

[Federal Register: February 27, 2007 (Volume 72, Number 38)]
[Notices]               
[Page 8828-8831]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27fe07-154]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55320; File No. SR-NYSEArca-2007-15]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change To 
Trade Shares of the CurrencySharesSM Japanese Yen Trust 
Pursuant to Unlisted Trading Privileges

February 21, 2007.
    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 February 12, 2007, NYSE Arca, Inc. (the ``Exchange''), through its 
wholly-owned subsidiary, NYSE Arca Equities, Inc. (``NYSE Arca 
Equities''), 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. 
This Order provides notice of the proposed rule change and approves 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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[[Page 8829]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange, through NYSE Arca Equities, proposes to trade shares 
(the ``Shares'') of the CurrencyShares SM Japanese Yen Trust 
(the ``Trust'') pursuant to unlisted trading privileges (``UTP''). The 
text of the proposed rule change is available at the Exchange, the 
Commission's Public Reference Room, and http://www.nyse.com.


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
    Pursuant to NYSE Arca Equities Rule 8.202, which permits the 
listing and trading of ``Currency Trust Shares,'' \3\ the Exchange 
proposes to trade pursuant to UTP the Shares of the Trust. The 
Commission has recently approved the listing and trading of the Shares 
on the New York Stock Exchange LLC (``NYSE'').\4\ The Exchange 
currently trades Shares of the Euro Currency Trust, CurrencyShares 
SM Australian Dollar Trust, CurrencyShares SM 
British Pound Sterling Trust, CurrencyShares SM Canadian 
Dollar Trust, CurrencyShares SM Mexican Peso Trust, 
CurrencyShares SM Swedish Krona Trust, and CurrencyShares 
SM Swiss Franc Trust (the ``CurrencyShares Trusts'').\5\
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    \3\ Currency Trust Shares are securities issued by a trust that 
represent investors' discrete, identifiable, and undivided 
beneficial ownership interest in the non-U.S. currency deposited 
into the trust. See Securities Exchange Act Release No. 53253 
(February 8, 2006), 71 FR 8029 (February 15, 2006) (SR-PCX-2005-123) 
(granting the Exchange accelerated approval of its proposed listing 
and trading standards for Currency Trust Shares and approving the 
UTP trading of shares of the Euro Currency Trust).
    \4\ See Securities Exchange Act Release No. 55268 (February 9, 
2007), 72 FR 7793 (February 20, 2007) (SR-NYSE-2007-03) (``NYSE 
Order'').
    \5\ See supra note 3. See also Securities Exchange Act Release 
No. 54043 (June 26, 2006), 71 FR 37967, (July 3, 2006) (SR-NYSEArca-
2006-26) (granting accelerated approval for the Exchange to trade 
shares of six of the CurrencyShares Trusts pursuant to UTP); 
Securities Exchange Act Release No. 54020 (June 20, 2006), 71 FR 
36579 (June 27, 2006) (SR-NYSE-2006-35) (granting approval for the 
original listing and trading of six of the CurrencyShares Trusts on 
NYSE).
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    The Shares issued by the Trust represent units of fractional, 
undivided, and beneficial interests in, and ownership of, the Trust. 
The Exchange states that the investment objective of the Trust is for 
the Shares to reflect the price of the Japanese Yen. A detailed 
discussion of the Trust, its assets and expenses, the creation and 
redemption of the Shares, the valuation of the Japanese Yen, the 
calculation methodology of the IIV (as defined herein), and 
distributions, among others, can be found in the NYSE Order.
    The Trust's Web site (http://www.currencyshares.com) provides 

information on: (1) The spot price for the Japanese Yen, including the 
bid and offer and the midpoint between the bid and offer for the 
Japanese Yen spot price; (2) an intraday indicative value (``IIV'') per 
Share, updated at least every 15 seconds;\6\ (3) a delayed indicative 
value (subject to a 20-minute delay), used for calculating premium/
discount information; (4) premium/discount information, calculated on a 
20-minute delayed basis; (5) the net asset value (``NAV'') of the 
Trust, calculated each business day; (6) accrued interest per Share; 
(7) the daily Federal Reserve Bank of New York Noon Buying Rate; (8) 
the Basket Amount;\7\ and (9) the last sale price of the Shares as 
traded in the U.S. market, subject to a 20-minute delay. The Trust's 
Web site disseminates the foreign currency spot price for the Japanese 
Yen and the IIV per Share at least every 15 seconds during NYSE Arca 
Marketplace's opening and late trading sessions, as well as during its 
core trading session.\8\
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    \6\ The IIV is analogous to the intraday optimized portfolio 
value (sometimes referred to as the IOPV) and the indicative 
portfolio value associated with the trading of exchange-traded 
funds.
    \7\ The Basket Amount is the amount required to be deposited for 
the purchase of a Basket of Shares. A Basket of Shares consists of a 
block of 50,000 Shares.
    \8\ Pursuant to NYSE Arca Equities Rule 7.34(a), the NYSE Arca 
Marketplace trading hours for exchange-traded funds are as follows: 
(1) 4 a.m. to 9:30 a.m. Eastern Time (``ET'') (opening trading 
session); (2) 9:30 a.m. to 4:15 p.m. ET (core trading session); and 
(3) 4:15 p.m. to 8 p.m. ET (late trading session). The Exchange 
states that the currency spot price is available on the Trust's Web 
site without interruption 24 hours a day, seven days a week.
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    The Exchange states that currently, the Consolidated Tape Plan does 
not provide for dissemination of the spot price of a foreign currency 
over the Consolidated Tape System (``CTS''). However, the last sale 
price for the Shares is disseminated through the CTS, as is the case 
for all equity securities traded on the Exchange (including exchange-
traded funds). Currency price and market information on the Japanese 
Yen and other foreign currencies is available on a 24-hour basis 
through public Web sites, major market data vendors, and professional 
and subscription services. Foreign currency futures and options prices, 
including information on current and past trading sessions, are also 
available on a real-time and delayed basis from various financial 
information sources. In addition, the Exchange states that current 
foreign currency spot prices are also generally available with bid/ask 
spreads from foreign currency dealers.
    The Exchange represents that it will cease trading the Shares if 
the original listing market stops trading the Shares due a regulatory 
halt or such listing market delists the Shares.\9\ UTP trading in the 
Shares would be governed by the trading halt provisions of NYSE Arca 
Equities Rule 7.34 relating to temporary interruptions in the 
calculation or wide dissemination of the IIV or the value (spot price) 
of the underlying currency.\10\ Additionally, the Exchange may cease 
trading the Shares if such other event shall occur or condition exists, 
which, in the opinion of the Exchange, makes further dealings on the 
Exchange inadvisable.\11\
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    \9\ E-mail from Timothy J. Malinowski, Director, NYSE Group, 
Inc., to Edward Cho, Special Counsel, Division of Market Regulation, 
Commission, dated February 20, 2007 (clarifying when the Exchange 
will halt trading of the Shares).
    \10\ The Exchange represents that the provisions of NYSE Arca 
Equities Rule 7.34(a), which address, in part, interruptions in the 
calculation or wide dissemination of the value of an underlying 
index, shall also apply to interruptions in the calculation or wide 
dissemination of the value (spot price) of an underlying currency. 
For purposes of trading the Shares pursuant to UTP, the applicable 
value would be the Japanese Yen spot price.
    \11\ See, e.g., NYSE Arca Equities Rule 7.12 (Trading Halts Due 
to Extraordinary Market Volatility).
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    The Exchange states that the Shares would trade as equity 
securities, and therefore, the Exchange's rules governing the trading 
of equity securities would govern the trading of such Shares. The 
Shares would trade on the NYSE Arca Marketplace from 4 a.m. ET until 8 
p.m. ET. The Exchange represents that its equity trading rules would 
govern transactions in the Shares during all trading sessions. The 
Shares would be deemed ``Eligible Listed Securities,'' as defined in 
NYSE Arca Equities Rule 7.55, for purposes of the Intermarket Trading 
System Plan, and therefore would be subject to the trade-

[[Page 8830]]

through restrictions of NYSE Arca Equities Rule 7.56.
    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 
properly monitor Exchange trading of the Shares in all trading sessions 
and to deter and detect violations of Exchange rules. The Exchange is 
able to obtain information regarding trading in the Shares and options 
and futures on the Japanese Yen through proprietary or customer trades 
which ETP Holders \12\ effect on any relevant market. In addition, the 
Exchange may obtain trading information via the Intermarket 
Surveillance Group from other exchanges who are members or affiliates 
thereof. The Exchange states that its general policy prohibits the 
distribution of material, non-public information by its employees.\13\
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    \12\ An ETP Holder is a registered broker or dealer that has 
been issued an Equity Trading Permit (ETP) by NYSE Arca Equities.
    \13\ The Exchange further states that the Sponsor (Rydex 
Specialized Products LLC), the Trustee (The Bank of New York), the 
Depository (JPMorgan Chase Bank, N.A., London Branch), and the 
Distributor (Rydex Distributors, Inc.) are not affiliated with the 
Exchange or one another, with the exception that the Sponsor and 
Distributor are affiliated.
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    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an Information Bulletin of the special characteristics 
and risks associated with trading the Shares. Specifically, the 
Bulletin will discuss the following: (1) The procedures for purchases 
and redemptions of Shares; (2) NYSE Arca Equities Rule 9.2(a), which 
imposes a duty of due diligence on its ETP Holders to learn the 
essential facts relating to every customer prior to trading the Shares; 
(3) how information regarding the IIV and the Japanese Yen is 
disseminated; (4) the requirement that ETP Holders deliver a prospectus 
to investors purchasing newly issued Shares prior to or concurrently 
with the confirmation of a transaction; and (5) other relevant 
information.
2. Statutory Basis
    The proposal is consistent with Section 6(b) of the Act \14\ in 
general and Section 6(b)(5) of the Act \15\ in particular in that it is 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to remove impediments 
to, and perfect the mechanism of a free and open market, and in general 
to protect investors and the public interest. In addition, the proposal 
is consistent with Rule 12f-5 under the Act \16\ because the Exchange 
deems the Shares to be equity securities, thus rendering trading in the 
Shares subject to the Exchange's existing rules governing the trading 
of equity securities.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ 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 will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purpose of the Act.

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

    The Exchange has neither solicited nor received written comments on 
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 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-2007-15 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-2007-15. 
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 offices 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-2007-15 and should be submitted on or before 
March 20, 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.\17\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\18\ 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. The Commission notes that it previously approved the original 
listing and trading of the Shares on NYSE.\19\
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    \17\ 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).
    \18\ 15 U.S.C. 78f(b)(5).
    \19\ See supra note 4.
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    In addition, the Commission finds that the proposal is consistent 
with Section 12(f) of the Act,\20\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\21\ The Commission notes that it previously approved for

[[Page 8831]]

trading pursuant to UTP on the Exchange the shares issued by the 
CurrencyShares Trusts, which are similar to the Shares issued by the 
Trust.\22\ The Commission finds that the proposal is consistent with 
Rule 12f-5 under the Act,\23\ 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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    \20\ 15 U.S.C. 78l(f).
    \21\ 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.
    \22\ See supra note 5.
    \23\ 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,\24\ 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. The last sale price of the Shares is available through CTS. 
Although the CTS does not provide for dissemination of the spot price 
of the Japanese Yen, the Trust's Web site disseminates the spot price 
every five to ten seconds, as well as the IIV per Share at least every 
15 seconds, the NAV once daily, the Basket Amount, and the last sale 
price of the Shares. In addition, currency prices and market 
information on the Japanese Yen, including futures and options prices, 
are available through various major market data vendors, financial 
information sources, and professional and subscription services. If the 
listing market halts trading in the Shares, or the IIV or the value of 
the underlying currency is not being calculated or disseminated, the 
Exchange would halt trading in the Shares.
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    \24\ 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 address 
any concerns associated with the trading of the Shares on a UTP basis.
    (2) The Exchange would inform its members in an Information 
Bulletin of the special characteristics and risks associated with 
trading the Shares, including suitability recommendation requirements.
    (3) The Exchange would require its members to deliver a prospectus 
or product description to investors purchasing Shares prior to or 
concurrently with a transaction in such Shares and will note this 
prospectus delivery requirement in the Information Bulletin.
    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 above, the Commission previously approved 
the original listing and trading of the Shares on NYSE and the trading 
of shares issued by the CurrencyShares Trusts, which are similar to the 
Shares issued by the Trust, pursuant to UTP on the Exchange. The 
Commission presently is not aware of any regulatory issue that should 
cause it to revisit those findings or would preclude the trading of the 
Shares on the Exchange pursuant to UTP. Accelerating approval of this 
proposal should benefit investors by creating, without undue delay, 
additional competition in the market for such Shares.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\25\ that the proposed rule change (SR-NYSEArca-2007-15) be, and it 
hereby is, approved on an accelerated basis.
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    \25\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-3291 Filed 2-26-07; 8:45 am]

BILLING CODE 8010-01-P
