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SECURITIES AND EXCHANGE COMMISSION

Securities and Exchange Commission

DOCUMENT ID: [Release No. 34-56888; File No. SR-NYSEArca-2007-124]

NOTICE: NOTICES

ACTION: Self-regulatory organizations; proposed rule changes:

SUBJECT CATEGORY: Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the Closing Auction Time for Exchange Traded Funds

DOCUMENT SUMMARY: December 3, 2007.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b4 thereunder,\2\ notice is hereby given that on November 30, 2007, NYSE Arca, Inc. (``NYSE Arca'' or the ``Exchange''), through its wholly owned subsidiary, NYSE Arca Equities, Inc. (``NYSE Arca Equities''), 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 substantially prepared by NYSE Arca. The Exchange filed the proposal as a ``non
controversial'' proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b4(f)(6) thereunder,\4\ which renders it effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b4(f)(6).
I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange proposes to amend NYSE Arca Equities Rule 7.35(e)(3)(E) in order to change the closing auction time for Exchange Traded Funds (``ETFs'') from 1:15 p.m. Pacific Time (``PT'') to 1 p.m. PT. The text of the proposed rule change is available at the Exchange's principal office, the Commission's Public Reference Room, and http://www.nysearca.com .
II. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, NYSE Arca 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. SelfRegulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change

1. Purpose

The Exchange proposes to amend NYSE Arca Equities Rule 7.35(e)(3)(E) in order to change the closing auction time for Exchange Traded Funds (``ETFs'') from 1:15 p.m. PT to 1 p.m. PT.\5\
\5\ The Exchange is not proposing to amend the manner in which the closing auction operates, merely the time at which the closing auction for ETFs will occur. See NYSE Arca Equities Rule 7.35(e).

Presently, closing auctions for ETFs listed on NYSE Arca are conducted at 1:15 p.m. PT. Historically, ETFs were frequently hedged by transactions in futures traded on the Chicago Mercantile Exchange, which closes its equity futures trading session at 1:15 p.m. PT. Certain marketplaces, however, such as the American Stock Exchange (``Amex''), which previously was the only exchange actively pursuing these listings, does not offer afterhours trading. Instead, conducting the closing auction for ETFs at 1:15 p.m. PT was the means by which Amex accommodated this hedge strategy. Other marketplaces simply followed this arbitrary timing structure, including NYSE Arca.

Now, however, there is no longer any meaningful reason for NYSE Arca to conduct its Closing Auctions for ETFs at 1:15 p.m. PT as opposed to 1 p.m. PT for all equities. The historical reasoning is outdated and is not practical for securities listed on NYSE Arca, because it offers no benefit to investors in our marketplace that offers trading in three distinct sessions, one of which extends until 5 p.m. PT. Indeed, the arbitrary time for closing auctions for ETFs may lead to unnecessary confusion. For starters, NYSE Arca offers a Late Trading Session for all equities, including ETFs, from the close of the Core Trading Session until 5 p.m. PT. In addition, fund managers calculate the
[[Page 70367]]
daily net asset value (``NAV'') of ETFs when equity markets close, typically 1 p.m. PT. Since ETFs trade until 1:15 p.m. PT, their closing price, which is the recorded price of the last trade, is often different than its NAV, calculated 15 minutes earlier. By synchronizing the closing auctions for ETFs with the close of the Exchange's Core Trading Session, an ETF's closing price will be better aligned with its NAV.

The Exchange intends this system change to be effective on filing and operative on January 1, 2008. By amending the time of the Closing Auction for ETFs from 1:15 p.m. PT to 1 p.m. PT, users will benefit from a better alignment of an ETF's NAV and closing price.

2. Statutory Basis

The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act \6\ in general, and furthers the objectives of Section 6(b)(5) of the Act \7\ in particular, because 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 facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. \6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
B. SelfRegulatory 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. SelfRegulatory 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. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

Because the foregoing proposed rule change does not: (1) Significantly affect the protection of investors or the public interest; (2) impose any significant burden on competition; and (3) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, it has become effective pursuant to Section 19(b)(3)(A) of the Act \8\ and Rule 19b 4(f)(6) thereunder.\9\
\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b4(f)(6). In addition, NYSE Arca has given the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date on which the Exchange filed the proposed rule change. See 17 CFR 240.19b 4(f)(6)(iii).

At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in the furtherance of the purposes of the Act.

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 email to rulecomments@sec.gov. Please include File Number SRNYSEArca2007124 on the subject line.
    Paper Comments
  • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 205491090.
    All submissions should refer to File Number SRNYSEArca2007124. This file number should be included on the subject line if email 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 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 SRNYSEArca2007124 and should be submitted on or before January 2, 2008.

    For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\10\
    \10\ 17 CFR 200.303(a)(12).
    Florence E. Harmon,
    Deputy Secretary.
    [FR Doc. E723918 Filed 121007; 8:45 am]
    BILLING CODE 801101P

    SUMMARY: NYSE Arca, Inc.,


    DOCUMENT BODY 2: December 3, 2007.

    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b4 thereunder,\2\ notice is hereby given that on November 30, 2007, NYSE Arca, Inc. (``NYSE Arca'' or the ``Exchange''), through its wholly owned subsidiary, NYSE Arca Equities, Inc. (``NYSE Arca Equities''), 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 substantially prepared by NYSE Arca. The Exchange filed the proposal as a ``non
    controversial'' proposed rule change pursuant to Section
    19(b)(3)(A)(iii) of the Act \3\ and Rule 19b4(f)(6) thereunder,\4\ which renders it effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b4(f)(6).
    I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

    The Exchange proposes to amend NYSE Arca Equities Rule 7.35(e)(3)(E) in order to change the closing auction time for Exchange Traded Funds (``ETFs'') from 1:15 p.m. Pacific Time (``PT'') to 1 p.m. PT. The text of the proposed rule change is available at the Exchange's principal office, the Commission's Public Reference Room, and http://www.nysearca.com .
    II. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NYSE Arca 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. SelfRegulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change

    1. Purpose

    The Exchange proposes to amend NYSE Arca Equities Rule 7.35(e)(3)(E) in order to change the closing auction time for Exchange Traded Funds (``ETFs'') from 1:15 p.m. PT to 1 p.m. PT.\5\
    \5\ The Exchange is not proposing to amend the manner in which the closing auction operates, merely the time at which the closing auction for ETFs will occur. See NYSE Arca Equities Rule 7.35(e).

    Presently, closing auctions for ETFs listed on NYSE Arca are conducted at 1:15 p.m. PT. Historically, ETFs were frequently hedged by transactions in futures traded on the Chicago Mercantile Exchange, which closes its equity futures trading session at 1:15 p.m. PT. Certain marketplaces, however, such as the American Stock Exchange (``Amex''), which previously was the only exchange actively pursuing these listings, does not offer afterhours trading. Instead, conducting the closing auction for ETFs at 1:15 p.m. PT was the means by which Amex accommodated this hedge strategy. Other marketplaces simply followed this arbitrary timing structure, including NYSE Arca.

    Now, however, there is no longer any meaningful reason for NYSE Arca to conduct its Closing Auctions for ETFs at 1:15 p.m. PT as opposed to 1 p.m. PT for all equities. The historical reasoning is outdated and is not practical for securities listed on NYSE Arca, because it offers no benefit to investors in our marketplace that offers trading in three distinct sessions, one of which extends until 5 p.m. PT. Indeed, the arbitrary time for closing auctions for ETFs may lead to unnecessary confusion. For starters, NYSE Arca offers a Late Trading Session for all equities, including ETFs, from the close of the Core Trading Session until 5 p.m. PT. In addition, fund managers calculate the
    [[Page 70367]]
    daily net asset value (``NAV'') of ETFs when equity markets close, typically 1 p.m. PT. Since ETFs trade until 1:15 p.m. PT, their closing price, which is the recorded price of the last trade, is often different than its NAV, calculated 15 minutes earlier. By synchronizing the closing auctions for ETFs with the close of the Exchange's Core Trading Session, an ETF's closing price will be better aligned with its NAV.

    The Exchange intends this system change to be effective on filing and operative on January 1, 2008. By amending the time of the Closing Auction for ETFs from 1:15 p.m. PT to 1 p.m. PT, users will benefit from a better alignment of an ETF's NAV and closing price.

    2. Statutory Basis

    The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act \6\ in general, and furthers the objectives of Section 6(b)(5) of the Act \7\ in particular, because 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 facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    B. SelfRegulatory 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. SelfRegulatory 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. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

    Because the foregoing proposed rule change does not: (1) Significantly affect the protection of investors or the public interest; (2) impose any significant burden on competition; and (3) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, it has become effective pursuant to Section 19(b)(3)(A) of the Act \8\ and Rule 19b 4(f)(6) thereunder.\9\
    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b4(f)(6). In addition, NYSE Arca has given the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date on which the Exchange filed the proposed rule change. See 17 CFR 240.19b 4(f)(6)(iii).

    At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in the furtherance of the purposes of the Act.

    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 email to rulecomments@sec.gov. Please include File Number SRNYSEArca2007124 on the subject line.
    Paper Comments
  • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 205491090.
    All submissions should refer to File Number SRNYSEArca2007124. This file number should be included on the subject line if email 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 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 SRNYSEArca2007124 and should be submitted on or before January 2, 2008.

    For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\10\
    \10\ 17 CFR 200.303(a)(12).
    Florence E. Harmon,
    Deputy Secretary.
    [FR Doc. E723918 Filed 121007; 8:45 am]
    BILLING CODE 801101P


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