

[Federal Register: February 20, 2008 (Volume 73, Number 34)]
[Notices]               
[Page 9395-9398]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20fe08-132]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57320; File No. SR-NYSEArca-2008-15]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Continue To List 
and Trade the Shares of the iShares MSCI Mexico Index Fund

February 13, 2008.
    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 January 28, 2008, 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. 
NYSE Arca filed the proposal pursuant to Section 19(b)(3)(A) of the Act 
\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to continue to list and trade the shares 
(``Shares'') of the iShares MSCI Mexico Index Fund (``Fund''). The Fund 
seeks 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 Mexican market, as 
represented by the MSCI Mexico Investable Market Index (``Index''). 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 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 continue to list and trade the Shares of 
the Fund under NYSE Arca Equities Rule 5.2(j)(3), the Exchange's 
listing standards for Investment Company Units (``ICUs'').\5\ Although 
the Shares are currently listed and traded on NYSE Arca, the Exchange 
submits this proposed rule change because, as a result of revisions to 
the methodology for calculating the Index that were implemented on 
December 1, 2007, the Shares no longer satisfy all of the ``generic'' 
listing requirements of Commentary .01(a)(B) to NYSE Arca Equities Rule 
5.2(j)(3) applicable to ICUs based on an international or global index 
or portfolio.\6\
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    \5\ ICUs are securities that represent an interest in a 
registered investment company or similar entity that (1) holds 
securities comprising, or otherwise based on or representing an 
interest in, an index or portfolio of securities, or (2) holds 
securities in another registered investment company that holds 
securities comprising, or otherwise based on or representing an 
interest in, an index or portfolio of securities. See NYSE Arca 
Equities Rule 5.2(j)(3)(A)(i).
    \6\ The generic listing requirements under NYSE Arca Equities 
Rule 5.2(j)(3) permit the listing and trading of ICUs pursuant to 
Rule 19b-4(e) under the Act (17 CFR 240.19b-4(e)). 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), 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 derivatives securities 
product, and the SRO has a surveillance program for the product 
class.
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    Specifically, the revised Index fails to satisfy the provisions of 
Commentary .01(a)(B)(3) to NYSE Arca Equities Rule 5.2(j)(3), which 
requires that: (1) The most heavily weighted component shall not exceed 
25% of the weight of the Index; and (2) the five most heavily weighted 
component stocks shall not exceed 60% of the weight of the Index.\7\ 
The Exchange represents that, except for Commentary .01(a)(B)(3) to 
NYSE Arca Equities Rule 5.2(j)(3), the Shares currently satisfy all of 
the generic listing standards under NYSE Arca Equities Rule 5.2(j)(3), 
and the continued listing standards under NYSE Arca Equities Rules 
5.2(j)(3) and 5.5(g)(2) applicable to ICUs continue to apply to the 
Shares. The Exchange further represents that iShares, Inc. is required 
to comply with Rule 10A-3 under the Act \8\ for the initial and 
continued listing of the Shares.
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    \7\ The Exchange represents that, as of December 3, 2007, the 
most heavily weighted component of the Index represented 32.2% of 
the Index weight, and the five most heavily weighted component 
stocks represented 65.2% of the Index weight.
    \8\ 17 CFR 240.10A-3.
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    Detailed descriptions of the Fund, Index (including the methodology 
used to determine the composition of the Index), procedures and payment 
requirements for creating and redeeming Shares, transaction fees and 
expenses, dividends, distributions, taxes, and reports to be 
distributed to beneficial owners of the Shares can be found in the 
Registration Statement \9\ or on the Internet Web site for the Fund 
(http://www.iShares.com), as applicable.

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    \9\ See Registration Statement on Form N-1A (Post-Effective 
Amendment) filed by iShares, Inc. with the Commission on December 
28, 2007 (File Nos. 033-97598 and 811-09102) (``Registration 
Statement'').

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[[Page 9396]]

Availability of Information Regarding the Shares and the Index
    Morgan Stanley Capital International, Inc. (``MSCI'') calculates 
the Index value for each trading day in the Mexican exchange market, 
the Bolsa Mexicana de Valores, based on official closing prices in such 
exchange market and publicly disseminates the Index values for the 
previous day's close.\10\ The Index values are reported periodically in 
major financial publications and are also available through vendors of 
financial information. MSCI or another third-party major market data 
vendor makes available at least every 60 seconds an updated Index value 
when the Mexican exchange market trading hours overlap with the NYSE 
Arca Marketplace (as defined in NYSE Arca Equities Rule 1.1(e)) Core 
Trading Session (9:30 a.m. to 4:15 p.m. Eastern Time or ``ET'').\11\ 
Otherwise, when the Bolsa Mexicana de Valores is closed during NYSE 
Arca Marketplace trading hours, the Fund provides closing Index values 
on http://www.ishares.com. iShares, Inc. causes to be made available 

daily the names and required number of shares of each of the securities 
to be deposited in connection with the issuance of the Shares,\12\ as 
well as information relating to the required cash payment representing, 
in part, the amount of accrued dividends for the Fund.
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    \10\ The Exchange notes that, when a broker-dealer or its 
affiliate, such as MSCI, is involved in the development and 
maintenance of a stock index upon which a product such as iShares is 
based, the broker-dealer or its affiliate should have procedures 
designed specifically to address the improper sharing of 
information. See Securities Exchange Act Release No. 52178 (July 29, 
2005), 70 FR 46244, 46246 n.18 (August 9, 2005) (SR-NYSE-2005-41) 
(describing the procedures which must be in place to prevent the 
improper sharing of information). The Exchange represents that MSCI 
has procedures in place that comply with the requirements of 
Commentary .01(b)(1) to NYSE Arca Equities Rule 5.2(j)(3), which 
relate to restricted access of information concerning changes and 
adjustments to the Index.
    \11\ See Commentary .01(b)(2)(b) to NYSE Arca Equities Rule 
5.2(j)(3) (providing that index values for ICUs based on 
international or global equity portfolios will be widely 
disseminated by one or more major market data vendors at least every 
60 seconds during the Core Trading Session). See also NYSE Arca 
Equities Rule 7.34 (describing the hours of trading during three 
trading sessions on the Exchange: Opening Session; Core Trading 
Session; and Late Trading Session).
    \12\ The closing prices of the securities to be deposited are 
readily available from, as applicable, the relevant exchanges, 
automated quotation systems, published or other public sources in 
Mexico, or online information services such as Bloomberg or Reuters. 
The exchange rate information required to convert such information 
into U.S. dollars is also readily available in newspapers and other 
publications and from a variety of on-line services.
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    In addition, an independent third party calculates and disseminates 
the Indicative Optimized Portfolio Value or ``IOPV'' on a per-Share 
basis through the facilities of the Consolidated Tape Association 
(``CTA'') at least every 15 seconds during the Core Trading 
Session.\13\ The Fund administrator, State Street Bank and Trust 
Company, calculates the net asset value (``NAV'') for the Fund once a 
day on each day that the New York Stock Exchange, LLC is open for 
trading, generally at 4 p.m. ET. The NAV is also available to the 
public on http://www.iShares.com, from the Fund distributor by means of 

a toll-free phone number, and to participants of the National 
Securities Clearing Corporation.
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    \13\ The Exchange notes that there is an overlap in trading 
hours between the Mexican and U.S. markets for the Fund; trading 
hours on the Bolsa Mexicana de Valores, where the Index stocks are 
traded, are from 8:30 a.m. to 3 p.m. Central Standard Time. 
Therefore, the IOPV calculator updates the applicable IOPV at least 
every 15 seconds to reflect price changes in the Mexican market, and 
converts such prices into U.S. dollars based on the currency 
exchange rate. When the Mexican market is closed, but U.S. markets 
are open from 9:30 a.m. to 4:15 p.m. ET, the IOPV is updated at 
least every 15 seconds to reflect changes in currency exchange rates 
after the Mexican market closes.
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    There is also disseminated a variety of data with respect to the 
Fund on a daily basis by means of CTA and Consolidated Quote High Speed 
Lines, which is made available prior to the opening of the Core Trading 
Session on the NYSE Arca Marketplace. Specifically, information with 
respect to recent NAV, number of shares outstanding, and the estimated 
and total cash amount per Creation Unit \14\ aggregation are made 
available prior to the opening of the Core Trading Session. The 
Exchange disseminates quotation and last-sale information for the 
Shares through the facilities of the CTA. In addition, the Web site for 
the Fund, which is publicly accessible at no charge, contains the 
following information, on a per-Share basis, for the Fund: (1) The 
prior business day's NAV and the mid-point of the bid-ask price at the 
time of calculation of such NAV (``Bid/Ask Price'') \15\ and a 
calculation of the premium or discount of such price against such NAV; 
and (2) data in chart format displaying the frequency distribution of 
discounts and premiums of the Bid/Ask Price against the NAV, within 
appropriate ranges, for each of the four previous calendar quarters. 
The Fund's holdings are available on the Fund's Web site, and 
components of the Index are available to subscribers at http://www.mscibarra.com.
 The information on the Fund's Web site will be 

available to all market participants at the same time. If the Exchange 
becomes aware that the NAV is not being disseminated to all market 
participants at the same time, it will halt trading in the Shares until 
such time as the NAV is available to all market participants.\16\
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    \14\ See Registration Statement, supra note 9 (defining Creation 
Unit).
    \15\ The Bid-Ask Price of the Fund is determined using the 
highest bid and lowest offer on the NYSE Arca Marketplace as of the 
time of calculation of the Fund's NAV.
    \16\ E-mail from Michael Cavalier, Assistant General Counsel, 
NYSE Euronext, to Edward Cho and Christopher Chow, Special Counsels, 
Division of Trading and Markets, Commission, dated February 12, 
2008.
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Trading Rules
    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. Shares will trade on 
the Exchange from 4 a.m. to 8 p.m. ET in accordance with NYSE Arca 
Equities Rule 7.34. The Exchange represents that it has appropriate 
rules to facilitate transactions in the Shares during all trading 
sessions, including rules governing trading halts, as provided in NYSE 
Arca Equities Rules 5.5(g)(2) and 7.12.

Surveillance

    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products, including ICUs, to 
monitor trading in the Shares.\17\ 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'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.
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    \17\ Telephone conversation between Michael Cavalier, Assistant 
General Counsel, NYSE Euronext, and Christopher Chow, Special 
Counsel, Division of Trading and Markets, Commission, dated February 
12, 2008.
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    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 has a 
general policy prohibiting the distribution of material, non-public 
information by its employees.

[[Page 9397]]

Information Bulletin
    The Exchange will inform its ETP Holders \18\ in an Information 
Bulletin (``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 in required unit aggregations (and that Shares are not 
individually redeemable); (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 IOPV is disseminated; (4) the risks 
involved in trading the Shares during the Opening and Late Trading 
Sessions when an updated Index value and IOPV will not be calculated or 
publicly available; (5) 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 (6) trading 
information.
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    \18\ See NYSE Arca Equities Rule 1.1 (defining ETP Holder as a 
registered broker or dealer that is a sole proprietorship, 
partnership, corporation, limited liability company, or other 
organization in good standing that has been issued an Equity Trading 
Permit or ``ETP'').
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    In addition, the Bulletin will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement 
for the Fund and discuss any exemptive, no-action, or interpretive 
relief granted by the Commission from the provisions of the Act and the 
rules thereunder. The Bulletin will also disclose that the NAV for the 
Shares will be calculated after 4 p.m. ET each trading day.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\19\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\20\ 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, and to remove impediments to and perfect 
the mechanism of a free and open market and a national market system.
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    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

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

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

    The Exchange states that written comments on the proposed rule 
change were neither solicited nor received.

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

    Because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest, the proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \21\ and Rule 19b-4(f)(6) 
thereunder.\22\
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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide the Commission 
with written notice of its intent to file the proposed rule change, 
along with a brief description and text of the proposed rule change, 
at least five business days prior to the date of filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. The Exchange has fulfilled this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange requests that the Commission waive 
the 30-day operative delay so that the Exchange can continue to list 
and trade the Shares without interruption. The Exchange states that it 
has developed adequate trading rules, procedures, surveillance 
programs, and listing standards for the continued listing and trading 
of the Shares.
    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public 
interest.\23\ Given that the Shares, which are currently listed and 
trading on the Exchange, comply with all of NYSE Arca's initial generic 
listing standards for ICUs (except for narrowly missing two 
requirements of Commentary .01(a)(B)(3) to NYSE Arca Equities Rule 
5.2(j)(3)), the continued listing and trading of the Shares by NYSE 
Arca does not appear to present any novel or significant regulatory 
issues or impose any significant burden on competition. For these 
reasons, the Commission designates the proposed rule change as 
operative upon filing.
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    \23\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

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-2008-15 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-2008-15. 
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, 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

[[Page 9398]]

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-2008-15 and should 
be submitted on or before March 12, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-3081 Filed 2-19-08; 8:45 am]

BILLING CODE 8011-01-P
