[Federal Register Volume 74, Number 175 (Friday, September 11, 2009)]
[Notices]
[Pages 46818-46820]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-21886]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60621; File No. SR-NYSEArca-2009-77]


 Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Amending NYSE Arca Options Rule 5.3(j)

September 3, 2009.
    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 August 19, 2009, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the definition of Futures-Linked 
Securities for the trading of options on Index-Linked Securities. The 
text of the proposed rule change is attached as Exhibit 5 to the 19b-4 
form. A copy of this filing is available on the Exchange's Web site at 
www.nyse.com, at the Exchange's principal office and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NYSE Arca Rules [sic] 5.3(j) designates the listing and trading of 
options on equity index-linked securities (``Equity Index-Linked 
Securities''), commodity-linked securities (``Commodity-Linked 
Securities''), currency-linked securities (``Currency-Linked 
Securities''), fixed income index-linked securities (``Fixed Income 
Index-Linked Securities''), futures-linked securities (``Futures-Linked 
Securities'') and multifactor index-linked securities (``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 
and Exchange Act of 1934). The Exchange proposes to amend the 
definition of Futures-Linked Securities for the trading of options on 
Index-Linked Securities to include products linked to CBOE Volatility 
Index (VIX) Futures. This proposal is substantially similar to the 
previously approved NYSE Arca Equities Rule 5.2(j)(6)(v).\4\
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    \4\ See Securities Exchange Act Release No. 34-58968 (November 
17, 2008), 73 FR 64647 (SR-NYSEArca-2008-111).
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    Specifically, the Exchange proposes to add the CBOE Volatility 
Index (VIX) Futures to the definition of a Futures Reference Asset in 
NYSE Arca Rule 5.3(j)(1)(E).
    Index-Linked Securities are designed for investors who desire to 
participate in a specific market segment by providing exposure to one 
or more identifiable

[[Page 46819]]

underlying securities, commodities, currencies, derivative instruments 
or market indexes of the foregoing (``Underlying Index'' or 
``Underlying Indexes''). Index-Linked Securities are the non-
convertible 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.
    Currently, the Exchange will consider listing and trading options 
on Index-Linked Securities provided the Index-Linked Securities meet 
the criteria for underlying securities set forth in Rule 5.3(a)-(b).
    Index-Linked Securities must meet the criteria and guidelines for 
underlying securities set forth in Rule 5.3(a); or the Index-Linked 
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.\5\ 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 Index-Linked 
Securities which underlie the option as described in the Index-Linked 
Securities prospectus.
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    \5\ For the purposes of Rule 5.3(j), Equity Reference Assets, 
Commodity Reference Assets, Currency Reference Assets, Fixed Income 
Reference Assets, Futures Reference Assets and Multifactor Reference 
Assets, will be collectively referred to as ``Reference Assets,'' as 
defined in NYSE Arca Equities Rule 5.2(j)(6).
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    Options on Index-Linked Securities will continue to be subject to 
all Exchange rules governing the trading of equity options. The current 
continuing or maintenance listing standards for options traded on NYSE 
Arca will continue to apply.
The VIX
    The information in this filing relating to the VIX was taken from 
the Web site of the Chicago Board Options Exchange (the ``CBOE'').
    The VIX was originally developed by the CBOE in 1993 and was 
calculated using S&P 100[reg] Index options. The current methodology 
for the VIX was introduced by the CBOE in September 2003 and it is now 
an index that uses the quotes of certain S&P 500[reg] Index (``SPX'') 
option series to derive a measure of the volatility of the U.S. equity 
market. The VIX measures market expectations of near term volatility 
conveyed by the prices of options on the SPX. It provides investors 
with up-to-the-minute market estimates of expected stock market 
volatility over the next 30 calendar days by extracting implied 
volatilities from real-time index option bid/ask quotes.
VIX Futures
    Information regarding VIX Futures can be found on the Web site of 
the CBOE Futures Exchange (the ``CFE'').
    The CFE began listing and trading VIX Futures since March 26, 2004 
under the ticker symbol VX. VIX Futures trade between the hours of 8:30 
a.m.--3:15 p.m. Central Time (Chicago Time).
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) \6\ of the Securities Exchange Act of 1934 (``Act'') 
in general, and furthers the objectives of Section 6(b)(5) \7\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanisms of a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest. The Exchange believes that the 
proposed rules applicable to trading pursuant to generic listing and 
trading criteria, together with the Exchange's surveillance procedures 
applicable to trading in the securities covered by the proposed rules, 
serve to foster investor protection.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an e-mail to <a href="/cdn-cgi/l/email-protection#0775726b622a64686a6a626973744774626429606871"><span class="__cf_email__" data-cfemail="aedcdbc2cb83cdc1c3c3cbc0daddeeddcbcd80c9c1d8">[email protected]</span></a>. Please include 
File Number SR-NYSEArca-2009-77 on the subject line.

Paper Comments

    <bullet> 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-2009-77. 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 inspection 
and copying 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. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that

[[Page 46820]]

you wish to make available publicly. All submissions should refer to 
File Number SR-NYSEArca-2009-77 and should be submitted on or before 
October 2, 2009.


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-21886 Filed 9-10-09; 8:45 am]
BILLING CODE 8010-01-P


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