8814 Federal Register / Vol. 72, No. 38 / Tuesday, February 27, 2007 / Notices 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(2). 

relevant New Fund. Therefore, 

applicants state that ‘‘in-kind’’

purchases and redemptions will afford 

no opportunity for the affiliated persons 

described above to effect a transaction 

detrimental to the other holders of its 

Shares. Applicants also believe that ‘‘inkind’’ purchases and redemptions will 

not result in abusive self-dealing or 

overreaching by affiliated persons of the 

New Funds. 

Applicants’ Conditions 

Applicants agree that any order 

granting the requested relief will be 

subject to the following conditions: 

1. Applicants will not register a series 

of the Trust not identified in the 

application, by means of filing a posteffective amendment to the Trust’s 

registration statement or by any other 

means, unless applicants have requested 

and received with respect to such series, 

either (a) exemptive relief from the 

Commission, or (b) a no-action letter 

from the Division of Investment 

Management of the Commission. 

2. The Prospectus and the Product 

Description will clearly disclose that, 

for purposes of the Act, Shares are 

issued by the New Funds 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 New Fund 

beyond the limits in section 12(d)(1), 

subject to certain terms and conditions, 

including that the registered investment 

company enter into an agreement with 

the New Fund regarding the terms of the 

investment. 

3. As long as the Trust operates in 

reliance on the requested order, the 

Shares will be listed on an Exchange. 

4. Neither the Trust nor any New 

Fund will be advertised or marketed as 

an open-end fund or a mutual fund. The 

Prospectus will prominently disclose 

that Shares are not individually 

redeemable shares and will disclose that 

the owners of the Shares may acquire 

those Shares from the Trust and tender 

those Shares for redemption to the Trust 

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 Trust 

and tender those Shares for redemption 

to the Trust in Creation Units only. 

5. Before a New Fund may rely on the 

order, the Commission will have 

approved, pursuant to rule 19b–4 under 

the Exchange Act, an Exchange rule or 

an amendment thereto, requiring 

Exchange members and member 

organizations effecting transactions in 

Shares to deliver a Product Description 

to purchasers of Shares. 

6. The Web site for the Trust, which 

will be publicly accessible at no charge, 

will contain the following information, 

on a per Share basis, for each New 

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

and the closing price (or the mid-point 

of the bid-ask spread at the time of 

calculation of such NAV (the Bid/Ask 

Price)), and a calculation of the 

premium or discount of such closing 

price (or Bid/Ask Price) against such 

NAV; and (b) data in chart format 

displaying the frequency distribution of 

discounts and premiums of the closing 

price (or Bid/Ask Price) against the 

NAV, within appropriate ranges, for 

each of the four previous calendar 

quarters (or the life of the New Fund, if 

shorter). In addition, the Product 

Description for each New Fund will 

state that the website for the Trust has 

information about the premiums and 

discounts at which the Shares have been 

traded. 

7. The Prospectus and annual report 

for each New Fund will also include: (a) 

The information listed in condition 6(b), 

(i) in the case of the 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 (or the 

life of the New Fund, if shorter); and (b) 

the following data, calculated on a per 

Share basis for one, five and ten year 

periods (or life of the New Fund, if 

shorter), (i) the cumulative total return 

and the average annual total return 

based on NAV and closing price (or Bid/ 

Ask Price), and (ii) the cumulative total 

return of the relevant Underlying Index. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–3284 Filed 2–26–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55296; File No. SR–Amex–

2007–14] 

Self-Regulatory Organizations; 

American Stock Exchange LLC; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change Relating to 

the Options Fee Schedule 

February 14, 2007. 

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 January 

30, 2007, the American Stock Exchange 

LLC (‘‘Amex’’ or ‘‘Exchange’’) 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 

Amex. The Amex has filed the proposal 

pursuant to Section 19(b)(3)(A) of the 

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

which renders the proposal effective 

upon filing with the Commission. 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 its 

options fee schedule (the ‘‘Fee 

Schedule’’) to (i) reduce the daily 

maximum aggregate fee charged for all 

dividend strategies, merger spreads and 

short stock interest spreads to $100, (ii) 

reduce the monthly maximum aggregate 

fee charged for such trades to $12,500, 

(iii) replace the term ‘‘dividend spread’’

with ‘‘dividend strategies,’’ (iv) extend 

the fee cap pilot program until February 

1, 2008, and (v) increase the licensing 

fee for the Russell Index and Russell 

ETF Options (together the ‘‘Russell 

Index Options’’) from $0.10 to $0.15 per 

contract side The text of the proposed 

rule change is available at the Exchange, 

the Commission’s Public Reference 

Room, and http://www.amex.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 

Amex included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 


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Federal Register / Vol. 72, No. 38 / Tuesday, February 27, 2007 / Notices 8815 

5A ‘‘dividend spread’’ is any trade done within 

a defined time frame in which a dividend arbitrage 

can be achieved between any two (2) deep-in-themoney options. 

6These fees are charged only to Exchange 

members. 

7See CBOE Fee Schedule and Philadelphia Stock 

Exchange Fee Schedule. 

8See Securities Exchange Act Release No. 53968 

(June 9, 2006), 71 FR 34971 (June 16, 2006) (SR–

Amex–2006–56). 

9See Securities Exchange Act Release No. 52493 

(September 22, 2005), 70 FR 56941 (September 29, 

2005) (SR–Amex–2005–087). 

10 15 U.S.C. 78f(b)(4). Section 6(b)(4) of the Act 

states that the rules of a national securities 

exchange provide for the equitable allocation of 

reasonable dues, fees, and other charges among its 

members and issuers and other persons using its 

facilities. 

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

12 17 CFR 240.19b–4(f)(2). 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. The Amex has 

prepared summaries, set forth in 

sections A, B, and C below, of the most 

significant aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Fee Cap Program 

Currently, specialists, registered 

options traders, non-member market 

makers, firms, and member and nonmember broker-dealers option 

transaction, comparison and floor 

brokerage fees are limited to an 

aggregate fee of $1,000 for all dividend 

spreads,5 merger spreads and short 

stock interest spreads executed on the 

same trading day in the same option 

class.6 In addition, such fees are also 

limited to $50,000 per month per 

initiating firm. In order to attract 

additional order flow to the Exchange, 

this proposal seeks to reduce the daily 

aggregate to $100 and the monthly 

aggregate to $12,500. The Exchange 

submits that the reduced fees may 

increase the trading opportunities for its 

members as well as enable the Exchange 

to attract new business. 

This proposal will also amend the Fee 

Schedule to expand dividend spreads to 

‘‘dividend strategies.’’ Dividend 

strategies are transactions done to 

achieve a dividend arbitrage involving 

the purchase, sale and exercise of inthe-money options of the same class, 

executed prior to the date on which the 

underlying stock goes ex-dividend. The 

proposed amendment is similar to the 

definition currently used by the Chicago 

Board Options Exchange (‘‘CBOE’’) as 

well as other exchanges.7

The fee cap program is currently 

operated on a six (6) month pilot basis. 

The proposal seeks to extend the pilot 

for an additional year, through February 

1, 2008. To date, the Exchange believes 

that the fee cap program has been 

beneficial, and submits, that a one (1) 

year extension is warranted. 

Russell Index Option License Fee 

The proposal also seeks to increase 

the licensing fees for the Russell Index 

Options. Currently, the licensing fees for 

the Russell Index Options are $0.10 per 

contract side. The Exchange proposes to 

increase this fee to $0.15 per contract 

side as a result of an increase in the 

license agreement for the Russell Index 

Options. 

As detailed in the original filing 

regarding license fees for Russell Index 

Options,8 the Exchange typically pays 

an index license fee to a third party as 

a condition to the listing and trading of 

such index options. In many cases, the 

Exchange is required to pay a significant 

licensing fee to the index provider that 

may not be reimbursed. In an effort to 

recoup the costs associated with certain 

index licenses, the Exchange has 

established a per contract licensing fee 

for the orders of specialists, registered 

options traders, firms, non-member 

market makers and broker-dealers, that 

is collected on every option transaction 

in designated products in which such 

market participant is a party.9

The purpose of the proposal is to 

charge a licensing fee of $0.15 per 

contract side for Russell Index Options 

for specialist, registered options trader, 

firm, non-member market maker and 

broker-dealer orders executed on the 

Exchange. In all cases, the fees are 

charged only to Exchange members 

through whom the orders are placed. 

The proposal will allow the Exchange 

to recoup its costs in connection with 

the index license fee for the trading of 

Russell Index Options. The Exchange 

notes that the Amex in recent years has 

revised a number of fees to better align 

Exchange fees with the actual cost of 

delivering services and reduce Exchange 

subsidies of such services. 

Implementation of this proposal is 

consistent with the reduction and/or 

elimination of these subsidies. 

The Exchange asserts that the 

proposal is equitable as required by 

Section 6(b)(4) of the Act.10 Further, the 

Exchange believes that charging an 

options licensing fee, where applicable, 

to all market participant orders except 

for customer orders is reasonable given 

the competitive pressures in the 

industry. 

2. Statutory Basis 

The Exchange asserts that the 

proposal is equitable as required by 

Section 6(b)(4) of the Act. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The proposed rule change does not 

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 

The foregoing proposed rule change is 

subject to Section 19(b)(3)(A)(ii) of the 

Act 11 and subparagraph (f)(2) of Rule 

19b–4 thereunder 12 because it 

establishes or changes a due, fee, or 

other charge applicable only to a 

member imposed by the self-regulatory 

organization. Accordingly, the proposal 

is effective upon the Commission’s 

receipt of the filing. At any time within 

60 days of the filing of the proposed rule 

change, the Commission may summarily 

abrogate 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 

rule-comments@sec.gov. Please include 

File Number SR–Amex–2007–14 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 


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8816 Federal Register / Vol. 72, No. 38 / Tuesday, February 27, 2007 / Notices 

13 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. 54987 

(December 20, 2006), 71 FR 78481. 

4 15 U.S.C. 78f(b)(3). 

5Further, the Exchange has represented that 

Permit holders would be eligible to sit on 

disciplinary panels and on any committee(s) that 

All submissions should refer to File 

Number SR–Amex–2007–14. 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. Copies of the filing also will be 

available for inspection and copying at 

the principal office of the Amex. 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–Amex–2007–14 and should 

be submitted on or before March 20, 

2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.13

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–3285 Filed 2–26–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55326; File No. SR–CBOE–

2006–107] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Order Granting Approval 

to Proposed Rule Change Regarding a 

Permit Program for CBSX 

February 21, 2007. 

I. Introduction 

On December 18, 2006, the Chicago 

Board Options Exchange, Incorporated 

(‘‘CBOE’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

establish a permit program for CBSX, 

the Exchange’s proposed stock-trading 

facility (‘‘Permit Program’’). The 

proposed rule change was published for 

comment in the Federal Register on 

December 29, 2006.3 The Commission 

received no comments regarding the 

proposal. This order approves the 

proposed rule change. 

II. Description of the Proposal 

CBSX will be a facility of the 

Exchange and will serve as the 

Exchange’s vehicle for trading nonoption securities. The Exchange 

proposed to modify its Constitution and 

Rules to establish the Permit Program 

and thereby allow non-CBOE seat 

holders access to CBSX. The Exchange 

noted that expanding access to CBSX 

beyond CBOE’s options user base would 

enhance liquidity on CBSX and make it 

a more attractive stock trading venue. 

The principal features of the Permit 

Program are as follows: 

• The permits may only be used for 

trading stock on CBSX. A Permit does 

not entitle the holder to trade options on 

CBOE or to physically enter an option 

trading post on the trading floor; 

• Up to 100 permits may be issued; 

• The Permit Program could be 

terminated by the Exchange pursuant to 

a rule filing approved by the 

Commission. This provision is 

incorporated in the Exchange’s 

Constitution to allow the CBSX Permit 

Program to be terminated without a 

corresponding membership vote (i.e., 

the Exchange’s membership has already 

approved the notion that a future 

termination of the Permit Program could 

occur without another membership 

vote); 

• Permit holders would be deemed 

statutory members of CBOE. 

Accordingly, they would have the same 

petition and voting rights as regular 

members except for matters relating to 

Exchange ownership (specifically, 

matters relating to demutualization, 

mergers, consolidations, dissolution, 

liquidation, transfer, or conversion of 

assets of the Exchange), and except for 

matters relating the Chicago Board of 

Trade exercise right; 

• Permit holders would have no 

interest in the assets or property of 

CBOE and would have no right to share 

in any distribution by the Exchange; 

• Permit holders (or an executive 

officer of a Permit holder) would be 

eligible to run for an at-large director 

position and a Nominating Committee 

position; 

• Permit holders would have to be 

registered broker-dealers; 

• Permits would not be transferable; 

and 

• All Permits would expire every 

October and would be eligible for 

renewal. 

If there are fewer available CBSX 

Permits than qualified applicants, the 

Exchange will determine which of the 

applicants to approve by lot. Applicants 

that are affiliated will be deemed one 

applicant in cases where there are fewer 

available CBSX Permits than qualified 

applicants. 

A Permit holder and its associated 

persons must comply with and be 

subject to CBOE Rules to the same 

extent that Exchange members and their 

associated persons are obligated to 

comply with and are subject to 

Exchange Rules. A Permit holder and its 

associated persons shall also be subject 

to the disciplinary, appeals, and 

arbitration jurisdiction and rules of the 

Exchange and entitled to the procedural 

rights under those rules to the same 

extent that Exchange members and their 

associated persons are subject to such 

jurisdiction and rules and entitled to 

such procedural rights. 

III. Discussion 

The Commission finds that the 

Exchange’s proposal relating to CBSX 

Permits is consistent with Section 

6(b)(3) of the Act,4 which requires that 

the rules of the exchange assure a fair 

representation of its members in the 

selection of its directors and 

administration of its affairs and provide 

that one or more directors shall be 

representative of issuers and investors 

and not be associated with a member of 

the exchange, broker, or dealer. The 

Commission notes that, for purposes of 

the Act, Permit holders would be 

considered members of CBOE. Permit 

holders would be eligible to be 

nominated for an at-large position on 

CBOE’s Board of Directors and to serve 

on the Exchange’s Nominating 

Committee and would have the same 

petition and voting rights as CBOE 

members except for matters relating to 

Exchange ownership (specifically, 

matters relating to demutualization, 

mergers, consolidations, dissolution, 

liquidation, transfer, or conversion of 

assets of the Exchange), and except for 

matters relating to the Chicago Board of 

Trade exercise right.5


cprice-sewell on PROD1PC62 with NOTICES