Federal Register / Vol. 85, No. 231 / Tuesday, December 1, 2020 / Notices 77297 

10 17 CFR 200.30–3(a)(12). 

1See Order Granting Approval of a Proposed Rule 

Change by Miami International Securities 

Exchange, LLC to List and Trade on the Exchange 

Options on the SPIKESTM Index, Exchange Act 

Release No. 84417 (Oct. 12, 2018), 83 FR 52865 

(Oct. 18, 2018) (SR–MIAX–2018–14) (‘‘SPIKES 

Options Approval Order’’). 

2See SPIKES Options Approval Order, 82 FR at 

52867 n. 36. 

3See The SPIKES Volatility Index: Methodology 

Guide (available at: https://www.miaxoptions.com/ 

sites/default/files/spikes-files/SPIKES_

Methodology_Guide.pdf) (‘‘SPIKES Methodology’’). 

Continued 

the purposes of the Act. If the 

Commission takes such action, the 

Commission will institute proceedings 

to determine whether the proposed rule 

change should be approved or 

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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

CBOE–2020–111 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–CBOE–2020–111. 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 website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website 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. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. All submissions 

should refer to File Number SR–CBOE– 

2020–111 and should be submitted on 

or before December 22, 2020. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–26403 Filed 11–30–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90510] 

Order Granting Conditional Exemptive 

Relief, Pursuant to Section 36 of the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’) With Respect to 

Futures Contracts on the SPIKESTM

Index 

November 24, 2020. 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Exemptive order. 

SUMMARY: The Minneapolis Grain 

Exchange, Inc. (or any successor thereto) 

(‘‘MGEX’’) has expressed an interest in 

listing and trading contracts for sale for 

future delivery on the SPIKESTM Index 

(‘‘SPIKES’’) (such futures contracts (and 

any options thereon) hereinafter referred 

to as the ‘‘Product’’). After careful 

consideration, the Securities and 

Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) believes that the 

Product has the potential to offer 

competition with the only comparable 

incumbent volatility product in the 

market, and is therefore conditionally 

exempting the Product from the 

definition of ‘‘security future’’ for all 

purposes other than as follows: First, 

the anti-fraud and anti-manipulation 

provisions under the Exchange Act will 

continue to apply; second, MGEX will 

continue to be subject to the 

requirement to register with the 

Commission as a national securities 

exchange (which may be done pursuant 

to a notice filing) and comply with 

related amendment and supplemental 

filing requirements; and third, MGEX 

will continue to be required, in its 

capacity as a national securities 

exchange, to make available to the 

Commission (or its representatives) 

books and records relating to 

transactions in the Product, upon 

request, and to make itself available to 

inspection and examination by the 

Commission (or its representatives), 

upon request. However, because 

registration as a notice-registered 

national securities exchange is intended 

only as a means to facilitate the 

Commission’s ability to exercise its 

books and records and examination 

authority over the Product, MGEX will 

be exempt from compliance with all 

other requirements applicable to 

national securities exchanges. Taken 

together, these actions will allow the 

Product to trade as a futures contract on 

MGEX, a designated contract market 

(‘‘DCM’’) and derivatives clearing 

organization (‘‘DCO’’) that is subject to 

the jurisdiction of the Commodity 

Futures Trading Commission (‘‘CFTC’’), 

consistent with the terms and 

conditions set forth below. 

DATES: This exemptive order is effective 

as of December 1, 2020. 

FOR FURTHER INFORMATION CONTACT: 

Carol McGee, Assistant Director, or 

Andrew Bernstein, Senior Special 

Counsel, at (202) 551–5870, Office of 

Derivatives Policy, Division of Trading 

and Markets, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–8010. 

I. Introduction 

A. Overview of the SPIKES Index 

On October 12, 2018, the Commission 

issued an order granting approval of a 

proposed rule change to allow the 

Miami International Securities 

Exchange LLC (‘‘MIAX’’) to list and 

trade options on SPIKES.1 Although that 

order permits MIAX to treat SPIKES as 

a broad-based index, as defined under 

MIAX’s rules, solely for purposes of 

determining the position limits, exercise 

limits, and margin requirements that 

apply to each options trade, the 

Commission stated explicitly that it was 

not determining whether SPIKES is a 

‘‘narrow-based security index,’’ as 

defined in Section 3(a)(55)(B) of the 

Exchange Act.2

SPIKES measures the expected 30-day 

volatility of the SPDR® S&P 500® ETF 

Trust (‘‘SPY’’), and is calculated using a 

variance swap methodology that 

includes live prices of existing 

exchange-traded options on the SPY to 

calculate volatility. Specifically, the 

SPIKES formula relies on the prices of 

standard monthly SPY options that 

expire on the third Friday of each 

calendar month.3 The formula uses 


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Weekly SPY options are not used in the SPIKES 

calculation. 

4See id. 

5See id. 

6 In-the-money SPY options are not included in 

the SPIKES calculation. See id. 

7See id. The ‘‘cash reference price’’ is the price 

of a particular SPY option, as determined using the 

‘‘price dragging’’ technique set forth in the SPIKES 

methodology. MIAX describes ‘‘price dragging’’ as 

the proprietary method used for determining the 

ongoing price for each individual option used in the 

calculation of SPIKES. Pursuant to that process, all 

prices are initially set to zero. If there is a trade, 

the price of the option is always set to the trade 

price. If there is not yet a trade, on the opening 

quote, the opening bid is used as the current price. 

For newly-placed ask (bid) quotes, if the ask (bid) 

is lower (higher) than the current ongoing reference 

price, the option price is set to ask (bid). MIAX 

believes that this process ‘‘should materially reduce 

erratic movements of the [SPIKES] value as 

quotations on [OTM] options are rapidly altered 

during times of low liquidity.’’ See Notice of Filing 

of a Proposed Rule Change by Miami International 

Securities Exchange, LLC to List and Trade on the 

Exchange Options on the SPIKESTM Index, 

Exchange Act Release No. 83619 (July 11, 2018), 83 

FR 32932, 32934 (‘‘SPIKES Options Notice’’). 

8See SPIKES Methodology, supra note 3. 

9See SPIKES Options Notice, 83 FR at 32933. 10See SPIKES Options Approval Order, 83 FR at 

52865–66. 11Public Law 106–554, 114 Stat. 2763 (2000). 12 15 U.S.C. 78c(a)(55)(A). 13 7 U.S.C. 1a(44). 14The term ‘‘narrow-based security index’’ is 

defined in Section 1a(35)(A) of the CEA and Section 

3(a)(55)(B) of the Exchange Act. 7 U.S.C. 1a(35)(A) 

and 15 U.S.C. 78c(a)(55)(B). 15See Section 3(a)(10) of the Exchange Act. 15 

U.S.C. 78c(a)(10). 16See Section 2(a)(1) of the Securities Act. 15 

U.S.C. 77b(a)(1). 17See Section 1a(44) of the CEA. 7 U.S.C. 1a(44). 18Section 3(a)(56) of the Exchange Act and 

Section 1a(45) of the CEA define ‘‘security futures 

product’’ to mean a security future or any put, call, 

straddle, option, or privilege on any security future. 

15 U.S.C. 78c(a)(56) and 7 U.S.C. 1a(45). 19As previously discussed, the SPIKES 

calculation uses live OTM SPY options to 

interpolate the price of a single synthetic precisely 

30-day ATM SPY option which, in turn, is used to 

calculate the precisely 30-day volatility of the SPY. 

Thus, a futures contract on SPIKES could, in the 

alternative, be viewed as a future based on the value 

of such single synthetic 30-day ATM SPY option. 

20 In the alternative, if SPIKES were considered to 

be an index composed of options on the SPY, a 

futures contract based on SPIKES would be a 

security future because SPIKES is a narrow-based 

security index under the definition set forth in 

Section 3(a)(55)(B) of the Exchange Act. See, e.g., 

Joint Final Rules: Application of the Definition of 

Narrow-Based Security Index to Debt Securities 

Indexes and Security Futures on Debt Securities, 

Exchange Act Release No. 54106 (July 6, 2006), 71 

FR 39534, 39536–37 (July 13, 2006). 

21 15 U.S.C. 78mm(a)(1). 

those prices to linearly interpolate 

between the variances of two monthly 

SPY option expirations—near-term (the 

closest expiration more than two full 

days into the future) and next-term (the 

monthly expiration following the nearterm). This expiration selection method 

is intended to avoid using highly 

irregular SPY option prices close to the 

options settlement date.4 When the 

near-term expiration is too close to 

expiry (less than two full days), rolling 

to the third-closest expiration occurs.5

The number of options included in 

the SPIKES calculation varies, and 

depends on the prices of live out-of-themoney (‘‘OTM’’) SPY options.6 In order 

to determine which SPY options are 

OTM, the methodology requires 

identification of the at-the-money 

(‘‘ATM’’) SPY options for both the nearterm and next-term options by 

calculating the absolute value of the call 

cash reference price minus the put cash 

reference price for all SPY options for 

which both call and put prices are 

available, and then selecting the strike 

price where that value is closest to zero 

(or in the case of a tie, using the lower 

strike).7 Once the ATM price has been 

identified, each OTM SPY option 

successively further away from the 

money is included in the calculation 

(for both the near-term and next-term) 

until two consecutive options with a 

cash reference price of five cents or less 

is reached, at which point all remaining 

far OTM options are excluded.8 The 

included OTM options are then 

weighted and used in the SPIKES 

formula to calculate the annualized 

expected volatility of the SPY, which is 

quoted in percentage points.9

The Commission understands that 

SPY options are used as inputs to the 

SPIKES formula, which is designed to 

interpolate the expected volatility of a 

single ATM option that expires in 

precisely 30 days. That formula requires 

the use of multiple live SPY options to 

determine the price (and ultimately the 

volatility) of what is essentially a 

synthetic SPY option that is both ATM 

and expires in exactly 30 days, updated 

on a real-time basis on each trading day 

beginning at 9:30 a.m. and ending at 

4:15 p.m. (New York time).10

B. Statutory Authority 

The Commodity Futures 

Modernization Act of 2000 (‘‘CFMA’’) 11

authorized the trading of security 

futures, which are defined in Section 

3(a)(55)(A) of the Exchange Act 12 and 

Section 1a(44) of the Commodity 

Exchange Act (‘‘CEA’’) 13 to include a 

contract of sale for future delivery of a 

single security or of a narrow-based 

security index,14 including any interest 

therein or based on the value thereof, 

other than certain exempt securities. A 

security future is considered to be a 

‘‘security’’ for purposes of the Federal 

securities laws, including the Exchange 

Act 15 and the Securities Act of 1933 

(‘‘Securities Act’’),16 and a futures 

contract for purposes of the CEA.17

Thus, the regulatory framework 

established by the CFMA provides the 

Commission and the CFTC with joint 

jurisdiction over security futures 

products.18

A futures contract on the SPIKES is a 

futures contract that is based on the 

value of a single security (i.e., the 

SPY) 19 and therefore satisfies the 

statutory definition of security future in 

Section 3(a)(55) of the Exchange Act. 

Nevertheless, the Commission has 

determined to use its authority in 

Section 36 of the Exchange Act to 

exempt a futures contracts on the 

SPIKES from the definition of ‘‘security 

future’’ under the Exchange Act, subject 

to the exceptions and conditions set 

forth below.20

C. Exemptive Relief Under Section 36 

Section 36(a)(1) of the Exchange Act 

authorizes the Commission to 

conditionally or unconditionally 

exempt any person, security, or 

transaction, or any class or classes of 

persons, securities, or transactions, from 

any provision or provisions of the 

Exchange Act or any rule or regulation 

thereunder, by rule, regulation, or order, 

to the extent that such exemption is 

necessary or appropriate in the public 

interest, and is consistent with the 

protection of investors.21 After careful 

consideration, the Commission finds 

that it is necessary or appropriate in the 

public interest, and is consistent with 

the protection of investors, to exercise 

its authority to exempt the Product from 

the definition of security future in 

Section 3(a)(55) of the Exchange Act for 

all purposes under the Exchange Act, 

other than certain specified provisions, 

including: (1) The anti-fraud and antimanipulation provisions under the 

Exchange Act, (2) the obligation of 

MGEX to register with the Commission 

as a national securities exchange; (3) the 

obligation of MGEX to make available to 

the Commission (or its representatives) 

books and records relating to 

transactions in the Product, upon 

request; and (4) the obligation of MGEX 

to make itself available to inspection 

and examination by the Commission (or 

its representatives), upon request. 

As a result of this exemptive order, 

market participants will be able to 

transact in the Product as a futures 

contract on MGEX, a DCM and DCO that 

is subject to the jurisdiction of the 

CFTC, consistent with the terms and 

conditions set forth below. The 

Commission believes that permitting the 

Product to trade as a futures contract, as 

opposed to as a security future, should 

foster competition as it could serve as 


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22 15 U.S.C. 78(i), (j), o(c), t, t–1, u, u–1, u–2, u– 

3, u–4, z, and aa. 

23 15 U.S.C. 77q(a). See infra note 53 and 

accompanying text (discussing the application of 

Section 17(a) of the Securities Act to the Product). 

24The cross-reference in Section 6(g) of the 

Exchange Act to the definition of ‘‘board of trade’’ 

cites to Section 1a(2) of the CEA which is no longer 

accurate due to subsequent amendments made to 

Section 1a of the CEA that modified the paragraph 

numbering. 

25 15 U.S.C. 78f(g). 

26See 17 CFR 240.6a–4(a)(1). Rule 6a–4(a)(2) also 

requires that promptly after the discovery that any 

information filed on Form 1–N was inaccurate 

when filed, the exchange shall file with the 

Commission an amendment correcting such 

inaccuracy. See 17 CFR 240.6a–4(a)(2). 

27See 17 CFR 240.6a–4(b). 

28See 17 CFR 240.6a–4(c). 

29 15 U.S.C. 78q(a). 

30Exchange Act Rule 17a–6 applies to national 

securities exchanges, national securities 

associations, registered clearing agencies, and the 

Municipal Securities Rulemaking Board, and allows 

for the destruction or disposal of records by these 

entities prior to the five-year retention period of 

Exchange Act Rule 17a–1 if done according to a 

plan for destruction or disposal that is filed with 

and approved by the Commission. 17 CFR 240.17a– 

6. 

an alternative to the only comparable 

incumbent volatility product in the 

market. Facilitating greater competition 

among these types of products should 

provide market participants with access 

to a wider range of financial instruments 

to trade on and hedge against volatility 

in the markets, particularly the S&P 500. 

In addition, the introduction of an 

additional volatility product in the 

market should lower transaction costs 

for market participants. Further, because 

SPY options are traded on 16 different 

national securities exchanges, the 

Commission would expect there to be a 

large number of market participants able 

to act as market makers in the Product. 

Moreover, the fact that SPY options are 

multi-listed should provide resiliency 

by reducing the likelihood that a 

disruption on one or more options 

exchanges could lead to a disruption in 

trading in the Product. 

The Commission understands, 

however, that the Product will need to 

trade, clear, and settle as a futures 

contract on a CFTC-regulated DCM and 

DCO in order to achieve such benefits 

to the market. This order, and the 

exemption of the Product from the 

definition of ‘‘security future,’’ subject 

to the terms and conditions discussed 

below, is intended to achieve that result. 

II. Exemptive Relief 

A. Scope 

Pursuant to Section 36 of the 

Exchange Act, the Commission is 

exempting the Product from the 

definition of ‘‘security future’’ in 

Section 3(a)(55) of the Exchange Act for 

all purposes under the Exchange Act 

other than as follows. First, such 

definitional exemption does not apply 

to the anti-fraud and anti-manipulation 

provisions of the Exchange Act 

(including related investigative, 

enforcement, and procedural authority) 

in Sections 9, 10, 15(c), 20, 20A, 21, 

21A, 21B, 21C, 21D, 26, and 27,22 and 

the rules and regulations thereunder. 

Moreover, and as discussed in detail 

below, trading in the Product will 

remain subject to the anti-fraud 

provisions of Section 17(a) of the 

Securities Act.23

Given that the price of a futures 

contract on the SPIKES is based on the 

value of the SPY and is derived using 

SPY options as inputs to a formula that 

creates a synthetic SPY option, the 

Commission believes it must retain the 

ability to exercise enforcement authority 

when necessary to protect the integrity 

of the securities markets to the extent 

that fraudulent or manipulative trading 

activity occurs in connection with 

transactions in the Product that could 

impact trading in the underlying 

securities (i.e., SPY or SPY options), or 

vice versa. Accordingly, the 

Commission is retaining this authority 

to, among other things, help prevent the 

possibility of market participants using 

fraudulent or manipulative transactions 

in the Product as a surrogate for 

transactions in the underlying securities 

in order to evade the Commission’s antifraud and anti-manipulation authority. 

Similarly, the Commission also would 

expect to use its anti-fraud and antimanipulation authority in the event that 

a market participant were to use 

transactions in the securities markets to 

engage in fraudulent or manipulative 

activities related to the Product. 

Second, the exemption from the 

definition of security future does not 

apply to the requirement to register with 

the Commission as a national securities 

exchange, as set forth in Section 5 of the 

Exchange Act, and the rules and 

regulations thereunder, and the 

requirements applicable to national 

securities exchanges, as set forth in 

Section 6 of the Exchange Act, and the 

rules and regulations thereunder, 

including Section 6(g), which applies to 

an exchange that lists and trades only 

security futures products. Specifically, 

Section 6(g) of the Exchange Act 

provides that an exchange that lists or 

trades security futures products may 

register as a national securities exchange 

solely for the purposes of trading 

security futures products if: (1) The 

exchange is a board of trade, as that 

term is defined by Section 1a(6) of the 

CEA,24 that has been designated a 

contract market by the CFTC and such 

designation is not suspended by order of 

the CFTC; and (2) such exchange does 

not serve as a market place for 

transactions in securities other than 

security futures products or futures on 

exempted securities or groups or 

indexes of securities or options thereon 

that have been authorized under Section 

2(a)(1)(C) of the CEA.25 Because MGEX 

satisfies the two conditions set forth in 

Section 6(g), it could avail itself of that 

provision to notice register as a national 

securities exchange by completing and 

submitting Form 1–N pursuant to 

Exchange Act Rule 6a–4(a)(1).26 By 

notice registering as a national securities 

exchange under Section 6(g), MGEX 

would also be subject to the ongoing 

requirements under Exchange Act Rule 

6a–4 regarding amendments to MGEX’s 

notice of registration on Form 1–N,27 as 

well as periodic filings regarding certain 

supplemental material related to the 

trading of security futures products on 

MGEX.28

The Commission believes that 

registration as a national securities 

exchange is necessary in order to 

facilitate the use of the Commission’s 

anti-fraud and anti-manipulation 

authority with respect to the Product. 

Registration will allow the Commission 

to access the information it needs to 

determine whether fraudulent or 

manipulative activity has occurred, the 

scope of such activity, and the parties 

engaging in it. Accordingly, MGEX will 

remain subject to the provisions in 

Section 17(a) of the Exchange Act, and 

the rules and regulations thereunder. 

Thus, the exemption from the definition 

of security future does not apply to the 

obligation of MGEX, in its capacity as a 

national securities exchange, to make 

and keep records relating to transactions 

in the Product, furnish such copies 

thereof, and to make and disseminate 

such reports available to the 

Commission (or its representatives), 

upon request.29 In particular, Exchange 

Act Rule 17a–1 requires each national 

securities exchange to: (1) Keep and 

preserve at least one copy of all 

documents, including all 

correspondence, memoranda, papers, 

books, notices, accounts, and other such 

records as shall be made or received by 

it in the course of its business as such 

and in the conduct of its self-regulatory 

activity; (2) keep all such documents for 

a period of not less than five years, the 

first two years in an easily accessible 

place, subject to the destruction and 

disposition provisions of Exchange Act 

Rule 17a–6; 30 and (3) upon request of 


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31 17 CFR 240.17a–1. 

32 15 U.S.C. 78q(b). 

33The exemption from the requirements in 

Section 6 of the Exchange Act applies to MGEX so 

long as it is only lists and trades the Product (as 

well as futures contracts subject to the CFTC’s 

exclusive jurisdiction). To the extent that MGEX 

were to expand its offerings to include a security 

futures product that is not subject to this exemptive 

order, all of the requirements in Section 6 would 

apply to such security futures product. In such an 

instance, however, the applicable exemption would 

continue to apply to the Product. 

34See infra note 54. 

35As an example of an analogous situation, the 

statutory definition of narrow-based security index 

in Section 3(a)(55) of the Exchange Act (which is 

used to determine whether a future on a security 

index is a security future) includes a similar three 

month grace period after an index transitions from 

broad- to narrow-based. See 15 U.S.C. 78c(a)(55)(E) 

any representative of the Commission, 

promptly furnish to the possession of 

such representative copies of any 

documents required to be kept and 

preserved by it pursuant to paragraphs 

(a) and (b) of the rule.31

Similarly, MGEX will remain subject 

to Section 17(b) of the Exchange Act, 

and the rules and regulations 

thereunder.32 Thus, the exemption from 

the definition of security future does not 

apply to the obligation of MGEX, in its 

capacity as a national securities 

exchange, to make itself available to 

inspection and examination by the 

Commission (or its representatives), 

upon request. 

Taken together, these provisions are 

intended to provide the Commission 

with prompt access to the information it 

needs to help determine whether 

fraudulent or manipulative activity has 

occurred and whether additional steps 

are necessary to halt such activity. Such 

information also should help to inform 

the Commission during the course of 

taking necessary enforcement action 

against parties in connection with 

transactions in the Product. For 

example, MGEX’s records of 

transactions in the Product should 

provide Commission staff with a key 

resource for analyzing whether 

manipulation has occurred (in the 

Product, the SPY, or SPY options). 

Trading records also should help the 

Commission and its staff analyze the 

amount of damages (including potential 

disgorgement) in connection with such 

enforcement matters. 

However, the Commission also 

recognizes that Section 6 of the 

Exchange Act imposes other 

requirements on national securities 

exchanges that have no relation to 

recordkeeping or examination 

requirements, and are therefore unlikely 

to assist the Commission in utilizing its 

anti-fraud and anti-manipulation 

authority over the Product. Accordingly, 

the Commission is providing MGEX 

with an exemption from all of the 

Section 6 requirements applicable to 

national securities exchanges, other 

than the ones described above. For 

example, under this exemptive relief, 

MGEX will not be required to comply 

with: (1) The requirement in Section 

6(h)(2) of the Exchange Act to only trade 

security futures that conform with 

listing standards that are filed with the 

Commission under Section 19(b) of the 

Exchange Act and meet the criteria 

specified in Section 2(a)(1)(D)(i) of the 

CEA; (2) the requirements for listing 

standards and conditions for trading set 

forth in Section 6(h)(3) of the Exchange 

Act (including with respect to margin); 

and (3) the requirement to submit 

proposed rule changes to the 

Commission, including those that 

would otherwise be required by Section 

6(g)(4)(B) of the Exchange Act. With 

respect to the listing standard 

requirements, given that this order 

allows MGEX to trade the Product as a 

future (and not as a security future), we 

do not believe it necessary or 

appropriate to require MGEX to comply 

with listing standard requirements that 

are specific to security futures. Rather, 

MGEX will be able to trade the Product 

under the listing standards for futures 

contracts that are subject to the CFTC’s 

oversight.33

Finally, the exemption from the 

definition of security future does not 

apply to the requirement to register with 

the Commission as a clearing agency, as 

set forth in Section 17A of the Exchange 

Act, and the rules and regulations 

thereunder, including the exemption 

from registration in paragraph (b)(7) of 

that section. Specifically, and as 

discussed in detail in Section II.C 

below, by not including Section 17A in 

the exemptive relief provided for in this 

order, MGEX will be able to avail itself 

of the statutory exemption from clearing 

agency registration in Section 17A(b)(7), 

which applies to certain clearing 

agencies that do not clear securities 

other than security futures.34 This carveout from the exemptive relief is not 

intended to affect MGEX’s obligations 

under this order, but rather to clarify its 

ability to rely on an exemption from 

Section 5 of the Securities Act, as 

discussed in detail in Section II.C. 

In crafting the scope of this exemptive 

order, the Commission recognizes that 

the CFTC has a regulatory regime that 

will govern every aspect of the Product 

on a day-to-basis, including the DCM 

and DCO on which it trades and clears 

(i.e., MGEX), and the market 

participants that are members of that 

DCM and DCO. The Commission 

intends to exercise its authority over 

MGEX and the Product for the limited 

purposes of enforcing its anti-fraud and 

anti-manipulation authority in 

connection with trading in the Product, 

which it is retaining pursuant to this 

order. Such retained authority is in 

addition to the CFTC’s jurisdiction over 

the Product and MGEX, which includes 

enforcing anti-fraud provisions and 

registration and recordkeeping 

obligations under the commodity laws. 

Accordingly, the Commission does not 

believe that additional requirements 

beyond those specified in this order are 

necessary given that such requirements 

would generally not directly impact the 

Commission’s ability to determine 

whether and how to use its anti-fraud 

and anti-manipulation authority in 

connection with trading in the Product. 

B. Conditions 

The relief the Commission is 

providing in this order is predicated 

upon certain facts and circumstances 

regarding how the Product (and the 

securities that underlie it) are currently 

structured and traded. That information 

has allowed the Commission to reach 

certain conclusions that relate to, among 

other things, the susceptibility of the 

Product (or its underlying securities) to 

manipulation and the ability of the SPY 

to effectively track the S&P 500. To the 

extent that those facts and 

circumstances were to change, such 

modifications could potentially 

undermine the basis for providing relief. 

Accordingly, this exemptive order 

includes a number of conditions. Those 

conditions, which are described in 

detail below, generally fit into one of 

two categories, as follows: (1) 

Conditions related to the SPIKES 

calculation, including the liquidity and 

trading venue of the required inputs; 

and (2) conditions on the relationship 

between the SPY and the S&P 500 

Index. 

To the extent that one or more of 

these conditions is no longer satisfied, 

this exemptive order will no longer 

apply three calendar months after the 

end of the month in which any 

condition is no longer satisfied. The 

Commission recognizes that, to the 

extent that the exemptions in this order 

are no longer effective, market 

participants will need time to take the 

necessary steps to wind down their 

existing transactions in an orderly 

fashion, which typically requires 

entering into offsetting transactions. In 

that respect, we believe that three 

calendar months is a sufficient amount 

of time to allow for such activity to 

occur.35


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(providing that an index that is a narrow-based 

security index solely because it was a narrow-based 

security index for more than 45 business days over 

three consecutive calendar months pursuant to 

Section 3(a)(55)(C)(iii) shall not be a narrow-based 

security index for the three following calendar 

months). 

36The Commission has previously noted that 

liquidity is an important factor when determining 

whether a security is readily susceptible to 

manipulation. See, e.g., Publication or Submission 

of Quotations Without Specified Information, 

Exchange Act Release No. 89891 (Sept. 16, 2020), 

85 FR 68124, 68158 (Oct. 27, 2020) (‘‘Further, the 

Commission believes that the exception’s three 

thresholds of ADTV value, total assets, and 

shareholders’ equity are tailored to appropriately 

capture issuers of securities that are less susceptible 

to fraud and manipulation based on the liquidity of 

the security and size of the issuer.’’). See also Short 

Sales, Exchange Act Release No. 48709 (Oct. 28. 

2003), 68 FR 62972, 63004 (Nov. 6, 2003) (‘‘The 

proposed pilot program would suspend the 

operation of the proposed bid test provision for 

selected stocks that the Commission believes are 

less susceptible to manipulation because they are 

more liquid and have a high market 

capitalization.’’); Concept Release on Short Sales, 

Exchange Act Release No. 42037 (Oct. 20, 1999), 64 

FR 57996, 58000 (Oct. 28, 1999) (‘‘Some of the 

Commission’s anti-manipulation rules assume that 

highly liquid securities are less vulnerable to 

manipulation and abuse than securities that are less 

liquid.’’); Joint Order Excluding Indexes Comprised 

of Certain Index Options from the Definition of 

Narrow-Based Security Index pursuant to Section 

1a(25)(B)(vi) of the Commodity Exchange Act and 

Section 3(a)(55)(C)(vi) of the Securities Exchange 

Act of 1934, Exchange Act Release No. 49469 (Mar. 

25, 2004), 69 FR 16900, 16901 (Mar. 31, 2004) 

(‘‘2004 Joint Order’’) (‘‘In addition, the 

Commissions believe that futures contracts on 

indexes that satisfy the conditions of this exclusion 

should not be readily susceptible to manipulation 

because of the composition, weighting, and 

liquidity of the securities in the Underlying BroadBased Security Index and the liquidity that the 

options comprising the index must have to qualify 

for the exclusion.’’). 

37See 2004 Joint Order, supra note 36; Joint Order 

to Exclude Indexes Composed of Certain Index 

Options from the Definition of Narrow-Based 

Security Index Pursuant to Section 1a(25)(B)(vi) of 

the Commodity Exchange Act and Section 

3(a)(55)(C)(vi) of the Securities Exchange Act of 

1934, Exchange Act Release No. 61020 (Nov. 17, 

2009), 74 FR 61116 (Nov. 23, 2009). 

38To determine the liquidity thresholds relating 

to the SPY and its component options, Commission 

staff reviewed data from the equity consolidated 

data feeds, namely the UTP Trade Data Feed 

(UTDF) and the Consolidated Tape System (CTS), 

and the Options Price Reporting Authority (OPRA), 

as collected by the Commission’s Market 

Information Data Analytics System (MIDAS) for the 

six-month period beginning in October 2019. 

Specifically, these thresholds were determined by 

identifying the level at which at least 90% of the 

values exceeded such level. 

39For the 180 days ending on October 14, 2020, 

the average daily dollar volume in the units of the 

SPY was approximately $13.7 billion. 

40For the 180 days ending on October 14, 2020, 

the aggregate average daily notional volume in 

options on the SPY was $1,369 million. 

41See supra note 37. 

42See State Street Global Advisors Fact Sheet: 

SPDR® S&P 500® ETF Trust, available at: https:// 

www.ssga.com/library-content/products/factsheets/ 

etfs/us/factsheet-us-en-spy.pdf. 

Finally, the Commission notes that 

some of these conditions contain 

numerical thresholds, the purposes of 

which are explained below in the 

discussion of each relevant condition. 

As a general matter, each threshold is 

intended to help ensure either that the 

securities used to calculate the SPIKES 

are not readily susceptible to 

manipulation because of their 

significant liquidity,36 or that the 

Product continues to serve as a 

competitor to other financial products 

that measure the volatility of the S&P 

500 Index because the SPY continues to 

closely track the index. The level of 

each threshold is based on historical 

public data relevant to the objective of 

the particular condition. In each 

instance, the thresholds seek to balance 

the importance of achieving the stated 

purpose of the relevant condition with 

the fact that the consequence of 

breaching these thresholds is that the 

exemptive relief would no longer apply. 

i. Conditions Related to the SPIKES 

Calculation, Including the Liquidity and 

Trading Venue of the Required Inputs 

The first condition of this exemptive 

order requires that SPIKES measure the 

magnitude of changes in the level of the 

price of the units of the SPY over a 

defined period of time, which 

magnitude is calculated using the prices 

of options on the SPY and represents: 

(a) An annualized standard deviation of 

percent changes in the price of the units 

of the SPY; (b) an annualized variance 

of percent changes in the price of the 

units of the SPY; or (c) on a nonannualized basis either the standard 

deviation or the variance of percent 

changes in the price of the units of the 

SPY. This condition, which is similar to 

one that is included in prior volatility 

index orders (which apply to volatility 

indexes that measure the expected 30- 

day volatility of broad-based security 

indexes), is designed to limit the 

exemption to volatility indexes 

calculated using one of two commonly 

recognized statistical measurements that 

show the degree to which an individual 

value tends to vary from an average 

value.37

The order also contains four 

conditions designed to measure both the 

volume and venue of trading in the SPY 

and SPY options, which are as 

follows: 38

(1) The average daily dollar volume in 

the units of the SPY must be at least $10 

billion calculated over the preceding 

180 days.39

(2) Units of the SPY must be listed 

and traded on a national securities 

exchange registered under section 6(a) 

of the Exchange Act. 

(3) The aggregate average daily 

notional volume in options on the SPY 

must be at least $400 million calculated 

over the preceding 180 days.40

(4) Options on the SPY must be listed 

and traded on a national securities 

exchange registered under section 6(a) 

of the Exchange Act. 

Although the Commission has 

retained its ability to exercise anti-fraud 

and anti-manipulation authority in 

connection with the Product, certain 

aspects of how SPIKES is designed 

should help to ensure that the need to 

use such authority is limited. For 

example, the fact that the SPY is one of 

the most liquid securities in the world, 

and is therefore likely to be not readily 

susceptible to manipulation, should 

minimize the possibility of market 

participants using the Product as a 

surrogate for trading in the SPY in order 

to avoid application of the Federal 

securities laws. Similarly, the 

significant liquidity of SPY options, in 

the aggregate, and the fact that such 

options are traded on 16 different 

national securities exchanges, supports 

the conclusion that the securities used 

to compute the SPIKES also should not 

be readily susceptible to manipulation. 

Finally, the fact that the SPY and its 

component options are traded on a 

national securities exchange—and must 

continue to be so—helps to ensure that 

pricing information is current, accurate, 

and publicly available, and that trading 

is appropriately surveilled. 

ii. Conditions on the Relationship 

Between the SPY and the S&P 500 Index 

As previously noted, SPIKES differs 

from other volatility products currently 

trading in the market in that while such 

other products measure the expected 30- 

day volatility of the S&P 500 Index, a 

broad-based security index,’’ 41 SPIKES 

measures the expected 30-day volatility 

of the SPY, a single security. Although 

the stated investment objective of the 

SPY is to provide investment returns 

that, before expenses, correspond 

generally to the price and yield 

performance of the S&P 500 Index,42 we 

generally do not believe it appropriate 

to ‘‘look through’’ to an issuer’s 

holdings in order to treat the issuer’s 

security as an index for purposes of 

determining the status of a futures 

contract. 

At the same time, however, the 

Commission recognizes the importance 

of fostering competition in the volatility 


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43 15 U.S.C. 80a–4(2). 

44See Exchange-Traded Funds, Investment 

Company Act Release No. 33646 (Sept. 25 2019), 84 

FR 57162 n. 42 (Oct. 24, 2019) (‘‘ETF Adopting 

Release). 

45See Exchange-Traded Funds, Investment 

Company Act Release No. 33140 (June 28 2018), 83 

FR 37332, 37336 n. 37 (July 31, 2018) (further 

explaining, in the context of UITs that are ETFs, 

that ‘‘[b]ecause a UIT must invest in ‘specified 

securities,’ the investment strategies that a UIT ETF 

can pursue are limited. All UIT ETFs today seek to 

track the performance of an index by investing in 

the component securities of the index in the same 

approximate proportions as in the index (i.e., 

‘‘replicating’’ the index). The trustee of an UIT ETF 

may make adjustments to the ETF’s portfolio only 

to reflect changes in the composition of the 

underlying index’’) (internal citations omitted). 

46The tracking error conditions set forth below 

have been designed solely for the purposes of this 

order. The methodologies and thresholds discussed 

herein are specific to the facts and circumstances 

of this exemptive order and should not be viewed 

as precedent for any other purposes, including as 

it relates to the regulation of investment companies 

under the Investment Company Act of 1940. 

47To determine the threshold for the comparison 

between the NAV of the SPY and the S&P 500 

Index, Commission staff reviewed the annualized 

NAV tracking error, as provided by Bloomberg, 

between January 2008 and October 2020, which was 

generally below 1%. 

48To determine the threshold for the comparison 

between the NAV of the SPY and the closing 

auction price, Commission staff reviewed 

Bloomberg data between January 2008 and October 

2020. Based on that review, it appears that the 

average difference over time is close to zero. Those 

differences do vary on a day-to-day basis, however, 

with the standard deviation of those differences 

being approximately 10 basis points, which 

suggests that the closing auction price of the SPY 

has historically been within 20 basis points of its 

NAV approximately 95% of the time. 

markets, in a manner that is consistent 

with the protection of investors. 

Specifically, the introduction of an 

additional volatility product in the 

market should lower transaction costs 

for market participants. Those 

competitive benefits animate the 

Commission’s decision to exempt 

SPIKES futures from the definition of 

security future—subject to certain 

exceptions and conditions—under these 

limited and factually-specific 

circumstances. Those facts and 

circumstances include, among other 

things, the liquidity of the SPY (and 

options on the SPY), as previously 

discussed, and the historical 

performance of the SPY in tracking the 

performance of the S&P 500 Index. 

Accordingly, this order includes a 

number of conditions designed to 

protect investors should significant 

deviations between the SPY and the 

S&P 500 Index materialize. The 

Commission believes that if any of those 

conditions are no longer satisfied, it 

could suggest a dislocation between the 

SPY and its underlying index large 

enough to call into question whether the 

Product would continue to be a 

competitor to volatility products that 

measure the expected 30-day volatility 

of the S&P 500 Index. 

The first two of these conditions 

address the structure and holdings of 

the SPY, and are as follows: 

• The SPY is a unit investment trust 

(‘‘UIT’’), as defined in Section 4(2) of 

the Investment Company Act of 1940, 

and is registered with the Commission 

as an investment company under the 

Investment Company Act of 1940.43

• The SPY holds a portfolio of 

common stocks designed to provide 

investment returns that, before 

expenses, correspond generally to the 

price and yield performance of the S&P 

500 Index. 

A UIT is an investment company 

organized under a trust indenture or 

similar instrument that issues 

redeemable securities, each of which 

represents an undivided interest in a 

unit of specified securities. By statute, a 

UIT is unmanaged and its portfolio is 

fixed.44 Substitution of securities may 

take place only under certain predefined 

circumstances. A UIT does not have a 

board of directors, corporate officers, or 

an investment adviser to render advice 

during the life of the trust. ExchangeTraded Funds (‘‘ETFs’’) organized as 

UITs (e.g., the SPY) operate pursuant to 

exemptive orders issued by the 

Commission.45 Under these 

circumstances, the Commission believes 

that the SPY’s status as a UIT, together 

with the condition addressing its 

investment objective and the 

composition of its portfolio, 

appropriately limit the possibility that 

the SPIKES would be based on the SPY 

at a time when the SPY is pursuing a 

different investment strategy, given that 

the SPY, as a UIT, must be an 

unmanaged investment vehicle with a 

fixed portfolio. 

Notwithstanding the legal 

requirements limiting the scope of the 

SPY’s investment objective, 

circumstances may ultimately arise 

impacting the relationship between the 

SPY and the S&P 500 Index, particularly 

during times of market volatility. 

Accordingly, this order contains a 

number of conditions designed to 

protect investors should a tracking error 

between the SPY and its underlying 

index materialize. 

Specifically, this order contains two 

tracking error conditions, one of which 

compares the net asset value (‘‘NAV’’) of 

the SPY to the S&P 500 Index, and the 

other compares the NAV of the SPY to 

its official closing price.46 The 

Commission is bifurcating the tracking 

error requirements in this manner—as 

opposed to simply comparing the 

official closing price of the SPY to the 

S&P 500 Index—to account for 

situations when a tracking error is 

quickly resolved and able to be netted, 

thereby allowing the exemptive relief to 

remain in effect. The Commission also 

is including two notice requirements 

designed to serve as an early warning to 

the Commission of a deviation between 

the NAV of the SPY and the 

corresponding returns of the S&P 500 

Index, or between the NAV of the SPY 

and its official closing price. Each of 

those requirements is discussed in 

detail below. 

The first tracking error condition 

requires that the annualized tracking 

error between the NAV of the SPY and 

the S&P 500 Index not meet or exceed 

1%.47 This condition, however, also 

provides that if over two consecutive 

trading days the returns used to 

calculate annualized tracking error can 

be netted, such that the annualized 

tracking error falls below 1%, then any 

such exceedance shall be deemed not to 

have occurred on those two consecutive 

trading days for purposes of this 

condition. For purposes of this 

condition, the term ‘‘annualized 

tracking error’’ should be calculated by 

taking the weekly return differences 

between the NAV of the SPY and the 

S&P 500 Index for the trailing 12 

months (with each week beginning and 

ending on a Friday), taking into account 

dividends (as applicable), and then 

multiplying the standard deviation of 

those return differences by the square 

root of 52. 

The Commission believes it important 

to provide some flexibility in 

circumstances when a large tracking 

error between the NAV of the SPY and 

the S&P 500 Index is quickly resolved. 

As a result, this condition will not be 

considered to have been breached if the 

tracking error falls below the 1% 

threshold when netted consecutive 

weekly returns are used to recalculate 

annualized tracking error. In addition, 

the Commission has decided to use an 

annualized measure for this condition 

in order to capture only those tracking 

errors that are large enough or so 

sustained (or both) that they result in a 

breach of the 1% threshold for an entire 

year. 

The second tracking error condition 

requires that the official closing price of 

the SPY not deviate from the NAV of the 

SPY by more than 20 basis points for 

five or more consecutive trading days.48

As a general matter, ETFs (including the 

SPY) are structured in such a way to 

help ensure that the NAV per share of 


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49See ETF Adopting Release, 84 FR at 57165 

(‘‘[t]he combination of the creation and redemption 

process with secondary market trading in ETF 

shares and underlying securities provides arbitrage 

opportunities that are designed to help keep the 

market price of ETF shares at or close to the NAV 

per share of the ETF.’’) 

50See ETF Adopting Release, 84 FR at 57173 

n.119 (‘‘[i]n an analysis of various asset classes 

during 2017–2018, end-of-day deviations between 

closing price of ETFs and NAV were relatively rare 

and generally not persistent.’’) (internal citations 

omitted). 

51 15 U.S.C. 77e. 

52 15 U.S.C. 77c(a)(14). 

53See Section 17(c) of the Securities Act. 15 

U.S.C. 77q(c) (providing that ‘‘[t]he exemptions 

provided in section 3 shall not apply to the 

provisions of this section’’). 

54 17 U.S.C. 78q–1(b)(7)(A). Subsection (b)(7) 

provides, in part, that ‘‘[a] clearing agency that is 

regulated directly or indirectly by the CFTC through 

its association with a designated contract market for 

security futures products that is a national 

securities exchange registered pursuant to [Section 

6(g) of the Exchange Act], and that would be 

required to register pursuant to [Section 17A(b)(1) 

of the Exchange Act] only because it performs the 

functions of a clearing agency with respect to 

security futures products effected pursuant to the 

rules of the designated contract market with which 

such agency is associated, is exempted from the 

provisions of this section and the rules and 

regulations thereunder.’’ 

55The Commission notes that the other 

requirements of the exemption from registration as 

a clearing agency set forth in Section 17A(b)(7) of 

the Exchange Act do not apply with respect to 

transactions in the Product, given that it will be 

cash settled and cleared only by MGEX. 

56 15 U.S.C. 78(i), (j), o(c), t, t–1, u, u–1, u–2, u– 

3, u–4, z, and aa. 

an ETF remains at or close to its market 

price per share.49 Accordingly, 

deviations between the SPY’s NAV and 

its official closing price that exceed 20 

basis points and that persist for five or 

more consecutive trading days should 

generally not occur.50 For purposes of 

both this requirement and the notice 

requirement discussed below, the 

‘‘official closing price’’ of the SPY 

should be determined pursuant to the 

rules of its primary listing exchange. 

Finally, the order is conditioned on 

MGEX providing the Commission with 

notice of certain tracking error issues. 

Specifically, MGEX is required to 

monitor the daily closing prices and the 

SPY’s NAV and the corresponding 

returns of the S&P 500 Index. If (i) at 

any time the annualized tracking error 

between the NAV of the SPY and the 

S&P 500 Index exceeds 0.5% or (ii) for 

two or more consecutive trading days 

the official closing price of the SPY 

deviates from the NAV of the SPY by 

more than 20 basis points, MGEX must: 

(A) Promptly notify the Commission of 

such divergence, in a form and manner 

acceptable to the Commission, and (B) 

conduct an investigation in an attempt 

to determine its cause. As with the other 

tracking error conditions, the notice 

requirement is intended to identify 

situations where a divergence between 

the SPY and the S&P 500 could result 

in the Product no longer serving as a 

viable competitor to existing volatility 

products, which would undermine the 

basis for providing this relief. 

The events that trigger the notice 

requirements largely mirror the two 

tracking error conditions described 

above. However, the threshold for the 

annualized tracking error between the 

NAV of the SPY and the S&P 500 Index 

is 0.5% for purposes of this notice 

requirement, rather than 1%. With 

respect to the deviation between the 

official closing price of the SPY and the 

NAV of the SPY, the time period is two 

or more consecutive trading days, rather 

than five or more consecutive trading 

days. These more restrictive thresholds 

reflect the fact that they trigger only a 

notice requirement, as opposed to 

resulting in the exemptive relief no 

longer applying. Those thresholds also 

are consistent with our view of the 

importance of providing the 

Commission and MGEX with an early 

warning of one or more divergences that 

could undermine the basis for the relief 

set forth in this exemptive order. 

C. Securities Act Status 

Section 5 of the Securities Act 

provides that any offer or sale of a 

security, including a security futures 

product, must either be registered under 

the Securities Act or made pursuant to 

an exemption from registration.51

Section 3(a)(14) of the Securities Act 

provides an exemption from the 

registration requirements of Section 5 of 

the Securities Act for any security 

futures product that is: (i) Cleared by a 

clearing agency registered under section 

17A of the Exchange Act or exempt from 

registration under subsection (b)(7) of 

such section 17A, and (ii) traded on a 

national securities exchange or a 

national securities association registered 

pursuant to section 15A(a) of the 

Exchange Act.52 A security futures 

product that satisfies the conditions of 

the Section 3(a)(14) exemption remains 

subject to the anti-fraud provisions of 

Section 17 of the Securities Act.53

Although the statutory exemption 

contained in Section 3(a)(14) of the 

Securities Act is effective by operation 

of law, and therefore does not require 

Commission action, for the avoidance of 

doubt we are confirming our view that 

MGEX will be able to rely on that 

exemption to offer and sell the Product, 

as follows. First, MGEX will need to 

register with the Commission as a 

national securities exchange under 

Section 6(g) of the Exchange Act due to 

the fact that the exemption from the 

definition of security future does not 

apply to the registration requirements in 

Section 5 of the Exchange Act. Second, 

because the exemptive relief also does 

not apply to Section 17A of the 

Exchange Act, and the rules and 

regulations thereunder, MGEX (which 

will also clear the Product) will be able 

to avail itself of the statutory exemption 

from registration as a clearing agency in 

Section 17A(b)(7),54 given that it is 

regulated directly by the CFTC as both 

a DCM and as a DCO.55

III. Conclusion 

It is hereby ordered, pursuant to 

section 36 of the Securities Exchange 

Act of 1934 (‘‘Exchange Act’’), that a 

contract of sale for future delivery on 

the SPIKESTM Index (‘‘SPIKES’’) trading 

on the Minneapolis Grain Exchange, 

Inc. (or any successor thereto) 

(‘‘MGEX’’) (such futures contracts (and 

any options thereon) hereinafter referred 

to as the ‘‘Product’’) shall be exempt 

from the definition of ‘‘security future’’ 

in Section 3(a)(55) of the Exchange Act 

for all purposes under the Exchange 

Act, other than the following: 

(1) The anti-fraud and antimanipulation provisions of the 

Exchange Act (including related 

investigative, enforcement, and 

procedural authority) in Sections 9, 10, 

15(c), 20, 20A, 21, 21A, 21B, 21C, 21D, 

26, and 27,56 and the rules and 

regulations thereunder; 

(2) the requirement that MGEX 

register with the Securities and 

Exchange Commission (‘‘Commission’’) 

as a national securities exchange, as set 

forth in Section 5 of the Exchange Act, 

and the rules and regulations 

thereunder, and the requirements 

applicable to national securities 

exchanges, as set forth in Section 6 of 

the Exchange Act, and the rules and 

regulations thereunder, including 

Section 6(g) and Exchange Act Rule 6a– 

4 (17 CFR 240.6a–4); provided, however, 

that once registered with the 

Commission as a national securities 

exchange, MGEX shall be exempt from 

all other requirements contained in 

Section 6 of the Exchange Act solely as 

they relate to transactions in the 

Product; 

(3) Section 17(a) of the Exchange Act, 

and the rules and regulations 

thereunder (including Exchange Act 

Rule 17a–1 (17 CFR 240.17a–1)), as it 

relates to the obligation of MGEX, in its 

capacity as a national securities 

exchange, to make and keep records 

relating to transactions in the Product, 

furnish such copies thereof, and to make 

and disseminate such reports available 


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1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

to the Commission (or its 

representatives), upon request; 

(4) Section 17(b) of the Exchange Act, 

and the rules and regulations 

thereunder, as it relates to the obligation 

of MGEX, in its capacity as a national 

securities exchange, to make itself 

available to inspection and examination 

by the Commission (or its 

representatives), upon request; and 

(5) the requirement that MGEX 

register with the Commission as a 

clearing agency, as set forth in Section 

17A of the Exchange Act, and the rules 

and regulations thereunder, including 

the exemption from registration in 

paragraph (b)(7) of that section. 

Such exemptions are subject to the 

conditions set forth below. To the extent 

that one or more of these conditions is 

no longer satisfied, the exemptions set 

forth in this order will no longer apply 

three calendar months after the end of 

the month in which any condition was 

no longer satisfied. 

(1) SPIKES measures the magnitude of 

changes in the level of the price of the 

units of the SPDR® S&P 500® ETF Trust 

(‘‘SPY’’) over a defined period of time, 

which magnitude is calculated using the 

prices of options on the SPY and 

represents: (a) An annualized standard 

deviation of percent changes in the 

price of the units of the SPY; (b) an 

annualized variance of percent changes 

in the price of the units of the SPY; or 

(c) on a non-annualized basis either the 

standard deviation or the variance of 

percent changes in the price of the units 

of the SPY. 

(2) The average daily dollar volume in 

the units of the SPY is at least $10 

billion calculated over the preceding 

180 days. 

(3) Units of the SPY are listed and 

traded on a national securities exchange 

registered under section 6(a) of the 

Exchange Act. 

(4) The aggregate average daily 

notional volume in options on the SPY 

is at least $400 million calculated over 

the preceding 180 days. 

(5) Options on the SPY are listed and 

traded on a national securities exchange 

registered under section 6(a) of the 

Exchange Act. 

(6) The SPY is a ‘‘unit investment 

trust,’’ as defined in Section 4(2) of the 

Investment Company Act of 1940, and 

is registered with the Commission as an 

investment company under the 

Investment Company Act of 1940. 

(7) The SPY holds a portfolio of 

common stocks designed to provide 

investment returns that, before 

expenses, correspond generally to the 

price and yield performance of the S&P 

500 Index. 

(8) The annualized tracking error 

between the net asset value (‘‘NAV’’) of 

the SPY and the S&P 500 Index does not 

meet or exceed 1%; provided, however, 

that if over two consecutive trading days 

the returns used to calculate annualized 

tracking error can be netted, such that 

the annualized tracking error falls below 

1%, then any such exceedance shall be 

deemed not to have occurred on those 

two consecutive trading days for 

purposes of this condition. For purposes 

of this condition, the term ‘‘annualized 

tracking error’’ should be calculated by 

taking the weekly return differences 

between the NAV of the SPY and the 

S&P 500 Index for the trailing 12 

months (with each week beginning and 

ending on a Friday), taking into account 

dividends (as applicable), and then 

multiplying the standard deviation of 

those return differences by the square 

root of 52. 

(9) The official closing price of the 

SPY, as determined pursuant to the 

rules of its primary listing exchange, 

does not deviate from the NAV of the 

SPY by more than 20 basis points for 

five or more consecutive trading days. 

(10) MGEX shall monitor the daily 

closing prices and the NAV of the SPY 

and the corresponding returns of the 

S&P 500 Index. If (i) at any time the 

annualized tracking error between the 

NAV of the SPY and the S&P 500 Index 

exceeds 0.5% or (ii) for two or more 

consecutive trading days the official 

closing price of the SPY, as determined 

pursuant to the rules of its primary 

listing exchange, deviates from the NAV 

of the SPY by more than 20 basis points, 

MGEX shall (A) promptly notify the 

Commission of such divergence, in a 

form and manner acceptable to the 

Commission, and (B) conduct an 

investigation in an attempt to determine 

its cause. 

Dated: November 24, 2020. 

By the Commission. 

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2020–26419 Filed 11–30–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90495; File No. SR–NYSE– 

2020–95] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing of Proposed Rule Change To 

Make Permanent Commentaries to 

Rule 7.35A and Commentaries to Rule 

7.35B and Make Related Changes to 

Rules 7.32, 7.35C, 46B, and 47 

November 24, 2020. 

Pursuant to Section 19(b)(1) 1 of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on 

November 13, 2020, New York Stock 

Exchange LLC (‘‘NYSE’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the 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 Substance of 

the Proposed Rule Change 

The Exchange proposes to make 

permanent Commentaries .01(a) and (b) 

and .06 to Rule 7.35A and 

Commentaries .01 and .03 to Rule 7.35B 

and make related changes to Rules 7.32, 

7.35C, 46B, and 47. The proposed rule 

change is available on the Exchange’s 

website 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. 


khammond on DSKJM1Z7X2PROD with NOTICES4