Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change to Trade Various iShares® MSCI Index Funds Pursuant to Unlisted Trading Privileges, 78503-78506 [E6-22402]

Download as PDF Federal Register / Vol. 71, No. 250 / Friday, December 29, 2006 / Notices or otherwise in furtherance of the purposes of the Act. A proposed rule change filed under Rule 19b–4(f)(6)12 normally does not become operative prior to 30 days after the date of filing. However, pursuant to Rule 19b–4(f)(6)(iii), the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay.13 The Commission believes that such waiver is consistent with the protection of investors and the public interest because the proposed rule change should provide transparency and more clarity with respect to the trading hours eligibility of certain derivative securities products and should promote consistency in the trading halts of derivative securities. For these reasons, the Commission designates the proposed rule change as operative immediately.14 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 • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send e-mail to rulecomments@sec.gov. Please include File Number SR–NYSEArca–2006–77 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEArca–2006–77. 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 pwalker on PROD1PC69 with NOTICES 12 Id. 13 17 CFR 240.19b–4(f)(6)(iii). In addition, Rule 19b–4(f)(6) requires an exchange to give the Commission 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 days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Commission has determined to waive the five-day pre-filing notice requirement in this case. 14 For purposes only of accelerating the operative date of this proposal, the Commission has considered the rule’s impact on efficiency, competition and capital formation. See 15 U.S.C. 78c(f). VerDate Aug<31>2005 18:15 Dec 28, 2006 Jkt 211001 post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal offices of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NYSEArca–2006–77 and should be submitted on or before January 19, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.15 Florence E. Harmon, Deputy Secretary. [FR Doc. E6–22396 Filed 12–28–06; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55002; File No. SR– NYSEArca–2006–32] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change to Trade Various iShares MSCI Index Funds Pursuant to Unlisted Trading Privileges December 21, 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 October 18, 2006, NYSE Arca, Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been substantially prepared by the Exchange. The Commission is publishing this notice and order to solicit comments on 15 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 78503 the proposed rule change from interested persons and to approve the proposed rule change on an accelerated basis. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange, through its wholly owned subsidiary NYSE Arca Equities, Inc. (‘‘NYSE Arca Equities’’), proposes to trade shares (‘‘Shares’’) of the following Index Funds (‘‘Funds’’) pursuant to unlisted trading privileges (‘‘UTP’’) based on NYSE Arca Rule 5.2(j)(3): • iShares MSCI Brazil (Symbol: EWZ) • iShares MSCI South Africa (EZA) • iShares MSCI South Korea (EWY) • iShares MSCI Taiwan (EWT) The text of the proposed rule change is available on the Exchange’s Web site (http://www.nysearca.com), at the principal office of the Exchange, 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 III below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange is proposing to trade the Shares of the Funds pursuant to UTP. Each Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the applicable underlying index (‘‘Index’’). Each Index is calculated by Morgan Stanley Capital Investment (‘‘MSCI’’) for each trading day based on official closing prices of the Index components in the applicable foreign markets. Each Index consists of stocks traded primarily on the respective country’s stock exchange. Each Fund utilizes a passive or indexing investment approach, which attempts to approximate the investment performance of its benchmark index through quantitative analytical E:\FR\FM\29DEN1.SGM 29DEN1 78504 Federal Register / Vol. 71, No. 250 / Friday, December 29, 2006 / Notices pwalker on PROD1PC69 with NOTICES procedures. MSCI generally seeks to have 60% of the capitalization of a country’s stock market reflected in the MSCI Index for such country. The Commission previously approved the original listing and trading of the Shares of the Funds on the American Stock Exchange, LLC. (‘‘Amex’’).3 The Funds, with the exception of iShares MSCI South Africa, were subsequently listed on The New York Stock Exchange (‘‘NYSE’’).4 The Exchange deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange’s existing rules governing the trading of equity securities. Trading hours on the Exchange for the Shares are the same as those set forth in NYSE Arca Equities Rule 7.34, except that the Shares issued by MSCI Brazil and iShares MSCI South Africa will not trade in the Opening Session (4 a.m. to 9:30 a.m. Eastern Time) unless the Indicative Optimized Portfolio Value (‘‘IOPV’’) is calculated and disseminated during that time. The iShares MSCI South Korea Index Fund and iShares MSCI Taiwan Index Fund will trade during the Opening Session, and there is no overlap in trading hours of the Opening Session and the foreign markets trading the MSCI South Korea Index and MSCI Taiwan Index securities. The last calculated IOPV is available to investors during the Opening Session by means of the consolidated tape or major market data vendors. The IOPV for these two Funds is unchanged during the Opening Session from its last calculated value. Quotations for and last sale information regarding the Funds are disseminated through the Consolidated Quotation System. The Index on which each Fund is based is calculated by MSCI for each trading day in the applicable foreign market based on official closing prices of the Index components in such markets. The Indexes are reported periodically in major financial publications, and the intra-day value of each Index is disseminated every 15 seconds throughout the trading day by organizations authorized by MSCI. The net asset value (‘‘NAV’’) of each Fund is calculated and disseminated each business day, normally at the close of regular trading of the NYSE. To provide updated information relating to each Fund for use by investors, professionals, and persons 3 See Securities Exchange Act Release No. 42748 (May 2, 2000), 65 FR 30155 (May 10, 2000) (SR– AMEX–98–49). The Funds were formerly known as World Equity Benchmark Shares or WEBS. 4 See Securities Exchange Act Release No. 52761 (November 10, 2005), 70 FR 70010 (November 18, 2005) (SR–NYSE–2005–76). VerDate Aug<31>2005 18:15 Dec 28, 2006 Jkt 211001 wishing to create or redeem the proposed Funds, the IOPV for each Fund as calculated by Bloomberg, L.P. is disseminated through the facilities of the Consolidated Tape Association. The IOPV is disseminated on a per-share basis every 15 seconds during regular NYSE trading hours of 9:30 a.m. to 4:15 p.m. Eastern Time, or, for iShares MSCI South Africa (listed on Amex), 9:30 a.m. to 4 p.m. or 4:15 p.m., depending on the time Amex specifies for the trading of such Fund’s Shares. The IOPV may not reflect the value of all securities included in the applicable Index. In addition, the IOPV does not necessarily reflect the precise composition of the current portfolio of securities held by each Fund at a particular point in time. Therefore, the IOPV on a per-share basis disseminated during NYSE’s or Amex’s regular trading hours should not be viewed as a real-time update of the NAV of a particular Fund, which is calculated only once a day. The IOPV is intended to closely approximate the value per share of the portfolio of securities for the Fund and provide for a close proxy of the NAV at a greater frequency for investors. For the iShares MSCI South Korea Index and MSCI Taiwan Index Funds, there is no overlap in trading hours between the foreign markets and NYSE. Therefore, for these Funds, the IOPV is calculated based on closing prices in the principal foreign market for securities in each Fund’s portfolio, which are then converted from the applicable foreign currency to U.S. dollars. This IOPV is updated every 15 seconds during NYSE regular trading hours of 9:30 a.m. to 4:15 p.m. E.T. to reflect changes in currency exchange rates between the U.S. dollar and the applicable foreign currency. The iShares MSCI Brazil and South Africa Index Funds include companies trading in markets with trading hours overlapping regular NYSE or Amex trading hours. For each of these Funds, the IOPV calculator updates the IOPV during the overlap period every 15 seconds to reflect price changes in the principal foreign market and converts such prices into U.S. dollars based on the current currency exchange rate. When the foreign market or markets are closed but NYSE or Amex is open for trading, the IOPV is updated every 15 seconds to reflect changes in currency exchange rates. The Commission has granted each Fund an exemption from certain prospectus delivery requirements under Section 24(d) of the Investment Company Act of 1940 (‘‘1940 Act’’).5 5 15 PO 00000 U.S.C. 80a–24(d). Frm 00110 Fmt 4703 Sfmt 4703 Any product description used in reliance on the Section 24(d) exemptive order will comply with all representations made and all conditions contained in the Funds’ application for orders under the 1940 Act.6 In connection with the trading of each Fund, the Exchange would inform ETP Holders in an Information Circular of the special characteristics and risks associated with trading Shares of such Fund, including how the Fund Shares are created and redeemed, the prospectus or product description delivery requirements applicable to the Fund, applicable Exchange rules, how information about the value of the underlying index is disseminated, and trading information. The Information Circular will disclose that the NAV is determined for Brazil, South Korea, or Taiwan at different times than other MSCI Index Series. Further, the Information Circular will disclose the possible market impact of the Fund buying or selling securities in Brazil, South Korea, or Taiwan prior to the calculation of the NAV. In addition, before an ETP Holder recommends a transaction in the Shares, the ETP Holder must determine the Shares are suitable for the customer, as required by NYSE Arca Equities Rule 9.2(a)–(b). The Exchange intends to utilize its existing surveillance procedures applicable to derivative products to monitor trading in the Shares. The Exchange represents that these procedures are adequate to monitor Exchange trading of the Shares. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act 7 in general and Section 6(b)(5) of the Act 8 in particular in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments and perfect the mechanisms of a free and open market, and to protect investors and the public interest. In addition, the Exchange believes that the proposal is consistent with Rule 12f–5 under the Act 9 because it deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange’s 6 See In the Matter of iShares, Inc., et al., Investment Company Act Release No. 25623 (June 25, 2002). 7 15 U.S.C. 78s(b). 87 15 U.S.C. 78s(b)(5). 9 17 CFR 240.12f–5. E:\FR\FM\29DEN1.SGM 29DEN1 Federal Register / Vol. 71, No. 250 / Friday, December 29, 2006 / Notices type of security to which the exchange extends UTP. The Exchange has represented that it meets this B. Self-Regulatory Organization’s requirement because it deems the Statement on Burden on Competition Shares to be equity securities, thus The Exchange does not believe that rendering trading in the Shares subject the proposed rule change would impose to the Exchange’s existing rules any burden on competition that is not governing the trading of equity necessary or appropriate in furtherance securities. The Commission further believes that of the purposes of the Act. the proposal is consistent with Section C. Self-Regulatory Organization’s IV. Commission’s Findings and Order 11A(a)(1)(C)(iii) of the Act,16 which sets Statement on Comments on the Granting Accelerated Approval of the forth Congress’ finding that it is in the Proposed Rule Change Received From Proposed Rule Change public interest and appropriate for the Members, Participants or Others After careful review, the Commission protection of investors and the finds that the proposed rule change is Written comments on the proposed maintenance of fair and orderly markets consistent with the requirements of the rule change were neither solicited nor to assure the availability to brokers, Act and the rules and regulations received. dealers, and investors of information thereunder applicable to a national with respect to quotations for and III. Solicitation of Comments securities exchange.10 In particular, the transactions in securities. Quotations for Interested persons are invited to Commission finds that the proposed and last sale information regarding the submit written data, views, and rule change is consistent with Section Shares are disseminated through the arguments concerning the foregoing, 6(b)(5) of the Act,11 which requires that Consolidated Quotation System. including whether the proposed rule an exchange have rules designed, among Furthermore, MSCI updates the change is consistent with the Act. other things, to promote just and applicable IOPV every 15 seconds to Comments may be submitted by any of equitable principles of trade, to remove reflect price changes of the Index the following methods: impediments to and perfect the components in the principal foreign mechanism of a free and open market markets, and converts such prices into Electronic Comments and a national market system, and in U.S. dollars based on the current • Use the Commission’s Internet general to protect investors and the currency exchange rate. When the comment form (http://www.sec.gov/ public interest. The Commission foreign market or markets are closed but rules/sro.shtml); or believes that this proposal should Amex or NYSE is open for trading, the • Send an e-mail to rulebenefit investors by increasing IOPV will be updated every 15 seconds comments@sec.gov. Please include File competition among markets that trade to reflect changes in currency exchange Number SR–NYSEArca–2006–32 on the the Shares. rates. NYSE Arca Rule 7.34 describes subject line. In addition, the Commission finds the situations when the Exchange would that the proposal is consistent with halt trading when the IOPV or the value Paper Comments Section 12(f) of the Act,12 which permits of the Index underlying one of the • Send paper comments in triplicate an exchange to trade, pursuant to UTP, Funds is not calculated or widely to Nancy M. Morris, Secretary, a security that is listed and registered on available. 13 The Commission Securities and Exchange Commission, another exchange. The Commission notes that, if the 100 F Street, NE., Washington, DC notes that it previously approved the Shares of any of the Funds should be 20549–1090. listing and trading of the Shares on delisted by the listing exchange, the All submissions should refer to File Amex and, with the exception of Exchange would no longer have Number SR–NYSEArca–2006–32. This iShares MSCI South Africa, authority to trade the Shares pursuant to file number should be included on the subsequently NYSE.14 The Commission this order. subject line if e-mail is used. To help the also finds that the proposal is consistent In support of this proposal, the Commission process and review your with Rule 12f–5 under the Act,15 which Exchange has made the following comments more efficiently, please use provides that an exchange shall not representations: only one method. The Commission will extend UTP to a security unless the 1. The Exchange’s surveillance post all comments on the Commission’s exchange has in effect a rule or rules procedures are adequate to monitor the Internet Web site (http://www.sec.gov/ providing for transactions in the class or trading of the Shares. rules/sro.shtml). Copies of the 2. In connection with the trading of 10 In approving this rule change, the Commission submission, all subsequent the Shares, the Exchange would inform notes that it has considered the proposed rule’s amendments, all written statements ETP Holders in an Information Circular impact on efficiency, competition, and capital with respect to the proposed rule of the special characteristics and risks formation. See 15 U.S.C. 78c(f). change that are filed with the 11 15 U.S.C. 78f(b)(5). associated with trading the Shares. Commission, and all written 12 15 U.S.C. 78l(f). 3. The Information Circular would communications relating to the 13 Section 12(a) of the Act, 15 U.S.C. 78l(a), inform participants of the prospectus or generally prohibits a broker-dealer from trading a proposed rule change between the product delivery requirements Commission and any person, other than security on a national securities exchange unless applicable to the Shares. the security is registered on that exchange pursuant those that may be withheld from the This approval order is conditioned on to Section 12 of the Act. Section 12(f) of the Act public in accordance with the the Exchange’s adherence to these excludes from this restriction trading in any security to which an exchange ‘‘extends UTP.’’ provisions of 5 U.S.C. 552, will be representations. When an exchange extends UTP to a security, it available for inspection and copying in The Commission finds good cause for allows its members to trade the security as if it were the Commission’s Public Reference approving this proposal before the listed and registered on the exchange even though Room. Copies of such filing also will be it is not so listed and registered. thirtieth day after the publication of 14 See supra notes 3 and 4. available for inspection and copying at 16 15 U.S.C. 78k–1(a)(1)(C)(iii). 15 17 CFR 240.12f–5. the principal office of the Exchange. All existing rules governing the trading of equity securities. pwalker on PROD1PC69 with NOTICES comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NYSEArca–2006–32 and should be submitted on or before January 19, 2007. 78505 VerDate Aug<31>2005 18:15 Dec 28, 2006 Jkt 211001 PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 E:\FR\FM\29DEN1.SGM 29DEN1 78506 Federal Register / Vol. 71, No. 250 / Friday, December 29, 2006 / Notices notice thereof in the Federal Register. As noted previously, the Commission previously found that the listing and trading of the iShares MSCI South Africa on Amex and the others Shares on NYSE is consistent with the Act. The Commission presently is not aware of any regulatory issue that should cause it to revisit these earlier findings or would preclude the trading of the Shares on the Exchange pursuant to UTP. Therefore, accelerating approval of this proposal should benefit investors by creating, without undue delay, additional competition in the market for the Shares. V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,17 that the proposed rule change (SR–NYSEArca– 2006–32) is approved on an accelerated basis. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.18 Jill M. Peterson, Assistant Secretary. [FR Doc. E6–22402 Filed 12–28–06; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54989; International Series Release No. 1299; File No. SR–Phlx–2006– 34] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval to Proposed Rule Change as Modified by Amendments No. 1, 2, and 3 Thereto Relating to U.S. Dollar-Settled Foreign Currency Options December 21, 2006. pwalker on PROD1PC69 with NOTICES I. Introduction On May 12, 2006, the Philadelphia Stock Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934, as amended (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change relating to the listing and trading of U.S. dollar-settled foreign currency options (‘‘FCOs’’) on the British pound and the Euro (together, the ‘‘Currencies’’). On September 29, 2006, 17 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(l). 2 17 CFR 240.19b–4. 18 17 VerDate Aug<31>2005 18:15 Dec 28, 2006 Jkt 211001 the Exchange filed Amendment No. 1,3 and on October 20, 2006, the Exchange filed Amendment No. 2.4 The proposed rule change, as amended, was published for comment in the Federal Register on November 2, 2006.5 The Commission received no comments on the proposal. On December 15, 2006, the Phlx filed Amendment No. 3 to the proposed rule change.6 This order provides notice of the proposed rule change as modified by Amendments No. 1, 2, and 3 and approves the proposed rule change as amended on an accelerated basis.7 II. Description of the Proposal The Exchange proposes to list U.S. dollar-settled FCOs 8 on the Currencies and to adopt rules and rule amendments to permit the trading of U.S. dollarsettled FCOs on the Exchange’s electronic trading platform for options, Phlx XL.9 The Exchange also proposes to amend a number of other rules applicable to U.S. dollar-settled FCOs, and to delete outdated references to the German mark, Italian lira, Spanish peseta, and the French franc.10 A. Contract Specifications and Amendments to FCO Rules Background. U.S. dollar-settled FCOs are cash-settled, European-style options issued by The Options Clearing Corporation (‘‘OCC’’) that allow holders to receive U.S. dollars representing the difference between the current foreign exchange spot price and the exercise price of the option. In contrast, a physical delivery option on a foreign currency, which the Exchange currently 3 See Form 19b–4 dated September 29, 2006 (‘‘Amendment No. 1’’). Amendment No. 1 replaced the original filing in its entirety. 4 See Form 19b–4 dated October 20, 2006 (‘‘Amendment No. 2’’). Amendment No. 2 replaced the Amendment No. 1 in its entirety. 5 See Securities Exchange Act Release No. 54652 (October 25, 2006), 71 FR 64597 (‘‘Notice’’). 6 See Partial Amendment dated December 15, 2006 (‘‘Amendment No. 3’’). 7 This order specifically approves the listing and trading of U.S. dollar-settled FCOs on the British pound and the Euro. The listing and trading of additional U.S. dollar-settled FCOs on other foreign currencies will require the Exchange to file additional proposed rule changes on Form 19b–4. 8 The Exchange previously traded U.S. dollarsettled options on the German mark and the Japanese yen beginning in September 1994 and February 1997, respectively. See Securities Exchange Act Release Nos. 33732 (March 8, 1994), 59 FR 12023 (March 15, 1994) and 36505 (November 22, 1995), 60 FR 61277 (November 29, 1995). U.S. dollar-settled German mark options and Japanese yen options were delisted on January 19, 1999 and August 23, 1999, respectively. 9 See Securities Exchange Act Release No. 49832 (June 8, 2004), 69 FR 33442 (June 15, 2004) (SR– Phlx–2003–59) (approving Phlx XL). 10 See Phlx Rules 722, 1000, 1001, 1009, 1014, 1033, 1034, 1069, 1079; and Options Floor Procedure Advice B–7. PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 lists and trades, gives its owner the right to receive physical delivery (if it is a call) or to make physical delivery (if it is a put) of the underlying foreign currency when the option is exercised.11 In addition, unlike other Phlx-traded FCOs, U.S. dollar-settled FCOs will be deemed to be exercised at expiration if the exercise settlement value is at least $1.00 per contract unless the clearing member instructs OCC not to exercise it.12 Delivery and Payment. Upon exercise of an in-the-money U.S. dollar-settled FCO structured as a call, the holder would receive, from OCC, U.S. dollars representing the difference between the exercise strike price and the closing settlement value of the U.S. dollarsettled FCO contract multiplied by the number of units of currency covered by the contract. Similarly, for a U.S. dollarsettled FCO structured as a put, the holder would receive U.S. dollars representing the excess of the exercise price over the closing settlement value of the U.S. dollar-settled FCO contract multiplied by the number of units of foreign currency covered by the contract.13 Contract Size. The contract sizes of the U.S. dollar-settled FCO contracts on the Currencies would be 10,000 British pounds and 10,000 Euros.14 Expirations. The Exchange proposes to permit U.S. dollar-settled FCO contracts to be listed with expirations that are the same as the expirations permitted for equity index options pursuant to Phlx Rule 1101A, with the exception of long term option series and quarterly expiring FCOs which the Exchange does not propose to list.15 The Exchange anticipates that, at least initially, it would list expirations at one, two, three, six, and nine months, and that the options would be on three of the months from the March, June, 11 The Exchange has listed and traded physical delivery FCOs issued by OCC on a number of currencies since 1982. The Exchange’s existing, physical delivery options on the Currencies would not be affected by this proposal and would continue to trade as they do today, by open outcry. 12 However, the normal expiration date exercise procedures do not apply in circumstances in which the fixing of the exercise settlement amount is delayed beyond the last trading day before expiration. See OCC Rule 2302 (setting forth the expiration date exercise procedures), and Securities Exchange Act Release No. 54395 (December 13, 2006) (order approving SR–OCC–2006–10). 13 See Phlx Rule 1044. 14 The contract sizes for the physical delivery options on the Currencies are 31,250 British pounds and 62,500 Euros. 15 See Phlx Rule 1012(a). The Exchange stated that it does not anticipate listing FLEX U.S. dollarsettled foreign currency options at this time. Currently, trades may be executed in certain FLEX options on equities and equity indexes. See Phlx Rule 1079. E:\FR\FM\29DEN1.SGM 29DEN1

Agencies

[Federal Register Volume 71, Number 250 (Friday, December 29, 2006)]
[Notices]
[Pages 78503-78506]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-22402]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55002; File No. SR-NYSEArca-2006-32]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change to 
Trade Various iShares[reg] MSCI Index Funds Pursuant to Unlisted 
Trading Privileges

December 21, 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 October 18, 2006, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been substantially prepared by the Exchange. The Commission is 
publishing this notice and order to solicit comments on the proposed 
rule change from interested persons and to approve the proposed rule 
change on an accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange, through its wholly owned subsidiary NYSE Arca 
Equities, Inc. (``NYSE Arca Equities''), proposes to trade shares 
(``Shares'') of the following Index Funds (``Funds'') pursuant to 
unlisted trading privileges (``UTP'') based on NYSE Arca Rule 
5.2(j)(3):
     iShares MSCI Brazil (Symbol: EWZ)
     iShares MSCI South Africa (EZA)
     iShares MSCI South Korea (EWY)
     iShares MSCI Taiwan (EWT)
    The text of the proposed rule change is available on the Exchange's 
Web site (http://www.nysearca.com), at the principal office of the 
Exchange, 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 III below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The Exchange is proposing to trade the Shares of the Funds pursuant 
to UTP. Each Fund seeks investment results that correspond generally to 
the price and yield performance, before fees and expenses, of the 
applicable underlying index (``Index''). Each Index is calculated by 
Morgan Stanley Capital Investment (``MSCI'') for each trading day based 
on official closing prices of the Index components in the applicable 
foreign markets. Each Index consists of stocks traded primarily on the 
respective country's stock exchange. Each Fund utilizes a passive or 
indexing investment approach, which attempts to approximate the 
investment performance of its benchmark index through quantitative 
analytical

[[Page 78504]]

procedures. MSCI generally seeks to have 60% of the capitalization of a 
country's stock market reflected in the MSCI Index for such country.
    The Commission previously approved the original listing and trading 
of the Shares of the Funds on the American Stock Exchange, LLC. 
(``Amex'').\3\ The Funds, with the exception of iShares MSCI South 
Africa, were subsequently listed on The New York Stock Exchange 
(``NYSE'').\4\ The Exchange deems the Shares to be equity securities, 
thus rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Trading hours on the 
Exchange for the Shares are the same as those set forth in NYSE Arca 
Equities Rule 7.34, except that the Shares issued by MSCI Brazil and 
iShares MSCI South Africa will not trade in the Opening Session (4 a.m. 
to 9:30 a.m. Eastern Time) unless the Indicative Optimized Portfolio 
Value (``IOPV'') is calculated and disseminated during that time. The 
iShares MSCI South Korea Index Fund and iShares MSCI Taiwan Index Fund 
will trade during the Opening Session, and there is no overlap in 
trading hours of the Opening Session and the foreign markets trading 
the MSCI South Korea Index and MSCI Taiwan Index securities. The last 
calculated IOPV is available to investors during the Opening Session by 
means of the consolidated tape or major market data vendors. The IOPV 
for these two Funds is unchanged during the Opening Session from its 
last calculated value.
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    \3\ See Securities Exchange Act Release No. 42748 (May 2, 2000), 
65 FR 30155 (May 10, 2000) (SR-AMEX-98-49). The Funds were formerly 
known as World Equity Benchmark Shares or WEBS.
    \4\ See Securities Exchange Act Release No. 52761 (November 10, 
2005), 70 FR 70010 (November 18, 2005) (SR-NYSE-2005-76).
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    Quotations for and last sale information regarding the Funds are 
disseminated through the Consolidated Quotation System. The Index on 
which each Fund is based is calculated by MSCI for each trading day in 
the applicable foreign market based on official closing prices of the 
Index components in such markets. The Indexes are reported periodically 
in major financial publications, and the intra-day value of each Index 
is disseminated every 15 seconds throughout the trading day by 
organizations authorized by MSCI. The net asset value (``NAV'') of each 
Fund is calculated and disseminated each business day, normally at the 
close of regular trading of the NYSE.
    To provide updated information relating to each Fund for use by 
investors, professionals, and persons wishing to create or redeem the 
proposed Funds, the IOPV for each Fund as calculated by Bloomberg, L.P. 
is disseminated through the facilities of the Consolidated Tape 
Association. The IOPV is disseminated on a per-share basis every 15 
seconds during regular NYSE trading hours of 9:30 a.m. to 4:15 p.m. 
Eastern Time, or, for iShares MSCI South Africa (listed on Amex), 9:30 
a.m. to 4 p.m. or 4:15 p.m., depending on the time Amex specifies for 
the trading of such Fund's Shares.
    The IOPV may not reflect the value of all securities included in 
the applicable Index. In addition, the IOPV does not necessarily 
reflect the precise composition of the current portfolio of securities 
held by each Fund at a particular point in time. Therefore, the IOPV on 
a per-share basis disseminated during NYSE's or Amex's regular trading 
hours should not be viewed as a real-time update of the NAV of a 
particular Fund, which is calculated only once a day. The IOPV is 
intended to closely approximate the value per share of the portfolio of 
securities for the Fund and provide for a close proxy of the NAV at a 
greater frequency for investors.
    For the iShares MSCI South Korea Index and MSCI Taiwan Index Funds, 
there is no overlap in trading hours between the foreign markets and 
NYSE. Therefore, for these Funds, the IOPV is calculated based on 
closing prices in the principal foreign market for securities in each 
Fund's portfolio, which are then converted from the applicable foreign 
currency to U.S. dollars. This IOPV is updated every 15 seconds during 
NYSE regular trading hours of 9:30 a.m. to 4:15 p.m. E.T. to reflect 
changes in currency exchange rates between the U.S. dollar and the 
applicable foreign currency.
    The iShares MSCI Brazil and South Africa Index Funds include 
companies trading in markets with trading hours overlapping regular 
NYSE or Amex trading hours. For each of these Funds, the IOPV 
calculator updates the IOPV during the overlap period every 15 seconds 
to reflect price changes in the principal foreign market and converts 
such prices into U.S. dollars based on the current currency exchange 
rate. When the foreign market or markets are closed but NYSE or Amex is 
open for trading, the IOPV is updated every 15 seconds to reflect 
changes in currency exchange rates.
    The Commission has granted each Fund an exemption from certain 
prospectus delivery requirements under Section 24(d) of the Investment 
Company Act of 1940 (``1940 Act'').\5\ Any product description used in 
reliance on the Section 24(d) exemptive order will comply with all 
representations made and all conditions contained in the Funds' 
application for orders under the 1940 Act.\6\
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    \5\ 15 U.S.C. 80a-24(d).
    \6\ See In the Matter of iShares, Inc., et al., Investment 
Company Act Release No. 25623 (June 25, 2002).
---------------------------------------------------------------------------

    In connection with the trading of each Fund, the Exchange would 
inform ETP Holders in an Information Circular of the special 
characteristics and risks associated with trading Shares of such Fund, 
including how the Fund Shares are created and redeemed, the prospectus 
or product description delivery requirements applicable to the Fund, 
applicable Exchange rules, how information about the value of the 
underlying index is disseminated, and trading information. The 
Information Circular will disclose that the NAV is determined for 
Brazil, South Korea, or Taiwan at different times than other MSCI Index 
Series. Further, the Information Circular will disclose the possible 
market impact of the Fund buying or selling securities in Brazil, South 
Korea, or Taiwan prior to the calculation of the NAV.
    In addition, before an ETP Holder recommends a transaction in the 
Shares, the ETP Holder must determine the Shares are suitable for the 
customer, as required by NYSE Arca Equities Rule 9.2(a)-(b).
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products to monitor trading in the 
Shares. The Exchange represents that these procedures are adequate to 
monitor Exchange trading of the Shares.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \7\ in general and Section 6(b)(5) of the 
Act \8\ in particular in that it is designed to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, to 
remove impediments and perfect the mechanisms of a free and open 
market, and to protect investors and the public interest. In addition, 
the Exchange believes that the proposal is consistent with Rule 12f-5 
under the Act \9\ because it deems the Shares to be equity securities, 
thus rendering trading in the Shares subject to the Exchange's

[[Page 78505]]

existing rules governing the trading of equity securities.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b).
    \87\ 15 U.S.C. 78s(b)(5).
    \9\ 17 CFR 240.12f-5.
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments on the proposed rule change were neither solicited 
nor received.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2006-32 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NYSEArca-2006-32. 
This file number should be included on the subject line if e-mail is 
used. To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NYSEArca-2006-32 and should be submitted on or before 
January 19, 2007.

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

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\10\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\11\ 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. The Commission believes that this proposal should benefit 
investors by increasing competition among markets that trade the 
Shares.
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    \10\ 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).
    \11\ 15 U.S.C. 78f(b)(5).
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    In addition, the Commission finds that the proposal is consistent 
with Section 12(f) of the Act,\12\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\13\ The Commission notes that it previously approved the 
listing and trading of the Shares on Amex and, with the exception of 
iShares MSCI South Africa, subsequently NYSE.\14\ The Commission also 
finds that the proposal is consistent with Rule 12f-5 under the 
Act,\15\ which provides that an exchange shall not extend UTP to a 
security unless the exchange has in effect a rule or rules providing 
for transactions in the class or type of security to which the exchange 
extends UTP. The Exchange has represented that it meets this 
requirement because it deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities.
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    \12\ 15 U.S.C. 78l(f).
    \13\ Section 12(a) of the Act, 15 U.S.C. 78l(a), generally 
prohibits a broker-dealer from trading a security on a national 
securities exchange unless the security is registered on that 
exchange pursuant to Section 12 of the Act. Section 12(f) of the Act 
excludes from this restriction trading in any security to which an 
exchange ``extends UTP.'' When an exchange extends UTP to a 
security, it allows its members to trade the security as if it were 
listed and registered on the exchange even though it is not so 
listed and registered.
    \14\ See supra notes 3 and 4.
    \15\ 17 CFR 240.12f-5.
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    The Commission further believes that the proposal is consistent 
with Section 11A(a)(1)(C)(iii) of the Act,\16\ which sets forth 
Congress' finding that it is in the public interest and appropriate for 
the protection of investors and the maintenance of fair and orderly 
markets to assure the availability to brokers, dealers, and investors 
of information with respect to quotations for and transactions in 
securities. Quotations for and last sale information regarding the 
Shares are disseminated through the Consolidated Quotation System. 
Furthermore, MSCI updates the applicable IOPV every 15 seconds to 
reflect price changes of the Index components in the principal foreign 
markets, and converts such prices into U.S. dollars based on the 
current currency exchange rate. When the foreign market or markets are 
closed but Amex or NYSE is open for trading, the IOPV will be updated 
every 15 seconds to reflect changes in currency exchange rates. NYSE 
Arca Rule 7.34 describes the situations when the Exchange would halt 
trading when the IOPV or the value of the Index underlying one of the 
Funds is not calculated or widely available.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

    The Commission notes that, if the Shares of any of the Funds should 
be delisted by the listing exchange, the Exchange would no longer have 
authority to trade the Shares pursuant to this order.
    In support of this proposal, the Exchange has made the following 
representations:
    1. The Exchange's surveillance procedures are adequate to monitor 
the trading of the Shares.
    2. In connection with the trading of the Shares, the Exchange would 
inform ETP Holders in an Information Circular of the special 
characteristics and risks associated with trading the Shares.
    3. The Information Circular would inform participants of the 
prospectus or product delivery requirements applicable to the Shares.
    This approval order is conditioned on the Exchange's adherence to 
these representations.
    The Commission finds good cause for approving this proposal before 
the thirtieth day after the publication of

[[Page 78506]]

notice thereof in the Federal Register. As noted previously, the 
Commission previously found that the listing and trading of the iShares 
MSCI South Africa on Amex and the others Shares on NYSE is consistent 
with the Act. The Commission presently is not aware of any regulatory 
issue that should cause it to revisit these earlier findings or would 
preclude the trading of the Shares on the Exchange pursuant to UTP. 
Therefore, accelerating approval of this proposal should benefit 
investors by creating, without undue delay, additional competition in 
the market for the Shares.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\17\ that the proposed rule change (SR-NYSEArca-2006-32) is 
approved on an accelerated basis.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6-22402 Filed 12-28-06; 8:45 am]
BILLING CODE 8011-01-P