

[Federal Register: December 12, 2007 (Volume 72, Number 238)]
[Notices]               
[Page 70640-70642]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12de07-93]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56907; File No. SR-NYSEArca-2007-122]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to Certain Modifications to the 
Initial Listing Standards for Index-Linked Securities

December 5, 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 November 28, 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, II, 
and III below, which Items have been substantially prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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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), 
the Exchange's listing standards for Equity Index-Linked Securities, 
Commodity-Linked Securities, and Currency-Linked Securities 
(collectively, ``Index-Linked Securities'').\3\ 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\ NYSE Arca Equities Rule 5.2(j)(6) defines Equity Index-
Linked Securities to be 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 (an ``Equity Reference 
Asset''). Commodity-Linked Securities are 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 (a ``Commodity Reference 
Asset''). Currency-Linked Securities are 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 (a ``Currency Reference Asset,'' and together with Equity 
Reference Asset and Commodity Reference Asset, collectively, a 
``Reference Asset'').
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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 IV 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 proposes to amend one of the requirements of NYSE Arca 
Equities Rule 5.2(j)(6)(A), which sets

[[Page 70641]]

forth the listing requirements applicable to all types of Index-Linked 
Securities to be listed and traded on the Exchange, to provide for 
greater flexibility in the listing criteria for such securities. 
Currently, NYSE Arca Equities Rule 5.2(j)(6)(A)(d) provides that the 
payment at maturity of a cash amount for Index-Linked Securities may or 
may not provide for a multiple of the positive performance of an 
underlying Reference Asset, and in no event will payment at maturity be 
based on a multiple of the negative performance of an underlying 
Reference Asset.
    The Exchange proposes to amend NYSE Arca Equities Rule 
5.2(j)(6)(A)(d) to: (a) Allow the Exchange to consider for listing and 
trading Index-Linked Securities that provide for payment at maturity 
based on a multiple of the direct or inverse performance of an 
underlying Reference Asset; and (b) provide that in no event will a 
loss or negative payment at maturity be accelerated by a multiple that 
exceeds twice the performance of an underlying Reference Asset. The 
Exchange proposes these changes in order to permit the listing and 
trading of Index-Linked Securities that employ investment strategies 
similar or analogous to certain exchange-traded funds like the Short 
Funds and UltraShort Funds of the ProShares Trust and the Inverse Funds 
and Leveraged Inverse Funds of the Rydex ETF Trust, each of which trade 
on the Exchange pursuant to unlisted trading privileges (``UTP'') under 
NYSE Arca Equities Rule 5.2(j)(3).\4\ The Short Funds and Inverse Funds 
seek daily investment results, before fees and expenses, that 
correspond to the inverse or opposite of the daily performance (-100%) 
of the respective underlying indexes, and the Ultra Short Funds and 
Leveraged Inverse Funds seek daily investment results, before fees and 
expenses, that correspond to twice the inverse or opposite of the daily 
performance (-200%) of the respective underlying indexes.
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    \4\ See Securities Exchange Act Release Nos. 56763 (November 7, 
2007), 72 FR 64103 (November 14, 2007) (SR-NYSEArca-2007-81) 
(approving the trading of shares of funds of the Rydex ETF Trust 
pursuant to UTP); 56601 (October 2, 2007), 72 FR 57625 (October 10, 
2007) (SR-NYSEArca-2007-79) (approving the trading shares of eight 
funds of the ProShares Trust based on international equity indexes 
pursuant to UTP); 55125 (January 18, 2007), 72 FR 3462 (January 25, 
2007) (SR-NYSEArca-2006-87) (approving the trading of shares of 81 
funds of the ProShares Trust pursuant to UTP); and 54026 (June 21, 
2006), 71 FR 36850 (June 28, 2006) (SR-PCX-2005-115) (approving the 
trading of shares of certain other funds of the ProShares Trust 
pursuant to UTP).
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    The Exchange believes that these changes will allow greater 
flexibility in the listing and trading of Index-Linked Securities and 
offer investors additional investment options. The Exchange believes 
that investors will continue to be protected because the payment at 
maturity cannot be based on a multiple that exceeds twice the inverse 
performance of an underlying Reference Asset.\5\
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    \5\ See id.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\6\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\7\ 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the proposed rule change will impose no 
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 no written comments were solicited or 
received with respect to the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which NYSE Arca consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. 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-2007-122 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-2007-122. 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 the 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-2007-122 and should 
be submitted on or before January 2, 2008.


[[Page 70642]]


For the Commission, by the Division of Trading and Markets, pursuant 
to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-23971 Filed 12-11-07; 8:45 am]

BILLING CODE 8011-01-P
