

[Federal Register: November 15, 2005 (Volume 70, Number 219)]
[Notices]               
[Page 69367-69369]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15no05-98]                         


[[Page 69367]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52747; File No. SR-Amex-2005-084]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change and Amendment No. 1 Thereto Relating to the Trading 
Pursuant to Unlisted Trading Privileges of the iShares MSCI EAFE Value 
Index Fund and the iShares MSCI EAFE Growth Index Fund

November 8, 2005.
    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 August 19, 2005 the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
On September 27, 2005, Amex filed Amendment No. 1 to the proposed rule 
change.\3\ The Commission is publishing this notice to solicit comments 
on the proposed rule change, as amended, from interested persons and is 
approving the proposal on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange clarified and supplemented 
certain aspects of its proposal. Amendment No. 1 supplements the 
information provided in various sections, as indicated, of the 
Exchange's Form 19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Amex proposes to trade shares (the ``Fund Shares'' or 
``Shares'') of the iShares[reg] MSCI EAFE Value Index Fund (ticker 
symbol: EFV) and iShares MSCI EAFE Growth Index Fund (ticker symbol: 
EFG) (each a ``Fund'' or collectively, the ``Funds''),\4\ pursuant to 
unlisted trading privileges (``UTP'').
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    \4\ MSCI and MSCI Indices are registered service marks of Morgan 
Stanley & Co. Incorporated.
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    The text of the proposed rule change is available on the Exchange's 
Web site (http://www.amex.com,) at the principal office of the 

Exchange, and at the Commission's Public Reference Room.

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 Amex included statements 
concerning the purpose of, and basis for, the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III below, and is set forth in Sections A, B, and C below.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

 1. Purpose
    The Exchange proposes to trade Fund Shares which are Index Fund 
Shares under Amex Rules 1000A et seq., pursuant to UTP. The Commission 
previously approved the original listing and trading of the Funds on 
the New York Stock Exchange, Inc. (``NYSE'').\5\ Each Fund is a 
separate series of the iShares Trust (the ``Trust''). Morgan Stanley 
Capital International (``MSCI'') calculates and maintains the MSCI EAFE 
Growth Index and MSCI EAFE Value Index (collectively, the ``Indexes''). 
MSCI is a partially owned subsidiary of Morgan Stanley. Additional 
information about the Funds is also available athttp://www.iShares.com.

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    \5\ See Securities Exchange Act Release No. 52178 (July 29, 
2005), 70 FR 46244 (August 9, 2005) (SR-NYSE-2005-41) (``NYSE 
Order''). The Funds commenced trading on the NYSE on August 5, 2005.
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    The investment objective of the iShares MSCI EAFE Value Index Fund 
is to provide investment results that correspond generally to the price 
and yield performance of the MSCI EAFE Value Index, and the investment 
objective of the iShares MSCI EAFE Growth Index Fund is to provide 
investment results that correspond generally to the price and yield 
performance of the MSCI EAFE Growth Index. The Indexes are subsets of 
the MSCI EAFE Index and constituents of the Indexes include securities 
from Europe, Australasia (Australia and Asia), and the Far East. Each 
Index generally represents approximately 50% of the free float-adjusted 
market capitalization of the MSCI EAFE Index and consists of those 
securities classified by MSCI as most representing the growth or value 
style, respectively.

(a) Dissemination of Information About the Fund Shares

    Quotations for and last sale information regarding the Funds are 
disseminated through the Consolidated Tape Association (``CTA''). The 
net asset value (``NAV'') of each Fund is calculated each business day, 
normally at the close of regular trading of the NYSE, and is published 
in a number of places, including http://www.iShares.com and through the 

facilities of the CTA. According to the Funds' prospectus, Investors 
Bank & Trust Company, the administrator, custodian and transfer agent 
for each Fund, determines the NAV for the Funds as of the close of 
regular trading on the NYSE (ordinarily 4 p.m., eastern time) on each 
day that the NYSE is open for trading.\6\ The Funds and the index 
calculation methodology for the Indexes are both described in more 
detail in the NYSE Order.
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    \6\ The Web site for the Trust, http://www.iShares.com. makes 

avaialble a variety of other relevant information about the Shares.
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    In order to provide updated information relating to the Funds for 
use by investors, professionals, and persons wishing to create or 
redeem shares in the Funds, the NYSE disseminates, through the 
facilities of the CTA, the indicative optimized portfolio value 
(``IOPV''), calculated by Bloomberg L.P., every fifteen (15) seconds 
during the regular trading hours of 9:30 a.m. to 4:15 p.m. e.t.

(b) Trading Rules

    The Exchange deems the Fund Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. The trading hours for 
the Funds on the Exchange will be 9:30 a.m. to 4:15 p.m. eastern time 
(``ET''). Shares trade with a minimum price variation of $0.01.
    Amex Rule 190 generally precludes certain business relationships 
between an issuer and the specialist in the issuer's securities. 
Exceptions in the rule permit specialists in Fund Shares to enter into 
Creation Unit transactions to facilitate the maintenance of a fair and 
orderly market. Commentary .04 to Amex Rule 190 specifically applies to 
Index Fund Shares listed on the Exchange, including the Shares. 
Commentary .04 states that nothing in Amex Rule 190(a) should be 
construed to restrict a specialist registered in a security issued by 
an investment company from purchasing and redeeming the listed 
security, or securities that can be subdivided or converted into the 
listed security, from the issuer as appropriate to facilitate the 
maintenance of a fair and orderly market.
    Amex Rule 154, Commentary .04(c) provides that stop and stop limit 
orders to buy or sell a security (other than an option, which is 
covered by Amex Rule 950(f) and Commentary thereto) the price of which 
is derivatively priced based upon another security or index of 
securities, may with the prior approval

[[Page 69368]]

of a Floor Official, be elected by a quotation, as set forth in 
Commentary .04(c)(i-v). The Exchange has designated Index Fund Shares, 
including the Funds Shares, as eligible for this treatment.\7\
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    \7\ See Securities Exchange Act Release No. 29063 (April 10, 
1991), 56 FR 15652 (April 17, 1991) (SR-Amex-90-31) at note 9, 
regarding the Exchange's designation of equity derivative securities 
as eligible for such treatment under Amex Rule 154, Commentary 
.04(c).
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    The rules of the Exchange require its members to deliver a 
prospectus or product description to investors purchasing Shares of the 
Fund prior to or concurrently with the confirmation of a transaction in 
such Shares. The Exchange notes, however, that although Amex Rule 1000A 
provides for delivery of written descriptions to customers of Funds 
that have received an exemption from section 24(d) of the Investment 
Company Act of 1940 and the Trust has received such an exemption, there 
is at this time no written description available for these Funds. The 
Exchange will advise its members and member organizations that delivery 
of a prospectus in lieu of a written description would satisfy the 
requirements of Amex Rule 1000A.
    The Exchange will cease trading in the Shares if (a) the primary 
market stops trading the Shares because of a regulatory halt akin to a 
halt based on Amex Rule 117 and/or a halt because dissemination of the 
IOPV and/or underlying index value has ceased or (b) the primary market 
delists the Shares.\8\
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    \8\ Telephone conversation between Florence Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission, and 
Marija Willen, Associate General Counsel, Amex, on November 7, 2005.
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(c) Surveillance

    The Exchange notes that the Underlying Indexes are broad-based and 
have components with significant market capitalizations and 
liquidity.\9\ Nevertheless, the Exchange represents that its 
surveillance procedures are adequate to properly monitor the trading of 
the Shares. Specifically, the Amex will rely on its existing 
surveillance procedures governing Index Fund Shares.
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    \9\ Telephone conversation between Florence Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission, and 
Marija Willen, Associate General Counsel, Amex, on November 7, 2005.
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(d) Information Circular

    In connection with the trading of the Shares of each Fund, the Amex 
will inform its members in an Information Circular of the special 
characteristics and risks associated with trading of the Shares, such 
as, a description of each Fund and associated Shares, how Fund Shares 
are created and redeemed in Creation Units (e.g., that Fund Shares are 
not individually redeemable), foreign currency risks, foreign 
securities characteristics, applicable foreign country laws and 
restrictions, applicable Exchange rules, dissemination information, 
trading information, the applicability of suitability rules, and a 
discussion of any relief provided by the Commission or the staff from 
any rules under the Act. Additionally, in the Information Circular, the 
Exchange will advise its members to deliver to investors purchasing 
Shares of the Fund a prospectus, as described above, prior to or 
concurrently with the confirmation of a transaction in such Shares. The 
Information Circular will also discuss the information that will be 
publicly available about the Shares.
    The Information Circular will also remind members of their 
suitability obligations, including Amex Rule 411, which impose a duty 
of due diligence on its members and member firms to learn the essential 
facts relating to every customer prior to trading the Shares.
2. Statutory Basis
    The proposed rule change, as amended, is consistent with section 
6(b) of the Act \10\ in general and furthers the objectives of section 
6(b)(5) \11\ 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 regulating, clearing, settling, processing 
information with respect to, and facilitating transaction in 
securities, and, in general to protect investors and the public 
interest. In addition, the Exchange believes that the proposal is 
consistent with Rule 12f-5 under the Act \12\ because it deems the Fund 
Shares to be equity securities, thus rendering the Shares subject to 
the Exchange's existing rules governing the trading of equity 
securities.
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    \10\ 15 U.S.C. 78s(b).
    \11\ 15 U.S.C. 78s(b)(5).
    \12\ 17 CFR 240.12f-5.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchanges believes that the proposed rule change, as amended, 
will impose no 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. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-Amex-2005-084 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.

    All submissions should refer to File Number SR-Amex-2005-084. 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. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the Amex. 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-Amex-2005-084 and should be submitted on or before 
December 6, 2005.

[[Page 69369]]

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\13\
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    \13\ In approving this rule change, the Commission notes that it 
has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
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    In particular, the Commission finds that the proposed rule change 
is consistent with section 6(b)(5) of the Act,\14\ which requires that 
an exchange have rules designed, among other things, to promote just 
and equitable principles of trade, to remove impediments to and perfect 
the mechanism of a free and open market and a national market system, 
and in general to protect investors and the public interest.
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    \14\ 15 U.S.C. 78f(b)(5).
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    In addition, the Commission finds that the proposal is consistent 
with section 12(f) of the Act,\15\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\16\ The Commission notes that it previously approved the 
listing and trading of the Shares on the NYSE.\17\ The Commission also 
finds that the proposal is consistent with Rule 12f-5 under the 
Act,\18\ which provides that an exchange shall not extend UTP to a 
security unless the exchange has in effect a rule or rules providing 
for transactions in the class or type of security to which the exchange 
extends UTP. Amex rules deem the Shares to be equity securities, thus 
trading in the Shares will be subject to the Exchange's existing rules 
governing the trading of equity securities.\19\
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    \15\ 15 U.S.C. 78l(f).
    \16\ Section 12(a) of the Act, 15 U.S.C. 78l(a), generally 
prohibits a broker-dealer from trading a security on a national 
securities exchange unless the security is registered on that 
exchange pursuant to section 12 of the Act. Section 12(f) of the Act 
excludes from this restriction trading in any security to which an 
exchange ``extends UTP.'' When an exchange extends UTP to a 
security, it allows its members to trade the security as if it were 
listed and registered on the exchange even though it is not so 
listed and registered.
    \17\ See NYSE Order, supra note 5.
    \18\ 17 CFR 240.12f-5.
    \19\ The Commission notes that Commentary .04 to existing Amex 
Rule 190 will permit a specialist in the Shares to create or redeem 
creation units of these funds to facilitate the maintenance of a 
fair and orderly market. The Commission previously has found 
Commentary .04 to Amex Rule 190 to be consistent with the Act. See 
Securities Exchange Act Release No. 36947 (March 8, 1996), 61 FR 
10606, 10612 (March 14, 1996) (SR-Amex-95-43).
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    The Commission further believes that the proposal is consistent 
with section 11A(a)(1)(C)(iii) of the Act,\20\ which sets forth 
Congress's finding that it is in the public interest and appropriate 
for the protection of investors and the maintenance of fair and orderly 
markets to assure the availability to brokers, dealers, and investors 
of information with respect to quotations for and transactions in 
securities. Quotations for and last sale information regarding the 
Shares are disseminated through the Consolidated Quotation System. 
Furthermore, the NYSE disseminates through the facilities of CTA an 
updated IOPV for the Shares at least every 15 seconds from 9:30 a.m. to 
4:15 p.m. e.t.
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    \20\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    The Exchange will cease trading in the Shares if (a) the primary 
market stops trading the Shares because of a regulatory halt similar to 
a halt based on Amex Rule 117 and/or a halt because dissemination of 
the IOPV and/or underlying index value has ceased or (b) the primary 
market delists the Shares.
    In support of this proposed rule change, the Exchange has made the 
following representations:
    1. Amex has appropriate rules to facilitate transactions in this 
type of security.
    2. Amex surveillance procedures are adequate to properly monitor 
the trading of the Shares on the Exchange.
    3. Amex will distribute an Information Circular to its members 
prior to the commencement of trading of the Shares on the Exchange that 
explains the terms, characteristics, and risks of trading such shares.
    4. Amex will require a member with a customer that purchases the 
Shares on the Exchange to provide that customer with a product 
prospectus and will note this prospectus delivery requirement in the 
Information Circular.
    5. Amex will cease trading in the Shares if (a) the primary market 
stops trading the Shares because of a regulatory halt similar to a halt 
based on Amex Rule 117 and/or a halt because dissemination of the IOPV 
and/or underlying index value has ceased or (b) the primary market 
delists the Shares.
    This approval order is conditioned on Amex's adherence to these 
representations.
    The Commission finds good cause for approving this proposed rule 
change, as amended, before the thirtieth day after the publication of 
notice thereof in the Federal Register. As noted previously, the 
Commission previously found that the listing and trading of these 
Shares on the NYSE is consistent with the Act.\21\ The Commission 
presently is not aware of any issue that would cause it to revisit that 
earlier finding or preclude the trading of these funds on the Exchange 
pursuant to UTP. Therefore, accelerating approval of this proposed rule 
change should benefit investors by creating, without undue delay, 
additional competition in the market for these Shares.
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    \21\ 21 See NYSE Order, supra note 5.
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the Act, 
that the proposed rule change (SR-Amex-2005-084), is hereby approved on 
an accelerated basis.\22\
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    \22\ 22 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
 [FR Doc. E5-6262 Filed 11-14-05; 8:45 am]

BILLING CODE 8010-01-P
