Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change To List and Trade Shares of the iShares FTSE NAREIT Residential Index Fund, 26435-26442 [E7-8860]
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Federal Register / Vol. 72, No. 89 / Wednesday, May 9, 2007 / Notices
26435
Comments may be submitted by any of
the following methods:
SECURITIES AND EXCHANGE
COMMISSION
the most significant aspects of such
statements.
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSE–2007–44 on the
subject line.
[Release No. 34–55699; File No. SR–
NYSEArca–2007–27]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and Order
Granting Accelerated Approval of
Proposed Rule Change To List and
Trade Shares of the iShares FTSE
NAREIT Residential Index Fund
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
May 3, 2007.
Paper Comments
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• 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–NYSE–2007–44. 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 will also be
available for inspection and copying at
the principal office of the NYSE. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File number
SR–NYSE–2007–44 and should be
submitted on or before May 30, 2007.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.10
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–8811 Filed 5–8–07; 8:45 am]
BILLING CODE 8010–01–P
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 March 9,
2007, NYSE Arca, Inc. (‘‘NYSE Arca’’ or
‘‘Exchange’’), through its wholly owned
subsidiary NYSE Arca Equities, Inc.
(‘‘NYSE Arca Equities’’), 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade shares (‘‘Shares’’) of the iShares
FTSE NAREIT Residential Index Fund
(‘‘Fund’’) of the iShares 3 Trust
(‘‘Trust’’) based on the FTSE NAREIT
Residential Index (‘‘Index’’ or
‘‘Underlying Index’’) pursuant to NYSE
Arca Equities Rule 5.2(j)(3). The text of
the proposed rule change is available on
the Exchange’s Web site at
www.nyse.com, at the Exchange’s
principal office, 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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 iShares is a registered trademark of Barclays
Global Investors, N.A.
2 17
10 17
CFR 200.30–3(a)(12).
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1. Purpose
The Exchange proposes to list the
Shares of the Fund. The Trust is an
open-end management company with
over 90 separate investment portfolios
and is registered under the Investment
Company Act of 1940 (‘‘1940 Act’’).4
The Fund seeks investment results that
correspond generally to the price and
yield performance, before fees and
expenses, of the Underlying Index, as
described more fully below. The Fund
would concentrate its investments in a
particular industry or group of
industries to approximately the same
extent as the Index is so concentrated.
Because all of the securities included in
the Underlying Index are issued by real
estate investment trusts (‘‘REITs’’) that
invest in residential real estate, the
Fund would always be concentrated in
the residential real estate industry.5
Under NYSE Arca Equities Rule
5.2(j)(3), the Exchange may list and/or
trade pursuant to unlisted trading
privileges (‘‘UTP’’) ‘‘Investment
Company Units’’ (‘‘ICUs’’).6 The Fund
does not meet the ‘‘generic’’ listing
requirements of NYSE Arca Equities
Rule 5.2(j)(3) applicable to listing of
ICUs in reliance upon Rule 19b–4(e)
under the Act,7 and thus cannot be
listed without a filing pursuant to Rule
19b–4 under the Act. Specifically, the
Underlying Index does not meet the
requirement of Commentary .01(a)(3) to
4 See Post-Effective Amendment No. 63 to the
Trust’s Registration Statement on Form N–1A, as
filed with the Commission on November 15, 2006
and accompanying Statement of Additional
Information (‘‘SAI’’) (File No. 333–92935 and 811–
09729) (the ‘‘Registration Statement’’). The Trust
was established as a Delaware statutory trust on
December 16, 1999.
5 See supra note 4; e-mail from Tim Milanowski,
Director, NYSE Group, Inc. to Mitra Mehr, Special
Counsel, Division of Market Regulation
(‘‘Division’’), Commission, dated April 25, 2007.
6 In October 1999, the Commission approved
NYSE Arca Equities Rule 5.2(j)(3), which sets forth
the rules related to listing and trading criteria for
ICUs. See Securities Exchange Act Release No.
41983 (October 6, 1999), 64 FR 56008 (October 15,
1999) (SR–PCX–1998–29). In July 2001, the
Commission also approved the Exchange’s generic
listing standards for listing and trading, or the
trading pursuant to UTP, of ICUs under NYSE Arca
Equities Rule 5.2(j)(3). See Securities Exchange Act
Release No. 44551 (July 12, 2001), 66 FR 37716
(July 19, 2001) (SR–PCX–2001–14). NYSE Arca
Equities Rule 5.1(b)(15) defines an ICU as a security
representing an interest in a registered investment
company that could be organized as a unit
investment trust, an open-end management
investment company, or a similar entity.
7 17 CFR 240.19b–4(e).
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NYSE Arca Equities Rule 5.2(j)(3) that
the five most heavily weighted
component stocks cannot exceed 65% of
the weight of the index or portfolio.8
Operation of the Fund
Barclays Global Fund Advisors
(‘‘BGFA’’), a subsidiary of Barclays
Global Investors, N.A. (‘‘BGI’’), would
be the investment adviser (‘‘Advisor’’) to
the Fund. The Advisor is registered as
an investment adviser under Section
203 of the Investment Advisers Act of
1940 9 (‘‘Advisers Act’’). As the Advisor,
BGFA would have overall responsibility
for the general management and
administration of the Trust. BGFA
would provide an investment program
for the Fund and would manage the
investment of the Fund’s assets. In
seeking to achieve a Fund’s investment
objective, BGFA would use teams of
portfolio managers, investment
strategists, and other investment
specialists. BGFA would also arrange for
transfer agency, custody, fund
administration, and all other nondistribution-related services necessary
for the Fund to operate. While the Fund
would be managed by the Advisor or
portfolio manager, the Trust’s Board of
Trustees would have responsibility for
the overall management and operations
of the Fund.
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The Index Provider
FTSE International Limited (‘‘FTSE’’)
is the provider of the Index. FTSE is an
independent company whose sole
business is the creation and
management of indices and associated
data services. FTSE is a joint venture
between The Financial Times and the
London Stock Exchange and ‘‘FTSETM’’
is a trademark owned jointly by the
London Stock Exchange plc and The
Financial Times Limited. FTSE
calculates over 60,000 indices daily,
including more than 600 real-time
indices. ‘‘NAREIT’’ is a trademark of
National Association of Real Estate
Investment Trusts (‘‘NAREIT’’). Both the
FTSE and NAREIT trademarks are used
by FTSE under license. FTSE is not
affiliated with the Trust, BGFA, or its
affiliates or SEI Investments Distribution
Co. (‘‘SEI’’), the distributor of the Fund
(as discussed below). BGI has entered
into a license agreement with FTSE to
use the Underlying Index and is sublicensing rights in the Underlying Index
to the Trust at no charge.
8 The five most heavily weighted component
stocks constitute approximately 69.90% of the
weight of the index, as of March 9, 2007. Source:
Bloomberg.
9 15 U.S.C. 80b.
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Administrator, Custodian, and Transfer
Agent
Investors Bank & Trust Company
(‘‘Investors Bank’’) would serve as
administrator, custodian, and transfer
agent for the Fund (‘‘Administrator’’).
Under the Administration Agreement
with the Trust, the Administrator would
provide necessary administrative, legal,
tax, accounting, and financial reporting
services for the maintenance and
operations of the Trust and the Fund.
Under the Custodian Agreement with
the Trust, the Administrator would
maintain cash, securities, and other
assets of the Trust and the Fund and
would keep all necessary accounts and
records. The Administrator would be
required to deliver securities held by the
Administrator and to make payments for
securities purchased by the Trust for the
Fund. Also, under a Delegation
Agreement, the Administrator may
appoint certain foreign custodians or
foreign custody managers for Fund
investments outside the United States.
Pursuant to a Transfer Agency and
Service Agreement with the Trust, the
Administrator would act as a transfer
agent for the Fund’s authorized and
issued shares of beneficial interest, and
as dividend disbursing agent of the
Trust.
The Distributor
SEI would be the distributor of shares
of the Trust (‘‘Distributor’’). The
Distributor has entered into a
Distribution Agreement with the Trust
pursuant to which it distributes Shares
of the Fund. Shares would be offered
continuously for sale by the Fund
through the Distributor only in Creation
Unit Aggregations (as described more
fully below). Shares in less than
Creation Unit Aggregations would not
be distributed by the Distributor. The
Distributor would deliver the
prospectus and, upon request, the
Statement of Additional Information
(‘‘SAI’’) to persons purchasing Creation
Unit Aggregations and would maintain
records of both orders placed with it
and confirmations of acceptance
furnished by it. The Distributor is a
broker-dealer registered under the Act
and a member of NASD.
The Fund intends to qualify as a
‘‘regulated investment company’’
(‘‘RIC’’) under the Internal Revenue
Code (‘‘Code’’). The Fund must, among
other things, meet certain diversification
tests imposed by the Code to satisfy RIC
requirements.10
10 Among these is a requirement that, at the close
of each quarter of the Fund’s taxable year: (1) At
least 50% of the market value of the Fund’s total
assets must be represented by cash items, U.S.
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Description of the Fund and the
Underlying Index
According to the Fund’s Registration
Statement, the Fund would be an
‘‘index fund’’ that seeks investment
results that correspond generally to the
price and yield performance, before fees
and expenses, of the Underlying Index.
The Underlying Index measures the
performance of the residential real
estate sector of the U.S. equity market.
The Fund would concentrate its
investments in a particular industry or
group of industries to approximately the
same extent as the Underlying Index is
so concentrated. Because all of the
securities included in the Underlying
Index are issued by REITs that invest in
residential real estate, the Fund would
always be concentrated in the
residential real estate industry.11
The Underlying Index is sponsored by
the Index Provider. The Index Provider
determines the relative weightings of
the securities in the Underlying Index
and publishes information regarding the
market value of the Underlying Index.
The Advisor would use a ‘‘passive’’ or
‘‘indexing’’ approach to try to achieve
the Fund’s investment objective. The
Fund would not try to ‘‘beat’’ the index
it tracks and would not seek temporary
defensive positions when markets
decline or appear overvalued. Indexing
eliminates the chance that the Fund
may substantially outperform the
Underlying Index, but also may
eliminate some of the risk of active
management, such as poor security
selection. Indexing seeks to achieve
lower costs and better after-tax
performance by keeping portfolio
turnover low in comparison to actively
managed investment companies.
The Fund would invest at least 90%
of its assets in the securities of its
Underlying Index or in American
Depositary Receipts (‘‘ADRs’’)
representing securities in the
Underlying Index. The Fund may invest
the remainder of its assets in securities
not included in the Underlying Index,
but which the Advisor believes would
help the Fund track the Underlying
Index. For example, the Fund may
government securities, securities of other RICs, and
other securities, with such other securities limited
for the purpose of this calculation with respect to
any one issuer to an amount not greater than 5%
of the value of the Fund’s assets and not greater
than 10% of the outstanding voting securities of
such issuer; and (2) not more than 25% of the value
of its total assets may be invested in securities of
any one issuer, or two or more issuers that are
controlled by the Fund (within the meaning of
Section 851(b)(4)(B) of the Code) and that are
engaged in the same or similar trades or business
(other than U.S. government securities or other
RICs).
11 See supra note 5.
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invest in securities not included in the
Underlying Index to reflect various
corporate actions (such as mergers) and
other changes in the Underlying Index
(such as reconstitutions, additions, and
deletions). The Fund also may invest its
other assets in futures contracts or other
derivatives related to the Underlying
Index, as well as cash and cash
equivalents, including shares of money
market funds affiliated with the
Advisor. The Advisor would use a
representative sampling indexing
strategy for the Fund.
‘‘Representative Sampling’’ is an
indexing strategy that involves investing
in a representative sample of the
securities, included in the Underlying
Index, that collectively have an
investment profile similar to the
Underlying Index. The securities
selected are expected to have, in the
aggregate, investment characteristics
(based on factors such as market
capitalization and industry weightings),
fundamental characteristics (such as
return variability, earnings valuation,
and yield), and liquidity measures
similar to those of the Underlying Index.
The Fund may or may not hold all of the
securities that are included in the
Underlying Index.
The Advisor expects that, over time,
the correlation between the Fund’s
performance and that of the Underlying
Index, before fees and expenses, would
be 95% or better. A correlation
percentage of 100% would indicate
perfect correlation. The difference
between 100% correlation and the
Fund’s actual percentage correlation
with the Underlying Index is called
‘‘tracking error.’’ The Fund’s use of a
representative sampling indexing
strategy can be expected to result in
greater tracking error than if the Fund
used a replication indexing strategy.
‘‘Replication’’ is an indexing strategy in
which a fund invests in substantially all
of the securities in its underlying index
in approximately the same proportions
as in the underlying index.
The Fund would concentrate its
investments only in the residential real
estate sector to approximately the same
extent that the Underlying Index is so
concentrated. For purposes of this
limitation, securities of the U.S.
government (including its agencies and
instrumentalities), repurchase
agreements collateralized by U.S.
government securities, and securities of
state or municipal governments and
their political subdivisions are not
considered to be issued by members of
any industry.
The Underlying Index is included in
the FTSE NAREIT U.S. Real Estate
Indices (‘‘FTSE NAREIT Indices’’). The
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FTSE NAREIT Indices are primarily
rule-based, but are also monitored by
the FTSE NAREIT Index Advisory
Committee. All tax-qualified REITs that
are listed on the New York Stock
Exchange (‘‘NYSE’’), the American
Stock Exchange (‘‘Amex’’), or the
Nasdaq Stock Market (‘‘Nasdaq’’) are
eligible for inclusion in the FTSE
NAREIT Indices. Potential components
of the FTSE NAREIT Residential Index
are determined by sector classifications
of components in the FTSE NAREIT
Composite Index. As part of an annual
review, all eligible securities are ranked
by their full market capitalizations as at
the close of business on the last
business day in November. Stocks are
then screened to ensure they have
sufficient liquidity. Factors used to
determine liquidity include the
availability of current and reliable price
information and the level of trading
volume relative to shares outstanding.
Value traded and float turnover are also
analyzed periodically to monitor
liquidity. The FTSE NAREIT Index
Advisory Committee meets to approve
the annual review on the Wednesday
after the first Friday in December. Any
component changes resulting from the
annual review would be implemented at
the close of business on the third Friday
of December.
When calculating index component
weights, component companies’ shares
are adjusted for available float. In
general, shares held by governments,
corporations, strategic partners, or other
control groups are excluded from a
component company’s outstanding
shares. The FTSE NAREIT Composite
Index would be periodically reviewed
for changes in free float. These reviews
would occur on a quarterly basis, and
implementation of any changes to the
Underlying Index, and potentially the
FTSE NAREIT Indices, would happen at
the close of business on the third Friday
in March, June, September, or
December.
The FTSE NAREIT Index Advisory
Committee is responsible for
undertaking the review of the FTSE
NAREIT Indices and for approving
changes in components and is also
responsible for the sector classification
of components of the FTSE NAREIT
Indices. The Chairman and Deputy
Chairman of the FTSE NAREIT Index
Advisory Committee are collectively
responsible for approving component
changes to the FTSE NAREIT Indices
between meetings of the Advisory
Committee. Adjustments to reflect a
major change in the amount or structure
of a component company’s issued
securities would be made before the
start of the index calculation on the day
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26437
on which the change takes effect.
Adjustments to reflect less significant
changes would be implemented before
the start of the index calculation on the
day following the announcement of the
change. Adjustments generally would be
made before the start of the index
calculations on the day concerned,
unless market conditions prevent such
adjustment. If a component is delisted,
or ceases to have a firm quotation, or is
subject to a takeover offer which has
been declared wholly unconditional, it
would be removed from the indices of
which it is a component.
The FTSE NAREIT Indices are
calculated continuously during normal
trading hours of the Nasdaq, Amex, and
NYSE, and would be closed on U.S.
holidays. The prices used to calculate
the FTSE NAREIT Indices are the
Reuters daily closing prices or those
figures accepted as such. FTSE NAREIT
reserves the right to use an alternative
pricing source on any given day. For
end-of-day alternative currency
calculations, FTSE NAREIT uses the
WM/Reuters Closing Spot Rates.
The Fund would issue and redeem,
on a continuous basis, shares at its net
asset value (‘‘NAV’’) only in blocks of
50,000 shares or multiples thereof (each,
a ‘‘Creation Unit’’ or a ‘‘Creation Unit
Aggregation’’).
Only certain large institutional
investors known as Authorized
Participants (as defined below) may
purchase or redeem Creation Units
directly with the Fund at the NAV.
These transactions are usually in
exchange for a basket of securities
similar to the Fund’s portfolio and an
amount of cash. Except when aggregated
in Creation Units, Shares of the Fund
are not redeemable securities.
Shareholders who are not Authorized
Participants may not redeem shares
directly from the Fund.
The Fund would impose a purchase
transaction fee and a redemption
transaction fee to offset transfer and
other transaction costs associated with
the issuance and redemption of Creation
Units. Purchasers and redeemers of
Creation Units for cash are required to
pay an additional variable charge to
compensate for brokerage and market
impact expenses. The creation and
redemption transaction fees for
creations and redemptions in-kind for
the Fund are described in the Fund’s
prospectus.
All orders to purchase Shares of the
Fund in Creation Units must be placed
with the Distributor by or through an
‘‘Authorized Participant,’’ which is
either: (1) A ‘‘Participating Party,’’ i.e.,
a broker-dealer or other participant in
the clearing process through the
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Continuous Net Settlement System of
the National Securities Clearing
Corporation (‘‘NSCC’’), a clearing
agency that is registered with the
Commission (‘‘Clearing Process’’); or (2)
a Depository Trust Company (‘‘DTC’’)
Participant that has executed a
‘‘Participant Agreement’’ with the
Distributor.
Consideration for Purchase of Creation
Units
The consideration for purchase of
Creation Unit Aggregations of the Fund
generally consists of the in-kind deposit
of a designated portfolio of equity
securities, the Deposit Securities, which
constitutes a substantial replication, or
a portfolio sampling representation, of
the stocks involved in the Fund’s
Underlying Index and an amount of
cash (the ‘‘Cash Component’’) computed
as described below. Together, the
Deposit Securities and the Cash
Component constitute the ‘‘Fund
Deposit,’’ which represents the
minimum initial and subsequent
investment amount for a Creation Unit
Aggregation.
The Cash Component is sometimes
also referred to as the ‘‘Balancing
Amount.’’ The Cash Component serves
the function of compensating for any
difference between the NAV per
Creation Unit Aggregation and the
Deposit Amount. The Cash Component
is an amount equal to the difference
between the NAV of the shares (per
Creation Unit Aggregation) and the
‘‘Deposit Amount,’’ which is an amount
equal to the market value of the Deposit
Securities. If the Cash Component is a
positive number (i.e., the NAV per
Creation Unit Aggregation exceeds the
Deposit Amount), the creator would
deliver the Cash Component. If the Cash
Component is a negative number (i.e.,
the NAV per Creation Unit Aggregation
is less than the Deposit Amount), the
creator would receive the Cash
Component. Computation of the Cash
Component excludes any stamp duty or
other similar fees and expenses payable
upon transfer of beneficial ownership of
the Deposit Securities, which shall be
the sole responsibility of the Authorized
Participant.
BGFA, through the NSCC, makes
available on each business day, prior to
the opening of business on the
applicable listing exchange (currently
9:30 a.m. Eastern time), the list of the
names and the required number of
shares of each Deposit Security to be
included in the current Fund Deposit
(based on information at the end of the
previous business day) for the Fund.
Such Deposit Securities are applicable,
subject to any adjustments as described
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18:12 May 08, 2007
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below, in order to effect creations of
Creation Unit Aggregations of the Fund
until such time as the next-announced
composition of the Deposit Securities is
made available. The identity and
number of shares of the Deposit
Securities required for the Fund Deposit
for the Fund changes as rebalancing
adjustments and corporate action events
are reflected from time to time by BGFA
with a view to the investment objective
of the Fund. The composition of the
Fund may also change in response to
adjustments to the weighting or
composition of the component
securities of the Underlying Index.
In addition, the Trust reserves the
right to permit or require the
substitution of an amount of cash (i.e. a
‘‘cash in lieu’’ amount) to be added to
the Cash Component to replace any
Deposit Security that may not be
available in sufficient quantity for
delivery or that may not be eligible for
transfer through the systems of DTC or
the Clearing Process. The Trust also
reserves the right to permit or require a
‘‘cash in lieu’’ amount where the
delivery of the Deposit Security by the
Authorized Participant would be
restricted under the securities laws or
where the delivery of the Deposit
Security to the Authorized Participant
would result in the disposition of the
Deposit Security by the Authorized
Participant becoming restricted under
the securities laws, or in certain other
situations. The adjustments described
above would reflect changes known to
BGFA on the date of announcement to
be in effect by the time of delivery of the
Fund Deposit, in the composition of the
Underlying Index or resulting from
certain corporate actions.
Redemption of Shares in Creation Units
Shares may be redeemed only in
Creation Unit Aggregations at their NAV
next determined after receipt of a
redemption request in proper form by
the Fund through Investors Bank and
only on a business day. The Fund
would not redeem shares in amounts
less than Creation Unit Aggregations. A
beneficial owner must accumulate
enough shares in the secondary market
to constitute a Creation Unit
Aggregation to have such shares
redeemed by the Trust. There can be no
assurance, however, that there would be
sufficient liquidity in the public trading
market at any time to permit assembly
of a Creation Unit Aggregation. Investors
should expect to incur brokerage and
other costs in connection with
assembling a sufficient number of shares
to constitute a redeemable Creation Unit
Aggregation.
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With respect to the Fund, BGFA,
through the NSCC and the Distributor,
would make available immediately prior
to the opening of business on the
applicable listing exchange (currently
9:30 a.m. Eastern time) on each business
day, the identity of the Fund securities
that would be applicable (subject to
possible amendment or correction) to
redemption requests received in proper
form on that day (‘‘Fund Securities’’).
Fund Securities received on redemption
may not be identical to Deposit
Securities that are applicable to
creations of Creation Unit Aggregations.
Unless cash redemptions are available
or specified for the Fund, the
redemption proceeds for a Creation Unit
Aggregation would generally consist of
Fund Securities—as announced on the
business day of the request for
redemption received in proper form—
plus cash in an amount equal to the
difference between the NAV of the
shares being redeemed, as next
determined after a receipt of a request
in proper form, and the value of the
Fund Securities (the ‘‘Cash Redemption
Amount’’), less a redemption
transaction fee as described below. If the
Fund Securities have a value greater
than the NAV of the shares, a
compensating cash payment equal to the
difference must be made by or through
an Authorized Participant by the
redeeming shareholder.
The right of redemption may be
suspended or the date of payment
postponed with respect to the Fund: (i)
For any period during which the NYSE
is closed (other than customary
weekend and holiday closings); (ii) for
any period during which trading on the
NYSE is suspended or restricted; (iii) for
any period during which an emergency
exists as a result of which disposal of
the shares of the Fund or determination
of the Fund’s NAV is not reasonably
practicable; or (iv) in such other
circumstances as is permitted by the
Commission.
Dividends, Distributions, and Taxes
Dividends from net investment
income, if any, would be declared and
paid at least annually by the Fund.
Distributions of net realized securities
gains, if any, generally would be
declared and paid once a year, but the
Trust may make distributions on a more
frequent basis for the Fund. The Trust
reserves the right to declare special
distributions if, in its reasonable
discretion, such action is necessary to
improve tracking error or is necessary or
advisable to preserve the status of the
Fund as a RIC or to avoid imposition of
income or excise taxes on undistributed
income.
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Federal Register / Vol. 72, No. 89 / Wednesday, May 9, 2007 / Notices
Dividends and other distributions on
shares would be distributed on a prorata basis to beneficial owners of such
shares. Dividend payments would be
made through DTC Participants and
Indirect Participants to beneficial
owners then of record with proceeds
received from the Fund.
sroberts on PROD1PC70 with NOTICES
Dividend Reinvestment Service
No dividend reinvestment service
would be provided by the Trust. Brokerdealers may make available the DTC
book-entry Dividend Reinvestment
Service for use by beneficial owners of
the Fund for reinvestment of their
dividend distributions. Beneficial
owners should contact their broker to
determine the availability and costs of
the service and the details of
participation therein. Brokers may
require beneficial owners to adhere to
specific procedures and timetables. If
this service is available and used,
dividend distributions of both income
and realized gains would be
automatically reinvested in additional
whole shares of the Fund purchased in
the secondary market.
Availability of Information Regarding
Shares and Underlying Index
The Advisor, through the NSCC,
would make available on each business
day, prior to the opening of business on
the Exchange (currently 9:30 a.m.
Eastern time), the list of the names and
the required number of shares of each
Deposit Security to be included in the
current Fund Deposit (based on
information at the end of the previous
business day) for the Fund.
Additional information regarding the
indicative value of shares of the Fund,
also known as the ‘‘indicative optimized
portfolio value’’ (‘‘IOPV’’), would be
disseminated every 15 seconds through
the Consolidated Tape throughout the
Opening, Core, and Late Trading
Sessions (4 a.m. ET to 8 p.m. Eastern
Time) by the Exchange. The IOPV does
not necessarily reflect the precise
composition of the current portfolio of
securities held by the Fund at a
particular point in time or the best
possible valuation of the current
portfolio. Therefore, the IOPV should
not be viewed as a ‘‘real-time’’ update
of the NAV, which is computed only
once a day. The IOPV is generally
determined by using both current
market quotations and/or price
quotations obtained from broker-dealers
that may trade in the portfolio securities
held by the Fund.
According to the Fund’s Registration
Statement, Investors Bank would
calculate the NAV for the Fund
generally once daily Monday through
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18:12 May 08, 2007
Jkt 211001
Friday generally as of the regularly
scheduled close of business of the NYSE
(normally 4:00 p.m. Eastern time) on
each day that the NYSE is open for
trading, based on prices at the time of
closing, provided that: (i) Any assets or
liabilities denominated in currencies
other than the U.S. dollar shall be
translated into U.S. dollars at the
prevailing market rates on the date of
valuation as quoted by one or more
major banks or dealers that makes a twoway market in such currencies (or a data
service provider based on quotations
received from such banks or dealers);
and (ii) U.S. fixed income assets may be
valued as of the announced closing time
for trading in fixed income instruments
on any day that the Securities Industry
and Financial Markets Association
(SIFMA) announces an early closing
time. The NAV of the Fund would be
calculated by dividing the value of the
net assets of the Fund (i.e., the value of
its total assets less total liabilities) by
the total number of outstanding shares
of the Fund, generally rounded to the
nearest cent. In calculating a Fund’s
NAV, a Fund’s investments are
generally valued using market
valuations. If current market valuations
are not readily available or such
valuations do not reflect current market
values, the affected investments would
be valued using fair value pricing
pursuant to the pricing policy and
procedures approved by the Board of
Trustees. The frequency with which a
Fund’s investments are valued using fair
value pricing is primarily a function of
the types of securities and other assets
in which a Fund invests pursuant to its
investment objective, strategies, and
limitations.12
The NAV for the Fund would be
calculated and disseminated daily. In
addition, the Trust’s Web site would
include the Fund’s Prospectus and SAI,
information regarding the Underlying
Index for the Fund, the prior business
day’s NAV, and the mid-point of the
bid-ask spread at the time of calculation
of the NAV (the ‘‘Bid/Ask Price’’), a
calculation of the premium or discount
of the Bid/Ask Price at the time of
calculation of the NAV against such
NAV, the Component Securities of the
Underlying Index, and a description of
the methodology used in these
12 Valuing a Fund’s investments using fair value
pricing would result in using prices for those
investments that may differ from current market
valuations. Use of fair value prices and certain
current market valuations could result in a
difference between the prices used to calculate a
Fund’s NAV and the prices used by the Fund’s
Underlying Index, which in turn could result in a
difference between the Fund’s performance and the
performance of the Fund’s Underlying Index.
PO 00000
Frm 00107
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26439
computations. The Bid/Ask Price of the
Fund is determined using the highest
bid and the lowest offer on the
Exchange on which the shares are listed
for trading. The Exchange would also
disseminate a variety of data such as
Total Cash Amount Per Creation Unit,
Shares Outstanding, and the Fund’s
NAV on a daily basis by means of CTA
and CQ High Speed Lines.
BGFA has informed the Exchange that
the Fund would make the Fund’s NAV
available to all market participants at
the same time. If the NAV is not
disseminated to all market participants
at the same time, the Exchange would
halt trading in the Fund shares.
The closing prices of the Fund’s
Deposit Securities are readily available
from, as applicable, the relevant
Exchange, automated quotation systems,
and published or other public sources or
on-line information services that are
major market data vendors, such as
Bloomberg or Reuters. Similarly,
information regarding market prices and
volume of Shares would be broadly
available on a real-time basis throughout
the trading day. Quotation and last-sale
information for the Shares would be
widely disseminated pursuant to the
CTA Plan.13 The previous day’s closing
price and volume information for the
Shares would be published daily in the
financial sections of many newspapers.
The value of the Underlying Index
would be updated intra-day on a realtime basis as individual Component
Securities change in price and would be
disseminated every 15 seconds
throughout the Exchange’s Core Trading
Session by one or more major market
data vendors.
The Underlying Index
As of March 9, 2007, the FTSE
NAREIT Residential Index component
securities had a market capitalization of
approximately $66,859,124,000,
representing 20 securities. The average
market capitalization was
approximately $3,342,956,000. The ten
largest components represented
approximately 91.41% of the index
weight. The five highest weighted
securities represented approximately
69.90% of the index weight. The
heaviest weighted security represented
approximately 21.27% of the index
weight.14
Criteria for Initial and Continued Listing
The Shares would be subject to the
criteria for initial and continued listing
13 See e-mail from Tim Milanowski, Director,
NYSE Group, Inc. to Mitra Mehr, Special Counsel,
Division, Commission, dated May 2, 2007 (‘‘May
NYSE Arca e-mail’’).
14 Source: Bloomberg.
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sroberts on PROD1PC70 with NOTICES
of Investment Company Units under
NYSE Arca Equities Rules 5.2(j)(3) and
5.5(g)(2). A minimum of two Creation
Units (at least 100,000 Shares) would be
required to be outstanding at the start of
trading. This minimum number of
Shares required to be outstanding at the
start of trading would be comparable to
requirements that have been applied to
previously listed series of ICUs. The
Exchange believes that the proposed
minimum number of Shares outstanding
at the start of trading is sufficient to
provide market liquidity.
The continued listing criteria for ICUs
under NYSE Arca Equities Rule 5.5(g)(2)
provides that the Exchange would
consider the suspension of trading and
delisting (if applicable) of the Shares in
any of the following circumstances:
• Following the initial 12-month
period following upon the
commencement of trading of the Shares
of the Fund, there are fewer than 50
record and/or beneficial holders of such
Shares for 30 or more consecutive
trading days;
• The value of the Underlying Index
of the Fund is no longer calculated or
available; or
• Such other event occurs or
condition exists that, in the opinion of
the Exchange, makes further dealings on
the Exchange inadvisable.
In addition, the Exchange would
remove the Shares from trading and
listing upon termination of the Trust.
The Exchange represents the Trust is
required to comply with Rule 10A–3
under the Act 15 for the initial and
continued listing of the Shares.
Trading Rules
The Exchange deems the Shares to be
equity securities, thus rendering trading
in the Shares subject to the Exchange’s
existing rules governing the trading of
equity securities. The trading hours for
the Funds on the Exchange are the same
as those set forth in NYSE Arca Equities
Rule 7.34 (4 a.m. to 8 p.m. Eastern
Time). The minimum trading increment
for shares of the Funds on the Exchange
would be $0.01.
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Shares of
a Fund. Trading may be halted because
of market conditions or for reasons that,
in the view of the Exchange, make
trading in the Shares inadvisable. These
may include: (i) the extent to which
trading is not occurring in the securities
comprising an Underlying Index and/or
the financial instruments of a Fund; or
(ii) whether other unusual conditions or
15 17
CFR 240.10A–3.
VerDate Aug<31>2005
18:12 May 08, 2007
Jkt 211001
circumstances detrimental to the
maintenance of a fair and orderly
market are present. In addition, trading
in the Shares could be halted pursuant
to the Exchange’s ‘‘circuit breaker’’
rule 16 or by the halt or suspension of
trading of the underlying securities. If
the IOPV or the Index value is not being
calculated or widely disseminated as
required,17 the Exchange may halt
trading during the day in which the
interruption to the calculation or wide
dissemination of the IOPV or the Index
value occurs. If the interruption to the
calculation or wide dissemination of the
IOPV or the Index value persists past
the trading day in which it occurred, the
Exchange would halt trading no later
than the beginning of the trading day
following the interruption.
Surveillance
The Exchange intends to utilize its
existing surveillance procedures
applicable to derivative products to
monitor trading in the Shares. The
Exchange represents that these
procedures are adequate to properly
monitor Exchange trading of the Shares
in all trading sessions and to deter and
detect violations of Exchange rules.
The Exchange’s current trading
surveillance focuses on detecting when
securities trade outside their normal
patterns. When such situations are
detected, surveillance analysis follows
and investigations are opened, where
appropriate, to review the behavior of
all relevant parties for all relevant
trading violations.
The Exchange may obtain information
via the Intermarket Surveillance Group
(‘‘ISG’’) from other exchanges who are
members or affiliates of the ISG.18
In addition, the Exchange also has a
general policy prohibiting the
distribution of material, non-public
information by its employees.
Information Bulletin
Prior to the commencement of
trading, the Exchange would inform its
ETP Holders in an Information Bulletin
(‘‘Bulletin’’) of the special
characteristics and risks associated with
trading the Shares. Specifically, the
Bulletin would discuss the following: (i)
The procedures for purchases and
redemptions of Shares in Creation Unit
Aggregations (and that Shares are not
individually redeemable); (ii) NYSE
Arca Equities Rule 9.2(a),19 which
16 See
NYSE Arca Equities Rule 7.12.
May NYSE Arca e-mail.
18 For a list of the current members and affiliate
members of ISG, see www.isgportal.com.
19 NYSE Arca Equities Rule 9.2(a) provides that
an ETP Holder, before recommending a transaction,
must have reasonable grounds to believe that the
17 See
PO 00000
Frm 00108
Fmt 4703
Sfmt 4703
imposes a duty of due diligence on its
ETP Holders to learn the essential facts
relating to every customer prior to
trading the Shares; (iii) how information
regarding the IOPV is disseminated; (iv)
the requirement that ETP Holders
deliver a prospectus to investors
purchasing newly issued Shares prior to
or concurrently with the confirmation of
a transaction; and (v) trading
information.
In addition, the Bulletin would
reference that the Fund is subject to
various fees and expenses described in
the Registration Statement. The
Information Bulletin would discuss
exemptive, no-action, and interpretive
relief granted by the Commission from
Section 11(d)(1) of the Act 20 and certain
rules under the Act, including Rule
10a–1, Regulation SHO, Rule 10b–10,
Rule 14e–5, Rule 10b–17, Rule 11d1–2,
Rules 15c1–5 and 15c1–6, and Rules
101 and 102 of Regulation M under the
Act. The Bulletin would also disclose
that the NAV for the Shares would be
calculated after 4 p.m. eastern time each
trading day.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,21 in general, and
furthers the objectives of Section
6(b)(5),22 in particular, in that it is
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities,
and to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system.
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.
recommendation is suitable for its customer based
on any facts disclosed by the customer as to his
other security holdings and as to his financial
situation and needs. Further, the rule provides,
with a limited exception, that prior to the execution
of a transaction recommended to a non-institutional
customer, the ETP Holder shall make reasonable
efforts to obtain information concerning the
customer’s financial status, tax status, investment
objectives, and any other information that it
believes would be useful to make a
recommendation. See Securities Exchange Act
Release No. 34–54045 (June 26, 2006), 71 FR 37971
(July 3, 2006) (SR–PCX–2005–115).
20 15 U.S.C. 78k(d)(1).
21 15 U.S.C. 78f(b).
22 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 72, No. 89 / Wednesday, May 9, 2007 / Notices
IV. Commission’s Findings and Order
Granting Accelerated Approval of the
Proposed Rule Change
After careful consideration, the
Commission finds that the proposed
Written comments on the proposed
rule change is consistent with the
rule change were neither solicited nor
requirements of the Act and the rules
received.
and regulations thereunder applicable to
III. Solicitation of Comments
a national securities exchange.23 In
particular, the Commission finds that
Interested persons are invited to
the proposed rule change is consistent
submit written data, views, and
with Section 6(b)(5) of the Act,24 which
arguments concerning the foregoing,
requires that an exchange have rules
including whether the proposed rule
designed, among other things, to
change is consistent with the Act.
promote just and equitable principles of
Comments may be submitted by any of
trade, to remove impediments to and
the following methods:
perfect the mechanism of a free and
Electronic Comments
open market and a national market
• Use the Commission’s Internet
system, and in general to protect
comment form (https://www.sec.gov/
investors and the public interest.
The Fund does not meet the ‘‘generic’’
rules/sro.shtml); or
listing standards of NYSE Arca Rule
• Send an e-mail to rule5.2(j)(3) and thus cannot be listed in
comments@sec.gov. Please include File
Number SR–NYSEArca–2007–27 on the reliance upon Rule 19b–4(e) under the
Act. As of March 9, 2007, the five
subject line.
highest weighted securities in the
Paper Comments
Underlying Index represented
approximately 69.90% of the index
• Send paper comments in triplicate
weight, rather than 65% as required by
to Nancy M. Morris, Secretary,
NYSE Arca’s listing standards under
Securities and Exchange Commission,
Rule 5.2(j)(3).25 Nevertheless, the
100 F Street, NE., Washington, DC
Commission believes that the listing and
20549–1090.
trading of the Shares is consistent with
All submissions should refer to File
the Act. The Commission notes that it
Number SR–NYSEArca–2006–27. This
previously has approved exchange rules
file number should be included on the
subject line if e-mail is used. To help the that contemplate the listing and trading
of derivative securities products based
Commission process and review your
on indices with similar weightings.26 In
comments more efficiently, please use
addition, the market capitalization and
only one method. The Commission will
post all comments on the Commission’s liquidity of the Index components
suggest that the Index has been
Internet Web site (https://www.sec.gov/
reasonably designed to reduce the
rules/sro.shtml). Copies of the
likelihood of manipulation.
submission, all subsequent
The Commission believes that the
amendments, all written statements
proposal is consistent with Section
with respect to the proposed rule
11A(a)(1)(C)(iii) of the Exchange Act,27
change that are filed with the
which sets forth Congress’ finding that
Commission, and all written
it is in the public interest and
communications relating to the
proposed rule change between the
23 In approving this rule change, the Commission
Commission and any person, other than notes that it has considered the proposal’s impact
those that may be withheld from the
on efficiency, competition, and capital formation.
See 15 U.S.C. 78c(f).
public in accordance with the
24 15 U.S.C. 78f(b)(5).
provisions of 5 U.S.C. 552, will be
25 See supra note 8.
available for inspection and copying in
26 See Securities Exchange Act Release No. 52826
the Commission’s Public Reference
(November 22, 2005), 70 FR 71874 (November 30,
Room. Copies of such filing also will be 2005) (SR–NYSE–2005–67) (approving the listing of
the iShares Dow Jones U.S. Energy Sector Index
available for inspection and copying at
five
the principal office of the Exchange. All Fund where theindexhighest weighted securities in
the underlying
represented 83.24% of the
comments received will be posted
index weight and the iShares Dow Jones U.S.
Telecommunications Sector Index Fund where the
without change; the Commission does
five highest weighted securities in the underlying
not edit personal identifying
index represented 93.5% of the index weight). The
information from submissions. You
Commission also notes that, as of March 9, 2007,
should submit only information that
the heaviest weighted security in the Underlying
you wish to make available publicly. All Index represented approximately 21.27% of the
index weight. See id. (the heaviest weighted
submissions should refer to File
security in iShares Dow Jones U.S. Energy Sector
Number SR–NYSEArca–2007–27 and
Index Fund represented 31.91% of the index
should be submitted on or before May
weight).
27 15 U.S.C. 78k–1(a)(1)(C)(iii).
30, 2007.
sroberts on PROD1PC70 with NOTICES
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
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18:12 May 08, 2007
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26441
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. Quotation and last-sale
information for the Shares would be
widely disseminated pursuant to the
CTA Plan. Moreover, the IOPV would be
calculated and disseminated at least
every 15 seconds throughout the trading
day, and the Index value would be
calculated and disseminated every 15
seconds during the Exchange’s Core
Trading Session. The NAV of the Fund
would be calculated once each trading
day and disseminated to all market
participants at the same time. In
addition, the Trust’s Web site would
include the Fund’s prospectus and SAI,
information regarding the Underlying
Index for the Fund, the prior business
day’s NAV, the Bid/Ask Price, a
calculation of the premium or discount
of the Bid/Ask Price at the time of
calculation of the NAV against the NAV,
the component securities of the
Underlying Index, and a description of
the methodology used in these
computations. In sum, the Commission
believes that the proposal is reasonably
designed to facilitate access to
information that will assist investors in
properly valuing the Shares.
The Commission believes that the
proposal is reasonably designed to
preclude trading of the Shares when
transparency is impaired. The Exchange
has represented that if the NAV is not
disseminated to all market participants
at the same time, the Exchange would
halt trading in the Fund shares. If the
IOPV or the Index value applicable to a
series of Shares is not being calculated
and disseminated as required, the
Exchange may halt trading during the
day in which the interruption to the
dissemination of the IOPV or the Index
value occurs. If the interruption to the
calculation and dissemination of the
IOPV or the Index value persists past
the trading day in which it occurred, the
Exchange would halt trading no later
than the beginning of the trading day
following the interruption.
The Commission finds that the
Exchange’s proposed rules and
procedures for trading of the Shares are
consistent with the Act. 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.
In support of this proposal, the
Exchange has made the following
representations:
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sroberts on PROD1PC70 with NOTICES
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Federal Register / Vol. 72, No. 89 / Wednesday, May 9, 2007 / Notices
1. The Exchange would rely on its
existing surveillance procedures
applicable to derivative products to
monitor trading in the Shares. These
procedures are adequate to properly
monitor Exchange trading of the Shares
in all trading sessions and to deter and
detect violations of Exchange rules. The
Exchange may obtain information via
the ISG from other exchanges that are
members or affiliates of the ISG.
2. Prior to the commencement of
trading, the Exchange would inform its
ETP Holders in an Information Bulletin
of the special characteristics and risks
associated with trading the Shares.
3. If the IOPV or the Index value
applicable to a series of Shares is not
being calculated and disseminated as
required, the Exchange may halt trading
during the day in which the
interruption to the dissemination of the
IOPV or the Index value occurs. If the
interruption to the calculation and
dissemination of the IOPV or the Index
value persists past the trading day in
which it occurred, the Exchange would
halt trading no later than the beginning
of the trading day following the
interruption.
This Order is conditioned on NYSE
Arca’s adherence to the foregoing
representations.
The Commission finds good cause to
approve the proposed rule change, prior
to the thirtieth day after publication for
comment in the Federal Register
pursuant to Section 19(b)(2) of the
Act.28 Except for the weighting of the
Underlying Index, the Fund meets the
‘‘generic’’ listing standards of NYSE
Arca Equities Rule 5.2(j)(3). In this case,
the weighting of the five highest
components of the Underlying Index
(69.90%) is only marginally higher than
that required by NYSE Arca’s generic
listing standards (65%). The market
capitalization and liquidity of the Index
components and the fact that they are
securities issued by REITs that are listed
and traded on a national securities
exchange reduce the likelihood of the
Shares being manipulated. Finally, the
Commission notes that it previously has
approved exchange rules that
contemplate the listing and trading of
derivative securities based on indices
with similar weightings.29 The listing
and trading of the Shares do not appear
to present any new regulatory concerns.
Accelerating approval would allow the
Shares to trade on NYSE Arca without
undue delay and should generate
additional competition in the market for
such products.
28 15
U.S.C. 78s(b)(2).
supra note 26.
18:12 May 08, 2007
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.31
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–8860 Filed 5–8–07; 8:45 am]
BILLING CODE 8010–01–P
SMALL BUSINESS ADMINISTRATION
Other (Including Non-Profit Organizations) With Credit Available
Elsewhere .................................
Businesses And Non-Profit Organizations Without Credit Available Elsewhere .........................
5.250
4.000
* The number assigned to this disaster for
physical damage is 10859.
(Catalog of Federal Domestic Assistance
Number 59008).
Herbert L. Mitchell,
Associate Administrator for Disaster
Assistance.
[FR Doc. E7–8823 Filed 5–8–07; 8:45 am]
BILLING CODE 8025–01–P
[Disaster Declaration # 10859]
Maine Disaster # ME–00007
SMALL BUSINESS ADMINISTRATION
U.S. Small Business
Administration.
ACTION: Notice.
[Disaster Declaration # 10855 and # 10856]
SUMMARY: This is a Notice of the
Presidential declaration of a major
disaster for Public Assistance Only for
the State of Maine ( FEMA–1693–DR),
dated 04/25/2007.
Incident: Severe Storms and Inland
and Coastal Flooding.
Incident Period: 04/15/2007 and
continuing.
Effective Date: 04/25/2007.
Physical Loan Application Deadline
Date: 06/25/2007.
ADDRESSES: Submit completed loan
applications to:
U.S. Small Business Administration,
Processing And Disbursement Center,
14925 Kingsport Road, Fort Worth, TX
76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street, Suite 6050, Washington,
DC 20416.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
President’s major disaster declaration on
04/25/2007, Private Non-Profit
organizations that provide essential
services of a governmental nature may
file disaster loan applications at the
address listed above or other locally
announced locations.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Counties:
Androscoggin, Cumberland,
Kennebec, Knox Oxford, York.
The Interest Rates are:
AGENCY:
AGENCY:
31
Jkt 211001
Percent
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,30 that the
proposed rule change (SR–NYSEArca–
2007–27), be and it hereby is, approved
on an accelerated basis.
30
29 See
VerDate Aug<31>2005
V. Conclusion
PO 00000
15 U.S.C. 78s(b)(2).
17 CFR 200.30–3(a)(12).
Frm 00110
Fmt 4703
Sfmt 4703
New Jersey Disaster Number NJ–00006
U.S. Small Business
Administration.
ACTION: Amendment 2.
SUMMARY: This is an amendment of the
Presidential declaration of a major
disaster for the State of New Jersey
(FEMA–1694–DR), dated 04/26/2007.
Incident: Severe Storms and Inland
and Coastal Flooding.
Incident Period: 04/14/2007 through
04/20/2007.
Effective Date: 04/30/2007.
Physical Loan Application Deadline
Date: 06/25/2007.
Eidl Loan Application Deadline Date:
01/28/2008.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street, SW., Suite 6050,
Washington, DC 20416.
SUPPLEMENTARY INFORMATION: The notice
of the Presidential disaster declaration
for the State of New Jersey, dated 04/26/
2007 is hereby amended to include the
following areas as adversely affected by
the disaster:
Primary Counties:
Camden, Gloucester, Mercer.
Contiguous Counties:
New Jersey, Cumberland, Salem,
Delaware, New Castle,
Pennsylvania and Delaware.
All other information in the original
declaration remains unchanged.
E:\FR\FM\09MYN1.SGM
09MYN1
]]>Agencies
[Federal Register Volume 72, Number 89 (Wednesday, May 9, 2007)]
[Notices]
[Pages 26435-26442]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-8860]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55699; File No. SR-NYSEArca-2007-27]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Order Granting Accelerated Approval of Proposed Rule Change To List
and Trade Shares of the iShares FTSE NAREIT Residential Index Fund
May 3, 2007.
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 March 9, 2007, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange''),
through its wholly owned subsidiary NYSE Arca Equities, Inc. (``NYSE
Arca Equities''), 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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade shares (``Shares'') of the
iShares FTSE NAREIT Residential Index Fund (``Fund'') of the
iShares[supreg] \3\ Trust (``Trust'') based on the FTSE NAREIT
Residential Index (``Index'' or ``Underlying Index'') pursuant to NYSE
Arca Equities Rule 5.2(j)(3). The text of the proposed rule change is
available on the Exchange's Web site at www.nyse.com, at the Exchange's
principal office, and at the Commission's Public Reference Room.
---------------------------------------------------------------------------
\3\ iShares[supreg] is a registered trademark of Barclays Global
Investors, N.A.
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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 proposes to list the Shares of the Fund. The Trust is
an open-end management company with over 90 separate investment
portfolios and is registered under the Investment Company Act of 1940
(``1940 Act'').\4\ The Fund seeks investment results that correspond
generally to the price and yield performance, before fees and expenses,
of the Underlying Index, as described more fully below. The Fund would
concentrate its investments in a particular industry or group of
industries to approximately the same extent as the Index is so
concentrated. Because all of the securities included in the Underlying
Index are issued by real estate investment trusts (``REITs'') that
invest in residential real estate, the Fund would always be
concentrated in the residential real estate industry.\5\
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\4\ See Post-Effective Amendment No. 63 to the Trust's
Registration Statement on Form N-1A, as filed with the Commission on
November 15, 2006 and accompanying Statement of Additional
Information (``SAI'') (File No. 333-92935 and 811-09729) (the
``Registration Statement''). The Trust was established as a Delaware
statutory trust on December 16, 1999.
\5\ See supra note 4; e-mail from Tim Milanowski, Director, NYSE
Group, Inc. to Mitra Mehr, Special Counsel, Division of Market
Regulation (``Division''), Commission, dated April 25, 2007.
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Under NYSE Arca Equities Rule 5.2(j)(3), the Exchange may list and/
or trade pursuant to unlisted trading privileges (``UTP'') ``Investment
Company Units'' (``ICUs'').\6\ The Fund does not meet the ``generic''
listing requirements of NYSE Arca Equities Rule 5.2(j)(3) applicable to
listing of ICUs in reliance upon Rule 19b-4(e) under the Act,\7\ and
thus cannot be listed without a filing pursuant to Rule 19b-4 under the
Act. Specifically, the Underlying Index does not meet the requirement
of Commentary .01(a)(3) to
[[Page 26436]]
NYSE Arca Equities Rule 5.2(j)(3) that the five most heavily weighted
component stocks cannot exceed 65% of the weight of the index or
portfolio.\8\
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\6\ In October 1999, the Commission approved NYSE Arca Equities
Rule 5.2(j)(3), which sets forth the rules related to listing and
trading criteria for ICUs. See Securities Exchange Act Release No.
41983 (October 6, 1999), 64 FR 56008 (October 15, 1999) (SR-PCX-
1998-29). In July 2001, the Commission also approved the Exchange's
generic listing standards for listing and trading, or the trading
pursuant to UTP, of ICUs under NYSE Arca Equities Rule 5.2(j)(3).
See Securities Exchange Act Release No. 44551 (July 12, 2001), 66 FR
37716 (July 19, 2001) (SR-PCX-2001-14). NYSE Arca Equities Rule
5.1(b)(15) defines an ICU as a security representing an interest in
a registered investment company that could be organized as a unit
investment trust, an open-end management investment company, or a
similar entity.
\7\ 17 CFR 240.19b-4(e).
\8\ The five most heavily weighted component stocks constitute
approximately 69.90% of the weight of the index, as of March 9,
2007. Source: Bloomberg.
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Operation of the Fund
Barclays Global Fund Advisors (``BGFA''), a subsidiary of Barclays
Global Investors, N.A. (``BGI''), would be the investment adviser
(``Advisor'') to the Fund. The Advisor is registered as an investment
adviser under Section 203 of the Investment Advisers Act of 1940 \9\
(``Advisers Act''). As the Advisor, BGFA would have overall
responsibility for the general management and administration of the
Trust. BGFA would provide an investment program for the Fund and would
manage the investment of the Fund's assets. In seeking to achieve a
Fund's investment objective, BGFA would use teams of portfolio
managers, investment strategists, and other investment specialists.
BGFA would also arrange for transfer agency, custody, fund
administration, and all other non-distribution-related services
necessary for the Fund to operate. While the Fund would be managed by
the Advisor or portfolio manager, the Trust's Board of Trustees would
have responsibility for the overall management and operations of the
Fund.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 80b.
---------------------------------------------------------------------------
The Index Provider
FTSE International Limited (``FTSE'') is the provider of the Index.
FTSE is an independent company whose sole business is the creation and
management of indices and associated data services. FTSE is a joint
venture between The Financial Times and the London Stock Exchange and
``FTSETM'' is a trademark owned jointly by the London Stock
Exchange plc and The Financial Times Limited. FTSE calculates over
60,000 indices daily, including more than 600 real-time indices.
``NAREIT[supreg]'' is a trademark of National Association of Real
Estate Investment Trusts (``NAREIT''). Both the FTSE and NAREIT
trademarks are used by FTSE under license. FTSE is not affiliated with
the Trust, BGFA, or its affiliates or SEI Investments Distribution Co.
(``SEI''), the distributor of the Fund (as discussed below). BGI has
entered into a license agreement with FTSE to use the Underlying Index
and is sub-licensing rights in the Underlying Index to the Trust at no
charge.
Administrator, Custodian, and Transfer Agent
Investors Bank & Trust Company (``Investors Bank'') would serve as
administrator, custodian, and transfer agent for the Fund
(``Administrator''). Under the Administration Agreement with the Trust,
the Administrator would provide necessary administrative, legal, tax,
accounting, and financial reporting services for the maintenance and
operations of the Trust and the Fund. Under the Custodian Agreement
with the Trust, the Administrator would maintain cash, securities, and
other assets of the Trust and the Fund and would keep all necessary
accounts and records. The Administrator would be required to deliver
securities held by the Administrator and to make payments for
securities purchased by the Trust for the Fund. Also, under a
Delegation Agreement, the Administrator may appoint certain foreign
custodians or foreign custody managers for Fund investments outside the
United States. Pursuant to a Transfer Agency and Service Agreement with
the Trust, the Administrator would act as a transfer agent for the
Fund's authorized and issued shares of beneficial interest, and as
dividend disbursing agent of the Trust.
The Distributor
SEI would be the distributor of shares of the Trust
(``Distributor''). The Distributor has entered into a Distribution
Agreement with the Trust pursuant to which it distributes Shares of the
Fund. Shares would be offered continuously for sale by the Fund through
the Distributor only in Creation Unit Aggregations (as described more
fully below). Shares in less than Creation Unit Aggregations would not
be distributed by the Distributor. The Distributor would deliver the
prospectus and, upon request, the Statement of Additional Information
(``SAI'') to persons purchasing Creation Unit Aggregations and would
maintain records of both orders placed with it and confirmations of
acceptance furnished by it. The Distributor is a broker-dealer
registered under the Act and a member of NASD.
The Fund intends to qualify as a ``regulated investment company''
(``RIC'') under the Internal Revenue Code (``Code''). The Fund must,
among other things, meet certain diversification tests imposed by the
Code to satisfy RIC requirements.\10\
---------------------------------------------------------------------------
\10\ Among these is a requirement that, at the close of each
quarter of the Fund's taxable year: (1) At least 50% of the market
value of the Fund's total assets must be represented by cash items,
U.S. government securities, securities of other RICs, and other
securities, with such other securities limited for the purpose of
this calculation with respect to any one issuer to an amount not
greater than 5% of the value of the Fund's assets and not greater
than 10% of the outstanding voting securities of such issuer; and
(2) not more than 25% of the value of its total assets may be
invested in securities of any one issuer, or two or more issuers
that are controlled by the Fund (within the meaning of Section
851(b)(4)(B) of the Code) and that are engaged in the same or
similar trades or business (other than U.S. government securities or
other RICs).
---------------------------------------------------------------------------
Description of the Fund and the Underlying Index
According to the Fund's Registration Statement, the Fund would be
an ``index fund'' that seeks investment results that correspond
generally to the price and yield performance, before fees and expenses,
of the Underlying Index. The Underlying Index measures the performance
of the residential real estate sector of the U.S. equity market. The
Fund would concentrate its investments in a particular industry or
group of industries to approximately the same extent as the Underlying
Index is so concentrated. Because all of the securities included in the
Underlying Index are issued by REITs that invest in residential real
estate, the Fund would always be concentrated in the residential real
estate industry.\11\
---------------------------------------------------------------------------
\11\ See supra note 5.
---------------------------------------------------------------------------
The Underlying Index is sponsored by the Index Provider. The Index
Provider determines the relative weightings of the securities in the
Underlying Index and publishes information regarding the market value
of the Underlying Index.
The Advisor would use a ``passive'' or ``indexing'' approach to try
to achieve the Fund's investment objective. The Fund would not try to
``beat'' the index it tracks and would not seek temporary defensive
positions when markets decline or appear overvalued. Indexing
eliminates the chance that the Fund may substantially outperform the
Underlying Index, but also may eliminate some of the risk of active
management, such as poor security selection. Indexing seeks to achieve
lower costs and better after-tax performance by keeping portfolio
turnover low in comparison to actively managed investment companies.
The Fund would invest at least 90% of its assets in the securities
of its Underlying Index or in American Depositary Receipts (``ADRs'')
representing securities in the Underlying Index. The Fund may invest
the remainder of its assets in securities not included in the
Underlying Index, but which the Advisor believes would help the Fund
track the Underlying Index. For example, the Fund may
[[Page 26437]]
invest in securities not included in the Underlying Index to reflect
various corporate actions (such as mergers) and other changes in the
Underlying Index (such as reconstitutions, additions, and deletions).
The Fund also may invest its other assets in futures contracts or other
derivatives related to the Underlying Index, as well as cash and cash
equivalents, including shares of money market funds affiliated with the
Advisor. The Advisor would use a representative sampling indexing
strategy for the Fund.
``Representative Sampling'' is an indexing strategy that involves
investing in a representative sample of the securities, included in the
Underlying Index, that collectively have an investment profile similar
to the Underlying Index. The securities selected are expected to have,
in the aggregate, investment characteristics (based on factors such as
market capitalization and industry weightings), fundamental
characteristics (such as return variability, earnings valuation, and
yield), and liquidity measures similar to those of the Underlying
Index. The Fund may or may not hold all of the securities that are
included in the Underlying Index.
The Advisor expects that, over time, the correlation between the
Fund's performance and that of the Underlying Index, before fees and
expenses, would be 95% or better. A correlation percentage of 100%
would indicate perfect correlation. The difference between 100%
correlation and the Fund's actual percentage correlation with the
Underlying Index is called ``tracking error.'' The Fund's use of a
representative sampling indexing strategy can be expected to result in
greater tracking error than if the Fund used a replication indexing
strategy. ``Replication'' is an indexing strategy in which a fund
invests in substantially all of the securities in its underlying index
in approximately the same proportions as in the underlying index.
The Fund would concentrate its investments only in the residential
real estate sector to approximately the same extent that the Underlying
Index is so concentrated. For purposes of this limitation, securities
of the U.S. government (including its agencies and instrumentalities),
repurchase agreements collateralized by U.S. government securities, and
securities of state or municipal governments and their political
subdivisions are not considered to be issued by members of any
industry.
The Underlying Index is included in the FTSE NAREIT U.S. Real
Estate Indices (``FTSE NAREIT Indices''). The FTSE NAREIT Indices are
primarily rule-based, but are also monitored by the FTSE NAREIT Index
Advisory Committee. All tax-qualified REITs that are listed on the New
York Stock Exchange (``NYSE''), the American Stock Exchange (``Amex''),
or the Nasdaq Stock Market (``Nasdaq'') are eligible for inclusion in
the FTSE NAREIT Indices. Potential components of the FTSE NAREIT
Residential Index are determined by sector classifications of
components in the FTSE NAREIT Composite Index. As part of an annual
review, all eligible securities are ranked by their full market
capitalizations as at the close of business on the last business day in
November. Stocks are then screened to ensure they have sufficient
liquidity. Factors used to determine liquidity include the availability
of current and reliable price information and the level of trading
volume relative to shares outstanding. Value traded and float turnover
are also analyzed periodically to monitor liquidity. The FTSE NAREIT
Index Advisory Committee meets to approve the annual review on the
Wednesday after the first Friday in December. Any component changes
resulting from the annual review would be implemented at the close of
business on the third Friday of December.
When calculating index component weights, component companies'
shares are adjusted for available float. In general, shares held by
governments, corporations, strategic partners, or other control groups
are excluded from a component company's outstanding shares. The FTSE
NAREIT Composite Index would be periodically reviewed for changes in
free float. These reviews would occur on a quarterly basis, and
implementation of any changes to the Underlying Index, and potentially
the FTSE NAREIT Indices, would happen at the close of business on the
third Friday in March, June, September, or December.
The FTSE NAREIT Index Advisory Committee is responsible for
undertaking the review of the FTSE NAREIT Indices and for approving
changes in components and is also responsible for the sector
classification of components of the FTSE NAREIT Indices. The Chairman
and Deputy Chairman of the FTSE NAREIT Index Advisory Committee are
collectively responsible for approving component changes to the FTSE
NAREIT Indices between meetings of the Advisory Committee. Adjustments
to reflect a major change in the amount or structure of a component
company's issued securities would be made before the start of the index
calculation on the day on which the change takes effect. Adjustments to
reflect less significant changes would be implemented before the start
of the index calculation on the day following the announcement of the
change. Adjustments generally would be made before the start of the
index calculations on the day concerned, unless market conditions
prevent such adjustment. If a component is delisted, or ceases to have
a firm quotation, or is subject to a takeover offer which has been
declared wholly unconditional, it would be removed from the indices of
which it is a component.
The FTSE NAREIT Indices are calculated continuously during normal
trading hours of the Nasdaq, Amex, and NYSE, and would be closed on
U.S. holidays. The prices used to calculate the FTSE NAREIT Indices are
the Reuters daily closing prices or those figures accepted as such.
FTSE NAREIT reserves the right to use an alternative pricing source on
any given day. For end-of-day alternative currency calculations, FTSE
NAREIT uses the WM/Reuters Closing Spot Rates.
The Fund would issue and redeem, on a continuous basis, shares at
its net asset value (``NAV'') only in blocks of 50,000 shares or
multiples thereof (each, a ``Creation Unit'' or a ``Creation Unit
Aggregation'').
Only certain large institutional investors known as Authorized
Participants (as defined below) may purchase or redeem Creation Units
directly with the Fund at the NAV. These transactions are usually in
exchange for a basket of securities similar to the Fund's portfolio and
an amount of cash. Except when aggregated in Creation Units, Shares of
the Fund are not redeemable securities. Shareholders who are not
Authorized Participants may not redeem shares directly from the Fund.
The Fund would impose a purchase transaction fee and a redemption
transaction fee to offset transfer and other transaction costs
associated with the issuance and redemption of Creation Units.
Purchasers and redeemers of Creation Units for cash are required to pay
an additional variable charge to compensate for brokerage and market
impact expenses. The creation and redemption transaction fees for
creations and redemptions in-kind for the Fund are described in the
Fund's prospectus.
All orders to purchase Shares of the Fund in Creation Units must be
placed with the Distributor by or through an ``Authorized
Participant,'' which is either: (1) A ``Participating Party,'' i.e., a
broker-dealer or other participant in the clearing process through the
[[Page 26438]]
Continuous Net Settlement System of the National Securities Clearing
Corporation (``NSCC''), a clearing agency that is registered with the
Commission (``Clearing Process''); or (2) a Depository Trust Company
(``DTC'') Participant that has executed a ``Participant Agreement''
with the Distributor.
Consideration for Purchase of Creation Units
The consideration for purchase of Creation Unit Aggregations of the
Fund generally consists of the in-kind deposit of a designated
portfolio of equity securities, the Deposit Securities, which
constitutes a substantial replication, or a portfolio sampling
representation, of the stocks involved in the Fund's Underlying Index
and an amount of cash (the ``Cash Component'') computed as described
below. Together, the Deposit Securities and the Cash Component
constitute the ``Fund Deposit,'' which represents the minimum initial
and subsequent investment amount for a Creation Unit Aggregation.
The Cash Component is sometimes also referred to as the ``Balancing
Amount.'' The Cash Component serves the function of compensating for
any difference between the NAV per Creation Unit Aggregation and the
Deposit Amount. The Cash Component is an amount equal to the difference
between the NAV of the shares (per Creation Unit Aggregation) and the
``Deposit Amount,'' which is an amount equal to the market value of the
Deposit Securities. If the Cash Component is a positive number (i.e.,
the NAV per Creation Unit Aggregation exceeds the Deposit Amount), the
creator would deliver the Cash Component. If the Cash Component is a
negative number (i.e., the NAV per Creation Unit Aggregation is less
than the Deposit Amount), the creator would receive the Cash Component.
Computation of the Cash Component excludes any stamp duty or other
similar fees and expenses payable upon transfer of beneficial ownership
of the Deposit Securities, which shall be the sole responsibility of
the Authorized Participant.
BGFA, through the NSCC, makes available on each business day, prior
to the opening of business on the applicable listing exchange
(currently 9:30 a.m. Eastern time), the list of the names and the
required number of shares of each Deposit Security to be included in
the current Fund Deposit (based on information at the end of the
previous business day) for the Fund. Such Deposit Securities are
applicable, subject to any adjustments as described below, in order to
effect creations of Creation Unit Aggregations of the Fund until such
time as the next-announced composition of the Deposit Securities is
made available. The identity and number of shares of the Deposit
Securities required for the Fund Deposit for the Fund changes as
rebalancing adjustments and corporate action events are reflected from
time to time by BGFA with a view to the investment objective of the
Fund. The composition of the Fund may also change in response to
adjustments to the weighting or composition of the component securities
of the Underlying Index.
In addition, the Trust reserves the right to permit or require the
substitution of an amount of cash (i.e. a ``cash in lieu'' amount) to
be added to the Cash Component to replace any Deposit Security that may
not be available in sufficient quantity for delivery or that may not be
eligible for transfer through the systems of DTC or the Clearing
Process. The Trust also reserves the right to permit or require a
``cash in lieu'' amount where the delivery of the Deposit Security by
the Authorized Participant would be restricted under the securities
laws or where the delivery of the Deposit Security to the Authorized
Participant would result in the disposition of the Deposit Security by
the Authorized Participant becoming restricted under the securities
laws, or in certain other situations. The adjustments described above
would reflect changes known to BGFA on the date of announcement to be
in effect by the time of delivery of the Fund Deposit, in the
composition of the Underlying Index or resulting from certain corporate
actions.
Redemption of Shares in Creation Units
Shares may be redeemed only in Creation Unit Aggregations at their
NAV next determined after receipt of a redemption request in proper
form by the Fund through Investors Bank and only on a business day. The
Fund would not redeem shares in amounts less than Creation Unit
Aggregations. A beneficial owner must accumulate enough shares in the
secondary market to constitute a Creation Unit Aggregation to have such
shares redeemed by the Trust. There can be no assurance, however, that
there would be sufficient liquidity in the public trading market at any
time to permit assembly of a Creation Unit Aggregation. Investors
should expect to incur brokerage and other costs in connection with
assembling a sufficient number of shares to constitute a redeemable
Creation Unit Aggregation.
With respect to the Fund, BGFA, through the NSCC and the
Distributor, would make available immediately prior to the opening of
business on the applicable listing exchange (currently 9:30 a.m.
Eastern time) on each business day, the identity of the Fund securities
that would be applicable (subject to possible amendment or correction)
to redemption requests received in proper form on that day (``Fund
Securities''). Fund Securities received on redemption may not be
identical to Deposit Securities that are applicable to creations of
Creation Unit Aggregations.
Unless cash redemptions are available or specified for the Fund,
the redemption proceeds for a Creation Unit Aggregation would generally
consist of Fund Securities--as announced on the business day of the
request for redemption received in proper form--plus cash in an amount
equal to the difference between the NAV of the shares being redeemed,
as next determined after a receipt of a request in proper form, and the
value of the Fund Securities (the ``Cash Redemption Amount''), less a
redemption transaction fee as described below. If the Fund Securities
have a value greater than the NAV of the shares, a compensating cash
payment equal to the difference must be made by or through an
Authorized Participant by the redeeming shareholder.
The right of redemption may be suspended or the date of payment
postponed with respect to the Fund: (i) For any period during which the
NYSE is closed (other than customary weekend and holiday closings);
(ii) for any period during which trading on the NYSE is suspended or
restricted; (iii) for any period during which an emergency exists as a
result of which disposal of the shares of the Fund or determination of
the Fund's NAV is not reasonably practicable; or (iv) in such other
circumstances as is permitted by the Commission.
Dividends, Distributions, and Taxes
Dividends from net investment income, if any, would be declared and
paid at least annually by the Fund. Distributions of net realized
securities gains, if any, generally would be declared and paid once a
year, but the Trust may make distributions on a more frequent basis for
the Fund. The Trust reserves the right to declare special distributions
if, in its reasonable discretion, such action is necessary to improve
tracking error or is necessary or advisable to preserve the status of
the Fund as a RIC or to avoid imposition of income or excise taxes on
undistributed income.
[[Page 26439]]
Dividends and other distributions on shares would be distributed on
a pro-rata basis to beneficial owners of such shares. Dividend payments
would be made through DTC Participants and Indirect Participants to
beneficial owners then of record with proceeds received from the Fund.
Dividend Reinvestment Service
No dividend reinvestment service would be provided by the Trust.
Broker-dealers may make available the DTC book-entry Dividend
Reinvestment Service for use by beneficial owners of the Fund for
reinvestment of their dividend distributions. Beneficial owners should
contact their broker to determine the availability and costs of the
service and the details of participation therein. Brokers may require
beneficial owners to adhere to specific procedures and timetables. If
this service is available and used, dividend distributions of both
income and realized gains would be automatically reinvested in
additional whole shares of the Fund purchased in the secondary market.
Availability of Information Regarding Shares and Underlying Index
The Advisor, through the NSCC, would make available on each
business day, prior to the opening of business on the Exchange
(currently 9:30 a.m. Eastern time), the list of the names and the
required number of shares of each Deposit Security to be included in
the current Fund Deposit (based on information at the end of the
previous business day) for the Fund.
Additional information regarding the indicative value of shares of
the Fund, also known as the ``indicative optimized portfolio value''
(``IOPV''), would be disseminated every 15 seconds through the
Consolidated Tape throughout the Opening, Core, and Late Trading
Sessions (4 a.m. ET to 8 p.m. Eastern Time) by the Exchange. The IOPV
does not necessarily reflect the precise composition of the current
portfolio of securities held by the Fund at a particular point in time
or the best possible valuation of the current portfolio. Therefore, the
IOPV should not be viewed as a ``real-time'' update of the NAV, which
is computed only once a day. The IOPV is generally determined by using
both current market quotations and/or price quotations obtained from
broker-dealers that may trade in the portfolio securities held by the
Fund.
According to the Fund's Registration Statement, Investors Bank
would calculate the NAV for the Fund generally once daily Monday
through Friday generally as of the regularly scheduled close of
business of the NYSE (normally 4:00 p.m. Eastern time) on each day that
the NYSE is open for trading, based on prices at the time of closing,
provided that: (i) Any assets or liabilities denominated in currencies
other than the U.S. dollar shall be translated into U.S. dollars at the
prevailing market rates on the date of valuation as quoted by one or
more major banks or dealers that makes a two-way market in such
currencies (or a data service provider based on quotations received
from such banks or dealers); and (ii) U.S. fixed income assets may be
valued as of the announced closing time for trading in fixed income
instruments on any day that the Securities Industry and Financial
Markets Association (SIFMA) announces an early closing time. The NAV of
the Fund would be calculated by dividing the value of the net assets of
the Fund (i.e., the value of its total assets less total liabilities)
by the total number of outstanding shares of the Fund, generally
rounded to the nearest cent. In calculating a Fund's NAV, a Fund's
investments are generally valued using market valuations. If current
market valuations are not readily available or such valuations do not
reflect current market values, the affected investments would be valued
using fair value pricing pursuant to the pricing policy and procedures
approved by the Board of Trustees. The frequency with which a Fund's
investments are valued using fair value pricing is primarily a function
of the types of securities and other assets in which a Fund invests
pursuant to its investment objective, strategies, and limitations.\12\
---------------------------------------------------------------------------
\12\ Valuing a Fund's investments using fair value pricing would
result in using prices for those investments that may differ from
current market valuations. Use of fair value prices and certain
current market valuations could result in a difference between the
prices used to calculate a Fund's NAV and the prices used by the
Fund's Underlying Index, which in turn could result in a difference
between the Fund's performance and the performance of the Fund's
Underlying Index.
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The NAV for the Fund would be calculated and disseminated daily. In
addition, the Trust's Web site would include the Fund's Prospectus and
SAI, information regarding the Underlying Index for the Fund, the prior
business day's NAV, and the mid-point of the bid-ask spread at the time
of calculation of the NAV (the ``Bid/Ask Price''), a calculation of the
premium or discount of the Bid/Ask Price at the time of calculation of
the NAV against such NAV, the Component Securities of the Underlying
Index, and a description of the methodology used in these computations.
The Bid/Ask Price of the Fund is determined using the highest bid and
the lowest offer on the Exchange on which the shares are listed for
trading. The Exchange would also disseminate a variety of data such as
Total Cash Amount Per Creation Unit, Shares Outstanding, and the Fund's
NAV on a daily basis by means of CTA and CQ High Speed Lines.
BGFA has informed the Exchange that the Fund would make the Fund's
NAV available to all market participants at the same time. If the NAV
is not disseminated to all market participants at the same time, the
Exchange would halt trading in the Fund shares.
The closing prices of the Fund's Deposit Securities are readily
available from, as applicable, the relevant Exchange, automated
quotation systems, and published or other public sources or on-line
information services that are major market data vendors, such as
Bloomberg or Reuters. Similarly, information regarding market prices
and volume of Shares would be broadly available on a real-time basis
throughout the trading day. Quotation and last-sale information for the
Shares would be widely disseminated pursuant to the CTA Plan.\13\ The
previous day's closing price and volume information for the Shares
would be published daily in the financial sections of many newspapers.
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\13\ See e-mail from Tim Milanowski, Director, NYSE Group, Inc.
to Mitra Mehr, Special Counsel, Division, Commission, dated May 2,
2007 (``May NYSE Arca e-mail'').
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The value of the Underlying Index would be updated intra-day on a
real-time basis as individual Component Securities change in price and
would be disseminated every 15 seconds throughout the Exchange's Core
Trading Session by one or more major market data vendors.
The Underlying Index
As of March 9, 2007, the FTSE NAREIT Residential Index component
securities had a market capitalization of approximately
$66,859,124,000, representing 20 securities. The average market
capitalization was approximately $3,342,956,000. The ten largest
components represented approximately 91.41% of the index weight. The
five highest weighted securities represented approximately 69.90% of
the index weight. The heaviest weighted security represented
approximately 21.27% of the index weight.\14\
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\14\ Source: Bloomberg.
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Criteria for Initial and Continued Listing
The Shares would be subject to the criteria for initial and
continued listing
[[Page 26440]]
of Investment Company Units under NYSE Arca Equities Rules 5.2(j)(3)
and 5.5(g)(2). A minimum of two Creation Units (at least 100,000
Shares) would be required to be outstanding at the start of trading.
This minimum number of Shares required to be outstanding at the start
of trading would be comparable to requirements that have been applied
to previously listed series of ICUs. The Exchange believes that the
proposed minimum number of Shares outstanding at the start of trading
is sufficient to provide market liquidity.
The continued listing criteria for ICUs under NYSE Arca Equities
Rule 5.5(g)(2) provides that the Exchange would consider the suspension
of trading and delisting (if applicable) of the Shares in any of the
following circumstances:
Following the initial 12-month period following upon the
commencement of trading of the Shares of the Fund, there are fewer than
50 record and/or beneficial holders of such Shares for 30 or more
consecutive trading days;
The value of the Underlying Index of the Fund is no longer
calculated or available; or
Such other event occurs or condition exists that, in the
opinion of the Exchange, makes further dealings on the Exchange
inadvisable.
In addition, the Exchange would remove the Shares from trading and
listing upon termination of the Trust. The Exchange represents the
Trust is required to comply with Rule 10A-3 under the Act \15\ for the
initial and continued listing of the Shares.
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\15\ 17 CFR 240.10A-3.
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Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. The trading hours for
the Funds on the Exchange are the same as those set forth in NYSE Arca
Equities Rule 7.34 (4 a.m. to 8 p.m. Eastern Time). The minimum trading
increment for shares of the Funds on the Exchange would be $0.01.
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of a Fund. Trading may be halted because of
market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable. These may include: (i) the
extent to which trading is not occurring in the securities comprising
an Underlying Index and/or the financial instruments of a Fund; or (ii)
whether other unusual conditions or circumstances detrimental to the
maintenance of a fair and orderly market are present. In addition,
trading in the Shares could be halted pursuant to the Exchange's
``circuit breaker'' rule \16\ or by the halt or suspension of trading
of the underlying securities. If the IOPV or the Index value is not
being calculated or widely disseminated as required,\17\ the Exchange
may halt trading during the day in which the interruption to the
calculation or wide dissemination of the IOPV or the Index value
occurs. If the interruption to the calculation or wide dissemination of
the IOPV or the Index value persists past the trading day in which it
occurred, the Exchange would halt trading no later than the beginning
of the trading day following the interruption.
---------------------------------------------------------------------------
\16\ See NYSE Arca Equities Rule 7.12.
\17\ See May NYSE Arca e-mail.
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Surveillance
The Exchange intends to utilize its existing surveillance
procedures applicable to derivative products to monitor trading in the
Shares. The Exchange represents that these procedures are adequate to
properly monitor Exchange trading of the Shares in all trading sessions
and to deter and detect violations of Exchange rules.
The Exchange's current trading surveillance focuses on detecting
when securities trade outside their normal patterns. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
The Exchange may obtain information via the Intermarket
Surveillance Group (``ISG'') from other exchanges who are members or
affiliates of the ISG.\18\
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\18\ For a list of the current members and affiliate members of
ISG, see www.isgportal.com.
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In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
Information Bulletin
Prior to the commencement of trading, the Exchange would inform its
ETP Holders in an Information Bulletin (``Bulletin'') of the special
characteristics and risks associated with trading the Shares.
Specifically, the Bulletin would discuss the following: (i) The
procedures for purchases and redemptions of Shares in Creation Unit
Aggregations (and that Shares are not individually redeemable); (ii)
NYSE Arca Equities Rule 9.2(a),\19\ which imposes a duty of due
diligence on its ETP Holders to learn the essential facts relating to
every customer prior to trading the Shares; (iii) how information
regarding the IOPV is disseminated; (iv) the requirement that ETP
Holders deliver a prospectus to investors purchasing newly issued
Shares prior to or concurrently with the confirmation of a transaction;
and (v) trading information.
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\19\ NYSE Arca Equities Rule 9.2(a) provides that an ETP Holder,
before recommending a transaction, must have reasonable grounds to
believe that the recommendation is suitable for its customer based
on any facts disclosed by the customer as to his other security
holdings and as to his financial situation and needs. Further, the
rule provides, with a limited exception, that prior to the execution
of a transaction recommended to a non-institutional customer, the
ETP Holder shall make reasonable efforts to obtain information
concerning the customer's financial status, tax status, investment
objectives, and any other information that it believes would be
useful to make a recommendation. See Securities Exchange Act Release
No. 34-54045 (June 26, 2006), 71 FR 37971 (July 3, 2006) (SR-PCX-
2005-115).
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In addition, the Bulletin would reference that the Fund is subject
to various fees and expenses described in the Registration Statement.
The Information Bulletin would discuss exemptive, no-action, and
interpretive relief granted by the Commission from Section 11(d)(1) of
the Act \20\ and certain rules under the Act, including Rule 10a-1,
Regulation SHO, Rule 10b-10, Rule 14e-5, Rule 10b-17, Rule 11d1-2,
Rules 15c1-5 and 15c1-6, and Rules 101 and 102 of Regulation M under
the Act. The Bulletin would also disclose that the NAV for the Shares
would be calculated after 4 p.m. eastern time each trading day.
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\20\ 15 U.S.C. 78k(d)(1).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\21\ in general, and furthers the
objectives of Section 6(b)(5),\22\ in particular, in that it is
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in facilitating transactions in
securities, and to remove impediments to and perfect the mechanism of a
free and open market and a national market system.
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\21\ 15 U.S.C. 78f(b).
\22\ 15 U.S.C. 78f(b)(5).
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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.
[[Page 26441]]
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments on the proposed rule change were neither solicited
nor received.
III. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2007-27 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-2006-27. 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-NYSEArca-2007-27 and should be submitted on or before
May 30, 2007.
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
After careful consideration, 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.\23\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\24\ which
requires that an exchange have rules designed, among other things, to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and in general to protect investors and the public
interest.
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\23\ In approving this rule change, the Commission notes that it
has considered the proposal's impact on efficiency, competition, and
capital formation. See 15 U.S.C. 78c(f).
\24\ 15 U.S.C. 78f(b)(5).
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The Fund does not meet the ``generic'' listing standards of NYSE
Arca Rule 5.2(j)(3) and thus cannot be listed in reliance upon Rule
19b-4(e) under the Act. As of March 9, 2007, the five highest weighted
securities in the Underlying Index represented approximately 69.90% of
the index weight, rather than 65% as required by NYSE Arca's listing
standards under Rule 5.2(j)(3).\25\ Nevertheless, the Commission
believes that the listing and trading of the Shares is consistent with
the Act. The Commission notes that it previously has approved exchange
rules that contemplate the listing and trading of derivative securities
products based on indices with similar weightings.\26\ In addition, the
market capitalization and liquidity of the Index components suggest
that the Index has been reasonably designed to reduce the likelihood of
manipulation.
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\25\ See supra note 8.
\26\ See Securities Exchange Act Release No. 52826 (November 22,
2005), 70 FR 71874 (November 30, 2005) (SR-NYSE-2005-67) (approving
the listing of the iShares Dow Jones U.S. Energy Sector Index Fund
where the five highest weighted securities in the underlying index
represented 83.24% of the index weight and the iShares Dow Jones
U.S. Telecommunications Sector Index Fund where the five highest
weighted securities in the underlying index represented 93.5% of the
index weight). The Commission also notes that, as of March 9, 2007,
the heaviest weighted security in the Underlying Index represented
approximately 21.27% of the index weight. See id. (the heaviest
weighted security in iShares Dow Jones U.S. Energy Sector Index Fund
represented 31.91% of the index weight).
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The Commission believes that the proposal is consistent with
Section 11A(a)(1)(C)(iii) of the Exchange Act,\27\ 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. Quotation and last-sale information for the Shares would be
widely disseminated pursuant to the CTA Plan. Moreover, the IOPV would
be calculated and disseminated at least every 15 seconds throughout the
trading day, and the Index value would be calculated and disseminated
every 15 seconds during the Exchange's Core Trading Session. The NAV of
the Fund would be calculated once each trading day and disseminated to
all market participants at the same time. In addition, the Trust's Web
site would include the Fund's prospectus and SAI, information regarding
the Underlying Index for the Fund, the prior business day's NAV, the
Bid/Ask Price, a calculation of the premium or discount of the Bid/Ask
Price at the time of calculation of the NAV against the NAV, the
component securities of the Underlying Index, and a description of the
methodology used in these computations. In sum, the Commission believes
that the proposal is reasonably designed to facilitate access to
information that will assist investors in properly valuing the Shares.
---------------------------------------------------------------------------
\27\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------
The Commission believes that the proposal is reasonably designed to
preclude trading of the Shares when transparency is impaired. The
Exchange has represented that if the NAV is not disseminated to all
market participants at the same time, the Exchange would halt trading
in the Fund shares. If the IOPV or the Index value applicable to a
series of Shares is not being calculated and disseminated as required,
the Exchange may halt trading during the day in which the interruption
to the dissemination of the IOPV or the Index value occurs. If the
interruption to the calculation and dissemination of the IOPV or the
Index value persists past the trading day in which it occurred, the
Exchange would halt trading no later than the beginning of the trading
day following the interruption.
The Commission finds that the Exchange's proposed rules and
procedures for trading of the Shares are consistent with the Act. 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.
In support of this proposal, the Exchange has made the following
representations:
[[Page 26442]]
1. The Exchange would rely on its existing surveillance procedures
applicable to derivative products to monitor trading in the Shares.
These procedures are adequate to properly monitor Exchange trading of
the Shares in all trading sessions and to deter and detect violations
of Exchange rules. The Exchange may obtain information via the ISG from
other exchanges that are members or affiliates of the ISG.
2. Prior to the commencement of trading, the Exchange would inform
its ETP Holders in an Information Bulletin of the special
characteristics and risks associated with trading the Shares.
3. If the IOPV or the Index value applicable to a series of Shares
is not being calculated and disseminated as required, the Exchange may
halt trading during the day in which the interruption to the
dissemination of the IOPV or the Index value occurs. If the
interruption to the calculation and dissemination of the IOPV or the
Index value persists past the trading day in which it occurred, the
Exchange would halt trading no later than the beginning of the trading
day following the interruption.
This Order is conditioned on NYSE Arca's adherence to the foregoing
representations.
The Commission finds good cause to approve the proposed rule
change, prior to the thirtieth day after publication for comment in the
Federal Register pursuant to Section 19(b)(2) of the Act.\28\ Except
for the weighting of the Underlying Index, the Fund meets the
``generic'' listing standards of NYSE Arca Equities Rule 5.2(j)(3). In
this case, the weighting of the five highest components of the
Underlying Index (69.90%) is only marginally higher than that required
by NYSE Arca's generic listing standards (65%). The market
capitalization and liquidity of the Index components and the fact that
they are securities issued by REITs that are listed and traded on a
national securities exchange reduce the likelihood of the Shares being
manipulated. Finally, the Commission notes that it previously has
approved exchange rules that contemplate the listing and trading of
derivative securities based on indices with similar weightings.\29\ The
listing and trading of the Shares do not appear to present any new
regulatory concerns. Accelerating approval would allow the Shares to
trade on NYSE Arca without undue delay and should generate additional
competition in the market for such products.
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\28\ 15 U.S.C. 78s(b)(2).
\29\ See supra note 26.
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\30\ that the proposed rule change (SR-NYSEArca-2007-27), be and it
hereby is, approved on an accelerated basis.
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\30\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-8860 Filed 5-8-07; 8:45 am]
BILLING CODE 8010-01-P
