Self-Regulatory Organizations; American Stock Exchange LLC; Order Approving Proposed Rule Change, as Modified by Amendment No. 1, Relating to Generic Listing Standards for Index Multiple Fund Shares and Index Inverse Fund Shares, 21391-21394 [E8-8518]

Download as PDF Federal Register / Vol. 73, No. 77 / Monday, April 21, 2008 / Notices Dated: April 15, 2008. Susanne Bolton, Committee Management Officer. [FR Doc. E8–8461 Filed 4–18–08; 8:45 am] SECURITIES AND EXCHANGE COMMISSION [Release Nos. 33–8910; 34–57669; File No. 265–24] BILLING CODE 7555–01–P Advisory Committee on Improvements to Financial Reporting. NATIONAL SCIENCE FOUNDATION National Science Foundation. Notice of permits issued under the Antarctic Conservation of 1978, Public Law 95–541. AGENCY: ACTION: SUMMARY: The National Science Foundation (NSF) is required to publish notice of permits issued under the Antarctic Conservation Act of 1978. This is the required notice. FOR FURTHER INFORMATION CONTACT: Nadene G. Kennedy, Permit Office, Office of Polar Programs, Rm. 755, National Science Foundation, 4201 Wilson Boulevard, Arlington, VA 22230. SUPPLEMENTARY INFORMATION: On March 17, 2008, the National Science Foundation published a notice in the Federal Register of a permit application received. A permit was issued on April 16, 2008 to: H. William Detrich, III, Permit No. 2009–001. Nadene G. Kennedy, Permit Officer. [FR Doc. E8–8524 Filed 4–18–08; 8:45 am] BILLING CODE 7555–01–P Advisory Committee on Reactor Safeguards (ACRS); Meeting of the ACRS Subcommittee on Reliability and Probabilistic Risk Assessment; Notice of Cancellation of Meeting rwilkins on PROD1PC63 with NOTICES The ACRS Subcommittee meeting on Reliability and Probabilistic Risk Assessment scheduled for April 18, 2008 has been cancelled. This meeting was published previously in the Federal Register on Monday, March 24, 2008 (73 FR 15543). For further information contact the Designated Federal Official Dr. Hossein P. Nourbakhsh, (Telephone: 301–415– 5622) between 7:30 a.m. and 4:15 p.m. (ET). Dated: April 14, 2008. Cayetano Santos, Branch Chief, ACRS. [FR Doc. E8–8548 Filed 4–18–08; 8:45 am] BILLING CODE 7590–01–P 16:59 Apr 18, 2008 SUMMARY: The Securities and Exchange Commission Advisory Committee on Improvements to Financial Reporting is providing notice that it is changing the room location of its public meeting on Friday, May 2, 2008. The meeting will continue to be held at the Donald E. Stephens Conference Center, 5555 N. River Road, Rosemont, Illinois 60018, beginning at 8 a.m. (CDT). However, the meeting will now be located in room 40. FOR FURTHER INFORMATION CONTACT: James L. Kroeker, Deputy Chief Accountant, or Shelly C. Luisi, Senior Associate Chief Accountant, at (202) 551–5300, Office of the Chief Accountant, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–6561. SUPPLEMENTARY INFORMATION: In accordance with Section 10(a) of the Federal Advisory Committee Act, 5 U.S.C. App. 1, 10(a), James L. Kroeker, Designated Federal Officer of the Committee, has approved publication of this notice. Dated: April 15, 2008. Nancy M. Morris, Committee Management Officer. [FR Doc. E8–8516 Filed 4–18–08; 8:45 am] NUCLEAR REGULATORY COMMISSION VerDate Aug<31>2005 Securities and Exchange Commission. ACTION: Room Change for Meeting of SEC Advisory Committee on Improvements to Financial Reporting. AGENCY: Notice of Permits Issued Under the Antarctic Conservation Act of 1978 Jkt 214001 SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meeting Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission will hold a Closed Meeting on Wednesday, April 23, 2008 at 10 a.m. Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the Closed Meeting. Certain staff members who have an interest in the matters may also be present. The General Counsel of the Commission, or his designee, has certified that, in his opinion, one or more of the exemptions set forth in 5 Frm 00089 Fmt 4703 U.S.C. 552b(c)(3) (5), (7), (8), (9)(B), and (10) and 17 CFR 200.402(a)(3), (5), (7), (8), 9(ii) and (10), permit consideration of the scheduled matters at the Closed Meeting. Commissioner Atkins, as duty officer, voted to consider the items listed for the Closed Meeting in closed session. The subject matter of the Closed Meeting scheduled for April 23, 2008 will be: formal orders of investigation; institution and settlement of injunctive actions; and institution and settlement of administrative proceedings of an enforcement nature. At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact: the Office of the Secretary at (202) 551–5400. Dated: April 16, 2008. Nancy M. Morris, Secretary. [FR Doc. E8–8544 Filed 4–18–08; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–57660; File No. SR–Amex– 2007–131] Self-Regulatory Organizations; American Stock Exchange LLC; Order Approving Proposed Rule Change, as Modified by Amendment No. 1, Relating to Generic Listing Standards for Index Multiple Fund Shares and Index Inverse Fund Shares April 14, 2008. I. Introduction BILLING CODE 8010–01–P PO 00000 21391 Sfmt 4703 On December 20, 2007, the American Stock Exchange LLC (‘‘Amex’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to revise Amex rules to include generic listing standards for series of Index Multiple Exchange Traded Fund Shares (‘‘Multiple Fund Shares’’) and Index Inverse Exchange Traded Fund Shares (‘‘Inverse Fund Shares’’) (collectively, the ‘‘Fund Shares’’). On February 29, 2008, Amex filed Amendment No. 1 to the proposed rule change. The proposed rule change, as amended, was published for comment in the Federal Register on 1 15 2 17 E:\FR\FM\21APN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 21APN1 21392 Federal Register / Vol. 73, No. 77 / Monday, April 21, 2008 / Notices March 13, 2008.3 The Commission received no comment letters regarding the proposal. This order approves the proposed rule change, as modified by Amendment No. 1. rwilkins on PROD1PC63 with NOTICES II. Description Amex Rules 1000A–AEMI and Rules 1001A through 1005A provide standards for listing Index Fund Shares (‘‘IFSs’’) on the Exchange. The Exchange proposes to amend the definition of ‘‘Index Fund Share’’ set forth in Amex Rule 1000A–AEMI(b)(2) to reflect that domestic equity, international or global equity, or fixed income securities indexes, or a combination thereof, may be used as the underlying performance benchmark for Fund Shares.4 The Exchange also proposes to revise Commentaries .02, .03 and .04 to Amex Rule 1000A–AEMI and add new Commentary .01 to Amex Rule 1002A to permit the listing and trading of Multiple Fund Shares and certain Inverse Fund Shares pursuant to the Exchange’s generic listing standards for IFSs. Specifically, the investment objective associated with the Fund Shares must be expected to achieve investment results, before fees and expenses, by a specified multiple (Multiple Fund Shares) or inversely up to ¥200% (Inverse Fund Shares) of the underlying performance benchmark domestic equity, international or global equity and/or fixed income indexes, as applicable. Accordingly, this proposal would enable the Exchange to list and trade Multiple Fund Shares and certain Inverse Fund Shares pursuant to Rule 19b–4(e) of the Act 5 if each of the conditions set forth in Commentaries .02, .03, .04 and .05 to Amex Rule 1000A–AEMI, as applicable, are satisfied.6 3 See Securities Exchange Act Release No. 57451 (March 7, 2008), 73 FR 13591. 4 Multiple Fund Shares seek to provide investment results, before fees and expenses, that correspond to a specified multiple of the percentage performance on a given day of a particular foreign, domestic or fixed income securities index. Inverse Fund Shares seek to provide investment results, before fees and expenses, that correspond to the inverse (opposite) of the percentage performance on a given day of a particular foreign, domestic or fixed income securities index by a specified multiple. Fund Shares differ from traditional exchange-traded fund (‘‘ETF’’) shares in that they do not merely correspond to the performance of a given securities index, but rather attempt to match a multiple or inverse of such underlying index performance. 5 17 CFR 240.19b–4(e). 6 See Commentaries .02(a)(A) to Amex Rule 1000A–AEMI (Domestic Equity); .02(a)(B) to Amex Rule 1000A–AEMI (International Equity); .02(a)(C) to Amex Rule 1000A–AEMI (Prior Approved Indexes); .03 to Amex Rule 1000A–AEMI (Fixed Income); and .04 to Amex Rule 1000A–AEMI (Combination Indexes of Domestic Equity, International Equity and/or Fixed Income). VerDate Aug<31>2005 16:59 Apr 18, 2008 Jkt 214001 Limitation on Leverage In connection with Inverse Funds that seek to provide investment results, before fees and expenses, in an amount that exceeds ¥200% of the underlying benchmark index, the Exchange’s proposal would continue to require specific Commission approval pursuant to Section 19(b)(2) of the Act.7 In particular, Amex Rule 1000A– AEMI(b)(2)(iii) would expressly prohibit Inverse Funds that seek to provide investment results, before fees and expenses, in an amount that exceeds ¥200% of the underlying benchmark index, from being approved by the Exchange for listing and trading pursuant to Rule 19b–4(e) under the Act.8 In connection with Multiple Fund Shares, proposed Amex Rule 1000A– AEMI(b)(2) does not provide a similar limitation on leverage. Instead, the proposal would permit the underlying registered management investment company or fund to seek to provide investment results, before fees and expenses, that correspond to any multiple, without limitation, of the percentage performance on given day of a particular domestic equity, international or global equity, or fixed income securities indexes or a combination thereof. Availability of Information About Fund Shares and Underlying Indexes Proposed new Commentary .01 to Amex Rule 1002A provides that the portfolio composition of a Fund will be disclosed on a public Web site. Web site disclosure of portfolio holdings that will form the basis for the calculation of the net asset value by the issuer of a series of Multiple Fund Shares or Inverse Fund Shares will be made daily and will include, as applicable, the identity and number of shares held of each specific equity security, the identity and amount held of each fixed income security, the specific types of Financial Instruments and characteristics of such instruments, cash equivalents and amount of cash held in the portfolio of a Fund. This public Web site disclosure of the portfolio composition of a Fund, that will form the basis for the calculation of the net asset value, will coincide with the disclosure of the same information to ‘‘Authorized Participants.’’ 9 Investors will have 7 15 U.S.C. 78s(b)(2). CFR 240.19b–4(e). 9 Authorized Participants are the only persons that may place orders to create and redeem Creation Units. Authorized Participants must be registered broker-dealers or other securities market participants, such as banks and other financial 8 17 PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 access to the current portfolio composition of a Fund through the Fund’s Web site and/or at the Exchange’s Web site at https:// www.amex.com. Trading Halts Existing trading halt requirements for IFSs will apply to Multiple Fund Shares and Inverse Fund Shares. In particular, Amex Rule 1002A(b)(ii) provides if the Intraday Indicative Value or the index value applicable to that series of IFSs is not being disseminated as required, the Exchange may halt trading during the day in which the interruption to the dissemination of the Intraday Indicative Value or the index value occurs. If the interruption to the dissemination of the Intraday Indicative Value or the index value persists past the trading day in which it occurred, the Exchange will halt trading no later than the beginning of the trading day following the interruption.10 In addition, proposed new Commentary .01 to Amex Rule 1002A will require Amex to halt trading of subject Fund Shares if the Exchange becomes aware that the open-end investment company fails to properly disseminate the appropriate net asset value (‘‘NAV’’) to market participants at the same time and/or fails to provide daily public Web site disclosure of its portfolio holdings. Commentary .01 to Amex Rule 1002A further provides that the Exchange may resume trading in such Fund Shares only when the NAV is disseminated to all market participants at the same time or the daily public Web site disclosure of portfolio holdings occurs, as appropriate. In addition to other factors that may be relevant, the Exchange may consider factors such as those set forth in Amex Rule 918C(b) in exercising its discretion to halt or suspend trading in Multiple and/or Inverse Fund Shares. These factors would include, but are not limited to, (1) the extent to which trading is not occurring in securities comprising an Underlying Index and/or the Financial Instruments of a Multiple or Inverse Fund, or (2) whether other institutions that are exempt from registration as broker-dealers to engage in securities transactions, who are participants in DTC. The Commission notes that, although substantively identical, the format of the disclosure of portfolio holdings to Authorized Participants may differ from the format of the public Web site disclosure. 10 If an IFS is traded on the Exchange pursuant to unlisted trading privileges, the Exchange will halt trading if the primary listing market halts trading in such IFS because the Intraday Indicative Value and/or the index value is not being disseminated. See Securities Exchange Act Release No. 55018 (December 28, 2006), 72 FR 1040 (January 9, 2007) (SR–Amex–2006–109). E:\FR\FM\21APN1.SGM 21APN1 Federal Register / Vol. 73, No. 77 / Monday, April 21, 2008 / Notices unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. In the case of the Financial Instruments held by a Multiple or Inverse Fund, the Exchange represented that a notification procedure will be implemented so that timely notice from the investment adviser of such Multiple or Inverse Fund is received by the Exchange when a particular Financial Instrument is in default or shortly to be in default. Notification from the investment adviser will be made by phone, facsimile or email. The Exchange will then determine on a case-by-case basis whether a default of a particular Financial Instrument justifies a trading halt of the Multiple and/or Inverse Fund Shares. Trading in Multiple and/or Inverse Fund Shares will also be halted if the circuit breaker parameters under Amex Rule 117 have been reached. rwilkins on PROD1PC63 with NOTICES Suitability Prior to commencement of trading, the Exchange will issue an Information Circular to its members and member organizations providing guidance with regard to member firm compliance responsibilities (including suitability obligations) when effecting transactions in the Fund Shares and highlighting the special risks and characteristics of Multiple and Inverse Funds Shares as well as applicable Exchange rules. This Information Circular will set forth the requirements relating to Commentary .05 to Amex Rule 411 (Duty to Know and Approve Customers). Specifically, the Information Circular will remind members of their obligations in recommending transactions in the Shares so that members have a reasonable basis to believe that (1) the recommendation is suitable for a customer given reasonable inquiry concerning the customer’s investment objectives, financial situation, needs, and any other information known by such member, and (2) the customer can evaluate the special characteristics, and is able to bear the financial risks, of such investment. In connection with the suitability obligation, the Information Circular will also provide that members make reasonable efforts to obtain the following information: (1) The customer’s financial status; (2) the customer’s tax status; (3) the customer’s investment objectives; and (4) such other information used or considered to be reasonable by such member or registered representative in making recommendations to the customer. VerDate Aug<31>2005 16:59 Apr 18, 2008 Jkt 214001 III. Discussion The Commission has carefully reviewed the proposed rule change and finds that it is consistent with the requirements of Section 6 of the Act 11 and the rules and regulations thereunder applicable to a national securities exchange.12 In particular, the Commission finds that the proposal is consistent with Section 6(b)(5) of the Act,13 which requires, among other things, that the Exchange’s rules be designed 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. Generic Listing Standards Pursuant to Section 19(b) of the Act 14 and Rule 19b–4 thereunder,15 the listing and trading of a new derivative securities product is a proposed rule change that must be filed with and approved by the Commission. Rule 19b– 4(e) under the Act,16 however, provides that the listing and trading of a new derivative securities product by an exchange will not be deemed a proposed rule change pursuant to Rule 19b–4(c)(1) under the Act 17 if the Commission has approved, pursuant to Section 19(b) of the Act, the self regulatory organization’s trading rules, procedures, and listing standards for the product class that would include the new derivative securities product, and the exchange has a surveillance program for the product class. Thus, at present, Amex must submit for Commission approval a proposal for each new series of Fund Shares that it seeks to list and trade. The Commission believes that the Exchange’s adoption of listing and trading standards for Fund Shares that meet the requirements of Commentaries .02, .03 and .04 to Amex Rule 1000A– AEMI should fulfill the intended objective of Rule 19b–4(e) by allowing such Fund Shares to commence trading, without the need for individualized Commission approval. The Commission notes that it has previously approved the listing and trading of various Multiple Fund Shares and Inverse Fund 11 15 U.S.C. 78f. approving this proposed rule change the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 13 15 U.S.C. 78f(b)(5). 14 15 U.S.C. 78s(b)(1). 15 17 CFR 240.19b–4. 16 17 CFR 240.19b–4(e). 17 17 CFR 240.19b–4(c)(1). 12 In PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 21393 Shares.18 The proposed rules should reduce the time frame for bringing these securities to market, thereby reducing the burdens on issuers and other market participants and promoting competition. Listing and Trading Rules Taken together, the Commission finds that the Exchange’s proposal contains adequate rules and procedures to govern the listing and trading of Inverse Fund Shares and Multiple Fund Shares listed pursuant to Rule 19b–4(e) on the Exchange. All Fund Shares listed under the proposed generic standards will be subject to the full panoply of Amex rules and procedures that currently govern the trading of IFSs on the Exchange. For example, where the value of the underlying index or portfolio of securities on which the series of Fund Shares is based is no longer calculated or available, the Exchange would commence delisting proceedings. Likewise, in the event that the issuer of a series of Fund Shares substitutes a new index or portfolio for the existing index or portfolio, the Exchange would commence delisting proceedings if the new index or portfolio does not meet the requirements of and listing standards set forth in Rule 1000A– AEMI. Fund Shares listed and/or traded under the proposed ‘‘generic’’ standards would be subject to existing Amex rules that govern the continued listing and trading of IFSs. In addition, the Commission notes that proposed new Commentary .01 to Amex Rule 1002A will require that the portfolio composition of a Fund be disclosed on a public Web site. Information Circular The Exchange has represented that it will distribute, as appropriate, an Information Circular to its members and member organizations describing, 18 See Securities Exchange Act Release Nos. 56713 (October 29, 2007), 72 FR 61915 (November 1, 2007) (SR–Amex–2007–74) (approving the listing and trading of Rydex Leveraged Funds, Inverse Funds and Leveraged Inverse Funds); 52553 (October 3, 2005), 70 FR 59100 (October 11, 2005) (SR–Amex–2004–62) (approving the listing and trading of the ProShares Ultra Funds and Short Funds); 54040 (June 23, 2006), 71 FR 37629 (June 30, 2006) (SR–Amex–2006–41) (approving the listing and trading of the ProShares UltraShort Funds); 55117 (January 17, 2007), 72 FR 3442 (January 25, 2007) (SR–Amex–2006–101) (approving the listing and trading of Ultra, Short and UltraShort Funds based on various indexes); 56592 (October 1, 2007), 72 FR 57364 (October 9, 2007) (SR–Amex–2007–60) (approving the listing and trading of ProShares Ultra, Short and UltraShort Funds based on various international indexes); and 56998 (December 19, 2007), 72 FR 73404 (December 27, 2007) (SR–Amex–2007–104) (approving the listing and trading of ProShares Ultra, Short and UltraShort Funds based on several fixed income indexes, among others). E:\FR\FM\21APN1.SGM 21APN1 21394 Federal Register / Vol. 73, No. 77 / Monday, April 21, 2008 / Notices among other things, their compliance responsibilities and highlighting the special risks and characteristics of Multiple Fund Shares and Inverse Fund Shares, as well as applicable Exchange rules. IV. Conclusion For the foregoing reasons, the Commission finds that the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to a national securities exchange, and, in particular, with Section 6(b)(5) of the Act.19 It is therefore ordered, pursuant to Section 19(b)(2) of the Act,20 that the proposed rule change (SR–Amex–2007– 131), as modified by Amendment No. 1, is approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Florence E. Harmon, Deputy Secretary. [FR Doc. E8–8518 Filed 4–18–08; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–57668; File No. SR–CBOE– 2008–36] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Fee Changes April 15, 2008. rwilkins on PROD1PC63 with NOTICES Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on March 28, 2008, 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, II, and III below, which Items have been substantially prepared by the CBOE. The CBOE has designated this proposal as one establishing or changing a due, fee, or other charge imposed by the CBOE under Section 19(b)(3)(A)(ii) of the Act,3 and Rule 19b–4(f)(2) thereunder,4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit 19 15 U.S.C. 78f(b)(5). U.S.C. 78s(b)(2). 21 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 16:59 Apr 18, 2008 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Hybrid 3.0 book execution fee. The text of the proposed rule change is available on the Exchange’s Web site (https:// www.cboe.org/legal), at the principal office of the Exchange, 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 CBOE 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. The CBOE 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 November 1, 2007, the Exchange implemented a fee of $.18 per contract applicable to orders in Hybrid 3.0 classes resting in the electronic book that are executed.5 The classes that trade on the Hybrid 3.0 platform are options on the S&P 100 Index (‘‘OEX’’), options on the S&P 500 Index (‘‘SPX’’) and options on the Morgan Stanley Retail Index (‘‘MVR’’). The fee does not apply to orders in SPX options resting in the SPX electronic book that are executed during opening rotation on the final settlement date of CBOE Volatility Index (‘‘VIX’’) options and futures. On February 1, 2008, the Exchange extended the fee to apply to orders in Hybrid 3.0 classes that are executed by the Hybrid Agency Liaison (‘‘HAL’’) system.6 The Exchange now proposes to adopt three additional exceptions to the Hybrid electronic execution fee. Specifically, the Exchange will assess $.18 per contract to all electronic executions in Hybrid 3.0 classes except: (i) Orders in SPX options in the SPX 5 See Securities Exchange Act Release No. 56937 (December 10, 2007), 72 FR 71465 (December 17, 2007) (SR–CBOE–2007–127). 6 See Securities Exchange Act Release No. 57374 (February 22, 2008), 73 FR 10845 (February 28, 2008) (SR–CBOE–2008–13). HAL is governed by CBOE Rule 6.14. 20 15 VerDate Aug<31>2005 comments on the proposed rule change from interested persons. Jkt 214001 PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 electronic book that are executed during opening rotation on the final settlement date of VIX options and futures (which orders are currently exempt from the fee); (ii) executions by market-makers against orders in the complex order auction (‘‘COA’’) and Simple Auction Liaison (‘‘SAL’’) systems 7 in their appointed classes; (iii) executions by market-makers against orders in the electronic book, HAL and the complex order book (‘‘COB’’) in their appointed classes; and (iv) orders executed by a broker. The fee will be renamed ‘‘Hybrid 3.0 execution fee.’’ In pre-Hybrid 3.0 trading, marketmakers that provided liquidity by trading against orders on the Retail Automatic Execution System (‘‘RAES’’) in their appointed classes did not pay the RAES Access Fee. Likewise, the Exchange believes it is appropriate to exempt from the Hybrid 3.0 execution fee executions by market-makers against orders in COA and SAL in their appointed classes. Market-makers in pre-Hybrid 3.0 trading did not pay an execution fee (other than standard transaction fees) to trade against orders resting in the electronic book in their appointed classes. Likewise, the Exchange believes it is appropriate to exempt from the Hybrid 3.0 execution fee executions by market-makers against orders in the electronic book, HAL and COB in their appointed classes. In addition, the Exchange does not believe it would be appropriate to charge the fee to orders that are executed electronically by a broker since such orders are already subject to brokerage fees by a broker. A similar exemption existed for the RAES Access Fee.8 In addition, the Exchange is deleting Section 4 of the CBOE Fees Schedule regarding the RAES access fee, and revising accompanying footnotes accordingly, because the RAES system is no longer in use. Hybrid 3.0 execution systems benefit market participants by improving execution time, service, efficiency, and in some cases providing price improvement. The Hybrid 3.0 execution fee is designed to help the Exchange recover its costs of developing these systems and offset the cost of maintaining and enhancing these systems in the future.9 7 COA and SAL are governed by CBOE Rules 6.53C and 6.13A, respectively. 8 Orders received by and executed on the RAES were assessed the RAES Access Fee that was set forth in Section 4 of the CBOE Fees Schedule, with one exception that was set forth in footnote 9 of the Fees Schedule. 9 In pre-Hybrid 3.0 trading, orders resting in the electronic book that were executed paid an Order Book Official execution fee. E:\FR\FM\21APN1.SGM 21APN1

Agencies

[Federal Register Volume 73, Number 77 (Monday, April 21, 2008)]
[Notices]
[Pages 21391-21394]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-8518]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57660; File No. SR-Amex-2007-131]


Self-Regulatory Organizations; American Stock Exchange LLC; Order 
Approving Proposed Rule Change, as Modified by Amendment No. 1, 
Relating to Generic Listing Standards for Index Multiple Fund Shares 
and Index Inverse Fund Shares

April 14, 2008.

I. Introduction

    On December 20, 2007, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to revise Amex rules to include generic listing 
standards for series of Index Multiple Exchange Traded Fund Shares 
(``Multiple Fund Shares'') and Index Inverse Exchange Traded Fund 
Shares (``Inverse Fund Shares'') (collectively, the ``Fund Shares''). 
On February 29, 2008, Amex filed Amendment No. 1 to the proposed rule 
change. The proposed rule change, as amended, was published for comment 
in the Federal Register on

[[Page 21392]]

March 13, 2008.\3\ The Commission received no comment letters regarding 
the proposal. This order approves the proposed rule change, as modified 
by Amendment No. 1.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 57451 (March 7, 
2008), 73 FR 13591.
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II. Description

    Amex Rules 1000A-AEMI and Rules 1001A through 1005A provide 
standards for listing Index Fund Shares (``IFSs'') on the Exchange. The 
Exchange proposes to amend the definition of ``Index Fund Share'' set 
forth in Amex Rule 1000A-AEMI(b)(2) to reflect that domestic equity, 
international or global equity, or fixed income securities indexes, or 
a combination thereof, may be used as the underlying performance 
benchmark for Fund Shares.\4\
---------------------------------------------------------------------------

    \4\ Multiple Fund Shares seek to provide investment results, 
before fees and expenses, that correspond to a specified multiple of 
the percentage performance on a given day of a particular foreign, 
domestic or fixed income securities index. Inverse Fund Shares seek 
to provide investment results, before fees and expenses, that 
correspond to the inverse (opposite) of the percentage performance 
on a given day of a particular foreign, domestic or fixed income 
securities index by a specified multiple. Fund Shares differ from 
traditional exchange-traded fund (``ETF'') shares in that they do 
not merely correspond to the performance of a given securities 
index, but rather attempt to match a multiple or inverse of such 
underlying index performance.
---------------------------------------------------------------------------

    The Exchange also proposes to revise Commentaries .02, .03 and .04 
to Amex Rule 1000A-AEMI and add new Commentary .01 to Amex Rule 1002A 
to permit the listing and trading of Multiple Fund Shares and certain 
Inverse Fund Shares pursuant to the Exchange's generic listing 
standards for IFSs. Specifically, the investment objective associated 
with the Fund Shares must be expected to achieve investment results, 
before fees and expenses, by a specified multiple (Multiple Fund 
Shares) or inversely up to -200% (Inverse Fund Shares) of the 
underlying performance benchmark domestic equity, international or 
global equity and/or fixed income indexes, as applicable.
    Accordingly, this proposal would enable the Exchange to list and 
trade Multiple Fund Shares and certain Inverse Fund Shares pursuant to 
Rule 19b-4(e) of the Act \5\ if each of the conditions set forth in 
Commentaries .02, .03, .04 and .05 to Amex Rule 1000A-AEMI, as 
applicable, are satisfied.\6\
---------------------------------------------------------------------------

    \5\ 17 CFR 240.19b-4(e).
    \6\ See Commentaries .02(a)(A) to Amex Rule 1000A-AEMI (Domestic 
Equity); .02(a)(B) to Amex Rule 1000A-AEMI (International Equity); 
.02(a)(C) to Amex Rule 1000A-AEMI (Prior Approved Indexes); .03 to 
Amex Rule 1000A-AEMI (Fixed Income); and .04 to Amex Rule 1000A-AEMI 
(Combination Indexes of Domestic Equity, International Equity and/or 
Fixed Income).
---------------------------------------------------------------------------

Limitation on Leverage

    In connection with Inverse Funds that seek to provide investment 
results, before fees and expenses, in an amount that exceeds -200% of 
the underlying benchmark index, the Exchange's proposal would continue 
to require specific Commission approval pursuant to Section 19(b)(2) of 
the Act.\7\ In particular, Amex Rule 1000A-AEMI(b)(2)(iii) would 
expressly prohibit Inverse Funds that seek to provide investment 
results, before fees and expenses, in an amount that exceeds -200% of 
the underlying benchmark index, from being approved by the Exchange for 
listing and trading pursuant to Rule 19b-4(e) under the Act.\8\
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    \7\ 15 U.S.C. 78s(b)(2).
    \8\ 17 CFR 240.19b-4(e).
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    In connection with Multiple Fund Shares, proposed Amex Rule 1000A-
AEMI(b)(2) does not provide a similar limitation on leverage. Instead, 
the proposal would permit the underlying registered management 
investment company or fund to seek to provide investment results, 
before fees and expenses, that correspond to any multiple, without 
limitation, of the percentage performance on given day of a particular 
domestic equity, international or global equity, or fixed income 
securities indexes or a combination thereof.

Availability of Information About Fund Shares and Underlying Indexes

    Proposed new Commentary .01 to Amex Rule 1002A provides that the 
portfolio composition of a Fund will be disclosed on a public Web site. 
Web site disclosure of portfolio holdings that will form the basis for 
the calculation of the net asset value by the issuer of a series of 
Multiple Fund Shares or Inverse Fund Shares will be made daily and will 
include, as applicable, the identity and number of shares held of each 
specific equity security, the identity and amount held of each fixed 
income security, the specific types of Financial Instruments and 
characteristics of such instruments, cash equivalents and amount of 
cash held in the portfolio of a Fund. This public Web site disclosure 
of the portfolio composition of a Fund, that will form the basis for 
the calculation of the net asset value, will coincide with the 
disclosure of the same information to ``Authorized Participants.'' \9\ 
Investors will have access to the current portfolio composition of a 
Fund through the Fund's Web site and/or at the Exchange's Web site at 
https://www.amex.com.
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    \9\ Authorized Participants are the only persons that may place 
orders to create and redeem Creation Units. Authorized Participants 
must be registered broker-dealers or other securities market 
participants, such as banks and other financial institutions that 
are exempt from registration as broker-dealers to engage in 
securities transactions, who are participants in DTC. The Commission 
notes that, although substantively identical, the format of the 
disclosure of portfolio holdings to Authorized Participants may 
differ from the format of the public Web site disclosure.
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Trading Halts

    Existing trading halt requirements for IFSs will apply to Multiple 
Fund Shares and Inverse Fund Shares. In particular, Amex Rule 
1002A(b)(ii) provides if the Intraday Indicative Value or the index 
value applicable to that series of IFSs is not being disseminated as 
required, the Exchange may halt trading during the day in which the 
interruption to the dissemination of the Intraday Indicative Value or 
the index value occurs. If the interruption to the dissemination of the 
Intraday Indicative Value or the index value persists past the trading 
day in which it occurred, the Exchange will halt trading no later than 
the beginning of the trading day following the interruption.\10\
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    \10\ If an IFS is traded on the Exchange pursuant to unlisted 
trading privileges, the Exchange will halt trading if the primary 
listing market halts trading in such IFS because the Intraday 
Indicative Value and/or the index value is not being disseminated. 
See Securities Exchange Act Release No. 55018 (December 28, 2006), 
72 FR 1040 (January 9, 2007) (SR-Amex-2006-109).
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    In addition, proposed new Commentary .01 to Amex Rule 1002A will 
require Amex to halt trading of subject Fund Shares if the Exchange 
becomes aware that the open-end investment company fails to properly 
disseminate the appropriate net asset value (``NAV'') to market 
participants at the same time and/or fails to provide daily public Web 
site disclosure of its portfolio holdings. Commentary .01 to Amex Rule 
1002A further provides that the Exchange may resume trading in such 
Fund Shares only when the NAV is disseminated to all market 
participants at the same time or the daily public Web site disclosure 
of portfolio holdings occurs, as appropriate.
    In addition to other factors that may be relevant, the Exchange may 
consider factors such as those set forth in Amex Rule 918C(b) in 
exercising its discretion to halt or suspend trading in Multiple and/or 
Inverse Fund Shares. These factors would include, but are not limited 
to, (1) the extent to which trading is not occurring in securities 
comprising an Underlying Index and/or the Financial Instruments of a 
Multiple or Inverse Fund, or (2) whether other

[[Page 21393]]

unusual conditions or circumstances detrimental to the maintenance of a 
fair and orderly market are present. In the case of the Financial 
Instruments held by a Multiple or Inverse Fund, the Exchange 
represented that a notification procedure will be implemented so that 
timely notice from the investment adviser of such Multiple or Inverse 
Fund is received by the Exchange when a particular Financial Instrument 
is in default or shortly to be in default. Notification from the 
investment adviser will be made by phone, facsimile or e-mail. The 
Exchange will then determine on a case-by-case basis whether a default 
of a particular Financial Instrument justifies a trading halt of the 
Multiple and/or Inverse Fund Shares. Trading in Multiple and/or Inverse 
Fund Shares will also be halted if the circuit breaker parameters under 
Amex Rule 117 have been reached.

Suitability

    Prior to commencement of trading, the Exchange will issue an 
Information Circular to its members and member organizations providing 
guidance with regard to member firm compliance responsibilities 
(including suitability obligations) when effecting transactions in the 
Fund Shares and highlighting the special risks and characteristics of 
Multiple and Inverse Funds Shares as well as applicable Exchange rules.
    This Information Circular will set forth the requirements relating 
to Commentary .05 to Amex Rule 411 (Duty to Know and Approve 
Customers). Specifically, the Information Circular will remind members 
of their obligations in recommending transactions in the Shares so that 
members have a reasonable basis to believe that (1) the recommendation 
is suitable for a customer given reasonable inquiry concerning the 
customer's investment objectives, financial situation, needs, and any 
other information known by such member, and (2) the customer can 
evaluate the special characteristics, and is able to bear the financial 
risks, of such investment. In connection with the suitability 
obligation, the Information Circular will also provide that members 
make reasonable efforts to obtain the following information: (1) The 
customer's financial status; (2) the customer's tax status; (3) the 
customer's investment objectives; and (4) such other information used 
or considered to be reasonable by such member or registered 
representative in making recommendations to the customer.

III. Discussion

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of Section 6 of the 
Act \11\ and the rules and regulations thereunder applicable to a 
national securities exchange.\12\ In particular, the Commission finds 
that the proposal is consistent with Section 6(b)(5) of the Act,\13\ 
which requires, among other things, that the Exchange's rules be 
designed 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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    \11\ 15 U.S.C. 78f.
    \12\ In approving this proposed rule change the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \13\ 15 U.S.C. 78f(b)(5).
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Generic Listing Standards

    Pursuant to Section 19(b) of the Act \14\ and Rule 19b-4 
thereunder,\15\ the listing and trading of a new derivative securities 
product is a proposed rule change that must be filed with and approved 
by the Commission. Rule 19b-4(e) under the Act,\16\ however, provides 
that the listing and trading of a new derivative securities product by 
an exchange will not be deemed a proposed rule change pursuant to Rule 
19b-4(c)(1) under the Act \17\ if the Commission has approved, pursuant 
to Section 19(b) of the Act, the self regulatory organization's trading 
rules, procedures, and listing standards for the product class that 
would include the new derivative securities product, and the exchange 
has a surveillance program for the product class. Thus, at present, 
Amex must submit for Commission approval a proposal for each new series 
of Fund Shares that it seeks to list and trade.
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    \14\ 15 U.S.C. 78s(b)(1).
    \15\ 17 CFR 240.19b-4.
    \16\ 17 CFR 240.19b-4(e).
    \17\ 17 CFR 240.19b-4(c)(1).
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    The Commission believes that the Exchange's adoption of listing and 
trading standards for Fund Shares that meet the requirements of 
Commentaries .02, .03 and .04 to Amex Rule 1000A-AEMI should fulfill 
the intended objective of Rule 19b-4(e) by allowing such Fund Shares to 
commence trading, without the need for individualized Commission 
approval. The Commission notes that it has previously approved the 
listing and trading of various Multiple Fund Shares and Inverse Fund 
Shares.\18\ The proposed rules should reduce the time frame for 
bringing these securities to market, thereby reducing the burdens on 
issuers and other market participants and promoting competition.
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    \18\ See Securities Exchange Act Release Nos. 56713 (October 29, 
2007), 72 FR 61915 (November 1, 2007) (SR-Amex-2007-74) (approving 
the listing and trading of Rydex Leveraged Funds, Inverse Funds and 
Leveraged Inverse Funds); 52553 (October 3, 2005), 70 FR 59100 
(October 11, 2005) (SR-Amex-2004-62) (approving the listing and 
trading of the ProShares Ultra Funds and Short Funds); 54040 (June 
23, 2006), 71 FR 37629 (June 30, 2006) (SR-Amex-2006-41) (approving 
the listing and trading of the ProShares UltraShort Funds); 55117 
(January 17, 2007), 72 FR 3442 (January 25, 2007) (SR-Amex-2006-101) 
(approving the listing and trading of Ultra, Short and UltraShort 
Funds based on various indexes); 56592 (October 1, 2007), 72 FR 
57364 (October 9, 2007) (SR-Amex-2007-60) (approving the listing and 
trading of ProShares Ultra, Short and UltraShort Funds based on 
various international indexes); and 56998 (December 19, 2007), 72 FR 
73404 (December 27, 2007) (SR-Amex-2007-104) (approving the listing 
and trading of ProShares Ultra, Short and UltraShort Funds based on 
several fixed income indexes, among others).
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Listing and Trading Rules

    Taken together, the Commission finds that the Exchange's proposal 
contains adequate rules and procedures to govern the listing and 
trading of Inverse Fund Shares and Multiple Fund Shares listed pursuant 
to Rule 19b-4(e) on the Exchange. All Fund Shares listed under the 
proposed generic standards will be subject to the full panoply of Amex 
rules and procedures that currently govern the trading of IFSs on the 
Exchange. For example, where the value of the underlying index or 
portfolio of securities on which the series of Fund Shares is based is 
no longer calculated or available, the Exchange would commence 
delisting proceedings. Likewise, in the event that the issuer of a 
series of Fund Shares substitutes a new index or portfolio for the 
existing index or portfolio, the Exchange would commence delisting 
proceedings if the new index or portfolio does not meet the 
requirements of and listing standards set forth in Rule 1000A-AEMI.
    Fund Shares listed and/or traded under the proposed ``generic'' 
standards would be subject to existing Amex rules that govern the 
continued listing and trading of IFSs. In addition, the Commission 
notes that proposed new Commentary .01 to Amex Rule 1002A will require 
that the portfolio composition of a Fund be disclosed on a public Web 
site.

Information Circular

    The Exchange has represented that it will distribute, as 
appropriate, an Information Circular to its members and member 
organizations describing,

[[Page 21394]]

among other things, their compliance responsibilities and highlighting 
the special risks and characteristics of Multiple Fund Shares and 
Inverse Fund Shares, as well as applicable Exchange rules.

IV. Conclusion

    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the Act and the rules and regulations 
thereunder applicable to a national securities exchange, and, in 
particular, with Section 6(b)(5) of the Act.\19\
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    \19\ 15 U.S.C. 78f(b)(5).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\20\ that the proposed rule change (SR-Amex-2007-131), as modified 
by Amendment No. 1, is approved.
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    \20\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-8518 Filed 4-18-08; 8:45 am]
BILLING CODE 8010-01-P
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