Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change and Amendment No. 1 To List and Trade Two Series of Commodity-Linked Securities of Wachovia Corporation, 66814-66820 [E6-19364]
Download as PDF
<![CDATA[
66814
Federal Register / Vol. 71, No. 221 / Thursday, November 16, 2006 / Notices
As required under Rule 19b–4(f)(6)(iii)
under the Act,11 Nasdaq provided the
Commission with written notice of its
intent to file the proposed rule change,
along with a brief description and text
of the proposed rule change, at least five
business days prior to the date of the
filing of the proposed rule change.
A proposed rule change filed under
19b–4(f)(6) normally may not become
operative prior to 30 days after the date
of filing.12 However, Rule 19b–
4(f)(6)(iii) 13 permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest.
Nasdaq has requested that the
Commission waive the 30-day operative
delay and render the proposed rule
change operative immediately. The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest. Waiver of the 30-day
operative delay would enable ITS/CAES
market makers to maintain a two-sided
quote at market open and would
replicate functionality currently in use
by the Nasdaq Exchange with respect to
Nasdaq-listed stocks. For the reasons
stated above, the Commission therefore
designated the proposal to become
operative upon filing.14
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
IV. 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
pwalker on PROD1PC61 with NOTICES
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NASD–2006–114 on the
subject line.
11 17
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54731; File No. SR–NYSE–
2006–54]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Order Granting Accelerated
All submissions should refer to File
Approval of Proposed Rule Change
Number SR–NASD–2006–114. This file
and Amendment No. 1 To List and
number should be included on the
subject line if e-mail is used. To help the Trade Two Series of CommodityLinked Securities of Wachovia
Commission process and review your
Corporation
comments more efficiently, please use
only one method. The Commission will November 9, 2006.
post all comments on the Commission’s
Pursuant to Section 19(b)(1) of the
Internet Web site (https://www.sec.gov/
Securities Exchange Act of 1934
rules/sro.shtml). Copies of the
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
submission, all subsequent
notice is hereby given that on July 25,
amendments, all written statements
2006, New York Stock Exchange LLC
with respect to the proposed rule
(the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
change that are filed with the
(‘‘Commission’’) the proposed rule
Commission, and all written
change as described in Items I and II
communications relating to the
below, which Items have been prepared
proposed rule change between the
Commission and any person, other than by the Exchange. On November 3, 2006,
the Exchange submitted Amendment
those that may be withheld from the
No. 1 to the proposed rule change.3 The
public in accordance with the
Commission is publishing this notice to
provisions of 5 U.S.C. 552, will be
solicit comments on the proposed rule
available for inspection and copying in
change, as amended, from interested
the Commission’s Public Reference
Room. Copies of such filing also will be persons and is approving the proposal,
as amended, on an accelerated basis.
available for inspection and copying at
the principal offices of Nasdaq. All
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
comments received will be posted
the Proposed Rule Change
without change; the Commission does
not edit personal identifying
The Exchange proposes to list and
information from submissions. You
trade two series of Commodity-Linked
should submit only information that
Securities (the ‘‘Securities’’) of
you wish to make available publicly. All Wachovia Corporation, one having an
submissions should refer to File
aggregate principal amount of
Number SR–NASD–2006–114 and
$45,000,000 and the other having an
should be submitted on or before
aggregate principal amount of
$40,000,000. The return on the
December 7, 2006.
Securities, in excess of the principal
For the Commission, by the Division of
amount, is linked to the performance of
Market Regulation, pursuant to delegated
an equally weighted basket (the
authority.15
‘‘Basket’’) of the following five
Nancy M. Morris,
commodities: WTI crude oil, natural
Secretary.
gas, copper, aluminum, and gold (each,
[FR Doc. E6–19379 Filed 11–15–06; 8:45 am]
a ‘‘Component Commodity’’ and,
collectively, the ‘‘Component
BILLING CODE 8011–01–P
Commodities’’).
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, as amended,
and discussed any comments it received
CFR 240.19b–4(f)(6)(iii).
12 Id.
13 Id.
14 For purposes of waiving the operative date of
this proposal only, the Commission has considered
the impact of the proposed rule on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
VerDate Aug<31>2005
20:27 Nov 15, 2006
Jkt 211001
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Amendment No. 1 replaced and superseded the
original filing in its entirety.
2 17
15 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00066
Fmt 4703
Sfmt 4703
E:\FR\FM\16NON1.SGM
16NON1
Federal Register / Vol. 71, No. 221 / Thursday, November 16, 2006 / Notices
on the proposed rule change. The text
of these statements may be examined at
the places specified in Item III below,
and is set forth in Sections A, B, and C
below.
pwalker on PROD1PC61 with NOTICES
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Under Section 703.19 of the NYSE
Listed Company Manual (the
‘‘Manual’’), the Exchange may approve
for listing and trading securities not
otherwise covered by the criteria of
Sections 1 and 7 of the Manual,
provided that the issue is suited for
auction market trading. The Exchange
proposes to list and trade, under Section
703.19 of the Manual, the Securities, the
return on which, in excess of the
principal amount, is linked to the
performance of the Basket. The
Securities are debt securities and are
part of a series of debt securities entitled
‘‘Medium-Term Notes, Series G’’ that
Wachovia may issue from time to time.
The Securities rank equally with all
other unsecured and unsubordinated
debt of Wachovia. The principal amount
of each Security is $25, and they will be
traded on the Exchange’s equity trading
floor.
The Exchange believes that the
Securities conform to the initial listing
standards for equity securities under
Section 703.19 of the Manual, as
Wachovia is a listed company in good
standing, each series of Securities has at
least 400 holders at the time of listing,
each series of Securities has a minimum
life of one year, and the minimum
public market value of each series of
Securities at the time of listing will
exceed $4 million.
The Exchange states that the
Securities will mature (the ‘‘Maturity
Date’’) on November 3, 2008, with
respect to the Series 1 Securities and
August 6, 2009 with respect to the
Series 2 Securities. The maturity
payment amount, in excess of the
principal amount, will be linked to the
performance of the Basket, which in
turn is based on the performance of the
Component Commodities.
Each Component Commodity
represents 20% of the Basket. The
Component Commodities are set forth
below:
• WTI Crude Oil (Bloomberg symbol
‘‘CL1’’)
• Natural Gas (Bloomberg symbol
‘‘NG1’’)
• Copper (Bloomberg symbol
‘‘LOCADY’’)
• Aluminum (Bloomberg symbol
‘‘LOAHDY’’)
VerDate Aug<31>2005
20:27 Nov 15, 2006
Jkt 211001
• Gold (Bloomberg symbol
‘‘GOLDLNPM’’)
The weighting of each Component
Commodity is fixed and will not change
during the term of the Securities.
Similarly, the Component Commodities
that comprise the Basket will not
change, except as described below
under ‘‘Adjustments to the Basket and
the Component Commodity Prices.’’
The Series 1 Securities pay a fixed 2%
interest rate semi-annually on May 3
and November 3, beginning on May 3,
2006. At maturity, for each Series 1
Security a holder owns, such holder
will receive a cash payment equal to the
sum of the principal amount of the
Security and the Basket performance
amount, plus any accrued but unpaid
interest. The ‘‘Basket performance
amount’’ per Series 1 Security will
equal the greater of (i) $0, and (ii) the
product of the principal amount of the
Series 1 Security and the percentage
change in the level of the Basket, as
further described below. If the Basket
ending level is less than or equal to the
Basket starting level, the Basket
performance amount will be $0, and the
maturity payment amount will be $25,
plus any accrued but unpaid interest.
The Series 2 Securities make no
payment of interest, periodic or
otherwise. At maturity, for each Series
2 Security a holder owns, such holder
will receive a cash payment equal to the
sum of the principal amount of the
Series 2 Security and the Basket
performance amount. The Basket
performance amount per Series 2
Security will equal the greater of (i) $0,
and (ii) the product of the principal
amount of the Series 2 Security, the
percentage change in the level of the
Basket, as further described below, and
a participation rate of 150%. If the
Basket ending level is less than or equal
to the Basket starting level, the Basket
performance amount will be $0, and the
maturity payment amount will be $25.
The Exchange states that the
Securities will provide for participation
in the positive performance of the
Component Commodities during their
term while reducing the risk exposure to
investors through principal protection.
The Securities are not callable by
Wachovia.
The Basket performance amount per
Security will be determined by the
calculation agent.4 The Basket
4 Wachovia
Bank, National Association, a
subsidiary of Wachovia, will serve as the
calculation agent. Wachovia may at any time
change the calculation agent without notice to
holders of Securities. Wachovia has represented to
the Exchange that it has policies prohibiting insider
trading that are applicable to all of its employees
and that it implements and maintains procedures
PO 00000
Frm 00067
Fmt 4703
Sfmt 4703
66815
performance amount per Series 1
Security will equal the greater of:
(i) $0, and
(ii) $25 × (Basket ending level ¥
Basket starting level) / Basket Starting
Level.
The Basket performance amount per
Series 2 Security will equal the greater
of:
(i) $0, and
(ii) $25 × ((Basket ending level ¥
Basket starting level) / Basket starting
level) × the Participation Rate.
The Participation Rate for the Series
2 Securities is 150%.
The ‘‘Basket starting level’’ for both
Series 1 and Series 2 Securities is 1,000.
The ‘‘Basket ending level’’ will be
determined by the calculation agent and
will equal the closing level of the Basket
on the valuation date. The closing level
of the Basket will be calculated based on
the weighted levels of the Component
Commodities and will equal the sum of
the products of (i) the component
multiplier of each Component
Commodity and (ii) the closing price (as
described below) of the Component
Commodity on the valuation date.
The ‘‘component multiplier’’ equals
the quotient of (i) the initial weight of
each Component Commodity (20%)
multiplied by the Basket starting level
divided by (ii) the closing price of each
Component Commodity on the pricing
date of the initial offering of the
Securities (October 27, 2005 for the
Series 1 Securities and January 30, 2006
for the Series 2 Securities).
The ‘‘closing price’’ of each
Component Commodity will be
determined by reference to its official
closing price or cash settlement price on
the relevant exchange or market on the
valuation date, as reported by
Bloomberg LP, as follows:
• In the case of WTI crude oil, the
U.S. dollar closing settlement price per
barrel of West Texas Intermediate light
sweet crude oil on the New York
Mercantile Exchange (the ‘‘NYMEX’’) of
the first nearby futures contract; 5
• In the case of natural gas, the
official U.S. dollar settlement price per
MMBtu of natural gas on the NYMEX of
the Henry Hub Natural Gas futures
contract in respect of the first nearby
month; in the case of copper, the official
U.S. dollar settlement price per ton of
copper-Grade A on the London Metals
reasonably designed to prevent the use and
dissemination by employees involved in the
activities of Wachovia Bank, National Association
in its capacity as calculation agent, in violation of
applicable laws, rules and regulations, of material
non-public information relating to the Securities.
5 The trading day in WTI crude oil and Henry
Hub Natural Gas on the NYMEX is between 10 a.m.
and 2:30 p.m. New York Time.
E:\FR\FM\16NON1.SGM
16NON1
66816
Federal Register / Vol. 71, No. 221 / Thursday, November 16, 2006 / Notices
pwalker on PROD1PC61 with NOTICES
Exchange (the ‘‘LME’’) for cash
delivery; 6
• In the case of aluminum, the official
U.S. dollar settlement price per ton of
high grade primary aluminum on the
LME for cash delivery; or
• In the case of gold, the afternoon
U.S. dollar fixing price per troy ounce
of unallocated gold bullion for delivery
in London through a member of the
London Bullion Market Association
(‘‘LBMA’’) authorized to effect such
delivery.7
Wachovia has informed the Exchange
that, in deciding whether to base the
pricing of each individual Component
Commodity on its cash price or on a
related futures contract, it used the
pricing source in each case that it
believed was most widely used as an
indicator of the market price of that
commodity.
The ‘‘valuation date’’ means the fifth
business day prior to the maturity date.
However, if that date occurs on a day on
which the calculation agent has
determined that a market disruption
event has occurred or is continuing,
then the valuation date will be
postponed until the next succeeding
business day on which the calculation
agent determines that a market
disruption event does not occur or is not
6 The Exchange states that the LME is the
principal non-ferrous metals exchange in the world
on which contracts for copper and aluminum,
among other metals, are traded. While there is a
futures market for each of copper and aluminum,
Wachovia has informed the Exchange that it is
using the respective U.S. dollar settlement prices as
those prices are the generally accepted standards for
determining the market price of those commodities.
The LME is not a cash-cleared market. Both interoffice and floor trading are cleared and guaranteed
by a system run by the London Clearing House,
whose role is to act as a central counterparty to
trades executed between clearing members. The
bulk of trading on the LME is transacted through
inter-office dealing that allows the LME to operate
as a 24-hour market. Liquidity for copper and
aluminum primarily exists during the two daily
trading sessions on the floor of the LME, from 11:40
a.m. to 1:15 p.m. and from 3:10 p.m. to 4:35 p.m.,
London time, and declines substantially outside of
these trading sessions.
7 The Exchange states that the LBMA is the
principal gold clearing center for over-the-counter
gold bullion transactions. Twice daily during
London trading hours a ‘‘fixing’’ occurs that
provides reference prices for that day’s trading.
Information regarding clearing volume estimates by
the LBMA can be found at https://www.lbma.org.uk/
clearing_table.htm. The three measures published
by LBMA are: volume, the amount of metal
transferred on average each day measured in
million of troy ounces; value, measured in U.S.
dollars, using the monthly average London PM
fixing price; and the number of transfers, which is
the average number recorded each day. The
statistics exclude allocated and unallocated balance
transfers where the sole purpose is for overnight
credit and physical movements arranged by clearing
members in locations other than London.
Additionally, the NYMEX publishes price and
volume statistics for transactions in contracts for
the future delivery of gold.
VerDate Aug<31>2005
20:27 Nov 15, 2006
Jkt 211001
continuing. If the valuation date is
postponed, then the maturity date of the
Securities will be postponed by an equal
number of business days.
The Securities are cash-settled in U.S.
dollars and do not give the holder any
right to receive a futures contract,
dividend payments, or any other
ownership right or interest in the
Component Commodities that comprise
the Basket. The Securities are designed
for investors who desire to participate or
gain exposure to the Component
Commodities that comprise the Basket,
who are willing to hold the investment
to maturity, and who want to limit risk
exposure by receiving principal
protection of their investment amount.
The Basket is not a recognized market
index and was created solely for the
purpose of offering the Securities.
Adjustments to the Basket and the
Component Commodities Prices
The composition of the Basket and/or
the method of determining the closing
price for each Component Commodity
may be adjusted from time to time by
the calculation agent, in its sole
discretion, as follows:
• In the event that an official closing
price is not available for a Component
Commodity for whatever reason,
including any discontinuance of trading
in the relevant Component Commodity
by the NYMEX, the LME, or the LBMA,
then the calculation agent may, in its
sole discretion, take such action,
including adjustments to the Basket or
to the method of determining such
closing price as it deems appropriate. By
way of example, and without limitation,
if a contract which serves as the basis
for determining the closing price of a
particular Component Commodity is
discontinued by the exchange or market
on which it traded, the calculation agent
may, in its sole discretion, determine
such closing price for that Component
Commodity by reference to another
contract for the Component Commodity
traded on another exchange or market or
to its bid for the Component Commodity
for delivery on the valuation date.
• In the event that the terms of any
contract used for determining the
closing price of any Component
Commodity are changed in a material
respect by the commodity exchange
upon which the contracts trade, the
calculation agent may take such action,
including adjustments to the Basket or
to the method of determining the
closing price of that Component
Commodity, as it deems appropriate.
No adjustments will be made unless
the calculation agent determines, in its
sole discretion, that such adjustment is
appropriate to maintain the validity of
PO 00000
Frm 00068
Fmt 4703
Sfmt 4703
the closing price as an economic
benchmark for the affected Component
Commodity. The calculation agent at
any time, or from time to time, if any,
may make such adjustments, on or prior
to the maturity date.
If any adjustments are of a more than
temporary nature, the Exchange will file
a proposed rule change pursuant to Rule
19b–4 under the Act seeking
Commission approval to continue to
trade the Securities and, unless
approved, the Exchange will commence
delisting the Securities.
Available Information
The hypothetical maturity payment
amount per Security (the ‘‘Closing
Values’’) will be published once every
NYSE trading day (as opposed to at least
every 15 seconds during the trading
day) at approximately 5 p.m., New York
City time, calculated on each day as if
such day were the valuation date. The
Closing Value will be accessible by
going to Bloomberg page ‘‘WSSN’’ and
selecting the ‘‘commodity-linked’’
option.
The Exchange believes that this daily
dissemination of the Closing Value is
appropriate because the Securities are
debt securities traded on the NYSE’s
equity floor, the value of which is
linked to the Basket, and there will be
no creation or redemption of shares as
there would be with an exchange-traded
fund (‘‘ETF’’).
As discussed in the prospectus
supplement dated October 27, 2005
relating to the Series 1 Securities and
the prospectus supplement dated May
13, 2005 relating to the Series 2
Securities, the trading price of the
Securities will be affected by many
factors that interrelate in complex ways.
The negative effect of one factor may
offset the positive effect on the trading
price of the Securities of another factor
and the negative effect of one factor may
exacerbate the decrease in the trading
price of the Securities caused by another
factor. For example, increased price
volatility with respect to one or more of
Component Commodities may offset
some or all of any increase in the
trading price of the Securities
attributable to another factor, such as an
increase in the prices of one or more of
the Component Commodities. In
addition, a change in interest rates may
offset other factors that would otherwise
change the prices of the Component
Commodities and, therefore, may
significantly change the trading price of
the Securities. The Exchange states that
the following bullet points summarize
the expected impact on the trading price
of the Securities given a change in a
E:\FR\FM\16NON1.SGM
16NON1
pwalker on PROD1PC61 with NOTICES
Federal Register / Vol. 71, No. 221 / Thursday, November 16, 2006 / Notices
specific factor, assuming all other
conditions remain constant:
• The level of the Basket at any given
point in time;
• Changes in Component Commodity
prices;
• The volatility (frequency and
magnitude of changes in prices) of the
Component Commodities and in
particular market expectations regarding
the volatility of the Component
Commodities;
• Interest rates generally, as well as
changes in interest rates and the yield
curve;
• Changes in correlation among the
prices of the Component Commodities;
• The time remaining to maturity of
the Securities;
• Wachovia’s credit worthiness, as
represented by its credit ratings or as
otherwise perceived in the market; and
• Geopolitical, economic, financial,
political, regulatory or judicial events,
as well as other conditions that affect
commodities’ markets in general and
that may affect the market prices of the
Component Commodities.
Pricing information with respect to
the Component Commodities is
available as follows:
• The official U.S. dollar settlement
price per ton of coppeR–Grade A on the
LME for cash delivery is publicly
available on the Web site of the LME at
https://www.lme.com/
dataprices_daily_metal.asp.
• The official U.S. dollar settlement
price per ton of high-grade primary
aluminum on the LME for cash delivery
is publicly available on the Web site of
the LME at https://www.lme.com/
dataprices_daily_metal.asp.
• The U.S. dollar closing settlement
price per barrel of West Texas
Intermediate light sweet crude oil on the
NYMEX of the first nearby futures
contract is publicly available on the
Web site of the NYMEX at https://
www.nymex.com/index.aspx.
• The official U.S. dollar settlement
price per MMBtu of natural gas on the
NYMEX of the Henry Hub Natural Gas
futures contract in respect of the first
nearby month is publicly available on
the Web site of the NYMEX at https://
www.nymex.com/index.aspx.
• The afternoon U.S. dollar fixing
price per troy ounce of unallocated gold
bullion for delivery in London through
a member of the LBMA authorized to
effect such delivery is publicly available
on the Web site of the LBMA at
https://www.lbma.org.uk/
statistics_current.htm. Complete realtime data for gold futures and options
prices traded on the NYMEX is available
by subscription from Reuters and
Bloomberg. The NYMEX also provides
VerDate Aug<31>2005
20:27 Nov 15, 2006
Jkt 211001
66817
delayed futures and options information
on current and past trading sessions and
market news free of charge on its Web
site at https://www.nymex.com/
index.aspx.
Real time intraday trading prices and
daily closing prices for the Component
Commodities are available by
subscription from major market
vendors.
implementation of such decision) in the
option or futures contract relating to any
Component Commodity or in any
Component Commodity on the NYMEX,
the LME, or the LBMA; or
• a limitation on the hours or
numbers of days of trading that results
from an announced change in the
regular business hours of the relevant
exchange.
Market Disruption Event
A market disruption event with
respect to a Component Commodity, as
determined by the calculation agent in
its sole discretion, means the occurrence
or existence of any of the following
events:
• The failure of the relevant
exchange, market or price source to
announce or publish the closing price
for a Component Commodity or the
temporary or permanent discontinuance
or unavailability of the relevant
exchange, market, or price source;
• The failure of trading to commence,
or the permanent discontinuation of
trading, in the relevant futures contracts
on the relevant exchange or market, or
the disappearance of, or the
disappearance of trading in, the relevant
Component Commodity;
• A material change in the formula
for or the method of calculating the
closing price for a Component
Commodity;
• A material change in the content,
composition, or constitution of a
Component Commodity or relevant
futures contracts;
• A suspension, absence or material
limitation imposed on trading in the
futures contracts or the relevant
Component Commodity on its
respective exchange or in any additional
futures contract, options contract, or
Component Commodity on any
exchange or principal trading market as
specified in the relevant agreement or
confirmation; for this purpose, an
absence of trading in the primary
exchange on which options or futures
contracts related to any Component
Commodities or the relevant Component
Commodities are traded will not include
any time when that exchange itself is
closed for trading under ordinary
circumstances; or
• Any other event, if the calculation
agent determines in its sole discretion
that the event materially interferes with
Wachovia’s ability or the ability of any
of its affiliates to unwind all or a
material portion of a hedge with respect
to the Securities.
The following events will not
constitute market disruption events:
• a decision to permanently
discontinue trading (without
Continued Listing Criteria
PO 00000
Frm 00069
Fmt 4703
Sfmt 4703
The Exchange prohibits the initial
and/or continued listing of any security
that is not in compliance with Rule
10A–3 under the Act.8
The Exchange will delist the
Securities if:
• The Securities do not meet the
continued listing criteria of Section
703.19 of the Exchange’s Listed
Company Manual.
• The Closing Value ceases to be
published every NYSE trading day.
• Such other event shall occur or
condition exists which in the opinion of
the Exchange makes further dealings on
the Exchange inadvisable.
Additionally, the Exchange will file a
proposed rule change pursuant to Rule
19b–4 under the Act, seeking approval
to continue trading the Securities and,
unless approved, the Exchange will
commence delisting the Securities if:
• Wachovia removes a Component
Commodity from the Basket or adds a
new Component Commodity to the
Basket, changes the weighting of the
Component Commodities in the Basket,
or changes on a more than temporary
basis the source of the closing price of
any of the Component Commodities; or
• A Market Disruption Event occurs
which is of a more than temporary
nature.
Trading Halts
If the Closing Value for a series of the
Securities is not being disseminated as
required, the Exchange may halt trading
during the day immediately following
the day on which the interruption to the
dissemination of the Closing Value first
occurs. If the interruption to the
dissemination of the Closing Value
persists past the trading day following
the day on which the interruption
occurred, the Exchange will halt trading
no later than the beginning of the
second trading day following the
interruption.
Surveillance
The Exchange represents that its
surveillance procedures are adequate to
properly monitor the trading of the
Securities and the Component
8 15
U.S.C. 78a.
E:\FR\FM\16NON1.SGM
16NON1
66818
Federal Register / Vol. 71, No. 221 / Thursday, November 16, 2006 / Notices
Commodities. The Exchange’s
surveillance procedures will incorporate
and rely upon existing Exchange
surveillance procedures governing
equities. The Exchange believes that
these procedures are adequate to
monitor Exchange trading of the
Securities and to detect violations of
Exchange rules, thereby deterring
manipulation. The Exchange is a party
to information sharing agreements with
each of the NYMEX and the LME,
pursuant to which such exchanges are
obligated to provide the Exchange with
access to transaction information,
including customer identity information
with respect to all commodities traded
on such exchanges.
In connection with its authorization
for listing of the streetTRACKS Gold
Shares (the ‘‘Shares’’), the Exchange
states that the Commission found that
the unique liquidity and depth of the
gold market, along with the existence of
an information sharing agreement
between the NYSE and the NYMEX and
the application of NYSE Rules 1300B
and 1301 to the Specialist trading those
Securities, created the basis for the
NYSE to monitor fraudulent and
manipulative practices in the trading of
the Shares.9
Similarly, the Exchange believes that
the depth and liquidity of the gold
market, along with the information
sharing agreement between the NYSE
and the NYMEX and the application of
NYSE Rules 1300B and 1301 to the
Specialist trading those Securities, will
provide adequate surveillance of the
trading of the gold Component
Commodity.
pwalker on PROD1PC61 with NOTICES
Suitability
The Exchange’s existing equity
trading rules will apply to trading of the
Securities. The Exchange states that it
will also have in place certain other
requirements to provide additional
investor protection. First, pursuant to
NYSE Rule 405, the Exchange will
impose a duty of due diligence on its
members and member firms to learn the
essential facts relating to every customer
prior to trading the Securities.10 Second,
the Securities will be subject to the
equity margin rules of the Exchange.11
Third, the Exchange will, prior to
trading the Securities, distribute a
circular to the membership providing
9 See Securities Exchange Act Release No. 50603
(October 28, 2004), 69 FR 64614 (November 5, 2004)
(SR–NYSE–2004–22).
10 NYSE Rule 405 requires that every member,
member firm or member corporation use due
diligence to learn the essential facts relative to
every customer and to every order or account
accepted.
11 See NYSE Rule 431.
VerDate Aug<31>2005
20:27 Nov 15, 2006
Jkt 211001
guidance with regard to member firm
compliance responsibilities (including
suitability recommendations) when
handling transactions in the Securities
and highlighting the special risks and
characteristics of the Securities. With
respect to suitability recommendations
and risks, the Exchange will require
members, member organizations and
employees thereof recommending a
transaction in the Securities: (1) To
determine that such transaction is
suitable for the customer; and (2) to
have a reasonable basis for believing
that the customer can evaluate the
special characteristics of, and is able to
bear the financial risks of, such
transaction.
Information Memorandum
The information memorandum will
note to members prospectus delivery
requirements for the Securities.12 The
information memorandum will discuss
the special characteristics and risks of
trading this type of security.
Specifically, the information
memorandum, among other things, will
discuss the following: what the
Securities are, applicable Exchange
rules, dissemination of information
regarding the Closing Value, trading
information, and applicable suitability
rules.
The information memorandum 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, natural
gas, copper, aluminum and gold, or the
futures contracts on which a portion of
the value of the Securities is based.
Specialist Trading Obligations
Supplementary Material .10 to NYSE
Rule 1301B applies the provisions of
NYSE Rule 1300B(b) and NYSE Rule
1301B to certain securities listed on the
Exchange pursuant to Section 703.19
(‘‘Other Securities’’) of the Manual.
Specifically, NYSE Rules 1300B(b) and
1301B apply to securities listed under
Section 703.19 of the Manual where the
price of such securities is based, in
whole or in part, on the price of: (a) A
commodity or commodities; (b) any
futures contracts or other derivatives
based on a commodity or commodities;
or (c) any index based on either (a) or
(b) above.
12 Telephone conversation between John Carey,
Assistant General Counsel, NYSE, Florence
Harmon, Senior Special Counsel, Division of
Market Regulation (‘‘Division’’), Commission, and
Angela Muehr, Attorney, Division, Commission, on
November 8, 2006.
PO 00000
Frm 00070
Fmt 4703
Sfmt 4703
As a result of application of NYSE
Rule 1300B(b), the specialist in the
Securities, the specialist’s member
organization and other specified persons
will be prohibited under paragraph (m)
of Exchange Rule 105 Guidelines from
acting as market maker or functioning in
any capacity involving market-making
responsibilities in the Basket
components, the commodities
underlying the Basket components, or
options, futures or options on futures on
the Basket, or any other derivatives
(collectively, ‘‘derivative instruments’’)
based on the Basket or based on any
Basket component or any physical
commodity underlying a Basket
component. If the member organization
acting as specialist in the Securities is
entitled to an exemption under NYSE
Rule 98 from paragraph (m) of NYSE
Rule 105 Guidelines, then that member
organization could act in a marketmaking capacity in the Basket
components, the commodities
underlying the Basket components, or
derivative instruments based on the
Basket or based on any Basket
component or commodity underlying a
Basket component, other than as a
specialist in the Securities themselves,
in another market center.
Under NYSE Rule 1301B(a), the
member organization acting as specialist
in the Securities will be: (1) Obligated
to conduct all trading in the Securities
in its specialist account (subject only to
the ability to have one or more
investment accounts, all of which must
be reported to the Exchange);
(2) required to file with the Exchange
and keep current a list identifying all
accounts for trading in the Basket
components or the physical
commodities underlying the Basket
components, or derivative instruments
based on the Basket or based on the
Basket components or the physical
commodities underlying the Basket
components, which the member
organization acting as specialist may
have or over which it may exercise
investment discretion; and (3)
prohibited from trading in the Basket
components or the physical
commodities underlying the Basket
components, or derivative instruments
based on the Basket or based on the
Basket components or the physical
commodities underlying the Basket
components, in an account in which a
member organization acting as
specialist, controls trading activities
which have not been reported to the
Exchange as required by NYSE Rule
1301B.
Under NYSE Rule 1301B(b), the
member organization acting as specialist
in the Securities will be required to
E:\FR\FM\16NON1.SGM
16NON1
Federal Register / Vol. 71, No. 221 / Thursday, November 16, 2006 / Notices
make available to the Exchange such
books, records, or other information
pertaining to transactions by the
member organization and other
specified persons for its or their own
accounts in the Basket components or
the physical commodities underlying
the Basket components, or derivative
instruments based on the Basket or
based on the Basket components or the
physical commodities underlying the
Basket components, as may be requested
by the Exchange. This requirement is in
addition to existing obligations under
Exchange rules regarding the production
of books and records.
Under NYSE Rule 1301B(c), in
connection with trading the Basket
components or the physical
commodities underlying the Basket
components, or derivative instruments
based on the Basket or based on the
Basket components or the physical
commodities underlying the Basket
components, the specialist could not
use any material nonpublic information
received from any person associated
with a member or employee of such
person regarding trading by such person
or employee in the Basket components
or the physical commodities underlying
the Basket components, or derivative
instruments based on the Basket or
based on the Basket components or the
physical commodities underlying the
Basket components.
2. Statutory Basis
The Exchange believes that the
proposed rule change, as amended, is
consistent with Section 6(b) of the Act 13
in general and furthers the objectives of
Section 6(b)(5),14 in particular, in that it
is designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to remove impediments and
perfect the mechanisms of a free and
open market, and, in general, to protect
investors and the public interest.
pwalker on PROD1PC61 with NOTICES
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change, as amended,
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.
13 15
14 15
U.S.C. 78s(b).
U.S.C. 78s(b)(5).
VerDate Aug<31>2005
20:27 Nov 15, 2006
Jkt 211001
III. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change, as amended, is consistent with
the Act. Comments may be submitted by
any of the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSE–2006–54 on the
subject line.
66819
rules and regulations thereunder
applicable to a national securities
exchange.15 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,16 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.
A. Surveillance
Information sharing agreements with
primary markets are an important part
of a self-regulatory organization’s ability
Paper Comments
to monitor for trading abuses in
• Send paper comments in triplicate
derivative products. The Commission
to Nancy M. Morris, Secretary,
believes that the Exchange’s
Securities and Exchange Commission,
comprehensive surveillance sharing
Station Place, 100 F Street, NE.,
agreements with the LME and the
Washington, DC 20549–1090.
NYMEX for the purpose of providing
All submissions should refer to File
information in connection with trading
Number SR–NYSE–2006–54. This file
of the Securities and Component
number should be included on the
Commodities create the basis for NYSE
subject line if e-mail is used. To help the to monitor for fraudulent and
Commission process and review your
manipulative practices in the trading of
comments more efficiently, please use
the Securities.
only one method. The Commission will
Moreover, NYSE Rules, including
post all comments on the Commission’s Rule 1301B, give NYSE the authority to
Internet Web site (https://www.sec.gov/
request the Exchange specialist in the
rules/sro.shtml). Copies of the
Securities to provide NYSE Regulation
submission, all subsequent
with information to monitor for
amendments, all written statements
fraudulent and manipulative trading
with respect to the proposed rule
facilities. The Commission believes that
change that are filed with the
these rules provide the NYSE with the
Commission, and all written
tools necessary to adequately surveil
communications relating to the
trading in the Securities.
proposed rule change between the
B. Dissemination of Information
Commission and any person, other than
The Commission believes that
those that may be withheld from the
sufficient venues exist for obtaining
public in accordance with the
reliable information so that investors in
provisions of 5 U.S.C. 552, will be
the Securities can monitor the
available for inspection and copying in
Component Commodities relative to the
the Commission’s Public Reference
Room. Copies of such filing also will be indicative value of their Securities.
There is a considerable amount of
available for inspection and copying at
the principal office of the Exchange. All information about the Component
Commodities available through public
comments received will be posted
Web sites, and real time intraday prices
without change; the Commission does
and daily closing prices for the
not edit personal identifying
Component Commodities are available
information from submissions. You
by subscription from major market
should submit only information that
you wish to make available publicly. All vendors.
The Exchange will calculate and
submissions should refer to File
disseminate the Closing Value once
Number SR–NYSE–2006–54 and should
each trading day. The Commission
be submitted on or before December 7,
believes that this daily dissemination of
2006.
an indicative basket amount is
IV. Commission’s Findings and Order
appropriate because there will be no
Granting Accelerated Approval of
creation or redemption of shares as
Proposed Rule Change
After careful consideration, the
Commission finds that the proposed
rule change, as amended, is consistent
with the requirements of the Act and the
PO 00000
Frm 00071
Fmt 4703
Sfmt 4703
15 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).
16 15 U.S.C. 78f(b)(5).
E:\FR\FM\16NON1.SGM
16NON1
66820
Federal Register / Vol. 71, No. 221 / Thursday, November 16, 2006 / Notices
there would be with an ETF.
Additionally, the Securities are debt,
whose value, while linked to the basket,
is at least 100% of the principal
investment amount, and whose value is
affected by factors, such as interest
rates, time remaining to maturity, and
the issuer’s creditworthiness, that make
an intraday indicative value not as
determinative. The Closing Value will
be published at approximately 5 p.m.,
New York City time, calculated on each
day as if such day were the valuation
date. The Closing Value will be
accessible by going to Bloomberg page
‘‘WSSN’’ and selecting the ‘‘commoditylinked’’ option. Wachovia will
determine the value of the Securities at
maturity, which will consist of at least
100% of the principal investment
amount, plus the Basket Performance
Amount.
C. Listing and Trading
pwalker on PROD1PC61 with NOTICES
The Commission finds that the
Exchange’s proposed rules and
procedures for the listing and trading of
the proposed Securities are consistent
with the Act. The Securities will trade
as equity securities under Section
703.19 of the Manual and will be subject
to NYSE rules applicable to equity
trading including, among others, rules
governing priority, parity and
precedence of orders, specialist
responsibilities, account opening and
customer suitability requirements. The
Commission believes that the listing and
delisting criteria for the Securities
should help to maintain a minimum
level of liquidity and therefore
minimize the potential for manipulation
of the Securities. The Exchange
represents that it would file a proposed
rule change, pursuant to Rule 19b–4
under the Act,17 if Wachovia removes a
Component Commodity from the
Basket, adds a new Component
Commodity to the Basket, changes the
weighting of the Component
Commodities in the Basket, or changes
on a more than temporary basis the
source of the closing price of any of the
Component Commodities; or a market
disruption event occurs which is of a
more than temporary nature. Finally,
the Commission notes that the
Information Memorandum the Exchange
will distribute will inform members and
member organizations about the terms,
characteristics and risks in trading the
17 17
CFR 240.19b–4.
VerDate Aug<31>2005
20:27 Nov 15, 2006
Jkt 211001
Securities, including their prospectus
delivery obligations.
D. Accelerated Approval
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. The Commission notes
that this product is similar to other
products already approved by the
Commission.18 The Commission
presently is not aware of any issue that
would cause it to revisit such earlier
findings or preclude the trading of these
Securities on the Exchange. Therefore,
accelerating approval of this proposed
rule change should benefit investors by
creating, without undue delay,
opportunities for investors to trade in
such Securities.
V. Conclusion
It Is Therefore Ordered, pursuant to
Section 19(b)(2) of the Act, that the
proposed rule change, as amended (SR–
NYSE–2006–54), is hereby approved on
an accelerated basis.19
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.20
Nancy M. Morris,
Secretary.
[FR Doc. E6–19364 Filed 11–15–06; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54727; File No. SR–NYSE–
2006–79]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to a
Fee on Orders in Equities and
Exchange Traded Funds Routed From
the Exchange and Executed in Another
Market Pursuant to the Linkage Plan
November 8, 2006.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
18 See,
e.g., Securities Exchange Act Release No.
54033 (June 22, 2006), 71 FR 37131 (June 29, 2006)
(order approving the listing and trading of principal
protected notes linked to the Metals-China Basket).
19 15 U.S.C. 78s(b)(2).
20 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
PO 00000
Frm 00072
Fmt 4703
Sfmt 4703
notice is hereby given that on
September 29, 2006, the New York
Stock Exchange LLC (‘‘NYSE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Exchange filed the proposal pursuant to
Section 19(b)(3)(A) of the Act 3 and
subparagraph (f)(2) of Rule 19b–4
thereunder 4 which renders the proposal
effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is proposing to charge
a fee (‘‘Linkage Order Fee’’) to its
member organizations in connection
with orders in equities and Exchange
Traded Funds (‘‘ETFs’’) routed from the
Exchange and executed in another
market pursuant to the ‘‘Plan for the
Purpose of Creating and Operating an
Intermarket Communications Linkage’’
(‘‘Linkage Plan’’).
The text of the proposed rule change
is available on the NYSE’s Web site
(https://www.nyse.com), at the NYSE’s
Office of the Secretary, and at the
Commission’s Public Reference Room.
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 IV below. The
NYSE 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
3 15
4 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
E:\FR\FM\16NON1.SGM
16NON1
]]>Agencies
[Federal Register Volume 71, Number 221 (Thursday, November 16, 2006)]
[Notices]
[Pages 66814-66820]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-19364]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54731; File No. SR-NYSE-2006-54]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Order Granting Accelerated Approval of Proposed
Rule Change and Amendment No. 1 To List and Trade Two Series of
Commodity-Linked Securities of Wachovia Corporation
November 9, 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 July 25, 2006, New York Stock Exchange LLC (the ``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. On November 3, 2006, the Exchange
submitted Amendment No. 1 to the proposed rule change.\3\ The
Commission is publishing this notice to solicit comments on the
proposed rule change, as amended, from interested persons and is
approving the proposal, as amended, on an accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1 replaced and superseded the original filing
in its entirety.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade two series of Commodity-
Linked Securities (the ``Securities'') of Wachovia Corporation, one
having an aggregate principal amount of $45,000,000 and the other
having an aggregate principal amount of $40,000,000. The return on the
Securities, in excess of the principal amount, is linked to the
performance of an equally weighted basket (the ``Basket'') of the
following five commodities: WTI crude oil, natural gas, copper,
aluminum, and gold (each, a ``Component Commodity'' and, collectively,
the ``Component Commodities'').
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, as
amended, and discussed any comments it received
[[Page 66815]]
on the proposed rule change. The text of these statements may be
examined at the places specified in Item III below, and is set forth in
Sections A, B, and C below.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Under Section 703.19 of the NYSE Listed Company Manual (the
``Manual''), the Exchange may approve for listing and trading
securities not otherwise covered by the criteria of Sections 1 and 7 of
the Manual, provided that the issue is suited for auction market
trading. The Exchange proposes to list and trade, under Section 703.19
of the Manual, the Securities, the return on which, in excess of the
principal amount, is linked to the performance of the Basket. The
Securities are debt securities and are part of a series of debt
securities entitled ``Medium-Term Notes, Series G'' that Wachovia may
issue from time to time. The Securities rank equally with all other
unsecured and unsubordinated debt of Wachovia. The principal amount of
each Security is $25, and they will be traded on the Exchange's equity
trading floor.
The Exchange believes that the Securities conform to the initial
listing standards for equity securities under Section 703.19 of the
Manual, as Wachovia is a listed company in good standing, each series
of Securities has at least 400 holders at the time of listing, each
series of Securities has a minimum life of one year, and the minimum
public market value of each series of Securities at the time of listing
will exceed $4 million.
The Exchange states that the Securities will mature (the ``Maturity
Date'') on November 3, 2008, with respect to the Series 1 Securities
and August 6, 2009 with respect to the Series 2 Securities. The
maturity payment amount, in excess of the principal amount, will be
linked to the performance of the Basket, which in turn is based on the
performance of the Component Commodities.
Each Component Commodity represents 20% of the Basket. The
Component Commodities are set forth below:
WTI Crude Oil (Bloomberg symbol ``CL1'')
Natural Gas (Bloomberg symbol ``NG1'')
Copper (Bloomberg symbol ``LOCADY'')
Aluminum (Bloomberg symbol ``LOAHDY'')
Gold (Bloomberg symbol ``GOLDLNPM'')
The weighting of each Component Commodity is fixed and will not
change during the term of the Securities. Similarly, the Component
Commodities that comprise the Basket will not change, except as
described below under ``Adjustments to the Basket and the Component
Commodity Prices.''
The Series 1 Securities pay a fixed 2% interest rate semi-annually
on May 3 and November 3, beginning on May 3, 2006. At maturity, for
each Series 1 Security a holder owns, such holder will receive a cash
payment equal to the sum of the principal amount of the Security and
the Basket performance amount, plus any accrued but unpaid interest.
The ``Basket performance amount'' per Series 1 Security will equal the
greater of (i) $0, and (ii) the product of the principal amount of the
Series 1 Security and the percentage change in the level of the Basket,
as further described below. If the Basket ending level is less than or
equal to the Basket starting level, the Basket performance amount will
be $0, and the maturity payment amount will be $25, plus any accrued
but unpaid interest.
The Series 2 Securities make no payment of interest, periodic or
otherwise. At maturity, for each Series 2 Security a holder owns, such
holder will receive a cash payment equal to the sum of the principal
amount of the Series 2 Security and the Basket performance amount. The
Basket performance amount per Series 2 Security will equal the greater
of (i) $0, and (ii) the product of the principal amount of the Series 2
Security, the percentage change in the level of the Basket, as further
described below, and a participation rate of 150%. If the Basket ending
level is less than or equal to the Basket starting level, the Basket
performance amount will be $0, and the maturity payment amount will be
$25.
The Exchange states that the Securities will provide for
participation in the positive performance of the Component Commodities
during their term while reducing the risk exposure to investors through
principal protection. The Securities are not callable by Wachovia.
The Basket performance amount per Security will be determined by
the calculation agent.\4\ The Basket performance amount per Series 1
Security will equal the greater of:
---------------------------------------------------------------------------
\4\ Wachovia Bank, National Association, a subsidiary of
Wachovia, will serve as the calculation agent. Wachovia may at any
time change the calculation agent without notice to holders of
Securities. Wachovia has represented to the Exchange that it has
policies prohibiting insider trading that are applicable to all of
its employees and that it implements and maintains procedures
reasonably designed to prevent the use and dissemination by
employees involved in the activities of Wachovia Bank, National
Association in its capacity as calculation agent, in violation of
applicable laws, rules and regulations, of material non-public
information relating to the Securities.
---------------------------------------------------------------------------
(i) $0, and
(ii) $25 x (Basket ending level - Basket starting level) / Basket
Starting Level.
The Basket performance amount per Series 2 Security will equal the
greater of:
(i) $0, and
(ii) $25 x ((Basket ending level - Basket starting level) / Basket
starting level) x the Participation Rate.
The Participation Rate for the Series 2 Securities is 150%.
The ``Basket starting level'' for both Series 1 and Series 2
Securities is 1,000.
The ``Basket ending level'' will be determined by the calculation
agent and will equal the closing level of the Basket on the valuation
date. The closing level of the Basket will be calculated based on the
weighted levels of the Component Commodities and will equal the sum of
the products of (i) the component multiplier of each Component
Commodity and (ii) the closing price (as described below) of the
Component Commodity on the valuation date.
The ``component multiplier'' equals the quotient of (i) the initial
weight of each Component Commodity (20%) multiplied by the Basket
starting level divided by (ii) the closing price of each Component
Commodity on the pricing date of the initial offering of the Securities
(October 27, 2005 for the Series 1 Securities and January 30, 2006 for
the Series 2 Securities).
The ``closing price'' of each Component Commodity will be
determined by reference to its official closing price or cash
settlement price on the relevant exchange or market on the valuation
date, as reported by Bloomberg LP, as follows:
In the case of WTI crude oil, the U.S. dollar closing
settlement price per barrel of West Texas Intermediate light sweet
crude oil on the New York Mercantile Exchange (the ``NYMEX'') of the
first nearby futures contract; \5\
---------------------------------------------------------------------------
\5\ The trading day in WTI crude oil and Henry Hub Natural Gas
on the NYMEX is between 10 a.m. and 2:30 p.m. New York Time.
---------------------------------------------------------------------------
In the case of natural gas, the official U.S. dollar
settlement price per MMBtu of natural gas on the NYMEX of the Henry Hub
Natural Gas futures contract in respect of the first nearby month; in
the case of copper, the official U.S. dollar settlement price per ton
of copper-Grade A on the London Metals
[[Page 66816]]
Exchange (the ``LME'') for cash delivery; \6\
---------------------------------------------------------------------------
\6\ The Exchange states that the LME is the principal non-
ferrous metals exchange in the world on which contracts for copper
and aluminum, among other metals, are traded. While there is a
futures market for each of copper and aluminum, Wachovia has
informed the Exchange that it is using the respective U.S. dollar
settlement prices as those prices are the generally accepted
standards for determining the market price of those commodities. The
LME is not a cash-cleared market. Both inter-office and floor
trading are cleared and guaranteed by a system run by the London
Clearing House, whose role is to act as a central counterparty to
trades executed between clearing members. The bulk of trading on the
LME is transacted through inter-office dealing that allows the LME
to operate as a 24-hour market. Liquidity for copper and aluminum
primarily exists during the two daily trading sessions on the floor
of the LME, from 11:40 a.m. to 1:15 p.m. and from 3:10 p.m. to 4:35
p.m., London time, and declines substantially outside of these
trading sessions.
---------------------------------------------------------------------------
In the case of aluminum, the official U.S. dollar
settlement price per ton of high grade primary aluminum on the LME for
cash delivery; or
In the case of gold, the afternoon U.S. dollar fixing
price per troy ounce of unallocated gold bullion for delivery in London
through a member of the London Bullion Market Association (``LBMA'')
authorized to effect such delivery.\7\
---------------------------------------------------------------------------
\7\ The Exchange states that the LBMA is the principal gold
clearing center for over-the-counter gold bullion transactions.
Twice daily during London trading hours a ``fixing'' occurs that
provides reference prices for that day's trading. Information
regarding clearing volume estimates by the LBMA can be found at
https://www.lbma.org.uk/clearing_table.htm. The three measures
published by LBMA are: volume, the amount of metal transferred on
average each day measured in million of troy ounces; value, measured
in U.S. dollars, using the monthly average London PM fixing price;
and the number of transfers, which is the average number recorded
each day. The statistics exclude allocated and unallocated balance
transfers where the sole purpose is for overnight credit and
physical movements arranged by clearing members in locations other
than London. Additionally, the NYMEX publishes price and volume
statistics for transactions in contracts for the future delivery of
gold.
---------------------------------------------------------------------------
Wachovia has informed the Exchange that, in deciding whether to
base the pricing of each individual Component Commodity on its cash
price or on a related futures contract, it used the pricing source in
each case that it believed was most widely used as an indicator of the
market price of that commodity.
The ``valuation date'' means the fifth business day prior to the
maturity date. However, if that date occurs on a day on which the
calculation agent has determined that a market disruption event has
occurred or is continuing, then the valuation date will be postponed
until the next succeeding business day on which the calculation agent
determines that a market disruption event does not occur or is not
continuing. If the valuation date is postponed, then the maturity date
of the Securities will be postponed by an equal number of business
days.
The Securities are cash-settled in U.S. dollars and do not give the
holder any right to receive a futures contract, dividend payments, or
any other ownership right or interest in the Component Commodities that
comprise the Basket. The Securities are designed for investors who
desire to participate or gain exposure to the Component Commodities
that comprise the Basket, who are willing to hold the investment to
maturity, and who want to limit risk exposure by receiving principal
protection of their investment amount.
The Basket is not a recognized market index and was created solely
for the purpose of offering the Securities.
Adjustments to the Basket and the Component Commodities Prices
The composition of the Basket and/or the method of determining the
closing price for each Component Commodity may be adjusted from time to
time by the calculation agent, in its sole discretion, as follows:
In the event that an official closing price is not
available for a Component Commodity for whatever reason, including any
discontinuance of trading in the relevant Component Commodity by the
NYMEX, the LME, or the LBMA, then the calculation agent may, in its
sole discretion, take such action, including adjustments to the Basket
or to the method of determining such closing price as it deems
appropriate. By way of example, and without limitation, if a contract
which serves as the basis for determining the closing price of a
particular Component Commodity is discontinued by the exchange or
market on which it traded, the calculation agent may, in its sole
discretion, determine such closing price for that Component Commodity
by reference to another contract for the Component Commodity traded on
another exchange or market or to its bid for the Component Commodity
for delivery on the valuation date.
In the event that the terms of any contract used for
determining the closing price of any Component Commodity are changed in
a material respect by the commodity exchange upon which the contracts
trade, the calculation agent may take such action, including
adjustments to the Basket or to the method of determining the closing
price of that Component Commodity, as it deems appropriate.
No adjustments will be made unless the calculation agent
determines, in its sole discretion, that such adjustment is appropriate
to maintain the validity of the closing price as an economic benchmark
for the affected Component Commodity. The calculation agent at any
time, or from time to time, if any, may make such adjustments, on or
prior to the maturity date.
If any adjustments are of a more than temporary nature, the
Exchange will file a proposed rule change pursuant to Rule 19b-4 under
the Act seeking Commission approval to continue to trade the Securities
and, unless approved, the Exchange will commence delisting the
Securities.
Available Information
The hypothetical maturity payment amount per Security (the
``Closing Values'') will be published once every NYSE trading day (as
opposed to at least every 15 seconds during the trading day) at
approximately 5 p.m., New York City time, calculated on each day as if
such day were the valuation date. The Closing Value will be accessible
by going to Bloomberg page ``WSSN'' and selecting the ``commodity-
linked'' option.
The Exchange believes that this daily dissemination of the Closing
Value is appropriate because the Securities are debt securities traded
on the NYSE's equity floor, the value of which is linked to the Basket,
and there will be no creation or redemption of shares as there would be
with an exchange-traded fund (``ETF'').
As discussed in the prospectus supplement dated October 27, 2005
relating to the Series 1 Securities and the prospectus supplement dated
May 13, 2005 relating to the Series 2 Securities, the trading price of
the Securities will be affected by many factors that interrelate in
complex ways. The negative effect of one factor may offset the positive
effect on the trading price of the Securities of another factor and the
negative effect of one factor may exacerbate the decrease in the
trading price of the Securities caused by another factor. For example,
increased price volatility with respect to one or more of Component
Commodities may offset some or all of any increase in the trading price
of the Securities attributable to another factor, such as an increase
in the prices of one or more of the Component Commodities. In addition,
a change in interest rates may offset other factors that would
otherwise change the prices of the Component Commodities and,
therefore, may significantly change the trading price of the
Securities. The Exchange states that the following bullet points
summarize the expected impact on the trading price of the Securities
given a change in a
[[Page 66817]]
specific factor, assuming all other conditions remain constant:
The level of the Basket at any given point in time;
Changes in Component Commodity prices;
The volatility (frequency and magnitude of changes in
prices) of the Component Commodities and in particular market
expectations regarding the volatility of the Component Commodities;
Interest rates generally, as well as changes in interest
rates and the yield curve;
Changes in correlation among the prices of the Component
Commodities;
The time remaining to maturity of the Securities;
Wachovia's credit worthiness, as represented by its credit
ratings or as otherwise perceived in the market; and
Geopolitical, economic, financial, political, regulatory
or judicial events, as well as other conditions that affect
commodities' markets in general and that may affect the market prices
of the Component Commodities.
Pricing information with respect to the Component Commodities is
available as follows:
The official U.S. dollar settlement price per ton of
coppeR-Grade A on the LME for cash delivery is publicly available on
the Web site of the LME at https://www.lme.com/dataprices_daily_
metal.asp.
The official U.S. dollar settlement price per ton of high-
grade primary aluminum on the LME for cash delivery is publicly
available on the Web site of the LME at https://www.lme.com/dataprices_
daily_metal.asp.
The U.S. dollar closing settlement price per barrel of
West Texas Intermediate light sweet crude oil on the NYMEX of the first
nearby futures contract is publicly available on the Web site of the
NYMEX at https://www.nymex.com/index.aspx.
The official U.S. dollar settlement price per MMBtu of
natural gas on the NYMEX of the Henry Hub Natural Gas futures contract
in respect of the first nearby month is publicly available on the Web
site of the NYMEX at https://www.nymex.com/index.aspx.
The afternoon U.S. dollar fixing price per troy ounce of
unallocated gold bullion for delivery in London through a member of the
LBMA authorized to effect such delivery is publicly available on the
Web site of the LBMA at https://www.lbma.org.uk/statistics_current.htm.
Complete real-time data for gold futures and options prices traded on
the NYMEX is available by subscription from Reuters and Bloomberg. The
NYMEX also provides delayed futures and options information on current
and past trading sessions and market news free of charge on its Web
site at https://www.nymex.com/index.aspx.
Real time intraday trading prices and daily closing prices for the
Component Commodities are available by subscription from major market
vendors.
Market Disruption Event
A market disruption event with respect to a Component Commodity, as
determined by the calculation agent in its sole discretion, means the
occurrence or existence of any of the following events:
The failure of the relevant exchange, market or price
source to announce or publish the closing price for a Component
Commodity or the temporary or permanent discontinuance or
unavailability of the relevant exchange, market, or price source;
The failure of trading to commence, or the permanent
discontinuation of trading, in the relevant futures contracts on the
relevant exchange or market, or the disappearance of, or the
disappearance of trading in, the relevant Component Commodity;
A material change in the formula for or the method of
calculating the closing price for a Component Commodity;
A material change in the content, composition, or
constitution of a Component Commodity or relevant futures contracts;
A suspension, absence or material limitation imposed on
trading in the futures contracts or the relevant Component Commodity on
its respective exchange or in any additional futures contract, options
contract, or Component Commodity on any exchange or principal trading
market as specified in the relevant agreement or confirmation; for this
purpose, an absence of trading in the primary exchange on which options
or futures contracts related to any Component Commodities or the
relevant Component Commodities are traded will not include any time
when that exchange itself is closed for trading under ordinary
circumstances; or
Any other event, if the calculation agent determines in
its sole discretion that the event materially interferes with
Wachovia's ability or the ability of any of its affiliates to unwind
all or a material portion of a hedge with respect to the Securities.
The following events will not constitute market disruption events:
a decision to permanently discontinue trading (without
implementation of such decision) in the option or futures contract
relating to any Component Commodity or in any Component Commodity on
the NYMEX, the LME, or the LBMA; or
a limitation on the hours or numbers of days of trading
that results from an announced change in the regular business hours of
the relevant exchange.
Continued Listing Criteria
The Exchange prohibits the initial and/or continued listing of any
security that is not in compliance with Rule 10A-3 under the Act.\8\
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78a.
---------------------------------------------------------------------------
The Exchange will delist the Securities if:
The Securities do not meet the continued listing criteria
of Section 703.19 of the Exchange's Listed Company Manual.
The Closing Value ceases to be published every NYSE
trading day.
Such other event shall occur or condition exists which in
the opinion of the Exchange makes further dealings on the Exchange
inadvisable.
Additionally, the Exchange will file a proposed rule change
pursuant to Rule 19b-4 under the Act, seeking approval to continue
trading the Securities and, unless approved, the Exchange will commence
delisting the Securities if:
Wachovia removes a Component Commodity from the Basket or
adds a new Component Commodity to the Basket, changes the weighting of
the Component Commodities in the Basket, or changes on a more than
temporary basis the source of the closing price of any of the Component
Commodities; or
A Market Disruption Event occurs which is of a more than
temporary nature.
Trading Halts
If the Closing Value for a series of the Securities is not being
disseminated as required, the Exchange may halt trading during the day
immediately following the day on which the interruption to the
dissemination of the Closing Value first occurs. If the interruption to
the dissemination of the Closing Value persists past the trading day
following the day on which the interruption occurred, the Exchange will
halt trading no later than the beginning of the second trading day
following the interruption.
Surveillance
The Exchange represents that its surveillance procedures are
adequate to properly monitor the trading of the Securities and the
Component
[[Page 66818]]
Commodities. The Exchange's surveillance procedures will incorporate
and rely upon existing Exchange surveillance procedures governing
equities. The Exchange believes that these procedures are adequate to
monitor Exchange trading of the Securities and to detect violations of
Exchange rules, thereby deterring manipulation. The Exchange is a party
to information sharing agreements with each of the NYMEX and the LME,
pursuant to which such exchanges are obligated to provide the Exchange
with access to transaction information, including customer identity
information with respect to all commodities traded on such exchanges.
In connection with its authorization for listing of the
streetTRACKS[reg] Gold Shares (the ``Shares''), the Exchange states
that the Commission found that the unique liquidity and depth of the
gold market, along with the existence of an information sharing
agreement between the NYSE and the NYMEX and the application of NYSE
Rules 1300B and 1301 to the Specialist trading those Securities,
created the basis for the NYSE to monitor fraudulent and manipulative
practices in the trading of the Shares.\9\
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 50603 (October 28,
2004), 69 FR 64614 (November 5, 2004) (SR-NYSE-2004-22).
---------------------------------------------------------------------------
Similarly, the Exchange believes that the depth and liquidity of
the gold market, along with the information sharing agreement between
the NYSE and the NYMEX and the application of NYSE Rules 1300B and 1301
to the Specialist trading those Securities, will provide adequate
surveillance of the trading of the gold Component Commodity.
Suitability
The Exchange's existing equity trading rules will apply to trading
of the Securities. The Exchange states that it will also have in place
certain other requirements to provide additional investor protection.
First, pursuant to NYSE Rule 405, the Exchange will impose a duty of
due diligence on its members and member firms to learn the essential
facts relating to every customer prior to trading the Securities.\10\
Second, the Securities will be subject to the equity margin rules of
the Exchange.\11\ Third, the Exchange will, prior to trading the
Securities, distribute a circular to the membership providing guidance
with regard to member firm compliance responsibilities (including
suitability recommendations) when handling transactions in the
Securities and highlighting the special risks and characteristics of
the Securities. With respect to suitability recommendations and risks,
the Exchange will require members, member organizations and employees
thereof recommending a transaction in the Securities: (1) To determine
that such transaction is suitable for the customer; and (2) to have a
reasonable basis for believing that the customer can evaluate the
special characteristics of, and is able to bear the financial risks of,
such transaction.
---------------------------------------------------------------------------
\10\ NYSE Rule 405 requires that every member, member firm or
member corporation use due diligence to learn the essential facts
relative to every customer and to every order or account accepted.
\11\ See NYSE Rule 431.
---------------------------------------------------------------------------
Information Memorandum
The information memorandum will note to members prospectus delivery
requirements for the Securities.\12\ The information memorandum will
discuss the special characteristics and risks of trading this type of
security. Specifically, the information memorandum, among other things,
will discuss the following: what the Securities are, applicable
Exchange rules, dissemination of information regarding the Closing
Value, trading information, and applicable suitability rules.
---------------------------------------------------------------------------
\12\ Telephone conversation between John Carey, Assistant
General Counsel, NYSE, Florence Harmon, Senior Special Counsel,
Division of Market Regulation (``Division''), Commission, and Angela
Muehr, Attorney, Division, Commission, on November 8, 2006.
---------------------------------------------------------------------------
The information memorandum 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, natural gas, copper,
aluminum and gold, or the futures contracts on which a portion of the
value of the Securities is based.
Specialist Trading Obligations
Supplementary Material .10 to NYSE Rule 1301B applies the
provisions of NYSE Rule 1300B(b) and NYSE Rule 1301B to certain
securities listed on the Exchange pursuant to Section 703.19 (``Other
Securities'') of the Manual. Specifically, NYSE Rules 1300B(b) and
1301B apply to securities listed under Section 703.19 of the Manual
where the price of such securities is based, in whole or in part, on
the price of: (a) A commodity or commodities; (b) any futures contracts
or other derivatives based on a commodity or commodities; or (c) any
index based on either (a) or (b) above.
As a result of application of NYSE Rule 1300B(b), the specialist in
the Securities, the specialist's member organization and other
specified persons will be prohibited under paragraph (m) of Exchange
Rule 105 Guidelines from acting as market maker or functioning in any
capacity involving market-making responsibilities in the Basket
components, the commodities underlying the Basket components, or
options, futures or options on futures on the Basket, or any other
derivatives (collectively, ``derivative instruments'') based on the
Basket or based on any Basket component or any physical commodity
underlying a Basket component. If the member organization acting as
specialist in the Securities is entitled to an exemption under NYSE
Rule 98 from paragraph (m) of NYSE Rule 105 Guidelines, then that
member organization could act in a market-making capacity in the Basket
components, the commodities underlying the Basket components, or
derivative instruments based on the Basket or based on any Basket
component or commodity underlying a Basket component, other than as a
specialist in the Securities themselves, in another market center.
Under NYSE Rule 1301B(a), the member organization acting as
specialist in the Securities will be: (1) Obligated to conduct all
trading in the Securities in its specialist account (subject only to
the ability to have one or more investment accounts, all of which must
be reported to the Exchange); (2) required to file with the Exchange
and keep current a list identifying all accounts for trading in the
Basket components or the physical commodities underlying the Basket
components, or derivative instruments based on the Basket or based on
the Basket components or the physical commodities underlying the Basket
components, which the member organization acting as specialist may have
or over which it may exercise investment discretion; and (3) prohibited
from trading in the Basket components or the physical commodities
underlying the Basket components, or derivative instruments based on
the Basket or based on the Basket components or the physical
commodities underlying the Basket components, in an account in which a
member organization acting as specialist, controls trading activities
which have not been reported to the Exchange as required by NYSE Rule
1301B.
Under NYSE Rule 1301B(b), the member organization acting as
specialist in the Securities will be required to
[[Page 66819]]
make available to the Exchange such books, records, or other
information pertaining to transactions by the member organization and
other specified persons for its or their own accounts in the Basket
components or the physical commodities underlying the Basket
components, or derivative instruments based on the Basket or based on
the Basket components or the physical commodities underlying the Basket
components, as may be requested by the Exchange. This requirement is in
addition to existing obligations under Exchange rules regarding the
production of books and records.
Under NYSE Rule 1301B(c), in connection with trading the Basket
components or the physical commodities underlying the Basket
components, or derivative instruments based on the Basket or based on
the Basket components or the physical commodities underlying the Basket
components, the specialist could not use any material nonpublic
information received from any person associated with a member or
employee of such person regarding trading by such person or employee in
the Basket components or the physical commodities underlying the Basket
components, or derivative instruments based on the Basket or based on
the Basket components or the physical commodities underlying the Basket
components.
2. Statutory Basis
The Exchange believes that the proposed rule change, as amended, is
consistent with Section 6(b) of the Act \13\ in general and furthers
the objectives of Section 6(b)(5),\14\ in particular, in that it is
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to remove impediments
and perfect the mechanisms of a free and open market, and, in general,
to protect investors and the public interest.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78s(b).
\14\ 15 U.S.C. 78s(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change, as
amended, 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. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, is consistent with the Act. Comments may be
submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NYSE-2006-54 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-NYSE-2006-54. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Room. Copies of such
filing also will be available for inspection and copying at the
principal office of the 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-NYSE-2006-54 and should be submitted on or before
December 7, 2006.
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
After careful consideration, 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.\15\ In particular, the Commission finds that the
proposed rule change is consistent with Section 6(b)(5) of the Act,\16\
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.
---------------------------------------------------------------------------
\15\ 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).
\16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
A. Surveillance
Information sharing agreements with primary markets are an
important part of a self-regulatory organization's ability to monitor
for trading abuses in derivative products. The Commission believes that
the Exchange's comprehensive surveillance sharing agreements with the
LME and the NYMEX for the purpose of providing information in
connection with trading of the Securities and Component Commodities
create the basis for NYSE to monitor for fraudulent and manipulative
practices in the trading of the Securities.
Moreover, NYSE Rules, including Rule 1301B, give NYSE the authority
to request the Exchange specialist in the Securities to provide NYSE
Regulation with information to monitor for fraudulent and manipulative
trading facilities. The Commission believes that these rules provide
the NYSE with the tools necessary to adequately surveil trading in the
Securities.
B. Dissemination of Information
The Commission believes that sufficient venues exist for obtaining
reliable information so that investors in the Securities can monitor
the Component Commodities relative to the indicative value of their
Securities. There is a considerable amount of information about the
Component Commodities available through public Web sites, and real time
intraday prices and daily closing prices for the Component Commodities
are available by subscription from major market vendors.
The Exchange will calculate and disseminate the Closing Value once
each trading day. The Commission believes that this daily dissemination
of an indicative basket amount is appropriate because there will be no
creation or redemption of shares as
[[Page 66820]]
there would be with an ETF. Additionally, the Securities are debt,
whose value, while linked to the basket, is at least 100% of the
principal investment amount, and whose value is affected by factors,
such as interest rates, time remaining to maturity, and the issuer's
creditworthiness, that make an intraday indicative value not as
determinative. The Closing Value will be published at approximately 5
p.m., New York City time, calculated on each day as if such day were
the valuation date. The Closing Value will be accessible by going to
Bloomberg page ``WSSN'' and selecting the ``commodity-linked'' option.
Wachovia will determine the value of the Securities at maturity, which
will consist of at least 100% of the principal investment amount, plus
the Basket Performance Amount.
C. Listing and Trading
The Commission finds that the Exchange's proposed rules and
procedures for the listing and trading of the proposed Securities are
consistent with the Act. The Securities will trade as equity securities
under Section 703.19 of the Manual and will be subject to NYSE rules
applicable to equity trading including, among others, rules governing
priority, parity and precedence of orders, specialist responsibilities,
account opening and customer suitability requirements. The Commission
believes that the listing and delisting criteria for the Securities
should help to maintain a minimum level of liquidity and therefore
minimize the potential for manipulation of the Securities. The Exchange
represents that it would file a proposed rule change, pursuant to Rule
19b-4 under the Act,\17\ if Wachovia removes a Component Commodity from
the Basket, adds a new Component Commodity to the Basket, changes the
weighting of the Component Commodities in the Basket, or changes on a
more than temporary basis the source of the closing price of any of the
Component Commodities; or a market disruption event occurs which is of
a more than temporary nature. Finally, the Commission notes that the
Information Memorandum the Exchange will distribute will inform members
and member organizations about the terms, characteristics and risks in
trading the Securities, including their prospectus delivery
obligations.
---------------------------------------------------------------------------
\17\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
D. Accelerated Approval
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. The Commission notes that this product is
similar to other products already approved by the Commission.\18\ The
Commission presently is not aware of any issue that would cause it to
revisit such earlier findings or preclude the trading of these
Securities on the Exchange. Therefore, accelerating approval of this
proposed rule change should benefit investors by creating, without
undue delay, opportunities for investors to trade in such Securities.
---------------------------------------------------------------------------
\18\ See, e.g., Securities Exchange Act Release No. 54033 (June
22, 2006), 71 FR 37131 (June 29, 2006) (order approving the listing
and trading of principal protected notes linked to the Metals-China
Basket).
---------------------------------------------------------------------------
V. Conclusion
It Is Therefore Ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change, as amended (SR-NYSE-2006-54), is hereby
approved on an accelerated basis.\19\
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\20\
Nancy M. Morris,
Secretary.
---------------------------------------------------------------------------
\20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
[FR Doc. E6-19364 Filed 11-15-06; 8:45 am]
BILLING CODE 8011-01-P
