Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To List and Trade Shares of the MacroShares Medical Inflation Trusts, 46689-46693 [E8-18486]
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Federal Register / Vol. 73, No. 155 / Monday, August 11, 2008 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–18422 Filed 8–8–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58312; File No. SR–
NYSEArca–2008–63]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of
Amendment No. 1 and Order Granting
Accelerated Approval of a Proposed
Rule Change, as Modified by
Amendment No. 1 Thereto, To List and
Trade Shares of the MacroShares
Medical Inflation Trusts
August 5, 2008.
On June 13, 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’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to: (1) Amend
NYSE Arca Equities Rule 8.400 (Paired
Trust Shares); and (2) list and trade
shares of the MacroShares Medical
Inflation Up Trust Series 2008–1 (‘‘Up
Trust’’) and shares of the MacroShares
Medical Inflation Down Trust Series
2008–1 (‘‘Down Trust’’ and, together
with the Up Trust, the ‘‘Trusts’’).3 The
proposed rule change was published for
comment in the Federal Register on July
2, 2008.4 The Commission received no
comments on the proposal. On July 31,
2008, the Exchange filed Amendment
No. 1 to the proposed rule change. This
order provides notice of filing of
Amendment No. 1 to the proposed rule
change,5 and grants accelerated
20 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The shares of the Up Trust are referred to as Up
MacroShares, the shares of the Down Trust are
referred to as Down MacroShares, and the Up
MacroShares and Down MacroShares are referred to
collectively as the ‘‘Shares.’’
4 See Securities Exchange Act Release No. 58024
(June 25, 2008), 73 FR 38003.
5 Amendment No. 1 provided additional detail
regarding the availability of the Applicable
Reference Value (as defined herein) and other
information relating to the Shares. The amendment
also clarifies proposed NYSE Arca Equities Rule
8.400(d)(2)(ii), which describes a circumstance in
which Paired Trust Shares will be delisted.
Specifically, the amendment makes clear that the
Exchange will delist any type of Paired Trust Shares
(not just Tradeable Shares) for which an intraday
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approval to the proposed rule change, as
modified by Amendment No. 1.
I. Description of the Proposal
A. Amendments to NYSE Arca Equities
Rule 8.400
The Exchange proposes to amend
NYSE Arca Equities Rule 8.400
governing Paired Trust Shares to allow
for the listing and trading of ‘‘Trading
Shares,’’ a proposed new type of Paired
Trust Share. Currently, NYSE Arca
Equities Rule 8.400 defines Paired Trust
Shares to include only Holding Shares,
which are issued by a matched pair of
Trusts (‘‘Holding Trusts’’) in exchange
for cash, and Tradeable Shares, which
are issued by a different pair of Trusts
(‘‘Tradeable Trusts’’) in exchange for the
deposit of Holding Shares.
Under the proposed amendments to
NYSE Arca Equities Rule 8.400, the
term ‘‘Paired Trust Shares’’ refers to: (1)
Both Holding Shares and any related
Tradeable Shares; or (2) solely ‘‘Trading
Shares,’’ which is a new defined term.
As proposed, Trading Shares has the
same definition as Holding Shares,
except that it is not required that a
majority of Trading Shares be acquired
and deposited in a related Tradeable
Trust, as it is with Holding Shares. The
Exchange represents that there are no
substantive differences between the
proposed Paired Trust Shares structure
(i.e., a single set of Trading Trusts that
issue Trading Shares and hold financial
instruments) and the current two-tier
structure (i.e., a set of Tradeable Trusts
that issue Tradeable Shares and hold
Holding Shares issued by a set of
Holding Trusts that invest in financial
instruments).
B. Listing and Trading of the Shares
The Up Trust and the Down Trust
intend to issue Up MacroShares and
Down MacroShares, respectively, on a
continuous basis at the direction of
authorized participants. The Up
MacroShares and the Down
MacroShares represent undivided
beneficial interests in the Up Trust and
the Down Trust, respectively.
The assets of each Trust will consist
of an income distribution agreement and
settlement contracts entered into with
the other Trust. Under the income
distribution agreement, as of any
distribution date, each Trust will either:
(1) Be required to pay a portion of its
available income to the other Trust; or
(2) be entitled to receive all or a portion
of the other Trust’s available income,
based, in each case, on the Applicable
Reference Price is calculated and disseminated if
the intraday Reference Price is not calculated or
disseminated as required by the Rule.
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46689
Reference Value of Medical Inflation
(the ‘‘Applicable Reference Value,’’ as
defined below) for each day during the
preceding calculation period. Under
each settlement contract, in connection
with the final scheduled termination
date, an early termination date or any
redemption date, each Trust will either:
(1) Be required to make a final payment
out of its assets to the other Trust; or (2)
be entitled to receive a final payment
from the other Trust out of the assets of
the other Trust, based, in each case, on
the Applicable Reference Value for the
period from the closing date through the
date of redemption. Each Trust will also
hold U.S. Treasuries and repurchase
agreements on U.S. Treasuries to secure
its obligations under the income
distribution agreement and the
settlement contracts.
Each Trust will make quarterly
distributions of income on the treasuries
and a final distribution of all assets it
holds on deposit on the final scheduled
termination date, an early termination
date or a redemption date. Each
quarterly and final distribution will be
based on the value for the medical care
component of the Consumer Price Index
for All Urban Consumers (‘‘CPI–U’’), as
calculated and published monthly by
the Bureau of Labor Statistics (‘‘BLS’’) at
www.bls.gov.6 The medical care
component of the CPI–U reflects
inflation in the cost of medical goods
and services. The Applicable Reference
Value is a daily linear interpolation
based on the monthly values of the
medical care component of the CPI–U
for the preceding two months, and is the
Reference Price for purposes of NYSE
Arca Equities Rule 8.400, on the basis of
which quarterly and final distributions
on the Up MacroShares and Down
MacroShares are calculated. The
Applicable Reference Value is
determined for each calendar day using
a formula set forth in the Up Trust
Registration Statement. For purposes of
determining the Applicable Reference
Value, following the monthly
publication by the BLS, any corrections
to the CPI–U values released for any
calendar month will not be taken into
consideration or used to recalculate the
underlying value of the Shares.
With respect to the Up Trust, if the
ratio of the Applicable Reference Value
on any day to the Applicable Reference
Value on the closing date (the date on
which the Trusts entered into an income
6 The BLS publishes a summary of its
methodology for calculating the CPI at www.bls.gov/
cpi/. In addition, a manual entitled BLS Handbook
of Methods, in which a chapter is dedicated to
calculation methodology for the CPI, may be
accessed on the BLS Web site at www.bls.gov/opub/
hom/pdf/homch17.pdf.
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distribution agreement) exceeds the
hurdle rate (‘‘Hurdle Rate’’),7
compounded on an annualized basis for
the period from the closing date to the
day of measurement, the underlying
value of the Up Trust on the next
business day will include all of its
assets plus a portion of the assets of the
paired Down Trust. This portion of
assets due from the Down Trust will be
multiplied by the leverage factor
(‘‘Leverage Factor’’).8 Conversely, if this
ratio is less than the compounded
hurdle rate, the Up Trust’s underlying
value will decrease, because a portion of
its assets will be included in the
underlying value of its paired Down
Trust. This portion of assets due to the
Down Trust will be multiplied by the
Leverage Factor.
With respect to the Down Trust, if the
ratio of the Applicable Reference Value
on any day to the Applicable Reference
Value on the closing date (the date on
which the Trusts entered into an income
distribution agreement) exceeds the
Hurdle Rate, compounded for the period
from the closing date to the day of
measurement, the underlying value of
the Down Trust on the next business
day will decrease, because a portion of
its assets will be included in the
underlying value of its paired Up Trust.
This portion of assets due to the Up
Trust will be multiplied by the Leverage
Factor. Conversely, if this ratio is less
than the compounded Hurdle Rate, the
Down Trust’s underlying value will
increase, because a portion of the assets
of the Up Trust will be included in the
underlying value of the Down Trust.
This portion of assets due from the Up
Trust will be multiplied by the Leverage
Factor.
The Up MacroShares may be issued
only in MacroShares Units consisting of
a minimum of 50,000 Up MacroShares
issued by the Up Trust and 50,000
Down MacroShares issued by the Down
Trust. The Up Trust and Down Trust
will issue their shares in the minimum
amounts that constitute a MacroShares
Unit on an ongoing basis only to
persons who qualify as authorized
participants at the per-share underlying
value of those shares on the business
day on which a creation order for the
shares is delivered to and accepted by
7 The hurdle rate has been designated as 4.50%.
This rate is fixed during the term of the Trusts. The
Up Trust Registration Statement provides a
description for calculating a hypothetical ‘‘per share
underlying value’’ for any date, which is the
amount an investor would be entitled to receive as
a final distribution on that date if the paired trusts
were to settle the settlement contracts and the Up
Trust were to make a final distribution on Up
MacroShares.
8 The leverage factor is 2, and is fixed for the term
of the Trusts.
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MacroMarkets LLC, the administrative
agent.9 The Shares may then be sold by
authorized participants to the public at
the market price prevailing at the time
of any such sale.
Up MacroShares must be redeemed
together with Down MacroShares by any
holder who is an authorized participant
on any business day in MacroShares
Units consisting of a minimum of
50,000 Up MacroShares and 50,000
Down MacroShares, at the respective
per Share underlying values of those
Shares, as measured on the applicable
redemption date.
More information regarding the
Shares, the Up Trust and the Applicable
Reference Value, Income Distribution,
Redemption Final Distribution, Risks,
Fees and Expenses, Termination
Triggers, and Creation and Redemption
Procedures can be found in the Up Trust
Registration Statement and Down Trust
Registration Statement.10
1. Availability of Information
At the beginning of each business day,
not later than one hour prior to the
commencement of trading in the Core
Trading Session on the Exchange, State
Street Bank and Trust Company, the
trustee for the Up Trust and the Down
Trust, will calculate the underlying
values of the Up Trust and the Down
Trust and the per Share underlying
values of the Up MacroShares and
Down MacroShares. The trustee will
then provide such values to the
administrative agent, who will post
them on its Web site located at
www.macromarkets.com. Intraday
indicative values for the Shares will not
be calculated. The trustee will base its
calculation of underlying value for any
business day on the administrative
agent’s calculation of the Applicable
Reference Value 11 for the preceding day
(regardless of whether that preceding
day is a business day or non-business
9 Authorized participants must also pay a
transaction fee of $2,000 for any paired redemption
or issuance and, for any paired issuance directed
prior to July 1, 2008, a fee equal to 3.00% of the
aggregate par amount of paired shares being created.
10 The Exchange states that the income
distribution agreement and applicable settlement
contracts will be attached as Exhibits to the
Registration Statements. On January 25, 2008, the
depositor filed with the Commission Amendment
No. 1 to Registration Statement on Form S–1 for the
Up MacroShares (File No. 333–147948). The
Exchange states that the depositor will file with the
Commission a Registration Statement on Form
S–1 for the Down MacroShares prior to
commencement of trading in the Shares on the
Exchange.
11 The Applicable Reference Value (the Reference
Price for the Shares) is a daily linear interpolation
based on the monthly values of the medical care
component of the CPI–U for the preceding two
months, and it will not be re-calculated or
disseminated intraday.
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day),12 which it will provide to the
trustee. The underlying values will be
disseminated to all market participants
at the same time.
Information regarding the market
price and volume of the Shares will be
continually available on a real-time
basis throughout the day via electronic
services. The previous day’s closing
price and trading volume information
for the Shares will be published daily in
the financial section of major
newspapers and will be available from
major market data vendors. Quotation
and last sale information for the Shares
will be available via the Consolidated
Tape Association high-speed line.
2. Initial and Continued Listing Criteria
NYSE Arca Equities Rule 8.400(d) sets
forth initial and continued listing
criteria applicable to Paired Trust
Shares. A minimum of 100,000 Up
MacroShares and 100,000 Down
MacroShares will be required to be
outstanding at the commencement of
trading. In addition, the Exchange will
obtain a representation on behalf of the
Up Trust and the Down Trust that the
underlying values per Share of the Up
Shares and Down Shares will be
calculated daily and will be made
available to all market participants at
the same time. The Exchange will
remove from listing the Up MacroShares
or the Down MacroShares under the
circumstances outlined in the proposed
amendments to NYSE Arca Equities
Rule 8.400(d) for Trading Shares, which
include:
• If, after the initial twelve-month
period following the commencement of
trading of the Shares, (A) the Up Trust
or the Down Trust has more than 60
days remaining until termination and
there are fewer than 50 record and/or
beneficial holders of Up MacroShares or
Down MacroShares, respectively, for 30
or more consecutive trading days; (B) if
the Up Trust or the Down Trust has
fewer than 50,000 Up MacroShares or
Down MacroShares, respectively, issued
and outstanding; or (C) if the combined
market value of all Shares issued and
outstanding for the Up Trust and the
Down Trust combined is less than
$1,000,000;
• If a replacement benchmark is
selected for the determination of the
Applicable Reference Value, unless the
Exchange files with the Commission a
related proposed rule change pursuant
to Rule 19b–4 under the Act 13 seeking
12 The daily value of the Applicable Reference
Value on the preceding day will be based upon the
value of the medical component of the CPI–U that
was calculated and published by the BLS for the
second and third preceding calendar months.
13 17 CFR 240.19b–4.
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approval to continue trading the Up
MacroShares or Down MacroShares and
such rule change is approved by the
Commission; or
• If such other event shall occur or
condition exists which in the opinion of
the Exchange makes further dealings on
the Exchange inadvisable.
3. Trading Halts
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Shares.
Trading may be halted because of
market conditions or for reasons that, in
the view of the Exchange, make trading
in the Shares inadvisable. These may
include: (1) The extent to which trading
is not occurring in the underlying
securities; or (2) whether other unusual
conditions or circumstances detrimental
to the maintenance of a fair and orderly
market are present. NYSE Arca Equities
Rule 8.400(d)(2) also provides that the
Exchange will halt trading in the Up
MacroShares or the Down MacroShares,
as the case may be, if the circuit breaker
parameters of NYSE Arca Equities Rule
7.12 have been reached. In exercising its
discretion to halt or suspend trading in
the Up MacroShares or the Down
MacroShares, the Exchange may
consider other factors that may be
relevant.
If the Exchange becomes aware that
the underlying value per Share of each
Up Share and Down Share is not
disseminated to all market participants
at the same time, it will halt trading in
the Up MacroShares or the Down
MacroShares, as the case may be, until
such time as the underlying value per
share is available to all market
participants.
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4. Trading Rules
The Exchange deems the Shares to be
equity securities, thus rendering trading
in the Shares subject to the Exchange’s
existing rules governing the trading of
equity securities. Shares will trade on
the NYSE Arca Marketplace from 4 a.m.
to 8 p.m. Eastern Time in accordance
with NYSE Arca Equities Rule 7.34
(Opening, Core, and Late Trading
Sessions). The Exchange represents that
it has appropriate rules to facilitate
transactions in the Shares during all
trading sessions.
5. Surveillance
The Exchange intends to utilize its
existing surveillance procedures
applicable to derivative securities
products, including Paired Trust Shares,
to monitor trading in the Shares. The
Exchange represents that these
procedures are adequate to properly
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monitor Exchange trading of the Shares
in all trading sessions and to deter and
detect violations of Exchange rules and
applicable federal securities laws.
The Exchange’s current trading
surveillance focuses on detecting
securities trading outside their normal
patterns. When such situations are
detected, surveillance analysis follows
and investigations are opened, where
appropriate, to review the behavior of
all relevant parties for all relevant
trading violations.
The Exchange may obtain information
via the Intermarket Surveillance Group
(‘‘ISG’’) from other exchanges who are
members of the ISG.14 In addition, the
Exchange also has a general policy
prohibiting the distribution of material,
non-public information by its
employees.
6. Information Bulletin
Prior to the commencement of
trading, the Exchange will inform its
ETP Holders in an Information Bulletin
(‘‘Bulletin’’) of the special
characteristics and risks associated with
trading the Shares. Specifically, the
Bulletin will discuss the following: (1)
What the Shares are; (2) the procedures
for purchases and redemptions of
Shares in MacroShares Units (and that
Shares are not individually redeemable);
(3) NYSE Arca Equities Rule 9.2(a),15
which imposes a duty of due diligence
on its ETP Holders to learn the essential
facts relating to every customer prior to
trading the Shares; (4) the requirement
that ETP Holders deliver a prospectus to
investors purchasing newly issued
Shares prior to or concurrently with the
confirmation of a transaction; and (5)
trading information.
In addition, the Bulletin will
reference that the Shares are subject to
various fees and expenses described in
the Registration Statement. The Bulletin
will discuss any exemptive, no-action,
and interpretive relief granted by the
Commission from any rules under the
Act.
14 For a list of the current members of ISG, see
www.isgportal.org.
15 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 the customer based
on any facts disclosed by the customer as to his
other security holdings and as to his financial
situation and needs. Further, the 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 the ETP
Holder believes would be useful to make a
recommendation. See Securities Exchange Act
Release No. 54026 (June 21, 2006), 71 FR 36850
(June 28, 2006) (SR–PCX–2005–115).
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46691
II. Discussion and Commission’s
Findings
The Commission has carefully
reviewed the proposed rule change and
finds that it is consistent with the
requirements of Section 6 of the Act 16
and the rules and regulations
thereunder applicable to a national
securities exchange.17 In particular, the
Commission finds that the proposal is
consistent with Section 6(b)(5) of the
Act,18 which requires, among other
things, that the Exchange’s rules be
designed to promote just and equitable
principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
A. Amendments to NYSE Arca Equities
Rule 8.400
NYSE Arca Equities Rule 8.400
governs the listing and trading of Paired
Trust Shares. The definition of Paired
Trust Shares is currently limited to
Holding Shares and Tradeable Shares.19
The Exchange proposes to broaden the
definition of Paired Trust Shares to
include Trading Shares. The structure of
Trading Shares differs from the
structures described under the current
NYSE Arca Equities Rules governing
Paired Trust Shares in that, for Trading
Shares, there are no Holding Trusts and
there is only one set of trusts (i.e., the
‘‘Up Trust’’ and the ‘‘Down Trust’’)
instead of two. As noted above, the
Exchange has represented that there are
no substantive differences between the
proposed structure (a single set of
Trading Trusts that issue Trading Shares
and hold financial instruments) and the
current two-tier structure (in which a set
of Tradeable Trusts that issue Tradeable
Shares and hold Holding Shares issued
by a set of Holding Trusts that invest in
financial instruments).
The Commission finds that the
Exchange’s proposal contains adequate
rules and procedures to govern the
listing and trading of Trading Shares on
the Exchange. Previously, the
Commission found that the current rules
governing the listing and trading of
Paired Trust Shares are consistent with
16 15
U.S.C. 78f.
approving this proposed rule change the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
18 15 U.S.C. 78f(b)(5).
19 See current NYSE Arca Equities Rule
8.400(b)(1).
17 In
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Section 6(b)(5) of the Act.20 Given the
substantial similarities between Holding
Shares, Tradeable Shares, and Trading
Shares, the Commission believes that
including Trading Shares within the
Exchange’s existing regime for listing
and trading Paired Trust Shares is
appropriate and does not raise any
regulatory issues. The Commission
notes that it recently approved a
proposal by another national securities
exchange which also included Trading
Shares as part of its rules relating to
Paired Trust Shares.21
The Commission believes that the
proposal should help to facilitate the
listing and trading of additional types of
exchange-traded products that should
enhance competition among market
participants, to the benefit of investors
and the marketplace. In addition, the
Commission believes that the listing and
trading criteria for Trading Shares set
forth in proposed NYSE Arca Equities
Rule 8.400 are reasonably designed to
protect investors and the public interest,
as discussed herein.
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B. Listing and Trading the Shares
The Commission finds that the
proposal to list and trade the Shares on
the Exchange is consistent with Section
11A(a)(1)(C)(iii) of the Act,22 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 will
be available via the Consolidated Tape
Association high-speed line. The
Exchange states that information
regarding the market price and volume
of the Shares will be continually
available on a real-time basis throughout
the day via electronic services, and that
the previous day’s closing price and
trading volume information for the
Shares will be published daily in the
financial sections of major newspapers
and will be available from major market
data vendors. At the end of each
business day, the administrative agent
(MacroShares Markets LLC) will also
calculate the premium or discount of
the midpoint of the bid/offer to the
underlying value per Share for both the
Up MacroShares and the Down
MacroShares for that day at the close of
20 See Securities Exchange Act Release No. 55033
(December 29, 2006), 72 FR 1253, 1256 (January 10,
2007) (SR–NYSEArca–2006–75).
21 See Securities Exchange Act Release No. 58057
(June 30, 2008), 73 FR 38474 (July 7, 2008) (SR–
Amex–2008–36).
22 15 U.S.C. 78k–1(a)(1)(C)(iii).
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the Exchange’s Core Trading Session.
The premium/discount calculation will
be conducted after such underlying
values are calculated and provided to
the administrative agent by the trustee
and after the Exchange provides the
administrative agent with the closing
price for the Up MacroShares and Down
MacroShares as of 3:59:59 (Eastern
Time). The administrative agent will
then post these premiums/discounts,
together with the end-of-day price
information for the Shares, on its Web
site (www.macromarkets.com).
At the beginning of each business day,
not later than one hour prior to the
commencement of trading in the Core
Trading Session on the Exchange, the
trustee for the Up Trust and the Down
Trust will calculate the underlying
value of the Up Trust and the Down
Trust and the per Share underlying
values of the Up MacroShares and
Down MacroShares. The trustee will
then provide such values to the
administrative agent, who will post
them on its Web site, which is
accessible to the public free of charge.
The Exchange represents that the
underlying values of the Trusts will be
disseminated to all market participants
at the same time.
The administrative agent will also
determine daily the Applicable
Reference Value, which it will
disseminate to all market participants at
the same time by posting it on its Web
site.
The Commission believes that the
proposal to list and trade the Shares is
reasonably designed to promote fair
disclosure of information that may be
necessary to price the Shares
appropriately and to prevent trading
when a reasonable degree of
transparency cannot be assured. The
Commission notes that the Exchange
will obtain a representation on behalf of
the Trusts that the per-Share net asset
values for the Trusts will be calculated
daily and made available to all market
participants at the same time.
Additionally, the Exchange will halt
trading in the Shares if it becomes aware
that the per-Share values of the Up
Trust or the Down Trust are not
disseminated daily to all market
participants at the same time.
As noted above, neither an indicative
value for the Shares nor the Applicable
Reference Value (the Reference Price for
the Shares, for purposes of NYSE Arca
Equities Rule 8.400) will be calculated
or disseminated intraday. Instead, the
per Share underlying values of the Up
MacroShares and Down MacroShares
and the Applicable Reference Value will
be calculated and disseminated daily.
The Commission believes that, because
PO 00000
Frm 00111
Fmt 4703
Sfmt 4703
the Applicable Reference Value is a
daily linear interpolation based on the
monthly values of the medical care
component of the CPI–U for the
preceding two months, daily
dissemination of the Applicable
Reference Value and underlying values
of the Trusts will be sufficient to
provide market participants an
approximation of the value of the
Shares.
The Exchange has represented that
the Shares are equity securities subject
to the Exchange’s rules governing the
trading of equity securities. In support
of this proposal, the Exchange has made
the following representations:
(1) The Exchange’s surveillance
procedures are adequate to properly
monitor Exchange trading of the Shares
and to deter and detect violations of
Exchange rules and applicable federal
securities laws.
(2) Prior to the commencement of
trading, the Exchange will inform its
members and Member Organizations an
Information Circular of the special
characteristics and risks associated with
trading the Shares. Specifically, the
Information Circular will discuss the
following: (a) What the Shares are; (b)
the procedures for purchases and
redemptions of Shares in MacroShares
Units (and that Shares are not
individually redeemable); (c) NYSE
Arca Equities Rule 9.2(a), 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; (d) the requirement
that ETP Holders deliver a prospectus to
investors purchasing newly issued
Shares prior to or concurrently with the
confirmation of a transaction; (e) trading
information; (f) that the Shares are
subject to various fees and expenses
described in the Registration
Statements; 23 and (g) any exemptive,
no-action, and interpretive relief granted
by the Commission from any rules
under the Act.
This approval order is based on the
Exchange’s representations.
For the foregoing reasons, the
Commission finds that the proposed
rule change is consistent with the Act
and the rules and regulations
thereunder applicable to a national
securities exchange, and, in particular,
with Section 6(b)(5) of the Act.24
III. Accelerated Approval
The Commission finds good cause,
pursuant to Section 19(b)(2) of the
Act,25 for approving the proposal, as
23 See
supra note 10.
U.S.C. 78f(b)(5).
25 15 U.S.C. 78s(b)(2).
24 15
E:\FR\FM\11AUN1.SGM
11AUN1
Federal Register / Vol. 73, No. 155 / Monday, August 11, 2008 / Notices
modified by Amendment No. 1, prior to
the thirtieth day after the date of
publication of notice of filing of
Amendment No. 1 in the Federal
Register.26 In Amendment No. 1, NYSE
Arca provided additional information
concerning the dissemination of
information relating to the Shares, and
clarified the continued listing
requirement with respect to the
calculation and dissemination of an
intraday Reference Price.27 Accordingly,
Amendment No. 1 does not raise any
new issues about the proposed rule
change, and the Commission finds good
cause for approving the NYSE Arca’s
proposal, as modified by Amendment
No. 1, on an accelerated basis, pursuant
to Section 19(b)(2) of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning Amendment No.
1, including whether Amendment No. 1
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–2008–63 on the
subject line.
rmajette on PRODPC74 with NOTICES
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2008–63. 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
26 Pursuant to Section 19(b)(2) of the Act, 15
U.S.C. 78s(b)(2), the Commission may not approve
any proposed rule change, or amendment thereto,
prior to the thirtieth day after the date of
publication of the notice thereof, unless the
Commission finds good cause for so doing.
27 See supra note 5.
VerDate Aug<31>2005
15:22 Aug 08, 2008
Jkt 214001
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–2008–63 and
should be submitted on or before
September 2, 2008.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,28 that the
proposed rule change (SR–NYSEArca–
2008–63), as modified by Amendment
No. 1 thereto, be, and it hereby is,
approved on an accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–18486 Filed 8–8–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58292; File No. SR–DTC–
2008–07]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing of Proposed Rule Change to
Implement Processing Enhancements
to the Profile Modification System
Used in the Direct Registration System
August 1, 2008.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
July 7, 2008, The Depository Trust
Company (‘‘DTC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) proposed rule change
No. SR–DTC–2008–07. The Commission
is publishing this notice to solicit
comments from interested parties on the
proposed rule change as described in
Items I, II, and III below, which items
28 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
29 17
PO 00000
Frm 00112
Fmt 4703
Sfmt 4703
46693
have been prepared primarily by the
DTC.2
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
DTC is proposing to enhance its
Profile Modification System in order to
allow a ‘‘move all’’ instruction and to
allow a second taxpayer identification
number or social security number to be
used to verify instructions, DTC is also
proposing to impose new participant
fees to reimburse transfer agents for the
cost of implementing and maintaining
the proposed Profile enhancements.
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
DTC 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. DTC has prepared
summaries, set forth in sections (A), (B),
and (C) below, of the most significant
aspects of these statements.3
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Direct Registration System
(‘‘DRS’’) allows investors to hold their
securities positions on the records of the
issuer in book-entry form rather than in
certificated form. In May 2000, DTC
established the Profile Modification
System (‘‘Profile’’) which allows its
participants (i.e., broker-dealers and
banks) and DRS Limited Participants
(i.e., transfer agents) to electronically
change an investor’s securities positions
from street-name ownership to direct
registration book-entry position and vice
versa.4 Specifically, Profile allows
2 The exact text of the DTC’s proposed rule
change can be found at https://www.dtcc.com/legal/
rule_filings/dtc/2008.
3 The Commission has modified portions of the
text of the summaries prepared by the DTC.
4 Transfer agents acting as DRS Limited
Participants must meet certain criteria established
by DTC, which includes, among other things, that
the transfer agent also be eligible to participate in
DTC’s Fast Automated Securities Transfer Program
(‘‘FAST’’). For securities that are part of FAST, the
DRS Limited Participants hold the securities
registered in the name of DTC’s nominee, Cede &
Co., in the form of balance certificates. As
additional securities are deposited or withdrawn
(‘‘deposit-by-transfer’’ and ‘‘withdrawal-bytransfer’’, respectively) from DTC, the DRS Limited
Participant adjusts the denomination of the balance
Continued
E:\FR\FM\11AUN1.SGM
11AUN1
]]>Agencies
[Federal Register Volume 73, Number 155 (Monday, August 11, 2008)]
[Notices]
[Pages 46689-46693]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-18486]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58312; File No. SR-NYSEArca-2008-63]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Amendment No. 1 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To List
and Trade Shares of the MacroShares Medical Inflation Trusts
August 5, 2008.
On June 13, 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''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to: (1) Amend NYSE Arca Equities Rule 8.400
(Paired Trust Shares); and (2) list and trade shares of the MacroShares
Medical Inflation Up Trust Series 2008-1 (``Up Trust'') and shares of
the MacroShares Medical Inflation Down Trust Series 2008-1 (``Down
Trust'' and, together with the Up Trust, the ``Trusts'').\3\ The
proposed rule change was published for comment in the Federal Register
on July 2, 2008.\4\ The Commission received no comments on the
proposal. On July 31, 2008, the Exchange filed Amendment No. 1 to the
proposed rule change. This order provides notice of filing of Amendment
No. 1 to the proposed rule change,\5\ and grants accelerated approval
to the proposed rule change, as modified by Amendment No. 1.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ The shares of the Up Trust are referred to as Up
MacroShares, the shares of the Down Trust are referred to as Down
MacroShares, and the Up MacroShares and Down MacroShares are
referred to collectively as the ``Shares.''
\4\ See Securities Exchange Act Release No. 58024 (June 25,
2008), 73 FR 38003.
\5\ Amendment No. 1 provided additional detail regarding the
availability of the Applicable Reference Value (as defined herein)
and other information relating to the Shares. The amendment also
clarifies proposed NYSE Arca Equities Rule 8.400(d)(2)(ii), which
describes a circumstance in which Paired Trust Shares will be
delisted. Specifically, the amendment makes clear that the Exchange
will delist any type of Paired Trust Shares (not just Tradeable
Shares) for which an intraday Reference Price is calculated and
disseminated if the intraday Reference Price is not calculated or
disseminated as required by the Rule.
---------------------------------------------------------------------------
I. Description of the Proposal
A. Amendments to NYSE Arca Equities Rule 8.400
The Exchange proposes to amend NYSE Arca Equities Rule 8.400
governing Paired Trust Shares to allow for the listing and trading of
``Trading Shares,'' a proposed new type of Paired Trust Share.
Currently, NYSE Arca Equities Rule 8.400 defines Paired Trust Shares to
include only Holding Shares, which are issued by a matched pair of
Trusts (``Holding Trusts'') in exchange for cash, and Tradeable Shares,
which are issued by a different pair of Trusts (``Tradeable Trusts'')
in exchange for the deposit of Holding Shares.
Under the proposed amendments to NYSE Arca Equities Rule 8.400, the
term ``Paired Trust Shares'' refers to: (1) Both Holding Shares and any
related Tradeable Shares; or (2) solely ``Trading Shares,'' which is a
new defined term. As proposed, Trading Shares has the same definition
as Holding Shares, except that it is not required that a majority of
Trading Shares be acquired and deposited in a related Tradeable Trust,
as it is with Holding Shares. The Exchange represents that there are no
substantive differences between the proposed Paired Trust Shares
structure (i.e., a single set of Trading Trusts that issue Trading
Shares and hold financial instruments) and the current two-tier
structure (i.e., a set of Tradeable Trusts that issue Tradeable Shares
and hold Holding Shares issued by a set of Holding Trusts that invest
in financial instruments).
B. Listing and Trading of the Shares
The Up Trust and the Down Trust intend to issue Up MacroShares and
Down MacroShares, respectively, on a continuous basis at the direction
of authorized participants. The Up MacroShares and the Down MacroShares
represent undivided beneficial interests in the Up Trust and the Down
Trust, respectively.
The assets of each Trust will consist of an income distribution
agreement and settlement contracts entered into with the other Trust.
Under the income distribution agreement, as of any distribution date,
each Trust will either: (1) Be required to pay a portion of its
available income to the other Trust; or (2) be entitled to receive all
or a portion of the other Trust's available income, based, in each
case, on the Applicable Reference Value of Medical Inflation (the
``Applicable Reference Value,'' as defined below) for each day during
the preceding calculation period. Under each settlement contract, in
connection with the final scheduled termination date, an early
termination date or any redemption date, each Trust will either: (1) Be
required to make a final payment out of its assets to the other Trust;
or (2) be entitled to receive a final payment from the other Trust out
of the assets of the other Trust, based, in each case, on the
Applicable Reference Value for the period from the closing date through
the date of redemption. Each Trust will also hold U.S. Treasuries and
repurchase agreements on U.S. Treasuries to secure its obligations
under the income distribution agreement and the settlement contracts.
Each Trust will make quarterly distributions of income on the
treasuries and a final distribution of all assets it holds on deposit
on the final scheduled termination date, an early termination date or a
redemption date. Each quarterly and final distribution will be based on
the value for the medical care component of the Consumer Price Index
for All Urban Consumers (``CPI-U''), as calculated and published
monthly by the Bureau of Labor Statistics (``BLS'') at www.bls.gov.\6\
The medical care component of the CPI-U reflects inflation in the cost
of medical goods and services. The Applicable Reference Value is a
daily linear interpolation based on the monthly values of the medical
care component of the CPI-U for the preceding two months, and is the
Reference Price for purposes of NYSE Arca Equities Rule 8.400, on the
basis of which quarterly and final distributions on the Up MacroShares
and Down MacroShares are calculated. The Applicable Reference Value is
determined for each calendar day using a formula set forth in the Up
Trust Registration Statement. For purposes of determining the
Applicable Reference Value, following the monthly publication by the
BLS, any corrections to the CPI-U values released for any calendar
month will not be taken into consideration or used to recalculate the
underlying value of the Shares.
---------------------------------------------------------------------------
\6\ The BLS publishes a summary of its methodology for
calculating the CPI at www.bls.gov/cpi/. In addition, a manual
entitled BLS Handbook of Methods, in which a chapter is dedicated to
calculation methodology for the CPI, may be accessed on the BLS Web
site at www.bls.gov/opub/hom/pdf/homch17.pdf.
---------------------------------------------------------------------------
With respect to the Up Trust, if the ratio of the Applicable
Reference Value on any day to the Applicable Reference Value on the
closing date (the date on which the Trusts entered into an income
[[Page 46690]]
distribution agreement) exceeds the hurdle rate (``Hurdle Rate''),\7\
compounded on an annualized basis for the period from the closing date
to the day of measurement, the underlying value of the Up Trust on the
next business day will include all of its assets plus a portion of the
assets of the paired Down Trust. This portion of assets due from the
Down Trust will be multiplied by the leverage factor (``Leverage
Factor'').\8\ Conversely, if this ratio is less than the compounded
hurdle rate, the Up Trust's underlying value will decrease, because a
portion of its assets will be included in the underlying value of its
paired Down Trust. This portion of assets due to the Down Trust will be
multiplied by the Leverage Factor.
---------------------------------------------------------------------------
\7\ The hurdle rate has been designated as 4.50%. This rate is
fixed during the term of the Trusts. The Up Trust Registration
Statement provides a description for calculating a hypothetical
``per share underlying value'' for any date, which is the amount an
investor would be entitled to receive as a final distribution on
that date if the paired trusts were to settle the settlement
contracts and the Up Trust were to make a final distribution on Up
MacroShares.
\8\ The leverage factor is 2, and is fixed for the term of the
Trusts.
---------------------------------------------------------------------------
With respect to the Down Trust, if the ratio of the Applicable
Reference Value on any day to the Applicable Reference Value on the
closing date (the date on which the Trusts entered into an income
distribution agreement) exceeds the Hurdle Rate, compounded for the
period from the closing date to the day of measurement, the underlying
value of the Down Trust on the next business day will decrease, because
a portion of its assets will be included in the underlying value of its
paired Up Trust. This portion of assets due to the Up Trust will be
multiplied by the Leverage Factor. Conversely, if this ratio is less
than the compounded Hurdle Rate, the Down Trust's underlying value will
increase, because a portion of the assets of the Up Trust will be
included in the underlying value of the Down Trust. This portion of
assets due from the Up Trust will be multiplied by the Leverage Factor.
The Up MacroShares may be issued only in MacroShares Units
consisting of a minimum of 50,000 Up MacroShares issued by the Up Trust
and 50,000 Down MacroShares issued by the Down Trust. The Up Trust and
Down Trust will issue their shares in the minimum amounts that
constitute a MacroShares Unit on an ongoing basis only to persons who
qualify as authorized participants at the per-share underlying value of
those shares on the business day on which a creation order for the
shares is delivered to and accepted by MacroMarkets LLC, the
administrative agent.\9\ The Shares may then be sold by authorized
participants to the public at the market price prevailing at the time
of any such sale.
---------------------------------------------------------------------------
\9\ Authorized participants must also pay a transaction fee of
$2,000 for any paired redemption or issuance and, for any paired
issuance directed prior to July 1, 2008, a fee equal to 3.00% of the
aggregate par amount of paired shares being created.
---------------------------------------------------------------------------
Up MacroShares must be redeemed together with Down MacroShares by
any holder who is an authorized participant on any business day in
MacroShares Units consisting of a minimum of 50,000 Up MacroShares and
50,000 Down MacroShares, at the respective per Share underlying values
of those Shares, as measured on the applicable redemption date.
More information regarding the Shares, the Up Trust and the
Applicable Reference Value, Income Distribution, Redemption Final
Distribution, Risks, Fees and Expenses, Termination Triggers, and
Creation and Redemption Procedures can be found in the Up Trust
Registration Statement and Down Trust Registration Statement.\10\
---------------------------------------------------------------------------
\10\ The Exchange states that the income distribution agreement
and applicable settlement contracts will be attached as Exhibits to
the Registration Statements. On January 25, 2008, the depositor
filed with the Commission Amendment No. 1 to Registration Statement
on Form S-1 for the Up MacroShares (File No. 333-147948). The
Exchange states that the depositor will file with the Commission a
Registration Statement on Form S-1 for the Down MacroShares prior to
commencement of trading in the Shares on the Exchange.
---------------------------------------------------------------------------
1. Availability of Information
At the beginning of each business day, not later than one hour
prior to the commencement of trading in the Core Trading Session on the
Exchange, State Street Bank and Trust Company, the trustee for the Up
Trust and the Down Trust, will calculate the underlying values of the
Up Trust and the Down Trust and the per Share underlying values of the
Up MacroShares and Down MacroShares. The trustee will then provide such
values to the administrative agent, who will post them on its Web site
located at www.macromarkets.com. Intraday indicative values for the
Shares will not be calculated. The trustee will base its calculation of
underlying value for any business day on the administrative agent's
calculation of the Applicable Reference Value \11\ for the preceding
day (regardless of whether that preceding day is a business day or non-
business day),\12\ which it will provide to the trustee. The underlying
values will be disseminated to all market participants at the same
time.
---------------------------------------------------------------------------
\11\ The Applicable Reference Value (the Reference Price for the
Shares) is a daily linear interpolation based on the monthly values
of the medical care component of the CPI-U for the preceding two
months, and it will not be re-calculated or disseminated intraday.
\12\ The daily value of the Applicable Reference Value on the
preceding day will be based upon the value of the medical component
of the CPI-U that was calculated and published by the BLS for the
second and third preceding calendar months.
---------------------------------------------------------------------------
Information regarding the market price and volume of the Shares
will be continually available on a real-time basis throughout the day
via electronic services. The previous day's closing price and trading
volume information for the Shares will be published daily in the
financial section of major newspapers and will be available from major
market data vendors. Quotation and last sale information for the Shares
will be available via the Consolidated Tape Association high-speed
line.
2. Initial and Continued Listing Criteria
NYSE Arca Equities Rule 8.400(d) sets forth initial and continued
listing criteria applicable to Paired Trust Shares. A minimum of
100,000 Up MacroShares and 100,000 Down MacroShares will be required to
be outstanding at the commencement of trading. In addition, the
Exchange will obtain a representation on behalf of the Up Trust and the
Down Trust that the underlying values per Share of the Up Shares and
Down Shares will be calculated daily and will be made available to all
market participants at the same time. The Exchange will remove from
listing the Up MacroShares or the Down MacroShares under the
circumstances outlined in the proposed amendments to NYSE Arca Equities
Rule 8.400(d) for Trading Shares, which include:
If, after the initial twelve-month period following the
commencement of trading of the Shares, (A) the Up Trust or the Down
Trust has more than 60 days remaining until termination and there are
fewer than 50 record and/or beneficial holders of Up MacroShares or
Down MacroShares, respectively, for 30 or more consecutive trading
days; (B) if the Up Trust or the Down Trust has fewer than 50,000 Up
MacroShares or Down MacroShares, respectively, issued and outstanding;
or (C) if the combined market value of all Shares issued and
outstanding for the Up Trust and the Down Trust combined is less than
$1,000,000;
If a replacement benchmark is selected for the
determination of the Applicable Reference Value, unless the Exchange
files with the Commission a related proposed rule change pursuant to
Rule 19b-4 under the Act \13\ seeking
[[Page 46691]]
approval to continue trading the Up MacroShares or Down MacroShares and
such rule change is approved by the Commission; or
---------------------------------------------------------------------------
\13\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
If such other event shall occur or condition exists which
in the opinion of the Exchange makes further dealings on the Exchange
inadvisable.
3. Trading Halts
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares. Trading may be halted because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable. These may include: (1) The extent to
which trading is not occurring in the underlying securities; or (2)
whether other unusual conditions or circumstances detrimental to the
maintenance of a fair and orderly market are present. NYSE Arca
Equities Rule 8.400(d)(2) also provides that the Exchange will halt
trading in the Up MacroShares or the Down MacroShares, as the case may
be, if the circuit breaker parameters of NYSE Arca Equities Rule 7.12
have been reached. In exercising its discretion to halt or suspend
trading in the Up MacroShares or the Down MacroShares, the Exchange may
consider other factors that may be relevant.
If the Exchange becomes aware that the underlying value per Share
of each Up Share and Down Share is not disseminated to all market
participants at the same time, it will halt trading in the Up
MacroShares or the Down MacroShares, as the case may be, until such
time as the underlying value per share is available to all market
participants.
4. Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. Shares will trade on
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. Eastern Time in
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late
Trading Sessions). The Exchange represents that it has appropriate
rules to facilitate transactions in the Shares during all trading
sessions.
5. Surveillance
The Exchange intends to utilize its existing surveillance
procedures applicable to derivative securities products, including
Paired Trust Shares, 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 and applicable federal securities
laws.
The Exchange's current trading surveillance focuses on detecting
securities trading outside their normal patterns. When such situations
are detected, surveillance analysis follows and investigations are
opened, where appropriate, to review the behavior of all relevant
parties for all relevant trading violations.
The Exchange may obtain information via the Intermarket
Surveillance Group (``ISG'') from other exchanges who are members of
the ISG.\14\ In addition, the Exchange also has a general policy
prohibiting the distribution of material, non-public information by its
employees.
---------------------------------------------------------------------------
\14\ For a list of the current members of ISG, see
www.isgportal.org.
---------------------------------------------------------------------------
6. Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
ETP Holders in an Information Bulletin (``Bulletin'') of the special
characteristics and risks associated with trading the Shares.
Specifically, the Bulletin will discuss the following: (1) What the
Shares are; (2) the procedures for purchases and redemptions of Shares
in MacroShares Units (and that Shares are not individually redeemable);
(3) NYSE Arca Equities Rule 9.2(a),\15\ which imposes a duty of due
diligence on its ETP Holders to learn the essential facts relating to
every customer prior to trading the Shares; (4) the requirement that
ETP Holders deliver a prospectus to investors purchasing newly issued
Shares prior to or concurrently with the confirmation of a transaction;
and (5) trading information.
---------------------------------------------------------------------------
\15\ 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 the customer based
on any facts disclosed by the customer as to his other security
holdings and as to his financial situation and needs. Further, the
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 the ETP Holder believes
would be useful to make a recommendation. See Securities Exchange
Act Release No. 54026 (June 21, 2006), 71 FR 36850 (June 28, 2006)
(SR-PCX-2005-115).
---------------------------------------------------------------------------
In addition, the Bulletin will reference that the Shares are
subject to various fees and expenses described in the Registration
Statement. The Bulletin will discuss any exemptive, no-action, and
interpretive relief granted by the Commission from any rules under the
Act.
II. Discussion and Commission's Findings
The Commission has carefully reviewed the proposed rule change and
finds that it is consistent with the requirements of Section 6 of the
Act \16\ and the rules and regulations thereunder applicable to a
national securities exchange.\17\ In particular, the Commission finds
that the proposal is consistent with Section 6(b)(5) of the Act,\18\
which requires, among other things, that the Exchange's rules be
designed 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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\16\ 15 U.S.C. 78f.
\17\ In approving this proposed rule change the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\18\ 15 U.S.C. 78f(b)(5).
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A. Amendments to NYSE Arca Equities Rule 8.400
NYSE Arca Equities Rule 8.400 governs the listing and trading of
Paired Trust Shares. The definition of Paired Trust Shares is currently
limited to Holding Shares and Tradeable Shares.\19\ The Exchange
proposes to broaden the definition of Paired Trust Shares to include
Trading Shares. The structure of Trading Shares differs from the
structures described under the current NYSE Arca Equities Rules
governing Paired Trust Shares in that, for Trading Shares, there are no
Holding Trusts and there is only one set of trusts (i.e., the ``Up
Trust'' and the ``Down Trust'') instead of two. As noted above, the
Exchange has represented that there are no substantive differences
between the proposed structure (a single set of Trading Trusts that
issue Trading Shares and hold financial instruments) and the current
two-tier structure (in which a set of Tradeable Trusts that issue
Tradeable Shares and hold Holding Shares issued by a set of Holding
Trusts that invest in financial instruments).
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\19\ See current NYSE Arca Equities Rule 8.400(b)(1).
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The Commission finds that the Exchange's proposal contains adequate
rules and procedures to govern the listing and trading of Trading
Shares on the Exchange. Previously, the Commission found that the
current rules governing the listing and trading of Paired Trust Shares
are consistent with
[[Page 46692]]
Section 6(b)(5) of the Act.\20\ Given the substantial similarities
between Holding Shares, Tradeable Shares, and Trading Shares, the
Commission believes that including Trading Shares within the Exchange's
existing regime for listing and trading Paired Trust Shares is
appropriate and does not raise any regulatory issues. The Commission
notes that it recently approved a proposal by another national
securities exchange which also included Trading Shares as part of its
rules relating to Paired Trust Shares.\21\
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\20\ See Securities Exchange Act Release No. 55033 (December 29,
2006), 72 FR 1253, 1256 (January 10, 2007) (SR-NYSEArca-2006-75).
\21\ See Securities Exchange Act Release No. 58057 (June 30,
2008), 73 FR 38474 (July 7, 2008) (SR-Amex-2008-36).
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The Commission believes that the proposal should help to facilitate
the listing and trading of additional types of exchange-traded products
that should enhance competition among market participants, to the
benefit of investors and the marketplace. In addition, the Commission
believes that the listing and trading criteria for Trading Shares set
forth in proposed NYSE Arca Equities Rule 8.400 are reasonably designed
to protect investors and the public interest, as discussed herein.
B. Listing and Trading the Shares
The Commission finds that the proposal to list and trade the Shares
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the
Act,\22\ 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 will be available via the Consolidated Tape
Association high-speed line. The Exchange states that information
regarding the market price and volume of the Shares will be continually
available on a real-time basis throughout the day via electronic
services, and that the previous day's closing price and trading volume
information for the Shares will be published daily in the financial
sections of major newspapers and will be available from major market
data vendors. At the end of each business day, the administrative agent
(MacroShares Markets LLC) will also calculate the premium or discount
of the midpoint of the bid/offer to the underlying value per Share for
both the Up MacroShares and the Down MacroShares for that day at the
close of the Exchange's Core Trading Session. The premium/discount
calculation will be conducted after such underlying values are
calculated and provided to the administrative agent by the trustee and
after the Exchange provides the administrative agent with the closing
price for the Up MacroShares and Down MacroShares as of 3:59:59
(Eastern Time). The administrative agent will then post these premiums/
discounts, together with the end-of-day price information for the
Shares, on its Web site (www.macromarkets.com).
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\22\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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At the beginning of each business day, not later than one hour
prior to the commencement of trading in the Core Trading Session on the
Exchange, the trustee for the Up Trust and the Down Trust will
calculate the underlying value of the Up Trust and the Down Trust and
the per Share underlying values of the Up MacroShares and Down
MacroShares. The trustee will then provide such values to the
administrative agent, who will post them on its Web site, which is
accessible to the public free of charge. The Exchange represents that
the underlying values of the Trusts will be disseminated to all market
participants at the same time.
The administrative agent will also determine daily the Applicable
Reference Value, which it will disseminate to all market participants
at the same time by posting it on its Web site.
The Commission believes that the proposal to list and trade the
Shares is reasonably designed to promote fair disclosure of information
that may be necessary to price the Shares appropriately and to prevent
trading when a reasonable degree of transparency cannot be assured. The
Commission notes that the Exchange will obtain a representation on
behalf of the Trusts that the per-Share net asset values for the Trusts
will be calculated daily and made available to all market participants
at the same time. Additionally, the Exchange will halt trading in the
Shares if it becomes aware that the per-Share values of the Up Trust or
the Down Trust are not disseminated daily to all market participants at
the same time.
As noted above, neither an indicative value for the Shares nor the
Applicable Reference Value (the Reference Price for the Shares, for
purposes of NYSE Arca Equities Rule 8.400) will be calculated or
disseminated intraday. Instead, the per Share underlying values of the
Up MacroShares and Down MacroShares and the Applicable Reference Value
will be calculated and disseminated daily. The Commission believes
that, because the Applicable Reference Value is a daily linear
interpolation based on the monthly values of the medical care component
of the CPI-U for the preceding two months, daily dissemination of the
Applicable Reference Value and underlying values of the Trusts will be
sufficient to provide market participants an approximation of the value
of the Shares.
The Exchange has represented that the Shares are equity securities
subject to the Exchange's rules governing the trading of equity
securities. In support of this proposal, the Exchange has made the
following representations:
(1) The Exchange's surveillance procedures are adequate to properly
monitor Exchange trading of the Shares and to deter and detect
violations of Exchange rules and applicable federal securities laws.
(2) Prior to the commencement of trading, the Exchange will inform
its members and Member Organizations an Information Circular of the
special characteristics and risks associated with trading the Shares.
Specifically, the Information Circular will discuss the following: (a)
What the Shares are; (b) the procedures for purchases and redemptions
of Shares in MacroShares Units (and that Shares are not individually
redeemable); (c) NYSE Arca Equities Rule 9.2(a), 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; (d) the
requirement that ETP Holders deliver a prospectus to investors
purchasing newly issued Shares prior to or concurrently with the
confirmation of a transaction; (e) trading information; (f) that the
Shares are subject to various fees and expenses described in the
Registration Statements; \23\ and (g) any exemptive, no-action, and
interpretive relief granted by the Commission from any rules under the
Act.
\23\ See supra note 10.
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This approval order is based on the Exchange's representations.
For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with the Act and the rules and regulations
thereunder applicable to a national securities exchange, and, in
particular, with Section 6(b)(5) of the Act.\24\
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\24\ 15 U.S.C. 78f(b)(5).
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III. Accelerated Approval
The Commission finds good cause, pursuant to Section 19(b)(2) of
the Act,\25\ for approving the proposal, as
[[Page 46693]]
modified by Amendment No. 1, prior to the thirtieth day after the date
of publication of notice of filing of Amendment No. 1 in the Federal
Register.\26\ In Amendment No. 1, NYSE Arca provided additional
information concerning the dissemination of information relating to the
Shares, and clarified the continued listing requirement with respect to
the calculation and dissemination of an intraday Reference Price.\27\
Accordingly, Amendment No. 1 does not raise any new issues about the
proposed rule change, and the Commission finds good cause for approving
the NYSE Arca's proposal, as modified by Amendment No. 1, on an
accelerated basis, pursuant to Section 19(b)(2) of the Act.
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\25\ 15 U.S.C. 78s(b)(2).
\26\ Pursuant to Section 19(b)(2) of the Act, 15 U.S.C.
78s(b)(2), the Commission may not approve any proposed rule change,
or amendment thereto, prior to the thirtieth day after the date of
publication of the notice thereof, unless the Commission finds good
cause for so doing.
\27\ See supra note 5.
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning Amendment No. 1, including whether Amendment No. 1
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-2008-63 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2008-63. 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, 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-2008-63 and should
be submitted on or before September 2, 2008.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\28\ that the proposed rule change (SR-NYSEArca-2008-63), as
modified by Amendment No. 1 thereto, be, and it hereby is, approved on
an accelerated basis.
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\28\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
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\29\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-18486 Filed 8-8-08; 8:45 am]
BILLING CODE 8010-01-P
