[Federal Register Volume 71, Number 221 (Thursday, November 16, 2006)]
[Notices]
[Pages 66814-66820]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-19364]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54731; File No. SR-NYSE-2006-54]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change and Amendment No. 1 To List and Trade Two Series of 
Commodity-Linked Securities of Wachovia Corporation

November 9, 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 July 25, 2006, New York Stock Exchange LLC (the ``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 Exchange. On November 3, 2006, the Exchange 
submitted Amendment No. 1 to the proposed rule change.\3\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons and is 
approving the proposal, as amended, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaced and superseded the original filing 
in its entirety.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade two series of Commodity-
Linked Securities (the ``Securities'') of Wachovia Corporation, one 
having an aggregate principal amount of $45,000,000 and the other 
having an aggregate principal amount of $40,000,000. The return on the 
Securities, in excess of the principal amount, is linked to the 
performance of an equally weighted basket (the ``Basket'') of the 
following five commodities: WTI crude oil, natural gas, copper, 
aluminum, and gold (each, a ``Component Commodity'' and, collectively, 
the ``Component Commodities'').

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, as 
amended, and discussed any comments it received

[[Page 66815]]

on the proposed rule change. The text of these statements may be 
examined at the places specified in Item III below, and is set forth in 
Sections A, B, and C below.

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

1. Purpose
    Under Section 703.19 of the NYSE Listed Company Manual (the 
``Manual''), the Exchange may approve for listing and trading 
securities not otherwise covered by the criteria of Sections 1 and 7 of 
the Manual, provided that the issue is suited for auction market 
trading. The Exchange proposes to list and trade, under Section 703.19 
of the Manual, the Securities, the return on which, in excess of the 
principal amount, is linked to the performance of the Basket. The 
Securities are debt securities and are part of a series of debt 
securities entitled ``Medium-Term Notes, Series G'' that Wachovia may 
issue from time to time. The Securities rank equally with all other 
unsecured and unsubordinated debt of Wachovia. The principal amount of 
each Security is $25, and they will be traded on the Exchange's equity 
trading floor.
    The Exchange believes that the Securities conform to the initial 
listing standards for equity securities under Section 703.19 of the 
Manual, as Wachovia is a listed company in good standing, each series 
of Securities has at least 400 holders at the time of listing, each 
series of Securities has a minimum life of one year, and the minimum 
public market value of each series of Securities at the time of listing 
will exceed $4 million.
    The Exchange states that the Securities will mature (the ``Maturity 
Date'') on November 3, 2008, with respect to the Series 1 Securities 
and August 6, 2009 with respect to the Series 2 Securities. The 
maturity payment amount, in excess of the principal amount, will be 
linked to the performance of the Basket, which in turn is based on the 
performance of the Component Commodities.
    Each Component Commodity represents 20% of the Basket. The 
Component Commodities are set forth below:
     WTI Crude Oil (Bloomberg symbol ``CL1'')
     Natural Gas (Bloomberg symbol ``NG1'')
     Copper (Bloomberg symbol ``LOCADY'')
     Aluminum (Bloomberg symbol ``LOAHDY'')
     Gold (Bloomberg symbol ``GOLDLNPM'')
    The weighting of each Component Commodity is fixed and will not 
change during the term of the Securities. Similarly, the Component 
Commodities that comprise the Basket will not change, except as 
described below under ``Adjustments to the Basket and the Component 
Commodity Prices.''
    The Series 1 Securities pay a fixed 2% interest rate semi-annually 
on May 3 and November 3, beginning on May 3, 2006. At maturity, for 
each Series 1 Security a holder owns, such holder will receive a cash 
payment equal to the sum of the principal amount of the Security and 
the Basket performance amount, plus any accrued but unpaid interest. 
The ``Basket performance amount'' per Series 1 Security will equal the 
greater of (i) $0, and (ii) the product of the principal amount of the 
Series 1 Security and the percentage change in the level of the Basket, 
as further described below. If the Basket ending level is less than or 
equal to the Basket starting level, the Basket performance amount will 
be $0, and the maturity payment amount will be $25, plus any accrued 
but unpaid interest.
    The Series 2 Securities make no payment of interest, periodic or 
otherwise. At maturity, for each Series 2 Security a holder owns, such 
holder will receive a cash payment equal to the sum of the principal 
amount of the Series 2 Security and the Basket performance amount. The 
Basket performance amount per Series 2 Security will equal the greater 
of (i) $0, and (ii) the product of the principal amount of the Series 2 
Security, the percentage change in the level of the Basket, as further 
described below, and a participation rate of 150%. If the Basket ending 
level is less than or equal to the Basket starting level, the Basket 
performance amount will be $0, and the maturity payment amount will be 
$25.
    The Exchange states that the Securities will provide for 
participation in the positive performance of the Component Commodities 
during their term while reducing the risk exposure to investors through 
principal protection. The Securities are not callable by Wachovia.
    The Basket performance amount per Security will be determined by 
the calculation agent.\4\ The Basket performance amount per Series 1 
Security will equal the greater of:
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    \4\ Wachovia Bank, National Association, a subsidiary of 
Wachovia, will serve as the calculation agent. Wachovia may at any 
time change the calculation agent without notice to holders of 
Securities. Wachovia has represented to the Exchange that it has 
policies prohibiting insider trading that are applicable to all of 
its employees and that it implements and maintains procedures 
reasonably designed to prevent the use and dissemination by 
employees involved in the activities of Wachovia Bank, National 
Association in its capacity as calculation agent, in violation of 
applicable laws, rules and regulations, of material non-public 
information relating to the Securities.
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    (i) $0, and
    (ii) $25 x (Basket ending level - Basket starting level) / Basket 
Starting Level.
    The Basket performance amount per Series 2 Security will equal the 
greater of:
    (i) $0, and
    (ii) $25 x ((Basket ending level - Basket starting level) / Basket 
starting level) x the Participation Rate.
    The Participation Rate for the Series 2 Securities is 150%.
    The ``Basket starting level'' for both Series 1 and Series 2 
Securities is 1,000.
    The ``Basket ending level'' will be determined by the calculation 
agent and will equal the closing level of the Basket on the valuation 
date. The closing level of the Basket will be calculated based on the 
weighted levels of the Component Commodities and will equal the sum of 
the products of (i) the component multiplier of each Component 
Commodity and (ii) the closing price (as described below) of the 
Component Commodity on the valuation date.
    The ``component multiplier'' equals the quotient of (i) the initial 
weight of each Component Commodity (20%) multiplied by the Basket 
starting level divided by (ii) the closing price of each Component 
Commodity on the pricing date of the initial offering of the Securities 
(October 27, 2005 for the Series 1 Securities and January 30, 2006 for 
the Series 2 Securities).
    The ``closing price'' of each Component Commodity will be 
determined by reference to its official closing price or cash 
settlement price on the relevant exchange or market on the valuation 
date, as reported by Bloomberg LP, as follows:
     In the case of WTI crude oil, the U.S. dollar closing 
settlement price per barrel of West Texas Intermediate light sweet 
crude oil on the New York Mercantile Exchange (the ``NYMEX'') of the 
first nearby futures contract; \5\
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    \5\ The trading day in WTI crude oil and Henry Hub Natural Gas 
on the NYMEX is between 10 a.m. and 2:30 p.m. New York Time.
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     In the case of natural gas, the official U.S. dollar 
settlement price per MMBtu of natural gas on the NYMEX of the Henry Hub 
Natural Gas futures contract in respect of the first nearby month; in 
the case of copper, the official U.S. dollar settlement price per ton 
of copper-Grade A on the London Metals

[[Page 66816]]

Exchange (the ``LME'') for cash delivery; \6\
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    \6\ The Exchange states that the LME is the principal non-
ferrous metals exchange in the world on which contracts for copper 
and aluminum, among other metals, are traded. While there is a 
futures market for each of copper and aluminum, Wachovia has 
informed the Exchange that it is using the respective U.S. dollar 
settlement prices as those prices are the generally accepted 
standards for determining the market price of those commodities. The 
LME is not a cash-cleared market. Both inter-office and floor 
trading are cleared and guaranteed by a system run by the London 
Clearing House, whose role is to act as a central counterparty to 
trades executed between clearing members. The bulk of trading on the 
LME is transacted through inter-office dealing that allows the LME 
to operate as a 24-hour market. Liquidity for copper and aluminum 
primarily exists during the two daily trading sessions on the floor 
of the LME, from 11:40 a.m. to 1:15 p.m. and from 3:10 p.m. to 4:35 
p.m., London time, and declines substantially outside of these 
trading sessions.
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     In the case of aluminum, the official U.S. dollar 
settlement price per ton of high grade primary aluminum on the LME for 
cash delivery; or
     In the case of gold, the afternoon U.S. dollar fixing 
price per troy ounce of unallocated gold bullion for delivery in London 
through a member of the London Bullion Market Association (``LBMA'') 
authorized to effect such delivery.\7\
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    \7\ The Exchange states that the LBMA is the principal gold 
clearing center for over-the-counter gold bullion transactions. 
Twice daily during London trading hours a ``fixing'' occurs that 
provides reference prices for that day's trading. Information 
regarding clearing volume estimates by the LBMA can be found at 
http://www.lbma.org.uk/clearing_table.htm. The three measures 
published by LBMA are: volume, the amount of metal transferred on 
average each day measured in million of troy ounces; value, measured 
in U.S. dollars, using the monthly average London PM fixing price; 
and the number of transfers, which is the average number recorded 
each day. The statistics exclude allocated and unallocated balance 
transfers where the sole purpose is for overnight credit and 
physical movements arranged by clearing members in locations other 
than London. Additionally, the NYMEX publishes price and volume 
statistics for transactions in contracts for the future delivery of 
gold.
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    Wachovia has informed the Exchange that, in deciding whether to 
base the pricing of each individual Component Commodity on its cash 
price or on a related futures contract, it used the pricing source in 
each case that it believed was most widely used as an indicator of the 
market price of that commodity.
    The ``valuation date'' means the fifth business day prior to the 
maturity date. However, if that date occurs on a day on which the 
calculation agent has determined that a market disruption event has 
occurred or is continuing, then the valuation date will be postponed 
until the next succeeding business day on which the calculation agent 
determines that a market disruption event does not occur or is not 
continuing. If the valuation date is postponed, then the maturity date 
of the Securities will be postponed by an equal number of business 
days.
    The Securities are cash-settled in U.S. dollars and do not give the 
holder any right to receive a futures contract, dividend payments, or 
any other ownership right or interest in the Component Commodities that 
comprise the Basket. The Securities are designed for investors who 
desire to participate or gain exposure to the Component Commodities 
that comprise the Basket, who are willing to hold the investment to 
maturity, and who want to limit risk exposure by receiving principal 
protection of their investment amount.
    The Basket is not a recognized market index and was created solely 
for the purpose of offering the Securities.
Adjustments to the Basket and the Component Commodities Prices
    The composition of the Basket and/or the method of determining the 
closing price for each Component Commodity may be adjusted from time to 
time by the calculation agent, in its sole discretion, as follows:
     In the event that an official closing price is not 
available for a Component Commodity for whatever reason, including any 
discontinuance of trading in the relevant Component Commodity by the 
NYMEX, the LME, or the LBMA, then the calculation agent may, in its 
sole discretion, take such action, including adjustments to the Basket 
or to the method of determining such closing price as it deems 
appropriate. By way of example, and without limitation, if a contract 
which serves as the basis for determining the closing price of a 
particular Component Commodity is discontinued by the exchange or 
market on which it traded, the calculation agent may, in its sole 
discretion, determine such closing price for that Component Commodity 
by reference to another contract for the Component Commodity traded on 
another exchange or market or to its bid for the Component Commodity 
for delivery on the valuation date.
     In the event that the terms of any contract used for 
determining the closing price of any Component Commodity are changed in 
a material respect by the commodity exchange upon which the contracts 
trade, the calculation agent may take such action, including 
adjustments to the Basket or to the method of determining the closing 
price of that Component Commodity, as it deems appropriate.
    No adjustments will be made unless the calculation agent 
determines, in its sole discretion, that such adjustment is appropriate 
to maintain the validity of the closing price as an economic benchmark 
for the affected Component Commodity. The calculation agent at any 
time, or from time to time, if any, may make such adjustments, on or 
prior to the maturity date.
    If any adjustments are of a more than temporary nature, the 
Exchange will file a proposed rule change pursuant to Rule 19b-4 under 
the Act seeking Commission approval to continue to trade the Securities 
and, unless approved, the Exchange will commence delisting the 
Securities.
Available Information
    The hypothetical maturity payment amount per Security (the 
``Closing Values'') will be published once every NYSE trading day (as 
opposed to at least every 15 seconds during the trading day) at 
approximately 5 p.m., New York City time, calculated on each day as if 
such day were the valuation date. The Closing Value will be accessible 
by going to Bloomberg page ``WSSN'' and selecting the ``commodity-
linked'' option.
    The Exchange believes that this daily dissemination of the Closing 
Value is appropriate because the Securities are debt securities traded 
on the NYSE's equity floor, the value of which is linked to the Basket, 
and there will be no creation or redemption of shares as there would be 
with an exchange-traded fund (``ETF'').
    As discussed in the prospectus supplement dated October 27, 2005 
relating to the Series 1 Securities and the prospectus supplement dated 
May 13, 2005 relating to the Series 2 Securities, the trading price of 
the Securities will be affected by many factors that interrelate in 
complex ways. The negative effect of one factor may offset the positive 
effect on the trading price of the Securities of another factor and the 
negative effect of one factor may exacerbate the decrease in the 
trading price of the Securities caused by another factor. For example, 
increased price volatility with respect to one or more of Component 
Commodities may offset some or all of any increase in the trading price 
of the Securities attributable to another factor, such as an increase 
in the prices of one or more of the Component Commodities. In addition, 
a change in interest rates may offset other factors that would 
otherwise change the prices of the Component Commodities and, 
therefore, may significantly change the trading price of the 
Securities. The Exchange states that the following bullet points 
summarize the expected impact on the trading price of the Securities 
given a change in a

[[Page 66817]]

specific factor, assuming all other conditions remain constant:
     The level of the Basket at any given point in time;
     Changes in Component Commodity prices;
     The volatility (frequency and magnitude of changes in 
prices) of the Component Commodities and in particular market 
expectations regarding the volatility of the Component Commodities;
     Interest rates generally, as well as changes in interest 
rates and the yield curve;
     Changes in correlation among the prices of the Component 
Commodities;
     The time remaining to maturity of the Securities;
     Wachovia's credit worthiness, as represented by its credit 
ratings or as otherwise perceived in the market; and
     Geopolitical, economic, financial, political, regulatory 
or judicial events, as well as other conditions that affect 
commodities' markets in general and that may affect the market prices 
of the Component Commodities.
    Pricing information with respect to the Component Commodities is 
available as follows:
     The official U.S. dollar settlement price per ton of 
coppeR-Grade A on the LME for cash delivery is publicly available on 
the Web site of the LME at http://www.lme.com/dataprices_daily_metal.asp.
     The official U.S. dollar settlement price per ton of high-
grade primary aluminum on the LME for cash delivery is publicly 
available on the Web site of the LME at http://www.lme.com/dataprices_daily_metal.asp.
     The U.S. dollar closing settlement price per barrel of 
West Texas Intermediate light sweet crude oil on the NYMEX of the first 
nearby futures contract is publicly available on the Web site of the 
NYMEX at http://www.nymex.com/index.aspx.
     The official U.S. dollar settlement price per MMBtu of 
natural gas on the NYMEX of the Henry Hub Natural Gas futures contract 
in respect of the first nearby month is publicly available on the Web 
site of the NYMEX at http://www.nymex.com/index.aspx.
     The afternoon U.S. dollar fixing price per troy ounce of 
unallocated gold bullion for delivery in London through a member of the 
LBMA authorized to effect such delivery is publicly available on the 
Web site of the LBMA at http://www.lbma.org.uk/statistics_current.htm. 
Complete real-time data for gold futures and options prices traded on 
the NYMEX is available by subscription from Reuters and Bloomberg. The 
NYMEX also provides delayed futures and options information on current 
and past trading sessions and market news free of charge on its Web 
site at http://www.nymex.com/index.aspx.
    Real time intraday trading prices and daily closing prices for the 
Component Commodities are available by subscription from major market 
vendors.
Market Disruption Event
    A market disruption event with respect to a Component Commodity, as 
determined by the calculation agent in its sole discretion, means the 
occurrence or existence of any of the following events:
     The failure of the relevant exchange, market or price 
source to announce or publish the closing price for a Component 
Commodity or the temporary or permanent discontinuance or 
unavailability of the relevant exchange, market, or price source;
     The failure of trading to commence, or the permanent 
discontinuation of trading, in the relevant futures contracts on the 
relevant exchange or market, or the disappearance of, or the 
disappearance of trading in, the relevant Component Commodity;
     A material change in the formula for or the method of 
calculating the closing price for a Component Commodity;
     A material change in the content, composition, or 
constitution of a Component Commodity or relevant futures contracts;
     A suspension, absence or material limitation imposed on 
trading in the futures contracts or the relevant Component Commodity on 
its respective exchange or in any additional futures contract, options 
contract, or Component Commodity on any exchange or principal trading 
market as specified in the relevant agreement or confirmation; for this 
purpose, an absence of trading in the primary exchange on which options 
or futures contracts related to any Component Commodities or the 
relevant Component Commodities are traded will not include any time 
when that exchange itself is closed for trading under ordinary 
circumstances; or
     Any other event, if the calculation agent determines in 
its sole discretion that the event materially interferes with 
Wachovia's ability or the ability of any of its affiliates to unwind 
all or a material portion of a hedge with respect to the Securities.
    The following events will not constitute market disruption events:
     a decision to permanently discontinue trading (without 
implementation of such decision) in the option or futures contract 
relating to any Component Commodity or in any Component Commodity on 
the NYMEX, the LME, or the LBMA; or
     a limitation on the hours or numbers of days of trading 
that results from an announced change in the regular business hours of 
the relevant exchange.

Continued Listing Criteria

    The Exchange prohibits the initial and/or continued listing of any 
security that is not in compliance with Rule 10A-3 under the Act.\8\
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    \8\ 15 U.S.C. 78a.
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    The Exchange will delist the Securities if:
     The Securities do not meet the continued listing criteria 
of Section 703.19 of the Exchange's Listed Company Manual.
     The Closing Value ceases to be published every NYSE 
trading day.
     Such other event shall occur or condition exists which in 
the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    Additionally, the Exchange will file a proposed rule change 
pursuant to Rule 19b-4 under the Act, seeking approval to continue 
trading the Securities and, unless approved, the Exchange will commence 
delisting the Securities if:
     Wachovia removes a Component Commodity from the Basket or 
adds a new Component Commodity to the Basket, changes the weighting of 
the Component Commodities in the Basket, or changes on a more than 
temporary basis the source of the closing price of any of the Component 
Commodities; or
     A Market Disruption Event occurs which is of a more than 
temporary nature.
Trading Halts
    If the Closing Value for a series of the Securities is not being 
disseminated as required, the Exchange may halt trading during the day 
immediately following the day on which the interruption to the 
dissemination of the Closing Value first occurs. If the interruption to 
the dissemination of the Closing Value persists past the trading day 
following the day on which the interruption occurred, the Exchange will 
halt trading no later than the beginning of the second trading day 
following the interruption.
Surveillance
    The Exchange represents that its surveillance procedures are 
adequate to properly monitor the trading of the Securities and the 
Component

[[Page 66818]]

Commodities. The Exchange's surveillance procedures will incorporate 
and rely upon existing Exchange surveillance procedures governing 
equities. The Exchange believes that these procedures are adequate to 
monitor Exchange trading of the Securities and to detect violations of 
Exchange rules, thereby deterring manipulation. The Exchange is a party 
to information sharing agreements with each of the NYMEX and the LME, 
pursuant to which such exchanges are obligated to provide the Exchange 
with access to transaction information, including customer identity 
information with respect to all commodities traded on such exchanges.
    In connection with its authorization for listing of the 
streetTRACKS[reg] Gold Shares (the ``Shares''), the Exchange states 
that the Commission found that the unique liquidity and depth of the 
gold market, along with the existence of an information sharing 
agreement between the NYSE and the NYMEX and the application of NYSE 
Rules 1300B and 1301 to the Specialist trading those Securities, 
created the basis for the NYSE to monitor fraudulent and manipulative 
practices in the trading of the Shares.\9\
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    \9\ See Securities Exchange Act Release No. 50603 (October 28, 
2004), 69 FR 64614 (November 5, 2004) (SR-NYSE-2004-22).
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    Similarly, the Exchange believes that the depth and liquidity of 
the gold market, along with the information sharing agreement between 
the NYSE and the NYMEX and the application of NYSE Rules 1300B and 1301 
to the Specialist trading those Securities, will provide adequate 
surveillance of the trading of the gold Component Commodity.
Suitability
    The Exchange's existing equity trading rules will apply to trading 
of the Securities. The Exchange states that it will also have in place 
certain other requirements to provide additional investor protection. 
First, pursuant to NYSE Rule 405, the Exchange will impose a duty of 
due diligence on its members and member firms to learn the essential 
facts relating to every customer prior to trading the Securities.\10\ 
Second, the Securities will be subject to the equity margin rules of 
the Exchange.\11\ Third, the Exchange will, prior to trading the 
Securities, distribute a circular to the membership providing guidance 
with regard to member firm compliance responsibilities (including 
suitability recommendations) when handling transactions in the 
Securities and highlighting the special risks and characteristics of 
the Securities. With respect to suitability recommendations and risks, 
the Exchange will require members, member organizations and employees 
thereof recommending a transaction in the Securities: (1) To determine 
that such transaction is suitable for the customer; and (2) to have a 
reasonable basis for believing that the customer can evaluate the 
special characteristics of, and is able to bear the financial risks of, 
such transaction.
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    \10\ NYSE Rule 405 requires that every member, member firm or 
member corporation use due diligence to learn the essential facts 
relative to every customer and to every order or account accepted.
    \11\ See NYSE Rule 431.
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Information Memorandum
    The information memorandum will note to members prospectus delivery 
requirements for the Securities.\12\ The information memorandum will 
discuss the special characteristics and risks of trading this type of 
security. Specifically, the information memorandum, among other things, 
will discuss the following: what the Securities are, applicable 
Exchange rules, dissemination of information regarding the Closing 
Value, trading information, and applicable suitability rules.
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    \12\ Telephone conversation between John Carey, Assistant 
General Counsel, NYSE, Florence Harmon, Senior Special Counsel, 
Division of Market Regulation (``Division''), Commission, and Angela 
Muehr, Attorney, Division, Commission, on November 8, 2006.
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    The information memorandum will also reference the fact that there 
is no regulated source of last sale information regarding physical 
commodities and that the Commission has no jurisdiction over the 
trading of physical commodities such as crude oil, natural gas, copper, 
aluminum and gold, or the futures contracts on which a portion of the 
value of the Securities is based.
Specialist Trading Obligations
    Supplementary Material .10 to NYSE Rule 1301B applies the 
provisions of NYSE Rule 1300B(b) and NYSE Rule 1301B to certain 
securities listed on the Exchange pursuant to Section 703.19 (``Other 
Securities'') of the Manual. Specifically, NYSE Rules 1300B(b) and 
1301B apply to securities listed under Section 703.19 of the Manual 
where the price of such securities is based, in whole or in part, on 
the price of: (a) A commodity or commodities; (b) any futures contracts 
or other derivatives based on a commodity or commodities; or (c) any 
index based on either (a) or (b) above.
    As a result of application of NYSE Rule 1300B(b), the specialist in 
the Securities, the specialist's member organization and other 
specified persons will be prohibited under paragraph (m) of Exchange 
Rule 105 Guidelines from acting as market maker or functioning in any 
capacity involving market-making responsibilities in the Basket 
components, the commodities underlying the Basket components, or 
options, futures or options on futures on the Basket, or any other 
derivatives (collectively, ``derivative instruments'') based on the 
Basket or based on any Basket component or any physical commodity 
underlying a Basket component. If the member organization acting as 
specialist in the Securities is entitled to an exemption under NYSE 
Rule 98 from paragraph (m) of NYSE Rule 105 Guidelines, then that 
member organization could act in a market-making capacity in the Basket 
components, the commodities underlying the Basket components, or 
derivative instruments based on the Basket or based on any Basket 
component or commodity underlying a Basket component, other than as a 
specialist in the Securities themselves, in another market center.
    Under NYSE Rule 1301B(a), the member organization acting as 
specialist in the Securities will be: (1) Obligated to conduct all 
trading in the Securities in its specialist account (subject only to 
the ability to have one or more investment accounts, all of which must 
be reported to the Exchange); (2) required to file with the Exchange 
and keep current a list identifying all accounts for trading in the 
Basket components or the physical commodities underlying the Basket 
components, or derivative instruments based on the Basket or based on 
the Basket components or the physical commodities underlying the Basket 
components, which the member organization acting as specialist may have 
or over which it may exercise investment discretion; and (3) prohibited 
from trading in the Basket components or the physical commodities 
underlying the Basket components, or derivative instruments based on 
the Basket or based on the Basket components or the physical 
commodities underlying the Basket components, in an account in which a 
member organization acting as specialist, controls trading activities 
which have not been reported to the Exchange as required by NYSE Rule 
1301B.
    Under NYSE Rule 1301B(b), the member organization acting as 
specialist in the Securities will be required to

[[Page 66819]]

make available to the Exchange such books, records, or other 
information pertaining to transactions by the member organization and 
other specified persons for its or their own accounts in the Basket 
components or the physical commodities underlying the Basket 
components, or derivative instruments based on the Basket or based on 
the Basket components or the physical commodities underlying the Basket 
components, as may be requested by the Exchange. This requirement is in 
addition to existing obligations under Exchange rules regarding the 
production of books and records.
    Under NYSE Rule 1301B(c), in connection with trading the Basket 
components or the physical commodities underlying the Basket 
components, or derivative instruments based on the Basket or based on 
the Basket components or the physical commodities underlying the Basket 
components, the specialist could not use any material nonpublic 
information received from any person associated with a member or 
employee of such person regarding trading by such person or employee in 
the Basket components or the physical commodities underlying the Basket 
components, or derivative instruments based on the Basket or based on 
the Basket components or the physical commodities underlying the Basket 
components.
2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with Section 6(b) of the Act \13\ in general and furthers 
the objectives of Section 6(b)(5),\14\ in particular, in that it is 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to remove impediments 
and perfect the mechanisms of a free and open market, and, in general, 
to protect investors and the public interest.
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    \13\ 15 U.S.C. 78s(b).
    \14\ 15 U.S.C. 78s(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, as 
amended, 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, as amended, 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-NYSE-2006-54 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2006-54. 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 
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-NYSE-2006-54 and should be submitted on or before 
December 7, 2006.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    After careful consideration, the Commission finds that the proposed 
rule change, as amended, is consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to a national 
securities exchange.\15\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\16\ 
which requires that an exchange have rules designed, among other 
things, to promote just and equitable principles of trade, 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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    \15\ In approving this 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).
    \16\ 15 U.S.C. 78f(b)(5).
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A. Surveillance

    Information sharing agreements with primary markets are an 
important part of a self-regulatory organization's ability to monitor 
for trading abuses in derivative products. The Commission believes that 
the Exchange's comprehensive surveillance sharing agreements with the 
LME and the NYMEX for the purpose of providing information in 
connection with trading of the Securities and Component Commodities 
create the basis for NYSE to monitor for fraudulent and manipulative 
practices in the trading of the Securities.
    Moreover, NYSE Rules, including Rule 1301B, give NYSE the authority 
to request the Exchange specialist in the Securities to provide NYSE 
Regulation with information to monitor for fraudulent and manipulative 
trading facilities. The Commission believes that these rules provide 
the NYSE with the tools necessary to adequately surveil trading in the 
Securities.

B. Dissemination of Information

    The Commission believes that sufficient venues exist for obtaining 
reliable information so that investors in the Securities can monitor 
the Component Commodities relative to the indicative value of their 
Securities. There is a considerable amount of information about the 
Component Commodities available through public Web sites, and real time 
intraday prices and daily closing prices for the Component Commodities 
are available by subscription from major market vendors.
    The Exchange will calculate and disseminate the Closing Value once 
each trading day. The Commission believes that this daily dissemination 
of an indicative basket amount is appropriate because there will be no 
creation or redemption of shares as

[[Page 66820]]

there would be with an ETF. Additionally, the Securities are debt, 
whose value, while linked to the basket, is at least 100% of the 
principal investment amount, and whose value is affected by factors, 
such as interest rates, time remaining to maturity, and the issuer's 
creditworthiness, that make an intraday indicative value not as 
determinative. The Closing Value will be published at approximately 5 
p.m., New York City time, calculated on each day as if such day were 
the valuation date. The Closing Value will be accessible by going to 
Bloomberg page ``WSSN'' and selecting the ``commodity-linked'' option. 
Wachovia will determine the value of the Securities at maturity, which 
will consist of at least 100% of the principal investment amount, plus 
the Basket Performance Amount.

C. Listing and Trading

    The Commission finds that the Exchange's proposed rules and 
procedures for the listing and trading of the proposed Securities are 
consistent with the Act. The Securities will trade as equity securities 
under Section 703.19 of the Manual and will be subject to NYSE rules 
applicable to equity trading including, among others, rules governing 
priority, parity and precedence of orders, specialist responsibilities, 
account opening and customer suitability requirements. The Commission 
believes that the listing and delisting criteria for the Securities 
should help to maintain a minimum level of liquidity and therefore 
minimize the potential for manipulation of the Securities. The Exchange 
represents that it would file a proposed rule change, pursuant to Rule 
19b-4 under the Act,\17\ if Wachovia removes a Component Commodity from 
the Basket, adds a new Component Commodity to the Basket, changes the 
weighting of the Component Commodities in the Basket, or changes on a 
more than temporary basis the source of the closing price of any of the 
Component Commodities; or a market disruption event occurs which is of 
a more than temporary nature. Finally, the Commission notes that the 
Information Memorandum the Exchange will distribute will inform members 
and member organizations about the terms, characteristics and risks in 
trading the Securities, including their prospectus delivery 
obligations.
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    \17\ 17 CFR 240.19b-4.
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D. Accelerated Approval

    The Commission finds good cause for approving this proposed rule 
change before the thirtieth day after the publication of notice thereof 
in the Federal Register. The Commission notes that this product is 
similar to other products already approved by the Commission.\18\ The 
Commission presently is not aware of any issue that would cause it to 
revisit such earlier findings or preclude the trading of these 
Securities on the Exchange. Therefore, accelerating approval of this 
proposed rule change should benefit investors by creating, without 
undue delay, opportunities for investors to trade in such Securities.
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    \18\ See, e.g., Securities Exchange Act Release No. 54033 (June 
22, 2006), 71 FR 37131 (June 29, 2006) (order approving the listing 
and trading of principal protected notes linked to the Metals-China 
Basket).
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V. Conclusion

    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change, as amended (SR-NYSE-2006-54), is hereby 
approved on an accelerated basis.\19\
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    \19\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\20\
Nancy M. Morris,
Secretary.
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    \20\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E6-19364 Filed 11-15-06; 8:45 am]
BILLING CODE 8011-01-P