Self-Regulatory Organizations; American Stock Exchange LLC, Boston Stock Exchange, Inc., Chicago Board Options Exchange, Incorporated, International Securities Exchange, LLC, NYSE Arca, Inc., and Philadelphia Stock Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Changes Relating to the Listing and Trading Options on Shares of the iShares COMEX Gold Trust and the iShares Silver Trust, 75148-75150 [E8-29200]
Download as PDF
75148
Federal Register / Vol. 73, No. 238 / Wednesday, December 10, 2008 / Notices
changes adequately protect investors
and the public interest.
Finally, the Commission notes that
the elimination of the outdated and
redundant provisions is consistent with
the Act and should make the Company
Manuel easier and clearer to use.
V. Conclusion
On the basis of the foregoing, the
Commission finds that the proposed
rule change, as amended, is consistent
with the requirements of the Act and in
particular Section 6 of the Act and the
rules and regulations thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act, that the
proposed rule change, as amended (File
No. SR–Amex–2008–70) is approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.36
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–29154 Filed 12–9–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59055; File Nos. SR–Amex–
2008–68; SR–BSE–2008–51; SR–CBOE–
2008–72; SR–ISE–2008–58; SR–NYSEArca–
2008–66; and SR–Phlx–2008–58]
Self-Regulatory Organizations;
American Stock Exchange LLC,
Boston Stock Exchange, Inc., Chicago
Board Options Exchange,
Incorporated, International Securities
Exchange, LLC, NYSE Arca, Inc., and
Philadelphia Stock Exchange, Inc.;
Notice of Filing and Order Granting
Accelerated Approval of Proposed
Rule Changes Relating to the Listing
and Trading Options on Shares of the
iShares COMEX Gold Trust and the
iShares Silver Trust
mstockstill on PROD1PC66 with NOTICES
December 4, 2008.
Six options exchanges filed with the
Securities and Exchange Commission
(‘‘Commission’’) proposed rule changes
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 2 thereunder to
list and trade options on shares of the
iShares COMEX Gold Trust and the
iShares Silver Trust (‘‘iShares Trust
Options’’). Specifically, NYSE Arca, Inc.
(‘‘NYSE Arca’’) submitted its proposal
on June 24, 2008; the Chicago Board
Options Exchange, Incorporated
(‘‘CBOE’’) submitted its proposal on July
3, 2008; the International Securities
36 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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16:49 Dec 09, 2008
Jkt 217001
Exchange, LLC (‘‘ISE’’) submitted its
proposal on July 14, 2008; the
Philadelphia Stock Exchange, Inc.
(‘‘Phlx’’) submitted its proposal on July
23, 2008; the American Stock Exchange
LLC (‘‘Amex’’) 3 submitted its proposal
on August 20, 2008; and the Boston
Stock Exchange, Inc. (‘‘BSE’’) submitted
its proposal on November 12, 2008. The
proposals (collectively, the ‘‘Proposals’’)
submitted by the Amex, BSE, CBOE,
ISE, NYSE Arca, and Phlx (collectively,
the ‘‘Exchanges’’) are substantively
identical. The Commission is publishing
this notice to solicit comments on the
Proposals from interested persons and is
approving the Proposals on an
accelerated basis.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchanges each propose to
amend certain of their respective rules
to enable the listing and trading of
iShares Trust Options on their markets.
The text of the Proposals is available at
each of the respective Exchanges, the
Commission’s Public Reference Room,
and http://www.amex.com, http://
www.bostonoptions.com, http://
www.cboe.com, http://
www.iseoptions.com, http://
www.nysearca.com, and http://
www.phlx.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In their filings with the Commission,
the Exchanges included statements
concerning the purpose of, and basis for,
the Proposals. The text of these
statements may be examined at the
places specified in Item III below. The
Exchanges have prepared summaries,
set forth in Sections A, B, and C below,
of the most significant aspects of such
statements.
A. Self-Regulatory Organizations’
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Recently, the Commission approved
the Exchanges’ proposals to list and
3 On September 29, 2008, the Commission
approved the merger of The Amex Membership
Corporation, Amex’s parent, with NYSE Euronext.
See Securities Exchange Act Release No. 58673
(September 29, 2008), 73 FR 57707 (October 3,
2008) (SR–NYSE–2008–60 and SR–Amex–2008–62)
(approving the merger). As a result, Amex was
renamed NYSE Alternext US LLC. For the purposes
of this order, the Commission will still refer to
Amex.
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Frm 00072
Fmt 4703
Sfmt 4703
trade options on the SPDR Gold Trust.4
Now, the Exchanges propose to list and
trade iShares Trust Options.
Currently, the rules of the Exchanges
permit only certain ‘‘Units’’ (also
referred to herein as exchange traded
funds (‘‘ETFs’’)) to underlie options
traded on their markets.5 Specifically, to
be eligible as an underlying security for
options traded on the Exchanges, an
ETF must represent: (i) Interests in
registered investment companies (or
series thereof) organized as open-end
management investment companies,
unit investment trusts or similar entities
that hold portfolios of securities, and/or
financial instruments including, but not
limited to, stock index futures contracts,
options on futures, options on securities
and indexes, equity caps, collars and
floors, swap agreements, forward
contracts, repurchase agreements and
reverse purchase agreements (‘‘Financial
Instruments’’), and money market
instruments, including, but not limited
to, U.S. government securities and
repurchase agreements (‘‘Money Market
Instruments’’) comprising or otherwise
based on or representing investments in
indexes or portfolios of securities and/
or Financial Instruments and Money
Market Instruments (or that hold
securities in one or more other
registered investment companies that
themselves hold such portfolios of
securities and/or Financial Instruments
and Money Market Instruments); or (ii)
interests in a trust or similar entity that
holds a specified non-U.S. currency
deposited with the trust or similar entity
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
and pays the beneficial owner interest
and other distributions on deposited
non-U.S. currency, if any, declared and
paid by the trust; or (iii) commodity
pool interests principally engaged,
directly or indirectly, in holding and/or
managing portfolios or baskets of
securities, commodity futures contracts,
options on commodity futures contracts,
swaps, forward contracts and/or options
on physical commodities and/or nonU.S. currency; or (iv) are shares of the
SPDR Gold Trust. The Proposals would
expand the types of ETFs that may be
4 See Securities Exchange Act Release Nos. 57894
(May 30, 2008), 73 FR 32061 (June 5, 2008) (SR–
Amex–2008–15; SR–CBOE–2005–11; SR–ISE–2008–
12; SR–NYSEArca–2008–52; and SR–Phlx–2008–
17); 58136 (July 10, 2008), 73 FR 40884 (July 16,
2008) (SR–BSE–2008–41) (‘‘SPDR Gold Trust
Options Approval Orders’’).
5 See Amex Rule 915 Commentary .06 and .10;
Boston Options Exchange (‘‘BOX’’) Rules, Chapter
IV, Section 3(i); Interpretation and Policy .06 to
CBOE Rule 5.3; ISE Rule 5.2(h); NYSE Arca Rule
5.3(g); and Phlx Rule 1009 Commentary .06.
E:\FR\FM\10DEN1.SGM
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mstockstill on PROD1PC66 with NOTICES
approved for options trading on the
Exchanges to include shares of the
iShares COMEX Gold Trust and the
iShares Silver Trust.
Apart from allowing iShares Trust
Options to be traded on the Exchanges
as described above, the Exchanges’
listing standards would remain
unchanged. ETFs on which options may
be listed and traded would still have to
be listed and traded on a national
securities exchange and satisfy the other
listing standards set forth in the
respective rules of each of the
Exchanges.6
Specifically, all ETFs underlying
options would also continue to be
required to: (1) Meet the criteria and
guidelines under the Exchanges’ rules
for underlying ETFs; or (2) be available
for creation or redemption each
business day from or through the issuer
in cash or in kind at a price related to
net asset value, and the issuer must be
obligated to issue Units in a specified
aggregate number even if some or all of
the investment assets required to be
deposited have not been received by the
issuer, subject to the condition that the
person obligated to deposit the
investments has undertaken to deliver
the investment assets as soon as
possible and such undertaking is
secured by the delivery and
maintenance of collateral consisting of
cash or cash equivalents satisfactory to
the issuer, as provided in the respective
prospectus.7
The Exchanges each propose that the
current continued listing standards for
options on ETFs would apply to iShares
Trust Options. Specifically, options on
Units may be subject to the suspension
of opening transactions as follows: (1)
Following the initial twelve-month
period beginning upon the
commencement of trading of the Units,
there are fewer than 50 record and/or
beneficial holders of the Units for 30 or
more consecutive trading days; (2) the
value of the index or portfolio of
securities, non-U.S. currency, or
portfolio of commodities including
commodity futures contracts, options on
commodity futures contracts, swaps,
forward contracts and/or options on
physical commodities and/or Financial
Instruments and Money Market
Instruments on which Units are based is
no longer calculated or available; or (3)
such other event occurs or condition
exists that in the opinion of the
6 Id.
7 See Amex Rule 915 Commentary .06 and .10;
BOX Rule Chapter IV, Section 3(i)(A)–(B);
Interpretation and Policy .01 and .06 to CBOE Rule
5.3; ISE Rule 502(h)(A)–(B); NYSE Arca Rule
5.3(g)(1)(A)–(B); and Phlx Rule 1009 Commentary
.06.
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16:49 Dec 09, 2008
Jkt 217001
exchanges makes further dealing on the
exchange inadvisable.8
In addition, shares of the iShares
COMEX Gold Trust and the iShares
Silver Trust would not be deemed to
meet the requirements for continued
approval, and the Exchanges would not
open for trading any additional series of
option contracts of the class covering
shares of the iShares COMEX Gold Trust
and the iShares Silver Trust, if the
shares cease to be an ‘‘NMS stock’’ as
provided for in rules of the Exchanges 9
or are halted from trading on their
primary market.
The Exchanges each represent that the
addition of the iShares COMEX Gold
Trust and the iShares Silver Trust to
types of Units that may underlie listed
options traded on the respective
exchange would not have any effect on
the rules pertaining to position and
exercise limits 10 or margin.11
The Exchanges also represent that the
respective surveillance procedures
applicable to iShares Trust Options
would be similar to those applicable to
all other options on ETFs currently
traded on the Exchanges. In addition,
the Exchanges note that they may obtain
information from the New York
Mercantile Exchange, Inc. (‘‘NYMEX’’)
through the Intermarket Surveillance
Group (‘‘ISG’’) related to any financial
instrument traded there that is based, in
whole or in part, upon an interest in, or
performance of, gold or silver.
2. Statutory Basis
The Exchanges each state that
amending its rules to accommodate the
listing and trading of iShares Trust
Options will benefit investors by
providing them with valuable risk
management tools. Accordingly, the
Exchanges believe that the proposed
rule changes are consistent with the
requirements of Section 6(b) of the
Act 12 in general, and further the
objectives of Section 6(b)(5) 13 of the Act
in particular, in that they are designed
to promote just and equitable principles
of trade, to remove impediments to, and
8 See Amex Rule 916 Commentary .07 and .11;
BOX Rule Chapter IV, Section 3(i); Interpretation
and Policy .08 to CBOE Rule 5.4; ISE Rule 503(h);
NYSE Arca Rule 5.4(k); and Phlx Rule 1010
Commentary .08.
9 See Amex Rule 916 Commentary .07 and .11;
BOX Rule Chapter IV, Section 3(i); Interpretation
and Policy .01 to CBOE Rule 5.4; ISE Rule 503(h);
NYSE Arca Rule 5.4(b); and Phlx Rule 1010.
10 See Amex Rules 904 and 905; BOX Rules
Chapter III, Sections 7 and 9; CBOE Rules 4.11 and
4.12; ISE Rules 412 and 414; NYSE Arca Rules 6.8
and 6.9; and Phlx Rules 1001 and 1002.
11 See Amex Rule 462; BOX Rules Chapter XIII,
Sections 3; CBOE Rule 12.3; ISE Rule 1202; NYSE
Arca Rules 4.15 and 4.16; and Phlx Rule 722.
12 15 U.S.C. 78f(b).
13 15 U.S.C. 78f(b)(5).
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Fmt 4703
Sfmt 4703
75149
perfect the mechanism of, a free and
open market and a national market
system, and in general to protect
investors and the public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchanges each believe that the
proposed rule changes will 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 Exchanges each state that no
written comments were solicited or
received with respect to the proposed
rule changes.
III. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
changes are 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
Nos. SR–Amex–2008–68; SR–BSE–
2008–51; SR–CBOE–2008–72; SR–ISE–
2008–58; SR–NYSEArca–2008–66; and
SR–Phlx–2008–58 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
Numbers SR–Amex–2008–68; SR–BSE–
2008–51; SR–CBOE–2008–72; SR–ISE–
2008–58; SR–NYSEArca–2008–66; and
SR–Phlx–2008–58. 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
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75150
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mstockstill on PROD1PC66 with NOTICES
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
Numbers SR–Amex–2008–68; SR–BSE–
2008–51; SR–CBOE–2008–72; SR–ISE–
2008–58; SR–NYSEArca–2008–66; and
SR–Phlx–2008–58 and should be
submitted on or before December 31,
2008.
IV. Commission’s Findings and Order
Granting Accelerated Approval of the
Proposed Rule Change
After careful consideration, the
Commission finds that the Proposals are
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to national
securities exchanges 14 and, in
particular, the requirements of Section 6
of the Act.15 Specifically, the
Commission finds that the Proposals are
consistent with Section 6(b)(5) of the
Act,16 which requires, among other
things, that the rules of a national
securities exchange be designed 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. In accordance with the
Memorandum of Understanding entered
into between the Commodity Futures
Trading Commission (‘‘CFTC’’) and the
Commission on March 11, 2008, and in
particular the addendum thereto
concerning Principles Governing the
Review of Novel Derivative Products,
the Commission believes that novel
derivative products that implicate areas
of overlapping regulatory concern
should be permitted to trade in either or
both a CFTC- or Commission-regulated
environment, in a manner consistent
with laws and regulations (including the
appropriate use of all available
exemptive and interpretive authority).
As national securities exchanges, each
of the Exchanges is required under
14 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).
15 15 U.S.C. 78f.
16 15 U.S.C. 78f(b)(5).
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16:49 Dec 09, 2008
Jkt 217001
Section 6(b)(1) of the Act 17 to enforce
compliance by its members, and persons
associated with its members, with the
provisions of the Act, Commission rules
and regulations thereunder, and its own
rules. In addition, brokers that trade
iShares Trust Options will also be
subject to best execution obligations and
FINRA rules.18 Applicable rules of the
Exchanges also require that customers
receive appropriate disclosure before
trading iShares Trust Options.19
Further, brokers opening accounts and
recommending options transactions
must comply with relevant customer
suitability standards.20
iShares Trust Options will trade as
options under the trading rules of each
of the Exchanges. These rules, among
other things, are designed to avoid
trading through better displayed prices
for iShares Trust Options available on
other exchanges and, thereby, satisfy
each exchange’s obligation under the
Options Intermarket Linkage Plan.21
Series of the iShares Trust Options will
be subject to the Exchanges’ rules
regarding continued listing
requirements, including standards
applicable to the underlying iShares
COMEX Gold Trust and the iShares
Silver Trust. Shares of the iShares
COMEX Gold Trust and the iShares
Silver Trust must continue to be traded
through a national securities exchange
or through the facilities of a national
securities association, and must be
‘‘NMS stock’’ as defined under Rule 600
of Regulation NMS.22 In addition, the
underlying shares must continue to be
available for creation or redemption
each business day from or through the
issuer in cash or in kind at a price
related to net asset value.23 If shares of
the iShares COMEX Gold Trust and the
iShares Silver Trust fail to meet these
requirements, the Exchanges will not
open for trading any new series of
iShares Trust Options.
17 15
U.S.C. 78f(b)(1).
18 See FINRA Rule 2320.
19 See Amex Rule 926; BOX Rules Chapter XI,
Section 17; CBOE Rule 9.15; ISE Rule 616; NYSE
Arca Rule 9.18(g); and Phlx Rule 1029.
20 See FINRA Rules 2860, 2860–2 and 2310;
Amex Rule 923; BOX Rules Chapter XI, Section 11;
CBOE Rules 9.7 and 9.9; ISE Rules 608 and 610;
NYSE Arca Rule 918(b)–(c); and Phlx Rules 1024
and 1026.
21 See Amex Rule 942; BOX Rules Chapter XII,
Section 3; CBOE Rule 6.83; ISE Rule 1902; NYSE
Arca Rule 6.94; and Phlx Rule 1085. Specifically,
each of the exchanges is a participant in the
Options Intermarket Linkage Plan.
22 17 CFR 242.600.
23 See Amex Rule 915 Commentary .06 and .10;
BOX Rules Chapter IV, Section 3(i); Interpretation
and Policy .06 to CBOE Rule 5.3; ISE Rule 502(a)–
(b); NYSE Arca Rule 5.3(a)–(b); and Phlx Rule 1009
Commentary .06.
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Frm 00074
Fmt 4703
Sfmt 4703
The Exchanges have all represented
that they have surveillance programs in
place for the listing and trading of
options based on the iShares COMEX
Gold Trust and the iShares Silver Trust.
For example, the Exchanges may obtain
trading information via the ISG from the
NYMEX related to any financial
instrument traded there that is based, in
whole or in part, upon an interest in, or
performance of, gold or silver.
Additionally, the listing and trading of
iShares Trust Options will be subject to
the Exchanges’ rules pertaining to
position and exercise limits 24 and
margin.25
In addition, the Commission finds
good cause, pursuant to Section 19(b)(2)
of the Act,26 for approving the Proposals
prior to the thirtieth day after the date
of publication of notice in the Federal
Register. The Proposals are similar to
proposals previously approved by the
Commission to list and trade options on
shares of the SPDR Gold Trust.27
Therefore, the Commission does not
believe that the Proposals raise any new
regulatory issues. Accordingly, the
Commission finds that there is good
cause, consistent with Section 6(b)(5) of
the Act,28 to approve the Proposals on
an accelerated basis.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,29 that the
Proposals (SR–Amex–2008–68; SR–
BSE–2008–51; SR–CBOE–2008–72; SR–
ISE–2008–58; SR–NYSEArca–2008–66;
and SR–Phlx–2008–58) are hereby
approved on an accelerated basis.
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.30
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E8–29200 Filed 12–9–08; 8:45 am]
BILLING CODE 8011–01–P
24 See Amex Rules 904 and 905; BOX Rules
Chapter III, Sections 7 and 9; CBOE Rules 4.11 and
4.12; ISE Rules 412 and 414; NYSE Arca Rules 6.8
and 6.9; and Phlx Rules 1001 and 1002.
25 See Amex Rule 462; BOX Rules Chapter XIII,
Section 3; CBOE Rule 12.3; ISE Rule 1202; NYSE
Arca Rules 4.15 and 4.16; and Phlx Rule 722. See
also FINRA Rules 2860 and 2860–1.
26 15 U.S.C. 78s(b)(2).
27 See SPDR Gold Trust Options Approval Orders,
supra note 4.
28 15 U.S.C. 78s(b)(5).
29 15 U.S.C. 78s(b)(2).
30 17 CFR 200.30–3(a)(12).
E:\FR\FM\10DEN1.SGM
10DEN1
Agencies
[Federal Register Volume 73, Number 238 (Wednesday, December 10, 2008)]
[Notices]
[Pages 75148-75150]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-29200]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59055; File Nos. SR-Amex-2008-68; SR-BSE-2008-51; SR-
CBOE-2008-72; SR-ISE-2008-58; SR-NYSEArca-2008-66; and SR-Phlx-2008-58]
Self-Regulatory Organizations; American Stock Exchange LLC,
Boston Stock Exchange, Inc., Chicago Board Options Exchange,
Incorporated, International Securities Exchange, LLC, NYSE Arca, Inc.,
and Philadelphia Stock Exchange, Inc.; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Changes Relating to the
Listing and Trading Options on Shares of the iShares COMEX Gold Trust
and the iShares Silver Trust
December 4, 2008.
Six options exchanges filed with the Securities and Exchange
Commission (``Commission'') proposed rule changes pursuant to Section
19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule
19b-4 \2\ thereunder to list and trade options on shares of the iShares
COMEX Gold Trust and the iShares Silver Trust (``iShares Trust
Options''). Specifically, NYSE Arca, Inc. (``NYSE Arca'') submitted its
proposal on June 24, 2008; the Chicago Board Options Exchange,
Incorporated (``CBOE'') submitted its proposal on July 3, 2008; the
International Securities Exchange, LLC (``ISE'') submitted its proposal
on July 14, 2008; the Philadelphia Stock Exchange, Inc. (``Phlx'')
submitted its proposal on July 23, 2008; the American Stock Exchange
LLC (``Amex'') \3\ submitted its proposal on August 20, 2008; and the
Boston Stock Exchange, Inc. (``BSE'') submitted its proposal on
November 12, 2008. The proposals (collectively, the ``Proposals'')
submitted by the Amex, BSE, CBOE, ISE, NYSE Arca, and Phlx
(collectively, the ``Exchanges'') are substantively identical. The
Commission is publishing this notice to solicit comments on the
Proposals from interested persons and is approving the Proposals on an
accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ On September 29, 2008, the Commission approved the merger of
The Amex Membership Corporation, Amex's parent, with NYSE Euronext.
See Securities Exchange Act Release No. 58673 (September 29, 2008),
73 FR 57707 (October 3, 2008) (SR-NYSE-2008-60 and SR-Amex-2008-62)
(approving the merger). As a result, Amex was renamed NYSE Alternext
US LLC. For the purposes of this order, the Commission will still
refer to Amex.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchanges each propose to amend certain of their respective
rules to enable the listing and trading of iShares Trust Options on
their markets. The text of the Proposals is available at each of the
respective Exchanges, the Commission's Public Reference Room, and
http://www.amex.com, http://www.bostonoptions.com, http://www.cboe.com,
http://www.iseoptions.com, http://www.nysearca.com, and http://
www.phlx.com.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In their filings with the Commission, the Exchanges included
statements concerning the purpose of, and basis for, the Proposals. The
text of these statements may be examined at the places specified in
Item III below. The Exchanges have prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organizations' Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Recently, the Commission approved the Exchanges' proposals to list
and trade options on the SPDR Gold Trust.\4\ Now, the Exchanges propose
to list and trade iShares Trust Options.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release Nos. 57894 (May 30,
2008), 73 FR 32061 (June 5, 2008) (SR-Amex-2008-15; SR-CBOE-2005-11;
SR-ISE-2008-12; SR-NYSEArca-2008-52; and SR-Phlx-2008-17); 58136
(July 10, 2008), 73 FR 40884 (July 16, 2008) (SR-BSE-2008-41)
(``SPDR Gold Trust Options Approval Orders'').
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Currently, the rules of the Exchanges permit only certain ``Units''
(also referred to herein as exchange traded funds (``ETFs'')) to
underlie options traded on their markets.\5\ Specifically, to be
eligible as an underlying security for options traded on the Exchanges,
an ETF must represent: (i) Interests in registered investment companies
(or series thereof) organized as open-end management investment
companies, unit investment trusts or similar entities that hold
portfolios of securities, and/or financial instruments including, but
not limited to, stock index futures contracts, options on futures,
options on securities and indexes, equity caps, collars and floors,
swap agreements, forward contracts, repurchase agreements and reverse
purchase agreements (``Financial Instruments''), and money market
instruments, including, but not limited to, U.S. government securities
and repurchase agreements (``Money Market Instruments'') comprising or
otherwise based on or representing investments in indexes or portfolios
of securities and/or Financial Instruments and Money Market Instruments
(or that hold securities in one or more other registered investment
companies that themselves hold such portfolios of securities and/or
Financial Instruments and Money Market Instruments); or (ii) interests
in a trust or similar entity that holds a specified non-U.S. currency
deposited with the trust or similar entity 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 and pays
the beneficial owner interest and other distributions on deposited non-
U.S. currency, if any, declared and paid by the trust; or (iii)
commodity pool interests principally engaged, directly or indirectly,
in holding and/or managing portfolios or baskets of securities,
commodity futures contracts, options on commodity futures contracts,
swaps, forward contracts and/or options on physical commodities and/or
non-U.S. currency; or (iv) are shares of the SPDR Gold Trust. The
Proposals would expand the types of ETFs that may be
[[Page 75149]]
approved for options trading on the Exchanges to include shares of the
iShares COMEX Gold Trust and the iShares Silver Trust.
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\5\ See Amex Rule 915 Commentary .06 and .10; Boston Options
Exchange (``BOX'') Rules, Chapter IV, Section 3(i); Interpretation
and Policy .06 to CBOE Rule 5.3; ISE Rule 5.2(h); NYSE Arca Rule
5.3(g); and Phlx Rule 1009 Commentary .06.
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Apart from allowing iShares Trust Options to be traded on the
Exchanges as described above, the Exchanges' listing standards would
remain unchanged. ETFs on which options may be listed and traded would
still have to be listed and traded on a national securities exchange
and satisfy the other listing standards set forth in the respective
rules of each of the Exchanges.\6\
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\6\ Id.
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Specifically, all ETFs underlying options would also continue to be
required to: (1) Meet the criteria and guidelines under the Exchanges'
rules for underlying ETFs; or (2) be available for creation or
redemption each business day from or through the issuer in cash or in
kind at a price related to net asset value, and the issuer must be
obligated to issue Units in a specified aggregate number even if some
or all of the investment assets required to be deposited have not been
received by the issuer, subject to the condition that the person
obligated to deposit the investments has undertaken to deliver the
investment assets as soon as possible and such undertaking is secured
by the delivery and maintenance of collateral consisting of cash or
cash equivalents satisfactory to the issuer, as provided in the
respective prospectus.\7\
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\7\ See Amex Rule 915 Commentary .06 and .10; BOX Rule Chapter
IV, Section 3(i)(A)-(B); Interpretation and Policy .01 and .06 to
CBOE Rule 5.3; ISE Rule 502(h)(A)-(B); NYSE Arca Rule 5.3(g)(1)(A)-
(B); and Phlx Rule 1009 Commentary .06.
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The Exchanges each propose that the current continued listing
standards for options on ETFs would apply to iShares Trust Options.
Specifically, options on Units may be subject to the suspension of
opening transactions as follows: (1) Following the initial twelve-month
period beginning upon the commencement of trading of the Units, there
are fewer than 50 record and/or beneficial holders of the Units for 30
or more consecutive trading days; (2) the value of the index or
portfolio of securities, non-U.S. currency, or portfolio of commodities
including commodity futures contracts, options on commodity futures
contracts, swaps, forward contracts and/or options on physical
commodities and/or Financial Instruments and Money Market Instruments
on which Units are based is no longer calculated or available; or (3)
such other event occurs or condition exists that in the opinion of the
exchanges makes further dealing on the exchange inadvisable.\8\
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\8\ See Amex Rule 916 Commentary .07 and .11; BOX Rule Chapter
IV, Section 3(i); Interpretation and Policy .08 to CBOE Rule 5.4;
ISE Rule 503(h); NYSE Arca Rule 5.4(k); and Phlx Rule 1010
Commentary .08.
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In addition, shares of the iShares COMEX Gold Trust and the iShares
Silver Trust would not be deemed to meet the requirements for continued
approval, and the Exchanges would not open for trading any additional
series of option contracts of the class covering shares of the iShares
COMEX Gold Trust and the iShares Silver Trust, if the shares cease to
be an ``NMS stock'' as provided for in rules of the Exchanges \9\ or
are halted from trading on their primary market.
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\9\ See Amex Rule 916 Commentary .07 and .11; BOX Rule Chapter
IV, Section 3(i); Interpretation and Policy .01 to CBOE Rule 5.4;
ISE Rule 503(h); NYSE Arca Rule 5.4(b); and Phlx Rule 1010.
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The Exchanges each represent that the addition of the iShares COMEX
Gold Trust and the iShares Silver Trust to types of Units that may
underlie listed options traded on the respective exchange would not
have any effect on the rules pertaining to position and exercise limits
\10\ or margin.\11\
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\10\ See Amex Rules 904 and 905; BOX Rules Chapter III, Sections
7 and 9; CBOE Rules 4.11 and 4.12; ISE Rules 412 and 414; NYSE Arca
Rules 6.8 and 6.9; and Phlx Rules 1001 and 1002.
\11\ See Amex Rule 462; BOX Rules Chapter XIII, Sections 3; CBOE
Rule 12.3; ISE Rule 1202; NYSE Arca Rules 4.15 and 4.16; and Phlx
Rule 722.
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The Exchanges also represent that the respective surveillance
procedures applicable to iShares Trust Options would be similar to
those applicable to all other options on ETFs currently traded on the
Exchanges. In addition, the Exchanges note that they may obtain
information from the New York Mercantile Exchange, Inc. (``NYMEX'')
through the Intermarket Surveillance Group (``ISG'') related to any
financial instrument traded there that is based, in whole or in part,
upon an interest in, or performance of, gold or silver.
2. Statutory Basis
The Exchanges each state that amending its rules to accommodate the
listing and trading of iShares Trust Options will benefit investors by
providing them with valuable risk management tools. Accordingly, the
Exchanges believe that the proposed rule changes are consistent with
the requirements of Section 6(b) of the Act \12\ in general, and
further the objectives of Section 6(b)(5) \13\ of the Act in
particular, in that they are 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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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchanges each believe that the proposed rule changes will 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 Exchanges each state that no written comments were solicited or
received with respect to the proposed rule changes.
III. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
changes are 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 Nos. SR-Amex-2008-68; SR-BSE-2008-51; SR-CBOE-2008-72; SR-ISE-
2008-58; SR-NYSEArca-2008-66; and SR-Phlx-2008-58 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 Numbers SR-Amex-2008-68; SR-BSE-
2008-51; SR-CBOE-2008-72; SR-ISE-2008-58; SR-NYSEArca-2008-66; and SR-
Phlx-2008-58. 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
[[Page 75150]]
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 Numbers SR-Amex-2008-68; SR-BSE-2008-51; SR-CBOE-2008-72; SR-ISE-
2008-58; SR-NYSEArca-2008-66; and SR-Phlx-2008-58 and should be
submitted on or before December 31, 2008.
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
After careful consideration, the Commission finds that the
Proposals are consistent with the requirements of the Act and the rules
and regulations thereunder applicable to national securities exchanges
\14\ and, in particular, the requirements of Section 6 of the Act.\15\
Specifically, the Commission finds that the Proposals are consistent
with Section 6(b)(5) of the Act,\16\ which requires, among other
things, that the rules of a national securities exchange be designed 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. In accordance with the Memorandum of
Understanding entered into between the Commodity Futures Trading
Commission (``CFTC'') and the Commission on March 11, 2008, and in
particular the addendum thereto concerning Principles Governing the
Review of Novel Derivative Products, the Commission believes that novel
derivative products that implicate areas of overlapping regulatory
concern should be permitted to trade in either or both a CFTC- or
Commission-regulated environment, in a manner consistent with laws and
regulations (including the appropriate use of all available exemptive
and interpretive authority).
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\14\ 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).
\15\ 15 U.S.C. 78f.
\16\ 15 U.S.C. 78f(b)(5).
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As national securities exchanges, each of the Exchanges is required
under Section 6(b)(1) of the Act \17\ to enforce compliance by its
members, and persons associated with its members, with the provisions
of the Act, Commission rules and regulations thereunder, and its own
rules. In addition, brokers that trade iShares Trust Options will also
be subject to best execution obligations and FINRA rules.\18\
Applicable rules of the Exchanges also require that customers receive
appropriate disclosure before trading iShares Trust Options.\19\
Further, brokers opening accounts and recommending options transactions
must comply with relevant customer suitability standards.\20\
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\17\ 15 U.S.C. 78f(b)(1).
\18\ See FINRA Rule 2320.
\19\ See Amex Rule 926; BOX Rules Chapter XI, Section 17; CBOE
Rule 9.15; ISE Rule 616; NYSE Arca Rule 9.18(g); and Phlx Rule 1029.
\20\ See FINRA Rules 2860, 2860-2 and 2310; Amex Rule 923; BOX
Rules Chapter XI, Section 11; CBOE Rules 9.7 and 9.9; ISE Rules 608
and 610; NYSE Arca Rule 918(b)-(c); and Phlx Rules 1024 and 1026.
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iShares Trust Options will trade as options under the trading rules
of each of the Exchanges. These rules, among other things, are designed
to avoid trading through better displayed prices for iShares Trust
Options available on other exchanges and, thereby, satisfy each
exchange's obligation under the Options Intermarket Linkage Plan.\21\
Series of the iShares Trust Options will be subject to the Exchanges'
rules regarding continued listing requirements, including standards
applicable to the underlying iShares COMEX Gold Trust and the iShares
Silver Trust. Shares of the iShares COMEX Gold Trust and the iShares
Silver Trust must continue to be traded through a national securities
exchange or through the facilities of a national securities
association, and must be ``NMS stock'' as defined under Rule 600 of
Regulation NMS.\22\ In addition, the underlying shares must continue to
be available for creation or redemption each business day from or
through the issuer in cash or in kind at a price related to net asset
value.\23\ If shares of the iShares COMEX Gold Trust and the iShares
Silver Trust fail to meet these requirements, the Exchanges will not
open for trading any new series of iShares Trust Options.
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\21\ See Amex Rule 942; BOX Rules Chapter XII, Section 3; CBOE
Rule 6.83; ISE Rule 1902; NYSE Arca Rule 6.94; and Phlx Rule 1085.
Specifically, each of the exchanges is a participant in the Options
Intermarket Linkage Plan.
\22\ 17 CFR 242.600.
\23\ See Amex Rule 915 Commentary .06 and .10; BOX Rules Chapter
IV, Section 3(i); Interpretation and Policy .06 to CBOE Rule 5.3;
ISE Rule 502(a)-(b); NYSE Arca Rule 5.3(a)-(b); and Phlx Rule 1009
Commentary .06.
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The Exchanges have all represented that they have surveillance
programs in place for the listing and trading of options based on the
iShares COMEX Gold Trust and the iShares Silver Trust. For example, the
Exchanges may obtain trading information via the ISG from the NYMEX
related to any financial instrument traded there that is based, in
whole or in part, upon an interest in, or performance of, gold or
silver. Additionally, the listing and trading of iShares Trust Options
will be subject to the Exchanges' rules pertaining to position and
exercise limits \24\ and margin.\25\
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\24\ See Amex Rules 904 and 905; BOX Rules Chapter III, Sections
7 and 9; CBOE Rules 4.11 and 4.12; ISE Rules 412 and 414; NYSE Arca
Rules 6.8 and 6.9; and Phlx Rules 1001 and 1002.
\25\ See Amex Rule 462; BOX Rules Chapter XIII, Section 3; CBOE
Rule 12.3; ISE Rule 1202; NYSE Arca Rules 4.15 and 4.16; and Phlx
Rule 722. See also FINRA Rules 2860 and 2860-1.
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In addition, the Commission finds good cause, pursuant to Section
19(b)(2) of the Act,\26\ for approving the Proposals prior to the
thirtieth day after the date of publication of notice in the Federal
Register. The Proposals are similar to proposals previously approved by
the Commission to list and trade options on shares of the SPDR Gold
Trust.\27\ Therefore, the Commission does not believe that the
Proposals raise any new regulatory issues. Accordingly, the Commission
finds that there is good cause, consistent with Section 6(b)(5) of the
Act,\28\ to approve the Proposals on an accelerated basis.
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\26\ 15 U.S.C. 78s(b)(2).
\27\ See SPDR Gold Trust Options Approval Orders, supra note 4.
\28\ 15 U.S.C. 78s(b)(5).
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\29\ that the Proposals (SR-Amex-2008-68; SR-BSE-2008-51; SR-CBOE-
2008-72; SR-ISE-2008-58; SR-NYSEArca-2008-66; and SR-Phlx-2008-58) are
hereby approved on an accelerated basis.
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\29\ 15 U.S.C. 78s(b)(2).
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E8-29200 Filed 12-9-08; 8:45 am]
BILLING CODE 8011-01-P