Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change and Amendment No. 1 Thereto To List for Trading Options on the iShares MSCI Emerging Markets Index Fund, 19568-19571 [E6-5548]
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19568
Federal Register / Vol. 71, No. 72 / Friday, April 14, 2006 / Notices
withdrawal liability under section 4219
of ERISA unless an applicable plan
provision provides otherwise. For
interest accruing during any calendar
quarter, the specified rate is the average
quoted prime rate on short-term
commercial loans for the fifteenth day
(or the next business day if the fifteenth
day is not a business day) of the month
preceding the beginning of the quarter,
as reported by the Board of Governors
of the Federal Reserve System in
Statistical Release H.15 (‘‘Selected
Interest Rates’’). The rate for the second
quarter (April through June) of 2006
(i.e., the rate reported for March 15,
2005) is 7.50 percent.
The following table lists the
withdrawal liability underpayment and
overpayment interest rates for the
specified time periods:
From—
Through—
4/1/00 ................
7/1/00 ................
4/1/01 ................
7/1/01 ................
10/1/01 ..............
1/1/02 ................
1/1/03 ................
10/1/03 ..............
10/1/04 ..............
1/1/05 ................
4/1/05 ................
7/1/05 ................
10/1/05 ..............
1/1/06 ................
4/1/06 ................
Interest rate
(percent)
6/30/00
3/31/01
6/30/01
9/30/01
12/31/01
12/31/02
9/30/03
9/30/04
12/31/04
3/31/05
6/30/05
9/30/05
12/31/05
3/31/06
6/30/06
8.75
9.50
8.50
7.00
6.50
4.75
4.25
4.00
4.50
5.25
5.50
6.00
6.50
7.25
7.50
Multiemployer Plan Valuations
Following Mass Withdrawal
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The PBGC’s regulation on Duties of
Plan Sponsor Following Mass
Withdrawal (29 CFR part 4281)
prescribes the use of interest
assumptions under the PBGC’s
regulation on Allocation of Assets in
Single-Employer Plans (29 CFR part
4044). The interest assumptions
applicable to valuation dates in May
2006 under part 4044 are contained in
an amendment to part 4044 published
elsewhere in today’s Federal Register.
Tables showing the assumptions
applicable to prior periods are codified
in appendix B to 29 CFR part 4044.
Issued in Washington, DC, on this 7th day
of April 2006.
Vincent K. Snowbarger,
Deputy Executive Director, Pension Benefit
Guaranty Corporation.
[FR Doc. 06–3571 Filed 4–13–06; 8:45 am]
BILLING CODE 7709–01–P
VerDate Aug<31>2005
16:37 Apr 13, 2006
RAILROAD RETIREMENT BOARD
100 F Street, NE., Washington,
DC.
Agency Forms Submitted for OMB
Review
SUMMARY: In accordance with the
Paperwork Reduction Act of 1995 (44
U.S.C. Chapter 35), the Railroad
Retirement Board (RRB) has submitted
the following proposal(s) for the
collection of information to the Office of
Management and Budget for review and
approval.
Summary of Proposal(s)
(1) Collection title: Nonresident
Questionnaire.
(2) Form(s) submitted: RRB–1001.
(3) OMB Number: 3220–0145.
(4) Expiration date of current OMB
clearance: 7/31/2006.
(5) Type of request: Extension of a
currently approved collection.
(6) Respondents: Individuals or
households.
(7) Estimated annual number of
respondents: 1,300.
(8) Total annual responses: 1,300.
(9) Total annual reporting hours: 650.
(10) Collection description: Under the
Railroad Retirement Act, the benefits
payable to an annuitant living outside
the United States may be subject to
withholding under Public Laws 98–21
and 98–76. The form obtains the
information needed to determine the
amount to be withheld.
Additional Information or Comments:
Copies of the forms and supporting
documents can be obtained from
Charles Mierzwa, the agency clearance
officer (312–751–3363) or
Charles.Mierzwa@rrb.gov.
Comments regarding the information
collection should be addressed to
Ronald J. Hodapp, Railroad Retirement
Board, 844 North Rush Street, Chicago,
Illinois 60611–2092 or
Ronald.Hodapp@rrb.gov and to the
OMB Desk Officer for the RRB, at the
Office of Management and Budget,
Room 10230, New Executive Office
Building, Washington, DC 20503.
Charles Mierzwa,
Clearance Officer.
[FR Doc. E6–5540 Filed 4–13–06; 8:45 am]
BILLING CODE 7905–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting Notice
FEDERAL REGISTER CITATION OF PREVIOUS
ANNOUNCEMENT: [71 FR 18788, April 12,
2006]
STATUS:
Jkt 208001
PLACE:
PO 00000
ANNOUNCEMENT OF ADDITIONAL MEETING:
Additional Meeting (Week of April 10,
2006).
A Closed Meeting has been scheduled
for Thursday, April 13, 2006 at 9 a.m.
Commissioners and certain staff
members who have an interest in the
matter will attend the Closed Meeting.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(5), (7), (9)(B) and (10)
and 17 CFR 200.402(a)(5), (7), 9(ii) and
(10) permit consideration of the
scheduled matter at the Closed Meeting.
Commissioner Glassman, as duty
officer, voted to consider the items
listed for the closed meeting in closed
session, and determined that no earlier
notice thereof was possible.
The subject matter of the Closed
Meeting scheduled for Thursday, April
13, 2006 will be: Institution and
settlement of injunctive actions.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items. For further
information and to ascertain what, if
any, matters have been added, deleted
or postponed, please contact: The Office
of the Secretary at (202) 551–5400.
Dated: April 12, 2006.
Nancy M. Morris,
Secretary.
[FR Doc. 06–3652 Filed 4–12–06; 3:48 pm]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53621; File No. SR–CBOE–
2006–32]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Order Granting Accelerated Approval
of Proposed Rule Change and
Amendment No. 1 Thereto To List for
Trading Options on the iShares MSCI
Emerging Markets Index Fund
April 10, 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 April 5,
2006, the Chicago Board Options
Exchange, Incorporated (‘‘CBOE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
1 15
Closed Meeting.
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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change as described in Items I and II
below, which Items have been prepared
by the Exchange. On April 6, 2006, the
CBOE filed Amendment No. 1 to the
proposed rule change.3 The Commission
is publishing this notice and order to
solicit comments on the proposal from
interested persons and to approve the
proposed rule change, as amended, on
an accelerated basis.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade options on the iShares MSCI
Emerging Markets Index Fund (‘‘Fund
Options’’). The text of the proposed rule
change is available on the Exchange’s
Web site (https://www.cboe.com), at the
Office of the Secretary, CBOE and at the
Commission.
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. 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
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1. Purpose
The Exchange seeks approval to list
for trading on the Exchange options on
the iShares MSCI Emerging Markets
Index Fund (‘‘Fund’’). The Exchange
currently has in place initial listing and
maintenance standards set forth in
CBOE Rules 5.3.06 and 5.4.08,
respectively (‘‘Listing Standards’’) that
are designed to allow the Exchange to
list and trade options on funds
structured as open-end investment
companies, such as the Fund.4 The
3 In Amendment No. 1, the Exchange agreed to
list Fund Options subject to a 60-day pilot program.
During this period, the Exchange agrees to use its
best efforts to obtain a comprehensive surveillance
agreement with the Bolsa Mexicana de Valores
(‘‘Bolsa’’) and will regularly update the Commission
on the status of its negotiations with Bolsa.
4 CBOE Rules 5.3.06 and 5.4.08 set forth the
initial listing and maintenance standards for
registered investment companies (or series thereof)
organized as open-end management investment
companies, unit investment trust or other similar
entities traded on a national securities exchange or
through the facilities of a national securities
exchange (‘‘Exchange-Traded Funds’’); see approval
order for SR–CBOE–97–45 (Securities Exchange Act
Release No. 40166 (July 2, 1998), 63 FR 37430 (July
10, 1998)).
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request for approval is based on the
Exchange’s determination that the Fund
meets substantially all of the Listing
Standard requirements, and for the
requirements that are not met, sufficient
mechanisms exist that would provide
the Exchange with adequate
surveillance and regulatory information
with respect to the Fund.
As provided in the Fund’s prospectus,
the Fund is an open-end investment
company that is designed to hold a
portfolio of securities that track the
MSCI Emerging Markets Index
(‘‘Index’’).5 The Fund employs a
‘‘representative sampling’’ methodology
to track the Index, which means that the
Fund invests in a representative sample
of securities in the Index that have a
similar investment profile as the Index.6
Securities selected by the Fund have
aggregate investment characteristics
(based on market capitalization and
industry weightings), fundamental
characteristics (such as return
variability, earnings valuation and
yield), and liquidity measures similar to
those of the Index. The Fund generally
invests at least 90% of its assets in the
securities of the Index or in American
Depositary Receipts (‘‘ADRs’’) and
Global Depositary Receipts (‘‘GDRs’’)
representing such securities. In order to
improve portfolio liquidity and give the
Fund additional flexibility to comply
with the requirements of the U.S.
Internal Revenue Code and other
regulatory requirements and to manage
future corporate actions and index
changes in smaller markets, the Fund
also has the authority to invest the
remainder of its assets in securities that
are not included in the Index or in
ADRs and GDRs representing such
securities. The Fund may invest up to
10% of its assets in other MSCI index
funds that seek to track the performance
5 As provided on the Web site of Morgan Stanley
Capital International Inc. (‘‘MSCI’’) (https://
www.msci.com), which is the entity that created
and currently maintains the Index, the Index is a
capitalization-weighted index whose component
securities are adjusted for available float and must
meet objective criteria for inclusion in the Index.
The Index aims to capture 85% of the publicly
available total market capitalization in each
emerging market included in the Index. As of
March 28, 2006, the Index was comprised of 832
constituents with the top five constituents
representing the following weights: 4.19%, 2.09%,
2.06%, 1.72%, and 1.63%. The Index is rebalanced
quarterly, calculated in U.S. Dollars on a real time
basis, and disseminated every 60 seconds during
market trading hours.
6 The Fund is comprised of 271 securities as of
March 28, 2006. Samsung Electronics Co LTD GDR
Registered, a South Korean security, has the greatest
individual weight at 5.61%. The security with the
smallest weight is Metropolitan Bank & Trust Co,
a Thailand security, at 0.01%. The aggregate
percentage weighting of the top 5, 10, and 20
securities in the Fund are 18.22%, 28.18%, and
43.74%, respectively.
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19569
of equity securities of constituent
countries of the Index. The Fund will
not concentrate its investments (i.e.,
hold 25% or more of its total assets in
the stocks of a particular industry or
group of industries), except that, to the
extent practicable, the Fund will
concentrate to approximately the same
extent that the Index concentrates in the
stocks of such particular industry or
group of industries. The Exchange
believes that these requirements and
policies prevent the Fund from being
excessively weighted in any single
security or small group of securities and
significantly reduce concerns that
trading in the Fund could become a
surrogate for trading in unregistered
securities.
Shares of the Fund (‘‘Fund Shares’’)
are issued in exchange for an ‘‘in kind’’
deposit of a specified portfolio of
securities, together with a cash
payment, in minimum size aggregation
size of 150,000 shares (each, a ‘‘Creation
Unit’’), as set forth in the Fund’s
prospectus.7 The Fund issues and sells
Fund Shares in Creation Unit sizes
through a principal underwriter on a
continuous basis at the net asset value
per share next determined after an order
to purchase Fund Shares and the
appropriate securities are received.
Following issuance, Fund Shares are
traded on an exchange like other equity
securities, and equity trading rules
apply. Likewise, redemption of Fund
Shares is made in Creation Unit size and
‘‘in kind,’’ with a portfolio of securities
and cash exchanged for Fund Shares
that have been tendered for redemption.
The Exchange notes that the
maintenance listing standards set forth
in Rule 5.4.08 for options on open-end
investment companies do not include
criteria based on either the number of
shares or other units outstanding or on
their trading volume. As explained in
SR–CBOE–97–03,8 the absence of such
criteria is justified on the ground that
since it should always be possible to
create additional shares or other
interests in open-end investment
companies at their net asset value by
making an in-kind deposit of the
securities that comprise the underlying
index or portfolio, there is no limit on
the available supply of such shares or
interests. The Exchange states that this
process should make it highly unlikely
7 See approval order for SR–Amex–2001–45
(Securities Exchange Act Release No. 44990, note
16) (October 25, 2001), noting that local restrictions
on transfers of securities to and between certain
kinds of investors exist in certain foreign markets
that preclude in-kind creation and redemptions of
Exchange-Traded Funds).
8 See Securities Exchange Act Release No. 40166
(July 2, 1998), 63 FR 37430 (July 10, 1998).
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that the market for listed, open-end
investment company shares could be
capable of manipulation, since
whenever the market price for such
shares departs from net asset value,
arbitrage will occur. Similarly, since the
Fund meets all of the requirements of
the Listing Standards except as
described below, the Exchange believes
that the same analysis applies to the
Fund.
The Exchange has reviewed the Fund
and determined that it satisfies the
Listing Standards except for the
requirement set forth in CBOE Rule
5.3.06(A), which requires the Fund to
meet the following condition: ‘‘any nonU.S. component securities of the index
or portfolio on which the Units are
based that are not subject to
comprehensive 9 surveillance
agreements do not in the aggregate
represent more than 50% of the weight
of the index or portfolio.’’ The Exchange
currently has in place comprehensive
surveillance agreements with foreign
exchanges that cover 49.76% of the
securities in the Fund. One of the
foreign exchanges on which component
securities of the Fund are traded and
with which the Exchange does not have
a comprehensive surveillance agreement
is the Bolsa. The percentage of the
weight of the Fund represented by these
securities is 7.54%.
The Exchange understands that the
Commission has been willing to allow
an exchange to rely on a memorandum
of understanding entered into between
regulators in the event that the
exchanges themselves cannot enter into
a surveillance agreement. The Exchange
had previously attempted to enter into
a surveillance agreement with Bolsa
around the time when the Exchange
sought approval to list for trading
options on the CBOE Mexico 30 Index
in 1995, which was comprised of stocks
trading on Bolsa.10 Since Bolsa was
unable to provide a surveillance
agreement, the Commission allowed the
Exchange to rely on the memorandum of
understanding executed by the
Commission and the Comision Nacional
Bancaria y de Valores (‘‘CNBV’’), dated
as of October 18, 1990 (‘‘MOU’’). The
Commission noted in the Approval
9 The Exchange inadvertently omitted reference to
the word ‘‘comprehensive’’ in Rule 5.3.06(A).
Telephone conference between Bill Speth, Director
of Research, Exchange, and Florence Harmon,
Senior Special Counsel, Division of Market
Regulation, Commission, on April 7, 2006.
10 See Securities Exchange Act Release No. 36415
(October 25, 1995), 60 FR 55620 (November 1,
1995). Telephone conference between Bill Speth,
Director of Research, Exchange, and Florence
Harmon, Senior Special Counsel, Division of
Market Regulation, Commission, on April 7, 2006
(correcting citation).
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Order that in cases where it would be
impossible to secure an agreement, the
Commission relied in the past on
surveillance sharing agreements
between the relevant regulators. The
Commission further noted in the
Approval Order that pursuant to the
terms of the MOU, it was the
Commission’s understanding that both
the Commission and the CNBV could
acquire information from and provide
information to the other similar to that
which would be required in a
surveillance sharing agreement between
exchanges, and therefore, should CBOE
need information on Mexican trading in
the component securities of the CBOE
Mexico 30 Index, the Commission could
request such information from the
CNBV under the MOU.11
The Exchange has recently contacted
Bolsa with a request to enter into a
comprehensive surveillance agreement.
Since Bolsa is still reviewing the
document, the Exchange is uncertain
whether the same barriers that
prevented Bolsa from entering into an
information sharing agreement
approximately ten years ago still exist
today. In this regard, the Exchange
requests permission to rely for a sixtyday pilot period on the MOU entered
into between the Commission and the
CNBV for purposes of satisfying its
surveillance and regulatory
responsibilities for the component
securities in the Fund that trade on
Bolsa until the Exchange is able to
secure a surveillance agreement with
Bolsa. During this period, the Exchange
has agreed to use its best efforts to
obtain a comprehensive surveillance
agreement with Bolsa, which shall
reflect the following: (i) Express
language addressing market trading
activity, clearing activity, and customer
identity; (ii) Bolsa’s reasonable ability to
obtain access to and produce requested
information; and (iii) based on the
comprehensive surveillance agreement
and other information provided by
Bolsa, the absence of existing rules,
laws, or practices that would impede
the Exchange from obtaining foreign
information relating to market activity,
clearing activity, or customer identity,
or, in the event such rules, laws, or
practices exist, they would not
materially impede the production of
11 The Exchange also states that the Commission
noted if securing an information sharing agreement
is not possible, an exchange should contact the
Commission prior to listing a new derivative
securities product. The Commission also noted that
the Commission may determine instead that it is
appropriate to rely on a memorandum of
understanding between the Commission and the
foreign regulator. See Securities Exchange Act
Release No. 40761 (December 8, 1998), 63 FR 70952
(December 22, 1998).
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customer or other information. The
Exchange also represents that it will
regularly update the Commission on the
status of its negotiations with Bolsa.
2. Statutory Basis
CBOE believes the proposed rule
change is consistent with the Act 12 and
the rules and regulations under the Act
applicable to a national securities
exchange and, in particular, the
requirements of section 6(b) of the
Act.13 Specifically, the Exchange
believes the proposed rule change is
consistent with the section 6(b)(5) 14
requirements that the rules of an
exchange be designed to promote just
and equitable principles of trade, and to
protect investors and the public interest.
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
Written comments on the proposed
rule change were neither solicited nor
received.
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–CBOE–2006–32 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
20549–1090.
All submissions should refer to File
Number SR–CBOE–2006–32. 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
12 15
U.S.C. 78a et seq.
U.S.C. 78(f)(b).
14 15 U.S.C. 78(f)(b)(5).
13 15
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only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://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 offices 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–CBOE–2006–32 and should
be submitted on or before May 5, 2006.
IV. Commission’s Findings and Order
Granting Accelerated Approval of the
Proposed Rule Change
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, as amended, 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.
The listing of the Fund Options does
not satisfy CBOE Rule 5.3.06(A), which
requires that: ‘‘any non-U.S. component
securities of the index or portfolio on
which the Units are based that are not
subject to comprehensive surveillance
agreements do not in the aggregate
represent more than 50% of the weight
of the index or portfolio.’’ Although the
Commission has been willing to allow
an exchange to rely on a memorandum
of understanding entered into between
regulators where the listing SRO finds it
impossible to enter into an information
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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16:37 Apr 13, 2006
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sharing agreement, it is not clear that
that CBOE has exhausted all avenues of
discussion with foreign markets,
including Bolsa, in order to obtain such
an agreement. Indeed, with regard to
Bolsa, conditions may have changed in
the time period since CBOE last raised
the issue with Bolsa in 1995 such that
Bolsa now would be able to enter a
comprehensive surveillance agreement
with CBOE.
Consequently, the Commission has
determined to approve CBOE’s listing
and trading of Fund Options for a sixtyday pilot period during which time
CBOE may rely on the MOU with
respect to Fund components trading on
Bolsa. During this period, the Exchange
has agreed to use its best efforts to
obtain a comprehensive surveillance
agreement with Bolsa, which shall
reflect the following: (i) Express
language addressing market trading
activity, clearing activity, and customer
identity; (ii) Bolsa’s reasonable ability to
obtain access to and produce requested
information; and (iii) based on the
comprehensive surveillance agreement
and other information provided by
Bolsa, the absence of existing rules,
laws, or practices that would impede
the Exchange from obtaining foreign
information relating to market activity,
clearing activity, or customer identity,
or, in the event such rules, laws, or
practices exist, they would not
materially impede the production of
customer or other information. The
Exchange also represents that it will
regularly update the Commission on the
status of its negotiations with Bolsa. In
approving the proposed rule change, the
Commission notes that CBOE currently
has in place surveillance agreements
with foreign exchanges that cover
49.76% of the securities in the Fund
and that the Index upon which the Fund
is based appears to be a broad-based
index.
The Exchange has requested
accelerated approval of the proposed
rule change. The Commission finds
good cause, consistent with Section
19(b)(2) of the Act,17 for approving this
proposed rule change before the
thirtieth day after the publication of
notice thereof in the Federal Register.
The Exchange has agreed to use its best
efforts to obtain a comprehensive
surveillance agreement with the Bolsa
during a sixty-day pilot period in which
the Exchange will rely on the MOU.
V. Conclusion
It is therefore ordered, pursuant to
section 19(b)(2) of the Act,18 that the
proposed rule change (SR–CBOE–2006–
32), as amended, is approved on an
accelerated basis for a sixty-day pilot
period ending on June 9, 2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.19
Nancy M. Morris,
Secretary.
[FR Doc. E6–5548 Filed 4–13–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53616; File No. SR–MSRB–
2006–02]
Self-Regulatory Organizations;
Municipal Securities Rulemaking
Board; Notice of Filing of Proposed
Rule Change Relating to Restated
Articles of Incorporation and By-Laws
April 7, 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 March 20,
2006, the Municipal Securities
Rulemaking Board (‘‘MSRB’’ or
‘‘Board’’) filed with the Securities and
Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the MSRB. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The MSRB is filing with the
Commission a proposed rule change
consisting of the MSRB’s Restated
Articles of Incorporation and By-Laws.
The text of the proposed rule change is
available on the MSRB’s Web site
(https://www.msrb.org), at the MSRB’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
MSRB 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 these statements
may be examined at the places specified
19 19
17 CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
17 15
U.S.C. 78s(b)(2).
18 18 Id.
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]]>Agencies
[Federal Register Volume 71, Number 72 (Friday, April 14, 2006)]
[Notices]
[Pages 19568-19571]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-5548]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53621; File No. SR-CBOE-2006-32]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Order Granting Accelerated Approval
of Proposed Rule Change and Amendment No. 1 Thereto To List for Trading
Options on the iShares MSCI Emerging Markets Index Fund
April 10, 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 April 5, 2006, the Chicago Board Options Exchange, Incorporated
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule
[[Page 19569]]
change as described in Items I and II below, which Items have been
prepared by the Exchange. On April 6, 2006, the CBOE filed Amendment
No. 1 to the proposed rule change.\3\ The Commission is publishing this
notice and order to solicit comments on the proposal from interested
persons and to approve the proposed rule change, 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\ In Amendment No. 1, the Exchange agreed to list Fund Options
subject to a 60-day pilot program. During this period, the Exchange
agrees to use its best efforts to obtain a comprehensive
surveillance agreement with the Bolsa Mexicana de Valores
(``Bolsa'') and will regularly update the Commission on the status
of its negotiations with Bolsa.
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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 options on the iShares MSCI
Emerging Markets Index Fund (``Fund Options''). The text of the
proposed rule change is available on the Exchange's Web site (https://
www.cboe.com), at the Office of the Secretary, CBOE and at the
Commission.
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. 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
The Exchange seeks approval to list for trading on the Exchange
options on the iShares MSCI Emerging Markets Index Fund (``Fund''). The
Exchange currently has in place initial listing and maintenance
standards set forth in CBOE Rules 5.3.06 and 5.4.08, respectively
(``Listing Standards'') that are designed to allow the Exchange to list
and trade options on funds structured as open-end investment companies,
such as the Fund.\4\ The request for approval is based on the
Exchange's determination that the Fund meets substantially all of the
Listing Standard requirements, and for the requirements that are not
met, sufficient mechanisms exist that would provide the Exchange with
adequate surveillance and regulatory information with respect to the
Fund.
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\4\ CBOE Rules 5.3.06 and 5.4.08 set forth the initial listing
and maintenance standards for registered investment companies (or
series thereof) organized as open-end management investment
companies, unit investment trust or other similar entities traded on
a national securities exchange or through the facilities of a
national securities exchange (``Exchange-Traded Funds''); see
approval order for SR-CBOE-97-45 (Securities Exchange Act Release
No. 40166 (July 2, 1998), 63 FR 37430 (July 10, 1998)).
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As provided in the Fund's prospectus, the Fund is an open-end
investment company that is designed to hold a portfolio of securities
that track the MSCI Emerging Markets Index (``Index'').\5\ The Fund
employs a ``representative sampling'' methodology to track the Index,
which means that the Fund invests in a representative sample of
securities in the Index that have a similar investment profile as the
Index.\6\ Securities selected by the Fund have aggregate investment
characteristics (based on market capitalization and industry
weightings), fundamental characteristics (such as return variability,
earnings valuation and yield), and liquidity measures similar to those
of the Index. The Fund generally invests at least 90% of its assets in
the securities of the Index or in American Depositary Receipts
(``ADRs'') and Global Depositary Receipts (``GDRs'') representing such
securities. In order to improve portfolio liquidity and give the Fund
additional flexibility to comply with the requirements of the U.S.
Internal Revenue Code and other regulatory requirements and to manage
future corporate actions and index changes in smaller markets, the Fund
also has the authority to invest the remainder of its assets in
securities that are not included in the Index or in ADRs and GDRs
representing such securities. The Fund may invest up to 10% of its
assets in other MSCI index funds that seek to track the performance of
equity securities of constituent countries of the Index. The Fund will
not concentrate its investments (i.e., hold 25% or more of its total
assets in the stocks of a particular industry or group of industries),
except that, to the extent practicable, the Fund will concentrate to
approximately the same extent that the Index concentrates in the stocks
of such particular industry or group of industries. The Exchange
believes that these requirements and policies prevent the Fund from
being excessively weighted in any single security or small group of
securities and significantly reduce concerns that trading in the Fund
could become a surrogate for trading in unregistered securities.
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\5\ As provided on the Web site of Morgan Stanley Capital
International Inc. (``MSCI'') (https://www.msci.com), which is the
entity that created and currently maintains the Index, the Index is
a capitalization-weighted index whose component securities are
adjusted for available float and must meet objective criteria for
inclusion in the Index. The Index aims to capture 85% of the
publicly available total market capitalization in each emerging
market included in the Index. As of March 28, 2006, the Index was
comprised of 832 constituents with the top five constituents
representing the following weights: 4.19%, 2.09%, 2.06%, 1.72%, and
1.63%. The Index is rebalanced quarterly, calculated in U.S. Dollars
on a real time basis, and disseminated every 60 seconds during
market trading hours.
\6\ The Fund is comprised of 271 securities as of March 28,
2006. Samsung Electronics Co LTD GDR Registered, a South Korean
security, has the greatest individual weight at 5.61%. The security
with the smallest weight is Metropolitan Bank & Trust Co, a Thailand
security, at 0.01%. The aggregate percentage weighting of the top 5,
10, and 20 securities in the Fund are 18.22%, 28.18%, and 43.74%,
respectively.
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Shares of the Fund (``Fund Shares'') are issued in exchange for an
``in kind'' deposit of a specified portfolio of securities, together
with a cash payment, in minimum size aggregation size of 150,000 shares
(each, a ``Creation Unit''), as set forth in the Fund's prospectus.\7\
The Fund issues and sells Fund Shares in Creation Unit sizes through a
principal underwriter on a continuous basis at the net asset value per
share next determined after an order to purchase Fund Shares and the
appropriate securities are received. Following issuance, Fund Shares
are traded on an exchange like other equity securities, and equity
trading rules apply. Likewise, redemption of Fund Shares is made in
Creation Unit size and ``in kind,'' with a portfolio of securities and
cash exchanged for Fund Shares that have been tendered for redemption.
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\7\ See approval order for SR-Amex-2001-45 (Securities Exchange
Act Release No. 44990, note 16) (October 25, 2001), noting that
local restrictions on transfers of securities to and between certain
kinds of investors exist in certain foreign markets that preclude
in-kind creation and redemptions of Exchange-Traded Funds).
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The Exchange notes that the maintenance listing standards set forth
in Rule 5.4.08 for options on open-end investment companies do not
include criteria based on either the number of shares or other units
outstanding or on their trading volume. As explained in SR-CBOE-97-
03,\8\ the absence of such criteria is justified on the ground that
since it should always be possible to create additional shares or other
interests in open-end investment companies at their net asset value by
making an in-kind deposit of the securities that comprise the
underlying index or portfolio, there is no limit on the available
supply of such shares or interests. The Exchange states that this
process should make it highly unlikely
[[Page 19570]]
that the market for listed, open-end investment company shares could be
capable of manipulation, since whenever the market price for such
shares departs from net asset value, arbitrage will occur. Similarly,
since the Fund meets all of the requirements of the Listing Standards
except as described below, the Exchange believes that the same analysis
applies to the Fund.
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\8\ See Securities Exchange Act Release No. 40166 (July 2,
1998), 63 FR 37430 (July 10, 1998).
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The Exchange has reviewed the Fund and determined that it satisfies
the Listing Standards except for the requirement set forth in CBOE Rule
5.3.06(A), which requires the Fund to meet the following condition:
``any non-U.S. component securities of the index or portfolio on which
the Units are based that are not subject to comprehensive \9\
surveillance agreements do not in the aggregate represent more than 50%
of the weight of the index or portfolio.'' The Exchange currently has
in place comprehensive surveillance agreements with foreign exchanges
that cover 49.76% of the securities in the Fund. One of the foreign
exchanges on which component securities of the Fund are traded and with
which the Exchange does not have a comprehensive surveillance agreement
is the Bolsa. The percentage of the weight of the Fund represented by
these securities is 7.54%.
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\9\ The Exchange inadvertently omitted reference to the word
``comprehensive'' in Rule 5.3.06(A). Telephone conference between
Bill Speth, Director of Research, Exchange, and Florence Harmon,
Senior Special Counsel, Division of Market Regulation, Commission,
on April 7, 2006.
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The Exchange understands that the Commission has been willing to
allow an exchange to rely on a memorandum of understanding entered into
between regulators in the event that the exchanges themselves cannot
enter into a surveillance agreement. The Exchange had previously
attempted to enter into a surveillance agreement with Bolsa around the
time when the Exchange sought approval to list for trading options on
the CBOE Mexico 30 Index in 1995, which was comprised of stocks trading
on Bolsa.\10\ Since Bolsa was unable to provide a surveillance
agreement, the Commission allowed the Exchange to rely on the
memorandum of understanding executed by the Commission and the Comision
Nacional Bancaria y de Valores (``CNBV''), dated as of October 18, 1990
(``MOU''). The Commission noted in the Approval Order that in cases
where it would be impossible to secure an agreement, the Commission
relied in the past on surveillance sharing agreements between the
relevant regulators. The Commission further noted in the Approval Order
that pursuant to the terms of the MOU, it was the Commission's
understanding that both the Commission and the CNBV could acquire
information from and provide information to the other similar to that
which would be required in a surveillance sharing agreement between
exchanges, and therefore, should CBOE need information on Mexican
trading in the component securities of the CBOE Mexico 30 Index, the
Commission could request such information from the CNBV under the
MOU.\11\
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\10\ See Securities Exchange Act Release No. 36415 (October 25,
1995), 60 FR 55620 (November 1, 1995). Telephone conference between
Bill Speth, Director of Research, Exchange, and Florence Harmon,
Senior Special Counsel, Division of Market Regulation, Commission,
on April 7, 2006 (correcting citation).
\11\ The Exchange also states that the Commission noted if
securing an information sharing agreement is not possible, an
exchange should contact the Commission prior to listing a new
derivative securities product. The Commission also noted that the
Commission may determine instead that it is appropriate to rely on a
memorandum of understanding between the Commission and the foreign
regulator. See Securities Exchange Act Release No. 40761 (December
8, 1998), 63 FR 70952 (December 22, 1998).
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The Exchange has recently contacted Bolsa with a request to enter
into a comprehensive surveillance agreement. Since Bolsa is still
reviewing the document, the Exchange is uncertain whether the same
barriers that prevented Bolsa from entering into an information sharing
agreement approximately ten years ago still exist today. In this
regard, the Exchange requests permission to rely for a sixty-day pilot
period on the MOU entered into between the Commission and the CNBV for
purposes of satisfying its surveillance and regulatory responsibilities
for the component securities in the Fund that trade on Bolsa until the
Exchange is able to secure a surveillance agreement with Bolsa. During
this period, the Exchange has agreed to use its best efforts to obtain
a comprehensive surveillance agreement with Bolsa, which shall reflect
the following: (i) Express language addressing market trading activity,
clearing activity, and customer identity; (ii) Bolsa's reasonable
ability to obtain access to and produce requested information; and
(iii) based on the comprehensive surveillance agreement and other
information provided by Bolsa, the absence of existing rules, laws, or
practices that would impede the Exchange from obtaining foreign
information relating to market activity, clearing activity, or customer
identity, or, in the event such rules, laws, or practices exist, they
would not materially impede the production of customer or other
information. The Exchange also represents that it will regularly update
the Commission on the status of its negotiations with Bolsa.
2. Statutory Basis
CBOE believes the proposed rule change is consistent with the Act
\12\ and the rules and regulations under the Act applicable to a
national securities exchange and, in particular, the requirements of
section 6(b) of the Act.\13\ Specifically, the Exchange believes the
proposed rule change is consistent with the section 6(b)(5) \14\
requirements that the rules of an exchange be designed to promote just
and equitable principles of trade, and to protect investors and the
public interest.
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\12\ 15 U.S.C. 78a et seq.
\13\ 15 U.S.C. 78(f)(b).
\14\ 15 U.S.C. 78(f)(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
Written comments on the proposed rule change were neither solicited
nor received.
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 (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-CBOE-2006-32 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 20549-1090.
All submissions should refer to File Number SR-CBOE-2006-32. 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
[[Page 19571]]
only one method. The Commission will post all comments on the
Commission's Internet Web site (https://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 offices 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-
CBOE-2006-32 and should be submitted on or before May 5, 2006.
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
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, as amended, 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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The listing of the Fund Options does not satisfy CBOE Rule
5.3.06(A), which requires that: ``any non-U.S. component securities of
the index or portfolio on which the Units are based that are not
subject to comprehensive surveillance agreements do not in the
aggregate represent more than 50% of the weight of the index or
portfolio.'' Although the Commission has been willing to allow an
exchange to rely on a memorandum of understanding entered into between
regulators where the listing SRO finds it impossible to enter into an
information sharing agreement, it is not clear that that CBOE has
exhausted all avenues of discussion with foreign markets, including
Bolsa, in order to obtain such an agreement. Indeed, with regard to
Bolsa, conditions may have changed in the time period since CBOE last
raised the issue with Bolsa in 1995 such that Bolsa now would be able
to enter a comprehensive surveillance agreement with CBOE.
Consequently, the Commission has determined to approve CBOE's
listing and trading of Fund Options for a sixty-day pilot period during
which time CBOE may rely on the MOU with respect to Fund components
trading on Bolsa. During this period, the Exchange has agreed to use
its best efforts to obtain a comprehensive surveillance agreement with
Bolsa, which shall reflect the following: (i) Express language
addressing market trading activity, clearing activity, and customer
identity; (ii) Bolsa's reasonable ability to obtain access to and
produce requested information; and (iii) based on the comprehensive
surveillance agreement and other information provided by Bolsa, the
absence of existing rules, laws, or practices that would impede the
Exchange from obtaining foreign information relating to market
activity, clearing activity, or customer identity, or, in the event
such rules, laws, or practices exist, they would not materially impede
the production of customer or other information. The Exchange also
represents that it will regularly update the Commission on the status
of its negotiations with Bolsa. In approving the proposed rule change,
the Commission notes that CBOE currently has in place surveillance
agreements with foreign exchanges that cover 49.76% of the securities
in the Fund and that the Index upon which the Fund is based appears to
be a broad-based index.
The Exchange has requested accelerated approval of the proposed
rule change. The Commission finds good cause, consistent with Section
19(b)(2) of the Act,\17\ for approving this proposed rule change before
the thirtieth day after the publication of notice thereof in the
Federal Register. The Exchange has agreed to use its best efforts to
obtain a comprehensive surveillance agreement with the Bolsa during a
sixty-day pilot period in which the Exchange will rely on the MOU.
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\17\ 15 U.S.C. 78s(b)(2).
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V. Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\18\ that the proposed rule change (SR-CBOE-2006-32), as amended,
is approved on an accelerated basis for a sixty-day pilot period ending
on June 9, 2006.
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\18\ 18 Id.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\19\
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\19\ 19 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-5548 Filed 4-13-06; 8:45 am]
BILLING CODE 8010-01-P
