

[Federal Register: May 17, 2007 (Volume 72, Number 95)]
[Notices]               
[Page 27879-27881]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17my07-127]                         


[[Page 27879]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55746; File No. SR-CBOE-2007-49]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Order Granting Accelerated Approval 
of Proposed Rule Change To Trade Certain iShares MSCI International 
Index Funds Pursuant to UTP

May 11, 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 May 10, 2007, the Chicago Board Options Exchange, Incorporated 
(``Exchange'' or ``CBOE''), 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 notice and order provides notice of the proposed 
rule change and approves the proposal 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 proposes to trade, on the CBOE Stock Exchange 
(``CBSX''), shares (``Shares'') of eight iShares MSCI international 
index funds (``Funds'') pursuant to unlisted trading privileges 
(``UTP''). The text of the proposed rule change is available on the 
Exchange's Web site (http://www.cboe.org/Legal), at the Exchange's 

principal office, 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 Shares of the following Funds 
pursuant to UTP:

 iShares MSCI Belgium (Symbol: EWK)
 iShares MSCI France (EWQ)
 iShares MSCI Italy (EWI)
 iShares MSCI Japan (EWJ)
 iShares MSCI Netherlands (EWN)
 iShares MSCI Spain (EWP)
 iShares MSCI Sweden (EWD)
 iShares MSCI Switzerland (EWL)

    The Funds seek to provide investment results that correspond 
generally to the price and yield performance, before fees and expenses, 
of publicly traded securities in the aggregate in the respective 
country's markets, as measured by the applicable MSCI Index (each, an 
``Index'').
    The Commission previously approved the original listing and trading 
of the Shares on the American Stock Exchange (``Amex'').\3\ The 
Commission subsequently approved listing of the Shares on the New York 
Stock Exchange (``NYSE'').\4\ Consequently, Shares of each Fund are 
listed on both Amex and NYSE.
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    \3\ See Securities Exchange Act Release No. 36947 (March 8, 
1996), 61 FR 10606 (March 14, 1996) (SR-Amex-95-43). The Shares were 
formerly known as World Equity Benchmark Shares or WEBS.
    \4\ See Exchange Act Release No. 52816 (November 21, 2005), 70 
FR 71574 (November 29, 2005) (SR-NYSE-2005-70) (approving the 
listing and trading on NYSE of the shares of iShares MSCI Index 
Funds for Belgium, France, Italy, Netherlands, Spain, Sweden, and 
Switzerland). See also Securities Exchange Act Release No. 52761 
(November 10, 2005), 70 FR 70010 (November 18, 2005) (SR-NYSE-2005-
76) (approving the listing and trading on NYSE of the shares of 
iShares MSCI Japan Index Fund, among other index funds).
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    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. The trading hours for 
the Shares on CBSX will be 8:15 a.m. until 3:15 p.m. Central Time 
(``CT''), unless the intraday indicative value (``IIV'') of a Fund is 
not being calculated and widely disseminated before 8:30 a.m. CT, in 
which case trading will begin at 8:30 a.m. CT; and unless the Amex 
closes trading at 3 p.m. CT, in which case trading will end at 3 p.m. 
CT.
    Quotations for and last-sale information regarding the Shares are 
disseminated through the Consolidated Quotation System. The value of 
each Index is updated intra-day on a real-time basis as individual 
component securities of each Index change in price. The intraday value 
of each Index is disseminated every 15 seconds throughout the trading 
day. In addition, a value for each Index is disseminated once each 
trading day, based on closing prices in the relevant exchange markets.
    To provide updated information relating to the Shares for use by 
investors, professionals, and persons wishing to create or redeem them, 
Amex disseminates through the facilities of the Consolidated Tape 
Association the IIV for each Fund as calculated by a securities 
information provider. The IIV for each Fund is disseminated on a per-
share basis every 15 seconds during regular trading hours. CBOE Rule 
52.3 provides that, if the IIV ceases to be widely available, CBSX 
would cease trading the Shares.
    In connection with the trading of the Shares, the Exchange would 
inform members and member organizations in an Information Circular of 
the special characteristics and risks associated with trading the 
Shares, including how they 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 a member recommends a transaction in the Shares, the member must 
determine that the Shares are suitable for the customer as required by 
CBOE Rule 53.6.
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares. Trading may be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable. These may include: (1) The extent to 
which trading is not occurring in the securities comprising the 
underlying index and/or financial instruments of the Funds, or (2) 
whether other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present. In addition, 
trading in the Shares would be subject to trading halts caused by 
extraordinary market volatility pursuant to the Exchange's ``circuit 
breaker'' rule.\5\
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    \5\ CBOE Rule 6.3B.
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    Moreover, the Exchange represents that it would cease trading the 
Shares if the listing market stops trading the Shares because of a 
regulatory halt similar to a halt based on CBOE Rule 6.3. UTP trading 
in the Shares is also governed by the trading halts provisions of CBOE 
Rule 52.3 relating to temporary

[[Page 27880]]

interruptions in the calculation or wide dissemination of the IIV or 
the value of the underlying index.
    The Exchange intends to utilize its existing surveillance 
procedures applicable to equity security 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
    CBOE believes that the proposed rule change is consistent with the 
Act and the rules and regulations thereunder applicable to a national 
securities exchange. Specifically, the Exchange believes that the 
proposed rule change is consistent with the Section 6(b)(5) \6\ 
requirements that an exchange have rules that are 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 to protect investors and the public interest. In addition, 
CBOE believes that the proposal is consistent with Rule 12f-5 under the 
Act \7\ because it deems 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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    \6\ 15 U.S.C. 78(f)(b)(5).
    \7\ 17 CFR 240.12f-5.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE does not believe that the proposed rule change will impose any 
burden on competition 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 neither solicited nor received comments on the 
proposal.

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-CBOE-2007-49 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-CBOE-2007-49. 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-CBOE-2007-49 and should be submitted on or before June 
7, 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.\8\ 
In particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\9\ 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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    \8\ In approving this rule change, the Commission notes that it 
has considered the proposal's impact on efficiency, competition, and 
capital formation. See 15 U.S.C. 78c(f).
    \9\ 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,\10\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\11\ The Commission notes that it previously approved the 
listing and trading of the Shares on Amex and NYSE.\12\ The Commission 
also finds that the proposal is consistent with Rule 12f-5 under the 
Act,\13\ 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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    \10\ 15 U.S.C. 78l(f).
    \11\ 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.
    \12\ See supra notes 3 and 4.
    \13\ 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,\14\ 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 facilities of the CTA and the 
Consolidated Quotation System. In addition, the IIV of each Fund is 
disseminated every 15 seconds throughout the trading day by the 
national securities exchange on which the Fund is listed or by other 
information providers or market data vendors.
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    \14\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    Furthermore, the Commission believes that the proposal is 
reasonably designed to preclude trading of the Shares when transparency 
is impaired. CBOE Rule 52.3 sets forth trading halt procedures when 
CBOE trades the

[[Page 27881]]

Shares pursuant to UTP. Under this rule, if the listing market halts 
trading when the IIV is not being calculated or widely disseminated, 
CBOE also would halt trading in the Shares. This rule is substantially 
similar to those recently adopted by other exchanges and found by the 
Commission to be consistent with the Act.\15\
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    \15\ See, e.g., NYSE Arca Equities Rule 7.34; Securities 
Exchange Act Release No. 54997 (December 21, 2006), 71 FR 78501 
(December 29, 2006).
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    The Commission notes that, if the Shares should be delisted by the 
listing market, 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 properly 
monitor Exchange trading of the Shares and to deter and detect 
violations of Exchange rules.
    2. Prior to the commencement of trading, the Exchange would inform 
its members and member organizations in an Information Circular of the 
special characteristics and risks associated with trading the Shares.
    3. The Information Circular would include the requirement that 
members and member firms deliver a prospectus to investors purchasing 
newly issued Shares prior to or concurrently with the confirmation of a 
transaction.

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 
the listing and trading of the Shares on Amex and NYSE to be consistent 
with the Act. The Commission presently is not aware of any regulatory 
issue that should cause it to revisit that finding or would 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,\16\ that the proposed rule change (SR-CBOE-2007-49) be and it 
hereby is, approved on an accelerated basis.
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    \16\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Deputy Secretary.
 [FR Doc. E7-9470 Filed 5-16-07; 8:45 am]

BILLING CODE 8010-01-P
