Federal Register / Vol. 77, No. 51 / Thursday, March 15, 2012 / Notices 15409 

16Nasdaq’s DOTM routing strategy posts on a 

primary listing market for the open and then acts 

like Nasdaq’s STGY routing strategy for the rest of 

the trading session. See NASDAQ Rule 4758 and 

NASDAQ Pricing List at: http:// 

www.nasdaqtrader.com/ 

Trader.aspx?id=PriceListTrading2. 

17 15 U.S.C. 78s(b)(3)(A). 

18 17 CFR 19b–4(f)(2). 

19 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

with how other exchanges pass through 

charges plus or minus a differential for 

orders routed to a different exchange. 

The rate represents a flat routing rate for 

EDGA members. The flat-rate provides 

simplicity for Members instead of 

passing through the actual rates that 

EDGA receives from various 

destinations on its schedule. This type 

of rate is similar to other rates that 

EDGA charges, such as the flat rates for 

the ROUT routing strategy (yielding Flag 

RT and priced at $0.0025 per share) and 

for Flag 7 executions ($0.0027 per 

share). In this rate, EDGA takes into 

account the rates that it is charged or 

rebated when routing to other 

destinations. It is also consistent with 

the processing of similar routing 

strategies by EDGA’s competitors, such 

as Nasdaq’s DOTM routing strategy 16

for which Nasdaq charges $0.0030 per 

share. The Exchange believes that the 

proposed fee is non-discriminatory in 

that it applies uniformly to all Members. 

In addition, the Exchange believes 

that the proposed pass-through of rates 

for Flags RZ, 9, 10, RB, RC, RM, RS, RW, 

and RY represent an equitable allocation 

or reasonable dues, fees and other 

charges since it reflects the pass-through 

of the rates associated with transactions 

done on other exchanges, as described 

above. In addition, EDGA believes that 

it is reasonable and equitable to passthrough certain rates to its Members. 

The Exchange also believes that the 

proposed pass-through of rates is nondiscriminatory because they apply to all 

Members. 

The Exchange also notes that it 

operates in a highly competitive market 

in which market participants can 

readily direct order flow to competing 

venues if they deem fee levels at a 

particular venue to be excessive. The 

proposed rule change reflects a 

competitive pricing structure designed 

to incent market participants to direct 

their order flow to the Exchange. The 

Exchange believes that the proposed 

rates are equitable and nondiscriminatory in that they apply 

uniformly to all Members. The 

Exchange believes the fees and credits 

remain competitive with those charged 

by other venues and therefore continue 

to be reasonable and equitably allocated 

to Members. 

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 

The Exchange has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any 

unsolicited written comments from 

members or other interested parties. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 19(b)(3) of 

the Act 17 and Rule 19b–4(f)(2) 18

thereunder. At any time within 60 days 

of the filing of such proposed rule 

change, the Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rulecomments@sec.gov. Please include File 

Number SR–EDGA–2012–07 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–EDGA–2012–07. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

10 a.m. and 3 p.m. Copies of the filing 

also will be available for inspection and 

copying at the principal office of the 

Exchange. 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–EDGA– 

2012–07 and should be submitted on or 

before April 5, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–6237 Filed 3–14–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66569; File No. SR–Phlx– 

2012–28] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing of Proposed Rule Change 

Relating to the MSCI EAFE Index 

March 9, 2012. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on March 1, 

2012, NASDAQ OMX PHLX LLC 

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

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I and 

II below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 


srobinson on DSK4SPTVN1PROD with NOTICES
15410 Federal Register / Vol. 77, No. 51 / Thursday, March 15, 2012 / Notices 

3The Exchange has entered into a license 

agreement with MSCI Inc. (‘‘MSCI’’) to list this 

product. 

4FLEX options are flexible exchange-traded 

index, equity, or currency option contracts that 

provide investors the ability to customize basic 

option features including size, expiration date, 

exercise style, and certain exercise prices. FLEX 

index options may have expiration dates within five 

years. See Exchange Rules 1079 and 1101A. 

5LEAPS or Long Term Equity Anticipation 

Securities are long term options that generally 

expire from twelve to thirty-nine months from the 

time they are listed. 

6The MSCI EAFE ETF is one of the top ten in 

the United States based on assets and trades a large 

volume with respect to ETFs today. 

7The free float adjusted market capitalization is 

used to calculate the weights of the securities in the 

indices. MSCI defines the free float of a security as 

the proportion of shares outstanding that is deemed 

to be available for purchase in the public equity 

markets by international investors. 

8MSCI is a provider of investment decision 

support tools. 

9Additional information about the methodology 

for calculating the MSCI EAFE Index can be found 

at: http://www.msci.com/eqb/methodology/ 

meth_docs/MSCI_May11_GIMIMethod.pdf. 10A divisor is an arbitrary number chosen at the 

starting date of an index to fix the index starting 

value. The divisor is adjusted periodically when 

capitalization amendments are made to the 

constituents of the index in order to allow the index 

value to remain comparable over time. Without a 

divisor the index value would change when 

corporate actions took place and would not reflect 

the true value of an underlying portfolio based 

upon the index. 

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 

Exchange Rules 1079, 1009A and 1101A 

to list and trade new options on the 

MSCI EAFE Index based upon the Full 

Value MSCI EAFE Index (‘‘Full Value 

MSCI EAFE Index’’).3

The Exchange also proposes to create 

a new Rule 1109A entitled ‘‘MSCI EAFE 

Index’’ which provides additional 

detailed information pertaining to the 

index as required by the licensor. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.nasdaqtrader.com/ 

micro.aspx?id=PHLXRulefilings, at the 

principal office of the Exchange, 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 IV 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 purpose of the proposed rule 

change is to amend Exchange Rules 

1079 (FLEX Index, Equity and Currency 

Options), 1009A (Designation of the 

Index) and 1101A (Terms of Option 

Contracts) to list and trade P.M. cashsettled, European-style options, 

including FLEX 4 options and LEAPS,5

on the MSCI EAFE (Europe, Australasia, 

and the Far East) Index. Specifically, the 

Exchange proposes to list and trade 

long-term options on the Full Value 

MSCI EAFE Index (‘‘MSCI EAFE 

LEAPS’’).6 The Exchange also proposes 

to create a new Rule 1109A entitled 

‘‘MSCI EAFE Index’’ which provides 

additional detailed information 

pertaining to the index as required by 

the licensor including, but not limited 

to, liability and other representations on 

the part of MSCI Inc. 

The MSCI EAFE Index is a free floatadjusted market capitalization index 7

that is designed to measure the equity 

market performance of developed 

markets, excluding the U.S. and Canada. 

The MSCI EAFE Index consists of 

component securities from the following 

twenty-two (22) developed market 

countries: Australia, Austria, Belgium, 

Denmark, Finland, France, Germany, 

Greece, Hong Kong, Ireland, Israel, Italy, 

Japan, the Netherlands, New Zealand, 

Norway, Portugal, Singapore, Spain, 

Sweden, Switzerland, and the United 

Kingdom. 

Index Design and Composition 

The MSCI EAFE Index is designed to 

measure international equity 

performance. It consists of component 

securities from countries that represent 

developed markets outside of North 

America: Europe, Australasia and the 

Far East. The Index is maintained by 

MSCI.8 The Index was launched on 

December 31, 1969. 

The MSCI EAFE Index is reviewed on 

a semi-annual basis. The index review 

is based on MSCI’s Global Investable 

Markets Indices Methodology. A 

description of the methodology is 

available at http://www.msci.com/eqb/ 

methodology/meth_docs/ 

MSCI_May11_GIMIMethod.pdf. The 

MSCI EAFE Index consists of large and 

midcap components from countries 

classified by MSCI as developed and 

excludes North America. 

Index Calculation and Index 

Maintenance 

The base index value of the MSCI 

EAFE Index was 100, as of December 31, 

1969. On June 1, 2011, the index value 

of the MSCI EAFE Index was 1727.187. 

The MSCI EAFE Index is calculated in 

U.S. Dollars on a real time basis from 

the open of the first market on which 

the components are traded to the closing 

of the last market on which the 

components are traded. The 

methodology used to calculate the value 

of the MSCI EAFE Index is similar to the 

methodology used to calculate the value 

of other well-known marketcapitalization weighted indexes.9 The 

level of the MSCI EAFE Index reflects 

the free float-adjusted market value of 

the component stocks relative to a 

particular base date and is computed by 

dividing the total market value of the 

companies in the MSCI EAFE index by 

the index divisor.10

Static data is distributed daily to 

clients through MSCI as well as through 

major quotation vendors, including 

Bloomberg L.P. (‘‘Bloomberg’’), FactSet 

Research Systems, Inc. (‘‘FactSet’’) and 

Thomson Reuters (‘‘Reuters’’). Real time 

data is distributed at least every 15 

seconds using MSCI’s real-time 

calculation engine to Reuters, 

Bloomberg, SIX Telekurs and FactSet. 

The MSCI EAFE Index is monitored 

and maintained by MSCI. Adjustments 

to the MSCI EAFE Index are made on a 

daily basis with respect to corporate 

events and dividends. The MSCI EAFE 

Index is generally updated on a 

quarterly basis in February, May, 

August and November of each year to 

reflect amendments to shares 

outstanding and free float and full index 

reviews are conducted on a semi-annual 

basis in May and November of each year 

for purposes of rebalancing the index. 

Exercise and Settlement Value 

The settlement value for expiring 

options on the MSCI EAFE Index would 

be based on the closing prices of the 

component stocks on the last trading 

day prior to expiration, usually a Friday. 

The last trading day for expiring 

contracts is the last business day prior 

to expiration, usually the third Friday of 

the expiration month. The index 

multiplier is $100. The Options Clearing 

Corporation would be the issuer and 

guarantor. 

Contract Specifications 

The MSCI EAFE Index is a broadbased index, as defined in Exchange 


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 51 / Thursday, March 15, 2012 / Notices 15411 

11See proposed Exchange Rule 1009A(h)(i)(2). 

12See Exchange Rule 1000A(b)(11), which 

defines a broad-based index as an index designed 

to be representative of a stock market as a whole 

or of a range of companies in unrelated industries. 

13The settlement value of a P.M. settled index 

option is based on closing prices of the component 

securities. 

14The Exchange’s Gold/Silver SectorSM Index 

(‘‘XAU’’) is a P.M. settled capitalization-weighted 

index. 

15NYSE Liffe futures based on the MSCI EAFE 

Index utilize these P.M. closing prices. 

16MSCI EAFE ETF is one of the top ten in the 

United States based on assets. 

17See generally Exchange Rules 1000A through 

1108A (Rules Applicable to Trading Options on 

Indices) and Exchange Rules 1000 through 1094 

(Rules Applicable to Trading of Options on Stocks, 

Exchange-Traded Fund Shares and Foreign 

Currencies). 

18See Exchange Rules 721 (Proper and Adequate 

Margin) and 1047A (Trading Rotations, Halts or 

Reopenings). 

19The exercise limits would also be 25,000 

contracts as per Exchange Rule 1002A. 

20See Exchange Rule 721. 

21See Exchange Rule 1034 and proposed rule 

1101A. 

22See Exchange Rule 1101A. 

Rule 1000A. Options on the MSCI EAFE 

Index would be European-style and 

P.M. cash-settled.11 The Exchange’s 

standard trading hours for index options 

(9:30 a.m. to 4:15 p.m. E.T. 

(Philadelphia Time)), as set forth in 

Exchange Rules 101 and 1101A at 

Commentary .01, would apply to 

options on the MSCI EAFE Index. The 

expiration date for this index is the 

Saturday following the third Friday of 

the expiration month. 

The Exchange also notes that the 

MSCI EAFE Index is a broad-based 

index as defined in Exchange Rule 

1000A(b)(11).12 In addition, the 

Exchange proposes to create specific 

listing and maintenance standards for 

options on the MSCI EAFE Index in 

Exchange Rule 1009A(h). Specifically, 

in proposed Rule 1009A(h)(i)(1) through 

(10) the Exchange proposes to require 

that the following conditions are 

satisfied: (1) The index is broad-based, 

as defined in Rule 1000A(b)(11); (2) 

Options on the index are designated as 

P.M.-settled index options; (3) The 

index is capitalization-weighted, priceweighted, modified capitalizationweighted or equal dollar-weighted; (4) 

The index consists of 500 or more 

component securities; (5) All of the 

component securities of the index will 

have a market capitalization of greater 

than $100 million; (6) No single 

component security accounts for more 

than fifteen percent (15%) of the weight 

of the index, and the five highest 

weighted component securities in the 

index do not, in the aggregate, account 

for more than fifty percent (50%) of the 

weight of the MSCI EAFE Index; (7) 

Non-U.S. component securities (stocks 

or ADRs) that are not subject to 

comprehensive surveillance agreements 

do not, in the aggregate, represent more 

than twenty percent (20%) of the weight 

of the index; (8) The current index value 

is widely disseminated at least once 

every fifteen (15) seconds by one or 

more major market data vendors during 

the time options on the index are traded 

on the Exchange; (9) The Exchange 

reasonably believes it has adequate 

system capacity to support the trading 

of options on the index, based on a 

calculation of the Exchange’s current 

Independent System Capacity Advisor 

(ISCA) allocation and the number of 

new messages per second expected to be 

generated by options on such index; and 

(10) The Exchange has written 

surveillance procedures in place with 

respect to surveillance of trading of 

options on the index. 

Additionally, the Exchange proposes 

to require the following maintenance 

requirements, as set forth in proposed 

Rule 1009A, for the MSCI EAFE Index 

options: (1) the conditions set forth in 

subparagraphs (h)(i)(1), (2), (3), (4), (7), 

(8), (9) and (10) must continue to be 

satisfied. The conditions set forth in 

subparagraphs (h)(i)(5) and (6), must be 

satisfied only as of the first day of 

January and July in each year; and (2) 

the total number of component 

securities in the index may not increase 

or decrease by more than thirty-five 

percent (35%) from the number of 

component securities in the index at the 

time of its initial listing. 

The Exchange believes that the 

modified initial listing requirements are 

appropriate for trading options on the 

MSCI EAFE Index for various reasons. 

The Exchange believes that a P.M. 

settlement 13 is appropriate given the 

nature of this index, which 

encompasses multiple markets around 

the world.14 Specifically, the MSCI 

EAFE Index components open with the 

start of trading in Asia at 6 p.m. E.T. 

(prior day) and closes with the end of 

trading in Europe at 12:30 p.m. E.T. (the 

next day) as closing prices from Ireland 

are accounted for in the closing 

calculation. The closing index level 

value is distributed by MSCI between 

2:00 and 2:30 p.m. E.T. each trading 

day.15 The index has a higher market 

capitalization requirement than other 

broad based indexes. The MSCI EAFE 

Index currently contains more than 900 

components and no single component 

comprises more than 5% of the index, 

making it not easily subject to market 

manipulation. Therefore, because the 

MSCI EAFE Index has a large number of 

component securities, representative of 

many countries, and trades a large 

volume with respect to ETFs today,16

the Exchange believes that the initial 

listing requirements are appropriate to 

trade options on this index. In addition, 

similar to other broad based indexes, the 

Exchange proposes various maintenance 

requirements, which require continual 

compliance and periodic compliance. 

Exchange Rules that apply to the 

trading of options on broad-based 

indexes also would apply to options on 

the Full Value MSCI EAFE Index.17 The 

trading of these options also would be 

subject to, among others, Exchange 

Rules governing margin requirements 

and trading halt procedures for index 

options.18 The Exchange would apply 

the same position limits as exist today 

for broad-based index options, namely 

25,000 contracts on the same side of the 

market for the MSCI EAFE Index 

option.19 All position limit hedge 

exemptions will apply. The Exchange 

proposes to apply existing index option 

margin requirements for the purchase 

and sale of options on the MSCI EAFE 

Index.20 In addition, the Exchange 

proposes to amend Rule 1079(d)(1) to 

also note that with respect to FLEX 

options on the MSCI EAFE index, the 

same number of contracts, 25,000, 

would apply with respect to the 

position limit. 

The Exchange proposes to set strike 

price intervals for these options at $2.50 

when the strike price of Full Value 

MSCI EAFE Index option is below $200, 

and at least $5.00 strike price intervals 

otherwise. The minimum tick size for 

series trading below $3 would be $0.05 

and for series trading at or above $3 

would be $0.10.21

Pursuant to Exchange Rule 1101A, the 

Exchange proposes to open at least one 

expiration month and one series for 

each class of index options open for 

trading on the Exchange.22 The 

Exchange may open additional series of 

index options to maintain an orderly 

market, to meet customer demand or 

when the market price of the underlying 

index moves more than five strike prices 

from the initial exercise price or prices. 

New series of options may be added 

until the beginning of the month in 

which the options contract will expire. 

Additionally, due to unusual market 

conditions, the Exchange, in its 

discretion, may add a new series of 

options on the index until five (5) 

business days prior to expiration. Also, 

the opening of a new series of options 

shall not affect the series of options of 

the same class previously opened. 

Options on the MSCI EAFE Index 

would be subject to the same rules that 


srobinson on DSK4SPTVN1PROD with NOTICES
15412 Federal Register / Vol. 77, No. 51 / Thursday, March 15, 2012 / Notices 

23See Exchange Rule 1024. 

24See Exchange Rule 1026. 

25See Exchange Rule 1027. Further, this Rule 

states that discretionary accounts shall receive 

frequent review by a Registered Options Principal 

qualified person specifically delegated such 

responsibilities under Rule 1025, who is not 

exercising the discretionary authority. 

26 15 U.S.C. 78f(b). 

27 15 U.S.C. 78f(b)(5). 

28The MSCI EAFE ETF is one of the top ten in 

the United States based on assets. 

29See generally Exchange Rules 1000A through 

1108A (Rules Applicable to Trading Options on 

Indices) and Exchange Rules 1000 through 1094 

(Rules Applicable to Trading of Options on Stocks, 

Exchange-Traded Fund Shares and Foreign 

Currencies). 

30See Exchange Rules 721 (Proper and Adequate 

Margin) and 1047A (Trading Rotations, Halts or 

Reopenings). 

31The exercise limits would also be 25,000 

contracts as per Exchange Rule 1002A. 

32See Exchange Rule 721. 

presently govern all Exchange index 

options, including sales practice rules, 

margin requirements, trading rules, and 

position and exercise limits. Exchange 

Rules are designed to protect public 

customer trading. Specifically, Rule 

1024 prohibits members and member 

organizations from accepting a customer 

order to purchase or write an option 

unless such customer’s account has 

been approved in writing by a 

designated Options Principal of the 

Member.23 Additionally, Exchange Rule 

1026, regarding suitability, is designed 

to ensure that options are only sold to 

customers capable of evaluating and 

bearing the risks associated with trading 

in this instrument.24 Further, Exchange 

Rule 1027 permits members and 

employees of member organizations to 

exercise discretionary power with 

respect to trading options in a 

customer’s account only if the member 

or employee of a member organization 

has received prior written authorization 

from the customer and the account had 

been accepted in writing by a 

designated Options Principal.25 Finally, 

Exchange Rule 1025, Supervision of 

Accounts, Rule 1028, Confirmations, 

and Rule 1029, Delivery of Options 

Disclosure Documents, will also apply 

to trading in options on the MSCI EAFE 

Index. 

Surveillance and Capacity 

The Exchange represents that it has an 

adequate surveillance program in place 

for options on the MSCI EAFE Index 

and intends to apply those same 

procedures that it applies to the 

Exchange’s other index options. 

Additionally, the Exchange is a member 

of the Intermarket Surveillance Group 

(‘‘ISG’’) under the Intermarket 

Surveillance Group Agreement, dated 

June 20, 1994. The members of the ISG 

include all of the national securities 

exchanges. ISG members work together 

to coordinate surveillance and share 

information regarding the stock and 

options markets. In addition, the major 

futures exchanges are affiliated 

members of the ISG, which allows for 

the sharing of surveillance information 

for potential intermarket trading abuses. 

In addition, the Exchange is an affiliate 

member of the International 

Organization of Securities Commissions 

(‘‘IOSCO’’). IOSCO has members from 

over 100 different countries. Each of the 

countries from which there is a 

component security in the MSCI EAFE 

Index is a member of IOSCO. These 

members regulate more than 90 percent 

of the world’s securities markets. 

Additionally, the Exchange has entered 

into various Information Sharing 

Agreements and/or Memoranda of 

Understandings with various stock 

exchanges. Given the capitalization of 

this index and the deep and liquid 

markets for the securities underlying the 

MSCI EAFE Index, the concerns for 

market manipulation and/or disruption 

in the underlying markets are greatly 

reduced. The MSCI EAFE ETF is one of 

the top ten in the United States based 

on assets and trades a large volume with 

respect to ETFs today. 

The Exchange also represents that it 

has the necessary systems capacity to 

support the new options series that 

would result from the introduction of 

options on the Full Value MSCI EAFE 

Index, including LEAPS on the Full 

Value MSCI EAFE Index. 

Finally, the Exchange proposes to add 

a new Rule 1109A entitled ‘‘MSCI EAFE 

Index’’ to provide additional detailed 

information pertaining to the index as 

required by the licensor, including but 

not limited to, liability and other 

representations on the part of MSCI Inc. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 26 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 27

in particular, in that it will permit 

trading in options on Full Value MSCI 

EAFE Index pursuant to rules designed 

to prevent fraudulent and manipulative 

acts and practices to protect investor 

and the public interest, and to promote 

just and equitable principles of trade. 

The Exchange believes that because 

the MSCI EAFE Index currently 

contains more than 900 components and 

no single component comprises more 

than 5% of the index, it is not easily 

subject to market manipulation. Given 

the capitalization of this index and the 

deep and liquid markets for the 

securities underlying the MSCI EAFE 

Index, the concerns for market 

manipulation and/or disruption in the 

underlying markets are greatly reduced. 

The MSCI EAFE ETF trades a large 

volume with respect to ETFs today.28

Therefore, because the MSCI EAFE 

Index has a large number of component 

securities, representative of many 

countries, and trades a large volume 

with respect to ETFs today, the 

Exchange believes that the initial listing 

requirements are appropriate to trade 

options on this index. In addition, 

similar to other broad based indexes, the 

Exchange proposes various maintenance 

requirements, which require continual 

compliance and periodic compliance. 

Exchange Rules that apply to the 

trading of options on broad-based 

indexes also would apply to options on 

the Full Value MSCI EAFE Index.29 The 

trading of these options also would be 

subject to, among others, Exchange 

Rules governing margin requirements 

and trading halt procedures for index 

options.30 The Exchange would apply 

the same position limits as exist today 

for broad-based index options, namely 

25,000 contracts on the same side of the 

market for the MSCI EAFE Index 

option.31 All position limit hedge 

exemptions will apply. The Exchange 

proposes to apply existing index option 

margin requirements for the purchase 

and sale of options on the MSCI EAFE 

Index.32 In addition, the Exchange 

proposes to amend Rule 1079(d)(1) to 

also note that with respect to FLEX 

options on the MSCI EAFE index, the 

same number of contracts, 25,000, 

would apply with respect to the 

position limit. 

The Exchange represents that it has an 

adequate surveillance program in place 

for options on the MSCI EAFE Index. 

The Exchange also represents that it has 

the necessary systems capacity to 

support the new options series. As 

stated in the filing, the Exchange has 

rules in place designed to protect public 

customer trading. 

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 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 either 

solicited or received. 


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 51 / Thursday, March 15, 2012 / Notices 15413 

33 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities and Exchange Act Release No. 

56955 (December 13, 2007); 72 FR 71979 (December 

19, 2007) (SR–ISE–2007–101). 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 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 self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve or disapprove 

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 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rulecomments@sec.gov. Please include File 

Number SR–Phlx-2012–28 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–Phlx–2012–28. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. 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–Phlx– 

2012–28 and should be submitted on or 

before April 5, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.33

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–6317 Filed 3–14–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66567; File No. SR–EDGA– 

2012–08] 

Self-Regulatory Organizations; EDGA 

Exchange, Inc.; Notice of Filing of 

Proposed Rule Change Relating to a 

Corporate Transaction in Which Its 

Indirect Parent, SIX Swiss Exchange 

AG, Will Transfer Its Indirect 

Ownership Interest in ISE Holdings, 

Inc. to a Newly Formed Swiss 

Corporation, Eurex Global Derivatives 

AG 

March 9, 2012. 

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

Securities Exchange Act of 1934 (the 

‘‘Exchange Act’’), and Rule 19b–4 

thereunder,2 notice is hereby given that 

on March 8, 2012, EDGA Exchange, Inc. 

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

the U.S. Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which items have 

been prepared by the 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 Exchange proposes to (i) make 

changes to its corporate structure in 

connection with the transfer of SIX 

Swiss Exchange AG’s (‘‘SIX’’) 50% 

indirect ownership interest of 

International Securities Exchange 

Holdings, Inc. (‘‘ISE Holdings’’) to a 

newly formed Swiss corporation, Eurex 

Global Derivatives AG (‘‘EGD’’), which 

will become a wholly-owned subsidiary 

of Deutsche Bo ̈rse AG (‘‘Deutsche 

Bo ̈rse’’), effectively granting Deutsche 

Bo ̈rse a 100% indirect ownership 

interest in ISE Holdings and, in turn, 

International Securities Exchange, LLC 

(‘‘ISE’’) (the ‘‘Transaction’’), (ii) amend 

and restate the Amended and Restated 

Trust Agreement (‘‘Trust’’), (iii) file the 

form of EGD Corporate Resolution 

(‘‘Resolution’’), (iv) file the form of 

Agreement and Consent by and between 

EGD and Eurex Zu ̈rich AG (‘‘Eurex 

Zu ̈rich’’) (‘‘Agreement and Consent’’) 

and (v) amend and restate the Amended 

and Restated Bylaws of ISE Holdings 

(‘‘Bylaws’’). The text of the proposed 

rule change is available on the 

Exchange’s Web site 

www.directedge.com, at the principal 

office of the Exchange, 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 has included statements 

concerning the purpose of, and basis for, 

the Proposed Rule Change. The text of 

these 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 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 proposes to (i) make 

changes to its corporate structure in 

connection with the Transaction, (ii) 

amend and restate the Trust, (iii) file the 

form of Resolution, (iv) file the form of 

Agreement and Consent, and (v) amend 

and restate the Bylaws. 

Background 

On December 17, 2007, ISE Holdings, 

the direct parent of ISE, became a direct 

wholly-owned subsidiary of U.S. 

Exchange Holdings, Inc. (‘‘U.S. 

Exchange Holdings’’), which, in turn, is 

a wholly-owned subsidiary of Eurex 

Frankfurt AG (‘‘Eurex Frankfurt’’).3

Eurex Frankfurt is a wholly-owned 

subsidiary of Eurex Zu ̈rich, which, in 

turn, is jointly owned by Deutsche Bo ̈rse 


srobinson on DSK4SPTVN1PROD with NOTICES