
[Federal Register: July 14, 2008 (Volume 73, Number 135)]
[Notices]               
[Page 40417-40418]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14jy08-138]                         


[[Page 40417]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58113; File No. SR-NYSEArca-2008-40]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Accelerated Approval of Proposed Rule Change Relating to the Listing 
and Trading of Shares of the NETS Tokyo Stock Exchange REIT Index Fund

July 7, 2008.

I. Introduction

    On May 22, 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''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade the shares (``Shares'') of the 
NETSTM Tokyo Stock Exchange REIT Index Fund (``Fund'') 
issued by the NETS Trust (``Trust''). The proposed rule change was 
published for comment in the Federal Register on June 6, 2008.\3\ The 
Commission received no comments on the proposal. This order approves 
the proposed rule change.
---------------------------------------------------------------------------

    \1\15 U.S.C. 78s(b)(1).
    \2\17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 57906 (June 2, 
2008), 73 FR 32377.
---------------------------------------------------------------------------

II. Description of the Proposal

    The Exchange proposes to list and trade the Shares pursuant to NYSE 
Arca Equities Rule 5.2(j)(3), the Exchange's listing standards for 
Investment Company Units (``ICUs'').\4\ 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 Japanese market, as represented by the Tokyo Stock 
Exchange REIT Index (``Index''). The Index is a market capitalization 
weighted index consisting of stocks of all of the real estate 
investment trusts traded primarily on the Tokyo Stock Exchange. 
Detailed descriptions of the Fund, the Index, procedures 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 \5\ or 
on the Fund's Web site (http://www.netsetfs.com), as applicable.
---------------------------------------------------------------------------

    \4\ ICUs are securities that represent interests in a registered 
investment company that holds securities comprising, or otherwise 
based on or representing an interest in, an index or portfolio of 
securities (or 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).
    \5\ See the Trust's Registration Statement on Form N-1A, dated 
February 13, 2008 (File Nos. 333-147077 and 811-22140) 
(``Registration Statement'').
---------------------------------------------------------------------------

    This proposed rule change is required because the Index does not 
meet all of the ``generic'' listing requirements of Commentary 
.01(a)(B) to NYSE Arca Equities Rule 5.2(j)(3) applicable to listing of 
ICUs based on international or global indexes. The Index meets all such 
requirements except for those set forth in Commentary .01(a)(B)(2). 
Commentary .01(a)(B)(2) to NYSE Arca Equities Rule 5.2(j)(3) provides 
that component stocks that in the aggregate account for at least 90% of 
the weight of the index or portfolio each shall have a minimum 
worldwide monthly trading volume during each of the last six months of 
at least 250,000 shares; for the period of October 2007 up to and 
including March 2008, component stocks that in the aggregate accounted 
for at least 90% of the weight of the Index had a minimum worldwide 
monthly trading volume of 2,918 shares.
    The Exchange represents that: (1) Except for Commentary 
.01(a)(B)(2) 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); (2) the continued listing standards under NYSE Arca 
Equities Rules 5.2(j)(3) and 5.5(g)(2) applicable to ICUs shall apply 
to the Shares; and (3) the Trust is required to comply with Rule 10A-3 
under the Act \6\ for the initial and continued listing of the Shares. 
In addition, the Exchange represents that the Shares will comply with 
all other requirements applicable to ICUs including, but not limited 
to, requirements relating to the dissemination of key information such 
as the Index value and Intraday Indicative Value, rules governing the 
trading of equity securities, trading hours, trading halts, 
surveillance, and Information Bulletin to ETP Holders, as set forth in 
prior Commission orders approving the generic listing rules applicable 
to the listing and trading of ICUs.\7\
---------------------------------------------------------------------------

    \6\ 17 CFR 240.10A-3.
    \7\ See, e.g., Securities Exchange Act Release Nos. 55621 (April 
12, 2007), 72 FR 19571 (April 18, 2007) (SR-NYSEArca-2006-86) 
(approving generic listing standards for ICUs based on international 
or global indexes); 44551 (July 12, 2001), 66 FR 37716 (July 19, 
2001) (SR-PCX-2001-14) (approving generic listing standards for ICUs 
and Portfolio Depositary Receipts); and 41983 (October 6, 1999), 64 
FR 56008 (October 15, 1999) (SR-PCX-98-29) (approving rules for the 
listing and trading of ICUs). See also e-mail from Michael Cavalier, 
Associate General Counsel, NYSE Euronext, to Christopher W. Chow, 
Special Counsel, Commission, dated June 2, 2008.
---------------------------------------------------------------------------

III. Discussion and Commission's Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of Section 6 of the 
Act \8\ and the rules and regulations thereunder applicable to a 
national securities exchange.\9\ In particular, the Commission finds 
that the proposal is consistent with Section 6(b)(5) of the Act,\10\ 
which requires, among other things, that the Exchange's rules be 
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, in general, to protect investors and the 
public interest.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f.
    \9\ 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).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Although the Index does not meet the generic listing requirement 
that component stocks accounting in the aggregate for at least 90% of 
the weight of the index have a minimum worldwide monthly trading volume 
during each of the last six months of at least 250,000 shares, the 
Commission believes that the proposed rule change should not 
significantly affect the protection of investors or the public interest 
or impose any significant burden on competition. Commentary .01(a)(B) 
was designed to, in conjunction with other listing requirements, ensure 
that ICUs listed on the Exchange are sufficiently broad-based in scope 
to be not readily susceptible to manipulation.\11\ In approving these 
standards, the Commission believed that, taken together, they are 
reasonably designed to ensure that securities with substantial market 
capitalization and trading volume account for a substantial portion of 
any underlying index or portfolio that, when applied in conjunction 
with the other applicable listing requirements, would permit the 
listing and trading only of products that are sufficiently broad-based 
in scope to minimize potential manipulation.\12\ In this case, the 
Commission believes that the global notional volume traded (number of 
shares traded multiplied by

[[Page 40418]]

price of security) of Index components indicates that the Shares should 
not be readily susceptible to manipulation: for the period of October 
2007 up to and including March 2008, component stocks that in the 
aggregate accounted for 93.42% of the weight of the Index each had 
global notional volume traded per month of at least $25,000,000, 
averaged over the last six months. In addition, the Commission notes 
the Exchange's representation that the Shares satisfy all of the other 
generic listing standards under NYSE Arca Equities Rule 5.2(j)(3), 
which includes: (1) Commentary .01(a)(B)(1), which establishes a 
minimum market value of index component stocks that in the aggregate 
account for at least 90% of the weight of the underlying index; (2) 
Commentary .01(a)(B)(3), which prohibits (a) the most heavily weighted 
component stock from exceeding 25% of the weight of the underlying 
index, and (b) the five most heavily weighted component stocks from 
exceeding 60% of the weight of the underlying index; and (3) Commentary 
.01(a)(B)(4), which establishes (in certain circumstances) a minimum 
number of component stocks for an underlying index.
---------------------------------------------------------------------------

    \11\ See Securities Exchange Act Release No. 55621 (April 12, 
2007), 72 FR 19571, 19574 (April 18, 2007) (SR-NYSEArca-2006-86) 
(order approving generic listing standards for ICUs based on global 
or international indexes).
    \12\ Id. at 19576.
---------------------------------------------------------------------------

    The Commission notes that the Exchange represented that the Shares 
will be subject to all of its continued listing standards applicable to 
ICUs and all other requirements applicable to ICUs, and that the Trust 
is required to comply with Rule 10A-3 under the Act.\13\ The Commission 
also notes that it has previously approved the listing and trading of 
derivative securities products based on indexes that were composed of 
stocks that did not meet certain quantitative generic listing criteria, 
including Commentary .01(a)(B)(2) to NYSE Arca Equities Rule 
5.2(j)(3).\14\
---------------------------------------------------------------------------

    \13\ See 17 CFR 240.10A-3.
    \14\ See, e.g., Securities Exchange Act Release No. 56695 
(October 24, 2007), 72 FR 61413 (October 30, 2007) (SR-NYSEArca-
2007-111).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\15\ that the proposed rule change (SR-NYSEArca-2008-40) be, and it 
hereby is, approved.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-15888 Filed 7-11-08; 8:45 am]

BILLING CODE 8010-01-P
