[Federal Register Volume 74, Number 52 (Thursday, March 19, 2009)]
[Notices]
[Pages 11794-11797]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-5928]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59562; File No. SR-NYSEArca-2009-20]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to the Listing and Trading of the 
Safety First Trust Certificates Linked to the S&P 500[supreg] Index

March 12, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on March 6, 2009, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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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 Exchange, through its wholly-owned subsidiary NYSE Arca 
Equities, Inc. (``NYSE Arca Equities'' or the ``Corporation''), 
proposes to list under NYSE Arca Equities Rule 5.2(j)(7) (``Trust 
Certificates'') Safety First Trust Series 2009-1, Principal-Protected 
Trust Certificates Linked to the S&P 500[supreg] Index. The text of the 
proposed rule change is available on the Exchange's Web site at http://www.nyse.com, at the

[[Page 11795]]

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 IV 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
    Trust Certificates are certificates representing an interest in a 
special purpose trust created pursuant to a trust agreement. The trust 
only issues Trust Certificates, which may or may not provide for the 
repayment of the original principal investment amount. The sole purpose 
of the trust is to invest the proceeds from its initial public offering 
to provide for a return linked to the performance of specified assets 
and to engage only in activities incidental to these objectives. Trust 
Certificates pay an amount at maturity based upon the performance of an 
underlying index or indexes of equity securities an (``Equity Index 
Reference Asset''); instruments that are direct obligations of the 
issuing company, either exercisable throughout their life (i.e., 
American style) or exercisable only on their expiration date (i.e., 
European style), entitling the holder to a cash settlement in U.S. 
dollars to the extent that the foreign or domestic index has declined 
below (for a put warrant) or increased above (for a call warrant) the 
pre-stated cash settlement value of the index (``Index Warrants''); or 
a combination of two or more Equity Index Reference Assets or Index 
Warrants, as set forth in Rule 5.2(j)(7).
    The Exchange proposes to list under Rule 5.2(j)(7) the Safety First 
Trust Series 2009-1, Principal-Protected Trust Certificates Linked to 
the S&P 500[supreg] Index (``Certificates'').\3\ According to the 
Registration Statement, the Certificates are preferred securities of 
Safety First Trust Series 2009-1 (``Trust'') and will mature on a 
specified date in 2014 (``Maturity Date'').\4\ Investors will receive 
at maturity for each certificate held intact (that is, that has not 
been exchanged by the holder, as described below) an amount in cash 
equal to $10 plus a ``Supplemental Distribution Amount,'' which may be 
positive or zero. The Supplemental Distribution Amount will be based on 
the percentage change of the value of the S&P 500 Index (``Index'') 
during the term of the Certificates. The Supplemental Distribution 
Amount for each Certificate will equal the product of (a) $10, (b) the 
percentage change in the value of the Index and (c) the Participation 
Rate, which is 90%-100%,\5\ provided that the Supplemental Distribution 
Amount will not be less than zero.\6\
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    \3\ See the Registration Statement for Safety First Trust Series 
2009-1, dated October 31, 2008 (Nos. 333-154914, 154914-08, 154914-
11); Registration Statement for Safety First Trust Series 2009-1, 
dated February 19, 2009 (Nos. 333-157386 and 333-157386-01) 
(``Registration Statements'').
    \4\ The Certificates will be subject to acceleration to an 
earlier Maturity Date upon one of the acceleration events described 
in the Registration Statements.
    \5\ The Participation Rate will be determined at the time of 
issuance of the Certificates.
    \6\ The Trust payments will not be guaranteed pursuant to a 
financial guaranty insurance policy.
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    A holder of the Certificates has an interest in two separate 
securities--equity index participation securities (``Securities'') and 
equity index warrants (``Warrants'') of Citigroup Funding Inc.\7\ The 
assets of the Trust will consist of the Securities and the Warrants. 
Beginning on the date the Certificates are issued and ending one 
business day prior to the Valuation Date,\8\ a holder can exercise an 
``exchange right.'' A holder can exercise the exchange right by 
providing notice to his or her broker and instructing the broker to 
forward that notice to the institutional trustee for the Certificates 
(U.S. Bank National Association), on any business day, to exchange the 
Certificates the investor holds for a pro rata portion of the assets of 
the Trust, which consist of the Securities and the Warrants. According 
to the Registration Statement, such holders will lose the benefit of 
principal protection at maturity, and this could result in their 
receiving substantially less than the amount of the original investment 
in the Certificates. In order to exercise the exchange right, the 
investor's account must be approved for options trading.\9\
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    \7\ The Securities and Warrants will not be exchange-listed and 
may trade over-the-counter.
    \8\ Capitalized terms used but not defined herein have the 
meanings set forth in the Registration Statements.
    \9\ See NYSE Arca Equities Rule 5.2(j)(7), Commentary .08.
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    The Securities will mature on the Maturity Date. At maturity, each 
Security will pay a ``Security Payment'' equal to $10 plus a ``Security 
Return Amount,'' which could be positive, zero or negative. If the 
value of the Index on the Valuation Date is greater than its value on 
the pricing date, the Security Return Amount for each Security will 
equal the product of (a) $10, (b) the percentage increase in the Index 
and (c) the Participation Rate, which equals 90%-100% (e.g., assuming a 
Participation Rate of 90%, if the Index rises 30%, the Security Return 
Amount would be $2.70 ($10 times 0.30 times 0.90), and the Security 
Payment would be $12.70 ($10 plus $2.70)).
    If the value of the Index on the Valuation Date is less than or 
equal to its value on the pricing date, the Security Return Amount for 
each security will equal the product of (a) $10 and (b) the percentage 
decrease in the Index. Thus, because the holder's participation in the 
depreciation of the S&P 500 is not limited by the Participation Rate, 
if the value of the Index on the Valuation Date is less than its value 
on the pricing date, investors will participate fully in the 
depreciation of the Index (e.g., if the Index falls 30%, the Security 
Return Amount would be $3.00 ($10 times 0.30) and the Security Payment 
would be $7.00 ($10 minus $3.00). The Security Return Amount will be 
used only for the purpose of determining the Security Payment for the 
Securities and is different from the Supplemental Distribution Amount 
used in determining the maturity payment on the Certificates.
    The Warrants will be automatically exercised on the Maturity Date. 
If the value of the Index increases or does not change, the Warrants 
will pay zero. If the value of the Index decreases, the warrants will 
pay a positive amount equal to the product of (a) $10 and (b) the 
percentage decrease in the value of the Index.
    The Certificates are similar to securities previously approved by 
the Commission for listing on the Exchange, including Trust 
Certificates issued by Citigroup Funding, Inc. based on the Index.\10\ 
At least one million publicly

[[Page 11796]]

held trading units will be issued prior to listing and trading on the 
Exchange, with at least 400 public beneficial holders. The issuer of 
the Certificates, Citigroup Funding, Inc., has total assets of at least 
$100 million and net worth of at least $10 million. In addition, the 
issuer will be required to have a minimum tangible net worth of 
$250,000,000, and, in the alternative, the issuer will be required to 
have a minimum tangible net worth of $150,000,000 and the original 
issue price of the Certificates combined with all of the issuer's other 
Trust Certificates listed on a national securities exchange or 
otherwise publicly traded in the United States, must not be greater 
than 25 percent of the issuer's tangible net worth at the time of 
issuance.\11\ The Certificates also will be subject to the continued 
listing criteria of Rule 5.2(j)(7) \12\ and will meet all other 
criteria of Rule 5.2(j)(7).
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    \10\ See Securities Exchange Act Release No. 59051 (December 4, 
2008), 73 FR 75155 (December 10, 2008) (SR-NYSEArca-2008-123) (order 
approving Rule 5.2(j)(7) and listing on the Exchange of 14 issues 
thereunder). Three of the issues in SR-NYSEArca-2008-123 related to 
Trust Certificates based on the Index: Safety First Investments 
TIERS[supreg] Principal-Protected Minimum Return Trust Certificates, 
Series S&P 2003-23; Safety First Trust Series 2008-2 Principal-
Protected Trust Certificates Linked to the Index; and Safety First 
Trust Series 2008-4 Principal-Protected Trust Certificates Linked to 
the Index. The Certificates have similar characteristics and payout 
provisions to the Trust Certificates approved by the Commission in 
SR-NYSEArca-2008-123.
    \11\ The parameters relating to number of units, number of 
public beneficial holders and issuer assets and net worth and 
minimum tangible net worth are similar to those in NYSE Arca 
Equities Rule 5.2(j)(6)(A).
    \12\ Commentary .01 provides criteria for continued listing and 
provides that the Corporation will commence delisting or removal 
proceedings with respect to an issue of Trust Certificates (unless 
the Commission has approved the continued trading of such issue) (i) 
if the aggregate market value or the principal amount of the 
securities publicly held is less than $400,000; (ii) if the value of 
the index or composite value of the indexes is no longer calculated 
or widely disseminated on at least a 15-second basis with respect to 
indexes containing only securities listed on a national securities 
exchange, or on at least a 60-second basis with respect to indexes 
containing foreign country securities; or (iii) if such other event 
shall occur or condition exists which in the opinion of the 
Corporation makes further dealings on the Corporation inadvisable.
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    Additional information relating to Citigroup Funding, Inc., the 
Trust, Certificates, Securities, Warrants, exercise right, Security 
Return Amount, Supplemental Distribution Amount, and risks is included 
in the Registration Statements.
    Exchange Rules Applicable to Trust Certificates
    The Certificates will be subject to all Exchange rules governing 
the trading of equity securities. The Exchange's equity margin rules 
will apply to transactions in Trust Certificates. The Certificates will 
trade during trading hours set forth in Rule 7.34(a).\13\
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    \13\ Pursuant to NYSE Arca Equities Rule 7.34(a), the NYSE Arca 
Marketplace will have three trading sessions each day the 
Corporation is open for business unless otherwise determined by the 
Corporation:
    Opening Session--begins at 1:00:00 a.m. (Pacific Time) and 
concludes at the commencement of the Core Trading Session. The 
Opening Auction and the Market Order Auction shall occur during the 
Opening Session.
    Core Trading Session--begins for each security at 6:30:00 a.m. 
(Pacific Time) or at the conclusion of the Market Order Auction, 
whichever comes later, and concludes at 1:00:00 p.m. (Pacific Time).
    Late Trading Session--begins following the conclusion of the 
Core Trading Session and concludes at 5:00:00 p.m. (Pacific Time).
    Telephone conversation between Michael Cavalier, Chief Counsel, 
NYSE Euronext, and Edward Cho, Special Counsel, Division of Trading 
and Markets, Commission, dated March 11, 2009.
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    Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in Trust Certificates. Trading may be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in Trust Certificates inadvisable. These may include: (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.\14\
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    \14\ See NYSE Arca Equities Rule 7.12, Commentary .04.
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    Information Dissemination
    The value of the Index is calculated and disseminated on at least a 
15-second basis. If the Index is not being disseminated as required, 
the Exchange may halt trading during the day on which the interruption 
first occurs. If such interruption persists past the trading day in 
which it occurred, the Exchange will halt trading no later than the 
beginning of the trading day following the interruption.
    Quotation and last sale information will be disseminated by the 
Exchange via the Consolidated Tape. The value of the Index is widely 
disseminated by major market data vendors and financial publications.
    Firewalls
    Standard & Poor's (``S&P''),\15\ which publishes the Index, is not 
a registered broker-dealer, and Citigroup Funding, Inc. is not 
affiliated with S&P. With respect to any index upon which the value of 
an issue of Trust Certificates is based that is maintained by a broker-
dealer, the Exchange would require that such broker-dealer erect a 
``firewall'' around personnel responsible for the maintenance of such 
index or who have access to information concerning adjustments to the 
index, and the index would be required to be calculated by a third 
party who is not a broker-dealer.
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    \15\ S&P is a division of The McGraw-Hill Companies, Inc.
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    Surveillance
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products, which include Trust 
Certificates, to monitor trading in the securities. The Exchange 
represents that these procedures are adequate to properly monitor 
Exchange trading of the securities 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 
when securities trade 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.
    The Exchange may obtain information via ISG from other exchanges 
who are members of the ISG.\16\
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    \16\ For a list of current members of the ISG, see http://www.isgportal.org.
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    In addition, the Exchange also has a generally policy prohibiting 
the distribution of material, non-public information by its employees.
    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 an issue of Trust Certificates and 
suitability recommendation requirements.
    Specifically, the Information Bulletin will discuss the following: 
(1) The procedures for purchases and exchanges of Trust Certificates; 
(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 an issue of Trust Certificates; (3) 
trading hours; and (4) trading information.
    In addition, the Information Bulletin will reference that an issue 
of Trust Certificates is subject to various fees and expenses described 
in the applicable prospectus.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \17\ of 
the Act in general and furthers the objectives of Section 6(b)(5) \18\ 
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 listing on the Exchange 
in a timely manner of the

[[Page 11797]]

Certificates. The Exchange believes that the provisions of Rule 
5.2(j)(7), together with the Exchange's applicable surveillance, serve 
to foster investor protection and the public interest.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 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. 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 Exchange consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.
    The Exchange has requested accelerated approval of this proposed 
rule change prior to the 30th day after the date of publication of the 
notice in the Federal Register. The Commission is considering granting 
accelerated approval of the proposed rule change at the end of a 21-day 
comment period.

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. 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 No. SR-NYSEArca-2009-20 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2009-20. 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, 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-2009-20 and should be submitted on or before 
April 9, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-5928 Filed 3-18-09; 8:45 am]
BILLING CODE 8011-01-P