Self-regulatory organizations; proposed rule changes: NYSE Arca, Inc.,

[Federal Register: October 27, 2006 (Volume 71, Number 208)]

[Notices]

[Page 63060-63061]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr27oc06-113]

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54636; File No. SR-NYSEArca-2006-70]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of a Proposed Rule Change Relating to the Exchange's Generic Listing Standards for Index-Linked Securities

October 20, 2006.

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 October 2, 2006, NYSE Arca, Inc. (``Exchange''), through its wholly- owned subsidiary NYSE Arca Equities, Inc. (``NYSE Arca Equities'' or the ``Corporation''), filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

\1\ 15 U.S.C. 78s(b)(1).

\2\ 17 CFR 240.19b-4.

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

   The Exchange is proposing to amend NYSE Arca Equities Rule 5.2(j)(6) to extend the maximum duration of index-linked securities (``Index-Linked Securities'') from ten (10) years to thirty (30) years. The text of the proposed rule change appears below. Proposed new language is in italics; proposed deletions are in [brackets]. * * * * * NYSE Arca Equities Rule 5.2(j)(6). Index-Linked Securities

   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. Such securities may or may not provide for the repayment of the original principal investment amount. The Corporation may submit a rule filing pursuant to Section 19(b)(2) of the Securities Exchange Act of 1934 (``Act'') to permit the listing and trading of index-linked securities that do not otherwise meet the standards set forth below in paragraphs (a) through (k). The Corporation will consider for listing and trading pursuant to Rule 19b-4(e) under the Act, index-linked securities provided: * * * * *

   (b) The issue has a minimum term of one (1) year but no greater than [ten (10)] thirty (30) years. * * * * *

2. 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 IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.

   1. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

      1. Purpose

         The Exchange states that the purpose of the proposed rule change is to amend the Exchange's rules to extend the maximum duration of Index- Linked Securities from ten (10) years to thirty (30) years.

         Pursuant to NYSE Arca Equities Rule 5.2(j)(6), the Exchange may approve for listing and trading securities that cannot be readily categorized under the listing criteria for common and preferred securities, bonds, debentures, or warrants. In August 2005, the Commission approved the Exchange's proposal to add NYSE Arca Equities Rule 5.2(j) (which was a PCX rule at the time) to the NYSE Arca Equities rule for the purpose of adopting generic listing standards pursuant to Rule 19b-4(e) \3\ in connection with Index-Linked Securities.\4\

         \3\ 17 CFR 240.19b-4(e).

         \4\ See Securities Exchange Act Release No. 52204 (August 3, 2005), 70 FR 46559 (August 10, 2005) (SR-PCX-2005-63). Telephone Conference on October 20, 2006 between John Carey, Assistant General Counsel, Exchange, and Hong-anh Tran, Special Counsel, Division of Market Regulation (``Division''), Commission (Telephone Conference).

         NYSE Arca Equities Rule 5.2(j)(6) sets forth criteria that the issue and the issuer must meet in order to list and trade Index-Linked Securities at the Exchange.\5\ Currently, one of the criteria the Exchange considers for the listing and trading of Index-Linked Securities, pursuant to NYSE Arca Equities Rule 5.2(j)(6), is that the term of the issue must be a minimum term of one (1) year but not greater than ten (10) years. The Exchange proposes to amend NYSE Arca Equities Rule 5.2(j)(6)(b) to extend the duration of the term of the issue from ten (10) years to thirty (30) years. The Exchange believes this amendment to NYSE Arca Equities Rule 5.2(j)(6)(b) is appropriate due to the increase demand from issuers to list and trade Index-Linked Securities that are greater than ten (10) years in duration. In addition, the Exchange notes that corporate bonds and other fixed- income products have historically been issued with terms of up to, or greater than, thirty (30) years.

         \5\ NYSE Arca Equities Rule 5.2(j)(6) permits the Exchange to submit a rule filing pursuant to Section 19(b)(2) of the Act to allow the listing and trading of Index-Linked Securities that do not otherwise meet the generic listing criteria.

         The Exchange believes expanding the duration for Index-Linked Securities, subject to generic listing standards in NYSE Arca Equities Rule 5.2(j)(6), will help to foster competition and promote enhanced efficiency in the marketplace. Incorporating these guidelines into the Exchange's generic listing standards for Index-Linked Securities will allow Index-Linked Securities that satisfy the listing standards to begin trading pursuant to Rule 19b-4(e), without constituting a proposed rule change within the meaning of Section 19(b) of the Act and Rule 19b-4, for which notice and comment and Commission approval is necessary.\6\ The Exchange's ability to rely on Rule 19b-4(e) to list such Index-Linked Securities potentially reduces the time frame for bringing these securities to the market, thereby promoting competition and making such products available to investors more quickly. The Exchange also notes that the Commission has approved amendments to the generic listing standards for equity-linked notes that removed the maximum term limits for those securities.\7\

         \6\ Telephone Conference on October 19, 2006 between John Carey, Assistant General Counsel, Exchange, and Hong-anh Tran, Special Counsel, Division, Commission.

         \7\ Telephone Conference. See Securities Exchange Act Release Nos. 42110 (November 5, 1999), 64 FR 61677 (November 12, 1999) (SR- Amex-99-33); 41992 (October 7, 1999), 64 FR 56007 (October 15, 1999) (SR-NYSE-99-22); and 42313 (January 4, 2000), 65 FR 2205 (January 13, 2000) (SR-Chx-99-19).

         [[Page 63061]]

      2. Statutory Basis

         The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,\8\ in general, and furthers the objectives of Section 6(b)(5),\9\ 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 and perfect the mechanism of a free and open market, and, in general to protect investors and the public interest.

         \8\ 15 U.S.C. 78f(b).

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

   2. 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 purpose of the Act.

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

      Written comments on the proposed rule change were neither solicited nor received.

3. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

   Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will:

   1. By order approve such proposed rule change; or

   2. Institute proceedings to determine whether the proposed rule change should be disapproved.

4. 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 rule-comments@sec.gov. Please include File

   Number SR-NYSEArca-2006-70 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-2006-70. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro/shtml ). Copies of the submission, all subsequent amendments,

   all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filings will also be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File number SR-NYSEArca-2006-70 and should be submitted by November 17, 2006.

   For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\10\

   \10\ 17 CFR 200.30-3(a)(12).

   Nancy M. Morris, Secretary. [FR Doc. E6-17996 Filed 10-26-06; 8:45 am]

   BILLING CODE 8011-01-P