Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change as Modified by Amendment Nos. 1 and 2 Thereto To List for Trading Options on the Vanguard® Emerging Markets Exchange Traded Fund, 14145-14149 [E7-5423]
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Federal Register / Vol. 72, No. 57 / Monday, March 26, 2007 / Notices
Change Tstf–477, Add An Action
Statement For Two Inoperable Control
Room Air Conditioning Subsystems To
The Technical Specifications Using
Consolidated Line Item Improvement
Process
Gentlemen: In accordance with the
provisions of 10 CFR 50.90 [LICENSEE] is
submitting a request for an amendment to the
technical specifications (TS) for [PLANT
NAME, UNIT NOS.].
The proposed amendment would modify
the TS by adding an action statement for two
inoperable control room AC subsystems to
the plant specific TS.
Enclosure 1 provides a description of the
proposed change, the requested confirmation
of applicability, and plant-specific
verifications. Enclosure 2 provides the
existing TS pages marked up to show the
proposed change. Enclosure 3 provides
revised (clean) TS pages. Enclosure 4
provides the existing TS Bases pages marked
up to show the proposed change in
accordance with 10 CFR 50.36(a).
[LICENSEE] requests approval of the
proposed license amendment by [DATE],
with the amendment being implemented [BY
DATE OR WITHIN X DAYS].
In accordance with 10 CFR 50.91, a copy
of this application, with enclosures, is being
provided to the designated [STATE] Official.
I declare under penalty of perjury under
the laws of the United States of America that
I am authorized by [LICENSEE] to make this
request and that the foregoing is true and
correct. (Note that request may be notarized
in lieu of using this oath or affirmation
statement).
If you should have any questions regarding
this submittal, please contact [NAME,
TELEPHONE NUMBER]
Sincerely,
[Name, Title]
Enclosures:
1. Description and Assessment
2. Proposed Technical Specification
Changes
3. Revised Technical Specification Pages
4. Marked up Existing TS Bases Changes
cc: NRC Project Manager
NRC Regional Office
NRC Resident Inspector
State Contact
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Enclosure 1—Description and Assessment
1.0 Description
The proposed amendment would modify
technical specifications by adding an Action
Statement to the Limiting Condition for
Operation (LCO). The new Action Statement
allows a finite time to restore one control
room AC subsystem to operable status and
requires verification that control room
temperature remains < 90 °F every 4 hours.1
The changes are consistent with Nuclear
Regulatory Commission (NRC) approved
Industry/Technical Specification Task Force
1 [In conjunction with the proposed change,
technical specifications (TS) requirements for a
Bases Control Program, consistent with the TS
Bases Control Program described in Section 5.5 of
the applicable vendor’s standard TS (STS), shall be
incorporated into the licensee’s TS, if not already
in the TS.]
VerDate Aug<31>2005
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Jkt 211001
(TSTF) TSTF–477 Revision 3. The
availability of this TS improvement was
published in the Federal Register on [DATE]
as part of the consolidated line item
improvement process (CLIIP).
2.0
Assessment
2.1 Applicability of TSTF–477, and
Published Safety Evaluation
[LICENSEE] has reviewed TSTF–477
(Reference 1), and the NRC model safety
evaluation (SE) (Reference 2) as part of the
CLIIP. [LICENSEE] has concluded that the
information in TSTF–477, as well as the SE
prepared by the NRC staff are applicable to
[PLANT, UNIT NOS.] and justify this
amendment for the incorporation of the
changes to the [PLANT] TS. [NOTE: Only
those changes proposed in TSTF–477 are
addressed in the model SE. The model SE
addresses the entire fleet of General Electric
Boiling Water Reactors. The plants adopting
TSTF–477 must confirm the applicability of
the changes to their plant.]
2.2 Optional Changes and Variations
[LICENSEE] is not proposing any variations
or deviations from the TS changes described
in TSTF–477 or the NRC staff’s model safety
evaluation dated [DATE]. [NOTE: The CLIIP
does not prevent licensees from requesting an
alternate approach or proposing changes
without the requested Bases or Bases control
program. However, deviations from the
approach recommended in this notice may
require additional review by the NRC staff
and may increase the time and resources
needed for the review. Significant variations
from the approach, or inclusion of additional
changes to the license, will result in staff
rejection of the submittal. Instead, licensees
desiring significant variations and/or
additional changes should submit a LAR that
does not claim to adopt TSTF–477.]
3.0
Regulatory Analysis
3.1 No Significant Hazards Consideration
Determination
[LICENSEE] has reviewed the proposed no
significant hazards consideration
determination (NSHC) published in the
Federal Register as part of the CLIIP.
[LICENSEE] has concluded that the proposed
NSHC presented in the Federal Register
notice is applicable to [PLANT] and is hereby
incorporated by reference to satisfy the
requirements of 10 CFR 50.91(a).
3.2 Verification and Commitments
As discussed in the notice of availability
published in the Federal Register on [DATE]
for this TS improvement, plant-specific
verifications were performed as follows:
In addition, [LICENSEE] has proposed TS
Bases consistent with TSTF–477 which
provide guidance and details on how to
implement the new requirements. Finally,
[LICENSEE] has a Bases Control Program
consistent with Section 5.5 of the Standard
Technical Specifications (STS).
4.0 Environmental Evaluation
The amendment changes requirements
with respect to the installation or use of a
facility component located within the
restricted area as defined in 10 CFR part 20.
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14145
The NRC staff has determined that the
amendment adopting TSTF–477, Rev 3,
involves no significant increase in the
amounts and no significant change in the
types of any effluents that may be released
offsite, and that there is no significant
increase in individual or cumulative
occupational radiation exposure. The
Commission has previously issued a
proposed finding that TSTF–477, Rev 3,
involves no significant hazards
considerations, and there has been no public
comment on the finding in Federal Register
Notice 71 FR 75774, December 18, 2006.
Accordingly, the amendment meets the
eligibility criteria for categorical exclusion
set forth in 10 CFR 51.22(c)(9). Pursuant to
10 CFR 51.22(b), no environmental impact
statement or environmental assessment need
be prepared in connection with the issuance
of the amendment.
5.0 References
1. TSTF–477, Revision 3, ‘‘Adding an
Action Statement for Two Inoperable Control
Room Air Conditioning Subsystems.’’
2. NRC Model Safety Evaluation Report.
Enclosure 2—Proposed Technical
Specification Changes (Mark-Up)
Enclosure 3—Proposed Technical
Specification Pages
[Clean copies of Licensee specific
Technical Specification (TS) pages,
corresponding to the TS pages changed by
TSTF–477, Rev 3, are to be included in
Enclosure 3]
Enclosure 4—Proposed Changes to Technical
Specification Bases Pages
[FR Doc. E7–5434 Filed 3–23–07; 8:45 am]
BILLING CODE 7590–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–55491; File No. SR–CBOE–
2006–95]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Order Granting Accelerated Approval
of Proposed Rule Change as Modified
by Amendment Nos. 1 and 2 Thereto
To List for Trading Options on the
Vanguard Emerging Markets
Exchange Traded Fund
March 19, 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 November
30, 2006, the Chicago Board Options
Exchange, Incorporated (‘‘CBOE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 72, No. 57 / Monday, March 26, 2007 / Notices
change as described in Items I and II
below, which Items have been
substantially prepared by the Exchange.
The Exchange submitted Amendment
No. 1 to the proposed rule change on
December 6, 2006. The Exchange
submitted Amendment No. 2 to the
proposed rule change on February 28,
2007. The Commission is publishing
this notice and order to solicit
comments on the proposal, as amended,
from interested persons and to approve
the proposed rule change, as modified
by Amendment Nos. 1 and 2, 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 Vanguard
Emerging Markets Exchange Traded
Fund (‘‘Fund Options’’). The text of the
proposed rule change is available on the
Exchange’s Web site (https://
www.cboe.org/legal), at the Office of the
Secretary, CBOE 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
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.
The Exchange has prepared summaries,
set forth in Sections A, B, and C below,
of the most significant parts of such
statements.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this rule change is to
obtain approval to list for trading on the
Exchange options on the Vanguard
Emerging Markets Exchange Traded
Fund (‘‘Fund’’) on a pilot basis for six
months to commence on the date of
approval and through six months after
that date. 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 funds structured as
open-end investment companies, such
as the Fund, without having to file for
Commission approval to list for trading
options on the fund.3 The request for
3 CBOE Rules 5.3.06 and 5.4.08 set forth the
initial listing and maintenance standards for
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15:30 Mar 23, 2007
Jkt 211001
approval is based on the Exchange’s
determination that the Fund meets
substantially all of the Listing Standards
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 most recent
prospectus, dated November 10, 2006,
the Fund is an open-end investment
company that is designed to hold a
portfolio of securities that tracks the
Morgan Stanley Capital International,
Inc. Emerging Markets Index (‘‘MSCI
Emerging Markets Index’’ or ‘‘Index’’),
which includes approximately 850
common stocks of companies located in
25 emerging markets around the world.4
The Fund employs a ‘‘passive
management’’—or indexing—
investment approach by investing
substantially all (normally about 95%)
of its assets in the common stocks that
comprise the MSCI Emerging Markets
Index while employing a form of
sampling to reduce risk.
As of January 31, 2007, the Fund was
comprised of 862 securities and the ten
largest holdings in the fund made up
18.5% of the total assets in the Fund.5
The security with the greatest
individual weight of 5.4% is OAO
Gazprom ADRSamsung Electronics Co
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
Exchange Act Release, No. 34–40166 (July 2, 1998),
63 FR 37430 (July 10, 1998) (approval order for SR–
CBOE–97–45, predating U.S. Securities and
Exchange Commission’s (‘‘Commission’’) adoption
of Rule 19b–4(e) of the Securities Exchange Act of
1934 (‘‘New Product Release’’). See Exchange Act
Release No. 34–40761 (Dec. 8, 1998), 63 FR 70952
(Dec. 22, 1998)).
4 As provided by Morgan Stanley Capital
International, Inc. (‘‘MSCI’’), 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
September 29, 2006, the Index was comprised of
852 constituents with the top five constituents
representing the following weights: 5.01%, 4.09%,
1.82%, 1.79%, and 1.76%. The Index is rebalanced
quarterly, calculated in U.S. Dollars on a real time
basis, and disseminated every 60 seconds during
market trading hours.
5 The ten largest holdings are: (1) OAO Gazprom
ADR, (2) Samsung Electronics Co., Ltd., (3) China
Mobile (Hong Kong), Ltd., (4) America Movil SA de
CV, (5) Lukoil Sponsored ADR; (6) Taiwan
Semiconductor Manufacturing Co., Ltd., (7)
Petroleo Brasileiro SA Pfd (8) Hon Hai Precision
Industry Co., Ltd., (9) Cemex SA CPO, and (10)
Petroleo Brasileiro SA. See https://
flagship.vanguard.com/VGApp/hnw/
FundsSnapshot?FundId=0964&FundIntExt=INT.
PO 00000
Frm 00075
Fmt 4703
Sfmt 4703
LTD GDR Registered, a South
KoreanRussian security. The security
with the smallest weight is Thanachart
Capital Public Company Ltd.,
Metropolitan Bank & Trust Coa Thai
security, at less than 0.01%. As of
January 31, 2007, the largest markets
covered in the Fund were South Korea
(14.9%), Taiwan (12.3%), Russia (9.9%),
Brazil (10.7%) and South Africa (8.5%).
The Exchange believes that
Vanguard’s stated investment policies
prevent the Fund from being excessively
weighted in any single security or small
group of securities and significantly
reduces 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
of 100,000 shares (each, a ‘‘Creation
Unit’’), as set forth in the Fund’s
prospectus.6 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 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–
03,7 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. This, in turn,
should make it highly unlikely that the
market for listed, open-end investment
company shares could be capable of
6 See Exchange Act Release No. 34–44990, n. 16
(Oct. 25, 2001), 66 FR 56869 (Nov. 13, 2001)
(approval order for SR–Amex–2001–45, 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).
7 See Securities Exchange Act Release No. 40166
(July 2, 1998), 63 FR 37430 (July 10, 1998).
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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 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
sharing agreements (‘‘CSSA’’) with
foreign exchanges that cover 48.10% 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 CSSA is the Bolsa Mexicana de
Valores (‘‘Bolsa’’). The percentage of the
weight of the Fund represented by these
securities is 6.60%.
The Exchange notes that the
Commission recently approved the
listing and trading of options on the
iShares MSCI Emerging Markets Index
Fund on a on a pilot basis 8 and
permitted the Exchange to rely on the
memorandum of understanding
executed by the Commission and the
CNBV, dated as of October 18, 1990
(‘‘MOU’’) for purposes of satisfying its
surveillance and regulatory
responsibilities for the component
securities in the Fund that trade on the
Bolsa until the Exchange is able to
secure a surveillance agreement with
the Bolsa.9
Specifically, in connection with the
listing and trading of options on the
8 See Exchange Act Release No. 34–53621 (April
10, 2006), 71 FR 79568 (April 14, 2006) (approving
60 day pilot listing and trading, until June 9, 2006);
see also Exchange Act Release No. 34–53960 (June
1, 2006), 71 FR 33322 (June 8, 2006) (continuation
of pilot program for additional 90 days, until
September 7, 2006); see also Exchange Act Release
No. 34–54347 (Aug. 22, 2006), 71 FR 51242 (Aug.
29, 2006) (continuation of pilot program for
additional 90 days, until December 7, 2006); see
also Exchange Act Release No. 34–54876 (Dec. 5,
2006), 71 FR 74968 (Dec. 13, 2006) (continuation of
pilot program for additional six months, until June
7, 2007).
9 The CNBV is the successor to the Comision
Nacional y de Valores of Mexico, which was
merged with the Mexican Banking Commission in
April 1995 to form the CNBV. See Exchange Act
Release No. 36415, at n.23 (Oct. 25, 1995), 60 FR
55620 (Nov. 1, 1995) (approval order for SR–CBOE–
95–045). The Bolsa falls within the regulatory
oversight of CNBV.
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15:30 Mar 23, 2007
Jkt 211001
iShares MSCI Emerging Markets Index
Fund, the Exchange contacted the Bolsa
with a request to enter into a CSSA. In
response, the Bolsa expressed a
willingness to enter into a surveillance
sharing agreement but indicated that it
was unable to provide certain
information that is required as part of a
CSSA. As a result of being unable to
secure a CSSA with the Bolsa, the
Exchange requested permission to rely
for a pilot period on the MOU and the
Exchange agreed to use its best efforts
that during this period to obtain a CSSA
with the Bolsa, which would reflect the
following: (1) Express language
addressing market trading activity,
clearing activity, and customer identify;
(2) the Bolsa’s reasonable ability to
obtain access to and produce requested
information; and (3) based on the CSSA
and other information provided by the
Bolsa, the absence of existing rules, law
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.
On other occasions, 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 CSSA. For example, the Exchange
previously attempted to enter into a
CSSA with the Bolsa around the time
the Exchange sought approval to list for
trading options on the CBOE Mexico 30
Index in 1995, which was comprised of
stocks trading on the Bolsa.10 Since the
Bolsa was unable to provide a CSSA, the
Commission allowed the Exchange to
rely on the MOU between the SEC and
CNBV.
The Commission noted in the
Approval Order regarding the CBOE
Mexico 30 Index that, in cases where it
would be impossible to secure a CSSA,
the Commission has 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 CSSA
between exchanges. Therefore, should
CBOE need information on Mexican
10 See Exchange Act Release No. 36415 (Oct. 25,
1995), 60 FR 55620 (Nov. 1, 1995) (approval order
for SR–CBOE–95–045).
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14147
trading in the component securities of
the CBOE Mexico 30 Index, the
Commission could request such
information from the CNBV under the
MOU.
The practice of relying on
surveillance agreements between
regulators when a foreign exchange was
unable or unwilling to provide a CSSA
was affirmed by the Commission in the
Commission’s New Product Release.11
In the New Product Release, the
Commission noted that 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 might determine instead
that it is appropriate to rely on a
memorandum of understanding between
the Commission and the foreign
regulator.
Given the Exchange’s current inability
to enter into a CSSA with the Bolsa, the
Exchange requests permission to rely on
a pilot basis 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 the
Bolsa until the Exchange is able to
secure a CSSA with the Bolsa. The
Exchange believes this request is
reasonable because the Commission has
already acknowledged that the MOU
permits both the Commission and the
CNBV to acquire information from and
provide information to the other, which
is similar to that which would be
required in a surveillance sharing
agreement between exchanges.
Additionally, if the Commission
approves the listing of the Fund on a
pilot basis, during this period, the
Exchange represents that it will
continue its efforts to obtain a CSSA
with the Bolsa. The Exchange also
represents that it will regularly update
the Commission on the status of its
discussions with the Bolsa. The
Commission’s approval of this request
would otherwise render the Fund
compliant with all of the Listing
Standards.12
11 See
n. 4, supra.
Exchange notes that the component
securities of the Fund change periodically.
Therefore, the Exchange may in fact have in place
CSSAs that would otherwise cover the percent
weighting requirements set forth in the Listing
Standards for securities not trading on the Bolsa. In
this event, the Fund would satisfy all of the Listing
Standards and reliance on an approval order for the
Fund would be unnecessary.
12 The
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Federal Register / Vol. 72, No. 57 / Monday, March 26, 2007 / Notices
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the Act 13
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.14 Specifically, the Exchange
believes the proposed rule change is
consistent with the Section 6(b)(5) 15
requirements that the rules of an
exchange be designed to promote just
and equitable principles of trade, to
prevent fraudulent and manipulative
acts and, in general, 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.
cprice-sewell on PROD1PC66 with NOTICES
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.
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–2006–95 and should
be submitted on or before April 16,
2007.
IV. Commission’s Findings and Order
Granting Accelerated Approval of the
Proposed Rule Change
The Commission finds that the
III. Solicitation of Comments
proposed rule change is consistent with
the requirements of the Act and the
Interested persons are invited to
rules and regulations thereunder
submit written data, views, and
applicable to a national securities
arguments concerning the foregoing,
exchange.16 In particular, the
including whether the proposed rule
Commission finds that the proposed
change, as amended, is consistent with
the Act. Comments may be submitted by rule change is consistent with Section
6(b)(5) of the Act,17 which requires that
any of the following methods:
an exchange have rules designed, among
Electronic Comments
other things, to promote just and
equitable principles of trade, to remove
• Use the Commission’s Internet
impediments to and perfect the
comment form (https://www.sec.gov/
mechanism of a free and open market
rules/sro.shtml); or
and a national market system, and in
• Send an e-mail to rulegeneral to protect investors and the
comments@sec.gov. Please include File
public interest.
Number SR–CBOE–2006–95 on the
The listing of the Fund Options does
subject line.
not satisfy CBOE Rule 5.3.06(A), which
Paper Comments
requires that: ‘‘any non-U.S. component
securities of the index or portfolio on
• Send paper comments in triplicate
which the Units are based that are not
to Nancy M. Morris, Secretary,
subject to comprehensive surveillance
Securities and Exchange Commission,
agreements do not in the aggregate
100 F Street, NE., Washington, DC
represent more than 50% of the weight
20549–1090.
of the index or portfolio.’’ Although the
All submissions should refer to File
Commission has been willing to allow
Number SR–CBOE–2006–95. This file
an exchange to rely on a memorandum
number should be included on the
subject line if e-mail is used. To help the of understanding entered into between
regulators where the listing SRO finds it
Commission process and review your
impossible to enter into an information
comments more efficiently, please use
only one method. The Commission will sharing agreement, it is not clear that
post all comments on the Commission’s
16
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).
17 15 U.S.C. 78f(b)(5).
13 15
U.S.C. 78a et seq.
U.S.C. 78(f)(b).
15 15 U.S.C. 78(f)(b)(5).
14 15
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Frm 00077
Fmt 4703
Sfmt 4703
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 entering a
comprehensive surveillance agreement
with CBOE.
Consequently, the Commission has
determined to approve CBOE’s listing
and trading of Fund Options for a sixmonth 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: (1) Express
language addressing market trading
activity, clearing activity, and customer
identify; (2) the Bolsa’s reasonable
ability to obtain access to and produce
requested information; and (3) based on
the CSSA and other information
provided by the Bolsa, the absence of
existing rules, law 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 48.10% 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,18 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 six-month 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,19 that the
18 15
U.S.C. 78s(b)(2).
19 Id.
E:\FR\FM\26MRN1.SGM
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Federal Register / Vol. 72, No. 57 / Monday, March 26, 2007 / Notices
proposed rule change (SR–CBOE–2006–
95), as modified by Amendment Nos. 1
and 2, be, and it hereby is approved on
an accelerated basis for a six-month
pilot period ending on September 19,
2007.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.20
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–5423 Filed 3–23–07; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–55495; File No. SR–NASD–
2007–023]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc.; Notice of Filing of
Proposed Rule Change To Amend the
By-Laws of NASD To Implement
Governance and Related Changes To
Accommodate the Consolidation of the
Member Firm Regulatory Functions of
NASD and NYSE Regulation, Inc.
March 20, 2007.
cprice-sewell on PROD1PC66 with NOTICES
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (‘‘Act’’
or ‘‘Exchange Act’’) 1 and Rule 19b–4
thereunder,2 notice is hereby given that
on March 19, 2007, the National
Association of Securities Dealers, Inc.
(‘‘NASD’’) 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 NASD. 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
NASD is proposing to amend the ByLaws of NASD (‘‘NASD By-Laws’’) to
implement governance and related
changes to accommodate the
consolidation of the member firm
regulatory functions of NASD and NYSE
Regulation, Inc. (‘‘NYSE Regulation’’).
The proposed rule change also would
make limited conforming changes to the
By-Laws of NASD Regulation, Inc.
(‘‘NASD Regulation By-Laws’’).
The text of the proposed rule change
is available on the NASD’s Web site
(https://www.nasd.com), at the principal
office of NASD, and at the
20 17
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
VerDate Aug<31>2005
15:30 Mar 23, 2007
Jkt 211001
Commission’s Public Reference Room.
The text of Exhibit 5 of the proposed
rule change is also available on the
Commission’s Web site (https://
www.sec.gov).
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
NASD 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
in Item IV below. NASD has prepared
summaries, set forth in Sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Background and Reasons for the
Transaction
The securities industry—both
domestically and internationally—is in
the midst of dramatic change. As the
industry changes, it has become clear
that the self-regulatory organization
(‘‘SRO’’) model must be adapted to
ensure efficient and effective regulation.
At the moment, both NASD and NYSE
Regulation oversee the activities of U.S.based broker-dealers doing business
with the public, approximately 170 of
which are regulated by both
organizations. The result is a
duplicative, sometimes conflicting
system that makes inefficient use of
resources and, as such, can be
detrimental to the ultimate goal of
investor protection.
NASD has long supported the idea of
one SRO having responsibility for all
member firm regulation.3 At the same
time, the SEC, Congress, securities
firms, and independent observers have
long encouraged greater efficiencies,
clarity and cost savings in the regulation
of America’s financial markets. For
these reasons, NASD and NYSE
Regulation joined together proactively
to design a system that would better
meet the needs of today’s investors and
securities firms.
With the support and encouragement
of the SEC, NASD and NYSE Group, Inc.
(‘‘NYSE Group’’) representatives began
3 See NASD’s comment letter dated March 15,
2005 in response to the SEC’s Concept Release
Concerning Self-Regulation, Securities Exchange
Act Release No. 50700 (November 18, 2004), 69 FR
71256 (December 8, 2004) (File No. S7–40–04).
PO 00000
Frm 00078
Fmt 4703
Sfmt 4703
14149
meeting in June 2006 to discuss options
for changes to the self-regulatory
system. A determination was made that
the scope of the discussions should be
limited to eliminating redundant
member regulation and not to combine
the market regulatory responsibilities of
NASD and NYSE Regulation.
On November 28, 2006, NASD and
the NYSE Group announced the plan to
consolidate their member regulation
operations into a combined organization
that will be the sole U.S. private-sector
provider of member firm regulation for
securities firms that do business with
the public (the ‘‘Transaction’’).4 This
consolidation will streamline the
broker-dealer regulatory system,
combine technologies, permit the
establishment of a single set of rules and
group examiners with complementary
areas of expertise in a single
organization—all of which will serve to
enhance oversight of U.S. securities
firms and help ensure investor
protection. Moreover, the new
organization will be committed to
reducing regulatory costs and burdens
for firms of all sizes through greater
regulatory efficiency.
The goals of the consolidation plan
are to:
• Establish a new organization that
will be the single SRO for all securities
firms doing business with the public in
the U.S.;
• Build and sustain the confidence
critical to the operation of vibrant
capital markets;
• Increase efficient, effective, and
consistent regulation of securities firms;
• Provide cost savings to securities
firms of all sizes; and
• Strengthen investor protection and
market integrity.
None of NASD’s current functions and
activities will be eliminated as a result
of the Transaction. The new
organization will be responsible for:
• Regulatory oversight of all
securities firms that do business with
the public;
• Professional training, testing and
licensing of registered persons;
• Arbitration and mediation;
• Market regulation by contract for
The Nasdaq Stock Market, Inc.
(‘‘Nasdaq’’), the American Stock
Exchange LLC, and the International
Securities Exchange, LLC; and
• Industry utilities, such as Trade
Reporting Facilities and other over-thecounter operations.
The consolidation plan addresses key
issues raised in the SEC’s 2004 Concept
4 At the closing of the Transaction, NASD will
adopt a new corporate name. The proposed rule
change refers to the newly named entity as the
‘‘New SRO.’’
E:\FR\FM\26MRN1.SGM
26MRN1
]]>Agencies
[Federal Register Volume 72, Number 57 (Monday, March 26, 2007)]
[Notices]
[Pages 14145-14149]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-5423]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55491; File No. SR-CBOE-2006-95]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Order Granting Accelerated Approval
of Proposed Rule Change as Modified by Amendment Nos. 1 and 2 Thereto
To List for Trading Options on the Vanguard[supreg] Emerging Markets
Exchange Traded Fund
March 19, 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 November 30, 2006, the Chicago Board Options Exchange, Incorporated
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule
[[Page 14146]]
change as described in Items I and II below, which Items have been
substantially prepared by the Exchange. The Exchange submitted
Amendment No. 1 to the proposed rule change on December 6, 2006. The
Exchange submitted Amendment No. 2 to the proposed rule change on
February 28, 2007. The Commission is publishing this notice and order
to solicit comments on the proposal, as amended, from interested
persons and to approve the proposed rule change, as modified by
Amendment Nos. 1 and 2, on an accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
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
Vanguard[supreg] Emerging Markets Exchange Traded Fund (``Fund
Options''). The text of the proposed rule change is available on the
Exchange's Web site (https://www.cboe.org/legal), at the Office of the
Secretary, CBOE 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 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. 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this rule change is to obtain approval to list for
trading on the Exchange options on the Vanguard[supreg] Emerging
Markets Exchange Traded Fund (``Fund'') on a pilot basis for six months
to commence on the date of approval and through six months after that
date. 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 funds structured as open-end investment companies,
such as the Fund, without having to file for Commission approval to
list for trading options on the fund.\3\ The request for approval is
based on the Exchange's determination that the Fund meets substantially
all of the Listing Standards 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.
---------------------------------------------------------------------------
\3\ 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
Exchange Act Release, No. 34-40166 (July 2, 1998), 63 FR 37430 (July
10, 1998) (approval order for SR-CBOE-97-45, predating U.S.
Securities and Exchange Commission's (``Commission'') adoption of
Rule 19b-4(e) of the Securities Exchange Act of 1934 (``New Product
Release''). See Exchange Act Release No. 34-40761 (Dec. 8, 1998), 63
FR 70952 (Dec. 22, 1998)).
---------------------------------------------------------------------------
As provided in the Fund's most recent prospectus, dated November
10, 2006, the Fund is an open-end investment company that is designed
to hold a portfolio of securities that tracks the Morgan Stanley
Capital International, Inc. Emerging Markets Index (``MSCI Emerging
Markets Index'' or ``Index''), which includes approximately 850 common
stocks of companies located in 25 emerging markets around the world.\4\
The Fund employs a ``passive management''--or indexing--investment
approach by investing substantially all (normally about 95%) of its
assets in the common stocks that comprise the MSCI Emerging Markets
Index while employing a form of sampling to reduce risk.
---------------------------------------------------------------------------
\4\ As provided by Morgan Stanley Capital International, Inc.
(``MSCI''), 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 September 29,
2006, the Index was comprised of 852 constituents with the top five
constituents representing the following weights: 5.01%, 4.09%,
1.82%, 1.79%, and 1.76%. The Index is rebalanced quarterly,
calculated in U.S. Dollars on a real time basis, and disseminated
every 60 seconds during market trading hours.
---------------------------------------------------------------------------
As of January 31, 2007, the Fund was comprised of 862 securities
and the ten largest holdings in the fund made up 18.5% of the total
assets in the Fund.\5\ The security with the greatest individual weight
of 5.4% is OAO Gazprom ADRSamsung Electronics Co LTD GDR Registered, a
South KoreanRussian security. The security with the smallest weight is
Thanachart Capital Public Company Ltd., Metropolitan Bank & Trust Coa
Thai security, at less than 0.01%. As of January 31, 2007, the largest
markets covered in the Fund were South Korea (14.9%), Taiwan (12.3%),
Russia (9.9%), Brazil (10.7%) and South Africa (8.5%).
---------------------------------------------------------------------------
\5\ The ten largest holdings are: (1) OAO Gazprom ADR, (2)
Samsung Electronics Co., Ltd., (3) China Mobile (Hong Kong), Ltd.,
(4) America Movil SA de CV, (5) Lukoil Sponsored ADR; (6) Taiwan
Semiconductor Manufacturing Co., Ltd., (7) Petroleo Brasileiro SA
Pfd (8) Hon Hai Precision Industry Co., Ltd., (9) Cemex SA CPO, and
(10) Petroleo Brasileiro SA. See https://flagship.vanguard.com/
VGApp/hnw/FundsSnapshot?FundId=0964&FundIntExt=INT.
---------------------------------------------------------------------------
The Exchange believes that Vanguard's stated investment policies
prevent the Fund from being excessively weighted in any single security
or small group of securities and significantly reduces 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 of 100,000 shares
(each, a ``Creation Unit''), as set forth in the Fund's prospectus.\6\
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.
---------------------------------------------------------------------------
\6\ See Exchange Act Release No. 34-44990, n. 16 (Oct. 25,
2001), 66 FR 56869 (Nov. 13, 2001) (approval order for SR-Amex-2001-
45, 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).
---------------------------------------------------------------------------
The Exchange notes that the maintenance Listing Standards set forth
in Rule 5.4.08 for 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,\7\ 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. This, in turn, should make it
highly unlikely that the market for listed, open-end investment company
shares could be capable of
[[Page 14147]]
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.
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 40166 (July 2,
1998), 63 FR 37430 (July 10, 1998).
---------------------------------------------------------------------------
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 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 sharing agreements
(``CSSA'') with foreign exchanges that cover 48.10% 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 CSSA
is the Bolsa Mexicana de Valores (``Bolsa''). The percentage of the
weight of the Fund represented by these securities is 6.60%.
The Exchange notes that the Commission recently approved the
listing and trading of options on the iShares MSCI Emerging Markets
Index Fund on a on a pilot basis \8\ and permitted the Exchange to rely
on the memorandum of understanding executed by the Commission and the
CNBV, dated as of October 18, 1990 (``MOU'') for purposes of satisfying
its surveillance and regulatory responsibilities for the component
securities in the Fund that trade on the Bolsa until the Exchange is
able to secure a surveillance agreement with the Bolsa.\9\
---------------------------------------------------------------------------
\8\ See Exchange Act Release No. 34-53621 (April 10, 2006), 71
FR 79568 (April 14, 2006) (approving 60 day pilot listing and
trading, until June 9, 2006); see also Exchange Act Release No. 34-
53960 (June 1, 2006), 71 FR 33322 (June 8, 2006) (continuation of
pilot program for additional 90 days, until September 7, 2006); see
also Exchange Act Release No. 34-54347 (Aug. 22, 2006), 71 FR 51242
(Aug. 29, 2006) (continuation of pilot program for additional 90
days, until December 7, 2006); see also Exchange Act Release No. 34-
54876 (Dec. 5, 2006), 71 FR 74968 (Dec. 13, 2006) (continuation of
pilot program for additional six months, until June 7, 2007).
\9\ The CNBV is the successor to the Comision Nacional y de
Valores of Mexico, which was merged with the Mexican Banking
Commission in April 1995 to form the CNBV. See Exchange Act Release
No. 36415, at n.23 (Oct. 25, 1995), 60 FR 55620 (Nov. 1, 1995)
(approval order for SR-CBOE-95-045). The Bolsa falls within the
regulatory oversight of CNBV.
---------------------------------------------------------------------------
Specifically, in connection with the listing and trading of options
on the iShares MSCI Emerging Markets Index Fund, the Exchange contacted
the Bolsa with a request to enter into a CSSA. In response, the Bolsa
expressed a willingness to enter into a surveillance sharing agreement
but indicated that it was unable to provide certain information that is
required as part of a CSSA. As a result of being unable to secure a
CSSA with the Bolsa, the Exchange requested permission to rely for a
pilot period on the MOU and the Exchange agreed to use its best efforts
that during this period to obtain a CSSA with the Bolsa, which would
reflect the following: (1) Express language addressing market trading
activity, clearing activity, and customer identify; (2) the Bolsa's
reasonable ability to obtain access to and produce requested
information; and (3) based on the CSSA and other information provided
by the Bolsa, the absence of existing rules, law 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.
On other occasions, 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 CSSA. For example, the Exchange previously attempted to enter into a
CSSA with the Bolsa around the time the Exchange sought approval to
list for trading options on the CBOE Mexico 30 Index in 1995, which was
comprised of stocks trading on the Bolsa.\10\ Since the Bolsa was
unable to provide a CSSA, the Commission allowed the Exchange to rely
on the MOU between the SEC and CNBV.
---------------------------------------------------------------------------
\10\ See Exchange Act Release No. 36415 (Oct. 25, 1995), 60 FR
55620 (Nov. 1, 1995) (approval order for SR-CBOE-95-045).
---------------------------------------------------------------------------
The Commission noted in the Approval Order regarding the CBOE
Mexico 30 Index that, in cases where it would be impossible to secure a
CSSA, the Commission has 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 CSSA between
exchanges. 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.
The practice of relying on surveillance agreements between
regulators when a foreign exchange was unable or unwilling to provide a
CSSA was affirmed by the Commission in the Commission's New Product
Release.\11\ In the New Product Release, the Commission noted that 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 might
determine instead that it is appropriate to rely on a memorandum of
understanding between the Commission and the foreign regulator.
---------------------------------------------------------------------------
\11\ See n. 4, supra.
---------------------------------------------------------------------------
Given the Exchange's current inability to enter into a CSSA with
the Bolsa, the Exchange requests permission to rely on a pilot basis 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 the Bolsa until the
Exchange is able to secure a CSSA with the Bolsa. The Exchange believes
this request is reasonable because the Commission has already
acknowledged that the MOU permits both the Commission and the CNBV to
acquire information from and provide information to the other, which is
similar to that which would be required in a surveillance sharing
agreement between exchanges.
Additionally, if the Commission approves the listing of the Fund on
a pilot basis, during this period, the Exchange represents that it will
continue its efforts to obtain a CSSA with the Bolsa. The Exchange also
represents that it will regularly update the Commission on the status
of its discussions with the Bolsa. The Commission's approval of this
request would otherwise render the Fund compliant with all of the
Listing Standards.\12\
---------------------------------------------------------------------------
\12\ The Exchange notes that the component securities of the
Fund change periodically. Therefore, the Exchange may in fact have
in place CSSAs that would otherwise cover the percent weighting
requirements set forth in the Listing Standards for securities not
trading on the Bolsa. In this event, the Fund would satisfy all of
the Listing Standards and reliance on an approval order for the Fund
would be unnecessary.
---------------------------------------------------------------------------
[[Page 14148]]
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act \13\ 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.\14\ Specifically, the Exchange believes the
proposed rule change is consistent with the Section 6(b)(5) \15\
requirements that the rules of an exchange be designed to promote just
and equitable principles of trade, to prevent fraudulent and
manipulative acts and, in general, to protect investors and the public
interest.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78a et seq.
\14\ 15 U.S.C. 78(f)(b).
\15\ 15 U.S.C. 78(f)(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, 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-2006-95 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-2006-95. 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 (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-2006-95 and should be submitted on or before April
16, 2007.
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange.\16\ In
particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(5) of the Act,\17\ 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.
---------------------------------------------------------------------------
\16\ 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).
\17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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 entering a comprehensive surveillance agreement with CBOE.
Consequently, the Commission has determined to approve CBOE's
listing and trading of Fund Options for a six-month 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: (1) Express language
addressing market trading activity, clearing activity, and customer
identify; (2) the Bolsa's reasonable ability to obtain access to and
produce requested information; and (3) based on the CSSA and other
information provided by the Bolsa, the absence of existing rules, law
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
48.10% 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,\18\ 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
six-month pilot period in which the Exchange will rely on the MOU.
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\18\ 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,\19\ that the
[[Page 14149]]
proposed rule change (SR-CBOE-2006-95), as modified by Amendment Nos. 1
and 2, be, and it hereby is approved on an accelerated basis for a six-
month pilot period ending on September 19, 2007.
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\19\ Id.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-5423 Filed 3-23-07; 8:45 am]
BILLING CODE 8010-01-P
