[Federal Register Volume 73, Number 227 (Monday, November 24, 2008)]
[Notices]
[Pages 71074-71078]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-27879]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58956; File No. SR-NYSEArca-2008-124]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change To List 
Shares of iShares Silver Trust

November 14, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on November 5, 2008, NYSE Arca, Inc. (``NYSE Arca'' 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 Exchange. The 
Commission is publishing this notice to

[[Page 71075]]

solicit comments on the proposed rule change from interested persons 
and approving the proposed rule change on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NYSE Arca, through its wholly-owned subsidiary NYSE Arca Equities, 
Inc. (``NYSE Arca Equities''), proposes to list and trade shares 
(``Shares'') of the iShares[supreg] Silver Trust (the ``Trust'') 
pursuant to NYSE Arca Equities Rule 8.201. The text of the proposed 
rule change is available on the Exchange's Web site at http://www.nyse.com, at the Exchange's principal office and at the 
Commission's Public Reference Room.

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 self-regulatory organization 
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 those statements may be examined at 
the places specified in Item III below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

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

1. Purpose
    The Exchange proposes to list and trade the Shares under NYSE Arca 
Equities Rule 8.201. Under NYSE Arca Equities Rule 8.201, the Exchange 
may propose to list and/or trade pursuant to unlisted trading 
privileges (``UTP'') ``Commodity-Based Trust Shares.'' \3\ The 
Commission has previously approved listing of the Shares on NYSE 
Alternext U.S. LLC (``NYSE Alternext US'') (formerly, the American 
Stock Exchange LLC (``Amex'')) \4\ and trading on the Exchange pursuant 
to UTP.\5\ Prior to listing on the Exchange, the issuer of the Shares 
would be required to satisfy the applicable delisting procedures of 
NYSE Alternext US and applicable statutory and regulatory requirements, 
including, without limitation, Section 12 of Securities Exchange Act of 
1934 (``Act''),\6\ relating to listing the Shares on the Exchange.\7\
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    \3\ Commodity-Based Trust Shares are securities issued by a 
trust that represent investors' discrete identifiable and undivided 
beneficial ownership interest in the commodities deposited into the 
trust.
    \4\ See Securities Exchange Act Release No. 53521 (March 20, 
2006), 71 FR 14967 (March 24, 2006) (SR-Amex-2005-72) (``Amex 
Order'').
    \5\ See Securities Exchange Act Release No. 53520 (March 20, 
2006), 71 FR 14977 (March 24, 2006) (SR-PCX-2005-117) (``UTP 
Filing'').
    \6\ 15 U.S.C. 78(l).
    \7\ See e-mail from Michael Cavalier, Chief Counsel, NYSE 
Euronext, to Brian O'Neill, Attorney, and Christopher Chow, Special 
Counsel, Division of Trading and Markets, Commission, dated November 
12, 2008 (``November 12 e-mail''). The Exchange will seek the 
voluntary consent of the issuer of the Shares to be delisted from 
NYSE Alternext US and listed on the Exchange.
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    The Shares represent beneficial ownership interests in the net 
assets of the Trust consisting primarily of silver bullion 
(``silver''). The investment objective of the Trust is for the Shares 
to reflect the performance of the price of silver, less the Trust's 
expenses.
    Descriptions of the Trust and the Shares are included in the Amex 
Order, the UTP Filing, and Registration Statement for the Trust.\8\ The 
Exchange represents that the Shares satisfy the requirements of Rule 
8.201 and thereby qualify for listing on the Exchange.\9\ The Exchange 
states that all of the facts describing the Trust and the Shares 
contained in the Amex Order are true and correct as of the date of this 
filing. The Exchange states further that the representations included 
in the Amex Order relating to the dissemination and availability of 
information regarding the Shares will apply to listing and trading of 
the Shares on the Exchange. To the extent NYSE Alternext US has any 
affirmative obligations with respect to dissemination of information or 
key values relating to the Shares, the Exchange represents that it 
would take the place of NYSE Alternext US in such role and discharge 
such obligations.
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    \8\ See the Registration Statement for the Trust, dated May 29, 
2008 (Registration Statement No. 333-149810).
    \9\ With respect to application of Rule 10A-3 (17 CFR 240.10A-3) 
under the Act, the Trust relies on the exemption contained in Rule 
10A-3(c)(7).
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Trading Rules

    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Fund subject to the Exchange's existing rules 
governing the trading of equity securities. The Shares will trade on 
the Exchange from 4:00 a.m. to 8:00 p.m. Eastern Time.\10\ The Exchange 
has appropriate rules to facilitate transactions in the Shares during 
all trading sessions. The minimum trading increment for Shares on the 
Exchange will be $0.01.
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    \10\ See November 12 e-mail, supra, note 7.
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    Further, NYSE Arca Equities Rule 8.201 sets forth certain 
restrictions on ETP Holders acting as registered Market Makers in the 
Shares to facilitate surveillance. Pursuant to NYSE Arca Equities Rule 
8.201(h), an ETP Holder acting as a registered Market Maker in the 
Shares is required to provide the Exchange with information relating to 
its trading in the underlying silver, related futures or options on 
futures, or any other related derivatives. NYSE Arca Equities Rule 
8.201(i) prohibits an ETP Holder acting as a registered Market Maker in 
the Shares from using any material nonpublic information received from 
any person associated with an ETP Holder or employee of such person 
regarding trading by such person or employee in the underlying silver, 
related futures or options on futures or any other related derivative 
(including the Shares). In addition, NYSE Arca Equities Rule 8.201(g) 
prohibits an ETP Holder acting as a registered Market Maker in the 
Shares from being affiliated with a market maker in the underlying 
silver, related futures or options on futures or any other related 
derivative unless adequate information barriers are in place, as 
provided in NYSE Arca Equities Rule 7.26.
    As a general matter, the Exchange has regulatory jurisdiction over 
its ETP Holders and their associated persons, which include any person 
or entity controlling an ETP Holder, as well as a subsidiary or 
affiliate of an ETP Holder that is in the securities business. A 
subsidiary or affiliate of an ETP Holder that does business only in 
commodities or futures contracts would not be subject to Exchange 
jurisdiction, but the Exchange could obtain information regarding the 
activities of such subsidiary or affiliate through surveillance sharing 
agreements with regulatory organizations of which such subsidiary or 
affiliate is a member.
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares. Trading on the Exchange in the Shares may be 
halted because of market conditions or for reasons that, in the view of 
the Exchange, make trading in the Shares inadvisable. These may 
include: (1) The extent to which conditions in the underlying silver 
market have caused disruptions and/or lack of trading, or (2) whether 
other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present.

Surveillance

    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products (including Commodity-Based 
Trust Shares) to monitor trading in the Shares. The Exchange represents 
that these

[[Page 71076]]

procedures are adequate to properly monitor Exchange trading of the 
Shares in all trading sessions and to deter and detect violations of 
Exchange rules and applicable federal securities laws.
    The Exchange's current trading surveillance focuses on detecting 
securities trading outside their normal patterns. When such situations 
are detected, surveillance analysis follows and investigations are 
opened, where appropriate, to review the behavior of all relevant 
parties for all relevant trading violations. Also, pursuant to NYSE 
Arca Equities Rule 8.201(h), the Exchange is able to obtain information 
regarding trading in the Shares and the underlying silver, silver 
futures contracts, options on silver futures, or any other silver 
derivative, through ETP Holders acting as registered Market Makers, in 
connection with such ETP Holders' proprietary or customer trades which 
they effect on any relevant market. In addition, the Exchange may 
obtain trading information via the Intermarket Surveillance Group 
(``ISG'') from other exchanges who are members of the ISG.\11\ Also, 
the Exchange has an Information Sharing Agreement with the New York 
Mercantile Exchange (``NYMEX'') for the purpose of sharing information 
in connection with trading in or related to COMEX (a division of NYMEX) 
silver futures contracts.
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    \11\ A list of ISG members is available at http://www.isgportal.org.
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Information Bulletin

    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an Information Bulletin of the special characteristics 
and risks associated with trading the Shares. Specifically, the 
Information Bulletin will discuss the following: (1) The procedures for 
purchases and redemptions of Shares in Baskets (including noting that 
Shares are not individually redeemable and that silver is a wasting 
asset); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty of due 
diligence on its ETP Holders to learn the essential facts relating to 
every customer prior to trading the Shares; (3) how information 
regarding the Intraday Trading Value (``ITV'') is disseminated; (4) the 
requirement that ETP Holders deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; (5) trading information; and (6) the 
risks involved in trading the Shares in the Opening and Late Trading 
Sessions when an updated ITV will not be calculated or publicly 
disseminated.\12\ For example, the Information Bulletin will advise ETP 
Holders, prior to the commencement of trading, of the prospectus 
delivery requirements applicable to the Trust. The Exchange notes that 
investors purchasing Shares directly from the Trust (by delivery of the 
Basket Silver Amount) will receive a prospectus. ETP Holders purchasing 
Shares from the Trust for resale to investors will deliver a prospectus 
to such investors.
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    \12\ See November 12 e-mail, supra, note 7.
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    In addition, the Information Bulletin will reference that the Trust 
is subject to various fees and expenses described in the Registration 
Statement. The Information Bulletin will also reference the fact that 
there is no regulated source of last sale information regarding 
physical silver, that the Commission has no jurisdiction over the 
trading of silver as a physical commodity, and that the CFTC has 
regulatory jurisdiction over the trading of silver futures contracts 
and options on silver futures contracts.
    The Information Bulletin will also discuss any relief, if granted, 
by the Commission or the staff from any rules under the Act.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \13\ of 
the Act 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 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. The proposed rule change will permit the listing and trading 
of the Shares on the Exchange, which the Exchange believes will benefit 
investors and the marketplace.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

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

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

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

III. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-NYSEArca-2008-124 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2008-124. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room, 100 F Street, 
NE, Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2008-124 and should 
be submitted on or before December 15, 2008.

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

    After careful consideration, the Commission finds that the proposed

[[Page 71077]]

rule change 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 believes that the proposal 
is consistent with Section 6(b)(5) of the Act,\16\ which requires, 
among other things, that the rules of a national securities exchange be 
designed 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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    The Exchange proposes to list and trade the Shares pursuant to NYSE 
Arca Equities Rule 8.201. NYSE Arca represents that the Shares satisfy 
the requirements of Rule 8.201, which include initial and continued 
listing criteria to which the Shares will be subject. The Exchange 
deems the Shares to be equity securities, thus subjecting the Shares to 
the Exchange's existing rules governing the trading of equity 
securities. The Shares will trade on the Exchange from 4 a.m. to 8 p.m. 
Eastern Time. The Commission approved the listing and trading of the 
Shares on Amex,\17\ now known as NYSE Alternext US, and trading of the 
Shares pursuant to UTP on NYSE Arca.\18\
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    \17\ See Amex Order, supra, note 4.
    \18\ See UTP Filing, supra, note 5.
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    The Commission believes that the proposal to list and trade the 
Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of 
the Act,\19\ which sets forth Congress' finding that it is in the 
public interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for and transactions in securities. The Exchange states 
that: (1) The representations included in the Amex Order relating to 
the dissemination and availability of information regarding the Shares 
will apply to listing and trading of the Shares on the Exchange; and 
(2) to the extent NYSE Alternext U.S. has any affirmative obligations 
with respect to dissemination of information or key values relating to 
the Shares, the Exchange will assume the role of NYSE Alternext US and 
discharge such obligations. Accordingly, among other things:
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    \19\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    1. The last sale price for the Shares will be disseminated on a 
real-time basis via the facilities of the Consolidated Tape 
Association; \20\
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    \20\ See Amex Order, supra, note 4, 71 FR at 14970.
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    2. Shortly after 4 p.m. each business day, the NAV of the Trust, 
the Basket Silver Amount (for orders properly placed by 4 p.m. during 
the day), and the next day's Indicative Basket Silver Amount are 
disseminated; \21\
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    \21\ Id. at 14969-70.
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    3. The ITV will be disseminated on a per Share basis at least every 
15 seconds between 9:30 a.m. and 4:15 p.m. Eastern Time; \22\
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    \22\ Id. at 14971.
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    4. The Trust's Web site is and will be publicly accessible at no 
charge and will contain, among other things, the NAV of the Silver 
Shares and the Basket Silver Amount as of the prior business day, the 
Indicative Basket Amount, the Bid-Ask Price, and a calculation of the 
premium or discount of the Bid-Ask Price in relation to the closing 
NAV; \23\
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    \23\ Id.
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    5. The Trust's Web site, to which the NYSE Arca will link, will 
also provide data in chart form displaying the frequency distribution 
of discounts and premiums of the Bid-Ask Price against the NAV, within 
appropriate ranges for each of the four previous calendar quarters, the 
Prospectus, and other applicable quantitative information; and \24\
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    \24\ Id. at 14974-75.
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    6. The Exchange will provide a hyperlink on its Web site to the 
Trust's Web site (http://www.iShares.com), which will include, among 
other things a real-time indicative silver spot price through 
TheBullionDesk at http://www.thebuilliondesk.com.\25\
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    \25\ Id. at 14971.
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    The Commission also believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. Under its continued listing standards, after the 12-month 
period following the commencement of trading on the Exchange, the 
Exchange will consider suspending trading in the Shares or removing 
them from listing if: (1) The value of the underlying commodity is no 
longer calculated or available on at least a 15-second delayed basis 
from a source unaffiliated with the sponsor, Trust, custodian or the 
Exchange, or if the Exchange stops providing a hyperlink on its Web 
site to any such unaffiliated commodity value; \26\ or (2) the ITV is 
no longer made available on at least a 15-second delayed basis.\27\ 
With respect to trading halts, the Exchange may consider all relevant 
factors in exercising its discretion to halt or suspend trading in the 
Shares.\28\ Specifically, however, if the Exchange becomes aware that 
the NAV is not being disseminated to all market participants at the 
same time, it will halt trading in the Shares until such time as the 
NAV is available to all market participants pursuant to NYSE Arca 
Equities Rule 7.34(a)(5).
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    \26\ See NYSE Arca Equities Rule 8.201(e)(2)(iv).
    \27\ See NYSE Arca Equities Rule 8.201(e)(2)(v).
    \28\ Trading may be halted because of market conditions or for 
reasons that make trading in the Shares inadvisable, including: (1) 
The extent to which trading is not occurring in the underlying 
securities; or (2) whether other unusual conditions or circumstances 
detrimental to the maintenance of a fair and orderly market are 
present.
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    Further, NYSE Arca Equities Rule 8.201 sets forth certain 
restrictions (described above) on ETP Holders acting as registered 
Market Makers in the Shares to facilitate surveillance. The Exchange 
states that it has regulatory jurisdiction over its ETP Holders and 
their associated persons, which include any person or entity 
controlling an ETP Holder, as well as a subsidiary or affiliate of an 
ETP Holder that is in the securities business. A subsidiary or 
affiliate of an ETP Holder that does business only in commodities or 
futures contracts would not be subject to Exchange jurisdiction, but 
the Exchange states that it can obtain information regarding the 
activities of such subsidiary or affiliate through surveillance sharing 
agreements with regulatory organizations of which such subsidiary or 
affiliate is a member.
    In support of this proposal, the Exchange has made the following 
representations:
    (1) The Shares satisfy the requirements of NYSE Arca Equities Rule 
8.201, which includes the initial and continued listing criteria for 
Commodity-Based Trust Shares.
    (2) The Exchange's surveillance procedures are adequate to properly 
monitor trading of the Shares in all trading sessions and to deter and 
detect violations of Exchange rules and applicable federal securities 
laws.
    (3) The Exchange will distribute an Information Bulletin, the 
contents of which are more fully described above, to ETP Holders in 
connection with the trading of the Shares.
This approval order is based on the Exchange's representations.
    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\29\ for approving the proposed rule

[[Page 71078]]

change prior to the 30th day after the date of publication of notice in 
the Federal Register. Previously, the Commission approved the listing 
and trading of the Shares on Amex,\30\ and the trading of the Shares 
pursuant to UTP on the Exchange.\31\ The Exchange's proposal to list 
and trade the Shares does not appear to present any novel or 
significant regulatory issues.
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    \29\ 15 U.S.C. 78s(b)(2).
    \30\ See Amex Order, supra, note 4.
    \31\ See UTP Filing, supra, note 5.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\32\ that the proposed rule change (SR-NYSEArca-2008-124) be, and 
it hereby is, approved on an accelerated basis.
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    \32\ 15 U.S.C. 78s(b)(2).
    \33\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-27879 Filed 11-21-08; 8:45 am]
BILLING CODE 8011-01-P