[Federal Register: April 14, 2008 (Volume 73, Number 72)]
[Notices]
[Page 20081-20082]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14ap08-98]
[[Page 20081]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57634; File No. SR-NYSEArca-2008-35]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Amendment No. 1 Thereto and Order Granting Accelerated Approval of
Proposed Rule Change, as Modified by Amendment No. 1, Relating to
Equity Index-Linked Securities
April 8, 2008.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on March 26, 2008, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange''),
through its wholly owned subsidiary, NYSE Arca Equities, Inc. (``NYSE
Arca Equities''), filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which items have been substantially prepared by the Exchange.
On April 4, 2008, the Exchange filed Amendment No. 1 to the proposed
rule change. This order provides notice of the proposed rule change, as
amended, and approves the proposed rule change, as modified, on an
accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its rules governing NYSE Arca, LLC
(also referred to as the ``NYSE Arca Marketplace''), which is the
equities trading facility of NYSE Arca Equities. The Exchange is
proposing to amend NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(2), the
Exchange's continued listing standard for equity index-linked
securities (``Equity Index-Linked Securities'') to: (i) Clarify equity
index rebalancing criteria; and (ii) amend the index rebalancing
requirement for equal-dollar or modified equal-dollar weighed indexes.
The text of the proposed rule change is available at the Exchange, the
Commission's Public Reference Room, and http://www.nyse.com.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item III below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
NYSE Arca proposes to amend NYSE Arca Equities Rule
5.2(j)(6)(B)(I)(2), the Exchange's continued listing standard for
Equity Index-Linked Securities. Specifically, the Exchange proposes to:
(i) Clarify equity index rebalancing criteria; and (ii) amend the
semiannual index rebalancing requirement for equal-dollar or modified
equal-dollar weighted indexes.
For Equity Index-Linked Securities, the Exchange proposes to
remove, in NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(2)(i), the
requirement that only capitalization weighted, modified capitalization
weighted, and price weighted indexes be reviewed as of the first day of
January and July in each year. The Exchange does not believe that it is
consistent to impose specific semiannual index reviews only to
capitalization weighted, modified capitalization weighted, or price
weighted indexes.
For Equity Index-Linked Securities, the Exchange proposes to amend
NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(2)(d), which currently requires
that equity indexes based upon the equal-dollar, or modified equal-
dollar weighting method be rebalanced at least semiannually. The
Exchange does not believe that it is consistent to impose a specific
semiannual rebalancing requirement only to equal-dollar or modified
equal-dollar weighted indexes. Instead, the Exchange proposes that all
indexes be rebalanced at least annually. An index is rebalanced in
accordance with its stated methodology, as determined by a third-party
index sponsor.
The Exchange notes that a significant number of currently existing
equity indexes that utilize the equal-dollar or modified equal-dollar
weighting methodology are rebalanced annually rather than semiannually.
As the issuer of Equity Index-Linked Securities generally licenses the
right to utilize the underlying index from a third-party index sponsor,
it is often not within the issuer's control to have the index
rebalanced more frequently. As such, it is not currently possible under
Rule 5.2(j)(6)(B)(I) to list Equity Index-Linked Securities based on
such indexes. However, as these types of indexes are relatively common
and detailed information concerning the procedures governing the
construction of the underlying index will be available to investors
either in the issuer's prospectus or on the index sponsor's Web site,
the Exchange believes that it is appropriate to allow investors to make
their own decisions as to the sufficiency of rebalancing of an equal-
dollar or modified equal-dollar weighted index underlying an issuance
of Equity Index-Linked Securities. Amending the generic listing
standards for Equity Index-Linked Securities would promote competition
and benefit investors, issuers, and third-party index sponsors since it
would allow NYSE Arca to list, without the delay associated with a
stand-alone rule filing, Equity Index-Linked Securities based on a
broader group of indexes. The Exchange notes that its listing standards
for Investment Company Units \3\ do not impose a semiannual index
rebalancing requirement for equal-dollar or modified equal-dollar
weighted index.
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\3\ See NYSE Arca Rule 5.2(j)(3) Commentary .01.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\4\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\5\ in particular, in that it
is designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, and to remove impediments to and perfect
the mechanisms 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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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
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III. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
Send e-mail to rule-comments@sec.gov. Please include File
Number SR-NYSEArca-2008-35 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2008-35.
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 (http://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-2008-35 and should
be submitted on or before May 5, 2008.
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
After careful consideration, the Commission finds that the proposed
rule change is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange \6\ and, in particular, the requirements of Section 6 of the
Act.\7\ Specifically, the Commission finds that the proposed rule
change is consistent with Section 6(b)(5) of the Act,\8\ which
requires, among other things, that the rules of a national securities
exchange be designed to promote just and equitable principles of trade,
to foster cooperation and coordination with persons engaged in
regulating, clearing, settling, processing information with respect to,
and facilitating transactions in securities, to remove impediments to
and perfect the mechanism of a free and open market and a national
market system, and, in general, to protect investors and the public
interest.
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\6\ 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).
\7\ 15 U.S.C. 78f.
\8\ 15 U.S.C. 78f(b)(5).
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The Commission believes that the proposed rule change will provide
for consistent criteria for the rebalancing of indexes based on
different methodologies. The Commission further believes that the
proposal should facilitate the listing and trading of Equity Index-
Linked Securities based on indexes with different rebalancing
requirements, thus benefiting investors by providing them with a wider
selection of derivative products. The Commission notes that the
proposed rule change would also conform index requirements for Equity
Index-Linked Securities to the requirements \9\ applicable to equity-
based Investment Company Units.
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\9\ See NYSE Arca Equities Rule 5.2(j)(3).
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The Commission finds good cause for approving the proposed rule
change prior to the 30th day after the date of publication of the
notice of filing thereof in the Federal Register. The Commission notes
that the proposed rule change is similar to a proposal related to index
rebalancing of Equity Index-Linked Securities \10\ that was recently
approved by the Commission and does not believe that this proposal
raises any novel regulatory issues. Therefore, the Commission finds
good cause, consistent with Section 19(b)(2) of the Act,\11\ to approve
the proposed rule change on an accelerated basis.
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\10\ See Securities Exchange Act Release No. 56838 (November 26,
2007), 72 FR 67774 (November 30, 2007) (SR-NYSEArca-2007-118).
\11\ 15 U.S.C. 78s(b)(2).
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\12\ that the proposed rule change, as modified (SR-NYSEArca-2008-
35), be, and it hereby is, approved on an accelerated basis.
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\12\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-7827 Filed 4-11-08; 8:45 am]
BILLING CODE 8011-01-P