[Federal Register Volume 72, Number 95 (Thursday, May 17, 2007)]
[Notices]
[Pages 27868-27871]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-9464]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55752; File No. SR-CBOE-2007-44]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Order Granting Accelerated Approval 
of Proposed Rule Change to Trade the streetTRACKS Gold Shares Fund 
Pursuant to Unlisted Trading Privileges

May 11, 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 May 8, 2007, the Chicago Board Options Exchange, Incorporated (the 
``Exchange'' or ``CBOE''), filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been substantially prepared by 
the Exchange. This notice and order provides notice of the proposed 
rule change and approves the proposal on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 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 Chicago Board Options Exchange, Incorporated proposes to: (1) 
trade on its stock trading facility, CBOE Stock Exchange (``CBSX''), 
the streetTRACKS Gold Shares (``GLD'' or ``Shares'') pursuant to 
unlisted trading privileges (``UTP''), and (2) adopt Exchange Rule 
54.8, which governs the trading of commodity-based trust shares. The 
text of the proposed rule change is available on the Exchange's Web 
site (http://www.cboe.org/Legal), 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 Exchange 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 III below. The Exchange 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
    The Exchange is proposing to trade the Shares on CBSX pursuant to 
UTP. The Shares represent fractional, undivided beneficial ownership 
interests in the streetTRACKS Gold Trust (``Trust''). The Trust is an 
investment trust, the sole assets of which are gold bullion, and from 
time to time, cash.\3\ The Commission previously approved the original 
listing and trading of the Shares on the New York Stock Exchange 
(``NYSE'').\4\ The Exchange deems the Shares to be equity securities, 
thus rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. The trading hours for 
the Shares on the Exchange would be from 8:15 a.m. until 3:15 p.m. 
(Central Time).
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    \3\ Additional information regarding the streetTRACKS Gold 
Shares is at http://www.streettracksgoldshares.com.
    \4\ See Securities Exchange Act Release No. 50603 (October 28, 
2004), 69 FR 64614 (November 5, 2004) (SR-NYSE-2004-22).
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    The last-sale price for the Shares is disseminated over the 
Consolidated Tape. Gold pricing information based on the spot price for 
a troy ounce of gold from various financial information service 
providers, such as Reuters and Bloomberg, is available on a 24-hour 
basis. Complete real-time data for gold futures and options prices 
traded on the COMEX (a division of the NYMEX) is available by 
subscription from Reuters and Bloomberg. The NYMEX also provides 
delayed futures and options information on current and past trading 
sessions and market news free of charge on its Web site. CBOE, via a 
link from its own public Web site (http://www.cboe.com) to the Trust 
Web site (http://www.streettracksgoldshares.com), will provide at no 
charge continuously updated bids and offers indicative of the spot 
price of gold.\5\
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    \5\ The gold spot price at the Trust's Web site will be provided 
by The Bullion Desk (http://www.thebulliondesk.com). The Trust's Web 
site will indicate that there are other sources for obtaining the 
gold spot price. If the Trust's Web site should cease to provide 
this indicative spot price from an unaffiliated source (and the 
intraday indicative value) of the Shares, CBOE would cease to trade 
the Shares.
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    The Trust Web site also will provide a calculation of the estimated 
NAV (also known as the Intraday Indicative Value or IIV) of a Share as 
calculated by multiplying the indicative spot price of gold by the 
quantity of gold backing

[[Page 27869]]

each Share. Comparing the IIV with the last sale price of the Shares 
helps an investor to determine whether, and to what extent, Shares may 
be selling at a premium or a discount to the NAV. Although provided 
free of charge, the indicative spot price and IIV per Share will be 
provided on an essentially real-time basis.\6\ The Trust Web site 
provides the NAV of the Trust as calculated each business day by the 
Sponsor. In addition, the Trust Web site contains the following 
information, on a per-Share basis, for the Trust: (a) The IIV as of the 
close of the prior business day and the midpoint of the bid/ask price 
\7\ in relation to such IIV (``Bid/Ask Price''), and a calculation of 
the premium or discount of such price against such IIV; and (b) data in 
chart format displaying the frequency distribution of discounts and 
premiums of the Bid/Ask Price against the IIV, within appropriate 
ranges, for each of the four previous calendar quarters. The Trust Web 
site also provides the Trust's prospectus, as well as the two most 
recent reports to stockholders. The Trust Web site provides the last 
sale price of the Shares as traded in the U.S. market, subject to a 20-
minute delay.\8\
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    \6\ The Trust's Web site, to which the CBOE Web site will link, 
will disseminate an indicative spot price of gold and the IIV, and 
indicate that these values are subject to an average delay of five 
to ten seconds.
    \7\ The bid/ask price is determined using the highest bid and 
lowest offer on the Consolidated Tape as of the time of calculation 
of the closing day IIV.
    \8\ The last sale price of the Shares in the secondary market is 
available on a real-time basis for a fee from regular data vendors.
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    In connection with the trading of the Shares, CBOE would inform its 
members in an Information Circular of the special characteristics and 
risks associated with trading the Shares, such as loss, damage, or 
theft of the Trust's gold, and unanticipated problems related to the 
mechanisms and procedures that were specifically developed for this 
relatively new securities product. CBOE also would require its members 
to deliver a prospectus or product description to investors purchasing 
Shares prior to or concurrently with a transaction in Shares. In 
addition, CBOE Rule 53.6 requires member organizations to have a 
reasonable basis for recommending the Shares when recommending a 
transaction in the Shares.
    CBOE believes that its surveillance procedures are adequate to 
address any concerns about the trading of the Shares on the Exchange 
because those procedures will be comparable to those used for exchange-
traded funds and trust-issued receipts currently trading on the 
Exchange, and will incorporate and rely upon existing Exchange 
surveillance procedures governing equities. In addition, for 
intermarket surveillance purposes, the Exchange has entered into a 
reciprocal Memorandum of Understanding with NYMEX for the sharing of 
information related to any financial instrument based, in whole or in 
part, upon an interest in or performance of gold.
    Further, proposed CBOE Rule 54.8 would impose certain obligations 
on Market-Makers that would apply in connection with trading the 
Shares. CBOE Rule 54.8(e) would require that a Market-Maker in the 
Shares provide the Exchange with information related to its trading in 
physical gold, gold futures contracts, options on gold futures, or any 
other gold derivatives. CBOE Rule 54.8(g) would prohibit a Market-Maker 
in the Shares from using any material non-public information received 
from any person associated with the Market-Maker or employee of such 
person regarding trading by such person or employee in physical gold, 
gold futures contracts, options on gold futures, or any other gold 
derivatives. In addition, CBOE Rule 54.8(d) would prohibit a Market-
Maker in the Shares from being affiliated with a market maker in 
physical gold, gold futures contracts, options on gold futures, or any 
other gold derivatives unless the specified information barriers are in 
place.
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares. Trading may be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable. In addition, trading in the Shares 
would be subject to trading halts caused by extraordinary market 
volatility pursuant to the Exchange's ``circuit breaker'' rule.\9\
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    \9\ CBOE Rule 6.3B.
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    Moreover, the Exchange represents that it would cease trading the 
Shares if the listing market stops trading the Shares because of a 
regulatory halt similar to a halt based on CBOE Rule 6.3. UTP trading 
in the Shares is also governed by the trading halts provisions of CBOE 
Rule 52.3 relating to temporary interruptions in the calculation or 
wide dissemination of the IIV.
2. Statutory Basis
    CBOE believes that the proposal is consistent with Section 6(b) of 
the Act \10\ in general, and Section 6(b)(5) of the Act \11\ in 
particular, in that the proposal is designed to promote just and 
equitable principles of trade, remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and 
protect investors and the public interest. In addition, CBOE believes 
that the proposal is consistent with Rule 12f-5 under the Act \12\ 
because it deems the Shares to be equity securities, thus rendering 
trading in the Shares subject to the Exchange's existing rules 
governing the trading of equity securities.
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    \10\ 15 U.S.C. 78s(b).
    \11\ 15 U.S.C. 78s(b)(5).
    \12\ 17 CFR 240.12f-5.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE does not believe that the proposed rule change will impose any 
burden on competition 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

    The Exchange neither solicited nor received comments on the 
proposal.

III. 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#c8babda4ade5aba7a5a5ada6bcbb88bbadabe6afa7be"><span class="__cf_email__" data-cfemail="7705021b125a14181a1a121903043704121459101801">[email protected]</span></a>. Please include 
File Number SR-CBOE-2007-44 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2007-44. 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

[[Page 27870]]

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 such 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 you wish to make available publicly. All 
submissions should refer to File Number SR-CBOE-2007-44 and should be 
submitted on or before June 7, 2007.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\13\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\14\ which 
requires that an exchange have rules designed, among other things, 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 Commission believes that this proposal should benefit 
investors by increasing competition among markets that trade the 
Shares.
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    \13\ In approving this rule change, the Commission notes that it 
has considered the proposal's impact on efficiency, competition, and 
capital formation. See 15 U.S.C. 78c(f).
    \14\ 15 U.S.C. 78f(b)(5).
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    In addition, the Commission finds that the proposal is consistent 
with Section 12(f) of the Act,\15\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\16\ The Commission notes that it previously approved the 
listing and trading of the Shares on the NYSE.\17\ The Commission also 
finds that the proposal is consistent with Rule 12f-5 under the 
Act,\18\ which provides that an exchange shall not extend UTP to a 
security unless the exchange has in effect a rule or rules providing 
for transactions in the class or type of security to which the exchange 
extends UTP. The Exchange has represented that it meets this 
requirement because it deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities.
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    \15\ 15 U.S.C. 78l(f).
    \16\ Section 12(a) of the Act, 15 U.S.C. 78l(a), generally 
prohibits a broker-dealer from trading a security on a national 
securities exchange unless the security is registered on that 
exchange pursuant to Section 12 of the Act. Section 12(f) of the Act 
excludes from this restriction trading in any security to which an 
exchange ``extends UTP.'' When an exchange extends UTP to a 
security, it allows its members to trade the security as if it were 
listed and registered on the exchange even though it is not so 
listed and registered.
    \17\ See supra note 4.
    \18\ 17 CFR 240.12f-5.
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    The Commission further believes that the proposal is consistent 
with Section 11A(a)(1)(C)(iii) of the Act,\19\ which sets forth 
Congress' finding that it is in the public interest and appropriate for 
the protection of investors and the maintenance of fair and orderly 
markets to assure the availability to brokers, dealers, and investors 
of information with respect to quotations for and transactions in 
securities. Quotations for and last-sale information regarding the 
Shares are disseminated through the facilities of the CTA and the 
Consolidated Quotation System. Furthermore, as noted by the Exchange, 
various means exist for investors to obtain reliable gold price 
information and thereby to monitor the underlying spot market in gold 
relative to the NAV of their Shares. In addition, the IIV of each Fund 
is disseminated every 15 seconds throughout the trading day by the 
national securities exchange on which the Fund is listed or by other 
information providers or market data vendors.
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    \19\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    Furthermore, the Commission believes that the proposal is 
reasonably designed to preclude trading of the Shares when transparency 
is impaired. CBOE Rule 52.3 sets forth trading halt procedures when 
CBOE trades an ETF pursuant to UTP. Under this rule, if the listing 
market halts trading when the IIV is not being calculated or 
disseminated, CBOE also would halt trading in the Shares. This rule is 
substantially similar to those recently adopted by other exchanges and 
found by the Commission to be consistent with the Act.\20\
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    \20\ See e.g., NYSE Arca Equities Rule 7.34; Securities Exchange 
Act Release No. 54997 (December 21, 2006), 71 FR 78501 (December 29, 
2006).
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    The Commission notes that, if the Shares should be delisted by the 
listing market, the Exchange would no longer have authority to trade 
the Shares pursuant to this order.
    In support of this proposal, the Exchange has made the following 
representations:
    1. The Exchange's surveillance procedures are adequate to properly 
monitor Exchange trading of the Shares and to deter and detect 
violations of Exchange rules. Among other things, the Exchange entered 
into a reciprocal Memorandum of Understanding with NYMEX for the 
sharing of information related to any financial instrument based, in 
whole or in part, upon an interest in or performance of gold.
    2. Prior to the commencement of trading, the Exchange would inform 
its members and member organizations in an Information Circular of the 
special characteristics and risks associated with trading the Shares.
    3. The Information Circular would include the requirement that 
members and member firms deliver a prospectus to investors purchasing 
newly issued Shares prior to or concurrently with the confirmation of a 
transaction.
    This approval order is conditioned on the Exchange's adherence to 
these representations.
    Finally, the Commission believes that proposed CBOE Rule 54.8, 
which imposes information barriers and trading restrictions on a member 
acting as a registered market maker in the Shares, is consistent with 
the Act. The Commission notes that CBOE Rule 54.8 is substantially 
similar to rules of other exchanges that previously have been approved 
by the Commission.\21\
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    \21\ See, e.g., Nasdaq Rule 4630; Securities Exchange Act 
Release No. 54765 (November 16, 2006), 71 FR 67668 (November 22, 
2006) (approving SR-Nasdaq-2006-009).
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    The Commission finds good cause for approving this proposal before 
the thirtieth day after the publication of notice thereof in the 
Federal Register. As noted previously, the Commission previously found 
that the listing and trading of the Shares on the NYSE is consistent 
with the Act. The Commission presently is not aware of any regulatory 
issue that should cause it to revisit that finding or would preclude 
the trading of the Shares on the Exchange pursuant to UTP. Therefore, 
accelerating approval of this proposal should benefit investors by 
creating, without undue delay, additional competition in the market for 
the Shares.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\22\ that the proposed rule change (SR-CBOE-2007-

[[Page 27871]]

44) be and it hereby is, approved on an accelerated basis.
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    \22\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
 [FR Doc. E7-9464 Filed 5-16-07; 8:45 am]
BILLING CODE 8010-01-P


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