concentrates in the stocks of such particular industry or group of industries. In such case, a Fund could hold 25% or more of its total assets in the stocks of such industry or group of industries. For purposes of this limitation, securities of the U.S. Government (including its agencies and instrumentalities), repurchase agreements collateralized by U.S. Government securities, and securities or state or municipal governments and their political subdivisions are not considered to be issued by members of any industry. (a) The Shares A description of the Trust, the operation of the Funds and the creation and redemption process for the Shares is set forth in the NYSE Proposal. To summarize, issuances of Shares will be made only in aggregations of at least 50,000 Shares or multiples thereof (‘‘Creation Units’’ or ‘‘Creation Unit Aggregations’’). The Funds will issue and redeem the Shares on a continuous basis, by or through participants that have entered into participant agreements (each, an ‘‘Authorized Participant’’) 8 with SEI Investments Distribution Co. (the ‘‘Distributor’’). 8 An Authorized Participant must be either a ‘‘Participating Party’’, i.e., a broker-dealer or other participant in the clearing process through the National Securities Clearing Corporation (‘‘NSCC’’) Continuous Net Settlement System, a clearing agency that is registered with the Commission, or PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 56205 Persons purchasing Creation Unit Aggregations from the Funds do so through an ‘‘in-kind’’ process in which a basket of securities (the ‘‘Deposit Securities’’), together with an amount of cash (the ‘‘Balancing Amount’’), plus the applicable transaction fee, is deposited with the Fund.9 A redeeming Authorized Participant deposits Fund Shares in Creation Unit Aggregations generally in exchange for a basket of securities (the ‘‘Fund Securities’’) and a balancing cash payment (‘‘Cash Redemption Payment’’).10 The redeeming Authorized Participant must pay a transaction fee to the Fund. Fund Securities received on redemption may not be identical to Deposit Securities deposited in connection with creations of Creation Unit Aggregations for the same day. The NAV of each Fund is calculated by Investors Bank & Trust Company (‘‘IBT’’). IBT determines the NAV at the close of regular trading of the NYSE (ordinarily 4 p.m. New York time) on each day that the NYSE is open for trading. The NAV for each Fund is computed by dividing the value of the net assets of such Fund (i.e., the value of its total assets less total liabilities) by its total number of Shares outstanding. Expenses and fees are accrued daily and taken into account for purposes of determining NAV. More information regarding the calculation of the NAV is set forth in the NYSE Proposal. (b) Availability of Information About the Shares and the Underlying Indexes On each business day the list of names and amount of each security constituting the current Deposit Securities of the Fund Deposit and the Balancing Amount effective as of the previous business day, per outstanding Share of each Fund, will be made available. According to the NYSE Proposal, an amount per Share representing the sum of the estimated Balancing Amount effective through and including the previous business day, plus the current value of the Deposit Securities in U.S. dollars, on a per Share a Depository Trust Company (‘‘DTC’’) participant, and in each case, must enter into a Participant Agreement. 9 The Trust reserves the right to permit or require the substitution of an amount of cash—i.e., a ‘‘cash in lieu’’ amount—to be added to the Balancing Amount to replace any Deposit Security that may not be available in sufficient quantity or that may not otherwise be eligible for transfer. 10 The Trust may also make redemptions in cash in lieu of transferring one or more Fund Securities to a redeemer if the Trust determines, in its discretion, that such method is warranted due to unusual circumstances (e.g., when a redeeming entity is restrained by regulation or policy from transacting in certain Fund Securities, such as the presence of Fund Securities on a redeeming investment banking firm’s restricted list). E:\FR\FM\26SEN1.SGM 26SEN1 pwalker on PRODPC60 with NOTICES 56206 Federal Register / Vol. 71, No. 186 / Tuesday, September 26, 2006 / Notices basis (the ‘‘Intra-day Optimized Portfolio Value’’ or ‘‘IOPV’’) will be calculated by an independent third party that is a major market data vendor (the ‘‘Value Calculator’’), such as Bloomberg L.P., every 15 seconds from 9:30 a.m. to 4:15 p.m. Eastern Time (‘‘ET’’) and disseminated every 15 seconds on the Consolidated Tape. The IOPV reflects the current value of the Deposit Securities and the Balancing Amount. The IOPV also reflects changes in currency exchange rates between the U.S. dollar and the applicable home foreign currency.11 Since the Funds will utilize a representative sampling strategy, the IOPV may not reflect the value of all securities included in the Underlying Indexes. In addition, the IOPV does not necessarily reflect the precise composition of the current portfolio of securities held by the Funds at a particular point in time. Therefore, the IOPV on a per Share basis should not be viewed as a real time update of the NAV of the Funds, which is calculated only once a day. While the IOPV disseminated at 9:30 a.m. is expected to be generally very close to the most recently calculated Fund NAV on a per Share basis, it is possible that the value of the portfolio of securities held by each Fund may diverge from the Deposit Securities values during any trading day. In such case, the IOPV will not precisely reflect the value of each Fund’s portfolio. However, during the trading day, the IOPV can be expected to closely approximate the value per Share of the portfolio of securities for each Fund except under unusual circumstances (e.g., in the case of extensive rebalancing of multiple securities in a Fund at the same time by the Advisor). There is an overlap in trading hours between the foreign and U.S. markets with respect to the Funds. Therefore, the Value Calculator will update the applicable IOPV every 15 seconds to reflect price changes in the applicable foreign market or markets, and convert such prices into U.S. dollars based on the currency exchange rate. When the foreign market or markets are closed but U.S. markets are open, the IOPV will be updated every 15 seconds to reflect changes in currency exchange rates after the foreign market closes. The IOPV will also include the applicable cash component for each Fund. In addition, a value for the Underlying Indexes will be 11 The IOPV ticker is available at www.ishares.com and the IOPV is publicly available utilizing this ticker through various financial Web sites such as https://finance.yahoo.com. VerDate Aug<31>2005 21:03 Sep 25, 2006 Jkt 208001 disseminated once each trading day, based on closing prices in the relevant exchange market, utilizing the currency exchange rates of WM/Reuters (or another major market data vendor). In each Underlying Index, the prices used to calculate the Underlying Indexes are the official exchange closing prices or those figures accepted as such. S&P reserves the right to use an alternative pricing source on any given day. As stated above under the heading ‘‘The Shares,’’ the NAV for the Fund will be calculated daily by IBT. IBT will also disseminate the information daily to Barclays Global Investors, N.A., the Distributor, the NYSE and others. The Funds’ NAV will be published in a number of places, including, https:// www.iShares.com and on the Consolidated Tape. Closing prices of the Funds’ Deposit Securities are readily available from, as applicable, the relevant exchanges, automated quotation systems, published or other public sources in the relevant country, or on-line information services such as Bloomberg or Reuters. The exchange rate information required to convert such information into U.S. dollars is also readily available in newspapers and other publications and from a variety of on-line services. In addition, the Web site for the Trust, https://www.iShares.com, which will be publicly accessible at no charge (and to which the Exchange will provide a hyperlink on its Web site), will contain the following information: (1) The prior business day’s NAV and the mid-point of the bid-ask price at the time of calculation of such NAV (‘‘Bid/Ask Price’’), and a calculation of the premium or discount of such price against such NAV; and (2) data in chart format displaying the frequency distribution of discounts and premiums of the Bid/Ask Price against the NAV, within appropriate ranges, for each of the four previous calendar quarters. Beneficial owners of the Funds will receive all of the statements, notices, and reports required under the Investment Company Act and other applicable laws. They will receive, for example, annual and semi-annual reports, written statements accompanying dividend payments, proxy statements, annual notifications detailing the tax status of distributions, IRS Form 1099–DIVs, etc. Because the Trust’s records reflect ownership of Shares by DTC only, the Trust will make available applicable statements, notices, and reports to the DTC Participants who, in turn, will be responsible for distributing them to the beneficial owners. (c) UTP Trading Criteria PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 The Exchange represents that it will cease trading the Shares of a Fund if: (a) The listing market stops trading the Shares because of a regulatory halt similar to a halt based on NYSE Arca Equities Rule 7.12 or a halt because the IOPV or the value of the applicable Underlying Index is no longer available; or (b) the listing market delists the Shares. Additionally, the Exchange may cease trading the Shares of a Fund 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 Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange’s existing rules governing the trading of equity securities. Shares will trade on the NYSE Arca Marketplace from 9:30 a.m. until 8 p.m. ET, even if the IOPV is not disseminated from 4:15 p.m. to 8 p.m. ET.12 The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. The minimum trading increment for Shares on the Exchange will be $0.01. With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of a Fund. Trading may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. These may include: (1) The extent to which trading is not occurring in the securities comprising an Underlying Index and/or the Depositary Receipts of a Fund; or (2) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. In addition, trading in Shares will be subject to trading halts caused by extraordinary market volatility pursuant to the Exchange’s ‘‘circuit breaker’’ rule 13 or by the halt or suspension of trading of the underlying securities. See ‘‘UTP Trading Criteria’’ above for specific instances when the Exchange will cease trading the Shares. Shares will be deemed ‘‘Eligible Listed Securities,’’ as defined in NYSE 12 Because NSCC does not disseminate the new basket amount to market participants until approximately 6 p.m. to 7 p.m. ET, an updated IOPV is not possible to calculate during the Exchange’s late trading session (4:15 p.m. to 8 p.m. ET). The Exchange may rely on the listing market to monitor dissemination of the IOPV during the Exchange’s core trading session (9:30 a.m. to 4:15 p.m. ET). Currently the official index sponsors for the Funds’ indexes do not calculate updated index values during the Exchange’s late trading session; however, if the index sponsors did so in the future, the Exchange will not trade this product unless such official index value is widely disseminated. 13 See NYSE Arca Equities Rule 7.12. E:\FR\FM\26SEN1.SGM 26SEN1 Federal Register / Vol. 71, No. 186 / Tuesday, September 26, 2006 / Notices pwalker on PRODPC60 with NOTICES 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 tradethroughs for ITS securities. (e) Surveillance The Exchange intends to utilize its existing surveillance procedures applicable to derivative products to monitor trading in the Shares. The Exchange represents that these procedures are adequate to properly monitor Exchange trading of the Shares. 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 may obtain information via the Intermarket Surveillance Group (‘‘ISG’’) from other exchanges who are members or affiliates of the ISG.14 (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 Shares. Specifically, the Information Bulletin will discuss the following: (1) The procedures for purchases and redemptions of Shares in Creation Unit Aggregations (and that Shares are not individually redeemable); (2) NYSE Arca Equities Rule 9.2(a),15 which imposes a duty of due diligence on its ETP Holders to learn the essential facts relating to every customer prior to trading the Shares; (3) how information regarding the IOPV is disseminated; (4) the requirement that ETP Holders deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of 14 For a list of the current members and affiliate members of ISG, see www.isgportal.com. 15 The Exchange recently amended NYSE Arca Equities Rule 9.2(a) (‘‘Diligence as to Accounts’’) to provide that ETP Holders, before recommending a transaction, must have reasonable grounds to believe that the recommendation is suitable for the customer based on any facts disclosed by the customer as to his other security holdings and as to his financial situation and needs. Further, the proposed rule amendment provides, with a limited exception, that prior to the execution of a transaction recommended to a non-institutional customer, the ETP Holders shall make reasonable efforts to obtain information concerning the customer’s financial status, tax status, investment objectives, and any other information that they believe would be useful to make a recommendation. See Securities Exchange Act Release No. 54045 (June 26, 2006), 71 FR 37971 (July 3, 2006) (SR– PCX–2005–115). VerDate Aug<31>2005 21:03 Sep 25, 2006 Jkt 208001 a transaction; and (5) trading information. In addition, the Information Bulletin will advise ETP Holders, prior to the commencement of trading, of the prospectus delivery requirements applicable to the Funds.16 The Exchange notes that investors purchasing Shares directly from the Trust will receive a prospectus. ETP Holders purchasing Shares from the Trust for resale to investors will deliver a prospectus to such investors. The Information Bulletin will also discuss any exemptive, no-action and interpretive relief granted by the Commission from any rules under the Act. In addition, the Information Bulletin will reference that the Trust is subject to various fees and expenses described in the Registration Statement. The Information Bulletin will also disclose that the NAV for the Shares will be calculated shortly after 4 p.m. ET each trading day. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act,17 in general, and furthers the objectives of section 6(b)(5),18 in particular, because it is designed to prevent fraudulent and manipulative act and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions 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 19 because it deems the Shares to be equity securities, thus rendering the Shares subject to the Exchange’s existing rules governing the trading of equity securities. 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 16 See In the Matter of iShares, Inc., et al., Investment Company Act Release No. 25623 (June 25, 2002), which permits dealers to sell Shares in the secondary market unaccompanied by a statutory prospectus when prospectus delivery is not required by the Securities Act of 1933. Any product description used in reliance on the Section 24(d) exemptive order will comply with all representations and conditions set forth in the order. 17 15 U.S.C. 78f(b). 18 15 U.S.C. 78f(b)(5). 19 17 CFR 240.12f–5. PO 00000 Frm 00108 Fmt 4703 Sfmt 4703 56207 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 rulecomments@sec.gov. Please include File Number SR–NYSEArca–2006–60 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEArca–2006–60. 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–2006–60 and E:\FR\FM\26SEN1.SGM 26SEN1 56208 Federal Register / Vol. 71, No. 186 / Tuesday, September 26, 2006 / Notices should be submitted on or before October 17, 2006. IV. Commission’s Findings and Order Granting Accelerated Approval of Proposed Rule Change pwalker on PRODPC60 with NOTICES The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.20 In particular, the Commission finds that the proposed rule change is consistent with section 6(b)(5) of the Act,21 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. In addition, the Commission finds that proposal is consistent with section 12(f) of the Act,22 which permits an exchange to trade, pursuant to UTP, a security that is listed and registered on another exchange.23 The Commission also finds that the proposal is consistent with Rule 12f–5 under the Act,24 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. NYSEArca rules deem the Shares to be equity securities, thus trading in the Shares will be subject to the Exchange’s existing rules governing the trading of equity securities. The Commission further believes that the proposal is consistent with section 11A(a)(1)(C)(iii) of the Act,25 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 20 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). 21 15 U.S.C. 78f(b)(5). 22 15 U.S.C. 78l(f). 23 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. 24 17 CFR 240.12f–5. 25 15 U.S.C. 78k–1(a)(1)(C)(iii). VerDate Aug<31>2005 21:03 Sep 25, 2006 Jkt 208001 with respect to quotations for and transactions in securities. In support of the proposed rule change, the Exchange has made the following representations: 1. The Exchange has appropriate rules to facilitate transactions in this type of security in all trading sessions. 2. The Exchange’s surveillance procedures are adequate to properly monitor the trading of the Shares on the Exchange. 3. The Exchange will inform its ETP Holders in an Information Bulletin of the special characteristics and risks associated with trading the Shares. 4. The Exchange will require its ETP Holders to deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction and will note this prospectus delivery requirement in the Information Bulletin. 5. The Exchange will cease trading the Shares of a Fund if: (a) The listing market stops trading the Shares because of a regulatory halt similar to a halt based on NYSE Arca Equities Rule 7.12 or a halt because the IOPV or the value of the applicable Underlying Index is no longer available; or (b) the listing market delists the Shares. This approval order is conditioned on the Exchange’s adherence to these representations. The Commission finds good cause for approving this proposed rule change before the thirtieth day after the publication of notice thereof in the Federal Register. As noted above, the Commission previously found that the listing and trading of these Shares on the NYSE is consistent with the Act.26 The Commission presently is not aware of any issue that would cause it to revisit that earlier finding or preclude the trading of these funds on the Exchange pursuant to UTP. Therefore, accelerating approval of this proposed rule change should benefit investors by creating, without undue delay, additional competition in the market for these Shares. V. Conclusion It is therefore ordered, pursuant to section 19(b)(2) of the Act, that the proposed rule change (SR–NYSEArca– 2006–60), is hereby approved on an accelerated basis.27 For the Commission, by the Division of Market Regulation, pursuant to delegated authority.28 Nancy M. Morris, Secretary. [FR Doc. 06–8236 Filed 9–25–06; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54464; File No. SR–OCC– 2006–14] Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Reduced Discounted Clearing Fees September 18, 2006. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 notice is hereby given that on August 15, 2006, The Options Clearing Corporation (‘‘OCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change described in Items I, II, and III below, which items have been prepared primarily by OCC. OCC filed the proposed rule change pursuant to section 19(b)(3)(A)(ii) of the Act 2 and Rule 19b–4(f)(2) thereunder 3 so that the proposal was effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested parties. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change is to reduce OCC’s currently discounted clearing fees for securities options and security futures where at least one side of the trade is cleared by an OCC clearing member for the period September 1, 2006, through December 29, 2006. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, OCC 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 IV below. OCC has prepared summaries, set forth in sections (A), (B), 28 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78s(b)(3)(A)(ii). 3 17 CFR 240.19b–4(f)(2). 1 15 26 See 27 15 PO 00000 NYSE Proposal, supra note 4. U.S.C. 78s(b)(2). Frm 00109 Fmt 4703 Sfmt 4703 E:\FR\FM\26SEN1.SGM 26SEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 71, Number 186 (Tuesday, September 26, 2006)]
[Notices]
[Pages 56204-56208]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-8236]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54473; File No. SR-NYSEArca-2006-60]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change 
Relating to Trading Shares of iShares[reg] S&P Global Index Funds 
Pursuant to Unlisted Trading Privileges

September 20, 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 September 14, 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. 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to trade shares (``Shares'') of the following 
five funds of the iShares[reg] Trust (the ``Trust''): iShares S&P 
Global Consumer Discretionary Sector Index Fund, iShares S&P Global 
Consumer Staples Sector Index Fund, iShares S&P Global Industrials 
Sector Index Fund, iShares S&P Global Utilities Sector Index Fund and 
iShares S&P Global Materials Sector Index Fund (the ``Funds'') pursuant 
to unlisted trading privileges (``UTP'') under NYSE Arca Equities Rule 
5.2(j)(3).

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Under NYSE Arca Equities Rule 5.2(j)(3), the Exchange may propose 
to list or trade pursuant to UTP ``Investment Company Units.'' \3\ The 
Commission previously approved a proposal to list and trade the Shares 
of the Funds by the New York Stock Exchange, LLC (``NYSE'').\4\ The 
Exchange proposes to trade pursuant to UTP the Shares of the Funds 
under NYSE Arca Equities Rule 5.2(j)(3).\5\ Because the Funds invest in 
non-U.S. securities not listed on a national securities exchange or the 
Nasdaq Stock Market (``Nasdaq''), the Funds do not meet the ``generic'' 
listing requirements

[[Page 56205]]

of NYSE Arca Equities Rule 5.2(j)(3), which permit listing and trading 
of Investment Company Units in reliance upon Rule 19b-4(e) under the 
Act.\6\ Therefore, to trade the Funds pursuant to UTP, the Exchange 
must file, and obtain Commission approval of, a proposed rule change 
pursuant to Rule 19b-4 under the Act.\7\
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    \3\ In October 1999, the Commission approved NYSE Arca Equities 
Rule 5.2(j)(3), which sets forth the rules related to listing and 
trading criteria for Investment Company Units. See Securities 
Exchange Act Release No. 41983 (October 6, 1999), 64 FR 56008 
(October 15, 1999) (SR-PCX-1998-29). In July 2001, the Commission 
also approved the Exchange's generic listing standards for listing 
and trading, or the trading pursuant to UTP, of Investment Company 
Units under NYSE Arca Equities Rule 5.2(j)(3). See Securities 
Exchange Act Release No. 44551 (July 12, 2001), 66 FR 37716-01 (July 
19, 2001) (SR-PCX-2001-14). The definition of an Investment Company 
Unit is set forth in NYSE Arca Equities Rule 5.1(b)(15), which 
provides that an Investment Company Unit is a security representing 
an interest in a registered investment company that could be 
organized as a unit investment trust, an open-end management 
investment company or a similar entity.
    \4\ See Securities Exchange Release No. 54458 (September 15, 
2006) (SR-NYSE-2006-60) (the ``NYSE Proposal'').
    \5\ NYSE Arca Equities Rule 5.2(j)(3)(A)(i)(a) allows the 
listing and trading of Investment Company Units issued by a 
registered investment company that holds securities comprising, or 
otherwise based on or representing an interest in, an index or 
portfolio or securities. The Trust is registered under the 
Investment Company Act of 1940 (15 U.S.C. 80a) (the ``Investment 
Company Act''). On April 15, 2005, the Trust filed with the 
Commission a Registration Statement for the Funds on Form N-1A under 
the Securities Act of 1933 (15 U.S.C. 77a), and under the Investment 
Company Act relating to the Funds (File Nos. 333-92935 and 811-
09729).
    \6\ 17 CFR 240.19b-4(e); 15 U.S.C. 78s(b)(4).
    \7\ Id.
---------------------------------------------------------------------------

    The Shares represent beneficial ownership interests in the net 
assets of the Funds, less expenses. As set forth in detail in the NYSE 
Proposal, the Funds will hold certain securities (``Component 
Securities'') selected to correspond generally to the performance of 
the following indexes, respectively: (1) S&P Global Consumer 
Discretionary Index; (2) S&P Global Consumer Staples Index; (3) S&P 
Global Industrials Index; (4) S&P Global Utilities Index; and (5) S&P 
Global Materials Index (each an ``Underlying Index; collectively, the 
``Underlying Indexes''). Each of the Underlying Indexes is a subset of 
the Standard & Poor's Global 1200 Index. The Underlying Indexes are 
free float adjusted and market capitalization weighted.
    The investment objective of the Funds will be to provide investment 
results that correspond generally to the price and yield performance of 
the Underlying Indexes. In seeking to achieve their investment 
objective, the Funds will utilize ``passive'' indexing investment 
strategies. The Funds may fully replicate their respective Underlying 
Index, but currently intend to use a ``representative sampling'' 
strategy to track the applicable Underlying Index. A Fund utilizing a 
representative sampling strategy generally will hold a basket of the 
Component Securities of its Underlying Index, but it may not hold all 
of the Component Securities of its Underlying Index.
    Each Fund will invest at least 90% of its assets in the securities 
of its Underlying Index or in American Depositary Receipts (``ADRs''), 
Global Depositary Receipts, or European Depositary Receipts 
(collectively ``Depositary Receipts'') representing securities in the 
Underlying Index. A Fund may invest the remainder of its assets in 
securities not included in its Underlying Index, but which Barclays 
Global Fund Advisors (the ``Advisor'') believes will help the Fund 
track its Underlying Index. For example, a Fund may invest in 
securities not included in its Underlying Index in order to reflect 
various corporate actions (such as mergers) and other changes in its 
Underlying Index (such as reconstitutions, additions and deletions). A 
Fund also may invest its other assets in futures contracts, options on 
futures contracts, options, and swaps related to its Underlying Index, 
as well as cash and cash equivalents, including shares of money market 
funds affiliated with the Advisor.
    To the extent the Funds invest in ADRs, such ADRs will be listed on 
a national securities exchange or Nasdaq, and to the extent the Funds 
invest in other Depositary Receipts, such Depositary Receipts will be 
listed on a foreign exchange. The Funds will not invest in any listed 
or unlisted Depositary Receipts that the Advisor deems to be illiquid 
or for which pricing information is not readily available. In addition, 
all Depositary Receipts must be sponsored (with the exception of 
certain pre-1984 ADRs that are listed and unsponsored because they are 
grandfathered).
    Each Fund will not concentrate its investments (i.e., hold 25% or 
more of its total assets in the stocks of a particular industry or 
group of industries), except that a Fund will concentrate to 
approximately the same extent that its Underlying Index concentrates in 
the stocks of such particular industry or group of industries. In such 
case, a Fund could hold 25% or more of its total assets in the stocks 
of such industry or group of industries. For purposes of this 
limitation, securities of the U.S. Government (including its agencies 
and instrumentalities), repurchase agreements collateralized by U.S. 
Government securities, and securities or state or municipal governments 
and their political subdivisions are not considered to be issued by 
members of any industry.
    (a) The Shares
    A description of the Trust, the operation of the Funds and the 
creation and redemption process for the Shares is set forth in the NYSE 
Proposal. To summarize, issuances of Shares will be made only in 
aggregations of at least 50,000 Shares or multiples thereof (``Creation 
Units'' or ``Creation Unit Aggregations''). The Funds will issue and 
redeem the Shares on a continuous basis, by or through participants 
that have entered into participant agreements (each, an ``Authorized 
Participant'') \8\ with SEI Investments Distribution Co. (the 
``Distributor'').
---------------------------------------------------------------------------

    \8\ An Authorized Participant must be either a ``Participating 
Party'', i.e., a broker-dealer or other participant in the clearing 
process through the National Securities Clearing Corporation 
(``NSCC'') Continuous Net Settlement System, a clearing agency that 
is registered with the Commission, or a Depository Trust Company 
(``DTC'') participant, and in each case, must enter into a 
Participant Agreement.
---------------------------------------------------------------------------

    Persons purchasing Creation Unit Aggregations from the Funds do so 
through an ``in-kind'' process in which a basket of securities (the 
``Deposit Securities''), together with an amount of cash (the 
``Balancing Amount''), plus the applicable transaction fee, is 
deposited with the Fund.\9\ A redeeming Authorized Participant deposits 
Fund Shares in Creation Unit Aggregations generally in exchange for a 
basket of securities (the ``Fund Securities'') and a balancing cash 
payment (``Cash Redemption Payment'').\10\ The redeeming Authorized 
Participant must pay a transaction fee to the Fund. Fund Securities 
received on redemption may not be identical to Deposit Securities 
deposited in connection with creations of Creation Unit Aggregations 
for the same day.
---------------------------------------------------------------------------

    \9\ The Trust reserves the right to permit or require the 
substitution of an amount of cash--i.e., a ``cash in lieu'' amount--
to be added to the Balancing Amount to replace any Deposit Security 
that may not be available in sufficient quantity or that may not 
otherwise be eligible for transfer.
    \10\ The Trust may also make redemptions in cash in lieu of 
transferring one or more Fund Securities to a redeemer if the Trust 
determines, in its discretion, that such method is warranted due to 
unusual circumstances (e.g., when a redeeming entity is restrained 
by regulation or policy from transacting in certain Fund Securities, 
such as the presence of Fund Securities on a redeeming investment 
banking firm's restricted list).
---------------------------------------------------------------------------

    The NAV of each Fund is calculated by Investors Bank & Trust 
Company (``IBT''). IBT determines the NAV at the close of regular 
trading of the NYSE (ordinarily 4 p.m. New York time) on each day that 
the NYSE is open for trading. The NAV for each Fund is computed by 
dividing the value of the net assets of such Fund (i.e., the value of 
its total assets less total liabilities) by its total number of Shares 
outstanding. Expenses and fees are accrued daily and taken into account 
for purposes of determining NAV. More information regarding the 
calculation of the NAV is set forth in the NYSE Proposal.
    (b) Availability of Information About the Shares and the Underlying 
Indexes
    On each business day the list of names and amount of each security 
constituting the current Deposit Securities of the Fund Deposit and the 
Balancing Amount effective as of the previous business day, per 
outstanding Share of each Fund, will be made available. According to 
the NYSE Proposal, an amount per Share representing the sum of the 
estimated Balancing Amount effective through and including the previous 
business day, plus the current value of the Deposit Securities in U.S. 
dollars, on a per Share

[[Page 56206]]

basis (the ``Intra-day Optimized Portfolio Value'' or ``IOPV'') will be 
calculated by an independent third party that is a major market data 
vendor (the ``Value Calculator''), such as Bloomberg L.P., every 15 
seconds from 9:30 a.m. to 4:15 p.m. Eastern Time (``ET'') and 
disseminated every 15 seconds on the Consolidated Tape.
    The IOPV reflects the current value of the Deposit Securities and 
the Balancing Amount. The IOPV also reflects changes in currency 
exchange rates between the U.S. dollar and the applicable home foreign 
currency.\11\
---------------------------------------------------------------------------

    \11\ The IOPV ticker is available at www.ishares.com and the 
IOPV is publicly available utilizing this ticker through various 
financial Web sites such as https://finance.yahoo.com.
---------------------------------------------------------------------------

    Since the Funds will utilize a representative sampling strategy, 
the IOPV may not reflect the value of all securities included in the 
Underlying Indexes. In addition, the IOPV does not necessarily reflect 
the precise composition of the current portfolio of securities held by 
the Funds at a particular point in time. Therefore, the IOPV on a per 
Share basis should not be viewed as a real time update of the NAV of 
the Funds, which is calculated only once a day.
    While the IOPV disseminated at 9:30 a.m. is expected to be 
generally very close to the most recently calculated Fund NAV on a per 
Share basis, it is possible that the value of the portfolio of 
securities held by each Fund may diverge from the Deposit Securities 
values during any trading day. In such case, the IOPV will not 
precisely reflect the value of each Fund's portfolio. However, during 
the trading day, the IOPV can be expected to closely approximate the 
value per Share of the portfolio of securities for each Fund except 
under unusual circumstances (e.g., in the case of extensive rebalancing 
of multiple securities in a Fund at the same time by the Advisor).
    There is an overlap in trading hours between the foreign and U.S. 
markets with respect to the Funds. Therefore, the Value Calculator will 
update the applicable IOPV every 15 seconds to reflect price changes in 
the applicable foreign market or markets, and convert such prices into 
U.S. dollars based on the currency exchange rate. When the foreign 
market or markets are closed but U.S. markets are open, the IOPV will 
be updated every 15 seconds to reflect changes in currency exchange 
rates after the foreign market closes. The IOPV will also include the 
applicable cash component for each Fund.
    In addition, a value for the Underlying Indexes will be 
disseminated once each trading day, based on closing prices in the 
relevant exchange market, utilizing the currency exchange rates of WM/
Reuters (or another major market data vendor). In each Underlying 
Index, the prices used to calculate the Underlying Indexes are the 
official exchange closing prices or those figures accepted as such. S&P 
reserves the right to use an alternative pricing source on any given 
day.
    As stated above under the heading ``The Shares,'' the NAV for the 
Fund will be calculated daily by IBT. IBT will also disseminate the 
information daily to Barclays Global Investors, N.A., the Distributor, 
the NYSE and others. The Funds' NAV will be published in a number of 
places, including, https://www.iShares.com and on the Consolidated Tape.
    Closing prices of the Funds' Deposit Securities are readily 
available from, as applicable, the relevant exchanges, automated 
quotation systems, published or other public sources in the relevant 
country, or on-line information services such as Bloomberg or Reuters. 
The exchange rate information required to convert such information into 
U.S. dollars is also readily available in newspapers and other 
publications and from a variety of on-line services.
    In addition, the Web site for the Trust, https://www.iShares.com, 
which will be publicly accessible at no charge (and to which the 
Exchange will provide a hyperlink on its Web site), will contain the 
following information: (1) The prior business day's NAV and the mid-
point of the bid-ask price at the time of calculation of such NAV 
(``Bid/Ask Price''), and a calculation of the premium or discount of 
such price against such NAV; and (2) data in chart format displaying 
the frequency distribution of discounts and premiums of the Bid/Ask 
Price against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters.
    Beneficial owners of the Funds will receive all of the statements, 
notices, and reports required under the Investment Company Act and 
other applicable laws. They will receive, for example, annual and semi-
annual reports, written statements accompanying dividend payments, 
proxy statements, annual notifications detailing the tax status of 
distributions, IRS Form 1099-DIVs, etc. Because the Trust's records 
reflect ownership of Shares by DTC only, the Trust will make available 
applicable statements, notices, and reports to the DTC Participants 
who, in turn, will be responsible for distributing them to the 
beneficial owners.
    (c) UTP Trading Criteria
    The Exchange represents that it will cease trading the Shares of a 
Fund if: (a) The listing market stops trading the Shares because of a 
regulatory halt similar to a halt based on NYSE Arca Equities Rule 7.12 
or a halt because the IOPV or the value of the applicable Underlying 
Index is no longer available; or (b) the listing market delists the 
Shares. Additionally, the Exchange may cease trading the Shares of a 
Fund 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 Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 9:30 a.m. until 8 p.m. ET, even if the 
IOPV is not disseminated from 4:15 p.m. to 8 p.m. ET.\12\ The Exchange 
has appropriate rules to facilitate transactions in the Shares during 
all trading sessions. The minimum trading increment for Shares on the 
Exchange will be $0.01.
---------------------------------------------------------------------------

    \12\ Because NSCC does not disseminate the new basket amount to 
market participants until approximately 6 p.m. to 7 p.m. ET, an 
updated IOPV is not possible to calculate during the Exchange's late 
trading session (4:15 p.m. to 8 p.m. ET). The Exchange may rely on 
the listing market to monitor dissemination of the IOPV during the 
Exchange's core trading session (9:30 a.m. to 4:15 p.m. ET). 
Currently the official index sponsors for the Funds' indexes do not 
calculate updated index values during the Exchange's late trading 
session; however, if the index sponsors did so in the future, the 
Exchange will not trade this product unless such official index 
value is widely disseminated.
---------------------------------------------------------------------------

    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of a Fund. Trading may be halted because of 
market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable. These may include: (1) The 
extent to which trading is not occurring in the securities comprising 
an Underlying Index and/or the Depositary Receipts of a Fund; or (2) 
whether other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present. In addition, 
trading in Shares will be subject to trading halts caused by 
extraordinary market volatility pursuant to the Exchange's ``circuit 
breaker'' rule \13\ or by the halt or suspension of trading of the 
underlying securities. See ``UTP Trading Criteria'' above for specific 
instances when the Exchange will cease trading the Shares.
---------------------------------------------------------------------------

    \13\ See NYSE Arca Equities Rule 7.12.
---------------------------------------------------------------------------

    Shares will be deemed ``Eligible Listed Securities,'' as defined in 
NYSE

[[Page 56207]]

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 intends to utilize its existing surveillance 
procedures applicable to derivative products to monitor trading in the 
Shares. The Exchange represents that these procedures are adequate to 
properly monitor Exchange trading of the Shares.
    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 may obtain information via the Intermarket 
Surveillance Group (``ISG'') from other exchanges who are members or 
affiliates of the ISG.\14\
---------------------------------------------------------------------------

    \14\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com.
---------------------------------------------------------------------------

    (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 Shares. Specifically, the 
Information Bulletin will discuss the following: (1) The procedures for 
purchases and redemptions of Shares in Creation Unit Aggregations (and 
that Shares are not individually redeemable); (2) NYSE Arca Equities 
Rule 9.2(a),\15\ which imposes a duty of due diligence on its ETP 
Holders to learn the essential facts relating to every customer prior 
to trading the Shares; (3) how information regarding the IOPV is 
disseminated; (4) the requirement that ETP Holders deliver a prospectus 
to investors purchasing newly issued Shares prior to or concurrently 
with the confirmation of a transaction; and (5) trading information.
---------------------------------------------------------------------------

    \15\ The Exchange recently amended NYSE Arca Equities Rule 
9.2(a) (``Diligence as to Accounts'') to provide that ETP Holders, 
before recommending a transaction, must have reasonable grounds to 
believe that the recommendation is suitable for the customer based 
on any facts disclosed by the customer as to his other security 
holdings and as to his financial situation and needs. Further, the 
proposed rule amendment provides, with a limited exception, that 
prior to the execution of a transaction recommended to a non-
institutional customer, the ETP Holders shall make reasonable 
efforts to obtain information concerning the customer's financial 
status, tax status, investment objectives, and any other information 
that they believe would be useful to make a recommendation. See 
Securities Exchange Act Release No. 54045 (June 26, 2006), 71 FR 
37971 (July 3, 2006) (SR-PCX-2005-115).
---------------------------------------------------------------------------

    In addition, the Information Bulletin will advise ETP Holders, 
prior to the commencement of trading, of the prospectus delivery 
requirements applicable to the Funds.\16\ The Exchange notes that 
investors purchasing Shares directly from the Trust will receive a 
prospectus. ETP Holders purchasing Shares from the Trust for resale to 
investors will deliver a prospectus to such investors. The Information 
Bulletin will also discuss any exemptive, no-action and interpretive 
relief granted by the Commission from any rules under the Act.
---------------------------------------------------------------------------

    \16\ See In the Matter of iShares, Inc., et al., Investment 
Company Act Release No. 25623 (June 25, 2002), which permits dealers 
to sell Shares in the secondary market unaccompanied by a statutory 
prospectus when prospectus delivery is not required by the 
Securities Act of 1933. Any product description used in reliance on 
the Section 24(d) exemptive order will comply with all 
representations and conditions set forth in the order.
---------------------------------------------------------------------------

    In addition, the Information Bulletin will reference that the Trust 
is subject to various fees and expenses described in the Registration 
Statement. The Information Bulletin will also disclose that the NAV for 
the Shares will be calculated shortly after 4 p.m. ET each trading day.

2. Statutory Basis

    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\17\ in general, and furthers the 
objectives of section 6(b)(5),\18\ in particular, because it is 
designed to prevent fraudulent and manipulative act and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in facilitating transactions 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.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In addition, the Exchange believes that the proposal is consistent 
with Rule 12f-5 under the Act \19\ because it deems the Shares to be 
equity securities, thus rendering the Shares subject to the Exchange's 
existing rules governing the trading of equity securities.
---------------------------------------------------------------------------

    \19\ 17 CFR 240.12f-5.
---------------------------------------------------------------------------

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-2006-60 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street NE., Washington, DC 20549-1090. All submissions should refer to 
File Number SR-NYSEArca-2006-60. 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-2006-60 and

[[Page 56208]]

should be submitted on or before October 17, 2006.

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

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\20\ In 
particular, the Commission finds that the proposed rule change is 
consistent with section 6(b)(5) of the Act,\21\ 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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    \20\ 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).
    \21\ 15 U.S.C. 78f(b)(5).
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    In addition, the Commission finds that proposal is consistent with 
section 12(f) of the Act,\22\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\23\ The Commission also finds that the proposal is consistent 
with Rule 12f-5 under the Act,\24\ 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. NYSEArca rules deem the 
Shares to be equity securities, thus trading in the Shares will be 
subject to the Exchange's existing rules governing the trading of 
equity securities.
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    \22\ 15 U.S.C. 78l(f).
    \23\ 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.
    \24\ 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,\25\ 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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    \25\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    In support of the proposed rule change, the Exchange has made the 
following representations:
    1. The Exchange has appropriate rules to facilitate transactions in 
this type of security in all trading sessions.
    2. The Exchange's surveillance procedures are adequate to properly 
monitor the trading of the Shares on the Exchange.
    3. The Exchange will inform its ETP Holders in an Information 
Bulletin of the special characteristics and risks associated with 
trading the Shares.
    4. The Exchange will require its ETP Holders to deliver a 
prospectus to investors purchasing newly issued Shares prior to or 
concurrently with the confirmation of a transaction and will note this 
prospectus delivery requirement in the Information Bulletin.
    5. The Exchange will cease trading the Shares of a Fund if: (a) The 
listing market stops trading the Shares because of a regulatory halt 
similar to a halt based on NYSE Arca Equities Rule 7.12 or a halt 
because the IOPV or the value of the applicable Underlying Index is no 
longer available; or (b) the listing market delists the Shares.
    This approval order is conditioned on the Exchange's adherence to 
these representations.
    The Commission finds good cause for approving this proposed rule 
change before the thirtieth day after the publication of notice thereof 
in the Federal Register. As noted above, the Commission previously 
found that the listing and trading of these Shares on the NYSE is 
consistent with the Act.\26\ The Commission presently is not aware of 
any issue that would cause it to revisit that earlier finding or 
preclude the trading of these funds on the Exchange pursuant to UTP. 
Therefore, accelerating approval of this proposed rule change should 
benefit investors by creating, without undue delay, additional 
competition in the market for these Shares.
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    \26\ See NYSE Proposal, supra note 4.
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the Act, 
that the proposed rule change (SR-NYSEArca-2006-60), is hereby approved 
on an accelerated basis.\27\
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    \27\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. 06-8236 Filed 9-25-06; 8:45 am]
BILLING CODE 8010-01-P

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