[Federal Register: September 4, 2008 (Volume 73, Number 172)]
[Notices]
[Page 51684-51686]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04se08-75]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58437; File No. SR-NYSEArca-2008-77]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving
Proposed Rule Change To List and Trade the Barclays Middle East
Equities (MSCI GCC) Non Exchange Traded Notes Due 2038
August 28, 2008.
I. Introduction
On July 17, 2008, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca''),
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 list and trade the Barclays Middle East
Equities (MSCI GCC) Non Exchange Traded Notes Due 2038. The proposed
rule change was published for comment in the Federal Register on July
29, 2008.\3\ The Commission received no comment letters on the proposed
rule change. This order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 58208 (July 22,
2008), 73 FR 43968.
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II. Description of the Proposed Rule Change
The Exchange proposed to list and trade shares of the Barclays
Middle East Equities (MSCI GCC) Non Exchange Traded Notes Due 2038
(``Notes''), which are linked to the MSCI Gulf Cooperation Council
(GCC) Countries ex-Saudi Arabia Net Total Return Index\SM\ (U.S.
dollar) (``Index''), under NYSE Arca Equities Rule 5.2(j)(6), which
includes the Exchange's listing standards for Equity Index-Linked
Securities.\4\ The Notes are senior unsecured debt obligations of
Barclays Bank PLC (``Barclays''). The Index is comprised of all of the
equity securities (each an ``Index Component'' and, collectively, the
``Index Components'') that are included in the following five
individual country indices (each a ``Country Index'' and, collectively,
the ``Country Indices''): (1) MSCI Bahrain Index\SM\; (2) MSCI Kuwait
Index\SM\; (3) MSCI Oman Index\SM\; (4) MSCI Qatar Index\SM\; and (5)
MSCI United Arab Emirates Index\SM\. Each Country Index is a free
float-adjusted market capitalization index that is designed to measure
the market performance, including price performance and income from
dividend payments, of equity securities in the country it represents.
The Index and the Country Indices are calculated and maintained by
MSCI, Inc.
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\4\ Equity Index-Linked Securities are securities that provide
for the payment at maturity of a cash amount based on the
performance of an underlying index or indexes of equity securities
(``Equity Reference Asset'').
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The Exchange submitted the proposed rule change because the Index
does not meet all of the ``generic'' listing requirements of NYSE Arca
Equities Rule 5.2(j)(6) applicable to the listing of Equity Index-
Linked Securities. Specifically, the Index meets all such requirements
except for those set forth in NYSE Arca Equities Rules
5.2(j)(6)(B)(I)(1)(b)(ii) \5\ and (v).\6\ The Exchange represented
that: (1) Except for NYSE Arca Equities Rules 5.2(j)(6)(B)(I)(1)(b)(ii)
and (v), the Notes currently satisfy all of the generic listing
standards under NYSE Arca Equities Rule 5.2(j)(6) applicable to Equity
Index-Linked Securities; (2) the continued listing standards under NYSE
Arca Equities Rule 5.2(j)(6) applicable to Equity Index-Linked
Securities shall apply to the Notes; and (3) Barclays is required to
comply with Rule 10A-3 under the Act \7\ for the initial and continued
listing of the Notes. In addition, the Exchange represented that the
Notes will comply with all other requirements applicable to Equity
Index-Linked Securities including, but not limited to, requirements
relating to the dissemination of key information such as the Equity
Reference Asset value and Intraday Indicative Value, rules and policies
governing the trading of equity securities, trading hours, trading
halts, surveillance, firewalls, and Information Bulletin to ETP
Holders, as set forth in prior Commission orders approving the generic
listing rules applicable to the listing and trading of Index-Linked
[[Page 51685]]
Securities, generally, and Equity Index-Linked Securities, in
particular.\8\
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\5\ NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(ii) provides
that each component security of the underlying index shall have
trading volume in each of the last six months of not less than
1,000,000 shares per month, except that for each of the lowest
dollar weighted component securities in the index that, in the
aggregate, account for no more than 10% of the dollar weight of the
index, the trading volume shall be at least 500,000 shares per month
in each of the last six months. The Exchange represented that as of
July 17, 2008, in each of the prior six months, 87.995% of the Index
had a trading volume of 1,000,000 shares, and 8.79% of the bottom
10% of the Index had a trading volume of 500,000 shares.
\6\ NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(v) provides
that all component securities of the underlying index shall be
either (A) securities (other than foreign country securities and
American Depositary Receipts (``ADRs'')) that are (x) issued by an
Act reporting company or by an investment company registered under
the Investment Company Act of 1940, which in each case is listed on
a national securities exchange, and (y) an ``NMS stock'' (as defined
in Rule 600 of Regulation NMS) or (B) foreign country securities or
ADRs, provided that foreign country securities or foreign country
securities underlying ADRs having their primary trading market
outside the United States on foreign trading markets that are not
members of the Intermarket Surveillance Group (``ISG'') or parties
to comprehensive surveillance sharing agreements with the Exchange
will not, in the aggregate, represent more than 20% of the dollar
weight of the index. See Securities Exchange Act Release No. 58376
(August 18, 2008), 73 FR 49726 (August 22, 2008) (SR-NYSEArca-2008-
70) (approving certain amendments to NYSE Arca Equities Rule
5.2(j)(6)(B)(I) and, as a result, the renumbering of NYSE Arca
Equities Rule 5.2(j)(6)(B)(I)(1)(b)(vi) to NYSE Arca Equities Rule
5.2(j)(6)(B)(I)(1)(b)(v), among other subsections).
\7\ 17 CFR 240.10A-3.
\8\ See, e.g., Securities Exchange Act Release Nos. 56637
(October 10, 2007), 72 FR 58704 (October 16, 2007) (SR-NYSEArca-
2007-92); 57132 (January 11, 2008), 73 FR 3300 (January 17, 2008)
(SR-NYSEArca-2007-125); 56838 (November 26, 2007), 72 FR 67774
(November 30, 2007) (SR-NYSEArca-2007-118); 56879 (December 3, 2007)
72 FR 69271 (December 7, 2007) (SR-NYSEArca-2007-110); and 52204
(August 3, 2005), 70 FR 46559 (August 10, 2005) (SR-PCX-2005-63).
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The Exchange stated that it might be unable to obtain surveillance
information from the Middle East Exchanges regarding the component
stocks, but that it intended to use its existing surveillance
procedures applicable to derivative products to monitor trading in the
Notes. The Exchange represented that such procedures are adequate to
properly monitor Exchange trading of the Notes in all trading sessions
and to deter and detect violations of Exchange rules. The Exchange also
noted that its 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 added that it
may obtain information via ISG from other exchanges that are members of
ISG.\9\
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\9\ For a list of the current members and affiliate members of
ISG, see http://www.isgportal.com.
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Notwithstanding the Notes' inability to meet the requirements of
NYSE Arca Equities Rules 5.2(j)(6)(B)(I)(1)(b)(ii) and (v), the
Exchange stated that the Index is sufficiently broad-based in scope
and, as such, less susceptible to potential manipulation, insofar as
the Index contains 105 companies, listed in five countries, with no one
Middle East Exchange listing greater than 50% of the Index Components.
The Exchange further stated that no one Index Component dominates the
underlying Index.
Detailed descriptions of the Notes, the Index (including the
methodology used to determine the composition of the Index), fees,
redemption procedures and payment at redemption, payment at maturity,
taxes, and risk factors relating to the Notes are available in the
Prospectus \10\ or on the Web site for the Notes (http://
www.barclays.com), as applicable.
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\10\ See Barclay's Prospectus, as amended, filed pursuant to
Rule 424(b)(2) under the Act (File No. 333-145845).
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III. Discussion and Commission's Findings
After careful review, the Commission finds that NYSE Arca's
proposal to list and trade the Notes is consistent with the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\11\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\12\ in that
it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest.
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\11\ 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).
\12\ 15 U.S.C. 78f(b)(5).
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Although NYSE Arca Equities Rule 5.2(j)(6)(B)(I) permits the
Exchange to approve the listing and trading of Equity Index-Linked
Securities, the Notes do not meet all of the generic listing
requirements thereunder because the components of the Index do not meet
the requirements in NYSE Arca Equities Rules 5.2(j)(6)(B)(I)(1)(b)(ii)
and (v).\13\ NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(ii) provides
that each component security of the underlying index shall have trading
volume in each of the last six months of not less than 1,000,000 shares
per month, except that for each of the lowest dollar weighted component
securities in the index that, in the aggregate, account for no more
than 10% of the dollar weight of the index, the trading volume shall be
at least 500,000 shares per month in each of the last six months.
According to the Exchange, as of July 17, 2008, in each of the prior
six months, 87.995% of the Index had a trading volume of 1,000,000
shares, and 8.79% of the bottom 10% of the Index had a trading volume
of 500,000 shares. Such percentages do not meet the minimum required
thresholds and, therefore, the Notes cannot be listed and traded
pursuant to the generic listing standards of NYSE Arca Equities Rule
5.2(j)(6)(B)(I) applicable to Equity Index-Linked Securities.
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\13\ See supra notes 5 and 6, respectively, and accompanying
text.
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In addition, NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(v)
provides that all component securities of the underlying index shall be
either (A) securities (other than foreign country securities and ADRs)
that are (x) issued by an Act reporting company or by an investment
company registered under the Investment Company Act of 1940, which, in
each case, is listed on a national securities exchange, and (y) an
``NMS stock'' (as defined in Rule 600 of Regulation NMS) or (B) foreign
country securities or ADRs, provided that foreign country securities or
foreign country securities underlying ADRs having their primary trading
market outside the United States on foreign trading markets that are
not members of ISG or parties to comprehensive surveillance sharing
agreements with the Exchange will not, in the aggregate, represent more
than 20% of the dollar weight of the index. According to the Exchange,
in the case of the Notes, the components underlying the Index are
foreign country securities that trade on foreign trading markets with
which the Exchange has not entered into any comprehensive surveillance
sharing agreements. In addition, the Exchange stated that none of the
Middle East Exchanges are members of ISG.
The Commission notes that the Exchange represents that it has
attempted, but to date has not been able, to enter into comprehensive
surveillance sharing agreements with the Middle East Exchanges. The
Commission further notes that, in certain limited circumstances, it has
previously approved the listing and trading of derivative securities
products based on indices that were composed of stocks for which a
national securities exchange has not entered into a comprehensive
surveillance sharing agreement with the relevant foreign exchange.\14\
The Exchange has represented that it intends to utilize its existing
surveillance procedures applicable to derivative products to monitor
trading in the Notes and that such procedures are adequate to properly
monitor Exchange trading of the Notes in all trading sessions and to
deter and detect violations of Exchange rules.
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\14\ See, e.g., Securities Exchange Act Release No. 54944
(December 15, 2006), 71 FR 77432 (December 26, 2006) (SR-NYSE-2006-
69) (approving the listing and trading of exchange-traded notes
linked to the MSCI India Equities Index).
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In addition, the Exchange has represented that the Notes will
comply with all other requirements applicable to Equity Index-Linked
Securities including, but not limited to, requirements relating to the
dissemination of key information such as the Equity Reference Asset
value and Intraday Indicative Value, rules and policies governing the
trading of equity securities, trading hours, trading halts,
surveillance, firewalls, and Information Bulletin to ETP Holders, as
set forth in prior Commission orders approving the generic listing
rules applicable to the listing and trading of Index-Linked
[[Page 51686]]
Securities, generally, and Equity Index-Linked Securities, in
particular.\15\
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\15\ See supra note 8.
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The Commission believes that the listing and trading of the Notes
is consistent with the Act. The Commission notes that, based on the
Exchange's representations, the Notes otherwise meet all of the other
applicable generic listing standards under NYSE Arca Equities Rule
5.2(j)(6). The Commission notes that the Index is composed of all of
the equity securities (103 stocks) that are included in five separate
Country Indices and has a total market capitalization of over $100
billion. The Commission further notes that it has previously approved
the listing and trading of derivative securities products based on
indices that were composed of stocks that did not meet certain
quantitative generic listing criteria.\16\
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\16\ See Securities Exchange Act Release No. 57349 (February 19,
2008), 73 FR 10084 (February 25, 2008) (SR-NYSEArca-2008-22). See
also Securities Exchange Act Release Nos. 55953 (June 25, 2007), 72
FR 36084 (July 2, 2007) (SR-NYSE-2007-46); and 56695 (October 24,
2007), 72 FR 61413 (October 30, 2007) (SR-NYSEArca-2007-111).
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For the foregoing reasons, the Commission believes that the
proposal to list and trade the Notes is consistent with the Act and
finds good cause for approving the proposed rule change. This order is
based on the Exchange's representations.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (SR-NYSEArca-2008-77) be, and it hereby
is, approved.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-20470 Filed 9-3-08; 8:45 am]
BILLING CODE 8010-01-P