Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving Proposed Rule Change Amending NYSE Arca Equities Rule 5.2(j)(6) Relating to the Initial Listing Standards for Equity Index-Linked Securities, Commodity-Linked Securities, Currency-Linked Securities, Fixed Income Index-Linked Securities, Futures-Linked Securities and Multifactor Index-Linked Securities, 6338-6339 [E9-2529]

Download as PDF 6338 Federal Register / Vol. 74, No. 24 / Friday, February 6, 2009 / Notices arbitration claim.40 This commenter suggested that the economic benefits that will inure to FINRA from reduced arbitration costs should be passed through to public investors in terms of reduced filing fees.41 FINRA responded by stating that it considered the effect of the proposal on all fees imposed by the forum. FINRA indicated that the significant cost savings for hearing sessions with a single arbitrator represent the greatest impact of the proposal to users of the forum. For example, under the proposal the forum fees for a dispute involving $75,000 will decrease from $750 to $450 per four-hour hearing session. FINRA has not proposed to amend the initial filing fees, which are already based on the amount in dispute, and which may be reallocated by the panel at the end of the case. The Codes will continue to provide that the Director of Arbitration may defer payment of all or part of the filing fee if a claimant has demonstrated a financial hardship. Moreover, parties will continue to be able to request that the panel consider assessing all or part of any filing fee on other parties in the case. For these reasons, FINRA declined to revise the forum’s filing fees.42 IV. Discussion and Findings dwashington3 on PROD1PC60 with NOTICES After careful review of the proposed rule change, the comments, and FINRA’s response to the comments, the Commission finds that the proposed rule change is consistent with the requirements of the Act, and the rules and regulations thereunder that are applicable to a national securities association.43 In particular, the Commission believes the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,44 which requires, among other things, that FINRA rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. The Commission believes that the proposed rule change will reduce costs for participants in FINRA arbitration proceedings with claims of greater than $25,000 but no more than $100,000 who have their matters heard before a single arbitrator, while preserving the parties’ ability to 40 See Caruso Letter. 41 Id. 42 See FINRA Letter. approving this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition and capital formation. See 15 U.S.C. 78c(f). 44 15 U.S.C. 78o–3(b)(6). 43 In VerDate Nov<24>2008 14:16 Feb 05, 2009 Jkt 217001 agree to have their case heard by a panel of three arbitrators. The Commission believes that FINRA has responded adequately to the comments regarding increasing the monetary threshold under which disputes would be heard by a single arbitrator. The Commission agrees that the proposal, as filed, balances offering users an efficient and cost-effective forum for disputes of $100,000 or less and providing three-arbitrator panels for disputes that involve greater amounts or that do not specify an amount in controversy. The Commission also agrees that parties in these cases will experience reduced case processing times because of the flexibility associated with scheduling conference calls and hearing dates with one arbitrator rather than three, and that FINRA would benefit from a more efficient use of its arbitrator roster. The Commission also believes that FINRA has adequately responded to comments regarding the aggregation of claims in calculating whether the $100,000 threshold has been met. The Commission notes that FINRA is not changing its current practice with respect to aggregating claims, and clarifying this practice in the Regulatory Notice announcing the rule change should help to resolve any ambiguity about how FINRA will determine whether a matter may be heard by a single arbitrator. The Commission also believes that FINRA has adequately responded to comments regarding the requirement that single arbitrators be chair-qualified arbitrators. The Commission agrees that appointing chair-qualified arbitrators to resolve claims up to $100,000 would ensure that parties have experienced arbitrators resolving their disputes. The Commission also believes that FINRA has adequately responded to comments regarding filing fees that investors would pay to bring a claim. The Commission agrees that parties will realize cost savings for hearing sessions with a single arbitrator. V. Conclusions It is therefore ordered, pursuant to Section 19(b)(2) of the Act,45 that the proposed rule change (SR–FINRA– 2008–047) be, and hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.46 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–2531 Filed 2–5–09; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–59332; File No. SR– NYSEArca–2008–136] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving Proposed Rule Change Amending NYSE Arca Equities Rule 5.2(j)(6) Relating to the Initial Listing Standards for Equity Index-Linked Securities, CommodityLinked Securities, Currency-Linked Securities, Fixed Income Index-Linked Securities, Futures-Linked Securities and Multifactor Index-Linked Securities January 30, 2009. I. Introduction On December 10, 2008, NYSE Arca, Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’) 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 amend NYSE Arca Equities Rule 5.2(j)(6), which sets forth listing standards for Equity Index-Linked Securities, Commodity-Linked Securities, Currency-Linked Securities, Fixed Income Index-Linked Securities, Futures-Linked Securities and Multifactor Index-Linked Securities (‘‘Index-Linked Securities’’). The proposed rule change was published in the Federal Register on December 31, 2008.3 The Commission received no comments on the proposal. This order approves the proposed rule change. II. Description of the Proposal The Exchange proposes to amend one of the requirements of NYSE Arca Equities Rule 5.2(j)(6), which sets forth the listing standards for Index-Linked Securities. Rule 5.2(j)(6) permits the Exchange to consider for listing and trading Index-Linked Securities pursuant to Rule 19b–4(e) under the Act, provided that, among other things, in no event will a loss or negative payment at maturity be accelerated by a multiple that exceeds twice the performance of an underlying Reference Asset. The Exchange proposes to amend Rule 5.2(j)(6)(A)(d) to provide that in no event will a loss or negative payment at maturity be accelerated by a multiple that exceeds three times the performance of an underlying Reference Asset. The Exchange proposes this change to allow it to list and trade Index-Linked Securities that employ 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 59146 (December 22, 2008), 73 FR 80504. 2 17 45 15 46 17 PO 00000 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). Frm 00075 Fmt 4703 Sfmt 4703 E:\FR\FM\06FEN1.SGM 06FEN1 Federal Register / Vol. 74, No. 24 / Friday, February 6, 2009 / Notices investment strategies similar or analogous to certain exchange-traded funds which list and trade on the Exchange pursuant to NYSE Arca Equities Rule 5.2(j)(3).4 Currently, exchange-traded funds are able to seek daily investment results, before fees and expenses, that correspond to three times the inverse or opposite of the daily performance (¥300%) of the underlying indexes. For Index-Linked Securities that are structured to allow a loss or negative payment at maturity that may be accelerated by a multiple that exceeds three times the performance of an underlying Reference Asset, the Exchange’s proposal would continue to require specific Commission approval pursuant to Section 19(b)(2) of the Act.5 In particular, NYSE Arca Equities Rule 5.2(j)(6) would expressly prohibit such Index-Linked Securities from being approved by the Exchange for listing and trading pursuant to Rule 19b–4(e) under the Act.6 III. Discussion and Commission’s Findings dwashington3 on PROD1PC60 with NOTICES After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange, in particular, with Section 6(b) of the Act 7 and the rules and regulations thereunder. Specifically, the Commission finds that the proposal is consistent with Section 6(b)(5) of the Act,8 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.9 The Commission believes that the proposal reasonably balances the removal of impediments to a free and open market with the protection of investors and the public interest, two principles set forth in Section 6(b)(5) of 4 See Securities Exchange Act Release No. 58825 (October 21, 2008), 73 FR 63756 (October 27, 2008) (SR–NYSEArca–2008–89). 5 15 U.S.C. 78s(b)(2). See e-mail dated January 29, 2009 from Tim Malinowski, Director, NYSE Euronext to Mitra Mehr, Special Counsel, Division of Trading and Markets, Commission (‘‘NYSE Arca e-mail’’). 6 17 CFR 240.19b–4(e). See NYSE Arca e-mail. 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(5). 9 In approving the 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). VerDate Nov<24>2008 14:16 Feb 05, 2009 Jkt 217001 the Act.10 The Commission notes that it has previously approved a proposed rule change that would permit the Exchange to list and trade, pursuant to Rule 19b–4(e) under the Act, exchangetraded funds that seek daily investment results, before fees and expenses, that correspond to three times the inverse or opposite of the daily performance (¥300%) of the underlying indexes.11 With respect to the listing and trading of Index-Linked Securities that would allow a loss or negative payment at maturity that is accelerated by a multiple that exceeds three times the performance of an underlying Reference Asset, the Commission further notes that the Exchange would be required to obtain prior Commission approval pursuant to Section 19(b)(2) of the Act.12 The Commission also notes that Index-Linked Securities must comply with all of the applicable provisions under NYSE Arca Equities Rule 5.2(j)(6), as proposed to be amended, and all other requirements applicable to IndexLinked Securities including, without limitation, requirements relating to initial and continued listing standards, the dissemination of index value and related information, rules and policies governing the trading of equity securities, trading hours, trading halts, surveillance, firewalls, and Information Bulletins to ETP Holders, as set forth in prior Commission orders approving the generic listing rules applicable to the listing and trading of Index-Linked Securities. The Commission also notes that NYSE Arca Equities Rule 9.2(a), which sets forth the Exchange’s suitability requirements, would apply to the trading of Index-Linked Securities. Specifically, before recommending a transaction to a non-institutional customer in such securities, ETP Holders must have reasonable grounds to believe that the recommendation is suitable for the customer, based on facts disclosed by the customer after reasonable inquiry concerning the customer’s investment objectives, financial situation, needs, and any other information that such ETP Holder believes would be useful to make a recommendation. ETP Holders must also have a reasonable basis to believe that the customer can evaluate the special characteristics, and is able to bear the financial risks, of investments in Index-Linked Securities. An Information Bulletin would inform ETP Holders of the suitability requirements U.S.C. 78f(b)(5). supra note 4. 12 15 U.S.C. 78s(b)(2). of NYSE Arca Equities Rule 9.2(a) prior to the commencement of trading in such securities. In sum, the Commission believes that the Exchange’s amendment to NYSE Arca Equities Rule 5.2(j)(6) relating to the listing and trading of Index-Linked Securities should fulfill the intended objective of Rule 19b–4(e) under the Act by allowing such derivative securities products to be listed and traded without separate Commission approval. The Commission believes that the proposed rule change should facilitate the listing and trading of additional types of IndexLinked Securities and reduce the time frame for bringing these securities to market. For the foregoing reasons, the Commission finds that the proposed rule change is consistent with the Act.13 IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,14 that the proposed rule change (SR–NYSEArca– 2008–136) be, and it hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–2529 Filed 2–5–09; 8:45 am] BILLING CODE 8011–01–P DEPARTMENT OF STATE [Public Notice 6489] Overseas Security Advisory Council (OSAC) Meeting Notice; Closed Meeting The Department of State announces a meeting of the U.S. State Department— Overseas Security Advisory Council on February 26, 2009 at the Boeing Company, Arlington, Virginia. Pursuant to Section 10(d) of the Federal Advisory Committee Act (5 U.S.C. Appendix), 5 U.S.C. 552b(c)(4), and 5 U.S.C. 552b(c)(7)(E), it has been determined that the meeting will be closed to the public. The meeting will focus on an examination of corporate security policies and procedures and will involve extensive discussion of proprietary commercial information that is considered privileged and confidential, and will discuss law enforcement investigative techniques and procedures. The agenda will include updated committee reports, a 10 15 13 15 11 See 14 15 PO 00000 Frm 00076 Fmt 4703 U.S.C. 78f(b)(5). U.S.C. 78s(b)(2). 15 17 CFR 200.30–3(a)(12). Sfmt 4703 6339 E:\FR\FM\06FEN1.SGM 06FEN1

Agencies

[Federal Register Volume 74, Number 24 (Friday, February 6, 2009)]
[Notices]
[Pages 6338-6339]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-2529]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59332; File No. SR-NYSEArca-2008-136]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving 
Proposed Rule Change Amending NYSE Arca Equities Rule 5.2(j)(6) 
Relating to the Initial Listing Standards for Equity Index-Linked 
Securities, Commodity-Linked Securities, Currency-Linked Securities, 
Fixed Income Index-Linked Securities, Futures-Linked Securities and 
Multifactor Index-Linked Securities

January 30, 2009.

I. Introduction

    On December 10, 2008, NYSE Arca, Inc. (``NYSE Arca'' or 
``Exchange'') 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 amend NYSE Arca Equities Rule 5.2(j)(6), which 
sets forth listing standards for Equity Index-Linked Securities, 
Commodity-Linked Securities, Currency-Linked Securities, Fixed Income 
Index-Linked Securities, Futures-Linked Securities and Multifactor 
Index-Linked Securities (``Index-Linked Securities''). The proposed 
rule change was published in the Federal Register on December 31, 
2008.\3\ The Commission received no comments on the proposal. This 
order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 59146 (December 22, 
2008), 73 FR 80504.
---------------------------------------------------------------------------

II. Description of the Proposal

    The Exchange proposes to amend one of the requirements of NYSE Arca 
Equities Rule 5.2(j)(6), which sets forth the listing standards for 
Index-Linked Securities. Rule 5.2(j)(6) permits the Exchange to 
consider for listing and trading Index-Linked Securities pursuant to 
Rule 19b-4(e) under the Act, provided that, among other things, in no 
event will a loss or negative payment at maturity be accelerated by a 
multiple that exceeds twice the performance of an underlying Reference 
Asset. The Exchange proposes to amend Rule 5.2(j)(6)(A)(d) to provide 
that in no event will a loss or negative payment at maturity be 
accelerated by a multiple that exceeds three times the performance of 
an underlying Reference Asset. The Exchange proposes this change to 
allow it to list and trade Index-Linked Securities that employ

[[Page 6339]]

investment strategies similar or analogous to certain exchange-traded 
funds which list and trade on the Exchange pursuant to NYSE Arca 
Equities Rule 5.2(j)(3).\4\ Currently, exchange-traded funds are able 
to seek daily investment results, before fees and expenses, that 
correspond to three times the inverse or opposite of the daily 
performance (-300%) of the underlying indexes.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 58825 (October 21, 
2008), 73 FR 63756 (October 27, 2008) (SR-NYSEArca-2008-89).
---------------------------------------------------------------------------

    For Index-Linked Securities that are structured to allow a loss or 
negative payment at maturity that may be accelerated by a multiple that 
exceeds three times the performance of an underlying Reference Asset, 
the Exchange's proposal would continue to require specific Commission 
approval pursuant to Section 19(b)(2) of the Act.\5\ In particular, 
NYSE Arca Equities Rule 5.2(j)(6) would expressly prohibit such Index-
Linked Securities from being approved by the Exchange for listing and 
trading pursuant to Rule 19b-4(e) under the Act.\6\
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78s(b)(2). See e-mail dated January 29, 2009 from 
Tim Malinowski, Director, NYSE Euronext to Mitra Mehr, Special 
Counsel, Division of Trading and Markets, Commission (``NYSE Arca e-
mail'').
    \6\ 17 CFR 240.19b-4(e). See NYSE Arca e-mail.
---------------------------------------------------------------------------

III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange, in 
particular, with Section 6(b) of the Act \7\ and the rules and 
regulations thereunder. Specifically, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the Act,\8\ 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.\9\
    The Commission believes that the proposal reasonably balances the 
removal of impediments to a free and open market with the protection of 
investors and the public interest, two principles set forth in Section 
6(b)(5) of the Act.\10\ The Commission notes that it has previously 
approved a proposed rule change that would permit the Exchange to list 
and trade, pursuant to Rule 19b-4(e) under the Act, exchange-traded 
funds that seek daily investment results, before fees and expenses, 
that correspond to three times the inverse or opposite of the daily 
performance (-300%) of the underlying indexes.\11\ With respect to the 
listing and trading of Index-Linked Securities that would allow a loss 
or negative payment at maturity that is accelerated by a multiple that 
exceeds three times the performance of an underlying Reference Asset, 
the Commission further notes that the Exchange would be required to 
obtain prior Commission approval pursuant to Section 19(b)(2) of the 
Act.\12\
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ In approving the 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).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ See supra note 4.
    \12\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

    The Commission also notes that Index-Linked Securities must comply 
with all of the applicable provisions under NYSE Arca Equities Rule 
5.2(j)(6), as proposed to be amended, and all other requirements 
applicable to Index-Linked Securities including, without limitation, 
requirements relating to initial and continued listing standards, the 
dissemination of index value and related information, rules and 
policies governing the trading of equity securities, trading hours, 
trading halts, surveillance, firewalls, and Information Bulletins to 
ETP Holders, as set forth in prior Commission orders approving the 
generic listing rules applicable to the listing and trading of Index-
Linked Securities.
    The Commission also notes that NYSE Arca Equities Rule 9.2(a), 
which sets forth the Exchange's suitability requirements, would apply 
to the trading of Index-Linked Securities. Specifically, before 
recommending a transaction to a non-institutional customer in such 
securities, ETP Holders must have reasonable grounds to believe that 
the recommendation is suitable for the customer, based on facts 
disclosed by the customer after reasonable inquiry concerning the 
customer's investment objectives, financial situation, needs, and any 
other information that such ETP Holder believes would be useful to make 
a recommendation. ETP Holders must also have a reasonable basis to 
believe that the customer can evaluate the special characteristics, and 
is able to bear the financial risks, of investments in Index-Linked 
Securities. An Information Bulletin would inform ETP Holders of the 
suitability requirements of NYSE Arca Equities Rule 9.2(a) prior to the 
commencement of trading in such securities.
    In sum, the Commission believes that the Exchange's amendment to 
NYSE Arca Equities Rule 5.2(j)(6) relating to the listing and trading 
of Index-Linked Securities should fulfill the intended objective of 
Rule 19b-4(e) under the Act by allowing such derivative securities 
products to be listed and traded without separate Commission approval. 
The Commission believes that the proposed rule change should facilitate 
the listing and trading of additional types of Index-Linked Securities 
and reduce the time frame for bringing these securities to market.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the Act.\13\
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change (SR-NYSEArca-2008-136) be, and 
it hereby is, approved.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-2529 Filed 2-5-09; 8:45 am]
BILLING CODE 8011-01-P
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