[Federal Register Volume 65, Number 160 (Thursday, August 17, 2000)]
[Notices]
[Pages 50249-50253]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-20886]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43131; File No. SR-Amex-00-26]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by the American Stock Exchange, Inc. 
Relating to Listing Additional Series of iShares MSCI Index Funds

August 8, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934,\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on 
May 4, 2000, the American Stock Exchange LLC (``Amex'' or ``Exchange'') 
filed with the Securities and Exchange Commission the proposed rule 
change as described in Items I, II, and III below, which Items have 
been prepared by the Amex. On June 12, 2000, the Exchange filed 
Amendment No. 1 to the proposal.\3\ The Commission is publishing this 
notice to solicit comments on the proposed rule change, as amended, 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Restated 19b-4 filing marked Amendment No. 1 
(``Amendment No. 1''). Amendment No. 1 changed all ``WEBS Index 
Series'' references to ``iShares MSCI Index Funds.''
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I. Self-Regulatory Organization's Statement on the Terms of 
Substance of the Proposed Rule Change

    The Amex proposes to list and trade a product called iShares MSCI 
Index Funds (formerly, ``WEBS Index Series''), under Amex rules 1000A 
et seq. (``Index Fund Shares'') based on the following Morgan Stanley 
Capital International (``MSCI'') Indices: Greece, Indonesia (Free), 
Portugal, Thailand (Free) and Turkey. The text of the proposed rule 
change and descriptions of the five specific indices referenced above 
are available at the Office of the Secretary, the Amex and at the 
Commission.

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 Amex 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 Amex 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 the 
Statutory Basis for, the Proposed Rule Change

(1) Purpose
    On March 8, 1996, the Commission approved Amex's listing and 
trading of Index Fund Shares under Amex Rules 1000A et seq. \4\ Index 
Fund Shares are shares issued by an open-end management investment 
company that seeks to provide investment results that correspond 
generally to the price and yield performance of a specified foreign or 
domestic equity market index. The first Index Fund Shares listed on the 
Exchange were seventeen series of World Equity Benchmark 
SharesTM (``WEBSTM'') issued by Foreign Fund, 
Inc. based on the following MSCI indices: Australia, Austria, Belgium, 
Canada, France, Germany, Hong Kong, Italy, Japan, Malaysia (Free), 
Mexico (Free), Netherlands, Singapore (Free), Spain, Sweden, 
Switzerland and United Kingdom. The WEBS Index Series have

[[Page 50250]]

been trading on the Amex since March 18, 1996.
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    \4\ See Securities Exchange Act Release No. 36947 (March 8, 
1996), 61 FR 10606 (March 14, 1996) (order approving File No. Amex-
95-43).
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    On April 29, 1999, the Exchange's proposal to list an additional 
eleven WEBS Index Series, including the five series that are the 
subject of this filing, was published in the Federal Register.\5\ On 
January 11, 2000, the Exchange requested that WEBS Index Series for 
Greece, Indonesia (Free), Portugal, Thailand (Free), and Turkey be 
excluded from the proposal.\6\ On May 2, 2000, the Commission approved 
the amended proposal to list and trade WEBS Index Series based on the 
following MSCI indices: MSCI European Monetary Union Index; MSCI Brazil 
(Free) Index; MSCI South Korea Index; MSCI South Africa Index; MSCI 
Taiwan Index; and MSCI United States Index.\7\
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    \5\ See Securities Exchange Act Release No. 41322 (April 22, 
1999), 64 FR 23138 (April 29, 1999)(SR-Amex-98-49).
    \6\ See Letter from Michael Cavalier, Associate General Counsel, 
Legal & Regulatory Policy, Amex, to Terri Evans, Special Counsel, 
Division of Market Regulation, Commission, dated January 6, 2000. 
See also Securities Exchange Act Release No. 42748n. 7 (May 2, 
2000), 65 FR 30155 (May 10, 2000)(order approving Amex-98-49).
    \7\ See Securities Exchange Act Release No. 42748 (May 2, 2000), 
65 FR 30155 (May 10, 2000).
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    As of May 15, 2000, the WEBS Index Series have been renamed iShares 
MSCI Index Funds. The fund that issues iShares--the WEBS Index Fund, 
Inc. (previously named Foreign Fund, Inc.)--has been renamed iShares, 
Inc. (``Fund''). The Exchange now proposes to list additional iShares 
MSCI Index Funds based on the following MSCI indices: MSCI Greece 
Index, MSCI Indonesia (Free) Index, MSCI Portugal Index, MSCI Thailand 
(Free) Index and, MSCI Turkey Index.\8\ The methodology and procedures 
used to calculate the MSCI Indices on which the proposed iShares MSCI 
Index Funds are based are the same as those previously filed with the 
Commission in SR-Amex-98-49.\9\
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    \8\ The Fund filed with the Commission an Application for Orders 
under Sections 6(c) and 17(b) of the Investment Company Act of 1940 
(``1940 Act'') as amended, for the purpose of exempting the five 
additional WEBS Index Series (Now iShares MSCI Index Funds) 
referenced herein from various provisions of the 1940 Act and rules 
thereunder (File No. 812-10756), and the Commission granted such 
relief in In the Matter of WEBS Index Funds, Inc., et al., 
Investment Company Act Release No. 23860 (June 7, 1999) and 
Investment Company Act Release No. 23890 (July 6, 1999).
    \9\ See Letter from Michael Cavalier, Associate General Counsel, 
Legal & Regulatory Policy, Amex, to Katherine England, Assistant 
Director, Division, Commission, dated April 8, 1999 (Amendment No. 2 
to SR-Amex-98-49). See also Securities Exchange Act Release No. 
41322 n.4 (April 22, 1999), 64 FR 23138 (April 29, 1999).
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    Issuances of iShares by the Fund are made only in Creation Unit 
size aggregations or multiples thereof. The size of the applicable 
Creation Unit size aggregation will be set forth in the Funds' 
prospectus and varies among iShares MSCI Index Funds, but is generally 
substantial (i.e., value in excess of $500,000 per Creation Unit). The 
Fund issues and sells iShares through a distributor on a continuous 
basis at the (``NAV'') per share next determined after an order to 
purchase iShares in Creation Unit size aggregations is received in 
proper form. Following issuance, iShares are traded on the Exchange 
like other equity securities by professionals, as well as retail and 
institutional investors.
    Creation Unit size aggregations of iShares are generally issued in 
exchange for the ``in kind'' deposit of a specified portfolio of 
securities, together with a cash payment representing, in part, the 
amount of dividends accrued up to the time of issuance. Such deposits 
are made primarily by institutional investors, arbitrageurs and 
Exchange specialists. Redemption of iShares is generally made on an in-
kind basis, with a portfolio of securities and cash exchanged for 
iShares that have been tendered for redemption. Issuances or 
redemptions could also occur for cash under specified circumstances 
(e.g., if it is not possible to effect delivery of securities 
underlying the specific series in a particular foreign country) and at 
other times at the discretion of the Fund.
    The Fund makes available on a daily basis a list of names and the 
required number of shares of each of the securities to be deposited in 
connection with the issuance of a particular iShares MSCI Index Fund in 
Creation Unit size aggregations, as well as information relating to the 
required cash payment representing, in part, the amount of accrued 
dividends.
    An iShares MSCI Index Fund may make periodic distributions of 
dividends from net investment income, including net foreign currency 
gains, if any, in an amount approximately equal to accumulated 
dividends on securities held by the iShares MSCI Index Fund during the 
applicable period, net of expenses and liabilities for such period.
    The NAV for each iShares MSCI Index Fund is calculated by the 
Fund's Administrator (PFPC Inc.). After calculation, such as NAVs, are 
available to the public from the Fund's distributor, and are also 
available to National Securities Clearing Corporation (``NSCC'') 
participants through data made available from NSCC.
    iShares are registered in book entry form through The Depository 
Trust Company. Trading in shares of iShares MSCI Index Funds on the 
Exchange is effected until 4 p.m. (New York Time) each business day. 
The minimum trading increment for iShares MSCI Index Funds is \1/16\ of 
$1.00, pursuant to Amex Rule 127, Commentary .02.
a. Shares Per Creation Unit
    It is anticipated that the number of iShares constituting a 
Creation Unit for each iShares MSCI Index Fund will be approximately 
50,000 and that the value of a Creation Unit at start of trading for 
these series will be in excess of $500,000. The Fund will establish a 
minimum number of iShares per Creation Unit for each Index Fund prior 
to commencement of trading, which minimum number will be disclosed in 
the Fund's prospectus. It is further anticipated that the NAV of an 
individual share will initially range from $10 to $25.
    Each MSCI Index on which an iShares MSCI Index Fund is based is 
calculated by MSCI for each trading day in the applicable foreign 
exchange markets based on official closing prices in those exchange 
markets. For each trading day, MSCI publicly disseminates each index 
value for the previous day's close. MSCI Indices are reported 
periodically in major financial publications worldwide, and are also 
available through vendors of financial information.
    There are two broad categories of changes to the MSCI Indices. The 
first consists of market-driven changes such as mergers, acquisitions, 
bankruptcies, etc. These are announced and implemented as they occur. 
The second category consists of structural changes to reflect the 
evolution of a market, for example due to changes in industry 
composition or regulations. Structural changes may occur only on four 
dates throughout the year: the first business days of March, June, 
September and December. They are pre-announced at least two weeks in 
advance.
    As noted in the iShares prospectus for the initial seventeen 
iShares MSCI Index Series (Registration No. 33-97598), the investment 
objective of each iShares MSCI Index Fund is to seek to provide 
investment results that correspond generally to the price and yield 
performance of public securities traded in the aggregate in particular 
markets, as represented by specific MSCI benchmark indices. Each 
iShares MSCI Index Fund utilizes a ``passive'' or indexing investment 
approach that attempts to approximate the investment performance of its 
benchmark index through quantitative analytical procedures. Each Index 
Fund has the policy to remain as fully invested as practicable in a 
pool of securities the performance of which will approximate

[[Page 50251]]

the performance of the benchmark MSCI Index taken in its entirety.
b. Fund Policies Relating to Weighting of Securities and Industries
    The Fund maintains several policies relating to the weighting of 
securities in an iShares MSCI Index Fund which serve to prevent 
excessive weighting in individual securities.
    In order for the Fund to qualify for tax treatment as a regulated 
investment company, it must meet several requirements under the 
Internal Revenue Code. These requirements include that, at the close of 
each quarter of the Fund's taxable year: (i) at least 50% of the market 
value of the Fund's total assets must be represented by cash items, 
U.S. government securities, securities of other regulated investment 
companies and other securities, with such other securities limited for 
purposes of this calculation in respect of any one issuer to an amount 
not greater than 5% of the value of the Fund's assets and not greater 
than 10% of the outstanding voting securities of such issuer, and (ii) 
not more than 25% of the value of its total assets may be invested in 
the securities of any one issuer, or of two or more issuers that are 
controlled by the Fund (within the meaning of Section 851(b)(4)(B) of 
the Internal Revenue Code) and that are engaged in the same or similar 
trades or businesses or related trades or businesses (other than U.S. 
government securities or the securities of other regulated investment 
companies).
    The Fund also maintains an industry concentration policy for all 
iShares MSCI Index Funds. With respect to the two most heavily weighted 
industries or groups of industries in its benchmark MSCI Index, an 
iShares MSCI Index Fund will invest in securities (consistent with its 
investment objective and other investment policies) so that the 
weighting of each such industry or group of industries in the iShares 
MSCI Index Funds does not diverge by more than 10% from the respective 
weighting of such industry or group of industries in its benchmark MSCI 
Index. An exception to this policy is that if investment in the stock 
of a single issuer would account for more than 25% of the iShares MSCI 
Index Fund, such Fund will invest less than 25% of its net assets in 
such stock and will reallocate the excess to stock(s) in the same 
industry or group of industries, and/or stock(s) in another industry or 
group of industries, in its benchmark MSCI Index. Each iShares MSCI 
Index Fund will evaluate these industry weightings at least weekly, and 
at the time of evaluation will adjust its portfolio composition to the 
extent necessary to maintain compliance with the above policy. An 
iShares MSCI Index Fund may not concentrate its investments except as 
discussed above. This policy is a fundamental investment policy and may 
not be changed without the approval of a majority of an iShares MSCI 
Index Fund's shareholders.
    An iShares MSCI Index Fund does not hold all of the issues that 
comprise the subject MSCI Index, but attempts to hold a representative 
sample of the securities in the Index utilizing a technique known as 
``portfolio sampling.'' Through the application of portfolio sampling, 
each of the iShares MSCI Index Funds is expected to contain less than 
all of the component stocks in its respective benchmark MSCI Index. The 
following table sets forth the the number of stocks contained in the 
Benchmark MSCI Index, and the initial number of stocks expected to be 
included in each corresponding iShares MSCI Index Funds (data as of 
December 31, 1999):

------------------------------------------------------------------------
                                                                  Number
                                                                    of
                                                      Number of   stocks
                                                      stocks in     in
                   Country/Region                     Benchmark  iShares
                                                         MSCI      MSCI
                                                        Index     Index
                                                                   Fund
------------------------------------------------------------------------
Greece..............................................        34        33
Indonesia (Free)....................................        41        26
Portugal............................................        18        18
 Thailand (Free)....................................        42        37
Turkey..............................................        39        33
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    Each iShares MSCI Index Fund has a policy to remain as fully 
invested as practicable in a pool of equity securities. Each iShares 
MSCI Index Fund will normally invest at least 95% of its total assets 
in stocks that are represented in its benchmark MSCI Index except, in 
limited circumstances, to assist in meeting shareholder redemptions of 
Creation Units.In order to comply with the Internal Revenue Code, and 
manage corporate actions and index chances in the smaller markets, each 
of the Greece, Indonesia (Free), Portugal Thailand (Free) and Turkey 
iShares MSCI Index Funds will at all times invest at least 80% if its 
total assets in such stocks and at least half of the remaining 20% of 
its total assets in such stocks or in stocks included in the relevant 
market, but not in its benchmark MSCI Index.
    The Exchange believes that these requirements and policies prevent 
any iShares MSCI Index Fund from being excessively weighted in any 
single security or small group of securities and significantly reduce 
concerns that trading in a particular iShares MSCI Index Fund could 
become a surrogate for trading in unregistered securities.
    As noted in the prospectus for the iShares MSCI Index Funds, it is 
expected that, over time, the ``expected tracking error'' of a iShares 
MSCI Index Funds relative to the performance of the relevant iShares 
MSCI will be less than 5%. The expected tracking error applies to all 
five of the iShares MSCI Index Funds proposed herein. An expected 
tracking error of 5% means that there is a 68% probability that the net 
return on the asset value for he Index Funds (including dividends and 
without reflecting expenses) will be between 95% and 105% of the return 
of the subject MSCI after one year without rebalancing the portfolio 
composition. While no particular levels of tracking error is assured, 
the Fund's Advisor (Barclays Global Fund Advisors) monitors the 
tracking error of each Index Series on an ongoing basis and seeks to 
minimize tracking error to the maximum extent possible. Semi-annual and 
annual reports of the Fund disclose tracking errors over the previous 
six month periods, and in the event that tracking errors exceeds 5%, 
the Fund Board of Directors will consider what action might be 
appropriate.
c. Criteria for Initial and Continued Listing
    iShares are subject to the criteria for initial and continued 
listing of Index Fund Shares in Amex Rule 1002A. For each of the five 
iShares MSCI Index Funds, it is anticipated that a minimum of two 
Creation Units will be required to be outstanding at the start of 
trading. The minimum number of shares of each iShares MSCI Index Funds 
required to be outstanding at the start of trading will be comparable 
to requirements that have been applied to previously listed series of 
Portfolio Depositary Receipts and Index Fund Shares.
    The Exchange believes that the proposed minimum number of iShares 
outstanding at the start of trading for each iShares MSCI Index Fund is 
sufficient to provide market liquidity and to further the Fund's 
objective to seek to provide investment results that correspond 
generally to the price and yield performance of a specified MSCI Index.
d. Dissemination of Indicative Optimized Portfolio Value
    As noted above, MSCI disseminates values for each MSCI Index once 
each trading day, based on closing prices in the relevant exchange 
market. In addition, the Fund causes to be made available on a daily 
basis the names and required number of shares of each of the

[[Page 50252]]

securities to be deposited in connection with the issuance of iShares 
in Creation Unit size aggregations for each iShares MSCI Index Fund, as 
well as information relating to the required cash payment representing, 
in part, the amount of accrued dividends applicable to such iShares 
MSCI Index Fund. This information is made available by the Fund's 
Advisor to any NSCC participants requesting such information. In 
addition, other investors can request such information directly from 
the Fund's distributor. The NAV for each iShares MSCI Index Fund is 
calculated daily by the Fund's Administrator.
    In order to provide updated information relating to each iShares 
MSCI Index Fund for use by investors, professionals and persons wishing 
to create or redeem iShares,\10\ the Exchange disseminates through the 
facilities of the Consolidated Tape Association (``CTA'') an updated 
``indicative optimized portfolio value'' (``Value'') for each of the 
seventeen iShares MSCI Index Funds currently traded as calculated by 
Bloomberg L.P. The Exchange will also disseminate a Value for the 
proposed five new iShares MSCI Index Funds over CTA facilities (Network 
B) as calculated by Bloomberg (``Value calculator''). The Value will be 
calculated by Bloomberg in the same manner utilized by Bloomberg to 
calculate the Value for iShares MSCI Index Funds that are currently 
trading. The Value is disseminated on a per iShare basis every 15 
seconds during regular Amex trading hours of 9:30 a.m. to 4 p.m. New 
York time. The equity securities values included in the Value are the 
values of the designated portfolio of equity securities (``Deposit 
Securities'') constituting an optimized representation of the benchmark 
MSCI foreign index for each iShares MSCI Index Fund, which is the same 
as the portfolio that is to be utilized generally in connection with 
creations and redemptions of iShares in Creation Unit size aggregations 
on that day. The equity securities included in the Value reflect the 
same market capitalization weighting as the Deposit Securities in the 
optimized portfolio for the particular iShares MSCI Index Fund. In 
addition to the value of the Deposit Securities for each iShares MSCI 
Index Fund, the Value includes a cash component consisting of estimated 
accrued dividend and other income, less expenses. The Value also 
reflects changes in currency exchange rates between the U.S. dollar and 
the applicable home foreign currency.
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    \10\ iShares cannot be redeemed individually but must be 
redeemed in Creation Unit size aggregations applicable to the 
specific iShares MSCI Index Funds.
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    The Value does not reflect the value of all securities included in 
the applicable benchmark MSCI Index. In addition, the Value does not 
necessarily reflect the precise composition of the current portfolio of 
securities held by the Fund for each iShares MSCI Index Fund at a 
particular point in time. Therefore, the Value on a per iShare basis 
disseminated during Amex trading hours should not be viewed as a real-
time update of the NAV of the Fund, which is calculated once a day. 
While the Value disseminated by the Amex at 9:30 a.m. is generally very 
close to the most recently calculated Fund NAV on a per iShare 
basis,\11\ it is possible that the value of the portfolio of securities 
held by the Fund for a particular iShares MSCI Index Fund may diverge 
from the Deposit Securities Values during any trading day. In such 
case, the Value will not precisely reflect the value of the Fund 
portfolio. Following calculation of the NAV by the Fund's Administrator 
as of 4 p.m. New York time, the Value on a per iShare basis can be 
expected to be the same as the NAV of the Fund on a per iShare basis.
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    \11\ A slight difference between the Value disseminated at 9:30 
a.m. and the most recently calculated Fund net asset value can be 
expected because the Value will include an estimated cash amount 
consisting principally of any dividend accruals for the Deposit 
Securities going ``ex-dividend'' on that day.
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    However, during the trading day, the Value can be expected to 
closely approximate the value per iShare of the portfolio of securities 
for each iShares MSCI Index Fund except under unusual circumstances 
(e.g., in the case of extensive rebalancing of multiple securities in 
an iShares MSCI Index Fund at the same time by the Fund Advisor). The 
circumstances that might cause the Value to be based on calculations 
different from the valuation per iShare of the actual portfolio of an 
Index Fund would not be different than circumstances causing any index 
fund or trust to diverge from an underlying benchmark index.
    The Exchange believes that dissemination of the Value based on the 
Deposit Securities provides additional information regarding each 
iShares MSCI Index Fund that is not otherwise available to the public 
and is useful to professionals and investors in connection with iShares 
trading on the Exchange or the creation or redemption of iShares.
1. Greece, Indonesia (Free), and Thailand (Free) MSCI Indices
    For Greece, Indonesia, and Thailand (Free), there is no overlap in 
trading hours between the foreign markets and the Amex. Therefore, for 
each Index Series, the Value calculator will utilize closing prices (in 
applicable foreign currency prices) in the principal foreign market for 
securities in the iShares portfolio, and convert the price to U.S. 
dollar. This Value will be updated every 15 seconds during Amex trading 
hours to reflect changes in currency exchange rates between the U.S. 
dollar and the applicable foreign currency. The Value will also include 
the applicable cash component for each iShares MSCI Index Fund.
2. Portugal and Turkey MSCI Indices
    For Portugal and Turkey, which have trading hours overlapping 
regular Amex trading hours, the Value calculator will update the 
applicable Value every 15 seconds to reflect price changes in the 
applicable foreign market or markets, and convert such prices into U.S. 
dollars based on the current currency exchange rate. When the foreign 
market or markets are closed but the Amex is open, the Value will be 
updated every 15 seconds to reflect changes in currency exchange rates 
after the foreign markets close. The Value will also include the 
applicable estimated cash component for each Index Fund.
e. Original and Annual Listing Fees
    The Amex original listing fee applicable to the listing of iShares 
MSCI Index Funds is $5,000 per iShares MSCI Index Fund (i.e., $25,000 
for the five iShares MSCI Index Funds listed above). In addition, the 
annual listing fee applicable to iShares MSCI Index Funds under Section 
141 of the Amex Company Guide will be based upon the year-end aggregate 
number of outstanding iShares in all iShares MSCI Index Funds, 
including the existing series and the additional funds proposed herein.
f. Stop and Stop Limit Orders
    Amex Rule 154, Commentary .04(c) provides that stop and stop limit 
orders to buy or sell a security (other than an option, which is 
covered by Amex Rule 950(f) and Commentary thereto) the price of which 
is derivatively priced based upon another security or index of 
securities, may with the prior approval of a Floor Official, be elected 
by a quotation, as set forth in Commentary .04(c)(i-v). The Exchange 
has designated

[[Page 50253]]

Index Fund Shares, including iShares, as eligible for this 
treatment.\12\
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    \12\ See Securites Exchange Act Release No. 29063 note 9 (April 
10, 1991), 56 FR 15652 (April 17, 1991) (order approving File No. 
SR-Amex-90-31 regarding Exchange designation of equity derivative 
securities as eligible for treatment under Amex Rule 154, Commentary 
.04(c)).
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Amex Rule 190
    Amex Rule 190, Commentary .04 applies to Index Fund Shares listed 
on the Exchange, including iShares. Commentary .04 states that nothing 
in Amex Rule 190(a) should be construed to restrict a specialist 
registered in a security issued by an investment company from 
purchasing and redeeming the listed security, or securities that can be 
subdivided or converted into the listed security, from the issuer as 
appropriate to facilitate the maintenance of a fair and orderly market.
h. Prospectus Delivery
    The Exchange, in an Information Circular to Exchange members and 
member organizations, will inform members and member organizations, 
prior to commencement of trading, that investors purchasing iShares 
will be required to receive a Fund prospectus prior to or concurrently 
with the confirmation of a transaction therein.
i. Trading Halts
    In addition to other factors that may be relevant, the Exchange may 
consider factors such as those set forth in Amex Rule 918C(b) in 
exercising its discretion to halt or suspend trading in Index Fund 
Shares, including iShares. These factors would include, but are not 
limited to: (1) the extent to which trading is not occurring in stocks 
underlying the index; or (2) whether other unusual conditions or 
circumstances detrimental to the maintenance of a fair and orderly 
market are present.\13\ In addition, trading in iShares will be halted 
if the circuit breaker parameters under Amex Rule 117 have been 
reached.
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    \13\ See Amex Rule 918C.
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j. Suitability
    Prior to commencement of trading, the Exchange will issue an 
Information Circular informing members and member organizations of the 
characteristics of the specific fund and of applicable Exchange rules, 
as well as of the requirements of Amex Rule 411 (Duty to Know and 
Approve Customers).
k. Purchases and Redemptions in Creation Unit Size
    In the Information Circular referenced above, members and member 
organizations will be informed that procedures for purchases and 
redemptions of iShares in Creation Unit Size are described in the Fund 
prospectus and Statement of Additional Information, and that iShares 
are not individually redeemable but are redeemable only in Creation 
Unit Size aggregations or multiples thereof.
l. Surveillance
    Exchange surveillance procedures applicable to trading in the 
proposed iShares MSCI Index Funds are the same as those applicable to 
iShares currently trading on the Exchange.
(2) Statutory Basis
    The Amex believes that the proposed rule change is consistent with 
Section 6(b) of the Act,\14\ in general, and furthers the objectives of 
Section 6(b)(5),\15\ 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 regulating, clearing, settling, processing 
information with respect to, and facilitating transaction in 
securities, and, in general to protect investors and the public 
interest.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change will impose no burden on competition.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. 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:
    (A) by order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. 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. In particular, the Commission 
requests comments on the market capitalization of the proposed iShares 
MCSI Index Funds. Persons making written submissions should file six 
copies thereof with the Secretary, Securities and Exchange Commission, 
450 Fifth Street, NW., Washington, DC 20549-0609. Copies of the 
submission, all subsequent amendments, all written statements with 
respect to the proposed rule change that are filed with the Commission, 
and all written communications relating to the proposed rule change 
between the Commission and any person, other than those that may be 
withheld from the public in accordance with the provisions of 5 U.S.C. 
552, will be available for inspection and copying in the Commission's 
Public Reference Room. Copies of such filing will also be available for 
inspection and copying at the principal office of the Amex. All 
submissions should refer to File No. Amex-00-29 and should be submitted 
by September 7, 2000.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-20886 Filed 8-16-00; 8:45 am]
BILLING CODE 8010-01-M