80084 Federal Register / Vol. 75, No. 244 / Tuesday, December 21, 2010 / Notices 

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). 

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’’). 

to be added to the distribution, please 

contact the Office of the Secretary, 

Washington, DC 20555 (301–415–1969), 

or send an e-mail to 

darlene.wright@nrc.gov. 

Dated: December 16, 2010. 

Rochelle C. Bavol, 

Policy Coordinator, Office of the Secretary. 

[FR Doc. 2010–32133 Filed 12–17–10; 4:15 pm] 

BILLING CODE 7590–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63550; File No. SR– 

NYSEArca–2010–115] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Amending NYSE Arca 

Options Rule 5.3(j) To Permit Trading 

Options on Leveraged ExchangeTraded 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 Arca, Inc. (the 

‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with 

the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

NYSE Arca Options Rule 5.3(j) to: (1) 

Permit trading options on leveraged 

(multiple or inverse) exchange-traded 

notes, and (2) broaden the definition of 

‘‘Futures-Linked Securities [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 

NYSE Arca Options Rule 5.3(j) 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. Index-Linked 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 exchangelisted security. Accordingly, rules 

pertaining to the listing and trading of 

standard equity options apply to IndexLinked Securities. 

Leveraged ETN Options 

The Exchange proposes to amend 

NYSE Arca Options Rule 5.3(j) 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 

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, NYSE Arca Options Rule 

5.3 provides that securities deemed 

appropriate for options trading shall 

include shares or other securities 

(‘‘Equity Index-Linked Securities,’’ 

‘‘Commodity-Linked Securities,’’ 

‘‘Currency-Linked Securities,’’ ‘‘Fixed 

Income Index-Linked Securities,’’ 

‘‘Futures-Linked Securities,’’ and 

‘‘Multifactor Index-Linked Securities,’’ 

collectively known as ‘‘Index-Linked 

Securities’’), as defined in NYSE Arca 

Equities Rule 5.2(j)(6), 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: 

• Equity 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 Arca Equities Rule 

8.202(c)), or a basket or index of any of 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 75, No. 244 / Tuesday, December 21, 2010 / Notices 80085 

6The Exchange also proposes a technical 

correction to the Rule to conform a definition. 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. 

7See Rules 5.15, Position Limits, and 5.18, 

Exercise Limits. 

8See Rule 5.25, Margins. 

the foregoing (‘‘Currency Reference 

Asset’’); 

• Fixed Income Index-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 

• Multifactor Index-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 (‘‘Multifactor 

Reference Asset’’). 

For purposes of NYSE Arca Options 

Rule 5.3(j), Equity Reference Assets, 

Commodity Reference Assets, Currency 

Reference Assets, Fixed Income 

Reference Assets, Futures Reference 

Assets, and Multifactor Reference Assets 

collectively are referred to as ‘‘Reference 

Assets.’’ 

In addition, Index-Linked Securities 

must meet the criteria and guidelines for 

underlying securities set forth in NYSE 

Arca Options Rule 5.3 or the IndexLinked 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 Index-Linked Securities that 

underlie the option as described in the 

Index-Linked Securities prospectus. 

The Exchange proposes to amend 

NYSE Arca Options Rule 5.3 to expand 

the type of Index-Linked Securities that 

may underlie options to include 

leveraged (multiple or inverse) ETNs. To 

effect this change, the Exchange 

proposes to amend NYSE Arca Options 

Rule 5.3(j) by adding the phrase, ‘‘or the 

leveraged (multiple or inverse) 

performance’’ to each of the 

subparagraphs ((A) through (F)) 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 

NYSE Arca Options Rule 5.4(m), 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 of 

option contracts of the class covering 

such Index-Linked Securities whenever 

the underlying securities are delisted 

and trading in the Index-Linked 

Securities is suspended on a national 

securities exchange, or the Index-Linked 

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 Index-Linked 

Securities in any of the following 

circumstances: (1) The underlying 

Index-Linked Security fails to comply 

with the terms of NYSE Arca Options 

Rule 5.3(j); (2) in accordance with the 

terms of NYSE Arca Options Rule 5.4(b), 

in the case of options covering IndexLinked Securities when such options 

were approved pursuant to NYSE Arca 

Options Rule 5.3(j), except that, in the 

case of options covering Index-Linked 

Securities approved pursuant to NYSE 

Arca Options Rule 5.3(j)(3)(B) 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 

600 of Regulation NMS; (3) in the case 

of any Index-Linked Security trading 

pursuant to NYSE Arca Options Rule 

5.3(j), 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 NYSE Arca 

Options Rule 5.3 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 

NYSE Arca Options Rule 5.3(j)(1)(E). 

Currently, the definition of ‘‘FuturesLinked 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 Arca Options Rule 5.3 sets forth 

generic listing criteria for securities that 

may serve as underlyings for listed 

options trading. The Exchange believes 

that the current definition of ‘‘FuturesLinked 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 


srobinson on DSKHWCL6B1PROD with NOTICES
80086 Federal Register / Vol. 75, No. 244 / Tuesday, December 21, 2010 / Notices 

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. 

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). 

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 

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–NYSEArca–2010–115 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–NYSEArca–2010–115. 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– 

NYSEArca–2010–115 and should be 

submitted on or before January 11, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–31994 Filed 12–20–10; 8:45 am] 

BILLING CODE 8011–01–P 


srobinson on DSKHWCL6B1PROD with NOTICES