[Federal Register: November 30, 2007 (Volume 72, Number 230)]
[Notices]
[Page 67774-67776]
[DOCID:fr30no07-101]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56838; File No. SR-NYSEArca-2007-118]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Order Granting Accelerated Approval of Proposed Rule Change To
Amend Certain Requirements Relating o Indexes Underlying Equity Index-
Linked Securities

November 26, 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 November 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.
This order provides notice of the proposed rule change and approves the
proposed rule change on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend NYSE Arca Equities Rule 5.2(j)(6) to
amend certain requirements relating to indexes underlying Equity Index-
Linked Securities.\3\ The text of the proposed rule change is available
at the Exchange, the Commission's Public Reference Room, and
http://www.nyse.com.

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    \3\ The Exchange defines Equity Index-Linked Securities as
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 (each such index, an ``Equity Reference Asset''). See
NYSE Arca Equities Rule 5.2(j)(6).
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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
    NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(2)(d) currently provides
that each Equity Reference Asset (i) must be calculated based on either
a capitalization, modified capitalization, price, equal-dollar, or
modified equal-dollar weighting methodology, and (ii) if based upon the
equal-dollar or modified equal-dollar weighting method, must be
rebalanced at least quarterly. The Exchange proposes to amend NYSE Arca
Equities Rule 5.2(j)(6)(B)(I)(2)(d) to delete the requirement that the
Equity Reference Asset used in connection with an issuance of Equity
Index-Linked Securities must be calculated based on either a
capitalization, modified capitalization, price, equal-dollar, or
modified equal-dollar weighting

methodology. In addition, the Exchange proposes to provide that Equity
Reference Assets based upon the equal-dollar or modified equal-dollar
weighting method must be rebalanced at least semiannually, rather than
quarterly, as is currently the case.
    The Exchange states that the elimination of the limitations as to
weighting methodologies permitted for Equity Reference Assets
underlying Equity Index-Linked Securities would make NYSE Arca Equities
Rule 5.2(j)(6) consistent with the Equity Index-Linked Securities
listing standards of other national securities exchanges, such as the
New York Stock Exchange LLC (``NYSE''),\4\ which has no such
requirements. The Exchange further states that a significant number of
currently existing equity indexes that utilize the equal-dollar or
modified equal-dollar weighting methodology are rebalanced semiannually
rather than quarterly. Because the issuer of Equity Index-Linked
Securities generally licenses the right to utilize the underlying index
from a third-party index sponsor, it is often not within the issuer's
control to have the index rebalanced more frequently. As such, it is
not possible currently to list Equity Index-Linked Securities under
NYSE Arca Equities Rule 5.2(j)(6) based on such indexes. The Exchange
believes, however, that, because these types of indexes are relatively
common and detailed information concerning the procedures governing the
construction of the underlying index will be available to investors
either in the issuer's prospectus or on the index sponsor's Internet
Web site, it would be appropriate to allow investors to make their own
decisions as to the sufficiency of a semiannual rebalancing of an
equal-dollar or modified equal-dollar index underlying an issuance of
Equity Index-Linked Securities. The Exchange further states that
investors and issuers would benefit from NYSE Arca's ability to list,
without delay, Equity Index-Linked Securities based on a broader group
of such indexes.
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    \4\ See Section 703.22 of the NYSE Listed Company Manual.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\5\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\6\ 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, 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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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

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

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

    The Exchange has neither solicited nor received written comments on
the proposed rule change.

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 e-mail to<EMAIL_ADDRESS>Please include File

Number SR-NYSEArca-2007-118 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-2007-118. 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-2007-118 and should
be submitted on or before December 21, 2007.

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 \7\ and, in particular, the requirements of Section 6 of the
Act.\8\ Specifically, the Commission finds that the proposed rule
change is consistent with Section 6(b)(5) of the Act,\9\ which
requires, among other things, that the rules of a national securities
exchange 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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    \7\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(5).
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    The Commission notes that the proposal to delete the requirement
that the Equity Reference Asset be calculated based on certain
specified methodologies would conform the Exchange's requirements to
the current listing standards for Equity Index-Linked Securities of
another national securities exchange.\10\ The Commission further
believes that the proposal to require Equity Reference Assets that are
based on the equal-dollar or modified equal-dollar weighting methods to
be rebalanced at least semiannually should benefit investors by
providing a wider

selection of derivative products based on such Equity Reference Assets.
The Commission believes that the proposal to adjust the minimum
rebalancing frequency requirement is reasonable, given the increasing
number of equal-dollar or modified equal-dollar weighted indexes that
are rebalanced on a semiannual-basis, and should allow for the listing
and trading of certain Equity Index-Linked Securities that would
otherwise not be able to be listed and traded on the Exchange.
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    \10\ See supra note 4.
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    The Commission finds good cause for approving the proposed rule
change prior to the 30th day after the date of publication of the
notice of filing thereof in the Federal Register. With respect to the
deletion of the provision requiring Equity Reference Assets to be based
on certain specified calculation methodologies, the Commission notes
that it has approved the deletion of a similar requirement under NYSE
listing standards for Equity Index-Linked Securities \11\ and does not
believe that this proposal raises any novel regulatory issues. With
respect to the Exchange's proposal to adjust the minimum rebalancing
frequency for certain Equity Reference Assets, accelerating approval of
this proposal should benefit investors by providing, without undue
delay, additional Equity Index-Linked Securities products for investors
and fostering competition in the market for such products. Therefore,
the Commission finds good cause, consistent with Section 19(b)(2) of
the Act,\12\ to approve the proposed rule change on an accelerated
basis.
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    \11\ Id.
    \12\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\13\ that the proposed rule change (SR-NYSEArca-2007-118) be, and
it hereby is, approved on an accelerated basis.
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    \13\ Id.
    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Nancy M. Morris,
Secretary.
[FR Doc. E7-23204 Filed 11-29-07; 8:45 am]

BILLING CODE 8011-01-P