August 4, 2005

Jack P. Drogin, Esq.
Morgan, Lewis & Bockius LLP
1111 Pennsylvania Ave, NW
Washington, DC 20004

Dear Mr. Drogin:

In your letter dated August 1, 2005,¹ as supplemented by conversations with the staff of the Division of Market Regulation (the "Staff"), the iShares Trust (the "Trust") on behalf of itself, the NYSE, and persons or entities engaging in transactions in iShares, requests exemptive, interpretive, or no-action advice regarding Section 11(d)(1) of the Exchange Act and Rules 10a 1, 10b-10, 10b-17, 11d1-2, 14e-5, 15c1-5 and 15c1-6 thereunder, Rules 101 and 102 of Regulation M, and Rule 200(g) of Regulation SHO under the Exchange Act, in connection with secondary market transactions in iShares on the NYSE and the creation and redemption of Creation Unit Aggregations of iShares.

The Trust is an open-end management investment company, organized as a Delaware business trust on December 16, 1999, and initially consisting of 35 investment series or funds. The Trust previously received relief from the above-described rules for the creation, redemption and trading of those series on the American Stock Exchange.² The Trust has registered over 70 investment series. The Growth Fund and the Value Fund are two additional series that invest in the component securities (the "Component Securities") of the MSCI EAFE Growth Index and the MSCI EAFE Value Index, respectively (collectively, the "Underlying Indices") to track investment results that correspond generally to the price and yield performance of the Underlying Indices.³ Each Requesting Fund's iShares are listed for trading on the NYSE.

The NYSE's proposed rule change regarding the listing and trading of iShares of the Requesting Funds was approved by the Commission pursuant to Section 19(b) of the Exchange Act on July 29, 2005.⁴

Response:

The Requesting Funds are structurally identical to the initial series issued by the Trust and approved by the Commission. The Underlying Indices that the Requesting Funds track are of sufficient size and represent liquid securities. Therefore, the relief afforded to the Trust in the TP 00-39 Letter is extended to cover trading in the Requesting Funds, as described in that letter and subject to the same limitations and conditions.

Rule 200(g) of Regulation SHO provides that a broker-dealer must mark all sell orders of any equity security as "long," "short," or "short exempt." Rule 200(g)(2) requires that a short sale order must be marked "short exempt" if the seller is relying on an exception from the tick test of Rule 10a-1 of the Exchange Act or any short sale price test of any exchange or national securities association.

Accordingly, in conjunction with the exemption granted herein to permit sales of iShares without regard to the "tick" requirements of Rule 10a-1, on the basis of your representations and the facts presented, and without necessarily concurring in your analysis, the Staff will not recommend to the Commission enforcement action under Rule 200(g) of Regulation SHO if a broker-dealer marks "short," rather than "short exempt," a short sale that is effected in iShares, subject to the following conditions:

1. For each exempt short sale, the various market centers that execute such sales have instituted procedures to "mask" the short sale character of the transaction so that they are executed as short exempt;
    
2. Such market centers monitor on a regular basis to confirm that any such product or transaction continues to meet the conditions for the exemptive relief and re-institute the price test for any product or transaction that fails to satisfy such conditions;
    
3. A broker-dealer executing exempt short sales will mark such sales as "short," and in no event will such sales be marked "long;" and
    
4. The market centers will maintain an audit trail of all such trade executions, which is capable of being produced and subject to review upon request by the Commission and other appropriate regulatory authorities.⁵
    

The foregoing exemptions from Rules 10a-1, 10b-10, 10b-17, 14e-5, interpretations of Rules 101 and 102 of Regulation M, and no-action positions taken under Section 11(d)(1) and Rules 11d1-2, 15c1-5, and 15c1-6 and Regulation SHO under the Exchange Act are based solely on your representations and the facts presented to the Staff, and are strictly limited to the application of those rules to transactions involving iShares under the circumstances described above and in your letter. Such transactions should be discontinued, pending presentation of the facts for our consideration, in the event that any material change occurs with respect to any of those facts or representations. Moreover, the foregoing exemptions from Rules 10a-1, 10b-10, 10b-17, and 14e-5, interpretations of Rules 101 and 102 of Regulation M and no-action positions taken under Section 11(d)(1) and Rules 11d1-2, 15c1-5, and 15c1-6 and Regulation SHO under the Exchange Act are subject to the condition that such transactions in iShares, any Component Security, or any related securities are not made for the purpose of creating actual, or apparent, active trading in or raising or otherwise affecting the price of such securities.

These exemptions, interpretations, and no-action positions are subject to modification or revocation if at any time the Commission or Staff determines that such action is necessary or appropriate in furtherance of the purposes of the Exchange Act. In addition, persons relying on these exemptions, interpretations, and no-action positions are directed to the anti-fraud and anti-manipulation provisions of the Exchange Act, particularly Sections 9(a), 10(b), and Rule 10b-5 thereunder. Responsibility for compliance with these and other provisions of the federal or state securities laws must rest with persons relying on these exemptions, interpretations, and no-action positions. The Staff expresses no view with respect to other questions that the proposed transactions may raise, including, but not limited to, the adequacy of disclosure concerning, and the applicability of other federal and state laws to, the proposed transactions.

Endnotes

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¹ We have enclosed a photocopy of your letter. Each defined term in this letter has the same meaning as defined in your letter, unless we note otherwise.

² See Letter from James A. Brigagliano, Assistant Director, Division of Market Regulation, to Kathleen Moriarty, Carter, Ledyard & Milburn, dated May 16, 2000, File No. TP 00-39 (the "TP 00-39 Letter"). The Trust has not previously sought relief from Regulation SHO.

³ The Underlying Indices are subsets of the MSCI EAFE Index, which is a composite of MSCI single country equity indices. The Requesting Funds will select Component Securities according to a Representative Sampling strategy which approximates the composition and performance of the Underlying Indices without necessarily owning each security in the Underlying Indices.

⁴ See Securities Exchange Act Release No. 34-52178 (July 29, 2005).

⁵ See also, Letter from James A. Brigagliano, Division of Market Regulation, to Ira Hammerman, dated January 3, 2005, File No. TP 05-11 (granting relief from Regulation SHO with regard to ETFs that had previously been granted an exemption from a price test).

Incoming Letter:

The Incoming Letter is in Acrobat format.

http://www.sec.gov/divisions/marketreg/mr-noaction/ishares080405.htm