[Federal Register: April 29, 2008 (Volume 73, Number 83)]
[Notices]
[Page 23281-23287]
[DOCID:fr29ap08-114]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57701; File No. SR-NYSEArca-2008-20]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change, as Modified by Amendment No. 1
Thereto, To Adopt Listing Rules Relating to Fixed Income Index-Linked
Securities, Futures-Linked Securities, and Multifactor Index-Linked
Securities

April 23, 2008.

I. Introduction

    On February 14, 2008, NYSE Arca, Inc. (``NYSE Arca'' or
``Exchange''), through its wholly owned subsidiary, NYSE Arca Equities,
Inc. (``NYSE Arca Equities''), filed with the Securities and Exchange
Commission (``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to adopt generic listing
standards for Fixed Income Index-Linked Securities, Futures-Linked
Securities, and Multifactor Index-Linked Securities. On March 14, 2008,
the Exchange filed Amendment No. 1 to the proposed rule change. The
proposed rule change, as amended, was published for comment in the
Federal Register on March 24, 2008.\3\ The Commission received no
comments on the proposal. This order approves the proposed rule change,
as modified by Amendment No. 1 thereto.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 57505 (March 14,
2008), 73 FR 15550.
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II. Description of the Proposal

    The Exchange proposes to amend NYSE Arca Equities Rule 5.2(j)(6)
\4\ to

adopt new generic listing standards, pursuant to which the Exchange
would be able to list and trade Fixed Income Index-Linked Securities,
Futures-Linked Securities, and Multifactor Index-Linked Securities
without Commission approval under Rule 19b-4(e) under the Act.\5\ The
Exchange also proposes to make conforming changes to Commentary .01 to
NYSE Arca Equities Rule 5.2(j)(6) to extend its application to Futures-
Linked Securities and Multifactor Index-Linked Securities that are
composed in part of Commodity, Currency, or Futures Reference Assets
(as defined herein).
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    \4\ NYSE Arca Equities Rule 5.2(j)(6) currently sets forth the
Exchange's generic listing standards for Equity Index-Linked
Securities, Commodity-Linked Securities, and Currency-Linked
Securities. See NYSE Arca Equities Rule 5.2(j)(6). Equity Index-
Linked Securities are securities that provide for the payment at
maturity of a cash amount based on the performance of an underlying
index or indexes of equity securities (``Equity Reference Asset'').
Commodity-Linked Securities are securities that provide for the
payment at maturity of a cash amount based on the performance of one
or more physical commodities or commodity futures, options or other
commodity derivatives or Commodity-Based Trust Shares (as defined in
NYSE Arca Equities Rule 8.201), or a basket or index of any of the
foregoing (``Commodity Reference Asset''). Currency-Linked
Securities are securities that provide for the payment at maturity
of a cash amount based on the performance of one or more currencies,
or options or currency futures or other currency derivatives or
Currency Trust Shares (as defined in NYSE Arca Equities Rule 8.202),
or a basket or index of any of the foregoing (``Currency Reference
Asset''). As a result of the proposed rule change, ``Index-Linked
Securities,'' which currently include Equity Index-Linked
Securities, Commodity-Linked Securities, and Currency-Linked
Securities, will also include, by definition, Fixed Income Index-
Linked Securities, Futures-Linked Securities, and Multifactor Index-
Linked Securities.
    \5\ Rule 19b-4(e)(1) under the Act 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 paragraph (c)(1) of Rule 19b-4 under the Act (17 CFR
240.19b-4(c)(1)), if the Commission has approved, pursuant to
Section 19(b) of the Act (15 U.S.C. 78s(b)), the SRO's trading
rules, procedures, and listing standards for the product class that
would include the new derivatives securities product, and the SRO
has a surveillance program for the product class. See 17 CFR
240.19b-4(e).
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    The Exchange represents that any securities it lists and/or trades
pursuant to Rule 19b-4(e)(1) and NYSE Arca Equities Rule 5.2(j)(6), as
amended, will satisfy the proposed standards set forth therein. The
Exchange states that within five business days after commencement of
trading of any such security under NYSE Arca Equities Rule 5.2(j)(6),
as amended, the Exchange will file a Form 19b-4(e).\6\
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    \6\ See 17 CFR 240.19b-4(e)(2)(ii); 17 CFR 249.820.
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Fixed Income Index-Linked Securities

    Fixed Income Index-Linked Securities are securities that provide
for the payment at maturity based on the performance of one or more
indexes or portfolios of debt securities that are notes, bonds,
debentures, or evidence of indebtedness that include, but are not
limited to, U.S. Department of Treasury securities (``Treasury
Securities''), government-sponsored entity securities (``GSE
Securities''), municipal securities, trust preferred securities,
supranational debt and debt of a foreign country or subdivision
thereof, or a basket or index of any of the foregoing (collectively,
``Fixed Income Reference Asset''). Fixed Income Index-Linked
Securities, like other Index-Linked Securities, will be subject to the
general criteria in NYSE Arca Equities Rule 5.2(j)(6)(A) for initial
listing.
    For the initial listing of a series of Fixed Income Index-Linked
Securities, the Fixed Income Reference Asset must either: (1) Have been
reviewed and approved for the trading of options, Investment Company
Units (as defined in NYSE Arca Equities Rule 5.2(j)(3)), or other
derivatives by the Commission under Section 19(b)(2) of the Act \7\ and
rules thereunder and the conditions set forth in the Commission's
approval order continue to be satisfied, or (2) meet the following
requirements: \8\
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    \7\ 15 U.S.C. 78s(b)(2).
    \8\ The Exchange notes that the quantitative standards for Fixed
Income Reference Assets are substantially similar to those set forth
under Commentary .02 to NYSE Arca Equities Rule 5.2(j)(3) relating
to fixed income securities underlying Investment Company Units. See
Commentary .02 to NYSE Arca Equities Rule 5.2(j)(3).
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     Components of the Fixed Income Reference Asset that, in
the aggregate, account for at least 75% of the dollar weight of the
Fixed Income Reference Asset must each have a minimum original
principal amount outstanding of $100 million or more;
     A component of the Fixed Income Reference Asset may be a
convertible security, however, once the convertible security component
converts to the underlying equity security, the component is removed
from the Fixed Income Reference Asset;
     No component of the Fixed Income Reference Asset
(excluding Treasury Securities and GSE Securities) will represent more
than 30% of the dollar weight of the Fixed Income Reference Asset, and
the five highest dollar weighted components in the Fixed Income
Reference Asset will not, in the aggregate, account for more than 65%
of the dollar weight of the Fixed Income Reference Asset;
     An underlying Fixed Income Reference Asset (excluding one
consisting entirely of exempted securities) \9\ must include a minimum
of 13 non-affiliated issuers; and
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    \9\ The Exchange notes that, for purposes of this standard,
``exempted securities'' refers to Treasury Securities and GSE
Securities, as defined in proposed NYSE Arca Equities Rule
5.2(j)(6)(iv).
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     Component securities that, in the aggregate, account for
at least 90% of the dollar weight of the Fixed Income Reference Asset
must be from one of the following: (1) Issuers that are required to
file reports pursuant to Sections 13 and 15(d) of the Act; \10\ or (2)
issuers that have a worldwide market value of outstanding common equity
held by non-affiliates of $700 million or more; or (3) issuers that
have outstanding securities that are notes, bonds, debentures, or
evidence of indebtedness having a total remaining principal amount of
at least $1 billion; or (4) exempted securities, as defined in Section
3(a)(12) of the Act; \11\ or (5) issuers that are a government of a
foreign country or a political subdivision of a foreign country.
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    \10\ 15 U.S.C. 78m; 15 U.S.C. 78o(d).
    \11\ 15 U.S.C. 78c(a)(12).
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    With respect to any series of Fixed Income Index-Linked Securities,
the value of the Fixed Income Reference Asset must be widely
disseminated to the public by one or more major market vendors at least
once per business day. In addition, the Exchange will commence
delisting or removal proceedings if: \12\
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    \12\ The Exchange notes that the continued listing standards for
each of Fixed Income Index-Linked Securities, Futures-Linked
Securities, and Multifactor Index-Linked Securities are
substantially similar to those standards currently applicable to
other Index-Linked Securities.
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     Any of the initial listing criteria for Fixed Income
Index-Linked Securities are not continuously maintained;
     The aggregate market value or the principal amount of the
Fixed Income Index-Linked Securities publicly held is less than
$400,000;
     The value of the Fixed Income Reference Asset is no longer
calculated or available and a new Fixed Income Reference is
substituted, unless the new Fixed Income Reference Asset meets the
requirements of NYSE Arca Equities Rule 5.2(j)(6); or
     Such other event shall occur or condition exists that, in
the opinion of the Exchange, makes further dealings on the Exchange
inadvisable.

Futures-Linked Securities

    Futures-Linked Securities are securities that provide for the
payment at maturity based on the performance of an index of (1) futures
on Treasury Securities, GSE Securities, supranational debt and debt of
a foreign country or a subdivision thereof, or options or other
derivatives on any of the foregoing, or (2) interest rate futures or
options or derivatives on the foregoing (collectively, ``Futures
Reference Asset''). Futures-Linked Securities will also be subject to
the general criteria in NYSE Arca Equities Rule 5.2(j)(6)(A) for
initial listing. An issue of Futures-Linked Securities must meet one of
the initial listing standards set forth below:
     The Futures Reference Asset to which the security is
linked shall have been reviewed and approved for the trading of
Futures-Linked Securities or options or other derivatives by the
Commission under Section 19(b)(2) of the Act \13\ and rules thereunder
and the

conditions set forth in the Commission's approval order, including with
respect to comprehensive surveillance sharing agreements, continue to
be satisfied; or
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    \13\ 15 U.S.C. 78s(b)(2).
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     The pricing information for components of a Futures
Reference Asset must be derived from a market which is an Intermarket
Surveillance Group (``ISG'') member or affiliate member or with which
the Exchange has a comprehensive surveillance sharing agreement. A
Futures Reference Asset may include components representing not more
than 10% of the dollar weight of such Futures Reference Asset for which
the pricing information is derived from markets that do not meet the
specified foregoing requirements; provided, however, that no single
component subject to this exception exceeds 7% of the dollar weight of
the Futures Reference Asset.
    In addition, an issue of Futures-Linked Securities must meet both
of the following initial listing criteria:
     The value of the Futures Reference Asset must be
calculated and widely disseminated by one or more major market data
vendors on at least a 15-second basis during the Core Trading Session
(as defined in NYSE Arca Equities Rule 7.34); \14\ and
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    \14\ See NYSE Arca Equities Rule 7.34 (generally describing the
three trading sessions of the Exchange to include the Opening
Session, from 4 a.m. to 9:30 a.m. Eastern Time or ``ET,'' Core
Trading Session, from 9:30 a.m. to 4 p.m. ET, and Late Trading
Session, from 4 p.m. to 8 p.m. ET).
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     In the case of Futures-Linked Securities that are
periodically redeemable, the indicative value of the subject Futures-
Linked Securities must be calculated and widely disseminated by the
Exchange or one or more major market data vendors on at least a 15-
second basis during the Core Trading Session.
    The Exchange will commence delisting or removal proceedings if:
     Any of the initial listing criteria for Futures-Linked
Securities are not continuously maintained;
     The aggregate market value or the principal amount of the
Futures-Linked Securities publicly held is less than $400,000;
     The value of the Futures Reference Asset is no longer
calculated or available and a new Futures Reference Asset is
substituted, unless the new Futures Reference Asset meets the
requirements of NYSE Arca Equities Rule 5.2(j)(6); or
     Such other event shall occur or condition exists which, in
the opinion of the Exchange, makes further dealings on the Exchange
inadvisable.

Multifactor Index-Linked Securities

    Multifactor Index-Linked Securities are securities that provide for
payment at maturity based on the performance of any combination of two
or more Equity Reference Assets, Commodity Reference Assets, Currency
Reference Assets, Fixed Income Reference Assets, or Futures Reference
Assets (collectively, the ``Multifactor Reference Asset,'' and together
with Equity Reference Assets, Commodity Reference Assets, Currency
Reference Assets, Fixed Income Reference Assets, and Futures Reference
Assets, collectively, the ``Reference Assets''). In addition, a
Multifactor Reference Asset may include as a component a notional
investment in cash or a cash equivalent based on a widely accepted
overnight loan interest rate, London Interbank Offered Rate
(``LIBOR''), Prime Rate, or an implied interest rate based on observed
market spot and foreign currency forward rates. The Exchange states
that, for purposes of a notional investment as a component of a
Multifactor Reference Asset, a long LIBOR weighting would represent a
leverage charge offsetting long positions in the underlying Reference
Assets.
    Multifactor Index-Linked Securities will be subject to the general
criteria under NYSE Arca Equities Rule 5.2(j)(6)(A) for initial
listing. In addition, for a series of Multifactor Index-Linked
Securities to be appropriate for listing, each component of the
Multifactor Reference Asset must either: (1) Have been reviewed and
approved for the trading of options, Investment Company Units, or other
derivatives under Section 19(b)(2) of the Act \15\ and rules thereunder
and the conditions set forth in the Commission's approval order
continued to be satisfied; or (2) meet the applicable requirements for
initial and continued listing set forth in the relevant section of NYSE
Arca Equities Rule 5.2(j)(6). In addition, an issue of Multifactor
Index-Linked Securities must meet both of the following initial listing
criteria:
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    \15\ 15 U.S.C. 78s(b)(2).
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     The value of the Multifactor Reference Asset must be
calculated and widely disseminated to the public on at least a 15-
second basis during the time the Multifactor Index-Linked Security
trades on the Exchange; and
     In the case of Multifactor Index-Linked Securities that
are periodically redeemable, the indicative value of the Multifactor
Index-Linked Securities must be calculated and widely disseminated by
one or more major market data vendors on at least a 15-second basis
during the time the Multifactor Index-Linked Securities trade on the
Exchange.
    The Exchange will commence delisting or removal proceedings if:
     Any of the initial listing criteria for Multifactor Index-
Linked Securities are not continuously maintained;
     The aggregate market value or the principal amount of the
Multifactor Index-Linked Securities publicly held is less than
$400,000;
     The value of the Multifactor Reference Asset is no longer
calculated or available and a new Multifactor Reference Asset is
substituted, unless the new Multifactor Reference Asset meets the
requirements of NYSE Arca Equities Rule 5.2(j)(6); or
     Such other event shall occur or condition exists that, in
the opinion of the Exchange, makes further dealings on the Exchange
inadvisable.

Information Circular

    Upon evaluating the nature and complexity of each Fixed Income
Index-Linked Security, Futures-Linked Security, or Multifactor Index-
Linked Security, the Exchange represents that it will prepare and
distribute, if appropriate, an Information Circular to ETP Holders\16\
describing the product. Accordingly, the Information Circular will
disclose the particular structure and corresponding risks of a Fixed
Income Index-Linked Security, Futures-Linked Security, or Multifactor
Index-Linked Security traded on the Exchange. In particular, the
Information Circular will set forth the Exchange's suitability rule
that requires ETP Holders recommending a transaction in Fixed Income
Index-Linked Securities, Futures-Linked Securities, or Multifactor
Index-Linked Securities: (1) To determine that such transaction is
suitable for the customer (NYSE Arca Equities Rule 9.2(a)); and (2) to
have a reasonable basis for believing that the customer can evaluate
the special characteristics, and is able to bear the financial risks,
of such transaction. In addition, the Information Circular will
reference the requirement that ETP Holders must deliver a prospectus to
investors purchasing newly issued Index-Linked Securities prior to or
concurrently with the confirmation of a transaction. The Information
Circular will also note that all of the Exchange's equity trading rules
will be applicable to trading in Fixed Income Index-Linked

Securities, Futures-Linked Securities, and Multifactor Index-Linked
Securities. Finally, the Information Circular will discuss the risks
involved in trading such securities during the Opening and Late Trading
Sessions\17\ when an updated indicative value or Reference Asset value,
as applicable, will not be calculated or publicly disseminated.
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    \16\ ETP Holder refers to a sole proprietorship, partnership,
corporation, limited liability company, or other organization in
good standing that has been issued an Equity Trading Permit or
``ETP.'' An ETP Holder must be a registered broker or dealer
pursuant to Section 15 of the Act. See NYSE Arca Equities Rule
1.1(n).
    \17\ See supra note 14.
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Surveillance

    The Exchange intends to utilize its existing surveillance
procedures applicable to derivative products (including Index-Linked
Securities) to monitor trading in Fixed Income Index-Linked Securities,
Futures-Linked Securities, and Multifactor Index-Linked Securities. The
Exchange represents that these procedures are adequate to properly
monitor Exchange trading of such securities in all trading sessions and
to deter and detect violations of Exchange rules. The Exchange's
current trading surveillance focuses on detecting when securities trade
outside their normal patterns. When such situations are detected,
surveillance analysis follows and investigations are opened, where
appropriate, to review the behavior of all relevant parties for all
relevant trading violations. The Exchange may also obtain information
via ISG from other exchanges who are members or affiliate members of
ISG.\18\ In addition, the Exchange also has a general policy
prohibiting the distribution of material, non-public information by its
employees.
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    \18\ The Exchange notes that not all of the instruments
underlying Index-Linked Securities may trade on exchanges that are
members or affiliate members of ISG.
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Trading Halts

    If the indicative value or Reference Asset value applicable to a
series of Index-Linked Securities is not being disseminated as
required, the Exchange may halt trading during the day on which the
interruption first occurs. If such interruption persists past the
trading day in which it occurred, the Exchange will halt trading no
later than the beginning of the trading day following the interruption.

Firewall Procedures

    Fixed Income Index-Linked Securities, Futures-Linked Securities,
and Multifactor Index-Linked Securities, like other Index-Linked
Securities, will be subject to the firewall requirements under NYSE
Arca Equities Rule 5.2(j)(6)(C). The firewall requirements provide
that, if the value of an Index-Linked Security is based in whole or in
part on an index that is maintained by a broker-dealer, the broker-
dealer shall erect a ``firewall'' around the personnel responsible for
the maintenance of the underlying index or who have access to
information concerning changes and adjustments to the index, and the
index shall be calculated by a third party who is not a broker-dealer.
    Furthermore, as provided in NYSE Arca Equities Rule 5.2(j)(6)(C),
any advisory committee, supervisory board, or similar entity that
advises an index licensor or administrator or that makes decisions
regarding the index or portfolio composition, methodology, and related
matters must implement and maintain, or be subject to, procedures
designed to prevent the use and dissemination of material, non-public
information regarding the applicable index or portfolio.

Commentary .01

    The Exchange has also proposed conforming changes to Commentary .01
to NYSE Arca Equities Rule 5.2(j)(6) relating to the obligations of an
Exchange ETP Holder acting as a registered Market Maker in order to
extend its application to Futures-Linked Securities and Multifactor
Index-Linked Securities to the extent that such securities are
composed, in part, of Commodity, Currency, or Futures Reference
Assets.\19\
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    \19\ The Exchange states that Equity Index-Linked Securities and
Fixed Income Index-Linked Securities are not explicitly included in
Commentary .01 to NYSE Arca Rule 5.2(j)(6) because such securities
are already subject to the requirements of NYSE Arca Equities Rule
7.26 (Limitations on Dealings).
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III. Discussion and Commission's Findings

    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.\20\ In particular, the Commission finds that the proposed
rule change is consistent with the requirements of Section 6(b)(5) of
the Act,\21\ which requires, among other things, that the Exchange's
rules be designed to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
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    \20\ In approving this proposed 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).
    \21\ 15 U.S.C. 78f(b)(5).
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A. Generic Listing Standards for Fixed Income Index-Linked Securities,
Futures-Linked Securities, and Multifactor Index-Linked Securities

    To list and trade Fixed Income Index-Linked Securities, Futures-
Linked Securities, or Multifactor Index-Linked Securities, the Exchange
currently must file a proposed rule change with the Commission pursuant
to Section 19(b)(1) of the Act \22\ and Rule 19b-4 thereunder.\23\
However, Rule 19b-4(e) provides that the listing and trading of a new
derivative securities product by an SRO will 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.
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    \22\ 15 U.S.C. 78s(b)(1).
    \23\ 17 CFR 240.19b-4.
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    The Commission has previously approved generic listing standards
pursuant to Rule 19b-4(e) for Investment Company Units based on the
performance of fixed income securities and notes that such standards
are substantially similar to those proposed to be applicable to Fixed
Income Index-Linked Securities.\24\ In addition, with respect to the
proposed generic listing standards for Multifactor Index-Linked
Securities, the Commission has previously approved generic listing
standards pursuant to Rule 19b-4(e) for Investment Company Units based
on the performance of a combination of assets.\25\ The Commission also
notes that the proposed generic standards applicable to Futures-Linked
Securities are substantively identical to those currently applicable to
Commodity-Linked Securities with respect to the pricing information for
the respective

underlying assets.\26\ Lastly, the Commission notes that the proposed
continued listing standards for each of Fixed Income Index-Linked
Securities, Futures-Linked Securities, and Multifactor Index-Linked
Securities are substantively identical to those standards currently
applicable to other Index-Linked Securities.\27\
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    \24\ See Commentary .02 to NYSE Arca Equities Rule 5.2(j)(3)
(setting forth the generic listing and trading standards for
Investment Company Units based on fixed income securities); see
supra note 8 and accompanying text.
    \25\ See Commentary .03 to NYSE Arca Equities Rule 5.2(j)(3)
(setting forth the generic listing and trading standards for
Investment Company Units based on a combination of assets
representing equity and fixed income securities and requiring that
each index or portfolio of equity or fixed income component
securities separately satisfy its own applicable generic criteria
for listing and trading pursuant to Rule 19b-4(e)).
    \26\ See NYSE Arca Equities Rule 5.2(j)(6)(B)(II); see also
infra note 38 and accompanying text.
    \27\ See supra note 12.
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    In approving these securities for Exchange trading, the Commission
considered applicable Exchange rules that govern their trading. The
Commission believes that generic listing standards for Fixed Income
Index-Linked Securities, Futures-Linked Securities, and Multifactor
Index-Linked Securities should fulfill the intended objective of Rule
19b-4(e) and allow securities that satisfy the proposed generic listing
standards to commence trading without the need for public comment and
Commission approval.\28\ The Exchange's ability to rely on Rule 19b-
4(e) to list and trade Fixed Income Index-Linked Securities, Futures-
Linked Securities, and Multifactor Index-Linked Securities that meet
the applicable requirements and minimum standards should reduce the
time frame for bringing these securities to market and thereby reduce
the burdens on issuers and other market participants, while also
promoting competition and making such securities available to investors
more quickly.
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    \28\ The Commission notes that the failure of a particular
product or index to comply with the proposed generic listing
standards under Rule 19b-4(e), however, would not preclude the
Exchange from submitting a separate filing pursuant to Section
19(b)(2) of the Act, requesting Commission approval to list and
trade a particular series of Index-Linked Securities.
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B. Listing and Trading Fixed Income Index-Linked Securities, Futures-
Linked Securities, and Multifactor Index-Linked Securities

    Taken together, the Commission finds that the proposal contains
adequate rules and procedures to govern the listing and trading of
Fixed Income Index-Linked Securities, Futures-Linked Securities, and
Multifactor Index-Linked Securities pursuant to Rule 19b-4(e) on the
Exchange. Products listed and traded under the proposed generic
standards will be subject to the full panoply of NYSE Arca Equities
rules and procedures that currently govern the trading of equity
securities on the Exchange.
    The listing requirements under NYSE Arca Equities Rule
5.2(j)(6)(A), which set forth criteria applicable to all Index-Linked
Securities, will apply to Fixed Income Index-Linked Securities,
Futures-Linked Securities, and Multifactor Index-Linked Securities
under the proposed rule change.\29\ With respect to Fixed Income Index-
Linked Securities, the definition of Fixed Income Reference Asset
includes the same types of fixed income securities that may underlie
Investment Company Units under Commentary .02 to NYSE Arca Equities
Rule 5.2(j)(3).\30\ In addition, the Exchange's proposed eligibility
criteria for Fixed Income Reference Assets, which are substantively
identical to the criteria applicable to fixed income-based Investment
Company Units, include, among other things, minimum standards relating
to original principal amount outstanding for each component of the
Fixed Income Reference Asset, maximum concentration limits for each
such component, and minimum number of non-affiliated issuers of such
components.\31\ The Commission believes that these requirements should
help to ensure that the underlying components of a Fixed Income
Reference Asset are adequately capitalized, sufficiently liquid, and
diversified. In addition, the Fixed Income Reference Asset must be
widely disseminated to the public by one or more major market vendors
at least once per business day.
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    \29\ See NYSE Arca Equities Rule 5.2(j)(6)(A) (providing, among
other things, minimum tangible net worth requirements of each issuer
of Index-Linked Securities, and minimum distribution and holder,
principal amount/market value, and term thresholds for each issuance
of such securities).
    \30\ Compare proposed NYSE Arca Equities Rule 5.2(j)(6)(iv) with
Commentary .02 to NYSE Arca Equities Rule 5.2(j)(3).
    \31\ See supra note 8.
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    In the case of Futures-Linked Securities, the underlying asset must
either be an index of (1) futures on Treasury Securities, GSE
Securities, supranational debt and debt of a foreign country or a
subdivision thereof, or options or other derivatives on any of the
foregoing, or (2) interest rate futures, or options on, or derivatives
of, such interest rate futures. In addition, as with Commodity
Reference Assets, Futures Reference Assets to which Futures-Linked
Securities are linked must either have been reviewed and approved for
trading by the Commission or the pricing information of their
underlying components must be derived from certain required sources,
subject to exceptions.\32\ These requirements should help to ensure
that the components comprising a Futures Reference Asset are adequately
transparent and subject to rules and standards of applicable exchanges
that trade such components and that the Exchange is able to obtain
information with respect to disruptions in, or unusual trading of, such
components.\33\ To enhance the transparency of such Futures-Linked
Securities, the proposal also would require (1) the value of the
Futures Reference Asset to be calculated and widely disseminated by one
or more major market data vendors on at least a 15-second basis during
the Core Trading Session, (2) in the case of Futures-Linked Securities
that are periodically redeemable, the indicative value of such
securities to be calculated and widely disseminated by the Exchange or
one or more major market data vendors on at least a 15-second basis
during the Core Trading Session.
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    \32\ See infra note 38 and accompanying text.
    \33\ See id.
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    In the case of Multifactor Index-Linked Securities, the Multifactor
Reference Asset may be comprised of any combination of two or more
Reference Assets and a notional investment in cash or a cash equivalent
based on a widely accepted overnight loan interest rate, LIBOR, Prime
Rate, or an implied interest rate based on observed market spot and
foreign currency forward rates. As stated earlier, the Commission notes
that the proposed generic standards applicable to Multifactor Index-
Linked Securities are substantially similar to those standards
applicable to Investment Company Units that are based on a combination
of equity and fixed income securities in that each underlying Reference
Asset must satisfy its own applicable minimum criteria and standards
for the listing and trading of a series of Multifactor Index-Linked
Securities. In addition, under the proposed rule change, (1) the value
of the Multifactor Reference Asset must be calculated and widely
disseminated on at least a 15-second basis during the time such
securities trade on the Exchange, and (2) in the case of Multifactor
Index-Linked Securities that are periodically redeemable, the
indicative value must be calculated and widely disseminated on at least
a 15-second basis during the time such securities trade on the
Exchange.
    The Exchange has also developed continued listing criteria that
would require it to commence delisting or removal proceedings in
circumstances that make further dealings in Fixed Income Index-Linked
Securities, Futures-Linked Securities, and Multifactor Index-Linked
Securities

inadvisable.\34\ The Commission notes that such standards are
substantively identical to those continued listing standards currently
applicable to other Index-Linked Securities, and the Commission
believes that such delisting criteria should help ensure the
maintenance of fair and orderly markets for such securities. The
Commission further notes that, under the proposal, if the indicative
value or Reference Asset value applicable to a series of Fixed Income
Index-Linked Securities, Futures-Linked Securities, and Multifactor
Index-Linked Securities is not disseminated as required, the Exchange
may halt trading during the day on which the interruption first occurs;
however, if the interruption persists past the trading day on which it
occurred, the Exchange will halt trading no later than the beginning of
the trading day following the interruption. Such provisions relating to
trading halts currently apply to Index-Linked Securities, and the
Commission believes that the trading halt requirements promote the
availability of key information for the benefit investors and other
market participants.\35\
---------------------------------------------------------------------------

    \34\ See proposed NYSE Arca Equities Rules 5.2(j)(6)(B)(IV)(3),
5.2(j)(6)(B)(V)(2), and 5.2(j)(6)(B)(VI)(3) (providing that the
Exchange will commence delisting or removal proceedings for any
series of Fixed Income Index-Linked Securities, Futures-Linked
Securities, and Multifactor Index-Linked Securities, respectively,
if: (a) Any of the applicable initial listing criteria are not
continuously maintained; (b) the aggregate market value or the
principal amount of the applicable security publicly held is less
than $400,000; (c) the value of the applicable Reference Asset is no
longer calculated or available and a new Reference Asset is
substituted, unless such new Reference Asset meets the applicable
requirements under NYSE Arca Equities Rule 5.2(j)(6); and (d) such
other event shall occur or condition exists that, in the opinion of
the Exchange, makes further dealings inadvisable).
    \35\ See NYSE Arca Equities Rule 5.2(j)(6)(E).
---------------------------------------------------------------------------

    Lastly, the Commission notes that the proposal would make
conforming changes to Commentary .01 to NYSE Arca Equities Rule
5.2(j)(6) relating to the obligations of an Exchange ETP Holder acting
as a registered Market Maker.\36\ Specifically, the proposal would
extend the application of Commentary .01 to NYSE Arca Equities Rule
5.2(j)(6) to Futures-Linked Securities and Multifactor Index-Linked
Securities, to the extent such securities are composed, in part, of
Commodity, Currency, or Futures Reference Assets. The Commission
believes that this proposal should deter conflicts of interest and the
use of material, non-public information with respect to ETP Holders
that engage in transactions that involve Futures-Linked Securities and
certain Multifactor Index-Linked Securities and the relevant components
that underlie such securities.\37\
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    \36\ See Commentary .01 to NYSE Arca Equities Rule 5.2(j)(6)
(setting forth, among other things, restrictions on dealings of ETP
Holders acting as registered Market Makers, requirements relating to
restrictions to the flow of material, non-public information, and
obligations relating to the maintenance of certain accounts and
books and records).
    \37\ See supra note 19.
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C. Surveillance

    The Commission notes that Fixed Income Index-Linked Securities,
Futures-Linked Securities, and Multifactor Index-Linked Securities
would be subject to the Exchange's existing surveillance procedures
applicable to derivative products (including Index-Linked Securities).
The Exchange has represented that its surveillance procedures are
adequate to properly monitor the trading of Index-Linked Securities
listed pursuant to these proposed generic listing standards in all
trading sessions and to deter and detect violations of Exchange rules.
In addition, the Commission notes that, with respect to the proposed
Fixed Income-Linked Securities, Futures-Linked Securities, and
Multifactor Index-Linked Securities, the Exchange has represented that
it will be able to obtain information from those markets that are full
members or affiliate members of the ISG and that the Exchange has a
general policy prohibiting the distribution of material, non-public
information by its employees. The Commission further notes that, for
Futures-Linked Securities, the pricing information for components of a
Futures Reference Asset must be derived from a market that is an ISG
member or affiliate member or with which the Exchange has a
comprehensive surveillance sharing agreement, subject to certain
exceptions.\38\
---------------------------------------------------------------------------

    \38\ See proposed NYSE Arca Equities Rule 5.2(j)(6)(B)(V)(1)(b)
(providing that the Futures Reference Asset may not include
components representing more than 10% of the dollar weight of such
Futures Reference Asset for which the pricing information is derived
from markets that are neither ISG members or parties to a
comprehensive surveillance sharing agreement with the Exchange and
that no such single component may exceed 7% of the dollar weight of
the Futures Reference Asset).
---------------------------------------------------------------------------

D. Information Circular

    The Exchange has represented that, upon evaluating the nature and
complexity of each Fixed Income Index-Linked Security, Futures-Linked
Security, and Multifactor Index-Linked Security, it will prepare and
distribute, as appropriate, an Information Circular to ETP Holders
describing the product, the particular structure of the product, and
the corresponding risks of the Index-Linked Security traded on the
Exchange. In addition, the Information Circular will set forth the
Exchange's suitability requirements with respect to recommendations in
transactions in Fixed Income Index-Linked Securities, Futures-Linked
Securities, and Multifactor Index-Linked Securities to customers and
the prospectus delivery requirements for such products. The Information
Circular will also identify and describe the Exchange's trading rules
governing the trading of Fixed Income Index-Linked Securities, Futures-
Linked Securities, and Multifactor Index-Linked Securities and will
discuss the risks involved in trading such securities during the
Opening and Late Trading Sessions when an updated indicative value or
Reference Asset value, as applicable, will not be calculated or
publicly disseminated.\39\
---------------------------------------------------------------------------

    \39\ See supra note 14.
---------------------------------------------------------------------------

E. Firewall Procedures

    Fixed Income Index-Linked Securities, Futures-Linked Securities,
and Multifactor Index-Linked Securities, like other Index-Linked
Securities, will be subject to the existing firewall requirements under
NYSE Arca Equities Rule 5.2(j)(6)(C). The firewall requirements provide
that, if the value of an Index-Linked Security is based in whole or in
part on an index that is maintained by a broker-dealer, the broker-
dealer shall erect a ``firewall'' around the personnel responsible for
the maintenance of the underlying index or who have access to
information concerning changes and adjustments to the index, and the
index shall be calculated by a third party who is not a broker-dealer.
    Furthermore, as provided in existing NYSE Arca Equities Rule
5.2(j)(6)(C), any advisory committee, supervisory board, or similar
entity that advises an index licensor or administrator or that makes
decisions regarding the index or portfolio composition, methodology,
and related matters must implement and maintain, or be subject to,
procedures designed to prevent the use and dissemination of material,
non-public information regarding the applicable index or portfolio.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\40\ that the proposed rule change (SR-NYSEArca-2008-20), as
modified by Amendment No. 1 thereto, be, and it hereby is, approved.
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 78s(b)(2).

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    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\41\
---------------------------------------------------------------------------

    \41\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-9320 Filed 4-28-08; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register: September 8, 2010 (Volume 75, Number 173)]
[Notices]
[Page 54606]
[DOCID:fr08se10-57]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

Combined Notice of Filings 2

August 27, 2010.
    Take notice that the Commission has received the following Natural
Gas Pipeline Rate and Refund Report filings:

    Docket Numbers: RP10-1072-001.
    Applicants: Egan Hub Storage, LLC.
    Description: Egan Hub Storage, LLC submits tariff filing per
154.205(b): Amendment to Contract 310527-R1 Filing to be effective 8/1/
2010.
    Filed Date: 08/23/2010.
    Accession Number: 20100823-5062.
    Comment Date: 5 p.m. Eastern Time on Tuesday, September 07, 2010.

    Docket Numbers: RP10-1089-001.
    Applicants: Cheniere Creole Trail Pipeline, L.P.
    Description: Cheniere Creole Trail Pipeline, L.P. submits tariff
filing per 154.203: Cheniere Creole Trail Pipeline Baseline Tariff to
be effective 9/30/2010.
    Filed Date: 08/23/2010.
    Accession Number: 20100823-5124.
    Comment Date: 5 p.m. Eastern Time on Tuesday, September 07, 2010.

    Docket Numbers: RP10-978-001.
    Applicants: Gulf South Pipeline Company, LP.
    Description: Gulf South Pipeline Company, LP submits tariff filing
per 154.203: Compliance Filing to be effective 8/18/2010.
    Filed Date: 08/23/2010.
    Accession Number: 20100823-5061.
    Comment Date: 5 p.m. Eastern Time on Tuesday, September 07, 2010.

    Docket Numbers: RP10-1087-001.
    Applicants: Kern River Gas Transmission Company.
    Description: Kern River Gas Transmission Company submits tariff
filing per 154.203: Correction to Baseline to be effective 8/19/2010.
    Filed Date: 08/24/2010.
    Accession Number: 20100824-5153.
    Comment Date: 5 p.m. Eastern Time on Tuesday, September 07, 2010.

    Docket Numbers: RP10-651-001.
    Applicants: Elba Express Company, L.L.C.
    Description: Elba Express Company, L.L.C. submits its baseline
errata filing to its FERC Gas Tariff, Second Revised Volume No 1, to be
effective 4/28/2010.
    Filed Date: 08/24/2010.
    Accession Number: 20100824-5001.
    Comment Date: 5 p.m. Eastern Time on Tuesday, September 07, 2010.

    Docket Numbers: RP10-713-001.
    Applicants: Enbridge Offshore Pipelines (UTOS) LLC.
    Description: Enbridge Offshore Pipelines (UTOS) LLC submits tariff
filing per 154.203: eTariff Baseline Resubmittal to be effective 6/5/
2010.
    Filed Date: 08/25/2010.
    Accession Number: 20100825-5052.
    Comment Date: 5 p.m. Eastern Time on Tuesday, September 07, 2010.

    Docket Numbers: RP10-778-001.
    Applicants: Stingray Pipeline Company, L.L.C.
    Description: Stingray Pipeline Company, L.L.C. submits tariff
filing per 154.203: eTariff Baseline Resubmittal to be effective 6/30/
2010.
    Filed Date: 08/25/2010.
    Accession Number: 20100825-5059.
    Comment Date: 5 p.m. Eastern Time on Tuesday, September 07, 2010

    Docket Numbers: RP10-975-001.
    Applicants: Northern Natural Gas Company.
    Description: Northern Natural Gas Company submits Sub. Ninth
Revised Sheet 154 et al of its FERC Gas Tariff, Fifth Revised Volume 1,
to be effective 8/13/10.
    Filed Date: 08/25/2010.
    Accession Number: 20100825-0208.
    Comment Date: 5 p.m. Eastern Time on Tuesday, September 07, 2010.

    Docket Numbers: RP10-1035-001.
    Applicants: Mississippi Hub, LLC.
    Description: Mississippi Hub, LLC submits tariff filing per
154.203: Mississippi Hub FERC Gas Tariff Compliance Filing to be
effective 8/26/2010.
    Filed Date: 08/27/2010.
    Accession Number: 20100827-5006.
    Comment Date: 5 p.m. Eastern Time on Wednesday, September 08, 2010.

    Any person desiring to protest this filing must file in accordance
with Rule 211 of the Commission's Rules of Practice and Procedure (18
CFR 385.211). Protests to this filing will be considered by the
Commission in determining the appropriate action to be taken, but will
not serve to make protestants parties to the proceeding. Such protests
must be filed on or before 5 p.m. Eastern time on the specified comment
date. Anyone filing a protest must serve a copy of that document on all
the parties to the proceeding.
    The Commission encourages electronic submission of protests in lieu
of paper using the ``eFiling'' link at http://www.ferc.gov. Persons
unable to file electronically should submit an original and 14 copies
of the protest to the Federal Energy Regulatory Commission, 888 First
Street, NE., Washington, DC 20426.
    This filing is accessible on-line at http://www.ferc.gov, using the
``eLibrary'' link and is available for review in the Commission's
Public Reference Room in Washington, DC. There is an ``eSubscription''
link on the Web site that enables subscribers to receive e-mail
notification when a document is added to a subscribed docket(s). For
assistance with any FERC Online service, please e-mail
<EMAIL_ADDRESS>or call<PHONE_NUMBER> (toll free). For
TTY, call<PHONE_NUMBER>.

Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2010-22263 Filed 9-7-10; 8:45 am]
BILLING CODE 6717-01-P