

[Federal Register: February 12, 2007 (Volume 72, Number 28)]
[Notices]               
[Page 6637-6639]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12fe07-130]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55211; File No. SR-Phlx-2006-79]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change, as Modified by Amendment No. 1, Relating to an Amendment 
to the Generic Listing Standards for Trust Shares

 January 31, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that on November 29, 2006, the Philadelphia Stock Exchange, Inc. 
(``Phlx'' 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. On January 29, 2007, the Exchange filed Amendment No. 1 
to the proposed rule change.\3\ The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons, and is granting accelerated approval to the proposed rule 
change as modified by Amendment No. 1.
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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 supplemented the rationale 
for its request for accelerated approval and made technical changes 
to the proposed rule text.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Phlx Rule 803--Criteria for 
Listing--Tier 1, regarding generic listing standards for Trust Shares. 
The text of the proposed Phlx Rule is set forth below, with new text 
italicized and deleted text [bracketed].
Rule 803 Criteria for Listing--Tier I
* * * * *
    (a)-(h) No Change.
    (i) Trust Shares
    (1)-(10) No Change.
    (11) The Exchange may approve a series of Trust Shares for trading, 
whether by listing or pursuant to unlisted trading privileges, pursuant 
to Rule 19b-4(e) under the Securities Exchange Act of 1934 provided 
each of the following criteria is satisfied:
    (a) Eligibility Criteria for Index Components. Upon the initial 
listing of a series of Trust Shares on the Exchange, the component 
stocks of an index or portfolio underlying such series of Trust Shares 
shall meet the following criteria as of the date of the initial deposit 
of cash and securities into the trust:
    (i)-(ii) No Change.
    (iii) The most heavily weighted component stock cannot exceed 
[25]30% of the weight of the index or portfolio, and the five most 
heavily weighted component stocks cannot exceed 65% of the weight of 
the index or portfolio;
    (iv)-(v) No Change.
    (b)-(h) No Change.
    (j)-(m) No Change.
* * * * *

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, substantially 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 purpose of the proposed rule change is to conform Phlx's 
generic listing standards for Trust Shares, specifically Rule 
803(i)(11)(a)(iii), to the standards of other exchanges. Phlx Rule 803 
provides generic listing standards for Trust Shares to permit listing 
and trading of these securities pursuant to Rule 19b-4(e) under the 
Act.\4\ Rule 19b-4(e) provides that the listing and trading of a new 
derivative securities product by a self-regulatory organization shall 
not be deemed a proposed rule change, pursuant to paragraph (c)(1) of 
Rule 19b-4,\5\ if the Commission has approved, pursuant to Section 
19(b) of the Act,\6\ the self-regulatory organization's trading rules, 
procedures and listing standards for the product class that would 
include the new derivative securities product, and the self-regulatory 
organization has a surveillance program for the product class.\7\
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    \4\ 17 CFR 240.19b-4(e).
    \5\ 17 CFR 240.19b-4(c)(1).
    \6\ 15 U.S.C. 78s(b).
    \7\ See Securities Exchange Act Release No. 40761 (December 8, 
1998), 63 FR 70952 (December 22, 1998).
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    These generic listing standards are intended to ensure that stocks 
with substantial market capitalization and trading volume account for a 
substantial portion of the weight of an index or portfolio. Phlx Rule 
803 provides that, upon the initial listing of a series of Trust Shares 
under Rule 19b-4(e), component stocks that in the aggregate account for 
at least 90 percent of the weight of the index or portfolio must have a 
minimum market value of at least $75 million. In addition, the 
component stocks in the index must have a minimum monthly trading 
volume during each of the last six months of at least 250,000 shares 
for stocks representing at least 90 percent of the weight of the index 
or portfolio. Currently, Rule 803(i)(11)(a)(iii) provides that the most 
heavily weighted component stock in an underlying index cannot exceed 
25 percent of the weight of the index or portfolio, and the five most 
heavily weighted component stocks cannot exceed 65 percent of the 
weight of the index or portfolio. The

[[Page 6638]]

Exchange proposes to increase from 25 percent to 30 percent the 
permissible weight of the most heavily weighted component stock in an 
underlying index. The Exchange is not amending the existing requirement 
that the five most heavily weighted stocks cannot exceed 65 percent of 
the weight of the index or portfolio. According to the Exchange, this 
change will provide additional flexibility to unit investment trusts to 
be listed pursuant to Rule 19b-4(e) in structuring their products and 
will help reduce possible concerns associated with a single stock 
exceeding the 25 percent threshold immediately prior to initial listing 
and trading due to a spike in the price of the most heavily weighted 
index stock. The Exchange notes that, notwithstanding this change, unit 
investment trusts (including Trust Shares) are subject to Internal 
Revenue Code Subchapter M requirements applicable to regulated 
investment companies. In order to maintain regulated investment company 
status, these entities would be required to rebalance their portfolios 
quarterly to avoid any one stock exceeding a 25 percent weighting in 
the trust's portfolio.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \8\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \9\ in particular, in that it is 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, 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange states that written comments 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 No. SR-Phlx-2006-79 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-Phlx-2006-79. 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 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-Phlx-2006-79 and should be submitted on or before March 
5, 2007.

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

    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of the Exchange 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 the requirements of Section 
6(b)(5) of the Exchange Act,\11\ which requires, among other things, 
that the Exchange's rules be designed to promote just and equitable 
principles of trade, to remove impediments and to 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 the proposed rule change is reasonably designed to provide 
additional flexibility in the listing of Trust Shares under the 
Exchange's generic listing standards. Further, the Commission believes 
that the proposed rule change will serve to protect investors and the 
public interest by maintaining the size and liquidity requirements 
applicable to the securities underlying the relevant index or 
portfolio.
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    \10\ 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 U.S.C. 78c(f).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Commission finds good cause for approving the proposed rule 
change prior to the 30th day after the date of publication of the 
notice of filing thereof in the Federal Register. The Commission has 
previously approved similar proposals by the American Stock Exchange 
LLC (``Amex''), Chicago Board Options Exchange, Incorporated (``CBOE'') 
and New York Stock Exchange LLC (``NYSE'').\12\ Therefore, the proposed 
rule change does not raise any new issues.
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    \12\ See Securities Exchange Act Release Nos. 44532 (July 10, 
2001), 66 FR 37078 (July 16, 2001) (SR-Amex-2001-25) (approving an 
increase for indexes underlying Portfolio Depositary Receipts and 
Index Fund Shares listed on the Amex); 44908 (October 4, 2001), 66 
FR 52161 (October 12, 2001) (SR-CBOE-2001-38) (approving an increase 
for indexes underlying Index Portfolio Receipts and Index Portfolio 
Shares listed on the CBOE); 53934 (June 1, 2006), 71 FR 33326 (June 
8, 2006) (SR-NYSE-2006-39) (approving an increase for indexes 
underlying Investment Company Units).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\13\ that the proposed rule change (SR-Phlx-2006-79), as modified by 
Amendment No. 1, is approved on an accelerated basis.
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    \13\ 15 U.S.C. 78s(b)(2).


[[Page 6639]]


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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-2248 Filed 2-9-07; 8:45 am]

BILLING CODE 8010-01-P
