Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Enable the Listing and Trading of Options on Index-Linked Securities, 72538-72540 [E8-28221]
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72538
Federal Register / Vol. 73, No. 230 / Friday, November 28, 2008 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–28243 Filed 11–26–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58985; File No. SR–ISE–
2008–86]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change To Enable the Listing and
Trading of Options on Index-Linked
Securities
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
November 20, 2008.
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
14, 2008, the International Securities
Exchange, LLC (‘‘ISE’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. The
Exchange filed the proposed rule change
as a ‘‘non-controversial’’ proposed rule
change pursuant to section 19(b)(3)(A)
of the Act 3 and Rule 19b–4(f)(6)
thereunder,4 which renders the proposal
effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
mstockstill on PROD1PC66 with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The ISE proposes to amend ISE Rule
502, Criteria for Underlying Securities,
and 503, Withdrawal of Approval of
Underlying Securities, to enable the
listing and trading on the Exchange of
options on Index-Linked Securities, as
defined below. The text of the proposed
rule change is available from the
principal office of the Exchange, at the
Commission’s Public Reference Room,
and on the Exchange’s Web site at
https://www.iseoptions.com.
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).
4 17 CFR 240.19b–4(f)(6).
17:16 Nov 26, 2008
1. Purpose
This proposed rule change is based on
recent Chicago Board Options Exchange,
Incorporated (‘‘CBOE’’) and NASDAQ
OMX PHLX, Inc. (‘‘PHLX’’).5
The purpose of the proposed rule
change is to revise ISE Rules 502 and
503 to enable the listing and trading of
options on equity index-linked
securities (‘‘Equity Index-Linked
Securities’’), commodity-linked
securities (‘‘Commodity-Linked
Securities’’), currency-linked securities
(‘‘Currency-Linked Securities’’), fixed
income index-linked securities (‘‘Fixed
Income Index-Linked Securities’’),
futures-linked securities (‘‘FuturesLinked Securities’’) and multifactor
index-linked securities (‘‘Multifactor
Index-Linked Securities’’) (the six types
of index-linked securities are
collectively known as ‘‘Index-Linked
Securities’’) that are principally traded
on a national securities exchange and
are ‘‘NMS Stock’’ (as defined in Rule
600 of Regulation NMS under the Act).
Index-Linked Securities are designed
for investors who desire to participate in
a specific market segment by providing
exposure to one or more identifiable
underlying securities, commodities,
currencies, derivative instruments or
market indexes of the foregoing
(‘‘Underlying Index’’ or ‘‘Underlying
Indexes’’). Index-Linked Securities are
the non-convertible debt of an issuer
that have a term of at least one (1) year
but not greater than thirty (30) years.
Despite the fact that Index-Linked
Securities are linked to an underlying
5 See Exchange Act Release Nos. 58204 (July 22,
2008), 73 FR 43807 (July 28, 2008) (SR–CBOE–
2008–64) and 58571 (September 17, 2008), 73 FR
55188 (September 24, 2008) (SR–PHLX–2008–60).
In addition, the Exchange is making minor changes
to ISE Rule 502(h) to conform the Exchange’s rules
to those of CBOE and PHLX.
15 17
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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
self-regulatory organization 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 self-regulatory organization has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
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index, each trades as a single, exchangelisted security. Accordingly, rules
pertaining to the listing and trading of
standard equity options will apply to
Index-Linked Securities. The Exchange
does not propose any changes to rules
pertaining to Index Options.
Listing Criteria
The Exchange will consider listing
and trading options on Index-Linked
Securities provided the Index-Linked
Securities meet the criteria for
underlying securities set forth in ISE
Rules 502(a) and (b).
The Exchange proposes that IndexLinked Securities deemed appropriate
for options trading represent ownership
of a security that provides for the
payment at maturity, as described
below:
—Equity Index-Linked Securities are
securities that provide for the
payment at maturity of a cash amount
based on the performance of an
underlying index or indexes of equity
securities (‘‘Equity Reference Asset’’);
—Commodity-Linked Securities are
securities that provide for the
payment at maturity of a cash amount
based on the performance of one or
more physical commodities or
commodity futures, options or other
commodity derivatives or
Commodity-Based Trust Shares or a
basket or index of any of the foregoing
(‘‘Commodity Reference Asset’’);
—Currency-Linked Securities are
securities that provide for the
payment at maturity of a cash amount
based on the performance of one or
more currencies, or options or
currency futures or other currency
derivatives or Currency Trust Shares 6
or a basket or index of any of the
foregoing (‘‘Currency Reference
Asset’’);
—Fixed Income Index-Linked Securities
are securities that provide for the
payment at maturity of a cash amount
based on the performance of one or
more notes, bonds, debentures or
evidence of indebtedness that
include, but are not limited to, U.S.
Department of Treasury securities
(‘‘Treasury Securities’’), government
sponsored entity securities (‘‘GSE
Securities’’), municipal securities,
trust preferred securities,
6 See proposed ISE Rule 502(h). The term
‘‘Currency Trust Shares’’ is defined as a security
that (a) holds a specified non-U.S. currency
deposited with the trust or similar entity; (b) when
aggregated in some specified minimum number
may be surrendered to the trust by the beneficial
owner to receive the specified non-U.S. currency or
currencies; and (c) pays the beneficial owner
interest and other distributions on deposited nonU.S. currency or currencies, if any, declared and
paid by the trust.
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mstockstill on PROD1PC66 with NOTICES
Federal Register / Vol. 73, No. 230 / Friday, November 28, 2008 / Notices
supranational debt and debt of a
foreign country or a subdivision
thereof or a basket or index of any of
the foregoing (‘‘Fixed Income
Reference Asset’’);
—Futures-Linked Securities are
securities that provide for the
payment at maturity of a cash amount
based on the performance of an index
of (a) futures on Treasury Securities,
GSE Securities, supranational debt
and debt of a foreign country or a
subdivision thereof, or options or
other derivatives on any of the
foregoing; or (b) interest rate futures
or options or derivatives on the
foregoing in this subparagraph (b)
(‘‘Futures Reference Asset’’); and
—Multifactor Index-Linked Securities
are securities that provide for the
payment at maturity of a cash amount
based on the performance of any
combination of two or more Equity
Reference Assets, Commodity
Reference Assets, Currency Reference
Assets, Fixed Income Reference
Assets or Futures Reference Assets
(‘‘Multifactor Reference Asset’’).
For the purposes of proposed ISE Rule
502(k), Equity Reference Assets,
Commodity Reference Assets, Currency
Reference Assets, Fixed Income
Reference Assets, Futures Reference
Assets and Multifactor Reference Assets,
will be collectively referred to as
‘‘Reference Assets.’’
Index-Linked Securities must meet
the criteria and guidelines for
underlying securities set forth in ISE
Rules 502(a) and (b), or the IndexLinked Securities must be redeemable at
the option of the holder at least on a
weekly basis through the issuer at a
price related to the applicable
underlying Reference Asset. In addition,
the issuing company is obligated to
issue or repurchase the securities in
aggregation units for cash or cash
equivalents satisfactory to the issuer of
Index-Linked Securities which underlie
the option as described in the IndexLinked Securities prospectus.
Continued Listing Requirements
Options on Index-Linked Securities
will be subject to all Exchange rules
governing the trading of equity options.
The current continuing or maintenance
listing standards for options traded on
the Exchange will continue to apply.
The Exchange’s proposed new rule
503(k) will include criteria related to the
continued listing of options on IndexLinked Securities.
Under the applicable continued
listing criteria in proposed ISE Rule
503(k), options on Index Linked
Securities initially approved for trading
pursuant to proposed ISE Rule 502(k)
may be subject to the suspension of
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17:16 Nov 26, 2008
Jkt 217001
opening transactions as follows: (1)
Non-compliance with the terms of ISE
Rule 502(k); (2) non-compliance with
the terms of ISE Rules 503(a) and (b),
except in the case of options covering
Index Linked Securities approved
pursuant to proposed ISE Rule
502(k)(3)(ii) that are redeemable at the
option of the holder at least on a weekly
basis, then option contracts of the class
covering such Securities may only
continue to be open for trading as long
as the Securities are listed on a national
securities exchange and are an ‘‘NMS
stock’’ as defined in Rule 600 of
Regulation NMS; (3) in the case of any
Index-Linked Security trading pursuant
to proposed ISE Rule 502(k), the value
of the Reference Asset is no longer
calculated or available; or (4) such other
event shall occur or condition exist that
in the opinion of the Exchange makes
further dealing in such options on the
Exchange inadvisable.
The Exchange represents that the
listing and trading of options on IndexLinked Securities under proposed ISE
Rule 502(k) will not have any effect on
the rules pertaining to position and
exercise limits 7 or margin.8
The Exchange will implement
surveillance procedures for options on
Index-Linked Securities, including
adequate comprehensive surveillance
sharing agreements with markets trading
in non-U.S. components, as applicable.
The Exchange represents that these
procedures will be adequate to properly
monitor Exchange trading of options on
these the securities and to deter and
detect violations of Exchange rules.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with section 6(b)
of the Act,9 in general, and furthers the
objectives of section 6(b)(5) of the Act,10
in particular, in that it is 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. The
Exchange believes that the proposed
rules applicable to trading pursuant to
generic listing and trading criteria,
together with the Exchange’s
surveillance procedures applicable to
trading in the securities covered by the
proposed rules, serve to foster investor
protection.
7 See
ISE Rules 412 and 414.
ISE Rules 1200 to 1204.
9 15 U.S.C. 78f(b).
10 15 U.S.C. 78f(b)(5).
8 See
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72539
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The proposed rule change does not
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 has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any
unsolicited written comments from
members or other interested parties.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the 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 after the date of
filing (or such shorter time as the
Commission may designate if consistent
with the protection of investors and the
public interest), the proposed rule
change has become effective pursuant to
Section 19(b)(3)(A) of the Act 11 and
subparagraph (f)(6) of Rule 19b–4
thereunder.12
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative for 30 days after the
date of filing. In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory
organization to provide the Commission
with written notice of its intent to file
the proposed rule change, along with a
brief description and text of the
proposed rule change, at least five
business days prior to the date of filing
of the proposed rule change, or such
shorter time as designated by the
Commission. However, Rule 19b–
4(f)(6)(iii) permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange requests that the Commission
waive the 30-day operative delay as well
as the five business-day pre-filing
requirement. The Commission believes
that waiving the 30-day operative
delay 13 is consistent with the protection
of investors and the public interest.14
11 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
13 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
14 The Commission is also waiving the five
business-day pre-filing requirement.
12 17
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Federal Register / Vol. 73, No. 230 / Friday, November 28, 2008 / Notices
The proposed rule change is
substantially similar to those of other
options exchanges that have been
previously approved by the
Commission 15 and does not appear to
present any novel regulatory issues.
Therefore, the Commission designates
the proposal operative upon filing to
enable the Exchange to list and trade
options on index-linked securities
without delay.
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in the furtherance of the
purposes of the Act.
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:
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-ISE–2008–86 and should be
submitted on or before December 19,
2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–28221 Filed 11–26–08; 8:45 am]
mstockstill on PROD1PC66 with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–ISE–2008–86 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–ISE–2008–86. This file
number should be included on the
subject line if e-mail is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
15 See e.g., Exchange Act Release Nos. 58203 (July
22, 2008), 73 FR 43812 (July 28, 2008) (SR–
NYSEArca–2008–57); 58204 (July 22, 2008), 73 FR
43807 (July 28, 2008) (SR–CBOE–2008–64); and
58571 (September 17, 2008), 73 FR 55188
(September 24, 2008) (SR–PHLX–2008–60).
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17:16 Nov 26, 2008
Jkt 217001
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58998; File No. SR–MSRB–
2008–07]
Self-Regulatory Organizations;
Municipal Securities Rulemaking
Board; Notice of Filing of Proposed
Rule Change to MSRB Rule G–34,
CUSIP Numbers and New Issue
Requirements, To Establish a
Transparency System for Municipal
Auction Rate Securities and Municipal
Variable Rate Demand Obligations
November 21, 2008.
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
18, 2008, the Municipal Securities
Rulemaking Board (‘‘MSRB’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’)
the proposed rule change as described
in Items I, II, and III below, which Items
have been substantially prepared by the
MSRB. The Commission is publishing
this notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The MSRB is filing with the
Commission a proposed rule change to
establish a transparency system for
municipal Auction Rate Securities
(‘‘ARS’’) and municipal Variable Rate
Demand Obligations (‘‘VRDO’’). The
proposed rule change would: (i)
Implement an electronic system that
would collect and disseminate ARS and
VRDO information (the ‘‘Short-term
Obligation Rate Transparency System
Proposal’’); (ii) provide free public
access to information disseminated from
the Short-term Obligation Rate
Transparency (‘‘SHORT’’) System
through the MSRB’s Electronic
Municipal Market Access (EMMA)
system (the ‘‘EMMA short-term
obligation rate transparency service’’);
and (iii) amend Rule G–34, on CUSIP
numbers and new issue requirements, to
require brokers, dealers and municipal
securities dealers (collectively
‘‘dealers’’) to report, or ensure the
reporting of, interest rate and
descriptive information to the SHORT
System about ARS and VRDO following
an ARS auction or VRDO interest rate
reset (the ‘‘rule change proposal’’).
The text of the proposed rule change
is available on the MSRB’s Web site
(https://www.msrb.org), at the MSRB’s
principal office, and at the
Commission’s Public Reference Room. If
approved, the rule text for the Shortterm Obligation Rate Transparency
System, as well as for the EMMA
variable rate transparency service,
would be available on the MSRB Web
site at https://www.msrb.org/msrb1/
rulesandforms under the heading
Information Facilities.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
MSRB included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. The MSRB has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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]]>Agencies
[Federal Register Volume 73, Number 230 (Friday, November 28, 2008)]
[Notices]
[Pages 72538-72540]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-28221]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58985; File No. SR-ISE-2008-86]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Enable the Listing and Trading of Options on Index-Linked
Securities
November 20, 2008.
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 14, 2008, the International Securities Exchange, LLC
(``ISE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
The Exchange filed the proposed rule change as a ``non-controversial''
proposed rule change pursuant to section 19(b)(3)(A) of the Act \3\ and
Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal effective
upon filing with the Commission. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The ISE proposes to amend ISE Rule 502, Criteria for Underlying
Securities, and 503, Withdrawal of Approval of Underlying Securities,
to enable the listing and trading on the Exchange of options on Index-
Linked Securities, as defined below. The text of the proposed rule
change is available from the principal office of the Exchange, at the
Commission's Public Reference Room, and on the Exchange's Web site at
https://www.iseoptions.com.
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 self-regulatory organization
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 self-regulatory organization
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
This proposed rule change is based on recent Chicago Board Options
Exchange, Incorporated (``CBOE'') and NASDAQ OMX PHLX, Inc.
(``PHLX'').\5\
---------------------------------------------------------------------------
\5\ See Exchange Act Release Nos. 58204 (July 22, 2008), 73 FR
43807 (July 28, 2008) (SR-CBOE-2008-64) and 58571 (September 17,
2008), 73 FR 55188 (September 24, 2008) (SR-PHLX-2008-60). In
addition, the Exchange is making minor changes to ISE Rule 502(h) to
conform the Exchange's rules to those of CBOE and PHLX.
---------------------------------------------------------------------------
The purpose of the proposed rule change is to revise ISE Rules 502
and 503 to enable the listing and trading of options on equity index-
linked securities (``Equity Index-Linked Securities''), commodity-
linked securities (``Commodity-Linked Securities''), currency-linked
securities (``Currency-Linked Securities''), fixed income index-linked
securities (``Fixed Income Index-Linked Securities''), futures-linked
securities (``Futures-Linked Securities'') and multifactor index-linked
securities (``Multifactor Index-Linked Securities'') (the six types of
index-linked securities are collectively known as ``Index-Linked
Securities'') that are principally traded on a national securities
exchange and are ``NMS Stock'' (as defined in Rule 600 of Regulation
NMS under the Act).
Index-Linked Securities are designed for investors who desire to
participate in a specific market segment by providing exposure to one
or more identifiable underlying securities, commodities, currencies,
derivative instruments or market indexes of the foregoing (``Underlying
Index'' or ``Underlying Indexes''). Index-Linked Securities are the
non-convertible debt of an issuer that have a term of at least one (1)
year but not greater than thirty (30) years. Despite the fact that
Index-Linked Securities are linked to an underlying index, each trades
as a single, exchange-listed security. Accordingly, rules pertaining to
the listing and trading of standard equity options will apply to Index-
Linked Securities. The Exchange does not propose any changes to rules
pertaining to Index Options.
Listing Criteria
The Exchange will consider listing and trading options on Index-
Linked Securities provided the Index-Linked Securities meet the
criteria for underlying securities set forth in ISE Rules 502(a) and
(b).
The Exchange proposes that Index-Linked Securities deemed
appropriate for options trading represent ownership of a security that
provides for the payment at maturity, as described below:
--Equity Index-Linked Securities are securities that provide for the
payment at maturity of a cash amount based on the performance of an
underlying index or indexes of equity securities (``Equity Reference
Asset'');
--Commodity-Linked Securities are securities that provide for the
payment at maturity of a cash amount based on the performance of one or
more physical commodities or commodity futures, options or other
commodity derivatives or Commodity-Based Trust Shares or a basket or
index of any of the foregoing (``Commodity Reference Asset'');
--Currency-Linked Securities are securities that provide for the
payment at maturity of a cash amount based on the performance of one or
more currencies, or options or currency futures or other currency
derivatives or Currency Trust Shares \6\ or a basket or index of any of
the foregoing (``Currency Reference Asset'');
---------------------------------------------------------------------------
\6\ See proposed ISE Rule 502(h). The term ``Currency Trust
Shares'' is defined as a security that (a) holds a specified non-
U.S. currency deposited with the trust or similar entity; (b) when
aggregated in some specified minimum number may be surrendered to
the trust by the beneficial owner to receive the specified non-U.S.
currency or currencies; and (c) pays the beneficial owner interest
and other distributions on deposited non-U.S. currency or
currencies, if any, declared and paid by the trust.
---------------------------------------------------------------------------
--Fixed Income Index-Linked Securities are securities that provide for
the payment at maturity of a cash amount based on the performance of
one or more notes, bonds, debentures or evidence of indebtedness that
include, but are not limited to, U.S. Department of Treasury securities
(``Treasury Securities''), government sponsored entity securities
(``GSE Securities''), municipal securities, trust preferred securities,
[[Page 72539]]
supranational debt and debt of a foreign country or a subdivision
thereof or a basket or index of any of the foregoing (``Fixed Income
Reference Asset'');
--Futures-Linked Securities are securities that provide for the payment
at maturity of a cash amount based on the performance of an index of
(a) futures on Treasury Securities, GSE Securities, supranational debt
and debt of a foreign country or a subdivision thereof, or options or
other derivatives on any of the foregoing; or (b) interest rate futures
or options or derivatives on the foregoing in this subparagraph (b)
(``Futures Reference Asset''); and
--Multifactor Index-Linked Securities are securities that provide for
the payment at maturity of a cash amount based on the performance of
any combination of two or more Equity Reference Assets, Commodity
Reference Assets, Currency Reference Assets, Fixed Income Reference
Assets or Futures Reference Assets (``Multifactor Reference Asset'').
For the purposes of proposed ISE Rule 502(k), Equity Reference
Assets, Commodity Reference Assets, Currency Reference Assets, Fixed
Income Reference Assets, Futures Reference Assets and Multifactor
Reference Assets, will be collectively referred to as ``Reference
Assets.''
Index-Linked Securities must meet the criteria and guidelines for
underlying securities set forth in ISE Rules 502(a) and (b), or the
Index-Linked Securities must be redeemable at the option of the holder
at least on a weekly basis through the issuer at a price related to the
applicable underlying Reference Asset. In addition, the issuing company
is obligated to issue or repurchase the securities in aggregation units
for cash or cash equivalents satisfactory to the issuer of Index-Linked
Securities which underlie the option as described in the Index-Linked
Securities prospectus.
Continued Listing Requirements
Options on Index-Linked Securities will be subject to all Exchange
rules governing the trading of equity options. The current continuing
or maintenance listing standards for options traded on the Exchange
will continue to apply.
The Exchange's proposed new rule 503(k) will include criteria
related to the continued listing of options on Index-Linked Securities.
Under the applicable continued listing criteria in proposed ISE
Rule 503(k), options on Index Linked Securities initially approved for
trading pursuant to proposed ISE Rule 502(k) may be subject to the
suspension of opening transactions as follows: (1) Non-compliance with
the terms of ISE Rule 502(k); (2) non-compliance with the terms of ISE
Rules 503(a) and (b), except in the case of options covering Index
Linked Securities approved pursuant to proposed ISE Rule 502(k)(3)(ii)
that are redeemable at the option of the holder at least on a weekly
basis, then option contracts of the class covering such Securities may
only continue to be open for trading as long as the Securities are
listed on a national securities exchange and are an ``NMS stock'' as
defined in Rule 600 of Regulation NMS; (3) in the case of any Index-
Linked Security trading pursuant to proposed ISE Rule 502(k), the value
of the Reference Asset is no longer calculated or available; or (4)
such other event shall occur or condition exist that in the opinion of
the Exchange makes further dealing in such options on the Exchange
inadvisable.
The Exchange represents that the listing and trading of options on
Index-Linked Securities under proposed ISE Rule 502(k) will not have
any effect on the rules pertaining to position and exercise limits \7\
or margin.\8\
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\7\ See ISE Rules 412 and 414.
\8\ See ISE Rules 1200 to 1204.
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The Exchange will implement surveillance procedures for options on
Index-Linked Securities, including adequate comprehensive surveillance
sharing agreements with markets trading in non-U.S. components, as
applicable. The Exchange represents that these procedures will be
adequate to properly monitor Exchange trading of options on these the
securities and to deter and detect violations of Exchange rules.
2. Statutory Basis
The Exchange believes that its proposal is consistent with section
6(b) of the Act,\9\ in general, and furthers the objectives of section
6(b)(5) of the Act,\10\ in particular, in that it is 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. The Exchange believes that the proposed rules applicable to
trading pursuant to generic listing and trading criteria, together with
the Exchange's surveillance procedures applicable to trading in the
securities covered by the proposed rules, serve to foster investor
protection.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change does not 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 has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from members or other interested
parties.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the 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 after the date of filing (or such shorter time as the Commission
may designate if consistent with the protection of investors and the
public interest), the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \11\ and subparagraph (f)(6)
of Rule 19b-4 thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of filing. In addition,
Rule 19b-4(f)(6)(iii) requires a self-regulatory organization to
provide the Commission with written notice of its intent to file the
proposed rule change, along with a brief description and text of the
proposed rule change, at least five business days prior to the date of
filing of the proposed rule change, or such shorter time as designated
by the Commission. However, Rule 19b-4(f)(6)(iii) permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
requests that the Commission waive the 30-day operative delay as well
as the five business-day pre-filing requirement. The Commission
believes that waiving the 30-day operative delay \13\ is consistent
with the protection of investors and the public interest.\14\
[[Page 72540]]
The proposed rule change is substantially similar to those of other
options exchanges that have been previously approved by the Commission
\15\ and does not appear to present any novel regulatory issues.
Therefore, the Commission designates the proposal operative upon filing
to enable the Exchange to list and trade options on index-linked
securities without delay.
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\13\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\14\ The Commission is also waiving the five business-day pre-
filing requirement.
\15\ See e.g., Exchange Act Release Nos. 58203 (July 22, 2008),
73 FR 43812 (July 28, 2008) (SR-NYSEArca-2008-57); 58204 (July 22,
2008), 73 FR 43807 (July 28, 2008) (SR-CBOE-2008-64); and 58571
(September 17, 2008), 73 FR 55188 (September 24, 2008) (SR-PHLX-
2008-60).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in the furtherance of the purposes of the Act.
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 (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-ISE-2008-86 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-ISE-2008-86. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Room, 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-ISE-2008-86 and should be
submitted on or before December 19, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-28221 Filed 11-26-08; 8:45 am]
BILLING CODE 8011-01-P
