Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to the Index Underlying the WisdomTree Put Write Strategy Fund, 79371-79375 [2015-31933]
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Federal Register / Vol. 80, No. 244 / Monday, December 21, 2015 / Notices
such organization. The Commission
believes the proposal is consistent with
section 17A(b)(3)(F) of the Act 8 and
Rule 17Ad–22(d)(12),9 as described in
detail below.
Consistency with Section 17A(b)(3)(F)
of the Act. Section 17A(b)(3)(F) of the
Act requires, among other things, that
the rules of a clearing agency be
designed (i) to foster cooperation and
coordination with persons engaged in
the clearance and settlement of
securities transactions, and (ii) to
remove impediments to and perfect the
mechanism of a national system for the
prompt and accurate clearance and
settlement of securities transactions.10
As described above, under NSCC’s
current Rules regarding AIP, settlement
of AIP Payments is the responsibility of
AIP Members, including AIP Fund
Administrators. However, NSCC has
learned from fund administrators
interested in becoming AIP Members
that fund administrators generally do
not control money settlement for their
Fund clients. This disconnect has
impeded the adoption of AIP by the
fund administrator community. To
address this issue, NSCC will now allow
AIP Fund Administrators to establish
AIP sub-accounts and permit AIP
Payments to settle at the sub-account
level. Doing so will redirect
responsibility for settlement of AIP
Payments from AIP Fund
Administrators to the AIP Fund
Administrator’s designated Fund
clients.
In allowing settlement at the subaccount level, NSCC (i) will be fostering
cooperation and coordination with fund
administrators and Funds that are
involved in the processing of alternative
investment securities transactions, and
(ii) will be removing an impediment to
the prompt and accurate clearance and
settlement of alternative investment
securities transactions at the subaccount level. As such, the Commission
believes that the proposal is consistent
with section 17A(b)(3)(F) of the Act.11
Consistency with Rule 17Ad–
22(d)(12). Rule 17Ad–22(d)(12) under
the Act requires a central counterparty,
such as NSCC, to ‘‘establish, implement,
maintain and enforce written policies
and procedures reasonably designed to
. . . [e]nsure that final settlement
occurs no later than the end of the
settlement day . . . .’’ 12 As described
above, under the current Rules
regarding AIP, if just one of an AIP
8 15
U.S.C. 78q–1(b)(3)(F).
CFR 240.17Ad–22(d)(12).
10 15 U.S.C. 78q–1(b)(3)(F).
11 Id.
12 17 CFR 240.17Ad–22(d)(12).
9 17
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Fund Administrators’ designated Fund
clients fails to make its AIP Payment on
Settlement Date, and the AIP Fund
Administrator does not cover the
shortfall, NSCC is required to reverse all
of the AIP Fund Administrator’s contraside credit positions, including the
contra-side credit positions of Funds
that did pay. With this proposed rule
change, AIP Fund Administrators can
create AIP sub-accounts that settle
separately from their primary AIP
accounts, as well as from other AIP subaccounts. Allowing AIP settlement at
the sub-account level will enable
funded AIP sub-accounts to settle no
later than the end of the settlement day,
while unfunded sub-accounts can be
reversed, separately. As such, the
Commission believes that the proposal
is consistent with Rule 17Ad–
22(d)(12).13
III. Conclusion
On the basis of the foregoing, the
Commission finds that the proposal is
consistent with the requirements of the
Act and in particular with the
requirements of section 17A of the
Act 14 and the rules and regulations
thereunder.
It is therefore ordered, pursuant to
section 19(b)(2) of the Act, that
proposed rule change SR–NSCC–2015–
007 be, and hereby is, approved.15
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–31923 Filed 12–18–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76646; File No. SR–
NYSEArca–2015–113)
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change Relating to the Index
Underlying the WisdomTree Put Write
Strategy Fund
December 15, 2015.
Pursuant to section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
13 Id.
14 15
U.S.C. 78q–1.
approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
16 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
15 In
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79371
notice is hereby given that, on December
2, 2015, NYSE Arca, Inc. (the
‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. 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 change a
representation relating to the number of
components in the CBOE S&P 500 Put
Write Index, the index underlying the
WisdomTree Put Write Strategy Fund
(‘‘Fund’’). The Securities and Exchange
Commission (‘‘Commission’’) has
approved listing and trading of shares of
the Fund on the Exchange under
Commentary .01 to NYSE Arca Equities
Rule 5.2(j)(3) (‘‘Investment Company
Units’’).4 Shares of the Fund have not
commenced listing and trading on the
Exchange. The proposed rule change is
available on the Exchange’s Web site at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Commission has approved a
proposed rule change relating to listing
and trading on the Exchange of shares
(‘‘Shares’’) of the Fund on the Exchange
under Commentary .01 to NYSE Arca
Equities Rule 5.2(j)(3) 5 (‘‘Investment
4 See
note 6, infra.
Arca Equities Rule 5.2(j)(3)(A) provides
that an Investment Company Unit is a security that
represents an interest in a registered investment
5 NYSE
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Company Units’’).6 Shares of the Fund
have not commenced listing and trading
on the Exchange.
The Shares will be offered by the
WisdomTree Trust (‘‘Trust’’), which was
established as a Delaware statutory trust
on December 15, 2005. The Trust is
registered with the Commission as an
investment company and has filed a
registration statement on Form N–1A
(‘‘Registration Statement’’) with the
Commission on behalf of the Fund.7
The Exchange proposes to change a
representation made in the Prior Release
relating to the number of components in
the CBOE S&P 500 Put Write Index
(‘‘Index’’), the index underlying the
Fund.
As described in the Prior Release, the
Fund’s investment objective will be to
seek investment results that, before fees
and expenses, closely correspond to the
price and yield performance of the
Index. The Index was developed and is
maintained by the Chicago Board
Options Exchange, Inc. (‘‘CBOE’’ or the
‘‘Index Provider’’). The Fund’s
investment objective is to seek
investment results that, before fees and
expenses, closely correspond to the
price and yield performance of the
Index. The Index tracks the value of a
passive investment strategy, which
consists of overlaying of S&P 500 Index
put options (‘‘SPX Puts’’) over a money
market account, invested in one and
three-month Treasury bills (‘‘PUT
Strategy’’). The SPX Puts are struck atthe-money and are sold on a monthly
basis, usually the third Friday of the
month (i.e., the ‘‘Roll Date’’), which
matches the expiration date of the SPX
company that holds securities comprising, or
otherwise based on or representing an interest in,
an index or portfolio of securities (or holds
securities in another registered investment
company that holds securities comprising, or
otherwise based on or representing an interest in,
an index or portfolio of securities).
6 See Securities Exchange Act Release Nos. 74290
(February 18, 2015), 80 FR 9818 (February 24, 2015)
(SR–NYSEArca–2015–05) (notice of filing of
proposed rule change relating to listing and trading
of shares of WisdomTree Put Write Strategy Fund
under Commentary .01 to NYSE Arca Equities Rule
5.2(j)(3)) (‘‘Prior Notice’’); 74675 (April 8, 2015), 80
FR 20038 (April 14, 2015) (SR–NYSEArca–2015–05)
(order approving proposed rule change to list and
trade shares of WisdomTree Put Write Strategy
Fund under Commentary .01 to NYSE Arca Equities
Rule 5.2(j)(3)) (‘‘Prior Order’’ and, together with the
Prior Notice, the ‘‘Prior Release’’).
7 The Trust is registered under the Investment
Company Act of 1940 (15 U.S.C. 80a–1) (‘‘1940
Act’’). See Post-Effective Amendment No. 381 to
Registration Statement on Form N–1A for the Trust,
dated December 15, 2014 (File Nos. 333–132380
and 811–21864). The descriptions of the Fund and
the Shares contained herein are based on
information in the Registration Statement. In
addition, the Commission has issued an order
granting certain exemptive relief to the Trust under
the 1940 Act. See Investment Company Act Release
No. 28171 (October 27, 2008) (File No. 812–13458).
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Puts. All SPX Puts are standardized
options traded on the CBOE.
As stated in the Prior Release, the
Exchange submitted a proposed rule
change (i.e., File No. SR–NYSEArca–
2015–05) to permit listing and trading of
Shares of the Fund because the Index
for the Fund does not meet all of the
‘‘generic’’ listing requirements of
Commentary .01(a)(A) to NYSE Arca
Equities Rule 5.2(j)(3), applicable to the
listing of Investment Company Units
based upon an index of ‘‘US Component
Stocks.’’ 8 Specifically, Commentary
.01(a)(A) to NYSE Arca Equities Rule
5.2(j)(3) sets forth the requirements to be
met by components of an index or
portfolio of US Component Stocks.
Because the Index consists primarily of
SPX Puts, rather than ‘‘US Component
Stocks’’ as defined in NYSE Arca
Equities Rule 5.2(j)(3), the Index does
not satisfy the requirements of
Commentary .01(a)(A).
As stated in the Prior Release, the
Shares will conform to the initial and
continued listing criteria under NYSE
Arca Equities Rules 5.2(j)(3) and
5.5(g)(2), except that the Index will not
meet the requirements of NYSE Arca
Equities Rule 5.2(j)(3), Commentary
.01(a)(A)(1–5) in that the Index will
consist of one series of options based on
US Component Stocks (i.e., SPX Puts),
rather than US Component Stocks.
However, the Prior Release also stated
that the Index will include a minimum
of 20 components and therefore, would
meet the numerical requirements of
NYSE Arca Equities Rule 5.2(j)(3),
Commentary .01(a)(A)(4) (a minimum of
13 index or portfolio components). The
representation in the preceding sentence
is incorrect in that NYSE Arca Equities
Rule 5.2(j)(3), Commentary .01 is
inapplicable to an index consisting of
options. NYSE Arca Equities Rule
5.2(j)(3), Commentary .01(a)(A)(4)
requires that an underlying index
include a minimum of 13 ‘‘component
stocks’’, i.e., US Component Stocks or
Non-US Component Stocks (as defined
in NYSE Arca Equities Rule 5.2(j)(3)),
not options components.9 In addition,
8 NYSE Arca Equities Rule 5.2(j)(3) provides that
the term ‘‘US Component Stock’’ shall mean an
equity security that is registered under sections
12(b) or 12(g) of the Act and an American
Depositary Receipt, the underlying equity securities
of which is registered under Sections 12(b) or 12(g)
of the Act.
9 NYSE Arca Equities Rule 5.2(j)(3), Commentary
.01(a)(A)(5) provides that all securities in the
applicable index or portfolio shall be US
Component Stocks listed on a national securities
exchange and shall be NMS Stocks as defined in
Rule 600 under Regulation NMS of the Act. Each
component stock of the S&P 500 Index is a US
Component Stock that is listed on a national
securities exchange and is an NMS Stock. Options
are excluded from the definition of NMS Stock. As
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the Index does not include 20
components, but rather consists of one
component, which will be one series of
SPX Puts struck at-the-money and sold
on a monthly basis.
The Exchange believes it is
appropriate to strike from the Prior
Release the representation that the
Index will include a minimum of 20
components and would meet the
numerical requirements of NYSE Arca
Equities Rule 5.2(j)(3), Commentary
.01(a)(A)(4) because such Commentary
is inapplicable to an index containing
options components and because the
Index does not include a minimum of
20 components. The Exchange believes
that such deletion will not adversely
impact investors or the public interest
in that the Index is based on CBOEtraded puts on one of the most widelyfollowed broad-based market indexes—
the S&P 500.
S&P 500 Index options traded on
CBOE are highly liquid, with average
daily trading volume in 2014 of 888,089
contracts, with a notional size per
contract of $200,000.10 The Exchange
represents that the average daily trading
volume of at-the-money 30-day SPX
Puts as of approximately 12:00 noon on
each of the three recent Roll Dates was
as follows: For Roll Date of April 17,
2015 (expiry May 15, 2015), strike price
of 2080, 4,069 contracts on Roll Date,
2,273 average contracts per day through
expiration; for Roll Date of May 15, 2015
(expiry June 19, 2015), strike price of
2120, 9,521 contracts on Roll Date,
2,427 average contracts per day through
expiration; and for Roll Date of June 19,
2015 (expiry July 17, 2015), strike price
of 2110, 126 contracts on Roll Date, 859
average contracts per day through
expiration.11 Moreover, the proceeds of
the sales of the SPX Puts will be
invested in one and three-month
Treasury bills, which are also highly
liquid instruments.
The trading volume of the at-themoney SPX Puts as of approximately
12:00 noon on Roll Dates compares
favorably with at-the-money (as of
approximately 12:00 noon) put options
on other major indexes on Roll Dates.
For example, the trading volume of
comparable 30-day put options trading
at-the-money as of 12:00 noon on each
of the Roll Dates above on the Russell
2000 Index (‘‘RUT’’) was as follows: For
stated in the Prior Release, the Fund and the Index
meet all of the requirements of the listing standards
for Investment Company Units in NYSE Arca
Equities Rule 5.2(j)(3) and the requirements of
Commentary .01, except the requirements in
Commentary .01(a)(A)(1)–(5), as the Index consists
of options on US Component Stocks.
10 See www.CBOE.com.
11 Source: Bloomberg.
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Roll Date of April 17, 2015 (expiry May
15, 2015), strike price of 1250, 1,137
contracts on Roll Date, 554 average
contracts per day through expiration; for
Roll Date of May 15, 2015 (expiry June
19, 2015), strike price of 1240, 356
contracts on Roll Date, 624 average
contracts per day through expiration;
and Roll Date of June 19, 2015 (expiry
July 17, 2015), strike price of 1280,
2,240 contracts on Roll Date, 670
average contracts per day through
expiration.12
The daily high, low and last reported
sales prices on each of the Roll Dates for
SPX Puts at-the-money as of
approximately 12:00 noon were as
follows: Roll Date of April 17, 2015
(expiry May 15, 2015), strike price of
2080, daily high: $34.65, low: $23.45,
last: $28.70; Roll Date of May 15, 2015
(expiry June 19, 2015), strike price of
2120, daily high: $32.70, low: $29.00,
last: $29.00; and Roll Date of June 19,
2015 (expiry July 17, 2015), strike price
of 2110, daily high: $30.40, low: $24.20,
last: $30.40.13
The Exchange estimates that on
launch date, the Fund would hold
approximately $2.5–$5.0 million in cash
and cash equivalents (e.g. one-month
and three-month Treasury bills). This
estimate is based on a minimum of
100,000–200,000 Shares being created at
an estimated initial offering price of $25
per Share.
The Exchange believes that sufficient
protections are in place to protect
against market manipulation of the
Fund’s Shares and SPX Puts for several
reasons: (i) Surveillances administered
by each of the Exchange, CBOE and
FINRA designed to detect violations of
the federal securities laws and selfregulatory organization (‘‘SRO’’) rules;
(ii) the large number of financial
instruments tied to the specified
securities; and (iii) the exchange-traded
fund (‘‘ETF’’) creation/redemption
arbitrage mechanism tied to the large
pool of liquidity of each of the Fund’s
underlying investments, as more fully
described below.
Trading in the Shares and the
underlying Fund instruments will be
subject to the federal securities laws and
Exchange, CBOE and the Financial
Industry Regulatory Authority
(‘‘FINRA’’) rules and surveillance
programs.14 In this regard, the Exchange
12 Id.
13 Source:
CBOE.
Exchange notes that CBOE is a member for
the Options Regulatory Surveillance Authority,
which was established in 2006, to provide
efficiencies in looking for insider trading and serves
as a central organization to facilitate collaboration
in insider trading and investigations for the U.S.
options exchanges. For more information,
14 The
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has in place a surveillance program for
transactions in ETFs to ensure the
availability of information necessary to
detect and deter potential
manipulations and other trading abuses,
thereby making the Shares less readily
susceptible to manipulation. The
Exchange notes that the Fund’s portfolio
is not readily susceptible to
manipulation as assets in the portfolio—
comprised primarily of short-term U.S.
Treasury bills 15 and SPX Puts—will be
acquired in extremely liquid and highly
regulated markets.
SPX options are among the most
liquid index options in the U.S. and
derive their value from the actively
traded S&P 500 Index components. SPX
options are cash-settled with no
delivery of stocks or ETFs, and trade in
competitive auction markets with price
and quote transparency. The Exchange
believes the highly regulated S&P 500
options markets and the broad base and
scope of the S&P 500 Index make
securities that derive their value from
that index, including S&P 500 options,
less susceptible to potential market
manipulation in view of market
capitalization and liquidity of the S&P
500 Index components, price and quote
transparency, and arbitrage
opportunities.
Because the pricing of the Shares is
tied to the Fund’s underlying assets
(cash, Treasuries and SPX Puts), all of
which are traded in efficient, diversified
and liquid markets, the Exchange also
expects the liquidity in the congruent
creation/redemption arbitrage
mechanism to keep the Shares’ market
pricing in line such that the Shares’
pricing would not materially differ from
their net asset value. The Exchange
believes that the efficiency and liquidity
of the markets for SPX Puts, related
derivatives, and S&P 500 Index
components are sufficiently great as to
see https://www.cboe.com/aboutcboe/legal/
departments/orsareg.aspx.
15 The Treasury bill market is highly liquid;
Treasury bills are often considered a cashequivalent given the ability of investors to quickly
convert them into cash. According to Federal
Reserve Bank of New York data as of September
2015, average daily trading volume for U.S.
Treasury bills totaled $67.8 billion. In addition, the
Treasury market and its participants are subject to
a wide range of oversight and regulations, including
requirements designed to prevent market
manipulation and other abuses. For example,
Treasury market participants and the Treasury
market, itself, are subject to significant oversight by
a number of regulatory authorities, including the
Treasury, the Commission, federal bank regulators,
and the Financial Industry Regulatory Authority.
The Exchange contends that the short-term
Treasury securities that the Fund will acquire as
part of its strategy are not readily susceptible to
market manipulation due to the liquidity and
extensive oversight associated with the short-term
U.S. Treasury market.
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79373
deter fraudulent or manipulative acts
associated with the Fund’s Share price.
Coupled with the extensive surveillance
programs of the SROs described above,
the Exchange does not believe that
trading in the Fund’s Shares, as
proposed, would present manipulation
concerns.
Surveillance
The Exchange represents that trading
in the Shares will be subject to the
existing trading surveillances,
administered by regulatory staff of the
Exchange or the Financial Industry
Regulatory Authority (‘‘FINRA’’) on
behalf of the Exchange, which are
designed to detect violations of
Exchange rules and applicable federal
securities laws.16 The Exchange
represents that these procedures are
adequate to properly monitor Exchange
trading of the Shares in all trading
sessions and to deter and detect
violations of Exchange rules and federal
securities laws applicable to trading on
the Exchange.
The surveillances referred to above
generally focus on detecting securities
trading outside their normal patterns,
which could be indicative of
manipulative or other violative activity.
When such situations are detected,
surveillance analysis follows and
investigations are opened, where
appropriate, to review the behavior of
all relevant parties for all relevant
trading violations.
FINRA, on behalf of the Exchange, or
the regulatory staff of the Exchange, will
communicate as needed regarding
trading in the Shares and SPX Index
options with other markets and other
entities that are members of the
Intermarket Surveillance Group (‘‘ISG’’),
and FINRA, on behalf of the Exchange,
or the regulatory staff of the Exchange,
may obtain trading information
regarding trading such securities from
such markets and other entities. In
addition, the regulatory staff of the
Exchange may obtain information
regarding trading in such securities from
markets and other entities that are
members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement.17
In addition, the Exchange also has a
general policy prohibiting the
16 FINRA surveils certain trading activity on the
Exchange pursuant to a regulatory services
agreement. The Exchange is responsible for
FINRA’s performance under this regulatory services
agreement.
17 For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all
components of the Disclosed Portfolio for a Fund
may trade on markets that are members of ISG or
with which the Exchange has in place a
comprehensive surveillance sharing agreement.
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distribution of material, non-public
information by its employees.
2. Statutory Basis
The basis under the Act for this
proposed rule change is the requirement
under section 6(b)(5) 18 that an exchange
have rules that are 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, in general, to protect investors and
the public interest.
The Exchange believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices in that the Shares will
be listed and traded on the Exchange
pursuant to the initial and continued
listing criteria in NYSE Arca Equities
Rule 5.2(j)(3). The Exchange has in
place surveillance procedures that are
adequate to properly monitor trading in
the Shares in all trading sessions and to
deter and detect violations of Exchange
rules and applicable federal securities
laws. The Exchange represents that
trading in the Shares will be subject to
the existing trading surveillances,
administered by regulatory staff of the
Exchange or FINRA on behalf of the
Exchange, which are designed to detect
violations of Exchange rules and
applicable federal securities laws.
FINRA, on behalf of the Exchange, or
the regulatory staff of the Exchange, will
communicate as needed regarding
trading in the Shares and SPX Index
options with other markets and other
entities that are members of ISG, and
FINRA, on behalf of the Exchange, or
the regulatory staff of the Exchange, may
obtain trading information regarding
trading such securities from such
markets and other entities. In addition,
the regulatory staff of the Exchange may
obtain information regarding trading in
such securities from markets and other
entities that are members of ISG or with
which the Exchange has in place a
comprehensive surveillance sharing
agreement. The Exchange believes it is
appropriate to strike from the Prior
Release the representation that the
Index will include a minimum of 20
components and would meet the
numerical requirements of NYSE Arca
Equities Rule 5.2(j)(3), Commentary
.01(a)(A)(4), as described above. The
Exchange believes that such deletion
will not adversely impact investors or
the public interest in that the Index is
based on CBOE-traded puts on the S&P
500, which are highly liquid and
actively traded. The Exchange
18 15
U.S.C. 78f(b)(5).
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represents that S&P 500 Index options
traded on CBOE are highly liquid, with
average daily trading volume in 2014 of
888,089 contracts, with a notional size
per contract of $200,000.19 The
Exchange represents that the average
daily trading volume of at-the-money
30-day SPX Puts as of approximately
12:00 noon on each of the three
previously referenced Roll Dates.
Moreover, the proceeds of the sales of
the SPX Puts will be invested in one
and three-month Treasury bills, which
are also highly liquid instruments. The
trading volume of the at-the-money SPX
Puts as of approximately 12:00 noon on
Roll Dates compares favorably with atthe-money (as of approximately 12:00
noon) put options on other major
indexes on Roll Dates. Trading in the
Shares and the underlying Fund
instruments will be subject to the
federal securities laws and Exchange,
CBOE and FINRA rules and surveillance
programs. In this regard, the Exchange
has in place a surveillance program for
transactions in ETFs to ensure the
availability of information necessary to
detect and deter potential
manipulations and other trading abuses,
thereby making the Shares less readily
susceptible to manipulation. The
Exchange notes that the Fund’s portfolio
is not readily susceptible to
manipulation as assets in the portfolio—
comprised primarily of short-term U.S.
Treasury bills and SPX Puts—will be
acquired in extremely liquid and highly
regulated markets.
The proposed rule change is designed
to promote just and equitable principles
of trade and to protect investors and the
public interest in that trading in the
Shares is subject to all requirements of
NYSE Arca Equities Rule 5.2(j)(3). The
Index is based on CBOE-traded puts on
the S&P 500, which are highly liquid
and actively traded. The Web site for the
Fund will include a form of the
prospectus for the Fund and additional
data relating to NAV and other
applicable quantitative information. In
addition, as stated in the Prior Notice,
investors will have ready access to
information regarding the Fund’s
holdings, the Intraday Indicative Value,
and quotation and last sale information
for the Shares.
The proposed rule change is designed
to perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest. As
noted above, the Exchange has in place
surveillance procedures relating to
trading in the Shares and may obtain
information via ISG from other
exchanges that are members of ISG or
19 See
Jkt 238001
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www.CBOE.com.
Frm 00073
Fmt 4703
Sfmt 4703
with which the Exchange has entered
into a comprehensive surveillance
sharing agreement. In addition, as stated
in the Prior Release, investors will have
ready access to information regarding
the Fund’s holdings, the Intraday
Indicative Value, and quotation and last
sale information for the Shares.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purpose of the Act. The proposed
rule change will enhance competition
by permitting listing and trading of an
additional type of index-based
exchange-traded fund whose underlying
index includes an options component.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or such longer time period up
to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will: (a) By
order approve or disapprove such
proposed rule change; or (b) institute
proceedings to determine whether the
proposed rule change should be
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an Email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–2015–113 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
E:\FR\FM\21DEN1.SGM
21DEN1
Federal Register / Vol. 80, No. 244 / Monday, December 21, 2015 / Notices
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2015–113. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEArca–2015–113 and should be
submitted on or before January 11, 2016.
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
1, 2015, The NASDAQ Stock Market
LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘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 Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Exchange’s transaction fees at Chapter
XV, Section 2 entitled ‘‘NASDAQ
Options Market—Fees and Rebates,’’
which governs pricing for Nasdaq
members using the NASDAQ Options
Market (‘‘NOM’’), Nasdaq’s facility for
executing and routing standardized
equity and index options.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaq.cchwallstreet.com, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
BILLING CODE 8011–01–P
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
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
SECURITIES AND EXCHANGE
COMMISSION
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–31933 Filed 12–18–15; 8:45 am]
mstockstill on DSK4VPTVN1PROD with NOTICES
[Release No. 34–76647; File No. SR–
NASDAQ–2015–148]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend
NASDAQ Options Market—Fees and
Rebates
December 15, 2015.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
1. Purpose
The Exchange proposes various
changes to the NOM transaction fees
and rebates set forth at Chapter XV,
Section 2 for executing and routing
standardized equity and index options
under the Non-Penny Pilot Options
program, as well as other changes.
The proposed changes are as follows:
Fees for Removing Liquidity in NonPenny Pilot Options: The Exchange
proposes to:
1 15
20 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
17:38 Dec 18, 2015
2 17
Jkt 238001
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00074
Fmt 4703
Sfmt 4703
79375
1. Increase fees from $0.94 to $1.10
per contract for all Participant categories
other than Customer, which remains at
$0.85 per contract.
2. Offer Participants that send
Professional, Firm, Non-NOM Market
Maker, NOM Market Maker and/or
Broker-Dealer order flow an opportunity
to lower the Fees for Removing
Liquidity in Non-Penny Pilot Options
from $1.10 to $1.03 per contract
provided they qualify for Customer or
Professional Penny Pilot 3 Options
Rebates to Add Liquidity Tiers 7 or 8.
3. Offer Participants that send NOM
Market Maker order flow an opportunity
to lower the Fee for Removing Liquidity
in Non-Penny Pilot Options from $1.10
to $1.08 per contract provided they
qualify for Customer or Professional
Penny Pilot Options Rebate to Add
Liquidity Tiers 2, 3, 4, 5 or 6.
3 The Penny Pilot was established in March 2008
and has since been expanded and extended through
June 30, 2016. See Securities Exchange Act Release
Nos. 57579 (March 28, 2008), 73 FR 18587 (April
4, 2008) (SR–NASDAQ–2008–026) (notice of filing
and immediate effectiveness establishing Penny
Pilot); 60874 (October 23, 2009), 74 FR 56682
(November 2, 2009)(SR–NASDAQ–2009–091)
(notice of filing and immediate effectiveness
expanding and extending Penny Pilot); 60965
(November 9, 2009), 74 FR 59292 (November 17,
2009)(SR–NASDAQ–2009–097) (notice of filing and
immediate effectiveness adding seventy-five classes
to Penny Pilot); 61455 (February 1, 2010), 75 FR
6239 (February 8, 2010) (SR–NASDAQ–2010–013)
(notice of filing and immediate effectiveness adding
seventy-five classes to Penny Pilot); 62029 (May 4,
2010), 75 FR 25895 (May 10, 2010) (SR–NASDAQ–
2010–053) (notice of filing and immediate
effectiveness adding seventy-five classes to Penny
Pilot); 65969 (December 15, 2011), 76 FR 79268
(December 21, 2011) (SR–NASDAQ–2011–169)
(notice of filing and immediate effectiveness [sic]
extension and replacement of Penny Pilot); 67325
(June 29, 2012), 77 FR 40127 (July 6, 2012) (SR–
NASDAQ–2012–075) (notice of filing and
immediate effectiveness and extension and
replacement of Penny Pilot through December 31,
2012); 68519 (December 21, 2012), 78 FR 136
(January 2, 2013) (SR–NASDAQ–2012–143) (notice
of filing and immediate effectiveness and extension
and replacement of Penny Pilot through June 30,
2013); 69787 (June 18, 2013), 78 FR 37858 (June 24,
2013) (SR–NASDAQ–2013–082) (notice of filing
and immediate effectiveness and extension and
replacement of Penny Pilot through December 31,
2013); 71105 (December 17, 2013), 78 FR 77530
(December 23, 2013) (SR–NASDAQ–2013–154)
(notice of filing and immediate effectiveness and
extension and replacement of Penny Pilot through
June 30, 2014); 79 FR 31151 (May 23, 2014), 79 FR
31151 (May 30, 2014) (SR–NASDAQ–2014–056)
(notice of filing and immediate effectiveness and
extension and replacement of Penny Pilot through
December 31, 2014); 73686 (November 25, 2014), 79
FR 71477 (December 2, 2014) (SR–NASDAQ–2014–
115) (notice of filing and immediate effectiveness
and extension and replacement of Penny Pilot
through June 30, 2015) and 75283 (June 24, 2015),
80 FR 37347 (June 30, 2015) (SR–NASDAQ–2015–
063) (notice of filing and immediate effectiveness of
a Proposed Rule Change Relating to Extension of
the Exchange’s Penny Pilot Program and
Replacement of Penny Pilot Issues That Have Been
Delisted.) See also NOM Rules, Chapter VI, Section
5.
E:\FR\FM\21DEN1.SGM
21DEN1
]]>Agencies
[Federal Register Volume 80, Number 244 (Monday, December 21, 2015)]
[Notices]
[Pages 79371-79375]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-31933]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76646; File No. SR-NYSEArca-2015-113)
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Relating to the Index Underlying the WisdomTree
Put Write Strategy Fund
December 15, 2015.
Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on December 2, 2015, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to change a representation relating to the
number of components in the CBOE S&P 500 Put Write Index, the index
underlying the WisdomTree Put Write Strategy Fund (``Fund''). The
Securities and Exchange Commission (``Commission'') has approved
listing and trading of shares of the Fund on the Exchange under
Commentary .01 to NYSE Arca Equities Rule 5.2(j)(3) (``Investment
Company Units'').\4\ Shares of the Fund have not commenced listing and
trading on the Exchange. The proposed rule change is available on the
Exchange's Web site at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
---------------------------------------------------------------------------
\4\ See note 6, infra.
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Commission has approved a proposed rule change relating to
listing and trading on the Exchange of shares (``Shares'') of the Fund
on the Exchange under Commentary .01 to NYSE Arca Equities Rule
5.2(j)(3) \5\ (``Investment
[[Page 79372]]
Company Units'').\6\ Shares of the Fund have not commenced listing and
trading on the Exchange.
---------------------------------------------------------------------------
\5\ NYSE Arca Equities Rule 5.2(j)(3)(A) provides that an
Investment Company Unit is a security that represents an interest in
a registered investment company that holds securities comprising, or
otherwise based on or representing an interest in, an index or
portfolio of securities (or holds securities in another registered
investment company that holds securities comprising, or otherwise
based on or representing an interest in, an index or portfolio of
securities).
\6\ See Securities Exchange Act Release Nos. 74290 (February 18,
2015), 80 FR 9818 (February 24, 2015) (SR-NYSEArca-2015-05) (notice
of filing of proposed rule change relating to listing and trading of
shares of WisdomTree Put Write Strategy Fund under Commentary .01 to
NYSE Arca Equities Rule 5.2(j)(3)) (``Prior Notice''); 74675 (April
8, 2015), 80 FR 20038 (April 14, 2015) (SR-NYSEArca-2015-05) (order
approving proposed rule change to list and trade shares of
WisdomTree Put Write Strategy Fund under Commentary .01 to NYSE Arca
Equities Rule 5.2(j)(3)) (``Prior Order'' and, together with the
Prior Notice, the ``Prior Release'').
---------------------------------------------------------------------------
The Shares will be offered by the WisdomTree Trust (``Trust''),
which was established as a Delaware statutory trust on December 15,
2005. The Trust is registered with the Commission as an investment
company and has filed a registration statement on Form N-1A
(``Registration Statement'') with the Commission on behalf of the
Fund.\7\
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\7\ The Trust is registered under the Investment Company Act of
1940 (15 U.S.C. 80a-1) (``1940 Act''). See Post-Effective Amendment
No. 381 to Registration Statement on Form N-1A for the Trust, dated
December 15, 2014 (File Nos. 333-132380 and 811-21864). The
descriptions of the Fund and the Shares contained herein are based
on information in the Registration Statement. In addition, the
Commission has issued an order granting certain exemptive relief to
the Trust under the 1940 Act. See Investment Company Act Release No.
28171 (October 27, 2008) (File No. 812-13458).
---------------------------------------------------------------------------
The Exchange proposes to change a representation made in the Prior
Release relating to the number of components in the CBOE S&P 500 Put
Write Index (``Index''), the index underlying the Fund.
As described in the Prior Release, the Fund's investment objective
will be to seek investment results that, before fees and expenses,
closely correspond to the price and yield performance of the Index. The
Index was developed and is maintained by the Chicago Board Options
Exchange, Inc. (``CBOE'' or the ``Index Provider''). The Fund's
investment objective is to seek investment results that, before fees
and expenses, closely correspond to the price and yield performance of
the Index. The Index tracks the value of a passive investment strategy,
which consists of overlaying of S&P 500 Index put options (``SPX
Puts'') over a money market account, invested in one and three-month
Treasury bills (``PUT Strategy''). The SPX Puts are struck at-the-money
and are sold on a monthly basis, usually the third Friday of the month
(i.e., the ``Roll Date''), which matches the expiration date of the SPX
Puts. All SPX Puts are standardized options traded on the CBOE.
As stated in the Prior Release, the Exchange submitted a proposed
rule change (i.e., File No. SR-NYSEArca-2015-05) to permit listing and
trading of Shares of the Fund because the Index for the Fund does not
meet all of the ``generic'' listing requirements of Commentary
.01(a)(A) to NYSE Arca Equities Rule 5.2(j)(3), applicable to the
listing of Investment Company Units based upon an index of ``US
Component Stocks.'' \8\ Specifically, Commentary .01(a)(A) to NYSE Arca
Equities Rule 5.2(j)(3) sets forth the requirements to be met by
components of an index or portfolio of US Component Stocks. Because the
Index consists primarily of SPX Puts, rather than ``US Component
Stocks'' as defined in NYSE Arca Equities Rule 5.2(j)(3), the Index
does not satisfy the requirements of Commentary .01(a)(A).
---------------------------------------------------------------------------
\8\ NYSE Arca Equities Rule 5.2(j)(3) provides that the term
``US Component Stock'' shall mean an equity security that is
registered under sections 12(b) or 12(g) of the Act and an American
Depositary Receipt, the underlying equity securities of which is
registered under Sections 12(b) or 12(g) of the Act.
---------------------------------------------------------------------------
As stated in the Prior Release, the Shares will conform to the
initial and continued listing criteria under NYSE Arca Equities Rules
5.2(j)(3) and 5.5(g)(2), except that the Index will not meet the
requirements of NYSE Arca Equities Rule 5.2(j)(3), Commentary
.01(a)(A)(1-5) in that the Index will consist of one series of options
based on US Component Stocks (i.e., SPX Puts), rather than US Component
Stocks. However, the Prior Release also stated that the Index will
include a minimum of 20 components and therefore, would meet the
numerical requirements of NYSE Arca Equities Rule 5.2(j)(3), Commentary
.01(a)(A)(4) (a minimum of 13 index or portfolio components). The
representation in the preceding sentence is incorrect in that NYSE Arca
Equities Rule 5.2(j)(3), Commentary .01 is inapplicable to an index
consisting of options. NYSE Arca Equities Rule 5.2(j)(3), Commentary
.01(a)(A)(4) requires that an underlying index include a minimum of 13
``component stocks'', i.e., US Component Stocks or Non-US Component
Stocks (as defined in NYSE Arca Equities Rule 5.2(j)(3)), not options
components.\9\ In addition, the Index does not include 20 components,
but rather consists of one component, which will be one series of SPX
Puts struck at-the-money and sold on a monthly basis.
---------------------------------------------------------------------------
\9\ NYSE Arca Equities Rule 5.2(j)(3), Commentary .01(a)(A)(5)
provides that all securities in the applicable index or portfolio
shall be US Component Stocks listed on a national securities
exchange and shall be NMS Stocks as defined in Rule 600 under
Regulation NMS of the Act. Each component stock of the S&P 500 Index
is a US Component Stock that is listed on a national securities
exchange and is an NMS Stock. Options are excluded from the
definition of NMS Stock. As stated in the Prior Release, the Fund
and the Index meet all of the requirements of the listing standards
for Investment Company Units in NYSE Arca Equities Rule 5.2(j)(3)
and the requirements of Commentary .01, except the requirements in
Commentary .01(a)(A)(1)-(5), as the Index consists of options on US
Component Stocks.
---------------------------------------------------------------------------
The Exchange believes it is appropriate to strike from the Prior
Release the representation that the Index will include a minimum of 20
components and would meet the numerical requirements of NYSE Arca
Equities Rule 5.2(j)(3), Commentary .01(a)(A)(4) because such
Commentary is inapplicable to an index containing options components
and because the Index does not include a minimum of 20 components. The
Exchange believes that such deletion will not adversely impact
investors or the public interest in that the Index is based on CBOE-
traded puts on one of the most widely-followed broad-based market
indexes--the S&P 500.
S&P 500 Index options traded on CBOE are highly liquid, with
average daily trading volume in 2014 of 888,089 contracts, with a
notional size per contract of $200,000.\10\ The Exchange represents
that the average daily trading volume of at-the-money 30-day SPX Puts
as of approximately 12:00 noon on each of the three recent Roll Dates
was as follows: For Roll Date of April 17, 2015 (expiry May 15, 2015),
strike price of 2080, 4,069 contracts on Roll Date, 2,273 average
contracts per day through expiration; for Roll Date of May 15, 2015
(expiry June 19, 2015), strike price of 2120, 9,521 contracts on Roll
Date, 2,427 average contracts per day through expiration; and for Roll
Date of June 19, 2015 (expiry July 17, 2015), strike price of 2110, 126
contracts on Roll Date, 859 average contracts per day through
expiration.\11\ Moreover, the proceeds of the sales of the SPX Puts
will be invested in one and three-month Treasury bills, which are also
highly liquid instruments.
---------------------------------------------------------------------------
\10\ See www.CBOE.com.
\11\ Source: Bloomberg.
---------------------------------------------------------------------------
The trading volume of the at-the-money SPX Puts as of approximately
12:00 noon on Roll Dates compares favorably with at-the-money (as of
approximately 12:00 noon) put options on other major indexes on Roll
Dates. For example, the trading volume of comparable 30-day put options
trading at-the-money as of 12:00 noon on each of the Roll Dates above
on the Russell 2000 Index (``RUT'') was as follows: For
[[Page 79373]]
Roll Date of April 17, 2015 (expiry May 15, 2015), strike price of
1250, 1,137 contracts on Roll Date, 554 average contracts per day
through expiration; for Roll Date of May 15, 2015 (expiry June 19,
2015), strike price of 1240, 356 contracts on Roll Date, 624 average
contracts per day through expiration; and Roll Date of June 19, 2015
(expiry July 17, 2015), strike price of 1280, 2,240 contracts on Roll
Date, 670 average contracts per day through expiration.\12\
---------------------------------------------------------------------------
\12\ Id.
---------------------------------------------------------------------------
The daily high, low and last reported sales prices on each of the
Roll Dates for SPX Puts at-the-money as of approximately 12:00 noon
were as follows: Roll Date of April 17, 2015 (expiry May 15, 2015),
strike price of 2080, daily high: $34.65, low: $23.45, last: $28.70;
Roll Date of May 15, 2015 (expiry June 19, 2015), strike price of 2120,
daily high: $32.70, low: $29.00, last: $29.00; and Roll Date of June
19, 2015 (expiry July 17, 2015), strike price of 2110, daily high:
$30.40, low: $24.20, last: $30.40.\13\
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\13\ Source: CBOE.
---------------------------------------------------------------------------
The Exchange estimates that on launch date, the Fund would hold
approximately $2.5-$5.0 million in cash and cash equivalents (e.g. one-
month and three-month Treasury bills). This estimate is based on a
minimum of 100,000-200,000 Shares being created at an estimated initial
offering price of $25 per Share.
The Exchange believes that sufficient protections are in place to
protect against market manipulation of the Fund's Shares and SPX Puts
for several reasons: (i) Surveillances administered by each of the
Exchange, CBOE and FINRA designed to detect violations of the federal
securities laws and self-regulatory organization (``SRO'') rules; (ii)
the large number of financial instruments tied to the specified
securities; and (iii) the exchange-traded fund (``ETF'') creation/
redemption arbitrage mechanism tied to the large pool of liquidity of
each of the Fund's underlying investments, as more fully described
below.
Trading in the Shares and the underlying Fund instruments will be
subject to the federal securities laws and Exchange, CBOE and the
Financial Industry Regulatory Authority (``FINRA'') rules and
surveillance programs.\14\ In this regard, the Exchange has in place a
surveillance program for transactions in ETFs to ensure the
availability of information necessary to detect and deter potential
manipulations and other trading abuses, thereby making the Shares less
readily susceptible to manipulation. The Exchange notes that the Fund's
portfolio is not readily susceptible to manipulation as assets in the
portfolio--comprised primarily of short-term U.S. Treasury bills \15\
and SPX Puts--will be acquired in extremely liquid and highly regulated
markets.
---------------------------------------------------------------------------
\14\ The Exchange notes that CBOE is a member for the Options
Regulatory Surveillance Authority, which was established in 2006, to
provide efficiencies in looking for insider trading and serves as a
central organization to facilitate collaboration in insider trading
and investigations for the U.S. options exchanges. For more
information, see https://www.cboe.com/aboutcboe/legal/departments/orsareg.aspx.
\15\ The Treasury bill market is highly liquid; Treasury bills
are often considered a cash-equivalent given the ability of
investors to quickly convert them into cash. According to Federal
Reserve Bank of New York data as of September 2015, average daily
trading volume for U.S. Treasury bills totaled $67.8 billion. In
addition, the Treasury market and its participants are subject to a
wide range of oversight and regulations, including requirements
designed to prevent market manipulation and other abuses. For
example, Treasury market participants and the Treasury market,
itself, are subject to significant oversight by a number of
regulatory authorities, including the Treasury, the Commission,
federal bank regulators, and the Financial Industry Regulatory
Authority. The Exchange contends that the short-term Treasury
securities that the Fund will acquire as part of its strategy are
not readily susceptible to market manipulation due to the liquidity
and extensive oversight associated with the short-term U.S. Treasury
market.
---------------------------------------------------------------------------
SPX options are among the most liquid index options in the U.S. and
derive their value from the actively traded S&P 500 Index components.
SPX options are cash-settled with no delivery of stocks or ETFs, and
trade in competitive auction markets with price and quote transparency.
The Exchange believes the highly regulated S&P 500 options markets and
the broad base and scope of the S&P 500 Index make securities that
derive their value from that index, including S&P 500 options, less
susceptible to potential market manipulation in view of market
capitalization and liquidity of the S&P 500 Index components, price and
quote transparency, and arbitrage opportunities.
Because the pricing of the Shares is tied to the Fund's underlying
assets (cash, Treasuries and SPX Puts), all of which are traded in
efficient, diversified and liquid markets, the Exchange also expects
the liquidity in the congruent creation/redemption arbitrage mechanism
to keep the Shares' market pricing in line such that the Shares'
pricing would not materially differ from their net asset value. The
Exchange believes that the efficiency and liquidity of the markets for
SPX Puts, related derivatives, and S&P 500 Index components are
sufficiently great as to deter fraudulent or manipulative acts
associated with the Fund's Share price. Coupled with the extensive
surveillance programs of the SROs described above, the Exchange does
not believe that trading in the Fund's Shares, as proposed, would
present manipulation concerns.
Surveillance
The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances, administered by regulatory staff
of the Exchange or the Financial Industry Regulatory Authority
(``FINRA'') on behalf of the Exchange, which are designed to detect
violations of Exchange rules and applicable federal securities
laws.\16\ The Exchange represents that these procedures are adequate to
properly monitor Exchange trading of the Shares in all trading sessions
and to deter and detect violations of Exchange rules and federal
securities laws applicable to trading on the Exchange.
---------------------------------------------------------------------------
\16\ FINRA surveils certain trading activity on the Exchange
pursuant to a regulatory services agreement. The Exchange is
responsible for FINRA's performance under this regulatory services
agreement.
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The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
FINRA, on behalf of the Exchange, or the regulatory staff of the
Exchange, will communicate as needed regarding trading in the Shares
and SPX Index options with other markets and other entities that are
members of the Intermarket Surveillance Group (``ISG''), and FINRA, on
behalf of the Exchange, or the regulatory staff of the Exchange, may
obtain trading information regarding trading such securities from such
markets and other entities. In addition, the regulatory staff of the
Exchange may obtain information regarding trading in such securities
from markets and other entities that are members of ISG or with which
the Exchange has in place a comprehensive surveillance sharing
agreement.\17\
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\17\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of the
Disclosed Portfolio for a Fund may trade on markets that are members
of ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement.
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In addition, the Exchange also has a general policy prohibiting the
[[Page 79374]]
distribution of material, non-public information by its employees.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under section 6(b)(5) \18\ that an exchange have rules that
are 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, in general, to protect investors and the public interest.
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\18\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in NYSE Arca Equities Rule
5.2(j)(3). The Exchange has in place surveillance procedures that are
adequate to properly monitor trading in the Shares in all trading
sessions and to deter and detect violations of Exchange rules and
applicable federal securities laws. The Exchange represents that
trading in the Shares will be subject to the existing trading
surveillances, administered by regulatory staff of the Exchange or
FINRA on behalf of the Exchange, which are designed to detect
violations of Exchange rules and applicable federal securities laws.
FINRA, on behalf of the Exchange, or the regulatory staff of the
Exchange, will communicate as needed regarding trading in the Shares
and SPX Index options with other markets and other entities that are
members of ISG, and FINRA, on behalf of the Exchange, or the regulatory
staff of the Exchange, may obtain trading information regarding trading
such securities from such markets and other entities. In addition, the
regulatory staff of the Exchange may obtain information regarding
trading in such securities from markets and other entities that are
members of ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement. The Exchange believes it is appropriate
to strike from the Prior Release the representation that the Index will
include a minimum of 20 components and would meet the numerical
requirements of NYSE Arca Equities Rule 5.2(j)(3), Commentary
.01(a)(A)(4), as described above. The Exchange believes that such
deletion will not adversely impact investors or the public interest in
that the Index is based on CBOE-traded puts on the S&P 500, which are
highly liquid and actively traded. The Exchange represents that S&P 500
Index options traded on CBOE are highly liquid, with average daily
trading volume in 2014 of 888,089 contracts, with a notional size per
contract of $200,000.\19\ The Exchange represents that the average
daily trading volume of at-the-money 30-day SPX Puts as of
approximately 12:00 noon on each of the three previously referenced
Roll Dates. Moreover, the proceeds of the sales of the SPX Puts will be
invested in one and three-month Treasury bills, which are also highly
liquid instruments. The trading volume of the at-the-money SPX Puts as
of approximately 12:00 noon on Roll Dates compares favorably with at-
the-money (as of approximately 12:00 noon) put options on other major
indexes on Roll Dates. Trading in the Shares and the underlying Fund
instruments will be subject to the federal securities laws and
Exchange, CBOE and FINRA rules and surveillance programs. In this
regard, the Exchange has in place a surveillance program for
transactions in ETFs to ensure the availability of information
necessary to detect and deter potential manipulations and other trading
abuses, thereby making the Shares less readily susceptible to
manipulation. The Exchange notes that the Fund's portfolio is not
readily susceptible to manipulation as assets in the portfolio--
comprised primarily of short-term U.S. Treasury bills and SPX Puts--
will be acquired in extremely liquid and highly regulated markets.
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\19\ See www.CBOE.com.
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The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that trading in the Shares is subject to all requirements of NYSE Arca
Equities Rule 5.2(j)(3). The Index is based on CBOE-traded puts on the
S&P 500, which are highly liquid and actively traded. The Web site for
the Fund will include a form of the prospectus for the Fund and
additional data relating to NAV and other applicable quantitative
information. In addition, as stated in the Prior Notice, investors will
have ready access to information regarding the Fund's holdings, the
Intraday Indicative Value, and quotation and last sale information for
the Shares.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest. As noted above, the Exchange has in place surveillance
procedures relating to trading in the Shares and may obtain information
via ISG from other exchanges that are members of ISG or with which the
Exchange has entered into a comprehensive surveillance sharing
agreement. In addition, as stated in the Prior Release, investors will
have ready access to information regarding the Fund's holdings, the
Intraday Indicative Value, and quotation and last sale information for
the Shares.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purpose of the Act. The proposed rule change will
enhance competition by permitting listing and trading of an additional
type of index-based exchange-traded fund whose underlying index
includes an options component.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or such longer time period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(a) By order approve or disapprove such proposed rule change; or (b)
institute proceedings to determine whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an Email to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2015-113 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities
[[Page 79375]]
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2015-113. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2015-113 and should
be submitted on or before January 11, 2016.
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\20\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-31933 Filed 12-18-15; 8:45 am]
BILLING CODE 8011-01-P
