Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Notices 80557 

9 15 U.S.C. 78s(b)(3)(A). 

10 17 CFR 240.19b–4(f)(1). 

11 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a et seq. 

3 17 CFR 240.19b–4. 

4The amendments proposed herein are similar to 

changes approved for the Chicago Board Options 

Exchange (‘‘CBOE’’). See Securities Exchange Act 

Release No. 63202 (October 28, 2010), 75 FR 67794 

(November 3, 2010) (SR–CBOE–2010–080). 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 9 and paragraph (f)(1) of Rule 

19b–4 thereunder.10 At any time within 

60 days of the filing of the proposed rule 

change, the Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–FINRA–2010–066 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2010–066. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

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 on official business 

days between the hours of 10 a.m. and 

3 p.m. Copies of such filing also will be 

available for inspection and copying at 

the principal office of FINRA. 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 publicly available. All 

submissions should refer to File 

Number SR–FINRA–2010–066 and 

should be submitted on or before 

January 12, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–32090 Filed 12–21–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63555; File No. SR– 

NYSEAmex–2010–118] 

Self-Regulatory Organizations; NYSE 

Amex LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Amending Commentary 

.11(a) to NYSE Amex Options Rule 915 

To Permit Trading Options on 

Leveraged Exchange-Traded Notes 

and Broaden the Definition of Futures 

Linked Securities 

December 15, 2010. 

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 

9, 2010, NYSE Amex LLC (the 

‘‘Exchange’’ or ‘‘NYSE Amex’’) 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 Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Commentary .11(a) to NYSE Amex 

Options Rule 915 to: (1) Permit trading 

options on leveraged (multiple or 

inverse) exchange-traded notes, and (2) 

broaden the definition of ‘‘FuturesLinked [sic]. The text of the proposed 

rule change is available at the Exchange, 

the Commission’s Public Reference 

Room, and http://www.nyse.com. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of 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 Exchange proposes to amend 

Commentary .11(a) to NYSE Amex 

Options Rule 915 to: (1) Permit trading 

options on leveraged (multiple or 

inverse) exchange-traded notes 

(‘‘ETNs’’), and (2) broaden the definition 

of ‘‘Futures-Linked Securities.’’ 4 ETNs 

are also known as ‘‘Index-Linked 

Securities,’’ which are designed for 

investors who desire to participate in a 

specific market segment by providing 

exposure to one or more identifiable 

underlying securities, commodities, 

currencies, derivative instruments, or 

market indexes of the foregoing. IndexLinked Securities are the nonconvertible 

debt of an issuer that have a term of at 

least one (1) year but not greater than 

thirty (30) years. Despite the fact that 

Index-Linked Securities are linked to an 

underlying index, each trade as a single 

exchange-listed security. Accordingly, 

rules pertaining to the listing and 

trading of standard equity options apply 

to Index-Linked Securities. 

Leveraged ETN Options 

The Exchange proposes to amend 

Commentary .11(a) to NYSE Amex 

Options Rule 915 to permit the listing 

of options on leveraged (multiple or 

inverse) ETNs. Multiple leveraged ETNs 

seek to provide investment results that 

correspond to a specified multiple of the 

percentage performance on a given day 

of a particular Reference Asset. Inverse 

leveraged ETNs seek to provide 

investment results that correspond to 


srobinson on DSKHWCL6B1PROD with NOTICES
80558 Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Notices 

5These ETNs include the Barclays Short B 

Leveraged Inverse S&P 500 TR ETN (‘‘BXDB’’), the 

Barclays Short C Leveraged Inverse S&P 500 TR 

ETN (‘‘BXDC’’) and the Barclays Short D Leveraged 

Inverse S&P 500 TR ETN (‘‘BXDD’’). 

6The Exchange also proposes technical 

corrections to the Rule to conform certain 

definitions. In particular, we are changing the 

defined term ‘‘NMS Stock’’ to ‘‘NMS stock’’ to 

conform to how it is defined in Rule 600 of 

Regulation NMS under the Securities and Exchange 

Act of 1934. 

the inverse (opposite) of the percentage 

performance on a given day of a 

particular Reference Asset by a specified 

multiple. Multiple leveraged ETNs and 

inverse leveraged ETNs differ from 

traditional ETNs in that they do not 

merely correspond to the performance 

of a given Reference Asset, but rather 

attempt to match a multiple or inverse 

of a Reference Asset’s performance. 

The Barclays Long B Leveraged S&P 

500 TR ETN (‘‘BXUB’’), the Barclays 

Long C Leveraged S&P 500 TR ETN 

(‘‘BXUC’’), and the UBS AG 2x Monthly 

Leveraged Long Exchange-Traded 

Access Securities (E–TRACS) linked to 

the Alerian MLP Infrastructure Index 

due July 9, 2040 (‘‘MLPL’’) currently 

trade on the NYSE Arca equity platform 

and are examples of multiple leveraged 

ETNs. In addition, the Barclays ETN + 

Inverse S&P 500 VIX Short-Term 

Futures ETN (‘‘XXV’’) currently trades 

on the NYSE Arca equity platform and 

is an example of an inverse leveraged 

ETN. The NYSE Arca equity platform 

also lists several other inverse leveraged 

ETNs for trading.5

Currently, Commentary .11 to NYSE 

Amex Options Rule 915 provides that 

securities deemed appropriate for 

options trading shall include shares or 

other securities (‘‘Index-Linked 

Securities,’’ ‘‘Commodity-Linked 

Securities,’’ ‘‘Currency-Linked 

Securities,’’ ‘‘Fixed Income-Linked 

Securities,’’ ‘‘Futures-Linked Securities,’’ 

and ‘‘Combination-Linked Securities,’’ 

collectively known as ‘‘Section 107 

Securities’’), as defined in Sections 

107D, 107E, 107F, 107G, 107H and 107I 

of the NYSE Amex Company Guide, that 

are principally traded on a national 

securities exchange and an ‘‘NMS stock’’ 

(as defined in Rule 600 of Regulation 

NMS under the Securities Exchange Act 

of 1934), and represent ownership of a 

security that provides for the payment at 

maturity, as described below: 

• Index-Linked Securities are 

securities that provide for the payment 

at maturity of a cash amount based on 

the performance of an underlying index 

or indexes of equity securities (‘‘Equity 

Reference Asset’’); 

• Commodity-Linked Securities are 

securities that provide for the payment 

at maturity of a cash amount based on 

the performance of one or more physical 

commodities or commodity futures, 

options on commodities or other 

commodity derivatives or CommodityBased Trust Shares or a basket or index 

of any of the foregoing (‘‘Commodity 

Reference Asset’’); 

• Currency-Linked Securities are 

securities that provide for the payment 

at maturity of a cash amount based on 

the performance of one or more 

currencies, or options on currencies or 

currency futures or other currency 

derivatives or Currency Trust Shares (as 

defined in NYSE Amex Rule 1200B– 

AEMI(b)), or a basket or index of any of 

the foregoing (‘‘Currency Reference 

Asset’’); 

• Fixed Income-Linked Securities are 

securities that provide for the payment 

at maturity of a cash amount based on 

the performance of one or more notes, 

bonds, debentures or evidence of 

indebtedness that include, but are not 

limited to, U.S. Department of Treasury 

securities (‘‘Treasury Securities’’), 

government-sponsored entity securities 

(‘‘GSE Securities’’), municipal securities, 

trust preferred securities, supranational 

debt and debt of a foreign country or a 

subdivision thereof or a basket or index 

of any of the foregoing (‘‘Fixed Income 

Reference Asset’’); 

• Futures-Linked Securities are 

securities that provide for the payment 

at maturity of a cash amount based on 

the performance of an index of: (a) 

Futures on Treasury Securities, GSE 

Securities, supranational debt and debt 

of a foreign country or a subdivision 

thereof, or options or other derivatives 

on any of the foregoing; (b) interest rate 

futures or options or derivatives on the 

foregoing in this subparagraph (b); or (c) 

CBOE Volatility Index (‘‘VIX’’) futures 

(‘‘Futures Reference Asset’’); and 

• Combination-Linked Securities are 

securities that provide for the payment 

at maturity of a cash amount based on 

the performance of any combination of 

two or more Equity Reference Assets, 

Commodity Reference Assets, Currency 

Reference Assets, Fixed Income 

Reference Assets, or Futures Reference 

Assets (‘‘Combination Reference Asset’’). 

For purposes of Commentary .11 to 

NYSE Amex Options Rule 915, Equity 

Reference Assets, Commodity Reference 

Assets, Currency Reference Assets, 

Fixed Income Reference Assets, Futures 

Reference Assets, and Combination 

Reference Assets collectively are 

referred to as ‘‘Reference Assets.’’ 

In addition, Section 107 Securities 

must meet the criteria and guidelines for 

underlying securities set forth in 

Commentary .01 to NYSE Amex Options 

Rule 915 or the Section 107 Securities 

must be redeemable at the option of the 

holder at least on a weekly basis 

through the issuer at a price related to 

the applicable underlying Reference 

Asset. In addition, the issuing company 

is obligated to issue or repurchase the 

securities in aggregation units for cash, 

or cash equivalents, satisfactory to the 

issuer of the Section 107 Securities that 

underlie the option as described in the 

Section 107 Securities prospectus. 

The Exchange proposes to amend 

Commentary .11(a) to NYSE Amex 

Options Rule 915 to expand the type of 

Section 107 Securities that may underlie 

options to include leveraged (multiple 

or inverse) ETNs. To effect this change, 

the Exchange proposes to amend 

Commentary .11(a) to NYSE Amex 

Options Rule 915 by adding the phrase 

‘‘or the leveraged (multiple or inverse) 

performance’’ to each of the 

subparagraphs ((1) through (6)) in that 

section, which sets forth the different 

eligible Reference Assets.6

The Exchange’s current continuing 

listing standards for ETN options will 

continue to apply. Specifically, under 

Commentary .12 to NYSE Amex Options 

Rule 916, ETN options shall not be 

deemed to meet the Exchange’s 

requirements for continued approval, 

and the Exchange shall not open for 

trading any additional series or [sic] 

option contracts of the class covering 

such Section 107 Securities whenever 

the underlying securities are delisted 

and trading in the Section 107 

Securities is suspended on a national 

securities exchange, or the Section 107 

Securities are no longer an ‘‘NMS stock’’ 

(as defined in Rule 600 of Regulation 

NMS under the Securities Exchange Act 

of 1934). In addition, the Exchange shall 

consider the suspension of opening 

transactions in any series of options of 

the class covering Section 107 Securities 

in any of the following circumstances: 

(1) The underlying Section 107 Security 

fails to comply with the terms of 

Commentary .11 to NYSE Amex Options 

Rule 915; (2) in accordance with the 

terms of Commentary .01 to NYSE 

Amex Options Rule 916, in the case of 

options covering Section 107 Securities 

when such options were approved 

pursuant to Commentary .11 to NYSE 

Amex Options Rule 915, except that, in 

the case of options covering Section 107 

Securities approved pursuant to 

Commentary .11(c)(2) that are 

redeemable at the option of the holder 

at least on a weekly basis, then option 

contracts of the class covering such 

Securities may only continue to be open 

for trading as long as the Securities are 

listed on a national securities exchange 

and are ‘‘NMS stock’’ as defined in Rule 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Notices 80559 

7See NYSE Amex Options Rule 904, Position 

Limits, and Rule 905, Exercise Limits. 8See NYSE Amex Options Rule 462, Minimum 

Margin. 

9 15 U.S.C. 78f(b). 

10 15 U.S.C. 78f(b)(5). 

11 15 U.S.C. 78s(b)(3)(A). 

12 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires a self-regulatory organization to 

provide the Commission with written notice of its 

intent to file the proposed rule change, along with 

a brief description and text of the proposed rule 

change, at least five business days prior to the date 

of filing of the proposed rule change, or such 

shorter time as designated by the Commission. The 

Exchange has fulfilled this requirement. 

13For purposes only of waiving the 30-day 

operative delay, the Commission has also 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

14See supra note 4. 

600 of Regulation NMS; (3) in the case 

of any Section 107 Security trading 

pursuant to Commentary .11 to NYSE 

Amex Options Rule 915, the value of the 

Reference Asset is no longer calculated 

or available or (4) such other event shall 

occur or condition exist that in the 

opinion of the Exchange make further 

dealing in such options on the Exchange 

inadvisable. Expanding the eligible 

types of ETNs for options trading under 

Commentary .11 to NYSE Amex Options 

Rule 915 will not have any effect on the 

rules pertaining to position and exercise 

limits 7 or margin.8

This proposal is necessary to enable 

the Exchange to list and trade options 

on shares of BXUB, BXUC, XXV, BXDB, 

BXDC, BXDD and MLPL. The Exchange 

believes the ability to trade options on 

leveraged (multiple or inverse) ETNs 

will provide investors with greater risk 

management tools. The proposed 

amendment to the Exchange’s listing 

criteria for options on ETNs is necessary 

to ensure that the Exchange will be able 

to list options on the above listed 

leveraged (multiple and inverse) ETNs 

as well as other leveraged (multiple and 

inverse) ETNs that may be introduced in 

the future. 

The Exchange represents that its 

existing surveillance procedures 

applicable to trading in options are 

adequate to properly monitor the 

trading in leveraged (multiple and 

inverse) ETN options. 

It is expected that The Options 

Clearing Corporation will seek to revise 

the Options Disclosure Document to 

accommodate the listing and trading of 

leveraged (multiple and inverse) ETN 

options. 

Broaden the Definition of ‘‘FuturesLinked Securities’’ 

The second change proposed by this 

filing is to amend the definition of 

‘‘Futures-Linked Securities’’ set forth in 

Commentary .11(a)(5) to NYSE Amex 

Options Rule 915. Currently, the 

definition of ‘‘Futures-Linked 

Securities’’ is limited to securities that 

provide for the payment at maturity of 

a cash amount based on the 

performance of an index of: (a) Futures 

on Treasury Securities, GSE Securities, 

supranational debt and debt of a foreign 

country or a subdivision thereof, or 

options or other derivatives on any of 

the foregoing; (b) interest rate futures or 

options or derivatives on the foregoing; 

or (c) CBOE VIX futures. 

NYSE Amex Options Rule 915 sets 

forth generic listing criteria for 

securities that may serve as underlyings 

for listed options trading. The Exchange 

believes that the current definition of 

‘‘Futures-Linked Securities’’ is 

unnecessarily restrictive and requires 

the Exchange to submit a filing to 

amend the definition each time a new 

ETN is issued that tracks the 

performance of an index of futures/ 

options on futures that is not 

enumerated in the existing rule. To 

address this issue, the Exchange is 

proposing to revise the definition of 

‘‘Futures-Linked Securities’’ to provide 

that they are securities that provide for 

the payment at maturity of a cash 

amount based on the performance or the 

leveraged (multiple or inverse) 

performance of an index or indexes of 

futures contracts or options or 

derivatives on futures contracts 

(‘‘Futures Reference Asset’’). The 

Exchange notes that all ETNs eligible for 

options trading must be principally 

traded on a national securities exchange 

and an ‘‘NMS stock.’’ As a result, the 

Exchange believes that broadening the 

definition of ‘‘Futures-Linked 

Securities’’ by no longer specifically 

listing the types of futures and options 

on futures contracts that may be tracked 

by an ETN is appropriate. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act,9 in general, and furthers the 

objectives of Section 6(b)(5) of the Act,10

in particular, in that it is designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. The Exchange believes 

the proposed rules applicable to trading 

pursuant to generic listing and trading 

criteria serve to foster investor 

protection. 

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 purposes of the Act. 

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 

Because the foregoing proposed rule 

change: (1) Does not significantly affect 

the protection of investors or the public 

interest; (2) does not impose any 

significant burden on competition; and 

(3) by its terms does not become 

operative for 30 days after the date of 

this filing, or such shorter time as the 

Commission may designate if consistent 

with the protection of investors and the 

public interest, the proposed rule 

change has become effective pursuant to 

Section 19(b)(3)(A) of the Act 11 and 

Rule 19b–4(f)(6) thereunder.12

A proposed rule change filed under 

Rule 19b–4(f)(6) normally does not 

become operative for 30 days after the 

date of filing. However, Rule 19b– 

4(f)(6)(iii) permits the Commission to 

designate a shorter time if such action 

is consistent with the protection of 

investors and the public interest. The 

Exchange requested that the 

Commission waive the 30-day operative 

delay so that the Exchange can list and 

trade options on leveraged (multiple or 

inverse) ETNs and implement the 

amended definition of ‘‘Futures-Linked 

Securities’’ immediately. The 

Commission believes that waiving the 

30-day operative delay is consistent 

with the protection of investors and the 

public interest.13 The Commission notes 

the proposal is substantively identical a 

proposal that was recently approved by 

the Commission, and does not raise any 

new regulatory issues.14 For these 

reasons, the Commission designates the 

proposed rule change as operative upon 

filing. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 


srobinson on DSKHWCL6B1PROD with NOTICES
80560 Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Notices 

15The text of the proposed rule change is 

available on the Commission’s Web site at http:// 

www.sec.gov. 

16 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 57044 

(December 27, 2007), 73 FR 2 (January 3, 2008) (SR– 

CBOE–2007–130). 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NYSEAmex–2010–118 on 

the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NYSEAmex–2010–118. 

This file number should be included on 

the subject line if e-mail is used. To help 

the Commission process and review 

your comments more efficiently, please 

use only one method. The Commission 

will post all comments on the 

Commission’s Internet Web site (http:// 

www.sec.gov/rules/sro.shtml). Copies of 

the submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

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 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange.15 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– 

NYSEAmex–2010–118 and should be 

submitted on or before January 12, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–32087 Filed 12–21–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63559; File No. SR–CBOE– 

2010–109] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing of a 

Proposed Rule Change Regarding Rule 

4.20—Anti-Money Laundering 

Compliance Program 

December 16, 2010. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on December 

2, 2010, the Chicago Board Options 

Exchange, Incorporated (‘‘Exchange’’ or 

‘‘CBOE’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’) 

the proposed rule change as described 

in Items I, II, and III below, which Items 

have been substantially 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 

CBOE proposes to amend CBOE Rule 

4.20 to require all Trading Permit 

Holders or TPH organizations to 

conduct independent testing during the 

first calendar year of becoming a 

Trading Permit Holder or TPH 

organization. The text of the proposed 

rule change is available on the 

Exchange’s Web site (http:// 

www.cboe.org/legal), at the Exchange’s 

Office of the Secretary, 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, 

CBOE 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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to amend Rule 4.20—AntiMoney Laundering Compliance Program 

to require all Trading Permit Holders or 

TPH organizations to conduct 

independent testing during the first 

calendar year of becoming a Trading 

Permit Holder or TPH organization. 

CBOE Rule 4.20 generally requires 

annual (on a calendar-year basis) 

independent testing for compliance. 

However, if the Trading Permit Holder 

or TPH organization does not execute 

transactions for customers or otherwise 

hold customer accounts, or act as an 

introducing broker with respect to 

customer accounts (e.g., engages solely 

in proprietary trading or conducts 

business only with other brokerdealers), such ‘‘independent testing’’ is 

required every two years (on a calendaryear basis). The Exchange believes that 

it is prudent to amend this rule to 

require that all Trading Permit Holders 

or TPH organizations conduct testing 

during the first calendar year of the 

Trading Permit Holder or TPH 

organization’s existence to ensure antimoney laundering compliance is in 

place and established at the outset of the 

Trading Permit Holder’s or TPH 

organization’s existence, even if they 

would thereafter conduct such testing 

every two years. 

CBOE Interpretations and Policies .01 

continues to provide that all Trading 

Permit Holders should undertake more 

frequent testing than required by Rule 

4.20 if circumstances warrant (e.g., 

should the business mix of the Trading 

Permit Holder or TPH organization 

materially change, in the event of a 

merger or acquisition, in light of a 

systemic weaknesss uncovered via 

testing of the anti-money laundering 

program, or in response to any other 

‘‘red flags’’).3


srobinson on DSKHWCL6B1PROD with NOTICES