Federal Register / Vol. 74, No. 161 / Friday, August 21, 2009 / Notices 42339 

1All existing entities that intend to rely on the 

requested order have been named as applicants. 

Any other existing or future entity that 

subsequently relies on the order will comply with 

the terms and conditions of the application. Any 

Future Fund will be advised by the Adviser or an 

entity controlled by or under common control with 

the Adviser. 

2Applicants represent that each Fund will invest 

at least 80% of its total assets in the component 

securities that comprise its Underlying Index 

(‘‘Component Securities’’) or, in the case of Foreign 

Funds, Component Securities and depositary 

receipts representing such securities. ‘‘Depositary 

Receipts’’ will typically be American Depositary 

Receipts, as well as Global Depositary Receipts and 

Euro Depositary Receipts. Each Fund also may 

invest up to 20% of its assets in certain futures, 

options and swap contracts, cash and cash 

Continued 

By the Commission. 

Judith M. Grady, 

Acting Secretary. 

[FR Doc. E9–20143 Filed 8–20–09; 8:45 am] 

BILLING CODE 7710–FW–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

28847; File No. 812–13614] 

Old Mutual Global Shares Trust, et al.; 

Notice of Application 

August 13, 2009. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of an application for an 

order under section 6(c) of the 

Investment Company Act of 1940 (the 

‘‘Act’’) for an exemption from sections 

2(a)(32), 5(a)(1), 22(d), and 22(e) of the 

Act and rule 22c-1 under the Act, under 

section 12(d)(1)(J) of the Act for an 

exemption from sections 12(d)(1)(A) and 

(B) of the Act, and under sections 6(c) 

and 17(b) of the Act for an exemption 

from sections 17(a)(1) and (a)(2) of the 

Act. 

SUMMARY: Summary of Application: 

Applicants request an order that would 

permit (a) certain open-end management 

investment companies and their series 

to issue shares (‘‘Shares’’) that can be 

redeemed only in large aggregations 

(‘‘Creation Units’’); (b) secondary market 

transactions in Shares to occur at 

negotiated prices; (c) certain series to 

pay redemption proceeds, under certain 

circumstances, more than seven days 

after the tender of Shares for 

redemption; (d) certain affiliated 

persons of the series to deposit 

securities into, and receive securities 

from, the series in connection with the 

purchase and redemption of Creation 

Units; and (e) certain registered 

management investment companies and 

unit investment trusts outside of the 

same group of investment companies as 

the series to acquire Shares. 

Applicants: Old Mutual Global Shares 

Trust (‘‘Trust’’), Old Mutual Global 

Index Trackers (Pty) Ltd. (‘‘Adviser’’), 

and Foreside Fund Services, LLC 

(‘‘Distributor’’). 

DATES: Filing Dates: The application was 

filed on December 16, 2008, and 

amendments were filed on May 7, 2009, 

and August 12, 2009. 

Hearing or Notification of Hearing: An 

order granting the application will be 

issued unless the Commission orders a 

hearing. Interested persons may request 

a hearing by writing to the 

Commission’s Secretary and serving 

applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on September 8, 2009 and 

should be accompanied by proof of 

service on applicants, in the form of an 

affidavit, or for lawyers, a certificate of 

service. Hearing requests should state 

the nature of the writer’s interest, the 

reason for the request, and the issues 

contested. Persons who wish to be 

notified of a hearing may request 

notification by writing to the 

Commission’s Secretary. 

ADDRESSES: Secretary, Securities and 

Exchange Commission, 100 F Street, 

NE., Washington, DC 20549–1090; 

Applicants: Old Mutual Global Shares 

Trust and Old Mutual Global Index 

Trackers (Pty) Ltd., c/o Betserai Tendai 

Musikavanhu, 144 Katherine Street, 

Grayson Ridge Office Park, Block A First 

Floor, Sandton 2196, South Africa, and 

Foreside Fund Services, LLC, Two 

Portland Square, First Floor, Portland, 

ME 04101. 

FOR FURTHER INFORMATION CONTACT: 

Courtney S. Thornton, Senior Counsel at 

(202) 551–6812, or Mary Kay Frech, 

Branch Chief, at (202) 551–6821 

(Division of Investment Management, 

Office of Investment Company 

Regulation). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained via the Commission’s 

Web site by searching for the file 

number, or for an applicant using the 

Company name box, at http:// 

www.sec.gov/search/search.htm, or by 

calling (202) 551–8090. 

Applicants’ Representations 

1. The Trust is organized as a 

Delaware statutory trust and is 

registered under the Act as an open-end 

management investment company with 

multiple series, each of which will offer 

separate investment portfolios 

comprised primarily of equity 

securities. The Trust initially will offer 

five series (‘‘Initial Funds’’). Applicants 

may establish additional series in the 

future (‘‘Future Funds,’’ together with 

the Initial Funds, the ‘‘Funds’’).1

2. The Adviser is a South African 

private limited company that is 

registered as an investment adviser 

under the Investment Advisers Act of 

1940 (the ‘‘Advisers Act’’) and will 

serve as the investment adviser to the 

Initial Funds. In the future, the Adviser 

may enter into sub-advisory agreements 

with other investment advisers to act as 

sub-advisers to particular Funds (‘‘SubAdvisers’’). Each Sub-Adviser will be 

registered under the Advisers Act. The 

Distributor is a broker-dealer registered 

under the Securities Exchange Act of 

1934 (the ‘‘Exchange Act’’) and will act 

as the principal underwriter and 

distributor for the Creation Units of 

Shares. 

3. Each Fund will hold certain equity 

securities (‘‘Portfolio Securities’’) and 

financial instruments selected to 

correspond, before fees and expenses, 

generally to the performance of a 

specified equity securities index 

(‘‘Underlying Index,’’ collectively 

‘‘Underlying Indices’’). Certain of the 

Underlying Indices may be composed of 

equity securities of domestic issuers and 

non-domestic issuers meeting the 

requirements for trading in U.S. markets 

(‘‘Domestic Indices’’). Other Underlying 

Indices may be composed of foreign 

equity securities (‘‘Foreign Indices’’). 

The Initial Funds will track Foreign 

Indices; Future Funds may track 

Domestic or Foreign Indices. Funds that 

track Domestic Indices are referred to as 

‘‘Domestic Funds’’ and Funds that track 

Foreign Indices are referred to as 

‘‘Foreign Funds.’’ No entity that creates, 

compiles, sponsors or maintains an 

Underlying Index (‘‘Index Provider’’) is 

or will be an affiliated person, as 

defined in section 2(a)(3) of the Act, or 

an affiliated person of an affiliated 

person, of the Trust or a Fund, the 

Adviser, any Sub-Adviser to or 

promoter of a Fund, or the Distributor. 

The Index Provider to the Initial Funds 

is FTSE Group. 

4. The investment objective of each 

Fund will be to provide investment 

results that correspond, before fees and 

expenses, generally to the performance 

of its Underlying Index. Intra-day values 

of the Underlying Index will be 

disseminated every 15 seconds 

throughout the trading day. A Fund will 

utilize either a replication or 

representative sampling strategy, which 

will be disclosed with regard to each 

Fund in its prospectus.2 A Fund using 


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equivalents, as well as in stocks not included in its 

Underlying Index, but which the Adviser or SubAdviser believes will help the Fund track its 

Underlying Index. 

3Under the representative sampling strategy, 

stocks are selected for inclusion in a Fund to have 

aggregate investment characteristics, fundamental 

characteristics, and liquidity measures similar to 

those of the Fund’s Underlying Index taken in its 

entirety. 

4All representations and conditions contained in 

the application that require a Fund to disclose 

particular information in the Fund’s Prospectus 

and/or annual report shall be effective with respect 

to the Fund until the time that the Fund complies 

with the disclosure requirements adopted by the 

Commission in Investment Company Act Release 

No. 28584 (Jan. 13, 2009). 

5Each Fund will sell and redeem Creation Units 

only on a ‘‘Business Day’’ which is defined as any 

day that the New York Stock Exchange, the Listing 

Exchange (defined below), and the custodian of a 

Fund are open for business, and includes any day 

that a Fund is required to be open under section 

22(e) of the Act. Each Business Day, prior to the 

opening of trading on the Listing Exchange (defined 

below), the list of names and amount of each 

security constituting the current Deposit Securities 

and the Balancing Amount will be made available. 

Any national securities exchange (as defined in 

section 2(a)(26) of the Act) (‘‘Exchange’’) on which 

Shares are listed (‘‘Listing Exchange’’) will 

disseminate, every 15 seconds during its regular 

trading hours, through the facilities of the 

Consolidated Tape Association, an amount per 

individual Share representing the sum of the 

estimated Balancing Amount and the current value 

of the Deposit Securities. 

6Applicants state that in some circumstances or 

in certain countries, it may not be practicable or 

convenient, or permissible under the laws of certain 

countries or the regulations of certain foreign stock 

exchanges, for a Foreign Fund to operate 

exclusively on an ‘‘in-kind’’ basis. Applicants also 

note that when a substantial rebalancing of a Fund’s 

portfolio is required, the Adviser or Sub-Adviser 

might prefer to receive cash rather than stocks so 

that the Fund may avoid transaction costs involved 

in liquidating part of its portfolio to achieve the 

rebalancing. 

7Where a Fund permits a purchaser to substitute 

cash in lieu of depositing a portion of the requisite 

Deposit Securities, the purchaser may be assessed 

a higher Transaction Fee to cover the cost of 

purchasing such Deposit Securities, including 

operational processing and brokerage costs, and 

part or all of the spread between the expected bid 

and the offer side of the market relating to such 

Deposit Securities. 

8Shares will be registered in book-entry form 

only. DTC or its nominee will be the registered 

owner of all outstanding Shares. DTC or DTC 

Participants will maintain records reflecting 

beneficial owners of Shares. 

9As a general matter, the Deposit Securities and 

Fund Securities will correspond pro rata to the 

Portfolio Securities held by each Fund, but Fund 

Securities received on redemption may not always 

be identical to Deposit Securities deposited in 

connection with the purchase of Creation Units for 

the same day. The Funds will comply with the 

Federal securities laws in accepting Deposit 

Securities and satisfying redemptions with Fund 

Securities, including that the Deposit Securities and 

Fund Securities are sold in transactions that would 

be exempt from registration under the Securities 

Act of 1933. 

a replication strategy will invest in the 

Component Securities in its Underlying 

Index in approximately the same 

proportions as in the Underlying Index. 

A Fund using representative sampling 

will hold some, but not necessarily all 

of the Component Securities of its 

Underlying Index.3 Applicants 

anticipate that a Fund that utilizes a 

representative sampling strategy will 

not track the performance of its 

Underlying Index with the same degree 

of accuracy as an investment vehicle 

that invests in every Component 

Security of the Underlying Index with 

the same weighting as the Underlying 

Index. Applicants expect that each Fund 

will have a tracking error relative to the 

performance of its Underlying Index of 

less than 5 percent. 

5. Creation Units are expected to 

range between 25,000 to 100,000 Shares 

as will be clearly stated in the relevant 

Fund’s prospectus (‘‘Prospectus’’).4

Applicants expect that the initial price 

of a Creation Unit will fall in the range 

of $1,000,000 to $10,000,000. All orders 

to purchase Creation Units must be 

placed with the Distributor, by or 

through a party that has entered into an 

agreement with the Distributor 

(‘‘Authorized Participant’’). The 

Distributor will be responsible for 

transmitting the orders to the Funds. An 

Authorized Participant must be either: 

(a) A broker-dealer or other participant 

in the continuous net settlement system 

of the National Securities Clearing 

Corporation, a clearing agency 

registered with the Commission, or (b) 

a participant in the Depository Trust 

Company (‘‘DTC’’, and such participant, 

‘‘DTC Participant’’). Shares of the Fund 

generally will be sold in Creation Units 

in exchange for an in-kind deposit by 

the purchaser of a portfolio of securities 

designated by the Adviser or SubAdviser to correspond generally to the 

performance of the relevant Underlying 

Index (the ‘‘Deposit Securities’’), 

together with the deposit of a specified 

cash payment (‘‘Balancing Amount’’). 

The Balancing Amount is an amount 

equal to the difference between (a) the 

net asset value (‘‘NAV’’) (per Creation 

Unit) of a Fund and (b) the total 

aggregate market value (per Creation 

Unit) of the Deposit Securities.5 Each 

Fund may permit, under certain 

circumstances, a purchaser of Creation 

Units to substitute cash in lieu of 

depositing some or all of the Deposit 

Securities.6

6. An investor purchasing or 

redeeming a Creation Unit from a Fund 

will be charged a fee (‘‘Transaction 

Fee’’) to prevent the dilution of the 

interests of the remaining shareholders 

resulting from costs in connection with 

the purchase or redemption of Creation 

Units.7 The maximum Transaction Fees 

relevant to each Fund and the method 

of calculating such Transaction Fees 

will be fully disclosed in the Prospectus 

of such Fund or statement of additional 

information (‘‘SAI’’). The Distributor 

will be responsible for delivering the 

Fund’s Prospectus to those persons 

purchasing Shares in Creation Units and 

for maintaining records of both the 

orders placed with it and the 

confirmations of acceptance furnished 

by it. In addition, the Distributor will 

maintain a record of the instructions 

given to the applicable Fund to 

implement the delivery of its Shares. 

7. Purchasers of Shares in Creation 

Units may hold such Shares or may sell 

such Shares into the secondary market. 

Shares will be listed and traded on an 

Exchange. It is expected that one or 

more member firms of the Listing 

Exchange will be designated to act as a 

specialist (‘‘Specialist’’) or a market 

maker (‘‘Market Maker’’) and maintain a 

market for Shares trading on the Listing 

Exchange. Prices of Shares trading on an 

Exchange will be based on the current 

bid/ask market. Shares sold in the 

secondary market will be subject to 

customary brokerage commissions and 

charges. 

8. Applicants expect that purchasers 

of Creation Units will include 

institutional investors and arbitrageurs 

(which could include institutional 

investors). A Specialist or Market 

Maker, in providing a fair and orderly 

secondary market for the Shares, also 

may purchase Creation Units for use in 

its market-making activities. Applicants 

expect that secondary market 

purchasers of Shares will include both 

institutional investors and retail 

investors.8 Applicants expect that the 

price at which Shares trade will be 

disciplined by arbitrage opportunities 

created by the option to continually 

purchase or redeem Creation Units at 

their NAV, which should ensure that 

Shares will not trade at a material 

discount or premium in relation to their 

NAV. 

9. Shares will not be individually 

redeemable, and owners of Shares may 

acquire those Shares from the Fund, or 

tender such Shares for redemption to 

the Fund, in Creation Units only. To 

redeem, an investor will have to 

accumulate enough Shares to constitute 

a Creation Unit. Redemption orders 

must be placed by or through an 

Authorized Participant. An investor 

redeeming a Creation Unit generally 

will receive (a) Portfolio Securities 

designated to be delivered for Creation 

Unit redemptions (‘‘Fund Securities’’) 

on the date that the request for 

redemption is submitted 9 and (b) a 

‘‘Cash Redemption Payment,’’ 

consisting of an amount calculated in 


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the same manner as the Balancing 

Amount, although the actual amount of 

the Cash Redemption Payment may 

differ if the Fund Securities are not 

identical to the Deposit Securities on 

that day. An investor may receive the 

cash equivalent of a Fund Security in 

certain circumstances, such as if the 

investor is constrained from effecting 

transactions in the security by 

regulation or policy. 

10. No Fund will be marketed or 

otherwise held out as a traditional openend investment company or a mutual 

fund. Instead, each Fund will be 

marketed as an ‘‘ETF,’’ an ‘‘investment 

company,’’ a ‘‘fund,’’ or a ‘‘trust.’’ All 

marketing materials that describe the 

features or method of obtaining, buying 

or selling Creation Units or Shares 

traded on an Exchange, or refer to 

redeemability, will prominently 

disclose that Shares are not individually 

redeemable and that the owners of 

Shares may purchase or redeem Shares 

from the Fund in Creation Units only. 

The same approach will be followed in 

the SAI, shareholder reports and 

investor educational materials issued or 

circulated in connection with the 

Shares. The Funds will provide copies 

of their annual and semi-annual 

shareholder reports to DTC Participants 

for distribution to shareholders. 

Applicants’ Legal Analysis 

1. Applicants request an order under 

section 6(c) of the Act for an exemption 

from sections 2(a)(32), 5(a)(1), 22(d), and 

22(e) of the Act and rule 22c–1 under 

the Act, under section 12(d)(1)(J) of the 

Act for an exemption from sections 

12(d)(1)(A) and (B) of the Act, and 

under sections 6(c) and 17(b) of the Act 

for an exemption from sections 17(a)(1) 

and 17(a)(2) of the Act. 

2. Section 6(c) of the Act provides that 

the Commission may exempt any 

person, security or transaction, or any 

class of persons, securities or 

transactions, from any provision of the 

Act, if and to the extent that such 

exemption is necessary or appropriate 

in the public interest and consistent 

with the protection of investors and the 

purposes fairly intended by the policy 

and provisions of the Act. Section 17(b) 

of the Act authorizes the Commission to 

exempt a proposed transaction from 

section 17(a) of the Act if evidence 

establishes that the terms of the 

transaction, including the consideration 

to be paid or received, are reasonable 

and fair and do not involve 

overreaching on the part of any person 

concerned, and the proposed 

transaction is consistent with the 

policies of the registered investment 

company and the general provisions of 

the Act. Section 12(d)(1)(J) of the Act 

provides that the Commission may 

exempt any person, security, or 

transaction, or any class or classes of 

persons, securities or transactions, from 

any provisions of section 12(d)(1) if the 

exemption is consistent with the public 

interest and the protection of investors. 

Sections 5(a)(1) and 2(a)(32) of the Act 

3. Section 5(a)(1) of the Act defines an 

‘‘open-end company’’ as a management 

investment company that is offering for 

sale or has outstanding any redeemable 

security of which it is the issuer. 

Section 2(a)(32) of the Act defines a 

redeemable security as any security, 

other than short-term paper, under the 

terms of which the owner, upon its 

presentation to the issuer, is entitled to 

receive approximately his proportionate 

share of the issuer’s current net assets, 

or the cash equivalent. Because Shares 

will not be individually redeemable, 

applicants request an order that would 

permit the Funds to register as open-end 

management investment companies and 

issue Shares that are redeemable in 

Creation Units only. Applicants state 

that investors may purchase Shares in 

Creation Units and redeem Creation 

Units from each Fund. Applicants state 

that because Creation Units may always 

be purchased and redeemed at NAV, the 

market price of the Shares should not 

vary substantially from their NAV. 

Section 22(d) of the Act and Rule 22c– 

1 Under the Act 

4. Section 22(d) of the Act, among 

other things, prohibits a dealer from 

selling a redeemable security, which is 

currently being offered to the public by 

or through a principal underwriter, 

except at a current public offering price 

described in the prospectus. Rule 22c– 

1 under the Act generally requires that 

a dealer selling, redeeming or 

repurchasing a redeemable security do 

so only at a price based on its NAV. 

Applicants state that secondary market 

trading in Shares will take place at 

negotiated prices, not at a current 

offering price described in a Fund’s 

Prospectus, and not at a price based on 

NAV. Thus, purchases and sales of 

Shares in the secondary market will not 

comply with section 22(d) of the Act 

and rule 22c–1 under the Act. 

Applicants request an exemption under 

section 6(c) from these provisions. 

5. Applicants assert that the concerns 

sought to be addressed by section 22(d) 

of the Act and rule 22c–1 under the Act 

with respect to pricing are equally 

satisfied by the proposed method of 

pricing Shares. Applicants maintain that 

while there is little legislative history 

regarding section 22(d), its provisions, 

as well as those of rule 22c–1, appear to 

have been designed to (a) prevent 

dilution caused by certain risklesstrading schemes by principal 

underwriters and contract dealers, (b) 

prevent unjust discrimination or 

preferential treatment among buyers, 

and (c) ensure an orderly distribution of 

investment company shares by 

eliminating price competition from 

dealers offering shares at less than the 

published sales price and repurchasing 

shares at more than the published 

redemption price. 

6. Applicants believe that none of 

these purposes will be thwarted by 

permitting Shares to trade in the 

secondary market at negotiated prices. 

Applicants state that (a) secondary 

market trading in Shares does not 

involve a Fund as a party and will not 

result in dilution of an investment in 

Shares, and (b) to the extent different 

prices exist during a given trading day, 

or from day to day, such variances occur 

as a result of third-party market forces, 

such as supply and demand. Therefore, 

applicants assert that secondary market 

transactions in Shares will not lead to 

discrimination or preferential treatment 

among purchasers. Finally, applicants 

contend that the proposed distribution 

system will be orderly because 

competitive forces will ensure that the 

difference between the market price of 

Shares and their NAV remains narrow. 

Section 22(e) 

7. Section 22(e) of the Act generally 

prohibits a registered investment 

company from suspending the right of 

redemption or postponing the date of 

payment of redemption proceeds for 

more than seven days after the tender of 

a security for redemption. Applicants 

state that settlement of redemptions for 

the Foreign Funds is contingent not 

only on the settlement cycle of the 

United States market, but also on 

current delivery cycles in local markets 

for underlying foreign securities held by 

the Foreign Funds. Applicants state that 

delivery cycles for transferring Fund 

Securities to redeeming investors, 

coupled with local market holiday 

schedules, will require a delivery 

process longer than seven calendar days 

for the Foreign Funds. Applicants 

request relief under section 6(c) of the 

Act from section 22(e) to allow the 

Foreign Funds to pay redemption 

proceeds up to fourteen calendar days 

after the tender of any Creation Unit for 

redemption. Except as disclosed in the 

relevant Foreign Fund’s Prospectus and/ 

or SAI, applicants expect that each 

Foreign Fund will be able to deliver 

redemption proceeds within seven 


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10Rule 15c6–1 under the Exchange Act requires 

that most securities transactions be settled within 

three business days of the trade. Applicants 

acknowledge that no relief obtained from the 

requirements of section 22(e) will affect any 

obligations applicants may have under rule 

15c6–1. 

11A ‘‘Purchasing Fund Affiliate’’ is a Purchasing 

Fund Adviser, Purchasing Fund Sub-Adviser, 

Sponsor, promoter, and principal underwriter of a 

Purchasing Fund, and any person controlling, 

controlled by, or under common control with any 

of those entities. A ‘‘Fund Affiliate’’ is an 

investment adviser, promoter, or principal 

underwriter of a Fund and any person controlling, 

controlled by or under common control with any 

of these entities. 

days.10 With respect to future Foreign 

Funds, applicants seek the same relief 

from section 22(e) only to the extent that 

circumstances similar to those described 

in the application exist. 

8. Applicants state that section 22(e) 

was designed to prevent unreasonable, 

undisclosed and unforeseen delays in 

the payment of redemption proceeds. 

Applicants assert that the requested 

relief will not lead to the problems that 

section 22(e) was designed to prevent. 

Applicants state that the SAI will 

disclose those local holidays (over the 

period of at least one year following the 

date of the SAI), if any, that are 

expected to prevent the delivery of 

redemption proceeds in seven calendar 

days, and the maximum number of days 

needed to deliver the proceeds for the 

relevant Foreign Fund. Applicants are 

not seeking relief from section 22(e) 

with respect to Foreign Funds that do 

not effect creations and redemptions of 

Creation Units in-kind. 

Section 12(d)(1) 

9. Section 12(d)(1)(A) of the Act, in 

relevant part, prohibits a registered 

investment company from acquiring 

securities of an investment company if 

such securities represent more than 3% 

of the total outstanding voting stock of 

the acquired company, more than 5% of 

the total assets of the acquiring 

company, or, together with the 

securities of any other investment 

companies, more than 10% of the total 

assets of the acquiring company. Section 

12(d)(1)(B) of the Act prohibits a 

registered open-end investment 

company, its principal underwriter and 

any other broker-dealer from selling the 

investment company’s shares to another 

investment company if the sale will 

cause the acquiring company to own 

more than 3% of the acquired 

company’s voting stock, or if the sale 

will cause more than 10% of the 

acquired company’s voting stock to be 

owned by investment companies 

generally. 

10. Applicants request an exemption 

to permit management investment 

companies (‘‘Purchasing Management 

Companies’’) and unit investment trusts 

(‘‘Purchasing Trusts’’) registered under 

the Act that are not sponsored or 

advised by the Adviser or any entity 

controlling, controlled by, or under 

common control with the Adviser and 

are not part of the same ‘‘group of 

investment companies,’’ as defined in 

section 12(d)(1)(G)(ii) of the Act, as the 

Funds (collectively, ‘‘Purchasing 

Funds’’) to acquire shares of a Fund 

beyond the limits of section 12(d)(1)(A). 

Purchasing Funds do not include the 

Funds. In addition, applicants seek 

relief to permit a Fund or broker-dealer 

(‘‘Broker’’) that is registered under the 

Exchange Act to sell Shares to a 

Purchasing Fund in excess of the limits 

of section 12(d)(1)(B). 

11. Each Purchasing Management 

Company will be advised by an 

investment adviser within the meaning 

of section 2(a)(20)(A) of the Act (the 

‘‘Purchasing Fund Adviser’’) and may 

be sub-advised by one or more 

investment advisers within the meaning 

of section 2(a)(20)(B) of the Act (each a 

‘‘Purchasing Fund Sub-Adviser’’). Any 

investment adviser to a Purchasing 

Management Company will be 

registered under the Advisers Act. Each 

Purchasing Trust will be sponsored by 

a sponsor (‘‘Sponsor’’). 

12. Applicants submit that the 

proposed conditions to the requested 

relief adequately address the concerns 

underlying the limits in section 

12(d)(1)(A) and (B), which include 

concerns about undue influence by a 

fund of funds over underlying funds, 

excessive layering of fees and overly 

complex fund structures. Applicants 

believe that the requested exemption is 

consistent with the public interest and 

the protection of investors. 

13. Applicants believe that neither the 

Purchasing Funds nor a Purchasing 

Fund Affiliate would be able to exert 

undue influence over the Funds.11 To 

limit the control that a Purchasing Fund 

may have over a Fund, applicants 

propose a condition prohibiting a 

Purchasing Fund Adviser or a Sponsor, 

any person controlling, controlled by, or 

under common control with a 

Purchasing Fund Adviser or Sponsor, 

and any investment company and any 

issuer that would be an investment 

company but for sections 3(c)(1) or 

3(c)(7) of the Act that is advised or 

sponsored by a Purchasing Fund 

Adviser or Sponsor, or any person 

controlling, controlled by, or under 

common control with a Purchasing 

Fund Adviser or Sponsor (‘‘Purchasing 

Fund Advisory Group’’) from 

controlling (individually or in the 

aggregate) a Fund within the meaning of 

section 2(a)(9) of the Act. The same 

prohibition would apply to any 

Purchasing Fund Sub-Adviser, any 

person controlling, controlled by or 

under common control with the 

Purchasing Fund Sub-Adviser, and any 

investment company or issuer that 

would be an investment company but 

for sections 3(c)(1) or 3(c)(7) of the Act 

(or portion of such investment company 

or issuer) advised or sponsored by the 

Purchasing Fund Sub-Adviser or any 

person controlling, controlled by or 

under common control with the 

Purchasing Fund Sub-Adviser 

(‘‘Purchasing Fund Sub-Advisory 

Group’’). 

14. Applicants propose other 

conditions to limit the potential for 

undue influence over the Funds, 

including that no Purchasing Fund or 

Purchasing Fund Affiliate (except to the 

extent it is acting in its capacity as an 

investment adviser to a Fund) will cause 

a Fund to purchase a security in any 

offering of securities during the 

existence of any underwriting or selling 

syndicate of which a principal 

underwriter is an Underwriting Affiliate 

(‘‘Affiliated Underwriting’’). An 

‘‘Underwriting Affiliate’’ is a principal 

underwriter in any underwriting or 

selling syndicate that is an officer, 

director, member of an advisory board, 

Purchasing Fund Adviser, Purchasing 

Fund Sub-Adviser, employee or 

Sponsor of a Purchasing Fund, or a 

person of which any such officer, 

director, member of an advisory board, 

Purchasing Fund Adviser, Purchasing 

Fund Sub-Adviser, employee, or 

Sponsor is an affiliated person (except 

that any person whose relationship to 

the Fund is covered by section 10(f) of 

the Act is not an Underwriting 

Affiliate). 

15. Applicants assert that the 

proposed conditions address any 

concerns regarding excessive layering of 

fees. The board of directors or trustees 

of any Purchasing Management 

Company, including a majority of the 

directors or trustees who are not 

‘‘interested persons’’ within the 

meaning of section 2(a)(19) of the Act 

(‘‘disinterested directors or trustees’’), 

will find that the advisory fees charged 

to the Purchasing Management 

Company are based on services 

provided that will be in addition to, 

rather than duplicative of, services 

provided under the advisory contract(s) 

of any Fund in which the Purchasing 

Management Company may invest. In 

addition, except as provided in 

condition 12, a Purchasing Fund 

Adviser or a trustee (‘‘Trustee’’) or 

Sponsor of a Purchasing Trust will, as 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 74, No. 161 / Friday, August 21, 2009 / Notices 42343 

12Any references to NASD Conduct Rule 2830 

include any successor or replacement FINRA rule 

to NASD Conduct Rule 2830. 

13Applicants acknowledge that receipt of 

compensation by (a) an affiliated person of a 

Purchasing Fund, or an affiliated person of such 

person, for the purchase by the Purchasing Fund of 

Shares of a Fund or (b) an affiliated person of a 

Fund, or an affiliated person of such person, for the 

sale by the Fund of its Shares to a Purchasing Fund 

may be prohibited by section 17(e)(1) of the Act. 

The Purchasing Fund Agreement also will include 

this acknowledgment. 

14See note 4, supra. 

applicable, waive fees otherwise 

payable to it by the Purchasing Fund in 

an amount at least equal to any 

compensation (including fees received 

pursuant to any plan adopted by a Fund 

under rule 12b–1 under the Act) 

received by the Purchasing Fund 

Adviser or Trustee or Sponsor or an 

affiliated person of the Purchasing Fund 

Adviser, Trustee or Sponsor, from the 

Funds in connection with the 

investment by the Purchasing Fund in 

the Fund. Applicants state that any sales 

loads or service fees charged with 

respect to shares of a Purchasing Fund 

will not exceed the limits applicable to 

a fund of funds set forth in NASD 

Conduct Rule 2830.12

16. Applicants submit that the 

proposed arrangement will not create an 

overly complex fund structure. 

Applicants note that no Fund may 

acquire securities of any investment 

company or company relying on 

sections 3(c)(1) or 3(c)(7) of the Act in 

excess of the limits contained in section 

12(d)(1)(A) of the Act. To ensure that 

Purchasing Funds comply with the 

terms and conditions of the requested 

relief from section 12(d)(1), any 

Purchasing Fund that intends to invest 

in a Fund in reliance on the requested 

order will enter into an agreement with 

the Fund (‘‘Purchasing Fund 

Agreement’’) requiring the Purchasing 

Fund to adhere to the terms and 

conditions of the requested order. The 

Purchasing Fund Agreement also will 

include an acknowledgement from the 

Purchasing Fund that it may rely on the 

requested order only to invest in the 

Funds and not in any other investment 

company. 

17. Applicants also note that a Fund 

may choose to reject a direct purchase 

of Shares in Creation Units by a 

Purchasing Fund. To the extent that a 

Purchasing Fund purchases Shares in 

the secondary market, a Fund would 

still retain its ability to reject any initial 

investment by a Purchasing Fund in 

excess of the limits of section 

12(d)(1)(A) by declining to enter into a 

Purchasing Fund Agreement with the 

Purchasing Fund. 

Sections 17(a)(1) and (2) of the Act 

18. Sections 17(a)(1) and (2) of the Act 

generally prohibit an affiliated person of 

a registered investment company, or an 

affiliated person of such a person 

(‘‘Second-Tier Affiliate’’), from selling 

any security to or purchasing any 

security from the company. Section 

2(a)(3) of the Act defines ‘‘affiliated 

person’’ to include (a) any person 

directly or indirectly owning, 

controlling or holding with power to 

vote 5% or more of the outstanding 

voting securities of the other person, (b) 

any person 5% or more of whose 

outstanding voting securities are 

directly or indirectly owned, controlled 

or held with the power to vote by the 

other person, and (c) any person directly 

or indirectly controlling, controlled by 

or under common control with the other 

person. Section 2(a)(9) of the Act 

provides that a control relationship will 

be presumed where one person owns 

more than 25% of another person’s 

voting securities. 

19. Applicants request an exemption 

from section 17(a) of the Act pursuant 

to sections 17(b) and 6(c) of the Act to 

permit persons to effectuate in-kind 

purchases and redemptions with a Fund 

when they are affiliated persons of the 

Fund or Second-Tier Affiliates solely by 

virtue of one or more of the following: 

(a) Holding 5% or more, or in excess of 

25%, of the outstanding Shares of one 

or more Funds; (b) having an affiliation 

with a person with an ownership 

interest described in (a); or (c) holding 

5% or more, or more than 25%, of the 

shares of one or more other registered 

investment companies (or series thereof) 

advised by the Adviser or an entity 

controlling, controlled by, or under 

common control with the Adviser. 

20. Applicants assert that no useful 

purpose would be served by prohibiting 

these types of affiliated persons from 

purchasing or redeeming Creation Units 

through ‘‘in-kind’’ transactions. The 

deposit procedures for both in-kind 

purchases and in-kind redemptions of 

Creation Units will be the same for all 

purchases and redemptions. Deposit 

Securities and Fund Securities will be 

valued in the same manner as Portfolio 

Securities. Therefore, applicants state 

that in-kind purchases and redemptions 

will afford no opportunity for the 

specified affiliated persons, or SecondTier Affiliates, of a Fund to effect a 

transaction detrimental to other holders 

of Shares. Applicants also believe that 

in-kind purchases and redemptions will 

not result in self-dealing or overreaching 

of the Funds. 

21. Applicants also seek relief from 

section 17(a) to permit a Fund that is an 

affiliated person of a Purchasing Fund 

to sell its Shares to and redeem its 

Shares from a Purchasing Fund, and to 

engage in the accompanying in-kind 

transactions with the Purchasing Fund. 

Applicants state that the terms of the 

transactions are fair and reasonable and 

do not involve overreaching. Applicants 

note that any consideration paid by a 

Purchasing Fund for the purchase or 

redemption of Shares directly from a 

Fund will be based on the NAV of the 

Fund.13 Applicants believe that any 

proposed transactions directly between 

the Funds and Purchasing Funds will be 

consistent with the policies of each 

Purchasing Fund. The purchase of 

Creation Units by a Purchasing Fund 

directly from a Fund will be 

accomplished in accordance with the 

investment restrictions of any such 

Purchasing Fund and will be consistent 

with the investment policies set forth in 

the Purchasing Fund’s registration 

statement. The Purchasing Fund 

Agreement will require any Purchasing 

Fund that purchases Creation Units 

directly from a Fund to represent that 

the purchase of Creation Units from a 

Fund by a Purchasing Fund will be 

accomplished in compliance with the 

investment restrictions of the 

Purchasing Fund and will be consistent 

with the investment policies set forth in 

the Purchasing Fund’s registration 

statement. 

Applicants’ Conditions 

Applicants agree that any order 

granting the requested relief will be 

subject to the following conditions: 14

ETF Relief 

1. As long as the Funds operate in 

reliance on the requested order, the 

Shares of each Fund will be listed on an 

Exchange. 

2. Neither the Trust nor any Fund will 

be advertised or marketed as an openend investment company or a mutual 

fund. Each Fund’s Prospectus will 

prominently disclose that Shares are not 

individually redeemable shares and will 

disclose that the owners of Shares may 

acquire those Shares from the Fund and 

tender those Shares for redemption to 

the Fund in Creation Units only. Any 

advertising material that describes the 

purchase or sale of Creation Units or 

refers to redeemability will prominently 

disclose that Shares are not individually 

redeemable, and that owners of Shares 

may acquire those Shares from the Fund 

and tender those Shares for redemption 

to the Fund in Creation Units only. 

3. The Web site maintained for each 

Fund, which will be publicly accessible 

at no charge, will contain the following 

information, on a per Share basis, for 


srobinson on DSKHWCL6B1PROD with NOTICES
42344 Federal Register / Vol. 74, No. 161 / Friday, August 21, 2009 / Notices 

each Fund: (a) The prior Business Day’s 

NAV and the mid-point of the bid-ask 

spread at the time of the calculation of 

NAV (‘‘Bid/Ask Price’’), and a 

calculation of the premium or discount 

of the Bid/Ask Price at the time of 

calculation of the NAV against such 

NAV; and (b) data in chart format 

displaying the frequency distribution of 

discounts and premiums of the daily 

Bid/Ask Price against the NAV, within 

appropriate ranges, for each of the four 

previous calendar quarters. 

4. The Prospectus and annual report 

for each Fund also will include: (a) The 

information listed in condition 3(b), (i) 

in the case of the Fund’s Prospectus, for 

the most recently completed year (and 

the most recently completed quarter or 

quarters, as applicable) and (ii) in the 

case of the annual report, for the 

immediately preceding five years, as 

applicable; and (b) the following data, 

calculated on a per Share basis for one, 

five and ten year periods (or life of the 

Fund): (i) The cumulative total return 

and the average annual total return 

based on NAV and Bid/Ask Price, and 

(ii) the cumulative total return of the 

relevant Underlying Index. 

5. Each Fund’s Prospectus will clearly 

disclose that, for purposes of the Act, 

Shares are issued by the Fund, which is 

a registered investment company, and 

that the acquisition of Shares by 

investment companies is subject to the 

restrictions of section 12(d)(1) of the 

Act, except as permitted by an 

exemptive order that permits registered 

investment companies to invest in a 

Fund beyond the limits in section 

12(d)(1), subject to certain terms and 

conditions, including that the registered 

investment company enter into a 

Purchasing Fund Agreement with the 

Fund regarding the terms of the 

investment. 

6. The requested relief to permit ETF 

operations will expire on the effective 

date of any Commission rule under the 

Act that provides relief permitting the 

operation of index-based exchangetraded funds. 

Section 12(d)(1) Relief 

7. The members of a Purchasing 

Fund’s Advisory Group will not control 

(individually or in the aggregate) a Fund 

within the meaning of section 2(a)(9) of 

the Act. The members of a Purchasing 

Fund’s Sub-Advisory Group will not 

control (individually or in the aggregate) 

a Fund within the meaning of section 

2(a)(9) of the Act. If as a result of a 

decrease in the outstanding Shares of a 

Fund, a Purchasing Fund’s Advisory 

Group or a Purchasing Fund’s SubAdvisory Group, each in the aggregate, 

becomes a holder of more than 25% of 

the outstanding Shares of a Fund, it will 

vote its Shares in the same proportion 

as the vote of all other holders of the 

Shares. This condition will not apply to 

the Purchasing Fund’s Sub-Advisory 

Group with respect to a Fund for which 

the Purchasing Fund’s Sub-Adviser or a 

person controlling, controlled by, or 

under common control with the 

Purchasing Fund Sub-Adviser acts as 

the investment adviser within the 

meaning of section 2(a)(20)(A) of the 

Act. 

8. No Purchasing Fund or Purchasing 

Fund Affiliate will cause any existing or 

potential investment by the Purchasing 

Fund in a Fund to influence the terms 

of any services or transactions between 

the Purchasing Fund or Purchasing 

Fund Affiliate and the Fund or a Fund 

Affiliate. 

9. The board of directors or trustees of 

a Purchasing Management Company, 

including a majority of the disinterested 

directors or trustees, will adopt 

procedures reasonably designed to 

ensure that the Purchasing Fund 

Adviser and Purchasing Fund SubAdviser are conducting the investment 

program of the Purchasing Management 

Company without taking into account 

any consideration received by the 

Purchasing Management Company or a 

Purchasing Fund Affiliate from a Fund 

or a Fund Affiliate in connection with 

any services or transactions. 

10. No Purchasing Fund or 

Purchasing Fund Affiliate (except to the 

extent it is acting in its capacity as an 

investment adviser to a Fund) will cause 

a Fund to purchase a security in any 

Affiliated Underwriting. 

11. Before investing in the Shares of 

a Fund in excess of the limits in section 

12(d)(1)(A), each Purchasing Fund and 

the Fund will execute a Purchasing 

Fund Agreement stating, without 

limitation, that their boards of directors 

or trustees and their investment advisers 

or Sponsors or Trustees, as applicable, 

understand the terms and conditions of 

the order, and agree to fulfill their 

responsibilities under the order. At the 

time of its investment in Shares of a 

Fund in excess of the limit in section 

12(d)(1)(A)(i), a Purchasing Fund will 

notify such Fund of the investment. At 

such time, the Purchasing Fund will 

also transmit to the Fund a list of names 

of each Purchasing Fund Affiliate and 

Underwriting Affiliate. The Purchasing 

Fund will notify the Fund of any 

changes to the list of names as soon as 

reasonably practicable after a change 

occurs. The relevant Fund and the 

Purchasing Fund will maintain and 

preserve a copy of the order, the 

Purchasing Fund Agreement, and the 

list with any updated information for 

the duration of the investment and for 

a period of not less than six years 

thereafter, the first two years in an 

easily accessible place. 

12. The Purchasing Fund Adviser, 

Trustee or Sponsor, as applicable, will 

waive fees otherwise payable to it by the 

Purchasing Fund in an amount at least 

equal to any compensation (including 

fees received under any plan adopted by 

a Fund under rule 12b–1 under the Act) 

received from a Fund by the Purchasing 

Fund Adviser, Trustee or Sponsor, or an 

affiliated person of the Purchasing Fund 

Adviser, Trustee or Sponsor, other than 

any advisory fees paid to the Purchasing 

Fund Adviser, Trustee or Sponsor, or its 

affiliated person by a Fund, in 

connection with the investment by the 

Purchasing Fund in the Fund. Any 

Purchasing Fund Sub-Adviser will 

waive fees otherwise payable to the 

Purchasing Fund Sub-Adviser, directly 

or indirectly, by the Purchasing 

Management Company in an amount at 

least equal to any compensation 

received from a Fund by the Purchasing 

Fund Sub-Adviser, or an affiliated 

person of the Purchasing Fund SubAdviser, other than any advisory fees 

paid to the Purchasing Fund SubAdviser or its affiliated person by the 

Fund, in connection with any 

investment by the Purchasing 

Management Company in a Fund made 

at the direction of the Purchasing Fund 

Sub-Adviser. In the event that the 

Purchasing Fund Sub-Adviser waives 

fees, the benefit of the waiver will be 

passed through to the Purchasing 

Management Company. 

13. Any sales charges and/or service 

fees charged with respect to shares of a 

Purchasing Fund will not exceed the 

limits applicable to a fund of funds as 

set forth in NASD Conduct Rule 2830. 

14. Once an investment by a 

Purchasing Fund in the Shares of a 

Fund exceeds the limit in section 

12(d)(1)(A)(i) of the Act, the board of 

directors or trustees of a Fund 

(‘‘Board’’), including a majority of the 

directors or trustees that are not 

‘‘interested persons’’ within the 

meaning of section 2(a)(19) of the Act 

(‘‘disinterested Board members’’), will 

determine that any consideration paid 

by the Fund to a Purchasing Fund or 

Purchasing Fund Affiliate in connection 

with any services or transactions: (a) Is 

fair and reasonable in relation to the 

nature and quality of the services and 

benefits received by the Fund; (b) is 

within the range of consideration that 

the Fund would be required to pay to 

another unaffiliated entity in connection 

with the same services or transactions; 

and (c) does not involve overreaching 

on the part of any person concerned. 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 74, No. 161 / Friday, August 21, 2009 / Notices 42345 

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

2 17 CFR 240.19b–4. 

3See American Stock Exchange Rule 906; Nasdaq 

OMX PHLX Rule 1003; FINRA Rule 2360(b)(5). 

This condition does not apply with 

respect to any services or transactions 

between a Fund and its investment 

adviser(s), or any person controlling, 

controlled by, or under common control 

with such investment adviser(s). 

15. The Board, including a majority of 

the disinterested Board members, will 

adopt procedures reasonably designed 

to monitor any purchases of securities 

by a Fund in an Affiliated Underwriting 

once an investment by the Purchasing 

Fund in the securities of the Fund 

exceeds the limit of section 

12(d)(1)(A)(i) of the Act, including any 

purchases made directly from an 

Underwriting Affiliate. The Board will 

review these purchases periodically, but 

no less frequently than annually, to 

determine whether the purchases were 

influenced by the investment by the 

Purchasing Fund in a Fund. The Board 

will consider, among other things: (a) 

Whether the purchases were consistent 

with the investment objectives and 

policies of the Fund; (b) how the 

performance of securities purchased in 

an Affiliated Underwriting compares to 

the performance of comparable 

securities purchased during a 

comparable period of time in 

underwritings other than Affiliated 

Underwritings or to a benchmark such 

as a comparable market index; and (c) 

whether the amount of securities 

purchased by a Fund in Affiliated 

Underwritings and the amount 

purchased directly from an 

Underwriting Affiliate have changed 

significantly from prior years. The 

Board will take any appropriate actions 

based on its review, including, if 

appropriate, the institution of 

procedures designed to assure that 

purchases of securities in Affiliated 

Underwritings are in the best interest of 

shareholders of the Fund. 

16. Each Fund will maintain and 

preserve permanently in an easily 

accessible place a written copy of the 

procedures described in the preceding 

condition, and any modifications to 

such procedures, and will maintain and 

preserve for a period not less than six 

years from the end of the fiscal year in 

which any purchase in an Affiliated 

Underwriting occurred, the first two 

years in an easily accessible place, a 

written record of each purchase of 

securities in Affiliated Underwritings, 

once an investment by a Purchasing 

Fund in the Shares of the Fund exceeds 

the limit of section 12(d)(1)(A)(i) of the 

Act, setting forth from whom the 

securities were acquired, the identity of 

the underwriting syndicate’s members, 

the terms of the purchase, and the 

information or materials upon which 

the Board’s determinations were made. 

17. Before approving any advisory 

contract under section 15 of the Act, the 

board of directors or trustees of each 

Purchasing Management Company, 

including a majority of the disinterested 

directors or trustees, will find that the 

advisory fees charged under such 

contract are based on services provided 

that will be in addition to, rather than 

duplicative of, the services provided 

under the advisory contract(s) of any 

Fund in which the Purchasing 

Management Company may invest. 

These findings and their basis will be 

recorded fully in the minute books of 

the appropriate Purchasing Management 

Company. 

18. No Fund will acquire securities of 

any investment company or companies 

relying on sections 3(c)(1) or 3(c)(7) of 

the Act in excess of the limits contained 

in section 12(d)(1)(A) of the Act. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–20065 Filed 8–20–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60500; File No. SR–ISE– 

2009–62] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change To Clarify Certain Exchange 

Rules 

August 13, 2009. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on August 7, 

2009, the International Securities 

Exchange, LLC (the ‘‘Exchange’’ or the 

‘‘ISE’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’) 

the proposed rule change, as described 

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

have been prepared by the Exchange. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The International Securities 

Exchange, LLC (the ‘‘Exchange’’ or the 

‘‘ISE’’) to amend (sic) certain rules in 

order to clarify the definition of an 

options class, to clarify that exercise 

limit exemptions will apply to all 

members, and to clarify how a member 

may aggregate its long or short positions 

for purposes of filing these limits with 

the Exchange. The text of the proposed 

rule change is available on the 

Exchange’s Web site, http:// 

www.ise.com, 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, 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 these statements may be examined at 

the places specified in Item IV below. 

The self-regulatory organization has 

prepared summaries, set forth in 

sections A, B and C below. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to amend Rules 100(a)(6), 

100(a)(12), 414, 415, and 504 to clarify 

the definition of an options class, to 

clarify that exercise limit exemptions 

will apply to all members, and to clarify 

how a member may aggregate its long or 

short positions for purposes of filing its 

reports of these limits with the 

Exchange. The proposed rule changes 

are similar to the rules of other SROs 3

and will provide consistency and 

clarity. The proposed rule makes no 

substantive changes to the rules. 

The Exchange is seeking to amend the 

definition of options class in Rule 

100(a)(6) to mean all options contracts 

covering the same underlying security. 

Currently, the definition defines an 

options class to be all contracts of the 

same type, which is either puts or calls 

on the same underlying security. This 

change will make the definition 

consistent with the way the term is used 

throughout the rest of the Exchange 

rules. Additionally, the Exchange is 

seeking to amend the definition of a 

covered short position in Rule 

100(a)(12) and to amend Rule 504 

regarding series listings so that the 

proposed change to the definition of 

options class in 100(a)(6) does not 


srobinson on DSKHWCL6B1PROD with NOTICES