

[Federal Register: May 30, 2006 (Volume 71, Number 103)]
[Notices]               
[Page 30706-30712]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30my06-107]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53849; File No. SR-NYSE-2006-20]

 
Self-Regulatory Organizations; New York Stock Exchange, Inc. (n/
k/a New York Stock Exchange LLC); Order Granting Accelerated Approval 
of Proposed Rule Change and Amendment No. 1 Thereto To List and Trade 
Index-Linked Securities of Barclays Bank PLC Linked to the Performance 
of the GSCI[supreg] Total Return Index

May 22, 2006.

I. Introduction

    On March 13, 2006, the New York Stock Exchange, Inc. (n/k/a New 
York Stock Exchange LLC) (``NYSE'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and Rule 19b-4 thereunder,\2\ a proposal to list and trade Index-Linked 
Securities (the ``Notes'') of Barclays Bank PLC (``Barclays'') linked 
to the performance of the GSCI[supreg] Total Return Index (the 
``Index''). On March 27, 2006, NYSE filed Amendment No. 1 to the 
proposed rule change. The proposed rule change was published for 
comment in the Federal Register on April 24, 2006.\3\ The Commission

[[Page 30707]]

received no comments regarding the proposal. This order approves the 
proposed rule change, as amended, on an accelerated basis.
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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. 53658 (April 14, 
2006), 71 FR 21064 (``Notice'').
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II. Description of the Proposal

    The NYSE proposes to list and trade the Notes that will track the 
performance of the Index pursuant to Section 703.19 (``Other 
Securities'') of the NYSE Listed Company Manual (``Manual''). Barclays 
intends to issue the Notes under the name ``iPath\SM\ Exchange-Traded 
Notes.'' The Exchange believes that the Notes will conform to the 
initial listing standards for equity securities under Section 703.19 of 
the Manual because Barclays is an affiliate of Barclays PLC,\4\ an 
Exchange listed company in good standing. Under Section 703.19 of the 
Manual, the Exchange may approve for listing and trading securities not 
otherwise covered by the criteria of Sections 1 and 7 of the Manual, 
provided the issue is suited for auction market trading.\5\ The Notes 
will have a minimum life of one year, the minimum public market value 
of the Notes at the time of issuance will exceed $4 million, there will 
be at least one million Notes outstanding, and there will be at least 
400 holders at the time of issuance.
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    \4\ The issuer of the Notes, Barclays, is an affiliate of an 
Exchange-listed company (Barclays PLC) and not an Exchange-listed 
company itself. However, Barclays, though an affiliate of Barclays 
PLC, would exceed the Exchange's earnings and minimum tangible net 
worth requirements in Section 102 of the Manual. Additionally, the 
Exchange states that the Notes, when combined with the original 
issue price of all other Note offerings of the issuer that are 
listed on a national securities exchange (or association), does not 
exceed 25% of the issuer's net worth. Telephone conference between 
Florence E. Harmon, Senior Special Counsel, Division of Market 
Regulation (``Division''), Commission, and John Carey, Assistant 
General Counsel, Exchange, on April 11, 2006 (``April 11 Telephone 
Conference'').
    \5\ See Securities Exchange Act Release No. 28217 (July 18, 
1990), 55 FR 30056 (July 24, 1990) (SR-NYSE-90-30).
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    The Notes are a series of medium-term debt securities of Barclays 
that provide for a cash payment at maturity or upon earlier exchange at 
the holder's option, based on the performance of the Index. The 
principal amount of each Note is $50. The Notes will trade on the 
Exchange's equity trading floor, and the Exchange's existing equity 
trading rules will apply to trading in the Notes. The Notes will not 
have a minimum principal amount that will be repaid and, accordingly, 
payment on the Notes prior to or at maturity may be less than the 
original issue price of the Notes. In fact, the value of the Index must 
increase for the investor to receive at least the $50 principal amount 
per Note at maturity or upon exchange or redemption. If the value of 
the Index decreases or does not increase sufficiently to offset the 
investor fee (described below), the investor will receive less, and 
possibly significantly less, than the $50 principal amount per Note. In 
addition, holders of the Notes will not receive any interest payments 
from the Notes. The Notes will have a term of 30 years. The Notes are 
not callable.\6\
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    \6\ April 11 Telephone Conference.
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Description of ``GSCI'' and the Index

    The investment objective of the Notes is to track the Index. The 
value of the Index is derived from the separate, but related Goldman 
Sachs Commodity Index (``GSCI[supreg]'').\7\ Both indexes are described 
below and in more detail in the Notice.\8\
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    \7\ Telephone conference between Florence E. Harmon, Senior 
Special Counsel, Division, Commission, and John Carey, Assistant 
General Counsel, Exchange, on April 14, 2006 (``April 14 Telephone 
Conference'').
    \8\ The methodology for determining the composition and 
weighting of the GSCI[supreg] and for calculating its value is 
described in more detail in the Notice. See supra, note 3.
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    The Index was established in May 1991 and is designed to be a 
diversified benchmark for physical commodities as an asset class. The 
Index reflects the excess returns that are potentially available 
through an unleveraged investment in the contracts comprising the 
GSCI[supreg] plus the Treasury Bill rate of interest that could be 
earned on funds committed to the trading of the underlying 
contracts.\9\ The value of the Index, on any given day, reflects (i) 
the price levels of the contracts included in the GSCI[supreg] (which 
represents the value of the GSCI[supreg]); (ii) the ``contract daily 
return,'' which is the percentage change in the total dollar weight of 
the GSCI[supreg] from the previous day to the current day; and (iii) 
the Treasury Bill rate of interest that could be earned on funds 
committed to the trading of the underlying contracts.
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    \9\ The Treasury Bill rate of interest used for purposes of 
calculating the index on any day is the 91-day auction high rate for 
U.S. Treasury Bills, as reported on Telerate page 56, or any 
successor page, on the most recent of the weekly auction dates prior 
to such day.
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    The GSCI[supreg], upon which the Index is based, is a proprietary 
index on a production-weighted basket of futures contracts on physical 
commodities traded on futures exchanges in major industrialized 
countries.\10\ The GSCI[supreg] is designed to be a measure of the 
performance over time of the markets for these commodities. The only 
commodities represented in the GSCI[supreg] are those physical 
commodities on which active and liquid contracts are traded on 
regulated futures exchanges in major industrialized countries. The 
commodities represented in the GSCI[supreg] are weighted, on a 
production basis, to reflect their relative significance (in the view 
of the Index Sponsor, in consultation with the Policy Committee) to the 
world economy. The fluctuations in the value of the GSCI[supreg] are 
intended generally to correlate with changes in the prices of such 
physical commodities in global markets. Futures contracts on the 
GSCI[supreg], and options on such futures contracts, are currently 
listed for trading on the Chicago Mercantile Exchange.
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    \10\ The criteria for index composition, contract expirations, 
component replacements, and valuation are set forth in more detail 
in the Notice. See Notice, supra, note 3. Currently, Index 
components trade on U.S. futures exchanges, the London Metals 
Exchange (``LME''), or the Intercontinental Exchange (formerly known 
as the International Petroleum Exchange, which now operates its 
futures business through ICE Futures), with whom NYSE has 
comprehensive surveillance sharing arrangements.
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    The contracts to be included in the GSCI[supreg] must satisfy 
several sets of eligibility criteria established by the Index 
Sponsor.\11\ First, the Index Sponsor identifies those contracts that 
meet the general criteria for eligibility. Second, the contract volume 
and weight requirements are applied and the number of contracts is 
determined, which serves to reduce the list of eligible contracts. At 
that point, the list of designated contracts for the relevant period is 
complete.
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    \11\ See GSCI[supreg] Manual at http://www.gs.com/gsci. Goldman, 

Sachs & Co. is the Index Sponsor for both the Index and the 
GSCI[supreg]. Telephone conference between Florence E. Harmon, 
Senior Special Counsel, Division, Commission, and Michael Cavalier, 
Assistant General Counsel, Exchange, on April 13, 2006 (``April 13 
Telephone Conference'').
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    The value of the GSCI[supreg] on any given day is equal to the 
total dollar weight of the GSCI[supreg] divided by a normalizing 
constant that assures the continuity of the GSCI[supreg] over time. The 
total dollar weight of the GSCI[supreg] is the sum of the dollar weight 
of each index component. The dollar weight of each such index component 
on any given day is equal to:
     The daily contract reference price,
     Multiplied by the appropriate contract production weights 
(``CPWs''), and
     During a roll period, the appropriate ``roll weights'' 
(discussed below).\12\
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    \12\ If the price is not made available or corrected by 4 p.m. 
New York time, the Index Sponsor, if it deems such action to be 
appropriate under the circumstances, will determine the appropriate 
daily contract reference price for the applicable futures contract 
in its reasonable judgment for purposes of the relevant GSCI[supreg] 
calculation. If such actions by the Index Sponsor are implemented on 
more than a temporary basis, the Exchange will contact the 
Commission staff and, as necessary, file a proposed rule change 
pursuant to Rule 19b-4, seeking Commission approval to continue to 
trade the Notes. Unless approved for continued trading, the Exchange 
would commence delisting proceedings. See ``Continued Listing 
Criteria,'' infra. Telephone conference between Florence Harmon, 
Senior Special Counsel, Division, Commission; John Carey, Assistant 
General Counsel, Exchange; and Michael Cavalier, Assistant General 
Counsel, Exchange, on April 10, 2006 (``April 10 Telephone 
Conference'').

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[[Page 30708]]

    These factors, along with the contract daily return for each Index 
component, are described in more detail in the Notice. Additionally, 
this information is publicly available each business day on the Index 
Sponsor's Web site at http://www.gs.com/gsci \13\ and the relevant 

futures exchanges, and/or from major market data vendors. However, if 
the volume of trading in the relevant contract, as a multiple of the 
production levels of the commodity, is below specified thresholds, the 
CPW of the contract is reduced until the threshold is satisfied. This 
is designed to ensure that trading in each contract is sufficiently 
liquid relative to the production of the commodity.
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    \13\ The CPWs are available in the GSCI[reg] manual on the 
GSCI[supreg] Web site (http://www.gs.com/gsci) and are published on 

Reuters. The roll weights are not published but can be determined 
from the rules in the GSCI Manual. Telephone conference between 
Florence Harmon, Senior Special Counsel, Division, Commission, John 
Carey, Assistant General Counsel, Exchange, and Heather Shemilt, 
Goldman Sachs & Co., on May 18, 2006 (``May 18 Telephone 
Conference'').
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    The composition of the GSCI[supreg] is reviewed on a monthly basis 
by the Index Sponsor and, if the multiple of any contract is below the 
prescribed threshold, the composition of the GSCI is reevaluated, based 
on the criteria and weighting procedures.\14\ This procedure is 
undertaken to allow the GSCI[supreg] to shift from contracts that have 
lost substantial liquidity into more liquid contracts during the course 
of a given year.\15\ As a result, it is possible that the composition 
or weighting of the GSCI[supreg] will change on one or more of these 
monthly Valuation Dates. In addition, regardless of whether any changes 
have occurred during the year, the Index Sponsor reevaluates the 
composition of the GSCI[supreg] at the conclusion of each year, based 
on the above criteria. Other commodities that satisfy such criteria, if 
any, will be added to the GSCI[supreg]. Commodities included in the 
GSCI[supreg] which no longer satisfy such criteria, if any, will be 
deleted.
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    \14\ The Index Sponsor, Goldman, Sachs & Co., which calculates 
and maintains the GSCI[supreg] and the Index, is a broker-dealer. 
Therefore, appropriate firewalls must exist around the personnel who 
have access to information concerning changes and adjustment to an 
index and the trading personnel of the broker-dealer. Accordingly, 
the Index Sponsor has represented that it (i) has implemented and 
maintained procedures reasonably designed to prevent the use and 
dissemination by personnel of the Index Sponsor, in violation of 
applicable laws, rules and regulations, of material non-public 
information relating to changes in the composition or method of 
computation or calculation of the Index and (ii) periodically checks 
the application of such procedures as they relate to such personnel 
of the Index Sponsor directly responsible for such changes. In 
addition, the Policy Committee members are subject to written 
policies with respect to material, non-public information. Telephone 
conversation between Florence Harmon, Senior Special Counsel, 
Division, Commission; John Carey, Assistant General Counsel, 
Exchange; and Michael Cavalier, Assistant General Counsel, Exchange, 
on April 14, 2006 (``April 14 Telephone Conference II'') and May 18 
Telephone Conference.
    \15\ See also ``Contract Expirations'' in Notice, supra, note 3.
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    The Index Sponsor has established a Policy Committee to assist it 
with the operation of the GSCI[supreg].\16\ The principal purpose of 
the Policy Committee is to advise the Index Sponsor with respect to, 
among other things, the calculation of the GSCI[supreg], the 
effectiveness of the GSCI[supreg] as a measure of commodity futures 
market performance, and the need for changes in the composition or the 
methodology of the GSCI[supreg]. The Policy Committee acts solely in an 
advisory and consultative capacity. All decisions with respect to the 
composition, calculation and operation of the GSCI[supreg] and the 
Index are made by the Index Sponsor.\17\
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    \16\ The component selections for the GSCI[supreg] would 
obviously affect the Index. Telephone conference between Florence 
Harmon, Senior Special Counsel, Division, Commission, and Michael 
Cavalier, Assistant General Counsel, Exchange, on April 12, 2006 
(``April 12 Telephone Conference'').
    \17\ The Policy Committee members are subject to written 
policies with respect to material, non-public information. Telephone 
conference between Florence Harmon, Senior Special Counsel, 
Division, Commission, and Michael Cavalier, Assistant General 
Counsel, Exchange, on May 15, 2006 (``May 15 Telephone 
Conference'').
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    The Index Sponsor makes the official calculations of the 
GSCI[supreg]. While the intraday and closing values of the GSCI [reg] 
(and the Index) are calculated by Goldman, Sachs & Co., a broker-
dealer, a number of factors provide for the independent verification of 
these intraday and closing values.\18\ This calculation is performed 
continuously and is reported on Reuters page GSCI[supreg] (or any 
successor or replacement page) and will be updated on Reuters at least 
every 15 seconds during business hours on each day on which the offices 
of the Index Sponsor in New York City are open for business (a ``GSCI 
Business Day'').\19\ The settlement price for the Index is also 
reported on Reuters page GSCI[supreg] (or any successor or replacement 
page) on each GSCI Business Day between 4 p.m. and 6 p.m., New York 
time.
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    \18\ The Index Sponsor calculates the level of the Index 
intraday and at the end of the day. The intraday calculation is 
based on feeds of real-time data relating to the underlying 
commodities and updates intermittently approximately every 15 
seconds. In the GSCI market, trades are quoted or settled against 
the end-of-day value, not against the value at any other particular 
time of the day. With respect to the end-of-day closing level of the 
index, the Index Sponsor uses independent feeds from at least two 
vendors for each of the underlying commodities in the index to 
verify closing prices and limit moves. A number of commodities 
market participants independently verify the correctness of the 
disseminated intraday Index value and closing Index value. 
Additionally, the closing Index values are audited by a major 
independent accounting firm. May 18 Telephone Conference.
    \19\ Additionally, this intraday index value of the Index will 
be updated and disseminated at least every 15 seconds by a major 
market data vendor during the time the Notes trade on the Exchange. 
April 13 Telephone Conference. The intraday information with respect 
to the Index (and GSCI[supreg]) reported on Reuters is derived 
solely from trading prices on the principal trading markets for the 
various Index components. For example, the Index currently includes 
contracts traded on ICE Futures and the LME, both of which are 
located in London and consequently have trading days that end 
several hours before those of the U.S.-based markets on which the 
rest of the Index components are traded. During the portion of the 
New York trading day when ICE Futures and LME are closed, the last 
reported prices for Index Components traded on ICE Futures or LME 
are used to calculate the intraday Index information disseminated on 
Reuters.
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Indicative Value

    An intraday ``Indicative Value'' meant to approximate the intrinsic 
economic value of the Notes will be calculated and published via the 
facilities of the Consolidated Tape Association (``CTA'') every 15 
seconds throughout the NYSE trading day on each day on which the Notes 
are traded on the Exchange. Additionally, Barclays or an affiliate will 
calculate and publish the closing Indicative Value of the Notes on each 
trading day at http://www.ipathetn.com.

    The Indicative Value will not reflect price changes to the price of 
an underlying commodity between the close of trading of the futures 
contract at the relevant futures exchange and the close of trading on 
the NYSE at 4 p.m. New York time.\20\ The value of the Notes may 
accordingly be influenced by non-concurrent trading hours between the 
NYSE and the various futures exchanges on which the futures contracts 
based on the Index commodities are traded.
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    \20\ April 10 Telephone Conference. The Notice includes a chart 
of the trading hours for each of the futures contract components in 
the Index. See Notice, supra, note 3.
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    While the market for futures trading for each of the Index 
commodities is open, the Indicative Value can be expected to closely 
approximate the redemption value of the Notes. However, during NYSE 
trading hours when relevant futures contracts have ceased trading, 
spreads and resulting premiums or discounts may widen, and therefore, 
increase the difference between the price of the Notes and their 
redemption value. The Indicative Value disseminated during NYSE trading

[[Page 30709]]

hours should not be viewed as a real time update of the redemption 
value.

Valuation and Redemption of Notes

    Holders who have not previously redeemed their Notes will receive a 
cash payment at maturity equal to the principal amount of their Notes 
times the index factor on the Final Valuation Date (as defined below) 
minus the investor fee on the Final Valuation Date. The ``index 
factor'' on any given day will be equal to the closing value of the 
Index on that day divided by the initial index level. The index factor 
on the Final Valuation Date will be equal to the final index level 
divided by the initial index level. The ``initial index level'' is the 
closing value of the Index on the date of issuance of the Notes (the 
``Trade Date''), and the ``final index level'' is the closing value of 
the Index on the Final Valuation Date. The investor fee is equal to 
0.75% per year times the principal amount of a holder's Notes times the 
index factor, calculated on a daily basis in the following manner: the 
investor fee on the Trade Date will equal zero. On each subsequent 
calendar day until maturity or early redemption, the investor fee will 
increase by an amount equal to 0.75% times the principal amount of a 
holder's Notes times the index factor on that day (or, if such day is 
not a trading day, the index factor on the immediately preceding 
trading day) divided by 365. The investor fee is the only fee holders 
will be charged in connection with their ownership of the Notes.
    Prior to maturity, holders may redeem their Notes on any Redemption 
Date (defined below) during the term of the Notes, provided that they 
present at least 50,000 Notes for redemption, or they act through a 
broker or other financial intermediaries (such as a bank or other 
financial institution not required to register as a broker-dealer to 
engage in securities transactions) that are willing to bundle their 
Notes for redemption with other investors' Notes. If a holder chooses 
to redeem his Notes on a Redemption Date, such holder will receive a 
cash payment on such date equal to the principal amount of his Notes 
times the index factor on the applicable Valuation Date (defined below) 
minus the investor fee on the applicable Valuation Date. A ``Redemption 
Date'' is the third business day following a Valuation Date (other than 
the Final Valuation Date (defined below)). A ``Valuation Date'' is each 
Thursday from the first Thursday after issuance of the Notes until the 
last Thursday before maturity of the Notes (the ``Final Valuation 
Date'') inclusive (or, if such date is not a trading day, the next 
succeeding trading day), unless the calculation agent determines that a 
market disruption event, as described below, occurs or is continuing on 
that day.\21\ In that event, the Valuation Date for the maturity date 
or corresponding Redemption Date, as the case may be, will be the first 
following trading day on which the calculation agent determines that a 
market disruption event does not occur and is not continuing. In no 
event, however, will a Valuation Date be postponed by more than five 
trading days.\22\
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    \21\ Barclays will serve as the initial calculation agent for 
the Notes.
    \22\ If a ``market disruption event'' (which affects the 
Valuation Date) is of more than a temporary nature, the Exchange 
will file a proposed rule change pursuant to Rule 19b-4 under the 
Act. Unless approved for continued trading, the Exchange would 
commence delisting proceedings. See ``Continued Listing Criteria,'' 
infra. April 10 Telephone Conference.
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    To redeem their Notes, holders must instruct their broker or other 
person through whom they hold their Notes to take the following steps:
     Deliver a notice of redemption to Barclays via e-mail by 
no later than 11 a.m. New York time on the business day prior to the 
applicable Valuation Date. If Barclays receives such notice by the time 
specified in the preceding sentence, it will respond by sending the 
holder a confirmation of redemption;
     Deliver the signed confirmation of redemption to Barclays 
via facsimile in the specified form by 4 p.m. New York time on the same 
day. Barclays must acknowledge receipt in order for the confirmation to 
be effective; and
     Transfer such holder's book-entry interest in its Notes to 
the trustee, The Bank of New York, on Barclays' behalf at or prior to 
10 a.m. New York time on the applicable Redemption Date (the third 
business day following the Valuation Date).\23\
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    \23\ April 10 Telephone Conference.
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    If holders elect to redeem their Notes, Barclays may request that 
Barclays Capital Inc. (a broker-dealer) purchase the Notes for the cash 
amount that would otherwise have been payable by Barclays upon 
redemption. In this case, Barclays will remain obligated to redeem the 
Notes if Barclays Capital Inc. fails to purchase the Notes. Any Notes 
purchased by Barclays Capital Inc. may remain outstanding for trading 
on the Exchange.
    If an event of default occurs and the maturity of the Notes is 
accelerated, Barclays will pay the default amount in respect of the 
principal of the Notes at maturity. Additionally, in the event of a 
disruption, adjustment, discontinuance, or substitution of the Index, 
the calculation agent has discretion as to the computation methodology 
and adjustments. However, in such case, the Exchange will file a 
proposed rule change pursuant to Rule 19b-4 under the Act. Unless 
approved for continued trading, the Exchange would commence delisting 
proceedings.\24\
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    \24\ See ``Continued Listing Criteria,'' infra. April 10 
Telephone Conference.
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Continued Listing Criteria

    The Exchange prohibits the initial and/or continued listing of any 
security that is not in compliance with Rule 10A-3 under the Act.\25\
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    \25\ 17 CFR 240.10A-3; see also 15 U.S.C. 78a.
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    The Exchange will delist the Notes:
     If, following the initial twelve month period from the 
date of commencement of trading of the Notes, the Notes have more than 
60 days remaining until maturity and (i) there are fewer than 50 
beneficial holders of the Notes for 30 or more consecutive trading 
days; (ii) if fewer than 50,000 Notes remain issued and outstanding; or 
(iii) if the market value of all outstanding Notes is less than 
$1,000,000;
     If the Index value ceases to be calculated or available 
during the time the Notes trade on the Exchange on at least every 15 
second basis through one or more major market data vendors;\26\
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    \26\ The Exchange confirmed that the Index value (along with the 
GSCI[supreg] index value) will be disseminated at least every 15 
seconds by one or more major market data vendors during the time the 
Notes trade on the Exchange. The Exchange also confirmed these 
indexes have daily settlement values that are widely disclosed. 
Telephone conference between Florence E. Harmon, Senior Special 
Counsel, Division, Commission, and Michael Cavalier, Assistant 
General Counsel, Exchange, on April 13, 2006 (``April 13 Telephone 
Conference'').
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     If, during the time the Notes trade on the Exchange, the 
Indicative Value ceases to be available on a 15 second delayed basis; 
or
     If such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    Additionally, the Exchange will file a proposed rule change 
pursuant to Rule 19b-4 under the Act \27\ seeking approval to continue 
trading the Notes and unless approved, the Exchange will commence 
delisting the Notes if:
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    \27\ 17 CFR 240.19b-4.
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     The Index Sponsor substantially changes either the Index 
component selection methodology or the weighting methodology;\28\
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    \28\ This would include the Index Sponsor's current examination 
of the conditions under which an instrument traded on an electronic 
platform, rather than a traditional futures contract traded on a 
traditional futures exchange should be included in the GSCI[supreg] 
and how the composition of the GSCI[supreg] should respond to rapid 
shifts in liquidity between such instruments and contracts currently 
included in the GSCI[supreg].

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[[Page 30710]]

     If a new component is added to the Index (or pricing 
information is used for a new or existing component) that constitutes 
more than 10% of the weight of the Index with whose principal trading 
market the Exchange does not have a comprehensive surveillance sharing 
agreement;\29\ or
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    \29\ Therefore, only 10% of the weight of all of the 
GSCI[supreg] (and thus the Index components) could not be subject to 
comprehensive surveillance sharing arrangements with the Exchange. 
April 10 Telephone Conference.
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     If a successor or substitute index is used in connection 
with the Notes. The filing will address, among other things the listing 
and trading characteristics of the successor or substitute index and 
the Exchange's surveillance procedures applicable thereto.

Trading Rules

    The Exchange's existing equity trading rules will apply to trading 
of the Notes. The Notes will trade between the hours of 9:30 a.m. and 4 
p.m. New York time and will be subject to the equity margin rules of 
the Exchange.\30\
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    \30\ See NYSE Rule 431.
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(1) Trading Halts
    The Exchange will cease trading the Notes if there is a halt or 
disruption in the dissemination of the Index value or the Indicative 
Value.\31\ The Exchange will also cease trading the Notes if a ``market 
disruption event'' occurs that is of more than a temporary nature.\32\ 
In the event that the Exchange is open for business on a day that is 
not a GSCI Business Day, the Exchange will not permit trading of the 
Notes on that day.
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    \31\ In the event the Index value or Indicative Value is no 
longer calculated or disseminated, the Exchange would immediately 
contact the Commission to discuss measures that may be appropriate 
under the circumstances.
    \32\ In the event a ``market disruption event'' occurs that is 
of more than a temporary nature, the Exchange would immediately 
contact the Commission to discuss measures that may be appropriate 
under the circumstances.
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(2) Specialist Trading Obligations
    Pursuant to new Supplementary Material .10 to NYSE Rule 1301B, the 
provisions of NYSE Rules 1300B(b) and 1301B would be applied to certain 
securities listed on the Exchange pursuant to Section 703.19 (``Other 
Securities'') of the Exchange's Manual. Specifically, NYSE Rules 
1300B(b) and 1301B will apply to securities listed under Section 703.19 
of the Manual where the price of such securities is based in whole or 
part on the price of (a) a commodity or commodities; (b) any futures 
contracts or other derivatives based on a commodity or commodities; or 
(c) any index based on either (a) or (b) above.
    As a result of application of NYSE Rule 1300B(b), the specialist in 
the Notes, the specialist's member organization and other specified 
persons will be prohibited under paragraph (m) of NYSE Rule 105 
Guidelines from acting as market maker or functioning in any capacity 
involving market-making responsibilities in the Index components, the 
commodities underlying the Index components, or options, futures or 
options on futures on the Index, or any other derivatives 
(collectively, ``derivative instruments'') based on the Index or based 
on any Index component or any physical commodity underlying an Index 
component. If the member organization acting as specialist in the Notes 
is entitled to an exemption under NYSE Rule 98 from paragraph (m) of 
NYSE Rule 105 Guidelines, then that member organization could act in a 
market making capacity in the Index components, the commodities 
underlying the Index components, or derivative instruments based on the 
Index or based on any Index component or commodity underlying an Index 
component, other than as a specialist in the Notes themselves, in 
another market center.
    Under NYSE Rule 1301B(a), the member organization acting as 
specialist in the Notes (a) will be obligated to conduct all trading in 
the Notes in its specialist account, (subject only to the ability to 
have one or more investment accounts, all of which must be reported to 
the Exchange); (b) will be required to file with the Exchange and keep 
current a list identifying all accounts for trading in the Index 
components or the physical commodities underlying the Index components, 
or derivative instruments based on the Index or based on the Index 
components or the physical commodities underlying the Index components, 
which the member organization acting as specialist may have or over 
which it may exercise investment discretion; and (c) will be prohibited 
from trading in the Index components or the physical commodities 
underlying the Index components, or derivative instruments based on the 
Index or based on the Index components or the physical commodities 
underlying the Index components, in an account in which a member 
organization acting as specialist, controls trading activities which 
have not been reported to the Exchange as required by NYSE Rule 1301B.
    Under NYSE Rule 1301B(b), the member organization acting as 
specialist in the Notes will be required to make available to the 
Exchange such books, records or other information pertaining to 
transactions by the member organization and other specified persons for 
its or their own accounts in the Index components or the physical 
commodities underlying the Index components, or derivative instruments 
based on the Index or based on the Index components or the physical 
commodities underlying the Index components, as may be requested by the 
Exchange. This requirement is in addition to existing obligations under 
Exchange rules regarding the production of books and records.
    Under NYSE Rule 1301B(c), in connection with trading the Index 
components or the physical commodities underlying the Index components, 
or derivative instruments based on the Index or based on the Index 
components or the physical commodities underlying the Index components, 
the specialist could not use any material nonpublic information 
received from any person associated with a member or employee of such 
person regarding trading by such person or employee in the Index 
components or the physical commodities underlying the Index components, 
or derivative instruments based on the Index or based on the Index 
components or the physical commodities underlying the Index components.

Surveillance

    The Exchange represents that its surveillance procedures are 
adequate to properly monitor the trading of the Notes and the Index 
components. The Exchange will rely upon existing NYSE surveillance 
procedures governing equities with respect to surveillance of the 
Notes. The Exchange believes that these procedures are adequate to 
monitor Exchange trading of the Notes and to detect violations of 
Exchange rules, consequently deterring manipulation. In this regard, 
the Exchange has the authority under NYSE Rules 476 and Rule 1301B to 
request the Exchange specialist in the Notes to provide NYSE Regulation 
with information that the specialist uses in connection with pricing 
the Notes on the Exchange, including specialist proprietary or other 
information regarding securities, commodities, futures, options on 
futures or other derivative instruments. The Exchange believes it also 
has authority to request any other information from its members--
including floor brokers,

[[Page 30711]]

specialists and ``upstairs'' firms--to fulfill its regulatory 
obligations.
    With regard to the Index components, the Exchange can obtain market 
surveillance information, including customer identity information, with 
respect to transactions occurring on the New York Mercantile Exchange 
(``NYMEX''), the Kansas City Board of Trade, ICE Futures, and the LME, 
pursuant to its comprehensive information sharing agreements with each 
of those exchanges. All of the other trading venues on which current 
Index components are traded are members of the Intermarket Surveillance 
Group (``ISG''), and the Exchange therefore has access to all relevant 
trading information with respect to those contracts without any further 
action being required on the part of the Exchange. All these 
surveillance arrangements constitute comprehensive surveillance sharing 
arrangements.\33\
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    \33\ April 14 Telephone Conference.33
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Suitability

    Pursuant to NYSE Rule 405, the Exchange will 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 Notes.\34\ With respect 
to suitability recommendations and risks, the Exchange will require 
members, member organizations and employees thereof recommending a 
transaction in the Notes: (a) To determine that such transaction is 
suitable for the customer; and (b) to have a reasonable basis for 
believing that the customer can evaluate the special characteristics 
of, and is able to bear the financial risks of, such transaction.
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    \34\ NYSE Rule 405 requires that every member, member firm or 
member corporation use due diligence to learn the essential facts 
relative to every customer and to every order or account accepted.
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Information Memorandum

    The Exchange will, prior to trading the Notes, distribute an 
information memorandum to the membership providing guidance with regard 
to member firm compliance responsibilities (including suitability 
recommendations) when handling transactions in the Notes. The 
information memorandum will note to members language in the prospectus 
used by Barclays in connection with the sale of the Notes regarding 
prospectus delivery requirements for the Notes. Specifically, in the 
initial distribution of the Notes,\35\ and during any subsequent 
distribution of the Notes, NYSE members will deliver a prospectus to 
investors purchasing from such distributors.\36\ The information 
memorandum will discuss the special characteristics and risks of 
trading this type of security. Specifically, the information 
memorandum, among other things, will discuss what the Notes are, how 
the Notes are redeemed, applicable Exchange rules, dissemination of 
information regarding the Index value and the Indicative Value, trading 
information and applicable suitability rules.
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    \35\ The Registration Statement reserves the right to do 
subsequent distributions of these Notes.
    \36\ April 10 Telephone Conference.
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    The information memorandum will also notify members and member 
organizations about the procedures for redemptions of Notes and that 
Notes are not individually redeemable but are redeemable only in 
aggregations of at least 50,000 Notes.
    The information memorandum will also reference the fact that there 
is no regulated source of last sale information regarding physical 
commodities and that the SEC has no jurisdiction over the trading of 
physical commodities, such as aluminum, gold, crude oil, heating oil, 
corn and wheat, or the futures contracts on which the value of the 
Notes is based, and that the Commodity Futures Trading Commission has 
no regulatory jurisdiction over the trading of certain foreign based 
futures contracts.\37\
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    \37\ April 14 Telephone Conference.
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    The information memorandum will also discuss other exemptive or no-
action relief under the Act provided by the Commission staff.\38\
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    \38\ April 10 Telephone Conference.
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III. Discussion and Commission's Findings

    After careful consideration, 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.\39\ In particular, the Commission finds that the 
proposed rule change, as amended, is consistent with the requirements 
of section 6(b)(5) of the Act,\40\ which requires, among other things, 
that the Exchange's rules be designed to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system and, in general, 
to protect investors and the public interest.
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    \39\ In approving this proposed 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).
    \40\ 15 U.S.C. 78f(b)(5).
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A. Surveillance

    Information sharing agreements with primary markets are an 
important part of a self-regulatory organization's ability to monitor 
for trading abuses in derivative products. The Commission believes that 
the Exchange's comprehensive surveillance sharing agreements with the 
NYMEX, the Kansas City Board of Trade, ICE Futures, and the LME for the 
purpose of providing information in connection with trading of the 
Notes and the Index components create the basis for the NYSE to monitor 
for fraudulent and manipulative practices in the trading of the Notes. 
The Exchange represents that all of the other trading venues on which 
current Index components are traded are members of the ISG, and the 
Exchange has access to all relevant trading information with respect to 
those contracts without any further action. In addition, the Exchange 
represents that it will delist the Notes if a new component is added to 
the Index (or pricing information is used for a new or existing 
component) that constitutes more than 10% of the weight of the Index 
with whose principal trading market the Exchange does not have a 
comprehensive surveillance sharing agreement.
    Moreover, NYSE Rules 476 and 1301B requires Exchange specialists, 
upon the Exchange's request, to provide NYSE Regulation with 
information that the specialist uses in connection with pricing the 
Notes on the Exchange, including specialist proprietary or other 
information regarding securities, commodities, futures, options on 
futures, or other derivative instruments. Furthermore, the Exchange 
believes that it also has the authority to request any other 
information from its member--including floor brokers, specialists and 
``upstairs'' firms--to fulfill its regulatory obligations. The 
Commission believes that these rules provide the NYSE with the tools 
necessary to adequately surveil trading in the Notes.

B. Dissemination of Information

    The Commission believes that sufficient venues exist for obtaining 
reliable information so that investors in the Notes can monitor the 
underlying Index relative to the Indicative Value of their Notes. There 
is a considerable amount of information about the Index and its 
components available through public Web sites and professional 
subscription services, including Reuters and Bloomberg. Real time 
information about the trading of the component

[[Page 30712]]

futures contracts and their daily settlement prices are available from 
one or more major market data vendors, and in some cases, the 
underlying futures exchanges. The official calculation of the Index 
made by the Index Sponsor is performed continuously and is reported on 
Reuters page GSCI (or any successor or replacement page) and will be 
updated on Reuters at least 15 seconds during business hours during the 
time the Notes trade on the Exchange. The settlement price for the 
Index is also reported on Reuters page GSCI (or any successor or 
replacement page) on each GSCI Business Day between 4 p.m. and 6 p.m., 
New York time. While the Index is calculated by a broker-dealer, a 
number of independent sources verify both the intraday and closing 
Index values. The calculation methodology is public and transparent, 
and the factors included in the Index calculation, such as the CPWs, 
are available in the GSCI Manual found on GSCI's Web site at http://www.gs.com/gsci
 and are published on Reuters. The roll weights are not 

published but can be determined from the rules in the GSCI Manual.\41\
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    \41\ May 18 Telephone Conference.
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    While the Indicative Value will not reflect price changes of an 
underlying commodity between the close of trading of the futures 
contract at the relevant futures exchange and the close of trading on 
the NYSE at 4 p.m. New York time, the Exchange represents that the 
Indicative Value will be calculated and published via the facilities of 
the CTA every 15 seconds throughout the NYSE trading day on each day 
the Notes are traded on the Exchange. In addition, Barclays or an 
affiliate will calculate and publish the closing Indicative Value of 
the Notes on each trading day at http://www.ipathetn.com.


C. Listing and Trading

    The Commission finds that the Exchange's proposed rules and 
procedures for the listing and trading of the proposed Notes are 
consistent with the Act. The Notes will trade as equity securities 
subject to NYSE rules including, among others, rules governing equity 
margins, specialist responsibilities, account opening, and customer 
suitability requirements. The Commission believes that the listing and 
delisting criteria for the Notes should help to maintain a minimum 
level of liquidity and therefore minimize the potential for 
manipulation of the Notes. The Exchange represents that it would file a 
proposed rule change, pursuant to Rule 19b-4,\42\ if the Index Sponsor 
materially changes the composition of both the GSCI[reg] and the Index, 
the methodology of calculating the value of the GSCI[reg] and the 
Index, or any other policies relevant to the Index. Finally, the 
Commission notes that the Information Memorandum that the Exchange will 
distribute will inform members and member organizations about the 
terms, characteristics and risks in trading the Notes, including their 
prospectus delivery obligations.
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    \42\ 17 CFR 240.19b-4.
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D. Accelerated Approval

    The Commission finds good cause, pursuant to section 19(b)(2) of 
the Act,\43\ for approving the proposed rule change, as amended, prior 
to the thirtieth day after the date of publication of notice in the 
Federal Register. The Commission notes that the proposal is consistent 
with the listing and trading standards in NYSE Rule 703.19. The 
Commission does not believe that the proposed rule change, as amended, 
raises novel regulatory issues. Consequently, the Commission believes 
that it is appropriate to permit investors to benefit from the 
flexibility afforded by trading these products as soon as possible.
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    \43\ 15 U.S.C. 78s(b)(2).
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    Accordingly, the Commission finds that there is good cause, 
consistent with section 6(b)(5) of the Act,\44\ to approve the proposal 
on an accelerated basis.
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    \44\ 15 U.S.C. 78s(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the Act, 
that the proposed rule change (SR-NYSE-2006-20), as amended, be, and it 
hereby is, approved on an accelerated basis.
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    \45\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\45\
Nancy M. Morris,
Secretary.
 [FR Doc. E6-8239 Filed 5-26-06; 8:45 am]

BILLING CODE 8010-01-P
