[Federal Register Volume 70, Number 198 (Friday, October 14, 2005)]
[Notices]
[Pages 60125-60127]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-5653]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52572; File No. SR-Phlx-2005-57]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Order Granting Accelerated Approval to a Proposed 
Rule Change Relating to Dissemination of the Underlying Index Value for 
Trust Shares and Index Fund Shares

October 7, 2005.
    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 September 21, 2005, the Philadelphia Stock Exchange, Inc. (``Phlx'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Phlx. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons. In addition, the Commission is granting 
accelerated approval of the proposed rule change.
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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 Phlx proposes to amend Sections (i) and (l) of Phlx Rule 803, 
the listing standards for two kinds of exchange traded funds, Trust 
Shares and Index Fund Shares, to provide that the current value of the 
underlying index must be widely disseminated by one or more major 
market data vendors at least every 15 seconds during the time the Trust 
Share or Index Fund Share trades on the Exchange. The text of the 
proposed rule change is set forth below. Proposed new language is in 
italics; proposed deletions are in brackets.
* * * * *

Rule 803

Criteria for Listing--Tier I
* * * * *
    (a)-(h) No Change.
    (i) Trust Shares
    (1)-(10) No Change.
    (11) The Exchange may approve a series of Trust Shares for trading, 
whether by listing or pursuant to unlisted trading privileges, pursuant 
to Rule 19b-4(e) under the Securities Exchange Act of 1934 provided 
each of the following criteria is satisfied:
    (a) No Change.

[[Page 60126]]

    (b) Index Methodology and Calculation.
    (i) No Change.
    (ii) No Change.
    (iii) The current index value will be widely disseminated by one or 
more major market data vendors at least every 15 seconds during the 
time when the Trust Shares trade on the Exchange [over the Consolidated 
Tape Association's Network B].
    (c)-(h) No Change.
    (j) No Change.
    (k) No Change.
    (l) Index Fund Shares
    (1)-(5) No Change.
    (6) Listing Pursuant to SEC Rule 19b-4(e). The Exchange may approve 
a series of Index Fund Shares for listing pursuant to Rule 19b-4(e) 
under the Securities Exchange Act of 1934 provided each of the 
following criteria is satisfied:
    (A) No Change.
    (B) Index Methodology and Calculation. (I) The index underlying a 
series of Index Fund Shares will be calculated based on either the 
market capitalization, modified market capitalization, price, equal-
dollar or modified equal-dollar weighting methodology; (II) If the 
index is maintained by a broker-dealer, the broker-dealer shall erect a 
``fire wall'' around the personnel 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; and (III) The 
current index value will be widely disseminated by one or more major 
market data vendors at least every 15 seconds during the time when the 
Index Fund Shares trade on the Exchange [over the Consolidated Tape 
Association's Network B].
    (C)-(H) No Change.
    (7)-(8) No Change.
* * * * *

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 had received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III below. The Phlx 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
    Sections (i)(11) and (l)(6) of Phlx Rule 803 provide listing 
standards for Trust Shares and Index Fund Shares, respectively, to 
permit listing and trading of these securities pursuant to Rule 19b-
4(e) under the Act.\3\ Rule 19b-4(e) provides that the listing and 
trading of a new derivative securities product by a self-regulatory 
organization shall not be deemed a proposed rule change, pursuant to 
paragraph (c)(1) of Rule 19b-4, if the Commission has approved, 
pursuant to Section 19(b) of the Act, the self-regulatory 
organization's trading rules, procedures and listing standards for the 
product class that would include the new derivative securities product, 
and the self-regulatory organization has a surveillance program for the 
product class.\4\
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    \3\ 17 CFR 240.19b-4(e).
    \4\ See Securities Exchange Act Release No. 40761 (December 8, 
1998), 63 FR 70952 (December 22,1998).
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    The Phlx rules for Trust Shares and Index Fund Shares currently 
provide that the current index value for the index underlying a series 
of Trust Shares (in the case of Phlx Rule 803(i)(11)) and Index Fund 
Shares (in the case of Phlx Rule 803(l)(6)) will be disseminated every 
15 seconds over the Consolidated Tape Association's Network B. The Phlx 
believes that, rather than identifying specifically in their rules the 
index dissemination service (that is, the Consolidated Tape 
Association's Network B), it is preferable to reflect in the rules a 
requirement for wide dissemination of the underlying index values. This 
proposed rule change would make clear that the value of the underlying 
index must be widely disseminated by a reputable index dissemination 
service, such as the Consolidated Tape Association, Reuters, or 
Bloomberg. The Phlx believes that the specific identity of the index 
dissemination service is not necessary, and the purpose of the rule 
would be achieved, as long as the service used for dissemination is 
reputable, accepted in the investment community, and effects 
appropriately wide dissemination of the particular index.
    The Exchange therefore proposes to change the generic listing 
standards for Trust Shares and Index Fund Shares to provide that the 
value of the underlying index must be widely disseminated by one or 
more major market data vendors at least every 15 seconds during the 
time when the Trust Shares or Index Fund Shares trade on the Exchange.
    As currently is the case, if the official index does not change 
during some or all of the period when trading is occurring (as is 
typically the case with pre-market-open and after-hours trading, and 
also with foreign indexes because of time zone differences or holidays 
in the countries where such indexes' components trade), then the last 
official calculated index value must remain available throughout the 
Phlx trading hours.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the provisions of 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 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. The Phlx believes that 
clarifying the rules helps all market participants.
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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 would 
impose any inappropriate 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 either solicited or received.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-Phlx-2005-57 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary,

[[Page 60127]]

Securities and Exchange Commission, 100 F Street, NE., Washington, DC 
20549-9303.
    All submissions should refer to File Number SR-Phlx-2005-57. 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 Section, 100 F Street, 
NE., Washington, DC 20549. Copies of such filing also will be available 
for inspection and copying at the principal office of the Phlx. 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 publicly available. All 
submissions should refer to File Number SR-Phlx-2005-57 and should be 
submitted on or before November 4, 2005.

IV. Commission's Findings and Order Granting Accelerated Approval of 
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\ In particular, the Commission believes that the proposed 
rule change is consistent with Section 6(b)(5) of the Act.\8\ The 
Commission notes that the proposed index dissemination requirement is 
similar to the index dissemination requirement used in the listing 
standards for narrow-based index options.\9\ The Phlx defines ``one or 
more major market data vendor'' to include the Consolidated Tape 
Association or private vendors, such as Reuters or Bloomberg.\10\ The 
Commission believes, however, that it is critical that such service 
widely disseminate such index value to market participants.
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    \7\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ See e.g., Chicago Board Options Exchange Rule 24.2(b); 
International Securities Exchange Rule 2002(b); Pacific Exchange 
Rule 5.13; and Philadelphia Stock Exchange Rule 1009A(b) (listing 
standards for narrow-based index options requiring that, among other 
things, the current underlying index value be reported at least once 
every 15 seconds during the time the index option trades on the 
exchange).
    \10\ The Commission notes, however, that if a self-regulatory 
organization designates a data vendor, on an exclusive basis, to 
disseminate an index value on behalf of the self-regulatory 
organization, such vendor would be an ``exclusive processor'' under 
Section 3(a)(22)(B) of the Act and, absent an exemption, required to 
register as a securities information processor under Section 
11A(b)(1) of the Act.
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    The Phlx has requested that the Commission find good cause for 
approving the proposed rule change prior to the thirtieth day after 
publication of notice thereof in the Federal Register. The Commission 
notes that it has recently approved similar proposals regarding the 
dissemination of the underlying index value for exchange traded funds 
traded on Nasdaq, the American Stock Exchange LLC (``Amex''), and the 
New York Stock Exchange, Inc. (``NYSE'').\11\ The Commission believes 
that granting accelerated approval of the proposal will allow the Phlx 
to immediately implement these listing standards for dissemination of 
the underlying index value that are in place on Nasdaq, the Amex, and 
the NYSE. Accordingly, the Commission finds good cause, pursuant to 
Section 19(b)(2) of the Act,\12\ for approving the proposed rule change 
prior to the thirtieth day after the date of publication of notice 
thereof in the Federal Register.
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    \11\ See Securities Exchange Act Release Nos. 51748 (May 26, 
2005), 70 FR 32684 (June 3, 2005) (SR-NASD-2005-024); 51868 (June 
17, 2005), 70 FR 36672 (June 24, 2005) (SR-Amex-2005-044); and 52081 
(July 20, 2005), 70 FR 43488 (July 27, 2005) (SR-NYSE-2005-44).
    \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-Phlx-2005-57) be, and hereby 
is, approved on an accelerated basis.
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    \13\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5-5653 Filed 10-13-05; 8:45 am]
BILLING CODE 8010-01-P