Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to Pricing Information for Components Underlying Currency-Linked Securities, 6759-6762 [E8-1969]
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Federal Register / Vol. 73, No. 24 / Tuesday, February 5, 2008 / Notices
Act,7 which governs minor rule
violation plans.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
NYSE Arca does not believe that the
proposed rule change will impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposal.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Exchange consents,
the Commission will:
(A) By order approve such proposed
rule change, or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
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–2008–08 and
should be submitted on or before
February 26, 2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–1967 Filed 2–4–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
[Release No. 34–57227; File No. SR–
NYSEArca–2008–12]
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSEArca–2008–08 on the
subject line.
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change Relating to Pricing
Information for Components
Underlying Currency-Linked Securities
rmajette on PROD1PC64 with NOTICES
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–2008–08. 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
January 29, 2008.
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 January
17, 2008, 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, II, and III below, which Items
8 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
7 17
CFR 240.19d–1(c)(2).
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6759
have been substantially prepared by the
Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
NYSE Arca Equities Rule
5.2(j)(6)(B)(III)(1), which sets forth the
Exchange’s initial listing criteria for
Currency-Linked Securities,3 to permit
the listing and trading of CurrencyLinked Securities where the pricing
information for one or more currencies
comprising the Currency Reference
Asset is the generally accepted forward
price for the currency exchange rate in
question. The text of the proposed rule
change is available at the Exchange, the
Commission’s Public Reference Room,
and https://www.nyse.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of, and basis for,
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
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 amend
NYSE Arca Equities Rule
5.2(j)(6)(B)(III)(1) to permit the listing of
Currency-Linked Securities where the
pricing information for some or all of
the components of the Currency
Reference Asset is the generally
accepted forward price for the currency
exchange rate in question. The ability
for an issuer to use forward pricing
information under proposed NYSE Arca
Equities Rule 5.2(j)(6)(B)(III)(1)(b) for
any component of a Currency Reference
3 Currency-Linked Securities are securities that
provide for payment at maturity of a cash amount
based on the performance of one or more
currencies, or options or currency futures or other
currency derivatives or Currency Trust Shares (as
defined in NYSE Arca Equities Rule 8.202), or a
basket or index of any of the foregoing (‘‘Currency
Reference Asset’’). See NYSE Arca Equities Rule
5.2(j)(6).
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6760
Federal Register / Vol. 73, No. 24 / Tuesday, February 5, 2008 / Notices
Asset would be restricted to the
following currencies, based on high
volumes of forward contract
transactions in such currencies: U.S.
Dollar, Euro, Japanese Yen, British
Pound Sterling, Swiss Franc, Canadian
Dollar, Australian Dollar, Brazilian Real,
Chinese Renminbi, Czech Koruna,
Danish Krone, Hong Kong Dollar,
Hungarian Forint, Indian Rupee,
Indonesian Rupiah, Korean Won,
Mexican Peso, Norwegian Krone, New
Zealand Dollar, Philippine Peso, Polish
Zloty, Russian Ruble, Swedish Krona,
South African Rand, Singapore Dollar,
Taiwan Dollar, Thai Baht or New
Turkish Lira. The volume in these
currencies is as follows: 4
FX FORWARD AVERAGE DAILY VOLUME IN MILLIONS USD
Currency
2001
2004
2007
Average
U.S. Dollar .......................................................................................................................
Euro .................................................................................................................................
Japanese Yen ..................................................................................................................
British Pound Sterling ......................................................................................................
Swiss Franc .....................................................................................................................
Canadian Dollar ...............................................................................................................
Australian Dollar ..............................................................................................................
Brazilian Real ...................................................................................................................
Chinese Renminbi ...........................................................................................................
Czech Koruna ..................................................................................................................
Danish Krone ...................................................................................................................
Hong Kong Dollar ............................................................................................................
Hungarian Forint ..............................................................................................................
Indian Rupee ...................................................................................................................
Indonesian Rupiah ...........................................................................................................
Korean Won .....................................................................................................................
Mexican Peso ..................................................................................................................
Norwegian Krone .............................................................................................................
New Zealand Dollar .........................................................................................................
Philippine Peso ................................................................................................................
Polish Zloty ......................................................................................................................
Russian Ruble .................................................................................................................
Swedish Krona .................................................................................................................
South African Rand .........................................................................................................
Singapore Dollar ..............................................................................................................
Taiwan Dollar ...................................................................................................................
Thai Baht .........................................................................................................................
New Turkish Lira ..............................................................................................................
110,795
54,327
33,257
16,826
6,637
4,335
5,416
1,259
55
96
888
3,055
28
428
103
1,671
673
1,187
579
73
439
52
3,207
825
825
603
231
164
170,357
88,243
47,135
31,338
11,307
8,947
9,788
1,072
811
253
1,347
2,221
308
1,531
267
6,048
1,716
2,543
1,462
232
483
253
4,158
1,122
1,242
2,798
490
239
289,435
137,391
61,453
46,274
21,186
15,280
20,463
5,259
4,572
1,432
2,841
6,022
1,357
5,815
1,292
10,013
4,594
6,498
6,639
1,123
2,644
1,253
8,543
3,458
2,962
4,724
847
535
190,196
93,320
47,282
31,479
13,043
9,521
11,889
2,530
1,813
594
1,692
3,766
564
2,591
554
5,911
2,328
3,409
2,893
476
1,189
519
5,303
1,802
1,676
2,708
523
313
Total (divided by 2) ...................................................................................................
125,018
199,858
337,956
220,944
rmajette on PROD1PC64 with NOTICES
The Exchange states that the total
amount of contracts reflected in the
chart above is divided by two because
each contract is denominated in two
currencies. For example, one contract
will reflect cross rates in two currencies:
U.S. Dollar against Euro, Singapore
Dollar against New Turkish Lira, etc.
The daily notional turnover for the
currency forward contracts reflected in
the chart above ranged from US$535
million to US$289 billion in April 2007.
In addition, the forward price will be
used for pricing purposes only to the
extent that the Currency Reference Asset
is based on the forward price. In the
event a Currency Reference Asset is
based on the forward price, and the
forward price becomes unavailable due
to a holiday, the spot price may be used
for calculating the price of the
component(s) comprising the Currency
Reference Asset. The pricing
information of such Currency Reference
Asset on the following business day
must be the forward price. The
Exchange states that this exception will
permit certain hedged products that use
forward pricing information to use the
spot price, which is quoted in the
United States, when the forward price,
which is derived from the spot price, is
unavailable due to a foreign holiday.
4 See Bank for International Settlements (‘‘BIS’’),
Triennial Central Bank Survey of Foreign Exchange
and Derivatives Market Activity in April 2007,
Statistical Annex Tables—Foreign Exchange
Markets (2007) (‘‘2007 BIS Report’’); BIS, Triennial
Central Bank Survey of Foreign Exchange and
Derivatives Market Activity in April 2004, Statistical
Annex Tables—Foreign Exchange Markets (2004);
and BIS, Triennial Central Bank Survey of Foreign
Exchange and Derivatives Market Activity in April
2001, Statistical Annex Tables—Foreign Exchange
Markets (2001).
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Federal Register / Vol. 73, No. 24 / Tuesday, February 5, 2008 / Notices
The Exchange states that the foreign
exchange market is predominantly an
over-the-counter (‘‘OTC’’) market with
no fixed location, and it operates 24
hours a day, five days a week. London,
New York, and Tokyo are the principal
geographic centers of the worldwide
foreign exchange market, with
approximately 58% of all foreign
exchange business executed in the
United Kingdom, United States, and
Forward Rate = Spot Rate ×
Japan. Other smaller markets include
Singapore, Zurich, and Frankfurt.5
There are three major types of
transactions in the traditional foreign
exchange markets: spot transactions,
outright forwards, and foreign exchange
swaps. ‘‘Forward’’ trades are
transactions involving the exchange of
two currencies at a rate agreed on the
date of the contract for value on delivery
(cash settlement) at some time in the
6761
future. These trades account for 12% of
the reported daily volume. Forward
rates are quoted among dealers in
premiums or discounts from the spot
rate.6 The premium or discount is
measured in ‘‘points’’ that represent the
interest rate differential between two
currencies for the period of the forward,
converted into foreign exchange.7 The
generally accepted forward price is
calculated as follows: 8
1 + Terms Currency Interest Rate × Forward Days / Interest Rate Year
1+ Base Currency Interest Rate × Forward Days/Interest Rate Year
Points = Forward Rate − Spot Rate
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,11 in general, and
furthers the objectives of Section 6(b)(5)
of the Act,12 in particular, in that it is
designed to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, 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.
5 See generally Securities Exchange Act Release
No. 55268 (February 9, 2007), 72 FR 7793 (February
20, 2007) (SR–NYSE–2007–03) (providing
background and information relating to the foreign
exchange markets).
6 See Sam Y. Cross, Federal Reserve Bank of New
York, All About . . . the Foreign Exchange Market
in the United States, at 38 (1998) (available at
https://www.newyorkfed.org/education/addpub/
usfxm).
7 See id.
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange states that it has neither
solicited nor received written comments
on the proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
PO 00000
Frm 00072
Fmt 4703
Sfmt 4703
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Exchange consents,
the Commission will:
A. By order approve such proposed
rule change, or
B. Institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSEArca–2008–12 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–2008–12. 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
8 See
id.
2007 BIS Report (Table 1), supra note 4.
10 See supra note 5.
11 15 U.S.C. 78f(b).
12 15 U.S.C. 78f(b)(5).
9 See
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rmajette on PROD1PC64 with NOTICES
The Exchange states that the OTC
foreign currency market is a very liquid
market. In 2007, the average daily spot
turnover accounted for over US$1
trillion, and the average daily forward
turnover accounted for US$362 billion.9
In addition to liquidity, the Exchange
states that the forward market is
extremely transparent. Bloomberg,
Reuters, and other major market
information providers disseminate
quotes for the forward market provided
by OTC market makers.
The Exchange notes that most trading
in the global OTC foreign currency
markets is conducted by regulated
financial institutions such as banks and
broker-dealers. In addition, in the
United States, the Foreign Exchange
Committee of the New York Federal
Reserve Bank has issued Guidelines for
Foreign Exchange Trading, and centralbank sponsored committees in Japan
and Singapore have published similar
best practices guidelines. In the United
Kingdom, the Bank of England has
published the Non-Investment Products
Code, which covers foreign currency
trading. The Financial Markets
Association, the members of which
include major international banking
organizations, has also established best
practices guidelines called the Model
Code.10 Participants in the U.S. OTC
market for foreign currencies are
generally regulated by their oversight
regulators. For example, participating
banks are regulated by the banking
authorities.
6762
Federal Register / Vol. 73, No. 24 / Tuesday, February 5, 2008 / Notices
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, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
Copies of the 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–2008–12 and
should be submitted on or before
February 26, 2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–1969 Filed 2–4–08; 8:45 am]
have been substantially prepared by the
Exchange. The Commission hereby
provides notice of filing of the proposed
rule change and approves 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 revise
NYSE Arca Rules 5.3 and 5.4 to enable
listing and trading on the Exchange of
options on Multiple Fund Shares and
Inverse Fund Shares. The text of the
proposed rule change is available at the
Exchange, the Commission’s Public
Reference Room, and https://
www.nyse.com.
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.
BILLING CODE 8011–01–P
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
1. Purpose
[Release No. 34–57226; File No. SR–
NYSEArca–2008–03]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and Order
Granting Accelerated Approval of
Proposed Rule Change, Relating to
Rules 5.3 and 5.4 To Enable Listing
and Trading of Options on Multiple
Fund and Inverse Fund Shares
rmajette on PROD1PC64 with NOTICES
January 29, 2008.
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 January 8,
2008, NYSE Arca, Inc. (the ‘‘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
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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The purpose of the proposed rule
change is to revise NYSE Arca Rules 5.3
and 5.4 to enable the listing and trading
on the Exchange of options on Multiple
Fund Shares 3 and Inverse Fund
Shares.4 Multiple and Inverse Fund
Shares differ from traditional exchangetraded fund shares (‘‘Exchange-Traded
Fund Shares’’ or ‘‘Fund Shares’’) in that
they do not merely correspond to the
performance of a given index, but rather
attempt to match a multiple or inverse
of such underlying index performance.
Currently, Multiple Fund Shares issued
by ProShares Trust and Rydex ETF
Trust trade on the Exchange pursuant to
unlisted trading privileges (‘‘UTP’’)
3 Multiple Fund Shares seek to provide
investment results, before fees and expenses, that
correspond to a specific multiple of the percentage
performance on a given day of a particular foreign
or domestic stock index.
4 Inverse Fund Shares seek to provide investment
results, before fees and expenses, that correspond
to the inverse (opposite) of the percentage
performance on a given day of a particular foreign
or domestic stock index by a specified multiple.
PO 00000
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under NYSE Arca Equities Rule
5.2(j)(3).5
In order to achieve investment results
that provide either a positive multiple
or inverse of the benchmark index,
Multiple Fund Shares or Inverse Fund
Shares may hold a combination of
financial instruments, including among
other things: stock index future
contracts; options on futures; options on
securities and indices; equity caps,
collars and floors; swap agreements;
forward contracts; repurchase
agreements; and reverse repurchase
agreements (the ‘‘Financial
Instruments’’). The underlying
portfolios of Multiple Fund Shares
generally will hold at least 85% of their
assets in the component securities of the
underlying relevant benchmark index.
The remainder of any assets is devoted
to Financial Instruments that are
intended to create the additional needed
exposure to such underlying index
necessary to pursue its investment
objective. Normally, 100% of the value
of the underlying portfolios of Inverse
Fund Shares will be devoted to
Financial Instruments and money
market instruments, including U.S.
government securities and repurchase
agreements (the ‘‘Money Market
Instruments’’). Currently, NYSE Arca
Rule 5.3(g) provides securities deemed
appropriate for options trading shall
include shares or other securities that
are traded on a national securities
exchange and are defined as an ‘‘NMS
Stock’’ under Rule 600 of Regulation
NMS, and that (i) represent an interest
in a registered investment company
organized as an open-end management
investment company, a unit investment
trust or a similar entity which holds
securities constituting or otherwise
based on or representing an investment
in an index or portfolio of securities, or
(ii) represent interests in a trust or
similar entity that holds a specified nonU.S. currency deposited with the trust
or a similar entity when aggregated in
some specified minimum number may
be surrendered to the trust by the
beneficial owner to receive the specified
non-U.S. currency and pays the
beneficial owner interest and other
distributions on the deposited U.S.
currency, if any, declared and paid by
the trust; or (iii) represent commodity
pool interests principally engaged,
directly or indirectly, in holding and/or
5 See Securities Exchange Act Release Nos. 56763
(November 7, 2007), 72 FR 94103 (November 14,
2007) (SR–NYSEArca–2007–81); 56601 (October 2,
2007), 72 FR 57625 (October 10, 2007) (SR–
NYSEArca–2007–79); 55125 (January 18, 2007), 72
FR 3462 (January 25, 2007) (SR–NYSEArca–2006–
87); 54026 (June 21, 2006), 71 FR 36850 (June 28,
2006) (SR–PCX–2005–115).
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]]>Agencies
[Federal Register Volume 73, Number 24 (Tuesday, February 5, 2008)]
[Notices]
[Pages 6759-6762]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-1969]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57227; File No. SR-NYSEArca-2008-12]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Relating to Pricing Information for Components
Underlying Currency-Linked Securities
January 29, 2008.
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 January 17, 2008, 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, II,
and III below, which Items have been substantially prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\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 amend NYSE Arca Equities Rule
5.2(j)(6)(B)(III)(1), which sets forth the Exchange's initial listing
criteria for Currency-Linked Securities,\3\ to permit the listing and
trading of Currency-Linked Securities where the pricing information for
one or more currencies comprising the Currency Reference Asset is the
generally accepted forward price for the currency exchange rate in
question. The text of the proposed rule change is available at the
Exchange, the Commission's Public Reference Room, and https://
www.nyse.com.
---------------------------------------------------------------------------
\3\ Currency-Linked Securities are securities that provide for
payment at maturity of a cash amount based on the performance of one
or more currencies, or options or currency futures or other currency
derivatives or Currency Trust Shares (as defined in NYSE Arca
Equities Rule 8.202), or a basket or index of any of the foregoing
(``Currency Reference Asset''). See NYSE Arca Equities Rule
5.2(j)(6).
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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 IV 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 amend NYSE Arca Equities Rule
5.2(j)(6)(B)(III)(1) to permit the listing of Currency-Linked
Securities where the pricing information for some or all of the
components of the Currency Reference Asset is the generally accepted
forward price for the currency exchange rate in question. The ability
for an issuer to use forward pricing information under proposed NYSE
Arca Equities Rule 5.2(j)(6)(B)(III)(1)(b) for any component of a
Currency Reference
[[Page 6760]]
Asset would be restricted to the following currencies, based on high
volumes of forward contract transactions in such currencies: U.S.
Dollar, Euro, Japanese Yen, British Pound Sterling, Swiss Franc,
Canadian Dollar, Australian Dollar, Brazilian Real, Chinese Renminbi,
Czech Koruna, Danish Krone, Hong Kong Dollar, Hungarian Forint, Indian
Rupee, Indonesian Rupiah, Korean Won, Mexican Peso, Norwegian Krone,
New Zealand Dollar, Philippine Peso, Polish Zloty, Russian Ruble,
Swedish Krona, South African Rand, Singapore Dollar, Taiwan Dollar,
Thai Baht or New Turkish Lira. The volume in these currencies is as
follows: \4\
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\4\ See Bank for International Settlements (``BIS''), Triennial
Central Bank Survey of Foreign Exchange and Derivatives Market
Activity in April 2007, Statistical Annex Tables--Foreign Exchange
Markets (2007) (``2007 BIS Report''); BIS, Triennial Central Bank
Survey of Foreign Exchange and Derivatives Market Activity in April
2004, Statistical Annex Tables--Foreign Exchange Markets (2004); and
BIS, Triennial Central Bank Survey of Foreign Exchange and
Derivatives Market Activity in April 2001, Statistical Annex
Tables--Foreign Exchange Markets (2001).
FX Forward Average Daily Volume in Millions USD
----------------------------------------------------------------------------------------------------------------
Currency 2001 2004 2007 Average
----------------------------------------------------------------------------------------------------------------
U.S. Dollar................................................. 110,795 170,357 289,435 190,196
Euro........................................................ 54,327 88,243 137,391 93,320
Japanese Yen................................................ 33,257 47,135 61,453 47,282
British Pound Sterling...................................... 16,826 31,338 46,274 31,479
Swiss Franc................................................. 6,637 11,307 21,186 13,043
Canadian Dollar............................................. 4,335 8,947 15,280 9,521
Australian Dollar........................................... 5,416 9,788 20,463 11,889
Brazilian Real.............................................. 1,259 1,072 5,259 2,530
Chinese Renminbi............................................ 55 811 4,572 1,813
Czech Koruna................................................ 96 253 1,432 594
Danish Krone................................................ 888 1,347 2,841 1,692
Hong Kong Dollar............................................ 3,055 2,221 6,022 3,766
Hungarian Forint............................................ 28 308 1,357 564
Indian Rupee................................................ 428 1,531 5,815 2,591
Indonesian Rupiah........................................... 103 267 1,292 554
Korean Won.................................................. 1,671 6,048 10,013 5,911
Mexican Peso................................................ 673 1,716 4,594 2,328
Norwegian Krone............................................. 1,187 2,543 6,498 3,409
New Zealand Dollar.......................................... 579 1,462 6,639 2,893
Philippine Peso............................................. 73 232 1,123 476
Polish Zloty................................................ 439 483 2,644 1,189
Russian Ruble............................................... 52 253 1,253 519
Swedish Krona............................................... 3,207 4,158 8,543 5,303
South African Rand.......................................... 825 1,122 3,458 1,802
Singapore Dollar............................................ 825 1,242 2,962 1,676
Taiwan Dollar............................................... 603 2,798 4,724 2,708
Thai Baht................................................... 231 490 847 523
New Turkish Lira............................................ 164 239 535 313
---------------------------------------------------
Total (divided by 2).................................... 125,018 199,858 337,956 220,944
----------------------------------------------------------------------------------------------------------------
The Exchange states that the total amount of contracts reflected in
the chart above is divided by two because each contract is denominated
in two currencies. For example, one contract will reflect cross rates
in two currencies: U.S. Dollar against Euro, Singapore Dollar against
New Turkish Lira, etc. The daily notional turnover for the currency
forward contracts reflected in the chart above ranged from US$535
million to US$289 billion in April 2007.
In addition, the forward price will be used for pricing purposes
only to the extent that the Currency Reference Asset is based on the
forward price. In the event a Currency Reference Asset is based on the
forward price, and the forward price becomes unavailable due to a
holiday, the spot price may be used for calculating the price of the
component(s) comprising the Currency Reference Asset. The pricing
information of such Currency Reference Asset on the following business
day must be the forward price. The Exchange states that this exception
will permit certain hedged products that use forward pricing
information to use the spot price, which is quoted in the United
States, when the forward price, which is derived from the spot price,
is unavailable due to a foreign holiday.
[[Page 6761]]
The Exchange states that the foreign exchange market is
predominantly an over-the-counter (``OTC'') market with no fixed
location, and it operates 24 hours a day, five days a week. London, New
York, and Tokyo are the principal geographic centers of the worldwide
foreign exchange market, with approximately 58% of all foreign exchange
business executed in the United Kingdom, United States, and Japan.
Other smaller markets include Singapore, Zurich, and Frankfurt.\5\
There are three major types of transactions in the traditional foreign
exchange markets: spot transactions, outright forwards, and foreign
exchange swaps. ``Forward'' trades are transactions involving the
exchange of two currencies at a rate agreed on the date of the contract
for value on delivery (cash settlement) at some time in the future.
These trades account for 12% of the reported daily volume. Forward
rates are quoted among dealers in premiums or discounts from the spot
rate.\6\ The premium or discount is measured in ``points'' that
represent the interest rate differential between two currencies for the
period of the forward, converted into foreign exchange.\7\ The
generally accepted forward price is calculated as follows: \8\
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\5\ See generally Securities Exchange Act Release No. 55268
(February 9, 2007), 72 FR 7793 (February 20, 2007) (SR-NYSE-2007-03)
(providing background and information relating to the foreign
exchange markets).
\6\ See Sam Y. Cross, Federal Reserve Bank of New York, All
About . . . the Foreign Exchange Market in the United States, at 38
(1998) (available at https://www.newyorkfed.org/education/addpub/
usfxm).
\7\ See id.
\8\ See id.
[GRAPHIC] [TIFF OMITTED] TN05FE08.002
The Exchange states that the OTC foreign currency market is a very
liquid market. In 2007, the average daily spot turnover accounted for
over US$1 trillion, and the average daily forward turnover accounted
for US$362 billion.\9\ In addition to liquidity, the Exchange states
that the forward market is extremely transparent. Bloomberg, Reuters,
and other major market information providers disseminate quotes for the
forward market provided by OTC market makers.
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\9\ See 2007 BIS Report (Table 1), supra note 4.
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The Exchange notes that most trading in the global OTC foreign
currency markets is conducted by regulated financial institutions such
as banks and broker-dealers. In addition, in the United States, the
Foreign Exchange Committee of the New York Federal Reserve Bank has
issued Guidelines for Foreign Exchange Trading, and central-bank
sponsored committees in Japan and Singapore have published similar best
practices guidelines. In the United Kingdom, the Bank of England has
published the Non-Investment Products Code, which covers foreign
currency trading. The Financial Markets Association, the members of
which include major international banking organizations, has also
established best practices guidelines called the Model Code.\10\
Participants in the U.S. OTC market for foreign currencies are
generally regulated by their oversight regulators. For example,
participating banks are regulated by the banking authorities.
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\10\ See supra note 5.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\11\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\12\ in particular, in that it
is designed to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, 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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\11\ 15 U.S.C. 78f(b).
\12\ 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 will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange states that it has neither solicited nor received
written comments on the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
A. By order approve such proposed rule change, or
B. Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change 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-2008-12 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-2008-12. 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
[[Page 6762]]
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, 100 F Street, NE., Washington, DC 20549, on
official business days between the hours of 10 a.m. and 3 p.m. Copies
of the 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-2008-12 and should be submitted on or before
February 26, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-1969 Filed 2-4-08; 8:45 am]
BILLING CODE 8011-01-P
