

[Federal Register: October 16, 2007 (Volume 72, Number 199)]
[Notices]               
[Page 58704-58709]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16oc07-124]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56637; File No. SR-NYSEArca-2007-92]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change, as 
Modified by Amendment Nos. 1, 2, and 3 Thereto, Relating to Generic 
Listing and Trading Rules for Index-Linked Securities

October 10, 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 September 11, 2007, NYSE Arca, Inc. (``NYSE Arca'' or ``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. 
On September 25, 2007, the Exchange filed Amendment No. 1 to the 
proposed rule change. On October 3, 2007, the Exchange filed Amendment 
No. 2 to the proposed rule change. On October 5, 2007, the Exchange 
filed Amendment No. 3 to the proposed rule change. This order provides 
notice of, and approves, the proposed rule change, as modified by 
Amendment Nos. 1, 2, and 3 thereto, 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 amend NYSE Arca Equities Rule 5.2(j)(6) 
to: (i) Include generic listing and trading rules for commodity-linked 
securities (``Commodity-Linked Securities'') and currency-linked 
securities (``Currency-Linked Securities'' and, together with Equity 
Index-Linked Securities \3\ and Commodity-Linked Securities, 
collectively, ``Index-Linked Securities''); (ii) make conforming 
changes to Commentary .01 of NYSE Arca Equities Rule 5.2(j)(6) and 
extend its application to Currency-Linked Securities; and (iii) make 
minor changes to the existing provisions of NYSE Arca Equities Rule 
5.2(j)(6) to conform the rule with changes to defined terms, changes to 
certain internal cross-references, and the generic listing and trading 
standards for Index-Linked Securities of the New York Stock Exchange 
LLC (``NYSE'').\4\ The text of the proposed rule change is available at 
the Exchange, the Commission's Public Reference Room, and http://www.nyse.com
.

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    \3\ Currently, NYSE Arca Equities Rule 5.2(j)(6) relates only to 
the listing and trading of securities that provide for the payment 
at maturity of a cash amount based on the performance of an 
underlying index or indexes of equity securities, also known as 
``Index-Linked Securities.'' See NYSE Arca Equities Rule 5.2(j)(6). 
For purposes of the proposed rule change, however, the Exchange 
seeks to modify the name of such securities to be ``Equity Index-
Linked Securities,'' among other proposed changes described herein.
    \4\ See Section 703.22 of the NYSE Listed Company Manual.
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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

[[Page 58705]]

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
    NYSE Arca proposes to amend NYSE Arca Equities Rule 5.2(j)(6) to: 
(i) Include provisions for the listing and trading of Commodity-Linked 
Securities and Currency-Linked Securities pursuant to Rule 19b-4(e) 
under the Act; \5\ (ii) make conforming changes to Commentary .01 of 
NYSE Arca Equities Rule 5.2(j)(6) and extend its application to 
Currency-Linked Securities; and (iii) make minor changes to the 
existing provisions of NYSE Arca Equities Rule 5.2(j)(6) to conform the 
rule with changes to defined terms, changes to certain internal cross 
references, and NYSE's generic listing and trading rules for Index-
Linked Securities.
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    \5\ 17 CFR 240.19b-4(e).
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    Generic Listing Standards: Rule 19b-4(e) provides that the listing 
and trading of a new derivative securities product by a self-regulatory 
organization (``SRO'') shall not be deemed a proposed rule change, 
pursuant to Rule 19b-4(c)(1),\6\ if the Commission has approved, 
pursuant to section 19(b) of the Act,\7\ the SRO's trading rules, 
procedures, and listing standards for the product class that would 
include the new derivatives securities product, and the SRO has a 
surveillance program for the product class. As a result, the Exchange 
seeks Commission approval to adopt generic listing standards under 
amended NYSE Arca Equities Rule 5.2(j)(6), pursuant to which it would 
be able to continue to list and trade Equity Index-Linked Securities 
and list and trade Commodity-Linked Securities and Currency-Linked 
Securities, in each case, without individual Commission approval of 
each such product. The Exchange represents that any securities it lists 
and/or trades pursuant to new NYSE Arca Equities Rule 5.2(j)(6), as 
amended, will satisfy the standards set forth therein. The Exchange 
states that, within five business days after commencement of trading of 
an Index-Linked Security pursuant to proposed NYSE Arca Equities Rule 
5.2(j)(6), the Exchange will file a Form 19b-4(e), in accordance with 
Rule 19b-4(e)(2)(ii) under the Act.\8\
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    \6\ 17 CFR 240.19b-4(c)(1).
    \7\ 15 U.S.C. 78s(b).
    \8\ See 17 CFR 240.19b-4(e)(2)(ii); 17 CFR 249.820.
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    Index-Linked Securities: Index-Linked Securities are designed for 
investors who desire to participate in a specific market segment by 
providing exposure to one or more identifiable underlying securities, 
commodities, currencies, derivative instruments, or market indexes of 
the foregoing. Equity Index-Linked Securities are securities that 
provide for the payment at maturity of a cash amount based on the 
performance of an underlying index or indexes of equity securities 
(``Equity Reference Asset''). Commodity-Linked Securities are proposed 
to be defined as securities that provide for the payment at maturity of 
a cash amount based on the performance of one or more physical 
commodities or commodity futures, options or other commodity 
derivatives or Commodity-Based Trust Shares (as defined in NYSE Arca 
Equities Rule 8.201) or a basket or index of any of the foregoing 
(``Commodity Reference Asset''). Finally, Currency-Linked Securities 
are proposed to be defined as securities that provide for the payment 
at maturity of a cash amount based on the performance of one or more 
currencies, or options or currency futures or other currency 
derivatives or Currency Trust Shares (as defined in NYSE Arca Equities 
Rule 8.202) or a basket or index of any of the foregoing (``Currency 
Reference Asset,'' and together with Equity Reference Asset and 
Commodity Reference Asset, collectively, ``Reference Asset'').\9\
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    \9\ The Exchange understands that the holder of an Index-Linked 
Security may or may not be fully exposed to the appreciation and/or 
depreciation of the underlying component assets of a Reference 
Asset. For example, an Index-Linked Security may be subject to a 
``cap'' on the maximum principal amount to be repaid to holders, or 
a ``floor'' on the minimum principal amount to be repaid to holders, 
at maturity.
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    Index-Linked Securities are the non-convertible debt of an issuer 
with a term of at least one year, but not greater than thirty years. 
Index-Linked Securities may or may not make interest payments based on 
dividends or other cash distributions paid on the components comprising 
the Reference Asset to the holder during the term. In addition, each 
Index-Linked Security will trade as a single, Exchange-listed security.
    The Exchange represents that the proposed generic listing standards 
to list and trade Index-Linked Securities pursuant to Rule 19b-4(e) 
under the Act will not apply if the payment at maturity is based on a 
multiple of the negative performance of the applicable Reference Asset. 
In addition, an Index-Linked Security may or may not provide 
``principal protection,'' i.e., a minimum guaranteed amount to be 
repaid.\10\ The Exchange further states that Index-Linked Securities do 
not give the holder any right to receive a portfolio component(s), 
dividend payments, or any other ownership right or interest in the 
portfolio or component(s) comprising the applicable Reference Asset. 
Pursuant to amended NYSE Arca Equities Rule 5.2(j)(6), the current or 
composite value of a Reference Asset, as applicable, will be widely 
disseminated at least every 15 seconds during the trading day.\11\
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    \10\ Some Index-Linked Securities may provide for ``contingent'' 
protection of the principal amount, whereby principal protection may 
not apply if the Reference Asset at any point in time during the 
term of such securities reaches a certain pre-determined level.
    \11\ See infra note 15.
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    Proposed Standards for All Index-Linked Securities: With respect to 
the current requirements applicable to all Index-Linked Securities, the 
Exchange proposes to amend the provision related to the required 
minimum tangible net worth \12\ of an issuer of Index-Linked Securities 
such that, if the Index-Linked Securities are fully and unconditionally 
guaranteed by an affiliate of the issuer, the Exchange would rely on 
such affiliate's tangible net worth for purposes of this requirement 
and include in its calculation all Index-Linked Securities that are 
fully and unconditionally guaranteed by such affiliate. In addition, 
for purposes of this requirement, government issuers and supranational 
entities would be evaluated on a case-by-case basis.
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    \12\ See proposed NYSE Arca Equities Rule 5.2(j)(6)(A)(e). The 
Exchange defines ``tangible net worth'' as total assets, Less 
intangible assets and total liabilities. Intangibles include non-
material benefits, such as goodwill, patents, copyrights, and 
trademarks.
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    If the Reference Asset of an Index-Linked Security listed pursuant 
to proposed NYSE Arca Equities 5.2(j)(6) is based in whole or in part 
on an index that is maintained by a broker-dealer, the broker-dealer is 
required to erect a ``firewall'' around the personnel responsible for 
the maintenance of such index or who have access to information 
concerning changes and adjustments to such index, and a third party who 
is not a broker-dealer would be required to calculate the value of such 
index. In addition, any advisory committee, supervisory board, or 
similar entity that advises an index licensor or administrator, or that 
makes decisions regarding the index or portfolio composition, 
methodology, and related matters, must implement and maintain, or be 
subject to, procedures designed to prevent the use and dissemination of 
material, non-public information

[[Page 58706]]

regarding the applicable index or portfolio.\13\
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    \13\ See proposed NYSE Arca Equities Rule 5.2(j)(6)(C). The 
Exchange states that NYSE Arca Equities Rule 7.26 (Limitations on 
Dealings), which imposes certain restrictions on ETP Holders, would 
apply to the trading of Commodity-Linked and Currency-Linked 
Securities. See NYSE Arca Equities Rule 7.26; NYSE Arca Equities 
Rule 1.1 (defining ETP Holder).
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    Index-Linked Securities and transactions therein will be subject to 
all Exchange rules governing the trading of equity securities, 
including its equity margin rules.\14\ The Exchange represents that 
Index-Linked Securities will trade during all three trading sessions 
pursuant to NYSE Arca Equities Rule 7.34(a).\15\
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    \14\ See proposed NYSE Arca Equities Rule 5.2(j)(6)(D).
    \15\ Pursuant to NYSE Arca Rule 7.34(a), NYSE Arca Marketplace, 
which is the equities trading facility of NYSE Arca Equities, 
generally has three trading sessions each day the Exchange is open 
for business: (1) an Opening Session (4 a.m. to 9:30 a.m. Eastern 
Time or ``ET''), during which the Opening Auction and the Market 
Order Auction occur; (2) a Core Trading Session (9:30 a.m. to 4:00 
p.m. ET); and (3) a Late Trading Session (4 p.m. to 8 p.m. ET).
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    With respect to trading halts,\16\ in the case of Commodity-or 
Currency-Linked Securities, if the indicative value or the Commodity 
Reference Asset value or Currency Reference Asset value, as the case 
may be, applicable to a series of such securities is not being 
disseminated as required, or, in the case of Equity Index-Linked 
Securities, if the value of the underlying index is not being 
disseminated as required, the Exchange may halt trading during the day 
on which such interruption first occurs. If such interruption persists 
past the trading day in which it occurred, the Exchange will halt 
trading no later than the beginning of the trading day following the 
interruption.
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    \16\ See proposed NYSE Arca Equities Rule 5.2(j)(6)(E).
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    The Exchange will implement written surveillance procedures for 
Index-Linked Securities, including adequate comprehensive surveillance 
sharing agreements with markets trading in non-U.S. components, as 
applicable.\17\ The Exchange states that it intends to utilize its 
existing surveillance procedures applicable to derivative products to 
monitor trading in Index-Linked Securities. The Exchange represents 
that these procedures are adequate to properly monitor Exchange trading 
of such securities in all trading sessions and to deter and detect 
violations of Exchange rules. The Exchange's current trading 
surveillance focuses on detecting when securities trade outside their 
normal patterns. When such situations are detected, surveillance 
analysis follows and investigations are opened, where appropriate, to 
review the behavior of all relevant parties for all relevant trading 
violations. The Exchange states that it may obtain information via the 
Intermarket Surveillance Group (``ISG'') from other exchanges who are 
members or affiliate members of ISG. In addition, the Exchange also has 
a general policy prohibiting the distribution of material, non-public 
information by its employees.
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    \17\ See proposed NYSE Arca Equities Rule 5.2(j)(6)(F).
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    Equity Index-Linked Securities: Equity Index-Linked Securities 
would be subject to the criteria in amended NYSE Arca Equities Rule 
5.2(j)(6)(B)(I) for initial and continued listing. The Exchange 
proposes to make certain revisions to this section to conform to NYSE's 
current generic listing and trading standards for Index-Linked 
Securities and changes with respect to certain defined terms and 
internal cross references. Specifically, the Exchange proposes to make 
the following notable modifications:
     The minimum of ten component securities comprising the 
Equity Reference Asset must include different issuers.\18\
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    \18\ See proposed NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(a).
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     The index or indexes to which the security is linked shall 
have been reviewed and approved for the trading of investment company 
units or options or other derivatives by the Commission under section 
19(b)(2) of the Act and rules thereunder.\19\
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    \19\ See proposed NYSE Arca Equities Rule 
5.2(j)(6)(B)(I)(1)(b)(1).
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     All component securities shall be either (A) securities 
(other than foreign country securities and American Depository Receipts 
(``ADRs'')) that are (i) Issued by an Act reporting company that is 
listed on a national securities exchange and (ii) an ``NMS stock'' (as 
defined in Rule 600 of Regulation NMS) \20\ or (B) foreign country 
securities or ADRs, provided that foreign country securities or foreign 
country securities underlying ADRs having their primary trading market 
outside the United States on foreign trading markets that are not ISG 
members or parties to comprehensive surveillance sharing agreements 
with the Exchange will not, in the aggregate, represent more than 20% 
of the dollar weight of the index.\21\
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    \20\ See 17 CFR 242.600(b)(47).
    \21\ See proposed NYSE Arca Equities Rule 
5.2(j)(6)(B)(I)(1)(b)(2)(vii).
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    Commodity-Linked Securities: The Exchange proposes to incorporate 
generic listing and trading standards for Commodity-Linked Securities. 
Commodity-Linked Securities will be subject to the criteria in proposed 
NYSE Arca Equities Rule 5.2(j)(6)(B)(II) for initial and continued 
listing. Each issue of Commodity-Linked Securities must meet one of the 
initial listing standards set forth below:
     The Commodity Reference Asset to which the security is 
linked shall have been reviewed and approved for the trading of 
Commodity-Based Trust Shares or options or other derivatives by the 
Commission under section 19(b)(2) of the Act and rules thereunder and 
the conditions set forth in the Commission's approval order, including 
with respect to comprehensive surveillance sharing agreements, continue 
to be satisfied; or
     The pricing information for components of a Commodity 
Reference Asset must be derived from a market which is an ISG member or 
affiliate or with which the Exchange has a comprehensive surveillance 
sharing agreement. Notwithstanding the previous sentence, pricing 
information for gold and silver may be derived from the London Bullion 
Market Association. A Commodity Reference Asset may include components 
representing not more than 10% of the dollar weight of such Commodity 
Reference Asset for which the pricing information is derived from 
markets that do not meet the foregoing requirements; provided, however, 
that no single component subject to this exception exceeds 7% of the 
dollar weight of the Commodity Reference Asset.\22\
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    \22\ See Securities Exchange Act Release No. 56525 (September 
25, 2007), 72 FR 56114 (October 2, 2007) (SR-NYSE-2007-76) 
(approving the adoption of certain exceptions to the pricing 
information requirements with respect to components underlying 
Commodity-Linked Securities and Currency-Linked Securities).
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In addition, the issue must meet both of the following initial listing 
criteria:
     The value of the Commodity Reference Asset must be 
calculated and widely disseminated by one or more major market data 
vendors on at least a 15-second basis during the Core Trading Session 
(as defined in NYSE Arca Equities Rule 7.34); \23\ and
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    \23\ See supra note 15.
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     In the case of Commodity-Linked Securities that are 
periodically redeemable, the indicative value of such securities must 
be calculated and widely disseminated by one or more major market data 
vendors on at least a 15-second basis during the Core Trading Session.
    The Exchange will commence delisting or removal proceedings if any 
of the foregoing initial listing criteria are not continuously 
maintained. The

[[Page 58707]]

Exchange will also commence delisting or removal proceedings:
     If the aggregate market value or the principal amount of 
the Commodity-Linked Securities publicly held is less than $400,000;
     If the value of the Commodity Reference Asset is no longer 
calculated or available and a new Commodity Reference Asset is 
substituted, unless the new Commodity Reference Asset meets the 
requirements of proposed NYSE Arca Equities Rule 5.2(j)(6); or
     If such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    Currency-Linked Securities: The Exchange also proposes to 
incorporate generic listing and trading standards for Currency-Linked 
Securities. Currency-Linked Securities will be subject to the criteria 
in proposed NYSE Arca Equities Rule 5.2(j)(6)(B)(III) for initial and 
continued listing. Currency-Linked Securities must meet one of the 
initial listing standards set forth below:
     The Currency Reference Asset to which the security is 
linked shall have been reviewed and approved for the trading of 
Currency Trust Shares or options or other derivatives by the Commission 
under section 19(b)(2) of the Act and rules thereunder and the 
conditions set forth in the Commission's approval order, including with 
respect to comprehensive surveillance sharing agreements, continue to 
be satisfied; or
     The pricing information for each component of a Currency 
Reference Asset must be (x) the generally accepted spot price for the 
currency exchange rate in question or (y) derived from a market which 
(i) Is an ISG member or affiliate or with which the Exchange has a 
comprehensive surveillance sharing agreement and (ii) is the pricing 
source for components of a Currency Reference Asset that has previously 
been approved by the Commission. A Currency Reference Asset may include 
components representing not more than 10% the dollar weight of such 
Currency Reference Asset for which the pricing information is derived 
from markets that do not meet the requirements of either (x) or (y) 
above; provided, however, that no single component subject to this 
exception exceeds 7% of the dollar weight of the Currency Reference 
Asset.\24\

    \24\ See supra note 22.
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In addition, the issue must meet both of the following initial listing 
criteria:
     The value of the Currency Reference Asset must be 
calculated and widely disseminated by one or more major market data 
vendors on at least a 15-second basis during the Core Trading Session; 
\25\ and
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    \25\ See supra note 15.
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     In the case of Currency-Linked Securities that are 
periodically redeemable, the indicative value of such securities must 
be calculated and widely disseminated by one or more major market data 
vendors on at least a 15-second basis during the Core Trading Session.
    The Exchange will commence delisting or removal proceedings if any 
of the foregoing initial listing criteria are not continuously 
maintained. The Exchange will also commence delisting or removal 
proceedings under any of the following circumstances:
     If the aggregate market value or the principal amount of 
the Currency-Linked Securities publicly held is less than $400,000;
     If the value of the Currency Reference Asset is no longer 
calculated or available and a new Currency Reference Asset is 
substituted, unless the new Currency Reference Asset meets the 
requirements of proposed NYSE Arca Equities Rule 5.2(j)(6); or
     If such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    Information Circular: Upon evaluating the nature and complexity of 
each Index-Linked Security, the Exchange represents that it will 
prepare and distribute, if appropriate, an Information Circular to ETP 
Holders describing the Index-Linked Securities. Accordingly, the 
particular structure and corresponding risks of an Index-Linked 
Security traded on the Exchange will be highlighted and disclosed. In 
particular, the Information Circular will discuss the risks involved in 
trading Index-Linked Securities during the Opening and Late Trading 
Sessions when an updated indicative value, if required, is not 
calculated or publicly disseminated.\26\ The Information Circular will 
also set forth the Exchange's suitability rule that requires ETP 
Holders recommending a transaction in Index-Linked Securities: (1) To 
determine that such transaction is suitable for the customer (NYSE Arca 
Equities Rule 9.2(a)); and (2) to have a reasonable basis for believing 
that the customer can evaluate the special characteristics, and is able 
to bear the financial risks, of such transaction. In addition, the 
Information Circular will reference the requirement that ETP Holders 
must deliver a prospectus to investors purchasing newly issued Index-
Linked Securities prior to or concurrently with the confirmation of a 
transaction. The Information Circular will note that all of the 
Exchange's equity trading rules will be applicable to trading in Index-
Linked Securities.
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    \26\ Specifically, the Exchange requires ETP Holders to disclose 
to their non-ETP Holder customers that an updated Reference Asset 
value or indicative value may not be calculated or publicly 
disseminated during extended trading hours. Because the indicative 
value is not calculated or widely disseminated during the Opening 
and Late Trading Sessions, an investor who is unable to calculate an 
implied value for a derivative securities product in those sessions 
may be at a disadvantage to market professionals. The Exchange 
believes that requiring ETP Holders to disclose this risk to non-ETP 
Holders will facilitate informed participation in extended hours 
trading. See Securities Exchange Act Release No. 56270 (August 15, 
2007), 72 FR 47109 (August 22, 2007) (SR-NYSEArca-2007-74).
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    Commentary .01: The Exchange also proposes to make conforming 
changes to Commentary .01 of NYSE Arca Equities Rule 5.2(j)(6) to 
extend the application of Currency-Linked Securities therein.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\27\ in general, and furthers the 
objectives of section 6(b)(5) of the Act,\28\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, 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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    \27\ 15 U.S.C. 78f(b).
    \28\ 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

    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:

[[Page 58708]]

Electronic Comments

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

Number SR-NYSEArca-2007-92 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-2007-92. 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, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. 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-2007-92 and should 
be submitted on or before November 6, 2007.

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

    After careful consideration, 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 \29\ and, in particular, the requirements of section 6 of the 
Act.\30\ Specifically, the Commission finds that the proposed rule 
change is consistent with section 6(b)(5) of the Act,\31\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to promote just and equitable principles of trade, 
to foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, 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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    \29\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \30\ 15 U.S.C. 78f.
    \31\ 15 U.S.C. 78f(b)(5).
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    Generic Listing Standards for Commodity-Linked and Currency-Linked 
Securities: To list and trade Commodity-Linked and Currency-Linked 
Securities, the Exchange currently must file a proposed rule change 
with the Commission pursuant to section 19(b)(1) of the Act \32\ and 
Rule 19b-4 thereunder.\33\ However, Rule 19b-4(e) provides that the 
listing and trading of a new derivative securities product by an SRO 
will not be deemed a proposed rule change pursuant to Rule 19b-4(c)(1) 
under the Act if the Commission has approved, pursuant to section 19(b) 
of the Act, the SRO's trading rules, procedures, and listing standards 
for the product class that would include the new derivative securities 
product, and the SRO has a surveillance program for the product class. 
The Exchange's proposed rules for the listing and trading of Commodity-
Linked Securities and Currency-Linked Securities pursuant to Rule 19b-
4(e) fulfill these requirements.
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    \32\ 15 U.S.C. 78s(b)(1).
    \33\ 17 CFR 240.19b-4.
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    The Exchange's ability to rely on Rule 19b-4(e) to list and trade 
Commodity-Linked and Currency-Linked Securities that meet the 
applicable requirements of proposed NYSE Arca Equities Rule 5.2(j)(6) 
should reduce the time frame for bringing these securities to the 
market and thereby reduce the burdens on issuers and other market 
participants, while also promoting competition and making such 
securities available to investors more quickly.
    The Commission has previously approved generic listing standards 
for such securities that are substantially similar to the Exchange's 
current proposal.\34\ The Commission believes that the proposed generic 
listing standards for Commodity-Linked and Currency-Linked Securities, 
in addition to the proposed changes to the generic listing standards 
applicable to all Index-Linked Securities and Equity Index-Linked 
Securities, should fulfill the intended objective of Rule 19b-4(e) and 
allow securities that satisfy the proposed generic listing standards to 
commence trading without the need for public comment and Commission 
approval.\35\
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    \34\ See Securities Exchange Act Release Nos. 55794 (May 22, 
2007), 72 FR 29558 (May 29, 2007) (SR-Amex-2007-45) (approving, 
among other things, generic listing standards for Commodity-Linked 
Securities and Currency-Linked Securities); and 55687 (May 1, 2007), 
72 FR 25824 (May 7, 2007) (SR-NYSE-2007-27) (approving generic 
listing standards for Equity Index-Linked Securities, Commodity-
Linked Securities, and Currency-Linked Securities).
    \35\ The Commission notes that the failure of a particular 
product or index to comply with the proposed generic listing 
standards under Rule 19b-4(e), however, would not preclude the 
Exchange from submitting a separate filing pursuant to Section 
19(b)(2), requesting Commission approval to list and trade a 
particular index-linked product.
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    Listing and Trading Index-Linked Securities: Taken together, the 
Commission finds that the Exchange's proposal contains adequate rules 
and procedures to govern the listing and trading of Index-Linked 
Securities listed pursuant to Rule 19b-4(e). All such securities listed 
under their respective generic standards will be subject to the full 
panoply of Exchange rules and procedures that currently govern the 
trading of equity securities, including the equity margin rules, on the 
Exchange.
    As set forth more fully above, the Exchange seeks to conform the 
minimum tangible net worth requirements for each issuer of Index-Linked 
Securities and the specific listing and trading requirements related to 
Equity Index-Linked Securities to the standards similarly adopted by 
other national securities exchanges.\36\ In addition, with respect to 
Commodity-Linked and Currency-Linked Securities, the Exchange's 
proposal requires that: (1) The applicable Reference Assets underlying 
such securities must have been reviewed and approved for trading by the 
Commission; or (2) the pricing information with respect to the 
underlying components representing at least 90% of the dollar weight of 
the applicable Reference Asset must have been derived from (a) A market 
which is an ISG member or affiliate or with which the Exchange has in 
place a comprehensive surveillance sharing agreement, or (b) certain 
other required sources. An underlying component for which the pricing 
information does not comply with the foregoing requirements cannot 
exceed 7% of the dollar weight

[[Page 58709]]

of the applicable Reference Asset. The Commission believes that these 
requirements are designed to ensure that the trading markets for the 
underlying components are adequately capitalized and sufficiently 
liquid and should minimize the potential for manipulation and permit 
the Exchange to identify potential trading and other violations of its 
rules. The Commission notes that such requirements should also 
contribute to the transparency of the Commodity Reference Asset or 
Currency Reference Asset, as the case may be. By requiring at least 90% 
of the pricing information for the relevant components to be readily 
available, the proposed listing standards of NYSE Arca Equities 
5.2(j)(6) should help ensure a fair and orderly market for Commodity-
Linked and Currency-Linked Securities listed and traded pursuant to 
Rule 19b-4(e).
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    \36\ See supra note 34.
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    The Exchange has also developed delisting criteria that would 
permit it to suspend trading in Index-Linked Securities in 
circumstances that make further dealings in such products inadvisable. 
The Commission believes that the delisting criteria should help ensure 
that a minimum level of liquidity exists for each such security to 
allow for the maintenance of fair and orderly markets. Also, in the 
event that the value of the underlying index for Equity Index-Linked 
Securities, or the applicable Commodity Reference Asset or Currency 
Reference Asset or, in the case of Commodity-Linked and Currency-Linked 
Securities that are periodically redeemable, the corresponding 
indicative value, is no longer calculated and widely disseminated on at 
least a 15-second basis, the Exchange may halt trading during the day 
on which the interruption first occurs; however, if the interruption 
persists past the trading day on which it occurred, the Exchange will 
halt trading no later than the beginning of the trading day following 
the interruption and will commence delisting proceedings.
    Surveillance: The Commission notes that any Index-Linked Securities 
approved for listing and trading would be subject to the Exchange's 
existing surveillance procedures governing derivative products, as well 
as procedures the Exchange represents are adequate to properly monitor 
the trading in such securities during all Exchange trading sessions. 
The Exchange also has represented that it will be able to obtain 
information from other exchanges that are members or affiliate members 
of ISG and has a general policy prohibiting the distribution of 
material, non-public information by its employees.
    Information Memorandum: The Exchange has represented that it will 
distribute, as appropriate, an Information Circular to members 
describing the product, the particular structure of the product, and 
the corresponding risks of trading Index-Linked Securities, including 
the risks involved in trading such securities during the Opening and 
Late Trading Sessions when an updated indicative value, if required, is 
not calculated or publicly disseminated.\37\ In addition, the 
Information Circular will set forth the Exchange's suitability 
requirements with respect to recommendations in transactions in Index-
Linked Securities to customers, the prospectus delivery requirements of 
ETP Holders. The Information Circular will also note that all of the 
Exchange's equity trading rules will be applicable to the trading of 
Index-Linked Securities.
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    \37\ See supra note 26.
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    Firewall Procedures: The Exchange has further represented that if 
the Reference Asset is an underlying index that is maintained by a 
broker-dealer, such broker-dealer will establish a ``firewall'' around 
personnel responsible for the maintenance of such underlying index or 
who have access to information concerning changes and adjustments to 
the underlying index. As an added measure, a third-party who is not a 
broker-dealer will be required to calculate the value of the index. In 
addition, the Exchange has stated that any advisory committee, 
supervisory board, or similar entity that advises an index licensor or 
administrator or that makes decisions regarding the underlying index or 
portfolio composition, methodology, and related matters must implement 
and maintain, or be subject to, procedures designed to prevent the use 
and dissemination of material, non-public information regarding the 
applicable underlying index or portfolio. With respect to trading on 
the Exchange, NYSE Arca has stated that, with respect to any issue of 
Commodity-Linked or Currency-Linked Securities, ETP Holders acting as a 
registered market maker will be restricted, among others, from making 
markets in and trading the components underlying the Commodity 
Reference Asset or Currency Reference Asset, as the case may be, or any 
derivative instruments thereof, pursuant to Commentary .01 of NYSE Arca 
Equities Rules 5.2(j)(6) and 7.26 (Limitations on Dealings).
    Acceleration: The Commission finds good cause for approving the 
proposed rule change, as modified by Amendment Nos. 1, 2, and 3 
thereto, before the 30th day after the date of publication of notice of 
filing thereof in the Federal Register. The Exchange requested 
accelerated approval of the proposal to facilitate the prompt listing 
and trading of Index-Linked Securities and, in particular, Commodity-
Linked Securities and Currency-Linked Securities, based on the 
specified criteria of proposed NYSE Arca Equities Rule 5.2(j)(6). The 
Commission notes that the Exchange's proposed changes to the generic 
listing standards that apply to all Index-Linked Securities, proposed 
changes to the generic listing standards for Equity Index-Linked 
Securities, and the proposed generic listing standards for Commodity-
Linked and Currency-Linked Securities are based on previously approved 
listing standards for such securities.\38\ The Commission is presently 
not aware of any regulatory issue that should cause it to revisit that 
finding or would preclude the trading of such securities on the 
Exchange. Therefore, accelerating approval of this proposal should 
benefit investors by creating, without undue delay, additional 
competition in the market for Index-Linked Securities, subject to the 
standards and representations discussed herein. Therefore, the 
Commission finds good cause, consistent with section 19(b)(2) of the 
Act,\39\ to approve the proposed rule change on an accelerated basis.
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    \38\ See supra note 34.
    \39\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\40\ that the proposed rule change (SR-NYSEArca-2007-92), as 
modified by Amendment Nos. 1, 2, and 3 thereto, be, and it hereby is, 
approved on an accelerated basis.
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    \40\ Id.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\41\
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    \41\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-20330 Filed 10-15-07; 8:45 am]

BILLING CODE 8011-01-P
