

[Federal Register: January 3, 2007 (Volume 72, Number 1)]
[Notices]               
[Page 173-175]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03ja07-78]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55004; File No. SR-NYSEArca-2006-33]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change to 
Trade the iShares[supreg] S&P Europe 350 Index Fund Pursuant to 
Unlisted Trading Privileges

December 22, 2006.
    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 October 18, 2006, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been substantially prepared by the Exchange. The Commission is 
publishing this notice and order to solicit comments on the proposed 
rule change from interested persons and to approve the proposed rule 
change on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange, through its wholly-owned subsidiary NYSE Arca 
Equities, Inc. (``NYSE Arca Equities''), proposes to trade shares 
(``Shares'') of the iShares S&P Europe 350 Index Fund (``Fund'') 
(Symbol: IEV) pursuant to unlisted trading privileges (``UTP'') based 
on NYSE Arca Equities Rule 5.2(j)(3).
    The text of the proposed rule change is available on the Exchange's 
Web site (http://www.nysearca.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 Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The Exchange is proposing to trade the Shares pursuant to UTP. The 
Fund seeks investment results that correspond generally to the price 
and yield performance, before fees and expenses, of the Standard & 
Poor's Europe 350 Index (``Index''). The Index measures the performance 
of the stocks of leading companies in the following countries: Austria, 
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, 
Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, 
and the United Kingdom. The market capitalization of constituent 
companies is adjusted to reflect only those stocks

[[Page 174]]

that are available to foreign investors. The stocks in the Index are 
chosen for market size, liquidity, industry group representation, and 
geographic diversity. The Fund uses a representative sampling strategy 
to try to track the Index.
    The Commission previously approved the original listing and trading 
of the Fund on the American Stock Exchange, LLC (``Amex'').\3\ The Fund 
was subsequently listed on the New York Stock Exchange (``NYSE'').\4\ 
The Exchange deems Shares of the Fund 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 Shares on the Exchange would be the same as those set forth in NYSE 
Arca Equities Rule 7.34, except that the Shares would not trade during 
the Opening Session (4 a.m. to 9:30 a.m. Eastern Time) unless the 
Indicative Optimized Portfolio Value (``IOPV'') is calculated and 
disseminated during that time.
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    \3\ See Securities Exchange Act Release No. 42786 (May 15, 
2000), 65 FR 33586 (May 24, 2000) (SR-Amex-99-49).
    \4\  See Securities Exchange Act Release No. 52761 (November 10, 
2005), 70 FR 70010 (November 18, 2005) (SR-NYSE-2005-76).
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    Quotations for and last sale information regarding the Shares are 
disseminated through the Consolidated Quotation System. NYSE 
disseminates, every 15 seconds during regular NYSE trading hours of 
9:30 a.m. to 4:15 p.m. (Eastern Time), the value of the underlying 
Index and this information is widely disseminated by quotation vendors. 
NYSE also disseminates, every 15 seconds during regular NYSE trading 
hours, an IOPV for the Fund calculated by a securities information 
provider and this information is widely disseminated by market data 
vendors. The net asset value (``NAV'') of the Fund, however, is 
calculated only once a day. Therefore, the IOPV may not reflect the 
value of all securities included in the Index and thus may not reflect 
the precise composition of the current portfolio of securities held by 
the Fund at a particular moment. The IOPV is intended to closely 
approximate the value per share of the portfolio of securities for the 
Fund and provide for a close proxy of the NAV at a greater frequency 
for investors.
    The Fund includes companies trading in markets with trading hours 
overlapping regular NYSE trading hours. For this Fund, the IOPV 
calculator updates the IOPV during the overlap period every 15 seconds 
to reflect price changes of the Index components in the principal 
foreign market and converts such prices into U.S. dollars based on the 
current currency exchange rate. When the foreign market or markets are 
closed but NYSE is open for trading, the IOPV is updated every 15 
seconds of the Index components to reflect changes in currency exchange 
rates.
    The Commission has granted the Fund an exemption from certain 
prospectus delivery requirements under Section 24(d) of the Investment 
Company Act of 1940 (``1940 Act'').\5\ Any product description used in 
reliance on the Section 24(d) exemptive order will comply with all 
representations made and all conditions contained in the Fund's 
application for orders under the 1940 Act.\6\
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    \5\ 15 U.S.C. 80a-24(d).
    \6\ See In the Matter of iShares, Inc., et al., Investment 
Company Act Release No. 25623 (June 25, 2002).
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    In connection with the trading of the Shares, the Exchange would 
inform ETP Holders in an Information Circular of the special 
characteristics and risks associated with trading the Shares, including 
how Fund Shares are created and redeemed, the prospectus or product 
description delivery requirements applicable to the Shares, applicable 
Exchange rules, how information about the value of the underlying Index 
is disseminated, and trading information.
    In addition, before an ETP Holder recommends a transaction in the 
Shares, the ETP Holder must determine the Fund is suitable for the 
customer, as required by NYSE Arca Equities Rule 9.2(a)-(b).
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products to monitor trading in the 
Shares. The Exchange represents that these procedures are adequate to 
monitor Exchange trading of the Shares.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \7\ in general and Section 6(b)(5) of the 
Act \8\ in particular in that it is designed to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, and to 
remove impediments and perfect the mechanisms of a free and open market 
and to protect investors and the public interest. In addition, the 
Exchange believes that the proposed rule change is consistent with Rule 
12f-5 under the Act \9\ because it 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.
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    \7\ 15 U.S.C. 78s(b).
    \8\ 15 U.S.C. 78s(b)(5).
    \9\ 17 CFR 240.12f-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 would 
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

    Written comments on the proposed rule change were neither solicited 
nor received.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File Number SR-NYSEArca-2006-33 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2006-33. 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

[[Page 175]]

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 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-2006-33 and should 
be submitted on or before January 23, 2007.

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

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\10\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\11\ 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. The Commission believes that this proposal should benefit 
investors by increasing competition among markets that trade the 
Shares.
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    \10\ 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).
    \11\ 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,\12\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\13\ The Commission notes that it previously approved the 
listing and trading of the Shares on Amex and subsequently on NYSE.\14\ 
The Commission also finds that the proposal is consistent with Rule 
12f-5 under the Act,\15\ 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. The Exchange has represented that it 
meets this requirement because it 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.
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    \12\ 15 U.S.C. 78l(f).
    \13\ 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.
    \14\ See supra notes 3 and 4.
    \15\ 17 CFR 240.12f-5.
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    The Commission further believes that the proposal is consistent 
with Section 11A(a)(1)(C)(iii) of the Act,\16\ which sets forth 
Congress' 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 IOPV calculator updates the IOPV for the Fund every 15 
seconds to reflect price changes of the Index components in the 
principal foreign markets, and converts such prices into U.S. dollars 
based on the current currency exchange rate. When the foreign market or 
markets are closed but NYSE is open for trading, the IOPV will be 
updated every 15 seconds to reflect changes in currency exchange rates. 
Furthermore, NYSE Arca Equities Rule 7.34 describes the circumstances 
where the Exchange would halt trading when the IOPV or the value of the 
underlying Index is not calculated or widely available.
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    \16\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    The Commission notes that, if the Shares should be delisted by the 
listing exchange, the Exchange would no longer have authority to trade 
the Shares pursuant to this order.
    In support of this proposal, the Exchange has made the following 
representations:
    1. The Exchange's surveillance procedures are adequate to monitor 
the trading of the Shares.
    2. In connection with the trading of the Shares, the Exchange would 
inform ETP Holders in an Information Circular of the special 
characteristics and risks associated with trading the Shares.
    3. The Information Circular would inform participants of the 
prospectus or product delivery requirements applicable to the Shares.
    This approval order is conditioned on the Exchange's adherence to 
these representations.
    The Commission finds good cause for approving this proposal 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 the Shares on Amex and subsequently on 
NYSE is consistent with the Act. The Commission presently is not aware 
of any regulatory issue that should cause it to revisit that earlier 
finding or preclude the trading of the Shares on the Exchange pursuant 
to UTP. Therefore, accelerating approval of this proposal should 
benefit investors by creating, without undue delay, additional 
competition in the market for the Shares.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\17\ that the proposed rule change (SR-NYSEArca-2006-33) is 
approved on an accelerated basis.
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    \17\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6-22445 Filed 12-29-06; 8:45 am]

BILLING CODE 8011-01-P
