Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change to List and Trade Options on Shares of the iShares MSCI Mexico Index Fund, 73923-73926 [E7-25199]

Download as PDF Federal Register / Vol. 72, No. 248 / Friday, December 28, 2007 / 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 by the Exchange with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding, or (ii) as to which the Exchange consents, the Commission will: A. By order approve the proposed rule change or B. Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–CBOE–2007–03 on the subject line. mstockstill on PROD1PC66 with NOTICES 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–2007–03. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than VerDate Aug<31>2005 22:27 Dec 27, 2007 Jkt 214001 those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–CBOE–2007–03 and should be submitted on or before January 18, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–25198 Filed 12–27–07; 8:45 am] 73923 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change CBOE proposes to list and trade options on shares of the iShares MSCI Mexico Index Fund (the ‘‘Fund Options’’). The text of the proposed rule change is available on the Exchange’s website (http://www.cboe.org/Legal), at the Exchange’s Office of the Secretary 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. BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose [Release No. 34–57013; File No. SR-CBOE– 2007–140] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change to List and Trade Options on Shares of the iShares MSCI Mexico Index Fund December 20, 2007. 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 27, 2007, the Chicago Board Options Exchange, Incorporated ( ‘‘Exchange’’ or ‘‘CBOE’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been substantially prepared by the Exchange. The Commission is publishing this notice and order to solicit comments on the proposal from interested persons and to approve the proposed rule change on an accelerated basis. 13 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00167 Fmt 4703 Sfmt 4703 The purpose of the proposed rule change is to obtain approval to list for trading on the Exchange options on the iShares MSCI Mexico 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 (the ‘‘Listing Standards’’), that are designed to allow the Exchange to list options on 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 Exchange submits that the Fund meets substantially all of the Listing Standards requirements. In particular, all of the requirements set forth in CBOE Rule 5.3.06 are met, except for the requirement concerning the existence of a comprehensive surveillance sharing agreement (‘‘CSSA’’). However, the Exchange submits that sufficient mechanisms exist that would provide the Exchange with adequate 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. E:\FR\FM\28DEN1.SGM 28DEN1 73924 Federal Register / Vol. 72, No. 248 / Friday, December 28, 2007 / Notices surveillance and regulatory information with respect to the Fund. The Fund is registered pursuant to the Investment Company Act of 1940 as a management investment company designed to hold a portfolio of securities that track the MSCI Mexico Index (‘‘Index’’).4 The Index consists of stocks traded primarily on the Bolsa Mexicana de Valores (the ‘‘Bolsa’’). 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.5 Barclays Global Fund Advisors (‘‘BGFA’’ or the ‘‘Adviser’’) expects the Fund to closely track the Index so that, over time, a tracking error of 5% of less is exhibited. 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 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, to the extent practicable, to reflect the concentration of the Index. The Fund will invest at least eighty percent (80%) of its assets in the securities comprising the Index and/or related American Depositary Receipts (‘‘ADRs’’). In addition, at least ninety percent (90%) of the Fund’s assets will be invested in the securities comprising the Index or in other related Mexican securities or ADRs. The Fund may also invest its other assets in futures contracts, options on futures contracts, listed options, over-thecounter (‘‘OTC’’) options and swaps related to the Index, as well as cash and cash equivalents. 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 and redeemed, on a continuous basis, at net asset value (‘‘NAV’’) in aggregation size of 100,000 mstockstill on PROD1PC66 with NOTICES 4 Morgan Stanley Capital International Inc. (‘‘MSCI’’) created and maintains the Index. 5 As of October 31, 2007, the Fund was comprised of 27 securities. America Movil SAB de DV-Series L had the greatest individual weight at 23.99%. The aggregate percentage weighting of the top five and ten securities in the Fund were 59.16% and 78.33%, respectively. More information may be accessed at the iShares MSCI Mexico Index Fund (EWW) Web Site (http://www.ishares.com). VerDate Aug<31>2005 22:27 Dec 27, 2007 Jkt 214001 shares, or multiples thereof (a ‘‘Creation Unit’’). Following issuance, Fund Shares are traded on an exchange like any other equity securities. The Fund Shares trade in the secondary markets in amounts less than a Creation Unit and the price per Fund Share may differ from its NAV, which is calculated once daily as of the regularly scheduled close of business of the New York Stock Exchange (‘‘NYSE’’).6 State Street Bank and Trust Company, the administrator, custodian, and transfer agent for the Fund, calculates the Fund’s NAV. Detailed information on the Fund can be found at http:// www.ishares.com. The Exchange has reviewed the Fund and determined that the Fund Shares satisfy 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 an index or portfolio of securities 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 does not have in place a surveillance agreement with Bolsa. The Exchange notes that the Commission, in the past, has been willing to allow a national securities exchange to rely on a memorandum of understanding entered into between regulators in the event the exchanges themselves cannot enter into a CSSA. The Exchange previously made attempts to enter into a CSSA with Bolsa as part of seeking approval to list and trade options on: (1) The CBOE Mexico 30 Index; (2) the iShares MSCI Emerging Markets Index Fund (‘‘EEM’’); and (3) the Vanguard Emerging Markets Fund (‘‘VWO’’), each of which held non-U.S. component securities that traded on Bolsa.7 The Exchange also understands that the American Stock Exchange (‘‘Amex’’) previously attempted to enter into a CSSA with Bolsa as part of seeking approval to list and trade options on the Mexico Index.8 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 6 The regularly scheduled close of trading in the NYSE is normally 4:00 p.m. Eastern Time (‘‘ET’’). 7 See Securities Exchange Act Release Nos. 36415 (October 25, 1995), 60 FR 559620 (November 1, 1995) (SR-CBOE–95–45); 53621 (April 10, 2006), 71 FR 79568 (April 14, 2006) (SR-CBOE–2006–82); and 55491 (March 19, 2007), 72 FR 14145 (March 26, 2007) (SR-CBOE–2006–95). 8 See Securities Exchange Act Release No. 34500 (August 8, 1994), 59 FR 41534 (August 12, 1994) (SR-Amex-94–20). PO 00000 Frm 00168 Fmt 4703 Sfmt 4703 on surveillance sharing agreements between the relevant regulators.9 The Commission further noted in the Approval Order that, pursuant to the terms of the memorandum of understanding executed by the Commission and the CNBV,10 dated October 18, 1990 (‘‘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.11 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.12 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 (‘‘New Product Release’’).13 The Commission noted in the New Product Release that if securing a CSSA 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. The Exchange requests that the Commission allow the listing and trading of the Fund Shares without a CSSA, upon reliance of the MOU entered into between the Commission and the CNBV, until the Exchange is able to secure a CSSA with Bolsa. The Exchange believes this request is reasonable and notes that the Commission has provided similar relief in the past. For example, the Commission approved, on a pilot basis, two CBOE proposals to list and trade options on the EEM and on the VWO.14 9 See Securities Exchange Act Release No. 36415 (October 25, 1995), 60 FR 55620 (November 1, 1995) (SR-CBOE–95–45). 10 The National Commission for Banking and Securities, or ‘‘CNBV,’’ is Mexico’s regulatory body for financial markets and banking. 11 See supra note 9. 12 Id. 13 See Securities Exchange Act Release No. 40761 (December 8, 1998), 63 FR 70952 (December 22, 1998), at note 101. 14 See Securities Exchange Act Release Nos. 53621 (April 10, 2006), 71 FR 19568 (April 14, 2006) (SR-CBOE–2006–32); 53930 (June 1, 2006), 71 FR 33322 (June 8, 2006) (SR-CBOE–2006–56); 54347 (August 22, 2006), 71 FR 51242 (August 29, 2006) (SR-CBOE–2006–72); 54876 (December 5, 2006), 71 FR 74968 (December 13, 2006) (SR-CBOE–2006– 103); and 55758 (May 14, 2007), 72 FR 28090 (May E:\FR\FM\28DEN1.SGM 28DEN1 Federal Register / Vol. 72, No. 248 / Friday, December 28, 2007 / Notices The Commission’s approval of this request to list and trade options on the Fund would otherwise render the Fund compliant with all of the Listing Standards. 2. Statutory Basis The proposed rule change is consistent with Section 6(b) of the Securities Exchange Act of 1934 15 (the ‘‘Act’’) in general and furthers the objectives of Section 6(b)(5) 16 in particular in that it is designed to prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, remove impediments to and perfect the mechanisms of a free and open market and a national market system, and, in general, protect investors and the public interest. Further, this proposed rule change is similar to a proposal that was submitted by Amex and recently approved by the Commission.17 B. Self-Regulatory Organization’s Statement on Burden on Competition CBOE 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 The Exchange neither solicited nor received comments on the proposal. III. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR-CBOE–2007–140 on the subject line. Paper comments mstockstill on PROD1PC66 with NOTICES • Send paper comments in triplicate to Nancy M. Morris, Secretary, 18, 2007) (SR-CBOE–2007–43); and 55491 (March 19, 2007), 72 FR 14145 (March 26, 2007) (SRCBOE–2006–95). 15 15 U.S.C. 78f(b). 16 15 U.S.C. 78f(b)(5). 17 See Securities Exchange Act Release No. 56778 (November 9, 2007), 72 FR 65113 (November 19, 2007) (SR–Amex–2007–100). VerDate Aug<31>2005 22:27 Dec 27, 2007 Jkt 214001 Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549–1090. All submissions should refer to File Number SR-CBOE–2007–140. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of Amex. 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– 2007–140 and should be submitted on or before January 18, 2008. 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.18 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,19 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 fully satisfy CBOE’s applicable 18 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). 19 15 U.S.C. 78f(b)(5). PO 00000 Frm 00169 Fmt 4703 Sfmt 4703 73925 Listing Standards, specifically the requirement set forth in CBOE Rule 5.3.06(A) that requires the Fund to meet the following condition, ‘‘any non-U.S. component securities of an index or portfolio of securities 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 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.20 In this case, CBOE has attempted unsuccessfully to reach such an agreement with Bolsa. Consequently, the Commission has determined to approve CBOE’s listing and trading of the Fund Options and to allow CBOE to rely on the MOU 21 with respect to the underlying Fund components trading on Bolsa. The Commission believes that, regardless of the Commission’s willingness to permit reliance on the MOU, CBOE should continue 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 identity; (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 has requested accelerated approval of the proposed rule change. The Commission finds good cause, consistent with Section 19(b)(2) of the Act,22 for approving this proposed rule change before the thirtieth day after the publication of notice thereof in the Federal Register because it will enable the Exchange to immediately consider listing and trading the Fund Options, similar to products already traded on the Exchange,23 and because it does not raise any new regulatory issues. 20 See supra note 9; See also New Product Release, supra note 13. 21 See supra note 9. 22 15 U.S.C. 78s(b)(2). 23 See supra note 14. E:\FR\FM\28DEN1.SGM 28DEN1 73926 Federal Register / Vol. 72, No. 248 / Friday, December 28, 2007 / Notices V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,24 that the proposed rule change (SR–CBOE–2007– 140) be, and it hereby is approved on an accelerated basis. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–25199 Filed 12–27–07; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–57007; File No. SR–CHX– 2007–17] Self-Regulatory Organizations; The Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding the Elimination of Provisions Relating to Rule 10a–1 December 20, 2007. mstockstill on PROD1PC66 with NOTICES Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 2 thereunder, notice is hereby given that on August 31, 2007, the Chicago Stock Exchange, Inc. (‘‘CHX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), and on October 22, 2007 amended, the proposed rule change as described in Items I and II below, which Items have been substantially prepared by CHX. CHX has designated the proposed rule change as constituting a ‘‘noncontroversial’’ rule change under paragraph (f)(6) of Rule 19b–4 under the Act.3 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 Through this filing, the Exchange proposes to amend its rules to eliminate all provisions that would impose a ‘‘price test’’ in connection with the short sale of securities or require that CHX’s Matching System operate in a manner consistent with such a price test. The text of this proposed rule change is available at the Exchange, on the Exchange’s Web site at http:// www.chx.com/rules/ 24 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 17 CFR 240.19b–4(f)(6). 25 17 VerDate Aug<31>2005 22:27 Dec 27, 2007 Jkt 214001 proposed_rules.htm, and in 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 CHX included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received regarding the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The CHX 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 On June 28, 2007, the Commission approved final rules eliminating the price test of Rule 10a–1 4 and amending Regulation SHO.5 The Commission’s action prohibits any self-regulatory organization from having a price test and removes the ‘‘short exempt’’ marking requirement of Rule 200(g). The compliance date for these changes (‘‘Compliance Date’’) was July 6, 2007. The Exchange’s rules currently include several provisions that should be eliminated to ensure that the Exchange’s rules do not improperly impose a price test or otherwise require handling of short sale orders in a manner inconsistent with the Commission’s latest action. Among others, these provisions include a requirement that participants effect short sales in compliance with Rule 10a–1; a description of the Matching System’s repricing of sell short orders, when necessary to comply with Rule 10a–1; and a requirement that participants mark orders as ‘‘short exempt.’’ 6 Through this filing, the Exchange would eliminate these provisions. The Exchange filed Amendment No. 1 to the proposal to confirm that it is not eliminating a section of its ‘‘Short Sales’’ rule that imposes a requirement 4 17 CFR 240.10a–1. Securities Exchange Act Release No. 34– 55970 (June 28, 2007). 6 See Article 9, Rule 23(a); Article 20, Rule 8(e)(5); and Article 11, Rules 3 and 4, respectively. Other provisions that must be eliminated are ones that relate to the ‘‘short exempt’’ order type and that refer to Rule 10a–1. See Article 1, Rule 2(hh) and Article 20, Rule 4(b)(23) (the ‘‘short exempt’’ order type); and Article 1, Rule 1(w) (referring to Rule 10a–1). 5 See PO 00000 Frm 00170 Fmt 4703 Sfmt 4703 that a market maker notify the Exchange if it has a position in a security that is greater than or equal to 5% of the outstanding public float of that security, as determined by the company’s most recent report on Form 10–K.7 The Exchange’s original proposal had sought to remove this provision from its rules.8 2. Statutory Basis The proposal is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange, and, in particular, with the requirements of Section 6(b).9 The Exchange believes that the proposed change is consistent with Section 6(b)(5) of the Act,10 because it would promote just and equitable principles of trade, remove impediments to, and perfect the mechanism of, a free and open market and a national market system, and, in general, protect investors and the public interest by modifying CHX’s rules to comply with the Commission’s amendments to Rule 10a–1 and Regulation SHO. B. Self-Regulatory Organization’s Statement of Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments Regarding the Proposed Rule Change Received From Members, Participants or Others No written comments were solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) Impose any significant burden on competition; and (iii) Become operative for 30 days from the date on which it was filed, or such shorter time as the Commission 7 See Article 9, Rule 23(b). provision is one that apparently was inadvertently carried over from the Exchange’s old trading model and is not necessary in the Exchange’s new trading model. A separate provision of the Exchange’s new trading model rules specifically requires that market makers keep data about their positions and report that information to the Exchange upon request. See Article 16, Rule 10. The Exchange will file a separate proposal to eliminate this provision, if it continues to believe that it is appropriate to do so. 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(5). 8 This E:\FR\FM\28DEN1.SGM 28DEN1

Agencies

[Federal Register Volume 72, Number 248 (Friday, December 28, 2007)]
[Notices]
[Pages 73923-73926]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-25199]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57013; File No. SR-CBOE-2007-140]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Order Granting Accelerated Approval 
of Proposed Rule Change to List and Trade Options on Shares of the 
iShares MSCI Mexico Index Fund

December 20, 2007.
    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 27, 2007, the Chicago Board Options Exchange, Incorporated 
( ``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been substantially prepared by 
the Exchange. The Commission is publishing this notice and order to 
solicit comments on the proposal from interested persons and to approve 
the proposed rule change 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

    CBOE proposes to list and trade options on shares of the iShares 
MSCI Mexico Index Fund (the ``Fund Options'').
    The text of the proposed rule change is available on the Exchange's 
website (http://www.cboe.org/Legal), at the Exchange's Office of the 
Secretary 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to obtain approval to 
list for trading on the Exchange options on the iShares MSCI Mexico 
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 (the ``Listing Standards''), that are designed to 
allow the Exchange to list options on 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 
Exchange submits that the Fund meets substantially all of the Listing 
Standards requirements. In particular, all of the requirements set 
forth in CBOE Rule 5.3.06 are met, except for the requirement 
concerning the existence of a comprehensive surveillance sharing 
agreement (``CSSA''). However, the Exchange submits that sufficient 
mechanisms exist that would provide the Exchange with adequate

[[Page 73924]]

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.
---------------------------------------------------------------------------

    The Fund is registered pursuant to the Investment Company Act of 
1940 as a management investment company designed to hold a portfolio of 
securities that track the MSCI Mexico Index (``Index'').\4\ The Index 
consists of stocks traded primarily on the Bolsa Mexicana de Valores 
(the ``Bolsa''). 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.\5\ Barclays Global Fund Advisors 
(``BGFA'' or the ``Adviser'') expects the Fund to closely track the 
Index so that, over time, a tracking error of 5% of less is exhibited. 
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 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, to the extent practicable, to reflect 
the concentration of the Index. The Fund will invest at least eighty 
percent (80%) of its assets in the securities comprising the Index and/
or related American Depositary Receipts (``ADRs''). In addition, at 
least ninety percent (90%) of the Fund's assets will be invested in the 
securities comprising the Index or in other related Mexican securities 
or ADRs. The Fund may also invest its other assets in futures 
contracts, options on futures contracts, listed options, over-the-
counter (``OTC'') options and swaps related to the Index, as well as 
cash and cash equivalents. 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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    \4\ Morgan Stanley Capital International Inc. (``MSCI'') created 
and maintains the Index.
    \5\ As of October 31, 2007, the Fund was comprised of 27 
securities. America Movil SAB de DV-Series L had the greatest 
individual weight at 23.99%. The aggregate percentage weighting of 
the top five and ten securities in the Fund were 59.16% and 78.33%, 
respectively. More information may be accessed at the iShares MSCI 
Mexico Index Fund (EWW) Web Site (http://www.ishares.com).
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    Shares of the Fund (``Fund Shares'') are issued and redeemed, on a 
continuous basis, at net asset value (``NAV'') in aggregation size of 
100,000 shares, or multiples thereof (a ``Creation Unit''). Following 
issuance, Fund Shares are traded on an exchange like any other equity 
securities. The Fund Shares trade in the secondary markets in amounts 
less than a Creation Unit and the price per Fund Share may differ from 
its NAV, which is calculated once daily as of the regularly scheduled 
close of business of the New York Stock Exchange (``NYSE'').\6\
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    \6\ The regularly scheduled close of trading in the NYSE is 
normally 4:00 p.m. Eastern Time (``ET'').
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    State Street Bank and Trust Company, the administrator, custodian, 
and transfer agent for the Fund, calculates the Fund's NAV. Detailed 
information on the Fund can be found at http://www.ishares.com.
    The Exchange has reviewed the Fund and determined that the Fund 
Shares satisfy 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 an index or 
portfolio of securities 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 does not have in place a 
surveillance agreement with Bolsa.
    The Exchange notes that the Commission, in the past, has been 
willing to allow a national securities exchange to rely on a memorandum 
of understanding entered into between regulators in the event the 
exchanges themselves cannot enter into a CSSA.
    The Exchange previously made attempts to enter into a CSSA with 
Bolsa as part of seeking approval to list and trade options on: (1) The 
CBOE Mexico 30 Index; (2) the iShares MSCI Emerging Markets Index Fund 
(``EEM''); and (3) the Vanguard Emerging Markets Fund (``VWO''), each 
of which held non-U.S. component securities that traded on Bolsa.\7\ 
The Exchange also understands that the American Stock Exchange 
(``Amex'') previously attempted to enter into a CSSA with Bolsa as part 
of seeking approval to list and trade options on the Mexico Index.\8\
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    \7\ See Securities Exchange Act Release Nos. 36415 (October 25, 
1995), 60 FR 559620 (November 1, 1995) (SR-CBOE-95-45); 53621 (April 
10, 2006), 71 FR 79568 (April 14, 2006) (SR-CBOE-2006-82); and 55491 
(March 19, 2007), 72 FR 14145 (March 26, 2007) (SR-CBOE-2006-95).
    \8\ See Securities Exchange Act Release No. 34500 (August 8, 
1994), 59 FR 41534 (August 12, 1994) (SR-Amex-94-20).
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    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.\9\ The Commission further 
noted in the Approval Order that, pursuant to the terms of the 
memorandum of understanding executed by the Commission and the 
CNBV,\10\ dated October 18, 1990 (``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.\11\ 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.\12\
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    \9\ See Securities Exchange Act Release No. 36415 (October 25, 
1995), 60 FR 55620 (November 1, 1995) (SR-CBOE-95-45).
    \10\ The National Commission for Banking and Securities, or 
``CNBV,'' is Mexico's regulatory body for financial markets and 
banking.
    \11\ See supra note 9.
    \12\ Id.
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    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 (``New Product Release'').\13\ The Commission noted in the New 
Product Release that if securing a CSSA 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.
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    \13\ See Securities Exchange Act Release No. 40761 (December 8, 
1998), 63 FR 70952 (December 22, 1998), at note 101.
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    The Exchange requests that the Commission allow the listing and 
trading of the Fund Shares without a CSSA, upon reliance of the MOU 
entered into between the Commission and the CNBV, until the Exchange is 
able to secure a CSSA with Bolsa. The Exchange believes this request is 
reasonable and notes that the Commission has provided similar relief in 
the past. For example, the Commission approved, on a pilot basis, two 
CBOE proposals to list and trade options on the EEM and on the VWO.\14\
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    \14\ See Securities Exchange Act Release Nos. 53621 (April 10, 
2006), 71 FR 19568 (April 14, 2006) (SR-CBOE-2006-32); 53930 (June 
1, 2006), 71 FR 33322 (June 8, 2006) (SR-CBOE-2006-56); 54347 
(August 22, 2006), 71 FR 51242 (August 29, 2006) (SR-CBOE-2006-72); 
54876 (December 5, 2006), 71 FR 74968 (December 13, 2006) (SR-CBOE-
2006-103); and 55758 (May 14, 2007), 72 FR 28090 (May 18, 2007) (SR-
CBOE-2007-43); and 55491 (March 19, 2007), 72 FR 14145 (March 26, 
2007) (SR-CBOE-2006-95).

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[[Page 73925]]

    The Commission's approval of this request to list and trade options 
on the Fund would otherwise render the Fund compliant with all of the 
Listing Standards.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 \15\ (the ``Act'') in general and 
furthers the objectives of Section 6(b)(5) \16\ in particular in that 
it is designed to prevent fraudulent and manipulative acts and 
practices, promote just and equitable principles of trade, remove 
impediments to and perfect the mechanisms of a free and open market and 
a national market system, and, in general, protect investors and the 
public interest. Further, this proposed rule change is similar to a 
proposal that was submitted by Amex and recently approved by the 
Commission.\17\
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
    \17\ See Securities Exchange Act Release No. 56778 (November 9, 
2007), 72 FR 65113 (November 19, 2007) (SR-Amex-2007-100).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE 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

    The Exchange neither solicited nor received comments on the 
proposal.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2007-140 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-2007-140. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of Amex. 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-2007-140 and should be 
submitted on or before January 18, 2008.

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.\18\ In 
particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\19\ 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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    \18\ 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).
    \19\ 15 U.S.C. 78f(b)(5).
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    The listing of the Fund Options does not fully satisfy CBOE's 
applicable Listing Standards, specifically the requirement set forth in 
CBOE Rule 5.3.06(A) that requires the Fund to meet the following 
condition, ``any non-U.S. component securities of an index or portfolio 
of securities 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 
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.\20\ In this case, CBOE has attempted unsuccessfully to reach 
such an agreement with Bolsa.
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    \20\ See supra note 9; See also New Product Release, supra note 
13.
---------------------------------------------------------------------------

    Consequently, the Commission has determined to approve CBOE's 
listing and trading of the Fund Options and to allow CBOE to rely on 
the MOU \21\ with respect to the underlying Fund components trading on 
Bolsa. The Commission believes that, regardless of the Commission's 
willingness to permit reliance on the MOU, CBOE should continue 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 
identity; (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.
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    \21\ See supra note 9.
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    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,\22\ for approving this proposed rule change before 
the thirtieth day after the publication of notice thereof in the 
Federal Register because it will enable the Exchange to immediately 
consider listing and trading the Fund Options, similar to products 
already traded on the Exchange,\23\ and because it does not raise any 
new regulatory issues.
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    \22\ 15 U.S.C. 78s(b)(2).
    \23\ See supra note 14.

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[[Page 73926]]

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\24\ that the proposed rule change (SR-CBOE-2007-140) be, and it 
hereby is approved on an accelerated basis.
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    \24\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-25199 Filed 12-27-07; 8:45 am]
BILLING CODE 8011-01-P