[Federal Register: September 16, 2010 (Volume 75, Number 179)]
[Notices]
[Page 56618-56624]
[DOCID:fr16se10-106]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62884; File Nos. SR-BATS-2010-018; SR-BX-2010-044; SR-
CBOE-2010-065; SR-CHX-2010-14; SR-EDGA-2010-05; SR-EDGX-2010-05; SR-
ISE-2010-66; SR-NASDAQ-2010-079; SR-NYSE-2010-49; SR-NYSEAmex-2010-63;
SR-NYSEArca-2010-61; SR-NSX-2010-08]

Self-Regulatory Organizations; BATS Exchange, Inc.; NASDAQ OMX
BX, Inc.; Chicago Board Options Exchange, Incorporated; Chicago Stock
Exchange, Inc.; EDGA Exchange, Inc.; EDGX Exchange, Inc.; International
Securities Exchange LLC; The NASDAQ Stock Market LLC; New York Stock
Exchange LLC; NYSE Amex LLC; NYSE Arca, Inc.; National Stock Exchange,
Inc.; Order Approving Proposed Rule Changes Relating to Expanding the
Pilot Rule for Trading Pauses Due to Extraordinary Market Volatility to
the Russell 1000[supreg] Index and Specified Exchange Traded Products

September 10, 2010.

I. Introduction

    On June 30, 2010, each of BATS Exchange, Inc. (``BATS''), NASDAQ
OMX BX, Inc. (``BX''), Chicago Board Options Exchange, Incorporated
(``CBOE''), Chicago Stock Exchange, Inc. (``CHX''), EDGA Exchange, Inc
(``EDGA''), EDGX Exchange, Inc. (``EDGX''), International Securities
Exchange LLC (``ISE''), The NASDAQ Stock Market LLC (``NASDAQ''), New
York Stock Exchange LLC (``NYSE''), NYSE Amex LLC (``NYSE Amex''), NYSE
Arca, Inc. (``NYSE Arca''), and National Stock Exchange, Inc. (``NSX'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934
(``Act''),\2\ and Rule 19b-4 thereunder,\3\ proposed rule changes to
amend certain of their respective rules to expand the trading pause
pilot in individual stocks comprising the S&P 500[reg] Index (``S&P
500'') when the price moves ten percent or more in the preceding five
minute period to securities included in the Russell 1000[reg] Index
(``Russell 1000'') and specified Exchange Traded Products
(``ETPs'').\4\ The proposed rule changes were published for comment in
the Federal Register on July 7, 2010.\5\ The Commission received 19
comments on the proposal and on broader issues relating to the
effectiveness of the circuit breaker pilot program to date.\6\

The NYSE responded to the comments in a letter dated July 23, 2010,\7\
and in a letter dated August 25, 2010.\8\ Nasdaq submitted a response
on August 26, 2010.\9\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ The term ``Exchanges'' shall refer collectively to all of
the exchanges in this order. The term ``Listing Markets'' refers
collectively to NYSE, NYSE Amex, NYSE Arca, and NASDAQ. The term
``Nonlisting Markets'' refers collectively to the remaining national
securities exchanges.
    The Commission notes that NYSE and NYSE Amex do not currently
trade ETPs. Therefore, the expansion of the pilot to the select list
of ETPs does not apply to these two markets.
    For purposes of Phase II, ETPs consist of exchange-traded funds
(including widely traded broad-based funds like SPY), exchange-
traded vehicles (which track the performance of an asset or index,
providing investors with exposure to futures contracts, currencies
and commodities without actually trading futures or taking physical
delivery of the asset), and exchange-traded notes.
    \5\ See Securities Exchange Act Release Nos. 62407 (June 30,
2010), 75 FR 39060 (July 7, 2010); 62415 (June 30, 2010), 75 FR
39086 (July 7, 2010); 62409 (June 30, 2010), 75 FR 39078 (July 7,
2010); 62408 (June 30, 2010), 75 FR 39065 (July 7, 2010); 62417
(June 30, 2010), 75 FR 39074 (July 7, 2010); 62418 (June 30, 2010),
75 FR 39084 (July 7, 2010); 62419 (June 30, 2010), 75 FR 39070 (July
7, 2010); 62414 (June 30, 2010), 75 FR 39081 (July 7, 2010); 62411
(June 30, 2010), 75 FR 39067 (July 7, 2010); 62412 (June 30, 2010),
75 FR 39073 (July 7, 2010); 62413 (June 30, 2010), 75 FR 39076 (July
7, 2010); and 62410 (June 30, 2010), 75 FR 39063 (July 7, 2010)
(``Phase II Circuit Breaker Pilot Notices'').
    On June 30, 2010, FINRA filed a proposed rule change, which was
approved today. See Securities Exchange Act Release No. 62416 (June
30, 2010), 75 FR 39069 (July 7, 2010); Securities Exchange Act
Release No. 62883 (September 10, 2010) (SR-FINRA-2010-033).
    \6\ The Commission considered letters received as of August 25
discussing the concept of the effectiveness of the individual stock
circuit breaker pilot to date as well as formal letters citing the
rule filings. See Letter from Paul Schott Stevens, President & CEO,
Investment Company Institute to Chairman Schapiro, Commission, dated
June 22, 2010 (``ICI Letter''); Letter from Craig S. Donohue, CEO,
CME Group, Inc. to Chairman Schapiro, Commission, dated June 23,
2010 (``CME Letter''); Letter from Ann L. Vlcek, Managing Director
and Associate General Counsel, Securities Industry and Financial
Markets Association to Elizabeth M. Murphy, Secretary, Commission,
dated June 25, 2010 (``SIFMA Letter''); Letter from Peter Skopp,
President, Molinete Trading Inc. to Elizabeth M. Murphy, Secretary,
Commission, dated July 8, 2010 (``Molinete Letter''); Letter from
Sal L. Arnuk, Co-Head, and Joseph Saluzzi, Co-Head, Themis Trading
to Elizabeth M. Murphy, Secretary, Commission, dated July 8, 2010
(``Themis Letter''); Letter from Peter A. Ianello, Partner, CSS, LLC
to Elizabeth M. Murphy, Secretary, Commission, dated July 15, 2010
(``CSS Letter''); Letter from Julie S. Sweet, General Counsel,
Secretary, Chief Compliance Officer, Accenture plc to Elizabeth M.
Murphy, Secretary, Commission, dated July 15, 2010 (``Accenture
Letter''); Letter from Patrick J. Healy, CEO, Issuer Advisory Group,
LLC, Washington, District of Columbia to Elizabeth M. Murphy,
Secretary, Commission, dated July 18, 2010 (``Issuer Advisory Group
Letter''); Letter from Alexander M. Cutler, Chair, Business
Roundtable Corporate Leadership Initiative, Business Roundtable, to
Elizabeth M. Murphy, Secretary, Commission, dated July 19, 2010
(``Business Roundtable Letter''); Letter from Geva Patz, Android
Alpha Fund to Elizabeth M. Murphy, Secretary, Commission, dated July
19, 2010 (``Android Alpha Fund Letter''); Letter from David C.
Cushing, Director of Global Equity Trading, Wellington Management
Company, LLP to Elizabeth M. Murphy, Secretary, Commission, dated
July 19, 2010 (``Wellington Letter''); Letter from Karrie McMillan,
General Counsel, Investment Company Institute to Elizabeth M.
Murphy, Secretary, Commission, dated July 19, 2010 (``ICI 2
Letter''); Letter from Ira P. Shapiro, Managing Director, BlackRock,
Inc., San Francisco, California to Elizabeth M. Murphy, Secretary,
Commission, dated July 19, 2010 (``BlackRock Letter''); Letter from
Tom Quaadman, Vice President, Center for Capital Markets
Competitiveness, Washington, District of Columbia to Elizabeth M.
Murphy, Secretary, Commission, dated July 19, 2010 (``CCMC
Letter''); Letter from James J. Angel, Associate Professor of
Finance, Georgetown University, dated June 19, 2010 [sic] (``Angel
Letter''); Letter from John A. McCarthy, General Counsel, GETCO to
Elizabeth M. Murphy, Secretary, Commission, dated July 20, 2010
(``GETCO Letter''); Letter from Jose Marques, Managing Director,
Deutsche Bank Securities Inc. to Elizabeth M. Murphy, Secretary,
Commission, dated July 21, 2010 (``Deutsche Bank Letter''); Letter
from Paul Schott Stevens, President & CEO, Investment Company
Institute to Chairman Schapiro, Commission, dated July 27, 2010
(``ICI 3 Letter''); Letter from Craig S. Donohue, Chief Executive
Officer, CME Group to Elizabeth M. Murphy, Secretary, Commission,
dated July 30, 2010 (CME 2 Letter'').
    \7\ See Letter from Janet M. Kissane, Senior Vice President--
Legal & Corporate Secretary, NYSE Euronext to Elizabeth M. Murphy,
Secretary, Commission, dated July 23, 2010 (``Response Letter'').
    \8\ See Letter from Janet M. Kissane, Senior Vice President--
Legal & Corporate Secretary, NYSE Euronext to Elizabeth M. Murphy,
Secretary, Commission, dated August 25, 2010.
    \9\ See Letter from Thomas P. Moran, Associate General Counsel,
The NASDAQ Stock Market LLC to Elizabeth M. Murphy, Secretary,
Commission, dated August 26, 2010.
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    The Commission finds that the proposals are consistent with Section
6(b)(5) of the Act,\10\ as it believes that expanding the uniform,
market-wide trading pauses will serve to prevent potentially
destabilizing price volatility and will thereby help promote the goals
of investor protection and fair and orderly markets. This order
approves the proposed rule changes.
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    \10\ 15 U.S.C. 78f(b)(5). That section, among other things,
requires that the rules of national securities exchanges be designed
to prevent fraudulent and manipulative acts and practices, 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.
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II. Description of the Proposals

    On May 6, 2010, the U.S. equity markets experienced a severe
disruption.\11\ Among other things, the prices of a large number of
individual securities suddenly declined by significant amounts in a
very short time period, before suddenly reversing to prices consistent
with their pre-decline levels. This severe price volatility led to a
large number of trades being executed at temporarily depressed prices,
including many that were more than 60% away from pre-decline prices and
were broken by the Exchanges. The Commission is concerned that events
such as those that occurred on May 6 can seriously undermine the
integrity of the U.S. securities markets. Accordingly, it is working on
a variety of fronts to assess the causes and contributing factors of
the May 6 market disruption and to fashion policy responses that will
help prevent a recurrence.
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    \11\ The events of May 6 are described more fully in the report
of the staffs of the Commodity Futures Trading Commission (``CFTC'')
and the Commission, titled Report of the CFTC and SEC to the Joint
Advisory Committee on Emerging Regulatory Issues, ``Preliminary
Findings Regarding the Market Events of May 6, 2010,'' dated May 18,
2010 (``Joint Report'').
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    The Commission also recognizes the importance of moving quickly to
implement appropriate steps that could help limit potential harm from
extreme price volatility. In this regard, it is pleased that the SROs
began consulting soon after May 6 in an effort to develop consistent
circuit breaker rules that could be implemented on an expedited basis.
The SROs were able to reach agreement on a consistent approach and, on
May 18 and 19, 2010, all of the SROs filed proposed rule changes with
the Commission.
    On June 10, 2010, the Commission granted accelerated approval, for
a pilot period to end December 10, 2010, for proposed rule changes by
the Exchanges to pause trading during periods of extraordinary market
volatility in S&P 500 stocks (the ``Phase I Circuit Breaker
Pilot'').\12\ The rules require the Listing Markets to issue five-
minute trading pauses for individual securities for which they are the
primary Listing Market if the transaction price of the security moves
ten percent or more from a price in the preceding five-minute period.
The Listing Markets are required to notify the other Exchanges and
market participants of the imposition of a trading pause by immediately
disseminating a special indicator over the consolidated tape. Under the
rules, once the Listing Market issues a trading pause, the other
Exchanges are required to pause trading in the security on their
markets.
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    \12\ See Securities Exchange Act Release No. 62252 (June 10,
2010), 75 FR 34186 (June 16, 2010) (``Phase I Approval Order'').
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    At the end of the five-minute pause, the Listing Market reopens
trading in the security in accordance with its procedures for doing so.
Trading resumes on other Exchanges and in the over-the-counter (OTC)
market once trading has resumed on the Listing Market. In the event of
a significant imbalance on the Listing Market at the end of the trading
pause, the Listing Market may delay reopening. If the Listing Market
has not reopened within ten minutes from the initiation of the trading
pause, however, the other Exchanges may resume trading.\13\
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    \13\ For more details on the operation of the Exchanges' rule,
see Securities Exchange Act Release No. 62252.
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    Several commenters on the proposal for the Phase I Circuit Breaker
Pilot expressed the view that the circuit breaker pilot should be
expanded beyond S&P 500 stocks, particularly to exchange traded funds
(``ETFs'') and the securities of other companies that were most
severely affected by the market disruption on May 6, 2010.\14\ In the
approval order for the Phase I Circuit Breaker Pilot, the Commission
agreed that consideration should be given by the Exchanges to whether
the circuit breakers should be expanded to cover additional securities,
but did not believe that there was a reason to delay implementation of
the Phase I Circuit Breaker Pilot as a reasonable first step to address
potential market volatility.
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    \14\ See, e.g., Letter from Jeffrey W. Rubin, American Bar
Association Business Law Section to Elizabeth M. Murphy, Secretary,
Commission, dated June 3, 2010; Letter from Julie Sweet, Accenture
plc to Elizabeth M. Murphy, Secretary, Commission, dated June 3,
2010; and Letter from Karrie McMillan, Investment Company Institute
to Elizabeth M. Murphy, Secretary, Commission, dated June 3, 2010
(expressing particular concern that if circuit breakers exist for
individual securities contained in ETFs' baskets, but not for the
ETFs themselves, ETFs could again suffer disproportionately during a
market event such as that of May 6).
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    Under the current proposal, the Exchanges propose to add securities
included in the Russell 1000, as well as specified ETPs, to the pilot
(the ``Phase II Circuit Breaker Pilot'') shortly after the Commission
approves the proposed rule changes. The Exchanges believe that adding
these securities to the pilot would have the beneficial effect of
applying the circuit breakers' protections against excessive volatility
to a larger group of securities, while at the same time allowing the
opportunity, during the pilot period, for continued review of the
operation of the circuit breakers and an assessment of whether the
pilot should be further expanded or modified.
    The Exchanges believe that the securities in the Russell 1000 have
similar trading characteristics to securities included in the S&P 500,
and therefore the 10% price movement that triggers a trading pause in
the Phase I Circuit Breaker Pilot is appropriate for Russell 1000
securities. Based on the analyses of certain of the Exchanges, the
number of times that the trading pause would be triggered for Russell
1000

securities would be similar to the number of instances for S&P 500
securities.
    In addition, the Exchanges proposed to include in the Phase II
Circuit Breaker Pilot the more liquid ETPs--specifically, those with a
minimum average daily volume of $2,000,000--that tend to have similar
trading characteristics as securities in the S&P 500 and Russell 1000
and for which they believe a 10% circuit breaker trigger is
appropriate.\15\ In addition, to assure related ETPs are subject to
comparable circuit breakers, the Exchanges proposed to include any ETP
that did not meet the $2,000,000 average daily volume threshold, but
tracked similar stocks and indices as ETPs meeting this criterion and
proposed to be included in the pilot. ETPs with average-daily-volumes
of less than $2,000,000, and for which there were no high-volume
counterparts were not included. Also excluded were leveraged ETFs since
those products by design are more volatile than the underlying stocks
they track, and the current proposal only contemplates adding
securities for which a 10% trigger is appropriate.\16\
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    \15\ For details on how the Exchanges developed the pilot list
of ETPs, see, e.g., Securities Exchange Act Release No. 62413 (June
30, 2010), 75 FR 39076 (July 7, 2010) (SR-NYSEArca-2010-61).
    \16\ One consequence of excluding leveraged ETFs is that they
could still suffer significant price dislocations even though
trading in the stocks they track might be paused as discussed above.
    The Exchanges do not believe that the 10% price movement is an
appropriate threshold for leveraged ETPs because, by definition,
leveraged ETPs are based on multiples of price movements in the
underlying index. Accordingly, a 10% percent price movement in a
leveraged ETP may not signify extraordinary volatility. Because the
Exchanges are not proposing to adopt revised price movement
thresholds at this time, they are not proposing to include leveraged
ETPs for now.
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    As proposed, the list of ETPs includes those that track broad-based
equity indices, which the Exchanges recognize has caused some debate.
For example, as described in Section III, concerns have been raised
about the effect that halting trading in an index-based ETP may have on
a related index-based option or future. However, the Exchanges believe
that including broad-based index ETPs is appropriate so that ETP
investors are protected should the component securities experience such
volatility that trading in the broad-based ETP is affected. Because the
proposal is for a pilot period, the Exchanges will continue to assess,
among other things, whether it is appropriate to have a trading pause
in broad-based index ETPs when there is not a similar trading pause in
related index-based options or futures.
    In addition, during the pilot period, the Exchanges will continue
to assess whether specific stocks or ETPs should be added to, or
removed from, the list of securities subject to the circuit breakers.
The Exchanges will also continue to assess whether the parameters for
invoking a trading pause continue to be appropriate or should be
modified.\17\
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    \17\ See Phase II Circuit Breaker Pilot Notices, supra note 5.
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III. Discussion of Comments and Commission Findings

    As of August 25, 2010, the Commission received 19 comment letters
regarding the proposed rule changes. Many commenters supported the
Phase II Circuit Breaker Pilot and its expansion to the Russell 1000
and the specified ETPs.\18\ For example, one commenter encouraged the
Commission to act expeditiously to expand the scope of the trading halt
rules to securities other than the S&P 500, particularly to ETFs, and
noted that ETFs experienced significant volatility on May 6, 2010 and
would benefit from uniform pauses in trading.\19\ Another commenter
urged the Commission to approve the Phase II Circuit Breaker Pilot as
quickly as possible, arguing that many of the securities that
experienced the most extreme trading jolts on May 6, 2010 were not
included in the Phase I Circuit Breaker Pilot, and that expansion of
the pilot was appropriate both to protect additional companies from
potential aberrational price movements and liquidity events affecting
their securities, and to provide investors with greater certainty about
the availability of the circuit breakers.\20\ Yet another commenter
noted that expanding the trading halt pilot to securities in the
Russell 1000 would protect investors in publicly traded companies not
in the S&P 500 that experienced severely aberrational trading on May
6.\21\
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    \18\ See Accenture Letter, Business Roundtable Letter; CCMC
Letter; ICI Letter; ICI 2 Letter; ICI 3 Letter; Issuer Advisory
Group Letter; Wellington Letter; Deutsche Bank Letter; SIFMA Letter;
and BlackRock Letter.
    \19\ See SIFMA Letter.
    \20\ See Business Roundtable Letter.
    \21\ See Accenture Letter.
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    Some commenters raised concerns about the proposed rule changes.
The two main areas of concern were: (1) The ability of erroneous trades
to trigger a trading pause; and (2) whether ETPs--particularly broad-
based index products--should be included in the pilot.

1. Erroneous Trades Triggering the Trading Pause

    Several commenters pointed out that, under the circuit breaker
pilot, erroneous trades can trigger--and have triggered--trading
pauses, when there otherwise is no extraordinary market volatility.\22\
One commenter asserted that under the current circuit breaker logic,
erroneous trades would have triggered a trading halt at least 238 times
in the past 18 months.\23\ This same commenter pointed out that, as of
the date of its letter, three stocks had been halted under the Phase I
Circuit Breaker Pilot, two of which were triggered on markets with
prices that were far away from the current national best bid or offer
(``NBBO'') and prevailing prices at other markets.\24\
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    \22\ See, e.g., Themis Letter; Accenture Letter; Molinete
Letter; SIFMA Letter; and Angel Letter.
    \23\ See Molinete Letter.
    \24\ Id. (referring to the trading pauses in Citigroup on June
29, 2010 and in Anadarko Petroleum on July 6, 2010). As of August
25, stock-specific circuit breakers have been triggered seven times
in six stocks.
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    Other commenters expressed concern that any trader in the world,
ill-intentioned \25\ or not, has the power to halt trading in a stock
simply by printing a trade outside the circuit breaker range on a trade
reporting facility for the OTC market.\26\ One of these commenters
suggested that either a minimum number of trades outside the circuit
breaker range occur before trading is halted, or that the trade first
be checked for consistency with the NBBO before trading is halted.\27\
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    \25\ The Commission notes that anyone reporting a trade with the
intention of triggering a trading pause could be charged with
manipulation, fraud or other violations of the Federal securities
laws.
    \26\ See Themis Letter and Angel Letter.
    \27\ Id.
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    Several commenters concerned with erroneous trades triggering the
circuit breakers offered alternatives to the ``trading pause''
mechanism used in the current pilot. A number of commenters suggested
that the Commission consider moving to a ``limit up/limit down''
approach to moderate market volatility, similar to that utilized in the
futures markets.\28\ Some commenters also encouraged the Commission to
consider adopting collars on market orders and eliminating stub
quotes.\29\ One commenter suggested that the markets trigger the single
stock circuit breakers

off of changes to the NBBO rather than to changes in the last trade
price.\30\
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    \28\ See SIFMA Letter; Accenture Letter; Wellington Letter; and
CME 2 Letter. Under this approach, trades could occur within the
established price bands, so that erroneous trades would largely be
eliminated. In addition, there would not be a complete trading
halt--trading would be prevented outside the applicable price band,
but could continue within it.
    \29\ See SIFMA Letter and CME 2 Letter.
    \30\ See Molinete Letter. As an alternative, this commenter
suggested requiring at least two consecutive trades outside the NBBO
to trigger the circuit breaker, and the exclusion of manually-
entered trades from being potential triggers.
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    The Commission believes that the ability of an erroneous trade to
trigger a trading pause is a concern that the Exchanges should seek to
address promptly. The Commission understands that the Exchanges are
working on a variety of measures to reduce the instances of erroneous
trades and to assure that, when they occur, they are resolved promptly
through a clear and transparent process.\31\ The Commission also notes
that, under the pilot rules, the Listing Market can exclude a
transaction price that results from an erroneous execution from
triggering a circuit breaker. In this regard, the Commission notes that
the Listing Markets, pursuant to this authority, intend to implement
automated processes to help prevent trades that may be erroneous--
specifically, those outside the NBBO--from triggering a circuit
breaker.\32\ Various Exchanges have taken steps to ``collar'' market
orders, which are intended to prevent executions that occur a specified
percentage away from the last sale,\33\ and Commission staff has been
working with the Exchanges on an initiative to prevent stub quotes. The
Commission, in conjunction with the Exchanges, will continue to
evaluate what further steps need to be taken to reduce the likelihood
of erroneous trades and to improve the efficiency of the pilot.
However, the Commission does not believe it is appropriate to delay
implementation of the Phase II Circuit Breaker Pilot pending the
conclusion of those efforts.
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    \31\ See SR-BATS-2010-016; SR-BX-2010-040; SR-CBOE-2010-056; SR-
CHX-2010-13; SR-EDGA-2010-03; SR-EDGX-2010-03; SR-FINRA-2010-032;
SR-ISE-2010-62; SR-NASDAQ-2010-076; SR-NSX-2010-07; SR-NYSE-2010-47;
SR-NYSEAmex-2010-60; SR-NYSEArca-2010-58 (proposed rule changes to
amend certain SRO rules to set forth clearer standards and curtail
SRO discretion with respect to breaking erroneous trades).
    \32\ See Letter from Janet M. Kissane, Senior Vice President--
Legal & Corporate Secretary, NYSE Euronext to Elizabeth M. Murphy,
Secretary, Commission, dated August 25, 2010; Letter from Thomas P.
Moran, Associate General Counsel, The NASDAQ Stock Market LLC to
Elizabeth M. Murphy, Secretary, Commission, dated August 26, 2010.
The Listing Markets may roll out these new automated processes on a
staggered basis.
    In addition, the Commission understands FINRA is developing more
effective ways to prevent erroneous OTC trades from being printed on
a trade reporting facility, and it encourages those efforts. See,
e.g., FINRA Trade Reporting Notice, dated August 19, 2010 (issuing
new guidance on the use of the weighted-average price/special
pricing formula (.W) trade modifier for reporting certain types of
OTC trades in NMS stocks to FINRA).
    \33\ See, e.g., Securities Exchange Act Release Nos. 62485 (July
13, 2010), 75 FR 41914 (July 19, 2010) (SR-NYSEArca-2010-67); 60371
(July 23, 2009), 74 FR 38075 (July 30, 2009) (SR-NASDAQ-2009-70).
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2. Inclusion of ETPs

    Many commenters addressed the inclusion of ETPs in the pilot
program.\34\ Several supported the proposed expansion of the Phase II
Circuit Breaker Pilot to include ETPs.\35\ One of these commenters
stated that ETFs experienced significant volatility on May 6, and would
benefit from a uniform trading pause.\36\ Another commenter noted that
the price of an ETF is typically highly correlated to the market price
of its basket of component securities.\37\ Under normal circumstances,
when trading has been halted for one or two component securities, an
ETF may experience a slight deviation from the price of its basket
because of the challenge of pricing the non-trading security, and may
trade with a wider spread to account for the associated risk. When
multiple underlying securities are affected, however, the correlation
between the prices of an ETF and its underlying basket may break down
and the ETF may experience more severe price dislocation.\38\ While
this commenter thought that a different circuit breaker trigger may be
appropriate for ETFs, it nonetheless encouraged the Commission to
include all ETFs in the pilot where a substantial number of the
component securities are subject to the circuit breakers.\39\ Doing
otherwise, in its view, creates risks that ETFs could again suffer
disproportionately during a market event similar to that of May 6.\40\
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    \34\ See Accenture Letter; Android Alpha Fund Letter; BlackRock
Letter; Business Roundtable Letter; CME Letter; CME 2 Letter; CCMC
Letter; ICI Letter; ICI 2 Letter; ICI 3 Letter; Molinete Letter;
SIFMA Letter.
    \35\ See Accenture Letter; BlackRock Letter; Business Roundtable
Letter; CCMC Letter; ICI Letter; ICI 2 Letter; ICI 3 Letter; SIFMA
Letter.
    \36\ See SIFMA Letter at 2.
    \37\ See ICI Letter and ICI 2 Letter.
    \38\ Id.
    \39\ See ICI Letter. In a subsequent letter, that commenter
supported examining the connection between price discovery in the
equities and the futures markets, and potentially making rules
consistent across markets. See ICI 2 Letter. According to this
commenter, however, such an examination should not prevent including
broad-based index ETFs in the pilot program. Id.
    \40\ See ICI 2 Letter.
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    One commenter supported the inclusion of ETFs in the pilot program,
in part because halting trading in the underlying component securities,
but not in the ETF, would hinder the arbitrage mechanism that is
critical to the ability of ETFs to track the performance of their
underlying basket or benchmark index.\41\ According to this commenter,
if an ETF were allowed to continue to trade while trading in the
majority of its underlying securities were halted, the arbitrage
mechanism would not work effectively, with the result that liquidity
for the ETF would diminish greatly, and perhaps lead to a collapse in
price similar to that which occurred on May 6.\42\
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    \41\ See BlackRock Letter. According to the commenter, this
arbitrage mechanism generally requires liquidity providers to sell a
basket of stocks equivalent to an ETF's underlying portfolio (or a
correlated derivative) as a hedge when purchasing ETF shares.
    \42\ Id. This commenter did, however, question the exclusion of
lower-volume ETFs from the Phase II Circuit Breaker Pilot, and urged
that these ETFs be included in the pilot at the earliest
opportunity. See discussion on pages 6-7 describing the rationale
for selecting the list of ETPs for inclusion in the pilot program.
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    Other commenters criticized various aspects of the application of
the proposed rule change to ETPs. One commenter described certain
ETFs--such as the S&P 500 SPDR (SPY)--as ``systemically important,''
and expressed concern that halting trading in these ETFs, especially as
a result of erroneous trades, might destabilize markets. Because the
SPY, for example, is used as a hedging vehicle in many trading
strategies, halting trading in it could cause liquidity providers
broadly to withdraw from the market, increasing volatility and perhaps
leading to a chain reaction like that witnessed on May 6.\43\ This
commenter did not believe that allowing ETFs to continue to trade while
some of the underlying component securities were halted would be
detrimental, because market participants would determine their own fair
value of the halted component securities.\44\
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    \43\ See Molinete Letter at 4.
    \44\ Id. at 4-5.
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    Another commenter expressed significant concern with the proposed
expansion of the pilot to broad-based equity index ETFs, as it believed
there could be potentially significant disruptions to trading across
related markets.\45\ This commenter noted that

the indices underlying the most active ETFs are the same as those
underlying the most active cash index options, index futures, and
options on ETFs.\46\ If a different circuit breaker mechanism applied
to broad-based equity index ETFs and ETF options than applied to index
futures and index options, or differed from the overall market-wide
circuit breakers, the commenter feared this could lead to further
market stress during periods of turbulence, perhaps impeding liquidity
and exacerbating risk management challenges.\47\ In addition, the
commenter thought that the inability of market makers to hedge using
equity index ETFs during a trading pause could lead to their
withdrawing liquidity across all markets, including in the E-mini index
futures.\48\ Accordingly, the commenter believed that the circuit
breakers applicable to equity index-based ETFs (as well as index
futures, index options, options on ETFs, and swaps) should be
consistent with both the methodology and levels of the market-wide
circuit breakers.\49\ Specifically, the commenter recommended the
adoption of uniform price limits across all broad-based index products
based upon the S&P 500, the DJIA, and the NASDAQ 100, which would
preclude trading beyond the enumerated limit but not within it.\50\
This commenter also recommended that automated risk and volatility
mitigation mechanisms be implemented in place of trading halts in
individual securities.\51\
---------------------------------------------------------------------------

    \45\ See CME Letter and CME 2 Letter. This commenter expressed
further concerns with the prospect of multiple constituent stocks in
an index being halted without the market-wide circuit breaker being
triggered. The commenter thought this would create complexity and
confusion in understanding the index calculation. In addition, the
commenter was of the view that the halting of high capitalization,
highly-liquid index components would be disruptive because it could
affect whether the index triggers a market-wide circuit breaker, the
intra-day index values circulated for risk management purposes may
not be reflective of the true value of the underlying market, and
large liquidity providers in index futures and ETFs may have
difficulty hedging with the result that they withdraw from the
market.
    \46\ Id. The commenter also noted that these markets are very
closely linked and the absence of effective coordination across
comparable markets was one factor cited by many as having
contributed to certain market issues experienced on May 6. The
Commission addresses issues of cross-market linkage in its
discussion infra.
    \47\ Id.
    \48\ See CME Letter.
    \49\ See CME Letter. This commenter also noted that, while
approximately 70% of the trades broken on May 6, 2010 were in ETFs,
they were not in the most liquid domestic, large cap index products.
    \50\ See CME 2 Letter. These price limits would be established
at the 5%, 10% and 20% levels, and would be implemented for a 10
minute period, after which trading would continue to the next
applicable limit.
    \51\ Id. Specifically, the commenter recommended that all
markets adopt: (1) Automated means--similar to the commenter's stop
logic functionality--to briefly pause the market in the event that
cascading sell orders precipitate a material market decline because
of a transitory dearth of liquidity; (2) functionality--similar to
the commenter's protection point functionality--to automatically
apply limit prices to all orders, including market and stop orders;
and (3) automated price banding functionality and maximum order size
restrictions to help prevent erroneous trades. For as long as single
stock circuit breakers continue to be employed, however, the
commenter believed regulators and the markets should establish
uniform policies and procedures to address situations where the
computation of the market-wide circuit breaker index value is
negatively affected due to the triggering of stock specific circuit
breakers on the component securities.
---------------------------------------------------------------------------

    In its response to comments, NYSE stated that the ``prompt review
and implementation of revised and coordinated market wide circuit
breakers is * * * a high priority.'' \52\ NYSE also indicated that it
would continue to review the operation of the pilot, including its
effect on how index-based products trade across multiple markets, and
would propose ``such changes as may be warranted for those
securities.'' \53\
---------------------------------------------------------------------------

    \52\ See Response Letter.
    \53\ Id.
---------------------------------------------------------------------------

    The Commission believes that, on balance, the inclusion of ETPs,
including broad-based index equity ETFs, in the Phase II Circuit
Breaker Pilot is warranted and consistent with the Act. The Commission
notes that there are a number of scenarios in which the application of
a circuit breaker to trading in an ETF would promote market stability.
For example, if an ETF triggers a circuit breaker when none of its
component stocks is experiencing abnormal moves, then it is likely that
the ETF is suffering from a temporary liquidity imbalance. In that
case, the ETF would no longer be suitable for use as a hedging
instrument because its price would no longer reflect an accurate
consensus market value of the ETF or its underlying stocks. By pausing
the ETF under these circumstances, the Exchanges would allow liquidity
to rebuild and provide time for the market to self-correct without
allowing the aberrant price of the ETF to adversely affect the trading
and pricing of the underlying stocks, other ETFs or other related
products.
    In another scenario, an ETF might trigger a circuit breaker, even
though its component stocks have not, because the ETF is leading its
underlying stocks in price discovery. In that case, the prices of many
of the underlying stocks may follow, triggering their own circuit
breakers shortly after the ETF does. In a broad market event such as
this, the net result would be that trading in the ETF and individual
stocks have each been paused, providing time for the market as a whole
to re-evaluate prices.
    In yet another scenario, a number of individual component stocks
might trigger their circuit breakers even though the related ETF has
not yet done so. In that case, different market participants may very
well have differing opinions on the market value for the ETF because
they will be required to estimate the value of those component stocks
that have been paused. If only a small number of component stocks is
paused (perhaps due to some temporary liquidity imbalances in those
stocks) then there likely would be minimal effect on the ETF, and the
ETF circuit breakers appropriately would not be triggered. But if a
large number of component stocks trigger halts, the market likely is
experiencing a broad-based move, either for fundamental reasons, or
because of a large-scale liquidity imbalance similar to that of May 6.
As noted above, if many component stocks of an ETF are paused, but the
ETF itself continues to trade, the arbitrage relationship between the
ETF and its component stocks likely will break down as market
participants find they cannot hedge their exposures and, as a
consequence, cease to provide liquidity. Without a circuit breaker
mechanism that also applies to ETFs, the ETF could experience excessive
volatility that is not necessarily driven by the prices of its
underlying stocks. By pausing the ETF, market participants would be
given time to re-evaluate prices and replenish liquidity as needed.
    The Commission acknowledges that a variety of ETFs do indeed trade
without incident when most, and sometimes all, of their underlying
components are not trading (e.g., ETFs on international stocks).
However, market makers and other participants trading these ETFs
account for this known and permanent structural difference by building
alternative methods for hedging and pricing into their trading models.
Market participants trading ETFs for which the component stocks
normally trade at the same time would not necessarily have the
opportunity to implement new hedging and pricing strategies in real
time if underlying component stocks were suddenly paused. Rather, they
would most likely withdraw from the market leaving the ETF with little
liquidity and even further need for a trading pause.\54\
---------------------------------------------------------------------------

    \54\ The Commission notes that a pause in the ETF could also
affect trading in underlying component stocks that were not
otherwise halted to the extent that the ETF was no longer available
as a hedging mechanism.
---------------------------------------------------------------------------

    The above arguments demonstrating the need to couple pauses in ETFs
with pauses in underlying stocks are equally applicable to the futures
market, and the Commission acknowledges the comments and concerns of
the CME for consistent treatment across instrument types. However, the
Commission notes that the CME's markets already have mechanisms for
limiting or pausing trading, and thus some inconsistency exists today
between the two markets. Maintaining the status quo, moreover,

would leave ETFs without a trading pause mechanism. In addition, the
Commission notes that there will need to be substantial work to
determine how best to make the volatility constraints in the futures
markets and the securities markets consistent.
    Commenters also raised related concerns that a pause in a broad-
based ETF (such as the SPY) could lead to significant liquidity
pressures on other index-based products in the futures market (such as
the E-mini).\55\ Although this is a potential point of concern, as
noted above the futures markets already have in place volatility
mechanisms that should help mitigate the effect of such an event.
Moreover, it should be noted that currently there could be a pause on
the futures market (e.g., in the E-mini) which could create liquidity
pressure for corresponding ETFs--but there is currently no mechanism to
protect the ETF against aberrant prices as a result of such liquidity
pressures.
---------------------------------------------------------------------------

    \55\ See CME Letter.
---------------------------------------------------------------------------

    NYSE also recognized these concerns in its response to comments,
and committed to working with regulators and other markets in
coordinating alerts to trading interruptions ``so consistent
application of pauses will be effected.''\56\ NYSE also described ``the
prompt review and implementation of revised and coordinated market wide
circuit breakers'' as ``a high priority.''\57\
---------------------------------------------------------------------------

    \56\ See NYSE Response Letter.
    \57\ Id.
---------------------------------------------------------------------------

    In response to the comment that the Commission instead implement
automated risk and volatility mitigation mechanisms--such as price
banding or stop logic functionality--the Commission notes that, even as
the circuit breaker pilot is being expanded, the Commission is
simultaneously exploring possible alternatives to a circuit breaker
approach that may include price limit bands or other mechanisms
described by the commenters.
    One commenter noted that the proposal would exclude many ETFs with
trading volumes below the criteria set by the Exchanges and FINRA,
although such ETFs were significantly affected in the cancelled trades
of May 6.\58\ The Commission acknowledges that fact, but notes that, as
the Exchanges have indicated, the potential application of the circuit
breakers to less liquid securities is more complex, as different
triggering thresholds may be appropriate for them. As the pilot
progresses, the Commission will work with the SROs to consider
expanding the circuit breakers to cover additional securities in an
appropriate manner.
---------------------------------------------------------------------------

    \58\ See BlackRock Letter.
---------------------------------------------------------------------------

    The Commission acknowledges the point made by commenters that
broad-based index products were not significantly implicated in the
cancelled trades on May 6.\59\ However, the Commission notes that
broad-based index products did experience substantial volatility on May
6 \60\ and, like other securities, could benefit from the protections
of a circuit breaker. In addition, a sudden change in price, due to a
loss of liquidity or otherwise, to a widely traded ETF could have an
adverse market-wide effect even more far-reaching than that of May 6.
It is important that the use of circuit breakers not be limited to only
those ETFs that happened to have experienced severe dislocations on May
6, since there is no fundamental reason why broad-based ETFs could not
experience a similar liquidity crisis. In addition, there were no
circuit breakers in effect for underlying stocks on May 6. If a similar
event occurred when many underlying stocks in an index were halted by
circuit breakers, broad-based ETFs could experience greater volatility
than occurred on May 6.
---------------------------------------------------------------------------

    \59\ See CME Letter.
    \60\ See Joint Report, supra note 11, at 39 (noting that many
ETFs ``experienced extreme daily lows'' on May 6, and that a
``significant number of ETFs'' experienced extreme daily highs on
May 6).
---------------------------------------------------------------------------

3. Other Areas of Comment

    Other areas of comment included potential ways to expand or modify
the circuit breaker pilot going forward,\61\ the need to carefully
study the effect of the pilot,\62\ the effect and continued
advisability of individual market volatility moderators in addition to
the uniform single-stock circuit breakers,\63\ and possible
modifications to the market-wide circuit breakers.\64\
---------------------------------------------------------------------------

    \61\ See Angel Letter (recommending that the trading pause be
expanded to cover the open, close, and after-hours trading); ICI
Letter (recommending examining whether a different circuit breaker
trigger is appropriate for ETFs); Wellington Letter (recommending
that the Commission require the Exchanges to continuously disclose
the high/low trigger of a security and its maximum remaining life).
    \62\ See Android Alpha Fund Letter.
    \63\ See Deutsche Bank Letter.
    \64\ See CME 2 Letter; SIFMA Letter.
---------------------------------------------------------------------------

    With regard to expanding or modifying the circuit breaker pilot, as
noted above, the Commission intends to continue working with the
Exchanges to consider expanding the pilot to include additional
securities, or modifying the circuit breaker mechanism or pursuing
other approaches to moderating market volatility, in the coming months.
In addition, as noted in the Joint Report, the Commission currently is
evaluating the extent to which individual market volatility moderators
exacerbated the market instability that occurred on May 6, 2010, and
expects to develop appropriate policy recommendations based on the
outcome of that analysis. Finally, as noted in the Joint Report, the
Commission intends to work with the CFTC to consider whether
modifications to the existing market-wide circuit breakers are
warranted in light of the events of May 6. While all of these issues
warrant further study in the coming months, the Commission does not
believe they provide a basis for not approving the Phase II Circuit
Breaker Pilot at this time. The fact that better alternatives to
address inordinate market volatility ultimately may be developed does
not provide a basis for the Commission not to approve the Exchanges'
proposals if, as the Commission believes, the proposed rule changes are
consistent with Section 6(b)(5) of the Act.

4. Findings

    The Commission finds that the proposed rule changes are consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to national securities exchanges. In particular,
the Commission finds that the proposals are consistent with Section
6(b)(5) of the Act,\65\ which among other things requires that the
rules of national securities exchanges be designed to prevent
fraudulent and manipulative acts and practices, 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.\66\
---------------------------------------------------------------------------

    \65\ 15 U.S.C. 78f(b)(5).
    \66\ In approving the proposed rule change, the Commission notes
that it has considered the proposed rules' impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    The proposed rule changes will expand the trading pause pilot to
include the securities in the Russell 1000 and specified ETPs. The
Commission believes that expanding the uniform, market-wide trading
pauses will serve to prevent potentially destabilizing price volatility
and will thereby help promote the goals of investor protection and fair
and orderly markets.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\67\ that the proposed rule changes (SR-BATS-2010-018; SR-BX-2010-
044; SR-

CBOE-2010-065; SR-CHX-2010-14; SR-EDGA-2010-05; SR-EDGX-2010-05; SR-
ISE-2010-66; SR-NASDAQ-2010-079; SR-NYSE-2010-49; SR-NYSEAmex-2010-63;
SR-NYSEArca-2010-61; SR-NSX-2010-08) be, and hereby are, approved.
---------------------------------------------------------------------------

    \67\ 15 U.S.C. 78s(b)(2).

    By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-23074 Filed 9-15-10; 8:45 am]
BILLING CODE 8010-01-P


[Federal Register Volume 79, Number 201 (Friday, October 17, 2014)]
[Notices]
[Pages 62447-62449]
[FR Doc No: 2014-24714]

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

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2004-N-0451]

Food and Drug Administration Modernization Act of 1997:
Modifications to the List of Recognized Standards, Recognition List
Number: 037

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice.

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

SUMMARY: The Food and Drug Administration (FDA) is announcing a
publication containing modifications the Agency is making to the list
of standards FDA recognizes for use in premarket reviews (``FDA
Recognized Consensus Standards''). This publication, entitled
``Modifications to the List of Recognized Standards, Recognition List
Number: 037'' (``Recognition List Number: 037''), will assist
manufacturers who elect to declare conformity with consensus standards
to meet certain requirements for medical devices.

DATES: Submit either electronic or written comments concerning this
document at any time. See section VII for the effective date of the
recognition of standards announced in this document.

ADDRESSES: An electronic copy of Recognition List Number: 037 is
available on the Internet at http://www.fda.gov/MedicalDevices/DeviceRegulationandGuidance/Standards/ucm123792.htm. See section VI for
electronic access to the searchable database for the current list of
FDA recognized consensus standards, including Recognition List Number:
037 modifications and other standards related information.
    Submit written requests for single copies of the document entitled
``Modifications to the List of Recognized Standards, Recognition List
Number: 037'' to the Division of Industry and Consumer Education,
Center for Devices and Radiological Health, Food and Drug
Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. 4613, Silver
Spring, MD 20993-0002. Send two self-addressed adhesive labels to
assist that office in processing your request, or fax your request to
301-847-8149.
    Submit electronic comments on this document to http://www.regulations.gov. Submit written comments to the Division of Dockets
Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane,
Rm. 1061, Rockville, MD 20852. Identify comments with the docket number
found in brackets in the heading of this document.

FOR FURTHER INFORMATION CONTACT: Scott A. Colburn, Center for Devices
and Radiological Health, Food and Drug Administration, 10903 New
Hampshire Ave., Bldg. 66, Rm. 3632, Silver Spring, MD 20993, 301-796-
6287<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. Background

    Section 204 of the Food and Drug Administration Modernization Act
of 1997 (Pub. L. 105-115) amended section 514 of the Federal Food,
Drug, and Cosmetic Act (the FD&C Act) (21 U.S.C. 360d). Amended section
514 allows FDA to recognize consensus standards developed by
international and national organizations for use in satisfying portions
of device premarket review submissions or other requirements.
    In a notice published in the Federal Register of February 25, 1998
(63 FR 9561), FDA announced the availability of a guidance entitled
``Recognition and Use of Consensus Standards.'' The notice described
how we would implement our standard recognition program and provided
the initial list of recognized standards.
    Modifications to the initial list of recognized standards, as
published in the Federal Register, can be accessed at http://www.fda.gov/MedicalDevices/DeviceRegulationandGuidance/Standards/ucm123792.htm.
    These notices describe the addition, withdrawal, and revision of
certain standards recognized by FDA. The Agency maintains HTML and PDF
versions of the list of FDA Recognized Consensus Standards. Both
versions are publicly accessible at the Agency's Internet site. See
section VI of this document for electronic access information.
Interested persons should review the supplementary information sheet
for the standard to understand fully the extent to which FDA recognizes
the standard.

II. Modifications to the List of Recognized Standards, Recognition List
Number: 037

    FDA is announcing the addition, withdrawal, correction, and
revision of certain consensus standards the Agency will recognize for
use in premarket submissions and other requirements for devices. We
will incorporate these modifications in the list of FDA Recognized
Consensus Standards in the Agency's searchable database. We will use
the term ``Recognition List Number: 037'' to identify these current
modifications.
    In Table 1, we describe the following modifications: (1) The
withdrawal of standards and their replacement by others, if applicable,
(2) the correction of errors made by FDA in listing previously
recognized standards, and (3) the changes to the supplementary
information sheets of recognized standards that describe revisions to
the applicability of the standards.

                           Table 1--Modifications to the List of Recognized Standards
----------------------------------------------------------------------------------------------------------------
                                         Replacement
        Old recognition No.            recognition No.          Title of standard \1\              Change
----------------------------------------------------------------------------------------------------------------
                                              A. General I (ES/EMC)
----------------------------------------------------------------------------------------------------------------
5-90..............................  .....................  ISO 15223-1 Second edition 2012- Extent of
                                                            07-01 Medical devices--Symbols   recognition.
                                                            to be used with medical device
                                                            labels, labeling, and
                                                            information to be supplied--
                                                            Part 1: General requirements.
5-91..............................  .....................  AAMI/ANSI/ISO 15223-1:2012       Extent of
                                                            Medical devices--Symbols to be   recognition.
                                                            used with medical devices
                                                            labels, labeling, and
                                                            information to be supplied--
                                                            Part 1: General requirements.
----------------------------------------------------------------------------------------------------------------
                                             B. General II (ES/EMC)
----------------------------------------------------------------------------------------------------------------
19-1..............................  .....................  IEC 60601-1-2 Edition 3: 2007-   Extent of
                                                            03 Medical Electrical            recognition and
                                                            Equipment--Part 1-2: General     transition period.
                                                            Requirements for Basic Safety
                                                            and Essential Performance--
                                                            Collateral Standard:
                                                            Electromagnetic Compatibility--
                                                            Requirements and Tests.
19-2..............................  .....................  ANSI/AAMI/IEC 60601-1-2:2007/    Extent of
                                                            (R)2012 Medical Electrical       recognition and
                                                            Equipment--Part 1-2: General     transition period.
                                                            requirements for basic safety
                                                            and essential performance--
                                                            Collateral Standard:
                                                            Electromagnetic compatibility--
                                                            requirements and tests.
19-8..............................  .....................  IEC 60601-1-2 Edition 4.0 2014-  Transition period
                                                            02 Medical electrical            extended.
                                                            equipment--Part 1-2: General
                                                            requirements for basic safety
                                                            and essential performance--
                                                            Collateral Standard:
                                                            Electromagnetic disturbances--
                                                            Requirements and tests.
----------------------------------------------------------------------------------------------------------------
                                             C. In Vitro Diagnostics
----------------------------------------------------------------------------------------------------------------
7-246.............................  .....................  CLSI POCT12-A3 Point-of-Care     Withdrawn.
                                                            Blood Glucose Testing in Acute
                                                            and Chronic Care Facilities;
                                                            Approved Guideline--Third
                                                            Edition.
----------------------------------------------------------------------------------------------------------------
\1\ All standard titles in this table conform to the style requirements of the respective organizations.

III. Listing of New Entries

    In Table 2 of this document, FDA provides the listing of new
entries and consensus standards added as modifications to the list of
recognized standards under Recognition List Number: 037.

        Table 2--New Entries to the List of Recognized Standards
------------------------------------------------------------------------
                                                          Reference No.
       Recognition No.          Title of standard \1\        and date
------------------------------------------------------------------------
                         A. General II (ES/EMC)
------------------------------------------------------------------------
19-12.......................  Medical electrical         ANSI/AAMI/IEC
                               equipment--Part 1-2:       60601-1-2:2014
                               General requirements for   .
                               basic safety and
                               essential performance--
                               Collateral Standard:
                               Electromagnetic
                               disturbances--Requiremen
                               ts and tests.
19-13.......................  Secondary cells and        IEC 62133
                               batteries containing       Edition 2.0
                               alkaline or other non-     2012-12.
                               acid electrolytes--
                               Safety requirements for
                               portable sealed
                               secondary cells, and for
                               batteries made from
                               them, for use in
                               portable applications
                               [Including: Corrigendum
                               1 (2013)].
------------------------------------------------------------------------
                       B. OB-GYN/Gastroenterology
------------------------------------------------------------------------
9-95........................  Enteral Feeding Catheters  EN 1615:2000.
                               and Enteral Giving Sets
                               for Single Use and their
                               Connectors--Design and
                               Testing.
9-96........................  Catheters Other Than       EN 1618:1997.
                               Intravascular Catheters--
                               Test Methods for Common
                               Properties.
------------------------------------------------------------------------
\1\ All standard titles in this table conform to the style requirements
  of the respective organizations.

IV. List of Recognized Standards

    FDA maintains the Agency's current list of FDA recognized consensus
standards in a searchable database that may be accessed directly at
FDA's Internet site at http://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfStandards/search.cfm. FDA will incorporate the modifications
and revisions described in this notice into the database and, upon
publication in the Federal Register, this recognition of

consensus standards will be effective. FDA will announce additional
modifications and revisions to the list of recognized consensus
standards, as needed, in the Federal Register once a year, or more
often if necessary. Beginning with Recognition List 033, FDA no longer
announces minor revisions to the list of recognized consensus standards
such as technical contact person, devices affected, processes affected,
Code of Federal Regulations citations, and product codes.

V. Recommendation of Standards for Recognition by FDA

    Any person may recommend consensus standards as candidates for
recognition under section 514 of the FD&C Act by submitting such
recommendations, with reasons for the recommendation, to
<EMAIL_ADDRESS>To be properly considered, such recommendations
should contain, at a minimum, the following information: (1) Title of
the standard, (2) any reference number and date, (3) name and address
of the national or international standards development organization,
(4) a proposed list of devices for which a declaration of conformity to
this standard should routinely apply, and (5) a brief identification of
the testing or performance or other characteristics of the device(s)
that would be addressed by a declaration of conformity.

VI. Electronic Access

    You may obtain a copy of ``Guidance on the Recognition and Use of
Consensus Standards'' by using the Internet. The Center for Devices and
Radiological Health (CDRH) maintains a site on the Internet for easy
access to information including text, graphics, and files that you may
download to a personal computer with access to the Internet. Updated on
a regular basis, the CDRH home page, http://www.fda.gov/MedicalDevices,
includes a link to standards-related documents including the guidance
and the current list of recognized standards. After publication in the
Federal Register, this notice announcing ``Modification to the List of
Recognized Standards, Recognition List Number: 037'' will be available
at http://www.fda.gov/MedicalDevices/DeviceRegulationandGuidance/Standards/ucm123792.htm.
    You may access ``Guidance on the Recognition and Use of Consensus
Standards,'' and the searchable database for ``FDA Recognized Consensus
Standards'' at http://www.fda.gov/MedicalDevices/DeviceRegulationandGuidance/Standards.

VII. Submission of Comments and Effective Date

    Interested persons may submit either electronic comments regarding
this document to http://www.regulations.gov or written comments to the
Division of Dockets Management (see ADDRESSES). It is only necessary to
send one set of comments. Identify comments with the docket number
found in brackets in the heading of this document. Received comments
may be seen in the Division of Dockets Management between 9 a.m. and 4
p.m., Monday through Friday, and will be posted to the docket at http://www.regulations.gov. FDA will consider any comments received in
determining whether to amend the current listing of modifications to
the list of recognized standards, Recognition List Number: 037. These
modifications to the list of recognized standards are effective upon
publication of this notice in the Federal Register.

    Dated: October 10, 2014.
Leslie Kux,
Assistant Commissioner for Policy.
[FR Doc. 2014-24714 Filed 10-16-14; 8:45 am]
BILLING CODE 4164-01-P


[Federal Register: January 4, 2008 (Volume 73, Number 3)]
[Notices]
[Page 913-916]
[DOCID:fr04ja08-60]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57047; File No. SR-NYSEArca-2007-127]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Order Granting Accelerated Approval of a Proposed Rule Change, as
Modified by Amendment No. 1 Thereto, To List and Trade Shares of the
iShares MSCI Belgium Index Fund

 December 27, 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 December 13, 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 December 19, 2007, the Exchange filed Amendment No. 1 to the
proposed rule change. This order provides notice of the proposed rule
change, as amended, and approves the amended proposal on an accelerated
basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to list and trade shares (``Shares'') of the
iShares MSCI Belgium Index Fund (``Fund'').\3\ The text of the proposed
rule change is available at the Exchange's principal office, the
Commission's Public Reference Room, and http://www.nyse.com.

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

    \3\ The Shares are issued by iShares, Inc., an open-ended
management investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a).
---------------------------------------------------------------------------

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

1. Purpose
    The Exchange proposes to list and trade the Shares of the Fund
pursuant to NYSE Arca Equities Rule 5.2(j)(3), the Exchange's listing
standards for Investment Company Units (``ICUs'').\4\ The Shares are
currently listed on the New York Stock Exchange LLC (``NYSE'') \5\ and
traded by the Exchange pursuant to unlisted trading privileges
(``UTP'').\6\ The Exchange states that, if the Commission approves this
proposed rule change, the listing and trading of the Shares will
transfer from NYSE to NYSE Arca, and the Shares will cease trading on
NYSE.
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    \4\ An Investment Company Unit is a security that represents an
interest 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)(A).
    \5\ See Securities Exchange Act Release No. 52816 (November 21,
2005), 70 FR 71574 (November 29, 2005) (SR-NYSE-2005-70) (approving
the listing and trading of the Shares, among others).
    \6\ See Securities Exchange Act Release No. 55017 (December 28,
2006), 72 FR 1044 (January 9, 2007) (SR-NYSEArca-2006-34) (approving
the trading of the Shares, among others, pursuant to UTP).
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    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 Belgian market,
as represented by the MSCI Belgium Investable Market Index (the
``Index''). The Index is designed to cover approximately 99% of the
investable large-, mid-, and small-cap securities of the Belgian
market.
    NYSE Arca represents that the Shares meet each of the ``generic''
listing requirements of Commentary .01(a)(B) to NYSE Arca Equities Rule
5.2(j)(3) applicable to the listing of ICUs based on equity securities
comprising international or global indexes, except for the requirements
set forth in Commentary .01(a)(B)(3) to NYSE Arca Equities Rule
5.2(j)(3) that: (1) The most heavily weighted component stock must not
exceed 25% of the weight of the index or portfolio; and (2) the five
most heavily weighted component stocks must not exceed 60% of the
weight of the index or portfolio. The Exchange represents that, as of
December 1, 2007, the most heavily weighted component stock represented
28.58% of the weight of the Index, and the five most heavily weighted
component stocks represented 61.58% of the weight of the Index. Because
the heavily weighted component stocks of the Index fall below the
required minimum percentages in Commentary .01(a)(B)(3) to NYSE Arca
Equities Rule 5.2(j)(3), the Exchange has filed the proposed rule
change to list and trade the Shares. 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 further
represents that the continued listing standards under NYSE Arca
Equities Rule 5.5(g)(2) applicable to Investment Company Units shall
apply to the Shares.
    Detailed descriptions of the Fund, the Index, and the Shares can be
found in the Registration Statement\7\ or on the Web site for the Fund
(http://www.ishares.com).

    Availability of Information. The Exchange states that quotations
for and last-sale information regarding the Shares is disseminated
through the facilities of the Consolidated Tape Association (``CTA'').
The Index value is calculated by Morgan Stanley Capital International,
Inc. (``MSCI''), the Index provider, for each trading day in the
applicable foreign exchange markets based on official closing prices in
such exchange markets and publicly disseminates the Index values for
the previous day's close.\8\ MSCI or third-party major market data
vendors will make available at least every 60 seconds an updated Index
value when foreign trading market hours overlap with the Core Trading
Session (9:30 a.m. to 4:15 p.m. ET).\9\ When the foreign markets are

closed during Exchange trading hours, the Fund will provide closing
Index values on http://www.ishares.com. iShares, Inc. will cause 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
Fund's Shares, 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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    \7\ See iShares, Inc.'s Registration Statement on Form N-1A, as
supplemented through December 6, 2007 (File Nos. 33-97598 and 811-
09102) (``Registration Statement'').
    \8\ 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 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 implemented procedures to prevent the misuse of material, non-
public information regarding changes to component stocks in the
MSCI, in accordance with the requirements of Commentary .01(b)(1) to
NYSE Arca Equities Rule 5.2(j)(3).
    \9\ See NYSE Arca Equities Rule 7.34. The Commission has
approved the Shares to trade in all three trading sessions on the
Exchange: (1) Opening Session (4 a.m. to 9:30 a.m. Eastern Time or
``ET''); (2) Core Trading Session (9:30 a.m. to 4 p.m. ET); and (3)
Late Trading Session (4 p.m. to 8 p.m. ET). See Securities Exchange
Release No. 56627 (October 5, 2007), 72 FR 58145 (October 12, 2007)
(SR-NYSEArca-2007-75) (approving the Shares, among others, to be
traded in all trading sessions).
---------------------------------------------------------------------------

    In addition, the Indicative Optimized Portfolio Value or ``IOPV''
on a per-Share basis will be calculated by an independent third party
and disseminated through the facilities of the CTA at least every 15
seconds during the Core Trading Session.\10\ The Exchange states that,
because the Fund utilizes a representative sampling strategy, the IOPV
likely will not reflect the value of all securities included in the
Index or necessarily reflect the precise composition of the current
portfolio of securities held by the Fund at a particular moment. The
Exchange notes that the IOPV disseminated during the Core Trading
Session should not be viewed as a real-time update of the NAV of the
Fund, which is calculated only once a day.
---------------------------------------------------------------------------

    \10\ The Exchange states that there is an overlap in trading
hours between the foreign and U.S. markets for the Fund and the
foreign market that trades securities in the underlying Index.
Therefore, the IOPV calculator will update the IOPV at least every
15 seconds to reflect price changes in the applicable foreign market
and convert such prices into U.S. dollars based on the currency
exchange rate. When the foreign market is closed and the U.S.
markets are open, the IOPV will be updated at least every 15 seconds
to reflect changes in currency exchange rates after the foreign
market closes.
---------------------------------------------------------------------------

    The Fund administrator, State Street Bank and Trust Company, will
calculate the net asset value or ``NAV'' for the Fund once a day on
each day that the NYSE is open for trading, generally at 4 p.m. ET. The
NAV will also be 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.
    Information with respect to recent NAV, number of Shares
outstanding, estimated cash amount, total cash amount per Creation Unit
Aggregation,\11\ and other data with respect to the Fund will also be
disseminated prior to the opening of the Core Trading Session on a
daily basis by means of CTA and Consolidated Quote High Speed Lines. In
addition, the Web site for the Fund will contain the following
information, on a per-Share basis: (1) The prior business day's NAV,
the mid-point of the bid-ask price at the time of calculation of such
NAV (``Bid/Ask Price''),\12\ 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. Finally, the Exchange states that
MSCI's Web site at http://www.mscibarra.com will make available the

components of the Index, and the holdings of the Fund will be available
at http://www.ishares.com. The Exchange represents that the information

on the Fund Web site will be available to all market participants at
the same time.
---------------------------------------------------------------------------

    \11\ See Registration Statement, supra note 7 (providing the
definition of Creation Unit Aggregation and the procedures for
purchasing and redeeming Shares).
    \12\ The Bid-Ask Price of the Fund is determined using the
highest bid and lowest offer on the Exchange as of the time of
calculation of the Fund's NAV.
---------------------------------------------------------------------------

    Trading Rules and Halts. 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.
As stated earlier, the 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 Rule 5.5(g)(2)(b).
    Surveillance. The Exchange intends to utilize its existing
surveillance procedures applicable to Investment Company Units to
monitor trading in the Shares. The Exchange represents that these
procedures, which focus on detecting when securities trade outside
their normal patterns, 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 further represents that it
may obtain information via the Intermarket Surveillance Group (``ISG'')
from other exchanges that are members or affiliate members of ISG.\13\
The Exchange states that it has a general policy prohibiting the
distribution of material, non-public information by its employees.
---------------------------------------------------------------------------

    \13\ The Exchange notes that one or more of the securities
comprising the Index may trade on exchanges that are not members or
affiliate members of ISG, and the Exchange may not have in place
comprehensive surveillance sharing agreements with such exchanges.
---------------------------------------------------------------------------

    Information Bulletin. Prior to the commencement of trading, the
Exchange will inform its ETP Holders \14\ in an Information Bulletin
(``Bulletin'') of the special characteristics and risks associated with
trading the Shares. Specifically, the Bulletin will discuss: (1) The
procedures for purchases and redemptions of Shares in Creation 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 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. In addition, the Bulletin will reference
that the Fund is subject to various fees and expenses described in the
Registration Statement and will also discuss any exemptive, no-action,
or interpretive relief granted by the Commission from 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.
---------------------------------------------------------------------------

    \14\ 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'').
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\15\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\16\ 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.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 recieved.

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:

Electronic Comments:

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to<EMAIL_ADDRESS>Please include

File Number SR-NYSEArca-2007-127 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-2007-127. 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-2007-127 and should
be submitted on or before January 25, 2008.

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.\17\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\18\ which
requires that the rules of a national securities exchange be 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.
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    \17\ 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).
    \18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Although NYSE Arca Equities Rule 5.2(j)(3) permits the Exchange to
list and trade ICUs, the Shares do not meet all of the generic listing
requirements \19\ under such rule because the components of the Index
do not meet the requirements of Commentary .01(a)(B)(3) to NYSE Arca
Equities Rule 5.2(j)(3). Commentary .01(a)(B)(3) to NYSE Arca Equities
Rule 5.2(j)(3) requires that, upon the initial listing of any series of
ICUs pursuant to Rule 19b-4(e) under the Act, the most heavily weighted
component stock must not exceed 25% of the weight of the index or
portfolio, and the five most heavily weighted component stocks must not
exceed 60% of the weight of the index or portfolio. According to the
Exchange, as of December 1, 2007, the most heavily weighted component
stock represented 28.58% of the weight of the Index, and the five most
heavily weighted component stocks represented 61.58% of the weight of
the Index. Such percentages miss the minimum required thresholds by
3.58% and 1.58%, respectively, and therefore the Shares cannot be
listed and traded pursuant to the generic listing standards of NYSE
Arca Equities Rule 5.2(j)(3).
---------------------------------------------------------------------------

    \19\ 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 derivative securities
product, and the SRO has a surveillance program for the product
class.
---------------------------------------------------------------------------

    The Commission believes, however, that the listing and trading of
the Shares is consistent with the Act. The Commission notes that, based
on the Exchange's representations, the Shares otherwise meet all of the
other applicable generic listing standards under NYSE Arca Equities
Rule 5.2(j)(3). The Commission further notes that it has previously
approved the listing and trading of derivative securities products
based on indices that were composed of stocks that did not meet certain
quantitative generic listing criteria by only a slight margin.\20\
---------------------------------------------------------------------------

    \20\ See, e.g., Securities Exchange Act Release No. 55953 (June
25, 2007), 72 FR 36084 (July 2, 2007) (SR-NYSE-2007-46) (approving
the listing and trading of shares of the HealthSharesTM
Orthopedic Repair exchange-traded fund where the component stocks
comprising the index that individually exceeded the minimum
worldwide monthly trading volume of 250,000 shares during each of
the last six months accounted, in the aggregate, for 86.2% of the
weight of the index, narrowly missing compliance with the initial
listing requirement by 3.8%); Securities Exchange Act Release No.
56695 (October 24, 2007), 72 FR 61413 (October 30, 2007) (SR-
NYSEArca-2007-111) (approving the listing and trading of shares of
the HealthSharesTM Ophthalmology exchange-traded fund
where the component stocks comprising the index that individually
exceeded the minimum worldwide monthly trading volume of 250,000
shares during each of the last six months accounted, in the
aggregate, for only 88.2% of the weight of the index, narrowly
missing compliance with the generic listing standard by 1.8%).
---------------------------------------------------------------------------

    The Commission also finds that the proposal is consistent with
Section 11A(a)(1)(C)(iii) of the Act,\21\ 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 and last-sale information for the Shares will be
disseminated through the facilities of the CTA. MSCI or third-party
market data vendors will make available at least every 60 seconds an
updated Index value during the Exchange's Core Trading Session. In
addition, an independent third-party calculator will calculate and
disseminate the IOPV through the facilities of the CTA at least every
15 seconds during the Exchange's Core Trading Session. Further, the
Fund's Web site will disseminate information relating to the NAV and
the Bid/Ask Price for the Shares, as well as the specific holdings of
the Fund.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

    The Commission believes that the proposed rule change is reasonably

designed to promote fair disclosure of information that may be
necessary to appropriately price the Shares. Under Rule 5.2(j)(3)(v),
the Exchange is required to obtain a representation from iShares, Inc.
that the NAV per Share will be calculated daily and made available to
all market participants at the same time. In addition, the Exchange
represents that the Web site disclosure of the information regarding
the Shares and the portfolio composition of the Fund will be made
available to all market participants at the same time. The Exchange
further 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 relates to restricted access of information concerning
changes and adjustments to the Index.
    The Commission further believes that the trading rules and
procedures to which the Shares would be subject pursuant to this
proposal are consistent with the Act. The Shares would trade as equity
securities and be subject to NYSE Arca's rules governing the trading of
equity securities. The Commission also believes that the Exchange's
trading halt rules under NYSE Arca Equities Rule 5.5(g)(2)(b) are
reasonably designed to prevent trading in the Shares when transparency
is impaired.
    In support of this proposal, the Exchange has made the following
representations:
    1. The Exchange would utilize its existing surveillance procedures
applicable to ICUs to monitor trading of the Shares. The Exchange
represents that such surveillance procedures are adequate to properly
monitor the trading of the Shares. The Exchange may obtain trading
information via the ISG from other exchanges that are members or
affiliate members of ISG.\22\
---------------------------------------------------------------------------

    \22\ See supra note 13.
---------------------------------------------------------------------------

    2. Prior to the commencement of trading, the Exchange will inform
its ETP Holders in the Bulletin of the special characteristics and
risks (including the risks involved in trading the Shares during the
Opening and Late Trading Sessions when an updated IOPV will not be
calculated or publicly available) associated with trading the Shares.
The Bulletin will discuss the procedures for purchases and redemptions
of Shares, the Exchange's suitability requirements, information
regarding the IOPV, and prospectus delivery requirements.
    3. The Exchange represents that iShares, Inc. is required to comply
with Rule 10A-3 under the Act \23\ for the initial and continued
listing of the Shares.
---------------------------------------------------------------------------

    \23\ 17 CFR 240.10A-3.

This approval order is based on the Exchange's representations.
    The Commission finds good cause, pursuant to Section 19(b)(2) of
the Act,\24\ for approving the proposed rule change prior to the 30th
day after the date of publication of notice in the Federal Register.
The Commission notes that the Shares are currently listed on NYSE and
trading on the Exchange pursuant to UTP. This proposal would move the
listing from NYSE to NYSE Arca. Given that the Shares 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 listing and trading of the Shares by
NYSE Arca does not appear to present any novel or significant
regulatory issues. Therefore, the Commission finds that there is good
cause to approve the proposed rule change, as modified by Amendment No.
1 thereto, on an accelerated basis.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) under the
Act,\25\ that the proposed rule change (SR-NYSEArca-2007-127), as
modified by Amendment No. 1 thereto, be, and it hereby is, approved on
an accelerated basis.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
---------------------------------------------------------------------------

    \26\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E7-25581 Filed 1-3-08; 8:45 am]

BILLING CODE 8011-01-P