[Federal Register: September 15, 2008 (Volume 73, Number 179)]
[Notices]
[Page 53306-53312]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15se08-126]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58469; File No. SR-NYSEArca-2008-92]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Relating to Listing of MacroShares Major Metro
Housing Trusts
September 5, 2008.
Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on August 25, 2008, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 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
Pursuant to the provisions of section 19(b)(1) of the Act,\4\ the
Exchange, through its wholly-owned subsidiary NYSE Arca Equities, Inc.
(``NYSE Arca Equities'' or the ``Corporation'') proposes to list and
trade under NYSE Arca Equities Rule 8.400 (``Paired Trust Shares'') the
shares of the MacroShares Major Metro Housing Up Trust (``Up Trust'')
and the MacroShares Major Metro Housing Down Trust (``Down Trust'')
(collectively, the ``Trusts''). The shares of the Up Trust are referred
to as the Up MacroShares, and the shares of the Down Trust are referred
to as the Down MacroShares (collectively, the ``Shares''). The text of
the proposed rule change is available on the Exchange's Web site at
http://www.nyse.com, at the Exchange's principal office and at the
[[Page 53307]]
Public Reference Room of the Commission.
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\4\ 15 U.S.C. 78s(b)(1).
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
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 those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade the Up MacroShares and the
Down MacroShares under Rule 8.400.\5\ The Up MacroShares and the Down
MacroShares will be offered by the Up Trust and the Down Trust,
respectively, established by MACRO Inflation Depositor, LLC, as
depositor, under the laws of the State of New York. The Trusts are not
registered with the Commission as investment companies.\6\
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\5\ The Commission approved trading a similar product on the
Exchange pursuant to unlisted trading privileges (``UTP'') when it
approved NYSE Arca Equities Rule 8.400. See Securities Exchange Act
Release No. 55033 (December 29, 2006), 72 FR 1253 (January 10, 2007)
(SR-NYSEArca-2006-75) (approving UTP trading of Claymore MACROshares
Oil Up Tradeable Shares and Claymore MACROshares Oil Down Tradeable
Shares). The Commission also approved for listing and trading the
same product on the American Stock Exchange. See Securities Exchange
Act Release No. 54839 (November 29, 2006), 71 FR 70804 (December 6,
2006) (SR-Amex-2006-82) (approving listing and trading Claymore
MACROshares Oil Up Tradeable Shares and Claymore MACROshares Oil
Down Tradeable Shares). In addition, the Commission has approved a
proposed rule change to amend NYSE Arca Equities Rule 8.400 to
permit listing and trading of MacroShares Medical Inflation Up Trust
and the MacroShares Medical Inflation Down Trust, which are similar
in structure to the Trusts. See Securities Exchange Act Release No.
58312 (August 5, 2008), 73 FR 46689 (August 11, 2008) (SR-NYSEArca-
2008-63). The Trusts will be listed and traded pursuant to NYSE Arca
Equities Rule 8.400 as amended in SR-NYSEArca-2008-63.
\6\ The Shares are being offered by the Trusts under the
Securities Act of 1933, as amended, 15 U.S.C. 77a. On August 6,
2008, the depositor filed with the Commission Registration
Statements on Form S-1 (Amendment No. 1) for the Up MacroShares
(File No. 333-151522) (``Up Trust Registration Statement'') and for
the Down MacroShares (File No. 333-151523)(``Down Trust Registration
Statement'', and, together with the Up Trust Registration Statement,
``Registration Statements''). Descriptions herein relating to the
operation of the Trusts and the S&P/Case-Shiller Home Price Indices
are based on the Registration Statements.
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Description of the Shares and the Trusts
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, as described in more detail below. The Up
MacroShares and the Down MacroShares represent undivided beneficial
interests in the Up Trust and the Down Trust, respectively. The Shares
are ``Trading Shares'' as defined in NYSE Arca Equities Rule
8.400(b)(1)(B).
The assets of the Down Trust will consist of an income distribution
agreement and settlement contracts entered into with the Up Trust.
Similarly, the assets of the Up Trust will consist of an income
distribution agreement and settlement contracts entered into with the
Down Trust.\7\ 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. The trustee
for the Trusts is State Street Bank and Trust Company (``Trustee'').
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\7\ The income distribution agreement and applicable settlement
contracts are attached as exhibits to the Registration Statements.
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The Trusts will make quarterly distributions of net income, if any,
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. Quarterly distributions of net income, if
any, will be made on distribution dates that are scheduled to occur in
April, July, October and January of each year. Each quarterly and final
distribution will be based on the value of the S&P/Case-Shiller
Composite-10 Home Price Index (``Index''), as well as on prevailing
interest rates on U.S. Treasury obligations. The last published value
of the S&P/Case-Shiller Composite-10 Home Price Index is referred to as
the ``Reference Value of the Index'' or ``Reference Value'', as
discussed below.\8\
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\8\ The Reference Value of the Index is the Reference Price for
purposes of NYSE Arca Equities Rule 8.400.
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The starting level for the Reference Value of the Index for
purposes of the transactions described in the Registration Statements
is 181.48.\9\ If the Reference Value rises above its starting level,
the Up Trust's Underlying Value (as described below) will increase to
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 a ``leverage factor'' of 2. Conversely, if the level of
the Reference Value of the Index falls below its starting level on and
after the closing date, 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, such portion being multiplied by the
leverage factor.
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\9\ This figure is as of July 29, 2008 and is subject to
updating to be included in the Registration Statements upon
effectiveness.
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Under the income distribution agreement, as of any distribution
date, each Trust will either (a) be required to pay a portion of its
available income to the other Trust or (b) be entitled to receive all
or a portion of the other Trust's available income, based, in each
case, on the Reference Value 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 (a) be required to make a final
payment out of its assets to the other Trust, or (b) 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 Reference Value of the Index
on the last calendar day preceding the final scheduled termination day,
an early termination day or the relevant redemption date.\10\
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\10\ The final distribution made on the Up MacroShares or Down
MacroShares on the final scheduled termination date, an early
termination date or a redemption date will be based upon the
Underlying Value of the Up Trust or Down Trust, respectively, on the
last calendar day, whether or not such day is a business day, that
precedes such final scheduled termination date, early termination
date, or redemption date. Underlying Value will be calculated for
each day based upon the Reference Value of the Index for that day.
The Underlying Value of the Up Trust or Down Trust on each day of
measurement represents the aggregate amount of the assets in the
paired trusts to which the Up Trust or Down Trust would be entitled
if the settlement contracts were settled on that day. The Underlying
Value of the Up Trust or Down Trust on each day of measurement also
represents the aggregate final distribution to which holders of the
Up MacroShares would be entitled if those shares were redeemed on
that day.
The Underlying Value of a Trust will be equal, on any calendar
day occurring during any Calculation Period, for so long as the
proportion of assets on deposit in the Up and Down Trust is one-to-
one. The methodology for calculating the Underlying Value for the
Trusts is described in the Registration Statements.
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The Reference Value of the Index
The amount of each payment required to be made by the paired trusts
under the income distribution agreement will be based on the daily
level of the Reference Value of the Index during the preceding
calculation period and the amount of the settlement payment to be made
under the settlement contracts will be based on the Reference Value of
the Index on the day preceding the business day on which those payments
are made on a redemption date, an early
[[Page 53308]]
termination date or the final scheduled termination date. The term
``Reference Value of the Index'' refers to the value of the Index, as
calculated and published by Standard & Poor's (``S&P'') on the most
recent Index Publication Day.\11\ If the relevant date of measurement
is an Index Publication Day, then the Reference Value of the Index will
be the value calculated and published on that day. The Index is
maintained and governed by the S&P/Case-Shiller Index Committee, whose
members are drawn from S&P, Fiserv Fulfillment Services, Inc. and
leading industry experts; S&P designates the Index Committee Chairman
and its representatives retain the controlling majority of such
committee.
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\11\ ``Index Publication Day'' means the business day in each
month on which S&P publishes the value for the S&P/Case-Schiller
Composite-10 Home Price Index for the second preceding month.
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The S&P/Case-Shiller Home Price Indices (``Indices'') measure the
change in home prices in one or several geographic regions of the
United States. They are calculated monthly and are publicly available
for 20 major metropolitan areas (Metropolitan Statistical Areas or
MSAs), which are also aggregated to form two composites--one comprised
of 10 of the metro areas, the other comprised of all 20. The S&P/Case-
Shiller Composite-10 Home Price Index is a weighted average of the
following 10 S&P/Case-Shiller Metro Area Home Price Indices: the S&P/
Case-Shiller Boston Home Price Index, the S&P/Case-Shiller Chicago Home
Price Index, the S&P/Case-Shiller Denver Home Price Index, the S&P/
Case-Shiller Las Vegas Home Price Index, the S&P/Case-Shiller Los
Angeles Home Price Index, the S&P/Case-Shiller Miami Home Price Index,
the S&P/Case-Shiller New York City Area Home Price Index, the S&P/Case-
Shiller San Diego Home Price Index, the S&P/Case-Shiller San Francisco
Home Price Index, and the S&P/Case-Shiller Washington, DC Home Price
Index. The value of the Index on any Index Publication Day reflects
home prices for the second calendar month preceding the month in which
such Index Publication Day occurs.
The Index is the result of a combination, based on a market
weighted average, of ten of the Indices for separate MSAs. The current
Index component weights and the factors considered in calculating the
separate Indices on which the Index is based are described below.\12\
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\12\ The current normalized composite weights for the Index are
as follows: Year 2000 on--Boston: 0.07412188, Chicago: 0.08886762,
Denver: 0.03682453, Las Vegas: 0.01480245, Los Angeles: 0.21161961,
Miami: 0.04986164, New York: 0.27239040, San Diego: 0.05513356, San
Francisco: 0.11787881, Washington, DC: 0.07849949. Source: Standard
& Poor's (S&P/Case-Shiller Home Price Indices Methodology) and
Fiserv.
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Overview of the S&P/Case-Shiller Home Price Indices and the Index
The Indices measure changes in housing market prices given a
constant level of quality. Changes in the types and sizes of houses or
changes in the physical characteristics of houses are specifically
excluded from the calculations to avoid incorrectly affecting the
applicable index value.
The Indices use the ``repeat sales method'' of index calculation--
an approach that is widely recognized as the premier methodology for
indexing housing prices--which uses data on properties that have sold
at least twice, in order to capture the true appreciated value of each
specific sales unit.
The Indices originated in the 1980s by Case Shiller Weiss's
research principals, Karl E. Case and Robert J. Shiller. At the time,
Case and Shiller developed the repeat sales pricing technique.
According to the Registration Statements, this methodology is
recognized as the most reliable means to measure housing price
movements and is used by other home price index publishers, including
the Office of Federal Housing Enterprise Oversight (OFHEO).
Eligibility Criteria
The Indices are designed to measure, as accurately as possible,
changes in the total value of all existing single-family housing stock.
The methodology samples all available and relevant transaction data to
create matched sale pairs for pre-existing homes.
The Indices do not sample sale prices associated with new
construction, condominiums, co-ops/apartments, multi-family dwellings,
or other properties that cannot be identified as single-family.
The factors that determine the demand, supply, and value of housing
are not the same across different property types. Consequently, the
price dynamics of different property types within the same market often
vary, especially during periods of increased market volatility. In
addition, the relative sales volumes of different property types
fluctuate, so Indices that are segmented by property type will more
accurately track housing values.
MSA Index Construction
The Indices are based on observed changes in home prices. They are
designed to measure increases or decreases in the market value of
residential real estate in 20 defined MSAs and three price tiers--low,
middle and high. In contrast, the Indices are, specifically, not
intended to measure recovery costs after disasters, construction or
repair costs, or other such related items.
The Indices are calculated monthly by FISERV, using a three-month
moving average algorithm. Home sales pairs are accumulated in rolling
three-month periods, on which the repeat sales methodology is applied.
The index point for each reporting month is based on sales pairs found
for that month and the preceding two months. For example, the December
2005 index point is based on repeat sales data for October, November
and December of 2005. This averaging methodology is used to offset
delays that can occur in the flow of sales price data from county deed
recorders and to keep sample sizes large enough to create meaningful
price change averages.
To calculate the Indices, data are collected on transactions of all
residential properties during the months in question. The main variable
used for index calculation is the price change between two arms-length
sales of the same single-family home. Home price data are gathered
after that information becomes publicly available at local recording
offices across the country. Available data usually consist of the
address for a particular property, the sale date, the sale price, the
type of property, and in some cases, the name of the seller, the name
of the purchaser, and the mortgage amount.
For each home sale transaction, a search is conducted to find
information regarding any previous sale for the same home. If an
earlier transaction is found, the two transactions are paired and are
considered a ``repeat sale.'' Sales pairs are designed to yield the
price change for the same house, while holding the quality and size of
each house constant.
All available arms-length transactions for single-family homes are
candidates for sale pairs. When they can be identified, transactions
with prices that do not reflect market value are excluded from sale
pairs. This includes: (1) Non-arms-length transactions (e.g., property
transfers between family members); (2) transactions where the property
type designation is changed (e.g., properties originally recorded as
single-family homes are subsequently recorded as condominiums); and (3)
suspected data errors where the order of magnitude in values appears
unrealistic.
Each sales pair is aggregated with all other sales pairs found in a
particular MSA to create the MSA-level index. 10
[[Page 53309]]
of the 20 Indices are then combined by S&P, using a market-weighted
average, to create the Index (as noted above).\13\
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\13\ See note 11, supra.
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The Weighting of Sales Pairs
The Indices are designed to reflect the average change in all home
prices in a particular geographic market. However, individual home
prices are used in these calculations and can fluctuate for a number of
reasons. In many of these cases, the change in value of the individual
home does not reflect a change in the housing market of that area; it
only reflects a change in that individual home. The index methodology
addresses these concerns by weighting sales pairs.
Different weights are assigned to different changes in home prices
based on their statistical distribution in that geographic region. The
goal of this weighting process is to measure changes in the value of
the residential real estate market, as opposed to atypical changes in
the value of individual homes. These weighting schemes include:
If there is a large change in the prices of a sales pair relative
to the statistical distribution of all price changes in the area, then
it is possible that the home was remodeled, rebuilt or neglected in
some manner during the period from the first sale to the second sale.
Or, if there were no physical changes to the property, there may have
been a recording error in one of the sale prices, or an excessive price
change caused by idiosyncratic, non-market factors. Since the Indices
seek to measure homes of constant quality, the methodology will apply
smaller weights to homes that appear to have changed in quality or
sales that are otherwise not representative of market price trends.
Data related to homes that sell more than once within six months
are excluded from the calculation of any Indices. Historical and
statistical data indicate that sales made within a short interval often
indicate that one of the transactions: (1) Is not arms-length, (2)
precedes or follows the redevelopment of a property, or (3) is a
fraudulent transaction.
Sales pairs are also weighted based on the time interval between
the first and second sales. If a sales pair interval is longer, then it
is more likely that a house may have experienced physical changes.
Sales pairs with longer intervals are, therefore, given less weight
than sales pairs with shorter intervals.
Each sales pair is assigned a weight equal to the first sale price
to ensure that the Indices track the aggregate/average value of all
homes in a market.
Index Governance
The S&P/Case-Shiller Home Price Indices and the Index are
maintained and governed by the S&P/Case-Shiller Index Committee. The
Index Committee members are drawn from S&P, Fiserv Fulfillment
Services, Inc. and leading industry experts; S&P designates the Index
Committee Chairman. The Index Committee has complete discretion to
determine how the Indices and the Index are calculated. In addition,
the Index Committee may revise index policy covering rules for
selecting houses to be considered for the index and extraordinary
events, such as natural disasters, that may result in special
consideration in the index in any given month. S&P considers
information about changes to the Indices and related matters to be
potentially market moving and material. Therefore, all Index Committee
discussions are confidential. The Index Committee has no broker-dealer
members.\14\
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\14\ S&P employee Index Committee members and any other S&P
employees with access to S&P/Case-Shiller index data are subject to
The McGraw-Hill Companies, Inc. Code of Business Ethics and to
additional policies that prohibit insider trading and that cover
securities trading, information security and information
dissemination.
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For more information on the index construction process, pairing
sales, controlling data quality, index maintenance, and the repeat
sales methodology, see the ``S&P/Case-Shiller Home Price Indices: Index
Methodology'' document, available at http://www.macromarkets.com.
Termination Triggers
Following the occurrence of specified events, referred to in the
Registration Statements as ``Termination Triggers,'' the income
distribution agreement and the settlement contracts will automatically
terminate and the Trustee will redeem all of the Paired Shares on the
next scheduled Distribution Date. Among the events that will constitute
Termination Triggers are the following:
--S&P fails to publish the Index or S&P fails to make the Reference
Value of the Index available to the Paired Trusts for purposes of
calculating Underlying Value, in either case, for 3 consecutive Index
Publication Days;
--On any Index Publication Day, the Index rises to or above 258.61,\15\
at which point the Down Trust would be entitled to approximately 85% of
the Up Trust's assets under the settlement contracts, or the Index
falls to or below 104.35,\16\ at which point the Up Trust would be
entitled to approximately 85% of the Down Trust's assets under the
settlement contracts, and remains at or above this value or at or below
this value, as applicable, for the next two (2) consecutive Index
Publication Days;
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\15\ See note 9, supra.
\16\ See note 9, supra.
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--The Down MacroShares and/or the Up MacroShares are delisted by NYSE
Arca. Additional Termination Triggers are described in the Registration
Statements.
Calculation of Underlying Value
The Final Distribution made on the Down MacroShares on the Final
Scheduled Termination Date, an Early Termination Date or a Redemption
Date will be based upon the Underlying Value of the Down Trust on the
last calendar day that precedes the Final Scheduled Termination Date,
an Early Termination Date or the relevant Redemption Date. Underlying
Value will be calculated for each calendar day based upon the Reference
Value of the Index. The Underlying Value of the Down Trust on any date
of measurement represents the aggregate amount of the assets in the
Paired Trusts to which the Down Trust would be entitled if the
settlement contracts were settled on that day. The Underlying Value of
the Down Trust on each day also represents the aggregate Final
Distribution to which holders of the Down MacroShares would be entitled
if those Shares were redeemed on that day. The Underlying Value of the
Up Trust on any day represents the aggregate amount of the assets in
the Paired Trusts to which the Up Trust would be entitled if the
settlement contracts were settled on that day. The Underlying Value of
the Up Trust on each day also represents the aggregate Final
Distribution to which holders of the Up MacroShares would be entitled
if those shares were redeemed on that day.
An increase in the Reference Value of the Index results in a
proportionate decrease in the Underlying Value of the Down Trust,
multiplied by the leverage factor. A decrease in the Reference Value of
the Index results in a proportionate increase in the Underlying Value
of the Down Trust, multiplied by the leverage factor. After the closing
date, the Reference Value of the Index may fluctuate above or below a
``starting level'' of 181.48.\17\ The proportion of the funds in the
Down Trust and the Up Trust will initially be 1:1 and this proportion
will be sought to be maintained throughout the entire
[[Page 53310]]
transaction by virtue of the requirement that redemptions and issuances
must be done in MacroShares Units composed of 50,000 Down MacroShares
and 50,000 Up MacroShares. The Underlying Value formula as described in
the Registration Statements, and the requirement that Down MacroShares
can only be issued and redeemed in paired optional redemptions and
paired issuances and only in the form of MacroShares Units, is intended
to ensure that a change of 3.63 \18\ in the Reference Value of the
Index will always result in a $1 change in the per share Underlying
Value of each Down MacroShare.
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\17\ See note 9, supra.
\18\ See note 9, supra.
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The impact of changes in the Reference Value of the Index is
multiplied by the leverage factor. The ratio of the ending level of the
Reference Value of the Index to the starting level of the Reference
Value of the Index on the closing date, will yield a settlement factor
by which the assets held on deposit by the Down Trust must be
multiplied in order to determine the trust's Underlying Value. Before
being so applied, this settlement factor is first adjusted by a
leverage factor, which is equal to 2. The effect of this is to double
any increase in the Underlying Value of the Down Trust as well as to
double any decline in that Underlying Value, making the per share
Underlying Value and the market price of Down MacroShares potentially
more volatile than the housing prices which those shares reference.
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.\19\ The Shares may then be sold by authorized
participants to the public at the market price prevailing at the time
of any such sale.
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\19\ Authorized participants must also pay a transaction fee of
$2,000 for any paired redemption or issuance.
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The 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 Underlying Value of those
shares, as measured on the applicable redemption date. Unless earlier
redeemed on a redemption date or an early termination date, a final
distribution will be made on the Up MacroShares on the distribution
date occurring in 2018.
The Registration Statements include a number of hypothetical
scenarios of circumstances that will impact the Underlying Value of an
Up MacroShare and a Down MacroShare.
For more information regarding the Shares, the Trusts, the
Reference Value, Income Distribution, Redemption Final Distribution,
risks, fees and expenses, Termination Triggers, and creation and
redemption procedures, see the Registration Statements.
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, the Trustee will calculate the Underlying Value of the Up
Trust and the Down Trust and the per share Underlying Value of one Up
MacroShare and one Down MacroShare. The Trustee will then provide such
values to the administrative agent, who will post them on its Web site
located at http://www.macromarkets.com. The Trustee will base its
calculation of the Underlying Values for any business day on the
administrative agent's calculation of the Reference Values for the
preceding day (regardless of whether that preceding day is a business
day or non-business day), which it will provide to the Trustee. The
Underlying Values will be disseminated to all market participants at
the same time.
An intraday indicative value will not be disseminated for the
Trusts. The Exchange believes that an intraday indicative value for the
Trusts would not provide an accurate approximation of the value of
Shares of the Trusts. As noted above, the Reference Price, (in the case
of the Up MacroShares and Down MacroShares, the Reference Value), is
based on the monthly value of the Index. The Exchange believes that the
Reference Price applicable to the Trusts, considered together with the
current market price of Shares, will provide investors with sufficient
information to approximate the amount to be received upon redemption of
Shares.
Information regarding market price and volume of the Shares is and
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.
Announcements regarding the levels for the Index and the Indices
are made at 9:00 a.m. Eastern Time on the last Tuesday of each month,
and are made available to all market participants at the same time.
Such levels are available through major market data vendors (e.g.,
Bloomberg, and Reuters). Press releases are posted at Standard and
Poor's Web site at http://www.indices.standardandpoors.com and are
released to major news services. Historical data regarding the Index
and the Indices are published at http://
www.indices.standardandpoors.com.
The Index and the Indices are disseminated to all market
participants at the same time.
Initial and Continued Listing Criteria
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 Corporation will obtain a
representation on behalf of the Up Trust and the Down Trust that the
Underlying Value per share of each Up Share and Down Share,
respectively, will be calculated daily and will be made available to
all market participants at the same time. The Corporation will remove
from listing the Up MacroShares or the Down MacroShares under the
circumstances outlined in 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 Reference Value, unless the Corporation files with
the Commission a related proposed rule change pursuant to Rule
[[Page 53311]]
19b-4 under the Exchange Act \20\ seeking approval to continue trading
the Up MacroShares or Down MacroShares and such rule change is approved
by the Commission; or
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\20\ 20 17 CFR 240.19b-4.
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If such other event shall occur or condition exists which
in the opinion of the Corporation makes further dealings on the
Corporation inadvisable.
Rule 8.400(d)(2) also provides that the Corporation 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 Corporation may
consider other factors that may be relevant.
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. Rule 8.400(d)(2)
described above sets forth circumstances under which Shares may be
halted.
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 Values per Share are available to all market
participants.
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 has appropriate rules to facilitate
transactions in the Shares during all trading sessions.
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.\21\
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\21\ For a list of the current members of ISG, see http://
www.isgportal.org.
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In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
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),\22\ 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.
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\22\ 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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In addition, the Bulletin will reference that the Shares are
subject to various fees and expenses described in the Registration
Statements. The Bulletin will discuss any exemptive, no-action, and
interpretive relief granted by the Commission from any rules under the
Exchange Act.
2. Statutory Basis
The basis under the Exchange Act for this proposed rule change is
the requirement under section 6(b)(5) \23\ that an exchange have rules
that are designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest. The
Exchange believes that the proposed rule change will facilitate the
listing and trading of additional types of exchange-traded products
that will enhance competition among market participants, to the benefit
of investors and the marketplace. In addition, the listing and trading
criteria set forth in NYSE Arca Equities Rule 8.400 are intended to
protect investors and the public interest.
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\23\ 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
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve such proposed rule change, or
[[Page 53312]]
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
The Exchange has requested accelerated approval of this proposed
rule change prior to the 30th day after the date of publication of the
notice of the filing thereof. The Commission is considering granting
accelerated approval of the proposed rule change at the end of a 15-day
comment period.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2008-92 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-2008-92. 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 the filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2008-92 and should
be submitted on or before September 30, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-21329 Filed 9-12-08; 8:45 am]
BILLING CODE 8010-01-P