Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Order Granting Approval of a Proposed Rule Change Relating to the Listing and Trading of MSCI EAFE Index Options, 26056-26059 [2012-10538]
Download as PDF
<![CDATA[
mstockstill on DSK4VPTVN1PROD with NOTICES
26056
Federal Register / Vol. 77, No. 85 / Wednesday, May 2, 2012 / Notices
assembled in the form and at the place
that the financial intermediary, or its
agent, reasonably requests to facilitate
the financial intermediary’s sending of
the 19(a) Notice to each beneficial
owner of the Fund’s shares; and (c)
upon the request of any financial
intermediary, or its agent, that receives
copies of the 19(a) Notice, will pay the
financial intermediary, or its agent, the
reasonable expenses of sending the 19(a)
Notice to such beneficial owners.
5. Additional Board Determinations
for Funds Whose Common Shares Trade
at a Premium.
If:
(a) The Fund’s common shares have
traded on the Exchange that they
primarily trade on at the time in
question at an average premium to NAV
equal to or greater than 10%, as
determined on the basis of the average
of the discount or premium to NAV of
the Fund’s common shares as of the
close of each trading day over a 12-week
rolling period (each such 12-week
rolling period ending on the last trading
day of each week); and
(b) The Fund’s annualized
distribution rate for such 12-week
rolling period, expressed as a percentage
of NAV as of the ending date of such
12-week rolling period, is greater than
the Fund’s average annual total return
in relation to the change in NAV over
the 2-year period ending on the last day
of such 12-week rolling period; then:
(i) At the earlier of the next regularly
scheduled meeting or within four
months of the last day of such 12-week
rolling period, the Board including a
majority of the Independent Trustees:
(1) Will request and evaluate, and the
Fund’s Adviser will furnish, such
information as may be reasonably
necessary to make an informed
determination of whether the Plan
should be continued or continued after
amendment;
(2) Will determine whether
continuation, or continuation after
amendment, of the Plan is consistent
with the Fund’s investment objective(s)
and policies and in the best interests of
the Fund and its shareholders, after
considering the information in
condition 5(b)(i)(1) above; including,
without limitation:
(A) Whether the Plan is
accomplishing its purpose(s);
(B) The reasonably foreseeable
material effects of the Plan on the
Fund’s long-term total return in relation
to the market price and NAV of the
Fund’s common shares; and
(C) The Fund’s current distribution
rate, as described in condition 5(b)
above, compared with the Fund’s
average annual taxable income or total
VerDate Mar<15>2010
16:55 May 01, 2012
Jkt 226001
return over the 2-year period, as
described in condition 5(b), or such
longer period as the Board deems
appropriate; and
(3) Based upon that determination,
will approve or disapprove the
continuation, or continuation after
amendment, of the Plan; and
(ii) The Board will record the
information considered by it including
its consideration of the factors listed in
condition 5(b)(i)(2) above and the basis
for its approval or disapproval of the
continuation, or continuation after
amendment, of the Plan in its meeting
minutes, which must be made and
preserved for a period of not less than
six years from the date of such meeting,
the first two years in an easily accessible
place.
6. Public Offerings. The Fund will not
make a public offering of the Fund’s
common shares other than:
(a) A rights offering below NAV to
holders of the Fund’s common shares;
(b) An offering in connection with a
dividend reinvestment plan, merger,
consolidation, acquisition, spin off or
reorganization of the Fund; or
(c) An offering other than an offering
described in conditions 6(a) and 6(b)
above, provided that, with respect to
such other offering:
(i) The Fund’s annualized distribution
rate for the six months ending on the
last day of the month ended
immediately prior to the most recent
distribution record date,4 expressed as a
percentage of NAV as of such date, is no
more than 1 percentage point greater
than the Fund’s average annual total
return for the 5-year period ending on
such date; 5 and
(ii) The transmittal letter
accompanying any registration
statement filed with the Commission in
connection with such offering discloses
that the Fund has received an order
under section 19(b) to permit it to make
periodic distributions of long-term
capital gains with respect to its common
shares as frequently as twelve times
each year, and as frequently as
distributions are specified by or
determined in accordance with the
terms of any outstanding preferred
shares that such Fund may issue.
7. Amendments to Rule 19b–1.
The requested order will expire on the
effective date of any amendment to rule
19b–1 that provides relief permitting
certain closed-end investment
4 If the Fund has been in operation fewer than six
months, the measured period will begin
immediately following the Fund’s first public
offering.
5 If the Fund has been in operation fewer than five
years, the measured period will begin immediately
following the Fund’s first public offering.
PO 00000
Frm 00098
Fmt 4703
Sfmt 4703
companies to make periodic
distributions of long-term capital gains
with respect to their outstanding
common shares as frequently as twelve
times each year.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–10569 Filed 5–1–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[File No. 500–1]
LocatePlus Holdings Corporation;
Order of Suspension of Trading
April 30, 2012.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of LocatePlus
Holdings Corporation (‘‘LocatePlus’’)
because it has not filed any periodic
reports since the period ended March
31, 2011.
The Commission is of the opinion that
the public interest and the protection of
investors require a suspension of trading
in the securities of the above-listed
company, and any equity securities of
any entity purporting to succeed to this
issuer. Therefore, it is ordered, pursuant
to Section 12(k) of the Exchange Act,
that trading in the securities of the
above-listed company, and any equity
securities of any entity purporting to
succeed to this issuer, is suspended for
the period from 9:30 a.m. EDT on April
30, 2012, through 11:59 p.m. EDT on
May 11, 2012.
By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2012–10671 Filed 4–30–12; 4:15 pm]
P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66861; File No. SR–
Phlx–2012–28]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Order
Granting Approval of a Proposed Rule
Change Relating to the Listing and
Trading of MSCI EAFE Index Options
April 26, 2012.
I. Introduction
On March 1, 2012, NASDAQ OMX
PHLX LLC (‘‘Exchange’’ or ‘‘Phlx’’) filed
E:\FR\FM\02MYN1.SGM
02MYN1
Federal Register / Vol. 77, No. 85 / Wednesday, May 2, 2012 / Notices
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 amend certain of its rules to
provide for the listing and trading of
options on the MSCI EAFE Index. The
proposed rule change was published for
comment in the Federal Register on
March 15, 2012.3 The Commission
received no comment letters on the
proposed rule change. This order
approves the proposed rule change.
II. Description
The proposed rule change would
amend Phlx Rules 1079 (FLEX Index,
Equity and Currency Options), 1009A
(Designation of the Index) and 1101A
(Terms of Option Contracts) to permit
the Exchange to list and trade P.M. cashsettled, European-style options,
including FLEX 4 options and LEAPS,5
on the MSCI EAFE (Europe, Australasia,
and the Far East) Index, which is
described below. The proposal would
also create new Phlx Rule 1109A,
entitled ‘‘MSCI EAFE Index,’’ which
would provide additional detailed
information pertaining to the index as
required by the licensor including, but
not limited to, liability and other
representations on the part of MSCI Inc.
(‘‘MSCI’’), which maintains the index.
As described by the Exchange, the
MSCI EAFE Index is a free floatadjusted market capitalization index
consisting of large and midcap
components from countries classified by
MSCI as developed (excluding the U.S.
and Canada), and is designed to
measure the equity market performance
of developed markets (excluding the
U.S. and Canada). The index consists of
component securities from markets in
the following 22 areas: Australia,
Austria, Belgium, Denmark, Finland,
France, Germany, Greece, Hong Kong,
Ireland, Israel, Italy, Japan, the
Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden,
Switzerland, and the United Kingdom.
As further described by the Exchange,
the MSCI EAFE Index is calculated in
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 66569
(March 9, 2012), 77 FR 15409 (‘‘Notice’’).
4 FLEX options are flexible exchange-traded
index, equity, or currency option contracts that
provide investors the ability to customize basic
option features including size, expiration date,
exercise style, and certain exercise prices. FLEX
index options may have expiration dates within five
years. See Exchange Rules 1079 and 1101A.
5 LEAPS or Long Term Equity Anticipation
Securities are long term options that generally
expire from twelve to thirty-nine months from the
time they are listed.
mstockstill on DSK4VPTVN1PROD with NOTICES
2 17
VerDate Mar<15>2010
16:55 May 01, 2012
Jkt 226001
U.S. Dollars on a real time basis from
the open of the first market on which
the components are traded to the close
of the last market on which the
components are traded. The level of the
index reflects the free float-adjusted
market value of the component stocks
relative to a particular base date, and the
methodology used to calculate the value
of the index is similar to the
methodology used to calculate the value
of other well-known marketcapitalization weighted indexes.6 As of
December 31, 1969, when the MSCI
EAFE Index was launched, its base
index value was 100. On June 1, 2011,
the index value was 1727.187.7
The MSCI EAFE Index is monitored
and maintained by MSCI. According to
the Exchange, adjustments to the MSCI
EAFE Index are made on a daily basis
with respect to corporate events and
dividends. The index is generally
updated on a quarterly basis to reflect
amendments to shares outstanding and
free float. Full index reviews are
conducted on a semi-annual basis for
purposes of rebalancing the index.
Options on the MSCI EAFE Index, as
introduced by the proposed rule change,
would be European-style and P.M. cashsettled. The settlement value for
expiring options would be based on the
closing prices of the component stocks
on the last trading day prior to
expiration. The expiration date would
be the Saturday following the third
Friday of the expiration month. The
Options Clearing Corporation would be
the issuer and guarantor.
Phlx Rule 1009A(d) provides that the
Exchange may trade options on a broadbased index 8 pursuant to Rule 19b–4(e)
under the Act, when certain conditions
are satisfied.9 The MSCI EAFE Index is
a broad-based index. However, it does
not meet all the conditions of Rule
1009A(d). The proposed rule change
6 Details regarding the methodology for
calculating the MSCI EAFE Index can be found in
the Notice, supra note 3, and at https://www.msci.
com/eqb/methodology/meth_docs/MSCI_May11_
GIMIMethod.pdf.
7 According to the Exchange, static data regarding
the MSCI EAFE Index is distributed daily to clients
through MSCI as well as through major quotation
vendors, including Bloomberg L.P. (‘‘Bloomberg’’),
FactSet Research Systems, Inc. (‘‘FactSet’’) and
Thomson Reuters (‘‘Reuters’’). Real time data is
distributed at least every 15 seconds, using MSCI’s
real-time calculation engine, to Reuters, Bloomberg,
SIX Telekurs and FactSet.
8 A broad-based index is defined in Exchange
Rule 1000A(b)(11) as an index designed to be
representative of a stock market as a whole or of a
range of companies in unrelated industries.
9 This provision is an exception to Exchange Rule
1009A(a), which provides generally that the listing
of a class of index options on a new underlying
index will be treated by the Exchange as a proposed
rule change subject to filing with and approved by
the Commission under Section 19(b) of the Act.
PO 00000
Frm 00099
Fmt 4703
Sfmt 4703
26057
would establish listing standards that
are specific to MSCI EAFE Index
options, to be set forth in new Rule
1009A(h).
Specifically, proposed Rule
1009A(h)(i) would provide that the
Exchange may trade options on the
MSCI EAFE Index if each of the
following conditions is satisfied:
(1) The index is broad-based;
(2) Options on the index are
designated as P.M.-settled index
options;
(3) The index is capitalizationweighted, price-weighted, modified
capitalization-weighted or equal dollarweighted;
(4) The index consists of 500 or more
component securities;
(5) All the component securities of the
index have a market capitalization of
greater than $100 million;
(6) No single component security
accounts for more than 15% of the
weight of the index, and the five highest
weighted component securities in the
index do not, in the aggregate, account
for more than 50% of the weight of the
index;
(7) Non-U.S. component securities
(stocks or ADRs) that are not subject to
comprehensive surveillance agreements
do not, in the aggregate, represent more
than 20% of the weight of the index;
(8) The current index value is widely
disseminated at least once every 15
seconds by one or more major market
data vendors during the time options on
the index are traded on the Exchange;
(9) The Exchange reasonably believes
it has adequate system capacity to
support the trading of options on the
index, based on a calculation of the
Exchange’s current Independent System
Capacity Advisor (ISCA) allocation and
the number of new messages per second
expected to be generated by options on
such index; and
(10) The Exchange has written
procedures in place for the surveillance
of trading of options on the index.
After the initial listing of options on
the MSCI EAFE Index under the above
conditions, the following maintenance
standards, as set forth in proposed Rule
1009A(h)(ii), would apply: The
requirements set forth in proposed Rule
1009A(h)(i)(1), (2), (3), (4), (7), (8), (9),
and (10) must continue to be satisfied.
The requirements set forth in proposed
Rule 1009A(h)(i)(5) and (6) must be
satisfied only as of the first day of
January and July in each year. In
addition, the total number of component
securities in the index could not
increase or decrease by more than 35%
from the number of component
securities in the index at the time of its
initial listing.
E:\FR\FM\02MYN1.SGM
02MYN1
26058
Federal Register / Vol. 77, No. 85 / Wednesday, May 2, 2012 / Notices
The Exchange proposed to apply
position limits of 25,000 contracts on
the same side of the market to options
on the MSCI EAFE Index.10 All position
limit hedge exemptions would apply. In
addition, the Exchange proposed to
amend Rule 1079(d)(1) to note that, with
respect to FLEX options on the MSCI
EAFE Index, the same number of
contracts, 25,000, would apply with
respect to the position limit. The
Exchange also proposed to apply
existing index option margin
requirements for the purchase and sale
of options on the MSCI EAFE Index.11
Further, as proposed, Exchange rules
that apply to the trading of options on
broad-based indexes also would apply
to options on the MSCI EAFE Index.12
The trading of these options would also
be subject to, among other provisions,
Exchange rules governing margin
requirements and trading halt
procedures for index options.13
Finally, the Exchange proposed to add
Rule 1109A, entitled ‘‘MSCI EAFE
Index,’’ to provide additional detailed
information pertaining to the index as
required by the licensor, including, but
not limited to, liability and other
representations on the part of MSCI.
mstockstill on DSK4VPTVN1PROD with NOTICES
III. Discussion and Commission
Findings
The Commission finds that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to a national securities
exchange.14 Specifically, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,15 which requires,
among other things, that the rules of a
national securities exchange be
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
10 The exercise limit would also be 25,000
contracts as per Exchange Rule 1002A.
11 See Exchange Rule 721. For additional
proposed requirements for options on the MSCI
EAFE Index, including strike price intervals,
minimum tick size, and series openings, see Notice,
supra note 3.
12 See generally Exchange Rules 1000A through
1108A (Rules Applicable to Trading of Options on
Indices) and Exchange Rules 1000 through 1094
(Rules Applicable to Trading of Options on Stocks,
Exchange-Traded Fund Shares and Foreign
Currencies).
13 See Exchange Rules 721 (Proper and Adequate
Margin) and 1047A (Trading Rotations, Halts or
Reopenings).
14 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
15 15 U.S.C. 78f(b)(5).
VerDate Mar<15>2010
16:55 May 01, 2012
Jkt 226001
open market and a national market
system and, in general, to protect
investors and the public interest.
The Commission believes that the
listing and trading of options on the
MSCI EAFE Index will broaden trading
and hedging opportunities for investors
by creating a new options instrument
based on an index designed to measure
the equity market performance of
developed markets (excluding the U.S.
and Canada). Because the MSCI EAFE
Index is a broad-based index comprised
of actively-traded, well-capitalized
stocks, the trading of options on the
MSCI EAFE Index does not raise unique
regulatory concerns. The Commission
believes that the listing standards,
which are created specifically and
exclusively for the MSCI EAFE Index,
are consistent with the Act, for the
reasons discussed below.
The Commission notes that proposed
Rule 1009A(h) would require that the
MSCI EAFE Index consist of 500 or
more component securities. The
component securities of the MSCI EAFE
Index are listed and traded on 22
different markets. Further, for options
on the MSCI EAFE Index to trade, each
of the minimum of 500 component
securities would need to have a market
capitalization of greater than $100
million. Moreover, the Commission
notes that, according to the Exchange,
the MSCI EAFE Index is comprised of
more than 900 components, all of which
must meet the market capitalization
requirement to permit an option on the
index to begin trading.
The Commission notes that the
proposed listing standards for options
on the MSCI EAFE Index would not
permit any single security to comprise
more than 15% of the weight of the
index, and would not permit a group of
five securities to comprise more than
50% of the weight of the index. The
Commission believes that, in view of the
number of countries represented in the
index and the requirement on the
number of securities in the index and
the market capitalization, this
concentration standard is consistent
with the Act. Further, the Exchange
stated that, of the more than 900
components that comprise the MSCI
EAFE Index, no single component
comprises more than 5% of the index.
The Exchange has represented that it
has an adequate surveillance program in
place for options on the MSCI EAFE
Index, and intends to apply the same
procedures for surveillance that it
applies to its other index options. The
Exchange also is a member of the
Intermarket Surveillance Group and an
affiliate member of the International
Organization of Securities Commissions,
PO 00000
Frm 00100
Fmt 4703
Sfmt 4703
and has entered into various
Information Sharing Agreements and/or
Memoranda of Understandings with
various stock exchanges. The
Commission notes that, consistent with
the Exchange’s generic listing standards
for broad-based index options, non-U.S.
component securities of the MSCI EAFE
Index that are not subject to
comprehensive surveillance agreements
will not, in the aggregate, represent
more than 20% of the weight of the
index.
In addition, the Commission notes
that the proposed listing standards
require the current value of the MSCI
EAFE Index to be widely disseminated
at least once every 15 seconds by one or
more major market data vendors during
the time options on the index are traded
on the Exchange. Further, the standards
require that the Exchange reasonably
believe it has adequate system capacity
to support the trading of options on the
MSCI EAFE Index. The Exchange stated
that these requirements will be met.
As a national securities exchange, the
Exchange is required, under Section
6(b)(1) of the Act,16 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 this regard, the Commission
notes that Exchange rules that apply to
the trading of options on broad-based
indexes would apply to options on the
MSCI EAFE Index.17 In addition, the
Exchange has stated that options on the
MSCI EAFE Index would be subject to
the same rules that govern all Exchange
index options, including rules that are
designed to protect public customer
trading.18
The Commission further believes that
the Exchange’s proposed position and
exercise limits, strike price intervals,
minimum tick size, series openings, and
other aspects of the proposed rule
change are appropriate and consistent
with the Act.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,19 that the
16 15
U.S.C. 78f(b)(1).
generally Exchange Rules 1000A through
1108A (Rules Applicable to Trading of Options on
Indices) and Exchange Rules 1000 through 1094
(Rules Applicable to Trading of Options on Stocks,
Exchange-Traded Fund Shares and Foreign
Currencies).
18 See Notice, supra note 3 and Exchange Rules
1024–1029. See also supra notes 12 and 13.
19 15 U.S.C. 78s(b)(2).
17 See
E:\FR\FM\02MYN1.SGM
02MYN1
Federal Register / Vol. 77, No. 85 / Wednesday, May 2, 2012 / Notices
proposed rule change (SR–Phlx–2012–
28) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Kevin M. O’Neill,
Deputy Secretary.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2012–10538 Filed 5–1–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66863; File No. SR–EDGA–
2012–15]
Self-Regulatory Organizations; EDGA
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to Fees
Associated With Receipt of the EDGA
Book Feed
April 26, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on April 19,
2012, EDGA Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGA’’) 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
prepared by the Exchange. 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 the Substance
of the Proposed Rule Change
The Exchange proposes to amend its
fee schedule applicable to Members 3
and non-Members of the Exchange to
assess market data fees for internal and
external distribution of the EDGA book
feed (‘‘EDGA Book Feed’’). The text of
the proposed rule change is available on
the Exchange’s Web site at
www.directedge.com, at the Exchange’s
principal office, and at the Public
Reference Room of the Commission.
mstockstill on DSK4VPTVN1PROD with NOTICES
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.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of, and basis for,
the proposed rule change and discussed
any comments it received on the
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 A Member is any registered broker or dealer that
has been admitted to membership in the Exchange.
1. Purpose
In SR–EDGA–2011–19,4 the Exchange
made available the EDGA Book Feed, a
data feed that contains all orders for
securities trading on the Exchange,
including all displayed orders for listed
securities trading on EDGA, order
executions, order cancellations, order
modifications, order identification
numbers and administrative messages.
The EDGA Book Feed offers real-time
data, thereby allowing Member firms to
more accurately price their orders based
on EDGA’s view of the depth of book
information. It also provides Members
an ability to track their own orders from
order entry to execution. It is available
in both unicast and multicast format.
Upon the Exchange’s initial offering of
the EDGA Book Feed, such service was
provided at no cost. In SR–EDGA–2011–
19, the Exchange stated that ‘‘[s]hould
EDGA determine to charge fees
associated with the EDGA Book Feed,
EDGA will submit a proposed rule
change to the Commission in order to
implement those fees.’’ 5 This proposal
is designed to implement fees for the
receipt of the EDGA Book Feed.
The proposed rule change to the
EDGA fee schedule codifies such a fee
associated with the receipt of the EDGA
Book Feed. The Exchange, like other
market centers and other data providers,
intends to assess fees for entities that
receive real-time market data directly or
indirectly and act as either internal or
external distributors, as discussed
below. A ‘‘Distributor’’ of Exchange data
is any entity that receives an EDGA
Book Feed directly from the Exchange
or indirectly through another entity and
then distributes such data either
internally (within that entity) (‘‘Internal
Distributor’’) or externally (outside that
entity) (‘‘External Distributor’’). All
Distributors shall execute a Market Data
Vendor Agreement with Direct Edge,
Inc., acting on behalf of the EDGA
Exchange. The amount of the monthly
fees would depend on whether the
distributor is an ‘‘Internal Distributor’’
20 17
1 15
VerDate Mar<15>2010
16:55 May 01, 2012
Jkt 226001
4 Securities Exchange Act Release No. 64792 (July
1, 2011), 76 FR 39959 (July 7, 2011) (SR–EDGA–
2011–19).
5 Id.
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
26059
or ‘‘External Distributor.’’ Internal
Distributors are proposed to be charged
$500 per month and External
Distributors are proposed to be charged
$2,500 per month. The fee paid by an
External Distributor includes the
Internal Distributor Fee and thus allows
an External Distributor to provide data
both internally (i.e., to users within
their own organization) and externally
(to users outside their own
organization).
Additionally, Distributors will only
pay one distributor fee, regardless of the
number of locations or users to which
the feed is received or distributed. In
addition, neither Distributors nor their
end-users will be charged per-user
device fees when used to receive the
EDGA Book Feed nor will they be
charged per-user display fees when used
to present the EDGA Book Feed.
The Exchange proposes to implement
this rule change on May 1, 2012.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the objectives of Section 6 of the Act 6
in general and furthers the objectives of
Section 6(b)(4) 7 in particular, as it is
designed to provide for the equitable
allocation of reasonable dues, fees and
other charges among its Members and
other persons using its facilities. The
Exchange makes all services and
products subject to these fees available
on a non-discriminatory basis to
similarly situated recipients because the
service is optional and fees charged for
the EDGA Book Feed will be the same
for both Members and non-Members.
The fees are not unreasonably
discriminatory and are equitably
allocated. The fees for Members and
non-Members are uniform except with
respect to reasonable distinctions with
respect to internal and external
distribution.8 The Exchange proposes
charging External Distributors more
than Internal Distributors because of
higher administrative costs associated
with monitoring External Distributors
ongoing reporting, as provided in the
Direct Edge Data Vendor Agreement and
6 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
8 The Exchange notes that distinctions based on
external versus internal distribution have been
previously filed with the Commission by NASDAQ
Exchange (‘‘NASDAQ’’), NASDAQ OMX BX (‘‘BX’’),
and NASDAQ OMX PSX (‘‘PSX’’). See Nasdaq Rule
7019(b). See also Securities Exchange Act Release
No. 62876 (September 9, 2010), 75 FR 56624
(September 16, 2010) (SR–PHLX–2010–120). See
also Securities Exchange Act Release No. 62907
(September 14, 2010), 75 FR 57314 (September 20,
2010) (SR–NASDAQ–2010–110). See also Securities
Exchange Act Release No. 63442 (December 6,
2010), 75 FR 77029 (December 10, 2010) (SR–BX–
2010–081).
7 15
E:\FR\FM\02MYN1.SGM
02MYN1
]]>Agencies
[Federal Register Volume 77, Number 85 (Wednesday, May 2, 2012)]
[Notices]
[Pages 26056-26059]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-10538]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66861; File No. SR-Phlx-2012-28]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Order
Granting Approval of a Proposed Rule Change Relating to the Listing and
Trading of MSCI EAFE Index Options
April 26, 2012.
I. Introduction
On March 1, 2012, NASDAQ OMX PHLX LLC (``Exchange'' or ``Phlx'')
filed
[[Page 26057]]
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 amend
certain of its rules to provide for the listing and trading of options
on the MSCI EAFE Index. The proposed rule change was published for
comment in the Federal Register on March 15, 2012.\3\ The Commission
received no comment letters on the proposed rule change. This order
approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 66569 (March 9,
2012), 77 FR 15409 (``Notice'').
---------------------------------------------------------------------------
II. Description
The proposed rule change would amend Phlx Rules 1079 (FLEX Index,
Equity and Currency Options), 1009A (Designation of the Index) and
1101A (Terms of Option Contracts) to permit the Exchange to list and
trade P.M. cash-settled, European-style options, including FLEX \4\
options and LEAPS,\5\ on the MSCI EAFE (Europe, Australasia, and the
Far East) Index, which is described below. The proposal would also
create new Phlx Rule 1109A, entitled ``MSCI EAFE Index,'' which would
provide additional detailed information pertaining to the index as
required by the licensor including, but not limited to, liability and
other representations on the part of MSCI Inc. (``MSCI''), which
maintains the index.
---------------------------------------------------------------------------
\4\ FLEX options are flexible exchange-traded index, equity, or
currency option contracts that provide investors the ability to
customize basic option features including size, expiration date,
exercise style, and certain exercise prices. FLEX index options may
have expiration dates within five years. See Exchange Rules 1079 and
1101A.
\5\ LEAPS or Long Term Equity Anticipation Securities are long
term options that generally expire from twelve to thirty-nine months
from the time they are listed.
---------------------------------------------------------------------------
As described by the Exchange, the MSCI EAFE Index is a free float-
adjusted market capitalization index consisting of large and midcap
components from countries classified by MSCI as developed (excluding
the U.S. and Canada), and is designed to measure the equity market
performance of developed markets (excluding the U.S. and Canada). The
index consists of component securities from markets in the following 22
areas: Australia, Austria, Belgium, Denmark, Finland, France, Germany,
Greece, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and
the United Kingdom.
As further described by the Exchange, the MSCI EAFE Index is
calculated in U.S. Dollars on a real time basis from the open of the
first market on which the components are traded to the close of the
last market on which the components are traded. The level of the index
reflects the free float-adjusted market value of the component stocks
relative to a particular base date, and the methodology used to
calculate the value of the index is similar to the methodology used to
calculate the value of other well-known market-capitalization weighted
indexes.\6\ As of December 31, 1969, when the MSCI EAFE Index was
launched, its base index value was 100. On June 1, 2011, the index
value was 1727.187.\7\
---------------------------------------------------------------------------
\6\ Details regarding the methodology for calculating the MSCI
EAFE Index can be found in the Notice, supra note 3, and at https://www.msci.com/eqb/methodology/meth_docs/MSCI_May11_GIMIMethod.pdf.
\7\ According to the Exchange, static data regarding the MSCI
EAFE Index is distributed daily to clients through MSCI as well as
through major quotation vendors, including Bloomberg L.P.
(``Bloomberg''), FactSet Research Systems, Inc. (``FactSet'') and
Thomson Reuters (``Reuters''). Real time data is distributed at
least every 15 seconds, using MSCI's real-time calculation engine,
to Reuters, Bloomberg, SIX Telekurs and FactSet.
---------------------------------------------------------------------------
The MSCI EAFE Index is monitored and maintained by MSCI. According
to the Exchange, adjustments to the MSCI EAFE Index are made on a daily
basis with respect to corporate events and dividends. The index is
generally updated on a quarterly basis to reflect amendments to shares
outstanding and free float. Full index reviews are conducted on a semi-
annual basis for purposes of rebalancing the index.
Options on the MSCI EAFE Index, as introduced by the proposed rule
change, would be European-style and P.M. cash-settled. The settlement
value for expiring options would be based on the closing prices of the
component stocks on the last trading day prior to expiration. The
expiration date would be the Saturday following the third Friday of the
expiration month. The Options Clearing Corporation would be the issuer
and guarantor.
Phlx Rule 1009A(d) provides that the Exchange may trade options on
a broad-based index \8\ pursuant to Rule 19b-4(e) under the Act, when
certain conditions are satisfied.\9\ The MSCI EAFE Index is a broad-
based index. However, it does not meet all the conditions of Rule
1009A(d). The proposed rule change would establish listing standards
that are specific to MSCI EAFE Index options, to be set forth in new
Rule 1009A(h).
---------------------------------------------------------------------------
\8\ A broad-based index is defined in Exchange Rule 1000A(b)(11)
as an index designed to be representative of a stock market as a
whole or of a range of companies in unrelated industries.
\9\ This provision is an exception to Exchange Rule 1009A(a),
which provides generally that the listing of a class of index
options on a new underlying index will be treated by the Exchange as
a proposed rule change subject to filing with and approved by the
Commission under Section 19(b) of the Act.
---------------------------------------------------------------------------
Specifically, proposed Rule 1009A(h)(i) would provide that the
Exchange may trade options on the MSCI EAFE Index if each of the
following conditions is satisfied:
(1) The index is broad-based;
(2) Options on the index are designated as P.M.-settled index
options;
(3) The index is capitalization-weighted, price-weighted, modified
capitalization-weighted or equal dollar-weighted;
(4) The index consists of 500 or more component securities;
(5) All the component securities of the index have a market
capitalization of greater than $100 million;
(6) No single component security accounts for more than 15% of the
weight of the index, and the five highest weighted component securities
in the index do not, in the aggregate, account for more than 50% of the
weight of the index;
(7) Non-U.S. component securities (stocks or ADRs) that are not
subject to comprehensive surveillance agreements do not, in the
aggregate, represent more than 20% of the weight of the index;
(8) The current index value is widely disseminated at least once
every 15 seconds by one or more major market data vendors during the
time options on the index are traded on the Exchange;
(9) The Exchange reasonably believes it has adequate system
capacity to support the trading of options on the index, based on a
calculation of the Exchange's current Independent System Capacity
Advisor (ISCA) allocation and the number of new messages per second
expected to be generated by options on such index; and
(10) The Exchange has written procedures in place for the
surveillance of trading of options on the index.
After the initial listing of options on the MSCI EAFE Index under
the above conditions, the following maintenance standards, as set forth
in proposed Rule 1009A(h)(ii), would apply: The requirements set forth
in proposed Rule 1009A(h)(i)(1), (2), (3), (4), (7), (8), (9), and (10)
must continue to be satisfied. The requirements set forth in proposed
Rule 1009A(h)(i)(5) and (6) must be satisfied only as of the first day
of January and July in each year. In addition, the total number of
component securities in the index could not increase or decrease by
more than 35% from the number of component securities in the index at
the time of its initial listing.
[[Page 26058]]
The Exchange proposed to apply position limits of 25,000 contracts
on the same side of the market to options on the MSCI EAFE Index.\10\
All position limit hedge exemptions would apply. In addition, the
Exchange proposed to amend Rule 1079(d)(1) to note that, with respect
to FLEX options on the MSCI EAFE Index, the same number of contracts,
25,000, would apply with respect to the position limit. The Exchange
also proposed to apply existing index option margin requirements for
the purchase and sale of options on the MSCI EAFE Index.\11\
---------------------------------------------------------------------------
\10\ The exercise limit would also be 25,000 contracts as per
Exchange Rule 1002A.
\11\ See Exchange Rule 721. For additional proposed requirements
for options on the MSCI EAFE Index, including strike price
intervals, minimum tick size, and series openings, see Notice, supra
note 3.
---------------------------------------------------------------------------
Further, as proposed, Exchange rules that apply to the trading of
options on broad-based indexes also would apply to options on the MSCI
EAFE Index.\12\ The trading of these options would also be subject to,
among other provisions, Exchange rules governing margin requirements
and trading halt procedures for index options.\13\
---------------------------------------------------------------------------
\12\ See generally Exchange Rules 1000A through 1108A (Rules
Applicable to Trading of Options on Indices) and Exchange Rules 1000
through 1094 (Rules Applicable to Trading of Options on Stocks,
Exchange-Traded Fund Shares and Foreign Currencies).
\13\ See Exchange Rules 721 (Proper and Adequate Margin) and
1047A (Trading Rotations, Halts or Reopenings).
---------------------------------------------------------------------------
Finally, the Exchange proposed to add Rule 1109A, entitled ``MSCI
EAFE Index,'' to provide additional detailed information pertaining to
the index as required by the licensor, including, but not limited to,
liability and other representations on the part of MSCI.
III. Discussion and Commission Findings
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange.\14\
Specifically, the Commission finds that the proposed rule change is
consistent with Section 6(b)(5) of the Act,\15\ which requires, among
other things, that the rules of a national securities exchange be
designed to prevent fraudulent and manipulative acts and practices, 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.
---------------------------------------------------------------------------
\14\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\15\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission believes that the listing and trading of options on
the MSCI EAFE Index will broaden trading and hedging opportunities for
investors by creating a new options instrument based on an index
designed to measure the equity market performance of developed markets
(excluding the U.S. and Canada). Because the MSCI EAFE Index is a
broad-based index comprised of actively-traded, well-capitalized
stocks, the trading of options on the MSCI EAFE Index does not raise
unique regulatory concerns. The Commission believes that the listing
standards, which are created specifically and exclusively for the MSCI
EAFE Index, are consistent with the Act, for the reasons discussed
below.
The Commission notes that proposed Rule 1009A(h) would require that
the MSCI EAFE Index consist of 500 or more component securities. The
component securities of the MSCI EAFE Index are listed and traded on 22
different markets. Further, for options on the MSCI EAFE Index to
trade, each of the minimum of 500 component securities would need to
have a market capitalization of greater than $100 million. Moreover,
the Commission notes that, according to the Exchange, the MSCI EAFE
Index is comprised of more than 900 components, all of which must meet
the market capitalization requirement to permit an option on the index
to begin trading.
The Commission notes that the proposed listing standards for
options on the MSCI EAFE Index would not permit any single security to
comprise more than 15% of the weight of the index, and would not permit
a group of five securities to comprise more than 50% of the weight of
the index. The Commission believes that, in view of the number of
countries represented in the index and the requirement on the number of
securities in the index and the market capitalization, this
concentration standard is consistent with the Act. Further, the
Exchange stated that, of the more than 900 components that comprise the
MSCI EAFE Index, no single component comprises more than 5% of the
index.
The Exchange has represented that it has an adequate surveillance
program in place for options on the MSCI EAFE Index, and intends to
apply the same procedures for surveillance that it applies to its other
index options. The Exchange also is a member of the Intermarket
Surveillance Group and an affiliate member of the International
Organization of Securities Commissions, and has entered into various
Information Sharing Agreements and/or Memoranda of Understandings with
various stock exchanges. The Commission notes that, consistent with the
Exchange's generic listing standards for broad-based index options,
non-U.S. component securities of the MSCI EAFE Index that are not
subject to comprehensive surveillance agreements will not, in the
aggregate, represent more than 20% of the weight of the index.
In addition, the Commission notes that the proposed listing
standards require the current value of the MSCI EAFE Index to be widely
disseminated at least once every 15 seconds by one or more major market
data vendors during the time options on the index are traded on the
Exchange. Further, the standards require that the Exchange reasonably
believe it has adequate system capacity to support the trading of
options on the MSCI EAFE Index. The Exchange stated that these
requirements will be met.
As a national securities exchange, the Exchange is required, under
Section 6(b)(1) of the Act,\16\ 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
this regard, the Commission notes that Exchange rules that apply to the
trading of options on broad-based indexes would apply to options on the
MSCI EAFE Index.\17\ In addition, the Exchange has stated that options
on the MSCI EAFE Index would be subject to the same rules that govern
all Exchange index options, including rules that are designed to
protect public customer trading.\18\
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f(b)(1).
\17\ See generally Exchange Rules 1000A through 1108A (Rules
Applicable to Trading of Options on Indices) and Exchange Rules 1000
through 1094 (Rules Applicable to Trading of Options on Stocks,
Exchange-Traded Fund Shares and Foreign Currencies).
\18\ See Notice, supra note 3 and Exchange Rules 1024-1029. See
also supra notes 12 and 13.
---------------------------------------------------------------------------
The Commission further believes that the Exchange's proposed
position and exercise limits, strike price intervals, minimum tick
size, series openings, and other aspects of the proposed rule change
are appropriate and consistent with the Act.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\19\ that the
[[Page 26059]]
proposed rule change (SR-Phlx-2012-28) be, and hereby is, approved.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
---------------------------------------------------------------------------
\20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-10538 Filed 5-1-12; 8:45 am]
BILLING CODE 8011-01-P
