Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)  and Rule 19b-4 thereunder, notice is hereby given that on October 18, 2006, NYSE Arca, Inc. (“NYSE Arca” or “Exchange”) 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. The Commission is publishing this notice and order to solicit comments on the proposal from interested persons and to approve the proposal on an accelerated basis.
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange, through its wholly owned subsidiary NYSE Arca Equities, Inc. (“NYSE Arca Equities”) proposes to trade shares (“Shares”) of the following index funds (“Funds”) pursuant to unlisted trading privileges (“UTP”) based on NYSE Arca Equities Rule 5.2(j)(3):
- streetTRACKS Dow Jones STOXX 50 Fund (Symbol: FEU); and
- streetTRACKS Dow Jones EURO STOXX 50 Fund (FEZ)
The text of the proposed rule change is available on the Exchange's Web site (http://www.nysearca.com), at the principal office of the Exchange, 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
The Exchange is proposing to trade the Shares pursuant to UTP. Each Fund represents the performance of the 50 largest companies, across all components of the 18 Dow Jones STOXX 600 and Dow Jones EURO STOXX 600 market sector indexes (each, an “Index”). Each Index is a subset of the pan-European Dow Jones STOXX Total Market Index and contains the 600 largest stocks traded on the major exchanges in Europe or the Eurozone (i.e., the countries of the European Monetary Union). Each Fund's components have a high degree of liquidity and represent the largest companies across all 18 market sectors defined by the Dow Jones Global Classification Standard. Each Fund seeks to replicate as closely as possible, before expenses, the price and yield of the underlying Index and uses a passive or indexing approach in seeking to achieve its investment objectives.
The Commission previously approved the original listing and trading of the Shares of the Funds on the New York Stock Exchange (“NYSE”). 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 the Exchange are the same as those set forth in NYSE Arca Equities Rule 7.34, except that the Shares will not trade during the Opening Session (4 a.m. to 9:30 a.m. Eastern Time) unless the Indicative Optimized Portfolio Value (“IOPV”) is calculated and disseminated during that time.
Quotations for and last sale information regarding the Shares for each Fund are disseminated through the Consolidated Quotation System. The value of each underlying Index is updated intra-day on a real-time basis as individual component securities of the underlying Index change in price. The intra-day values of the underlying Indexes are disseminated every 15 seconds throughout the NYSE trading day. In addition, a value for each underlying Index is disseminated once each trading day, based on closing prices of the Index components in the relevant foreign market. The net asset value (“NAV”) of each Fund is calculated by the Fund's custodian and disseminated each business day, normally at the close of regular trading on NYSE.
To provide updated information relating to the Shares for use by investors, professionals, and persons wishing to create or redeem them, NYSE disseminates the IOPV for each Fund as calculated by a securities information provider. The IOPV is disseminated on a per-share basis every 15 seconds during regular NYSE trading hours of 9:30 a.m. to 4:15 p.m. Eastern Time.
Each Fund includes companies trading in markets with trading hours overlapping regular NYSE trading hours. During the overlap period, an IOPV calculator updates an IOPV every 15 seconds to reflect price changes in the principal foreign markets, and converts such prices into U.S. dollars based on the currency exchange rates. When the foreign market or markets are closed but the NYSE is open for trading, the IOPV is updated every 15 seconds to reflect changes in currency exchange rates.
The IOPV may not reflect the value of all securities included in the applicable underlying Index. In addition, the IOPV does not necessarily reflect the precise composition of the current portfolio of securities held by each Fund at a particular point in time. Therefore, the IOPV on a per-share basis disseminated during NYSE's regular trading hours should not be viewed as a real-time update of the NAV of a particular Fund, which is calculated only once a day. The IOPV is intended to closely approximate the value per-share of the portfolio of securities for a Fund and provide for a close proxy of the NAV at a greater frequency for investors.
The Commission has granted each Fund an exemption from certain prospectus delivery requirements under Section 24(d) of the Investment Company Act of 1940 (“1940 Act”). Any product description used in reliance on the Section 24(d) exemptive order will comply with all representations made and all conditions contained in the application for orders under the 1940 Act.Start Printed Page 1043
In connection with the trading of the Shares, the Exchange would inform ETP Holders 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 each underlying Index is disseminated, and trading information. In addition, before an ETP Holder recommends a transaction in the Shares, the ETP Holder must determine that the Shares are suitable for the customer, as required by NYSE Arca Equities Rule 9.2(a)-(b).
The Exchange intends to utilize its existing surveillance procedures applicable to derivative 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
The Exchange believes that the proposal is consistent with Section 6(b) of the Act  in general and Section 6(b)(5) of the Act  in particular in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments and perfect the mechanisms of a free and open market, and to protect investors and the public interest. In addition, the Exchange believes that the proposal is consistent with Rule 12f-5 under the Act  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.
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:
- Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
- Send an e-mail to email@example.com. Please include File Number SR-NYSEArca-2006-36 on the subject line.
- 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-2006-36. 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-NYSEArca-2006-36 and should be submitted on or before January 30, 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. In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act, 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.
In addition, the Commission finds that the proposal is consistent with Section 12(f) of the Act, which permits an exchange to trade, pursuant to UTP, a security that is listed and registered on another exchange. The Commission notes that it previously approved the listing and trading of the Shares on NYSE. The Commission also finds that the proposal is consistent with Rule 12f-5 under the Act, 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.
The Commission further believes that the proposal is consistent with Section 11A(a)(1)(C)(iii) of the Act, 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 Start Printed Page 1044and last sale information regarding the Shares are disseminated through the Consolidated Quotation System. Furthermore, an IOPV calculator updates the applicable IOPV every 15 seconds to reflect price changes in the principal foreign markets, and converts such prices into U.S. dollars based on the current currency exchange rate. When the foreign market or markets are closed but NYSE is open for trading, the IOPV is updated every 15 seconds to reflect changes in currency exchange rates. Furthermore, NYSE Arca Equities Rule 7.34 describes the situations when the Exchange would halt trading when the IOPV or the value of the Index underlying one of the Funds is not calculated or widely available.
The Commission notes that, if the Shares should be delisted by NYSE, the original listing exchange, 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 monitor the trading of the Shares.
2. In connection with the trading of the Shares, the Exchange would inform ETP Holders in an Information Circular of the special characteristics and risks associated with trading the Shares.
3. The Information Circular would inform participants of the prospectus or product delivery requirements applicable to the Shares.
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 that the listing and trading of the Shares on NYSE is consistent with the Act. The Commission presently is not aware of any regulatory issue that should cause it to revisit that earlier finding or preclude the trading of 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.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that the proposed rule change (SR-NYSEArca-2006-36) is approved on an accelerated basis.Start Signature
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.
Nancy M. Morris,
3. See Securities Exchange Act Release No. 46686 (October 18, 2002), 67 FR 65388 (October 24, 2002) (SR-NYSE-2002-51). The Funds were originally listed on NYSE as the Fresco Dow Jones STOXX 50 Fund and the Fresco Dow Jones Euro STOXX 50 Fund, respectively. As of July 1, 2004, SsgA Management, Inc. replaced UBS Global Asset Management (U.S.) Inc. as investment advisor for the Funds. At that time, the name of the Funds was changed from Fresco to streetTRACKS®.Back to Citation
5. See Investment Company Act Release No. 25738 (October 11, 2002).Back to Citation
9. In approving this rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f).Back to Citation
12. Section 12(a) of the Act, 15 U.S.C. 78 l (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.Back to Citation
13. See supra note 3.Back to Citation
[FR Doc. E7-59 Filed 1-8-07; 8:45 am]
BILLING CODE 8011-01-P