92238 Federal Register / Vol. 89, No. 225 / Thursday, November 21, 2024 / Notices 

12 15 U.S.C. 78s(b)(3)(A). 

13 17 CFR 240.19b–4(f). 

14 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78k–1. 

2 17 CFR 242.608. 

3The Sponsors of the OLPP are: BOX Exchange 

LLC; Cboe BZX Exchange, Inc.; Cboe C2 Exchange, 

Inc.; Cboe EDGX Exchange, Inc.; Cboe Exchange, 

Inc.; MEMX LLC; Miami International Securities 

Exchange LLC; MIAX Emerald, LLC; MIAX Pearl, 

LLC; MIAX Sapphire LLC; Nasdaq BX, Inc.; Nasdaq 

GEMX, LLC; Nasdaq ISE, LLC; Nasdaq MRX, LLC; 

Nasdaq PHLX LLC; The Nasdaq Stock Market LLC; 

NYSE American LLC; NYSE Arca, Inc.; and The 

Options Clearing Corporations. 

4OLPP is a national market system plan approved 

by the Commission pursuant to Section 11A of the 

Act and Rule 608 thereunder. See Securities 

Exchange Act Release No. 44521 (July 6, 2001), 66 

FR 36809 (July 13, 2001). The full text of the OLPP 

is available at https://www.theocc.com/getmedia/ 

198bfc93-5d51-443c-9e5b-fd575a0a7d0f/options_

listing_procedures_plan.pdf. 

make Cboe Options a more attractive 

marketplace for market participants at 

other exchanges, such market 

participants are welcome to become 

Cboe Options market participants. The 

clarifying rule changes are not intended 

to have any impact on competition, as 

they make no substantive change to the 

Fees Schedule and will have no impact 

on trading on the Exchange. 

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 proposed 

rule change. 

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)(A) 

of the Act 12 and paragraph (f) of Rule 

19b–4 13 thereunder. At any time within 

60 days of the filing of the 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. If the 

Commission takes such action, the 

Commission will institute proceedings 

to determine whether the proposed rule 

change should be approved or 

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 (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

CBOE–2024–050 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to file 

number SR–CBOE–2024–050. 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 website (https://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 website 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. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–CBOE–2024–050 and should be 

submitted on or before December 12, 

2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Stephanie J. Fouse, 

Assistant Secretary. 

[FR Doc. 2024–27215 Filed 11–20–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101640; File No. 4–443] 

Joint Industry Plan; Notice of Filing of 

Proposed Amendment To Add 

Paragraph (c) to Section 6 of the Plan 

for the Purpose of Developing and 

Implementing Procedures Designed To 

Facilitate the Listing and Trading of 

Standardized Options Authorizing the 

OLPP Sponsors To Act Jointly To 

Discuss Quote Mitigation Issues and 

Potential Solutions 

November 15, 2024. 

Pursuant to Section 11A of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 608 thereunder,2

notice is hereby given that on October 

31, 2024, Cboe BZX Exchange, Inc., 

Cboe C2 Exchange, Inc., Cboe EDGX 

Exchange, Inc., and Cboe Exchange, 

Inc., on behalf of the Sponsors 3 of the 

Plan for the Purpose of Developing and 

Implementing Procedures Designed to 

Facilitate the Listing and Trading of 

Standardized Options Submitted 

Pursuant to Section 11A(a)(3)(B) of the 

Securities Exchange Act of 1934 

(‘‘Options Listing Procedures Plan,’’ 

‘‘Plan,’’ or ‘‘OLPP’’),4 filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) a proposed amendment 

to the OLPP. The amendment proposes 

to add a provision to the OLPP 

authorizing the OLPP Sponsors to act 

jointly to discuss both quote mitigation 

issues and potential solutions to address 

any issues identified, including, but not 

limited to, discussing potential new 

options strike listing methodologies and 

rules, in order to determine whether the 

Sponsors might propose one or more 

amendments to the Plan for Commission 

approval or whether the individual 

Sponsors might seek to amend their 

own rules. 

The Commission is publishing this 

notice to solicit comments from 

interested persons on the proposed 

amendment. Set forth below in Section 

I, which is being published substantially 

as filed by the Sponsors, is the 

statement of the purpose and summary 

of the amendment, along with 

information pursuant to Rule 608(a) 

under the Act. 

I. Requirements Pursuant to Rule 608(a) 

1. Text of Amendment 

This [a]mendment proposes to add 

paragraph (c) to Section 6 of the OLPP. 

The text of the proposed amendment is 

in Exhibit I, which is set forth in Section 

II, below. 

2. Purpose of Amendment 

For many years, as the options 

industry has expanded and become 

more complex, industry participants 

have raised so-called ‘‘quote mitigation’’ 


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Federal Register / Vol. 89, No. 225 / Thursday, November 21, 2024 / Notices 92239 

concerns, including concerns about 

proliferation of listed options strike 

prices and the resulting potential 

negative effects on investors and on the 

market makers that are obligated to 

quote in all of the listed series. Such 

concerns have been raised at various 

times in discussions involving one or 

more of the OLPP Sponsors, market 

maker members of the national 

securities exchanges who are obligated 

to provide quotes in all of the listed 

option series, the staff of the Securities 

and Exchange Commission, and the 

members of various industry working 

groups (such as the Listed Options 

Market Structure Working Group). 

For example, industry participants 

have voiced concerns about how to 

balance the need to provide investors 

with a sufficient number of strikes to 

meet their investment purposes, while 

also ensuring that the number of listed 

strikes does not become so large that the 

market makers, who are required to 

quote continuously in a significant 

number of existing strikes, are not 

unduly burdened by having to expend 

significant amounts of their finite 

capital to continuously quote strikes in 

thinly traded and illiquid series. Indeed, 

although investors need to have a choice 

of appropriately granular strikes to 

satisfy their investment needs, some 

industry participants also have 

questioned whether the increase in the 

number of strikes might harm investors, 

particularly in less liquid series, 

because investors could become 

confused about the properties of the 

various strikes and might be unable to 

close out positions in illiquid series in 

an effective manner. Finally, industry 

participants also have questioned 

whether the proliferation of strikes 

might harm overall market quality and 

widen spreads because market makers 

are forced to deploy their limited capital 

in a less efficient manner as a result of 

their obligation to continuously quote 

strikes in thinly traded series. 

Over the years, there have been a 

number of amendments to both the 

OLPP and to the rules of the OLPP 

Sponsors that were designed to address 

some of the issues summarized above. 

For example, in 2009, the OLPP 

Sponsors proposed a ‘‘quote mitigation 

strategy’’ amendment to the OLPP, with 

a goal of reducing the amount of quote 

traffic that had resulted from the Penny 

Pilot Program. See Joint Industry Plan; 

Notice of Filing of Amendment No. 3 to 

the Plan for the Purpose of Developing 

and Implementing Procedures Designed 

To Facilitate the Listing and Trading of 

Standardized Options, Release No. 34– 

60362, 74 FR 37266 (July 22, 2009). 

When proposing that amendment, the 

Plan Sponsors represented that the 

Penny Pilot Program resulted ‘‘in an 

explosion of quote traffic’’ and that the 

proposed ‘‘uniform listing standards to 

the range of options series exercise (or 

strike) prices available for trading’’ was 

a quote mitigation strategy designed to 

‘‘reduce the number of options series 

available for trading, which will in turn 

lessen the rate of increase in quote 

traffic.’’ Id., 74 FR at 37266 and n.4. 

When it approved the 2009 

amendment to the OLPP, the 

Commission concluded that the 

amendment ‘‘should reduce the number 

of options series available for trading, 

and thus should reduce increases in the 

options quote message traffic because 

market participants will not be 

submitting quotes in those series.’’ See 

Joint Industry Plan, Order Approving 

Amendment No. 3 to the Plan for the 

Purpose of Developing and 

Implementing Procedures Designed To 

Facilitate the Listing and Trading of 

Standardized Options, Release No. 34– 

60531, entered on August 19, 2009, 74 

FR 43173, 43174 (Aug. 26, 2009). 

As another example, in 2020, Nasdaq 

BX, Inc. (‘‘BX’’) proposed a rule that 

sought to limit ‘‘Short Term Options 

Series’’ intervals between strikes which 

are available for quoting and trading on 

that exchange. See Self-Regulatory 

Organizations; Nasdaq BX, Inc.; Notice 

of Filing of Proposed Rule Change To 

Amend Options 4, Section 5, To Limit 

Short Term Options Series Intervals 

Between Strikes Which are Available for 

Quoting and Trading on BX, Release No. 

34–90384, 85 FR 73113 (Nov. 9, 2020). 

In its filing, BX noted that its proposal 

‘‘to reduce the number of strikes in the 

furthest weeklies, where there exist 

wider markets and therefore lower 

market quality’’ was an ‘‘initial attempt 

at reducing strikes and [that BX] 

anticipates filing additional proposals to 

continue reducing strikes.’’ Id., 85 FR at 

73117 and n.23. BX also noted that 

reducing the number of listed weekly 

options would encourage market makers 

to deploy their capital more efficiently 

and improve displayed market quality. 

Id. at 73119. Finally, BX represented 

that (1) its proposal was a reaction to 

comments that it received from industry 

members ‘‘with respect to the increasing 

number of strikes that are required to be 

quoted by market makers in the options 

industry’’ and (2) reducing the number 

of strikes would ‘‘allow Lead Market 

Makers and Market Makers to expend 

their capital in the options market in a 

more efficient manner’’ because, as the 

number of strikes listed across options 

exchanges increases, market makers 

‘‘must expend [more] capital to ensure 

that they have the appropriate 

infrastructure to meet their quoting 

obligations on all options markets in 

which they are assigned in options 

series.’’ Id. 

When approving BX’s 2020 rule filing, 

the Commission noted that it had 

received several comments expressing 

support for the proposed rule change. 

See Self-Regulatory Organizations; 

Nasdaq BX, Inc.; Notice of Filing of 

Amendment No. 1 and Order Granting 

Accelerated Approval of Proposed Rule 

Change, as Modified by Amendment No. 

1, To Amend Options4, Section 5, To 

Limit Short Term Options Series 

Intervals Between Strikes That Are 

Available for Quoting and Trading on 

BX, Release No. 34–91125, entered 

February 12, 2021, 86 FR 10375, 10376 

(Feb. 19, 2021). The Commission also 

found that: 

More efficient and better calibrated strike 

increment rules can have a positive impact 

on options markets, as it can provide 

certainty, minimize confusion, and promote 

more efficient use of resources among market 

makers that are obligated to continuously 

quote such series, all while still offering 

customers the choice to meet their 

investment needs. 

Id., 86 FR at 10377. Finally, the 

Commission also noted that the 

approved rule ‘‘may serve as a starting 

point to a broader initiative to revisit, 

harmonize, and update the panoply of 

strike listing rules more broadly.’’ Id. 

Following the Commission’s approval 

of BX’s 2020 rule filing, other 

exchanges, including Cboe Exchange, 

Inc. (‘‘Cboe’’), promulgated similar 

amendments to their rules. See, e.g., 

Self-Regulatory Organizations; Cboe 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend Rule 4.5 (Series 

of Option Contracts Open for Trading) 

in Connection With Limiting the 

Number of Strikes Listed for Short Term 

Option Series Which Are Available for 

Quoting and Trading on the Exchange, 

Release No. 34–91456, 86 FR 18090 

(April 1, 2021). In its filing, Cboe noted 

that limiting the number of weekly 

strikes in which market makers are 

required to quote would allow those 

market makers to expend their capital in 

the options market in a more efficient 

manner, which could improve overall 

market quality, while still providing 

market participants with access to 

sufficient strike intervals to meet their 

investment objectives. Id., 86 FR at 

18093–94. Cboe also noted that the 

removal of strikes found in clusters 

whose characteristics closely resemble 

one another would protect the investors 

and the general public by removing 

unnecessary choices of an options 


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92240 Federal Register / Vol. 89, No. 225 / Thursday, November 21, 2024 / Notices 

series, which could result in improved 

market quality. Id. at 18094. 

Recently, one of the OLPP Sponsors, 

Cboe, compiled statistics comparing the 

increase in the average number of 

multiple listed options series listed per 

day in the months of June 2020 and June 

2024. Cboe also examined the reduction 

in the average percentage of series 

traded per day during those two months 

and the reduction in average percentage 

of series with open interest per day. 

That analysis suggests that there are still 

significant quote mitigation issues in the 

options markets. 

Specifically, Cboe’s analysis revealed 

that the average series listed per day 

increased by 27% in June 2024, when 

compared to June 2020, with an average 

of 1,406,632 series listed per day in 

2024 and 1,107,980 series listed per day 

in June 2020. Cboe’s analysis also 

revealed, however, that the average 

percentage of series that traded per day 

decreased from 18% in June 2020 to 

10% in June 2024 and that the average 

percentage of series with open interest 

per day decreased from 53% to 47% 

during those same comparison months. 

In other words, as the average number 

of series listed per day continues to 

increase, more series appear to be thinly 

traded and therefore less liquid—a 

dynamic that the OLPP Sponsors 

believe may worsen quote quality 

because market makers are required to 

expend their capital to quote in the 

expanding number of series that are 

listed. 

As a result of the concerns outlined 

above, the OLPP Sponsors believe that 

the options industry would benefit from 

the OLPP being amended to explicitly 

authorize the Sponsors to act jointly to 

discuss quote mitigation issues, 

including reaching out to other industry 

participants to solicit their views, with 

a goal of identifying specific issues and 

potential solutions to those issues. Such 

an amendment would be consistent 

with Rule 608(a)(3)(A) of Regulation 

National Market System, which 

authorizes self-regulatory organizations 

(like the OLPP Sponsors) to act jointly 

in preparing and filing any amendment 

to a national market system plan. 17 

CFR 242.608(a)(3)(A). In addition, if the 

Sponsors determine that it is 

appropriate to address a quote 

mitigation issue by proposing a further 

amendment to the OLPP, such an 

amendment would be submitted to the 

Commission for approval pursuant to 

Rule 608(b) of Regulation NMS. 17 CFR 

608(b). Similarly, if the Sponsors 

determine to address any identified 

issues with new options strike listing 

methodologies and rules, they may seek 

to do so through submission of rule 

filings pursuant to Section 19(b) of the 

Exchange Act. 15 U.S.C. 78s(b). 

3. Manner of Implementation of 

Amendment 

The proposed amendment will be 

added to the OLPP following 

Commission approval of the amendment 

pursuant to Rule 608(b)(1) and (b)(2) of 

Regulation NMS. 

4. Phases of Development and 

Implementation 

Not applicable. 

5. Impact on Competition 

The Sponsors believes that the 

proposed amendment will impose no 

burdens on competition that are not 

justified in light of the purposes of the 

Act. 

6. Written Understandings or 

Agreements Among Plan Members 

Not applicable. 

7. Approval of Proposed Amendment 

Each Sponsor approved the 

submission of the [a]mendment and has 

executed a signed copy of the 

[a]mendment. 

8. Exhibits 

I. Proposed amendments to Section 6 

of the OLPP. 

9. Description of Operation of Facility 

Contemplated by the Proposed 

Amendment 

Not applicable. 

10. Terms and Conditions of Access 

Not applicable. 

11. Method of Determination and 

Imposition, and Amount of, Fees and 

Charges 

Not applicable. 

12. Method and Frequency of Processor 

Evaluation 

Not applicable. 

13. Dispute Resolution 

The Plan does not include provisions 

regarding the method by which disputes 

arising in connection with the operation 

of the plan will be resolved. 

II. Text of the Proposed Amendment to 

the OLPP (Exhibit I) 

Language proposed to be added to 

Section 6 of the OLPP as new Section 

6(c): 

(c) The Plan Sponsors are authorized 

to act jointly to discuss both quote 

mitigation issues and potential solutions 

to address any issues identified, 

including, but not limited to, discussing 

potential new options strike listing 

methodologies and rules, in order to 

determine whether the Sponsors might 

propose one or more amendments to the 

Plan for Commission approval or 

whether the individual Sponsors might 

seek to amend their own rules. 

III. Solicitation of Comments 

The Commission seeks comment on 

the amendment. Interested persons are 

invited to submit written data, views 

and arguments concerning the 

foregoing, including whether the 

proposed amendment is necessary or 

appropriate in the public interest, for 

the protection of investors and the 

maintenance of fair and orderly markets, 

to remove impediments to, and perfect 

the mechanisms of, a national market 

system, or otherwise in furtherance of 

the purposes of the Act. Comments may 

be submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number 4– 

443 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submission should refer to file 

number 4–443. 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 

website (https://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 website 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 offices of the 

Sponsors. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 


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Federal Register / Vol. 89, No. 225 / Thursday, November 21, 2024 / Notices 92241 

5 17 CFR 200.30–3(a)(85). 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

4–443 and should be submitted on or 

before December 12, 2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.5

Stephanie J. Fouse, 

Assistant Secretary. 

[FR Doc. 2024–27220 Filed 11–20–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

35388; File No. 812–15654] 

Figure Certificate Company 

(‘‘Applicant’’) 

November 15, 2024. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’ or ‘‘SEC’’). 

ACTION: Notice. 

Notice of application for an order 

under section 28(c) of the Investment 

Company Act of 1940 (the ‘‘Act’’). 

SUMMARY OF APPLICATION: Applicant 

seeks an order pursuant to section 28(c) 

of the Act approving certain proposed 

custodial arrangements. 

APPLICANTS: Figure Certificate 

Company. 

FILING DATES: The application was filed 

on November 7, 2024 and amended and 

restated on November 13, 2024. 

HEARING OR NOTIFICATION OF HEARING: 

An order granting the requested relief 

will be issued unless the Commission 

orders a hearing. Interested persons may 

request a hearing on any application by 

emailing the SEC’s Secretary at 

Secretarys-Office@sec.gov and serving 

the Applicant with a copy of the request 

by email, if an email address is listed for 

the Applicant below, or personally or by 

mail, if a physical address is listed for 

the Applicant below. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on December 11, 2024 and 

should be accompanied by proof of 

service on the Applicant, in the form of 

an affidavit or, for lawyers, a certificate 

of service. Pursuant to rule 0–5 under 

the Act, hearing requests should state 

the nature of the writer’s interest, any 

facts bearing upon the desirability of a 

hearing on the matter, the reason for the 

request, and the issues contested. 

Persons who wish to be notified of a 

hearing may request notification by 

emailing the Commission’s Secretary at 

Secretarys-Office@sec.gov. 

ADDRESSES: The Commission: 

Secretarys-Office@sec.gov. Applicant: 

susan.gault-brown@aoshearman.com. 

FOR FURTHER INFORMATION CONTACT: 

Taylor Evenson, Senior Counsel, or 

Robert S. Shapiro, Assistant Director, at 

(202) 551–6825 (Division of Investment 

Management, Chief Counsel’s Office). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. For Applicant’s 

representations, legal analysis, and 

conditions, please refer to Applicant’s 

amended and restated application, 

dated November 13, 2024, which may 

be obtained via the Commission’s 

website by searching for the file number 

at the top of this document, or for the 

Applicant using the Company name 

search field, on the SEC’s EDGAR 

system. The SEC’s EDGAR system may 

be searched at, http://www.sec.gov/ 

edgar/searchedgar/legacy/ 

companysearch.html. You may also call 

the SEC’s Public Reference Room at 

(202) 551–8090. 

Applicant’s Representations 

1. Applicant, a Delaware corporation, 

intends to register under the Act as a 

face-amount certificate company and 

operate as a registered face-amount 

certificate company. Applicant 

currently intends to offer two types of 

face-amount certificates registered 

under the Securities Act of 1933, faceamount certificates of the installment 

type (the ‘‘Installment Certificates’’) and 

fully-paid certificates (the 

‘‘Transferrable Certificates’’ and, 

together with the Installment 

Certificates, the ‘‘Certificates’’). 

Applicant states that it does not 

contemplate, or seek approval for, 

custodial arrangements under which 

Applicant would deposit and maintain 

reserves associated with any faceamount certificates other than the 

Installment Certificates and 

Transferrable Certificates. Applicant 

represents that both types of Certificates 

will be issued and the fully-paid 

Certificates will be transferable using 

blockchain technology and, as a result, 

both types of Certificates will be ‘‘digital 

assets.’’ Applicant further represents 

that, although the Certificates will be 

digital assets, Applicant will not accept 

or hold any assets that are digital assets 

other than as necessary to destroy 

Certificates that have been surrendered. 

2. The Certificates are interest-bearing 

debt securities. The Certificates entitle 

the Certificate holder to receive, at 

maturity, the face-amount of the 

Certificate and interest credited thereon, 

less applicable expenses or fees. To 

meet its payment obligations, Applicant 

is required to maintain a minimum 

amount of reserves in ‘‘qualified 

investments’’ as defined in Section 28(b) 

of the Act (‘‘Reserves’’). 

3. Applicant proposes to enter into 

custodial arrangements, from time to 

time, with one or more banks as defined 

in Section 2(a)(5) of the Act, that 

possess the qualifications required by 

Section 26(a) of the Act for trustees of 

unit investment trusts (‘‘Custodians’’). 

Applicant seeks an order approving the 

Applicant’s proposed custodial 

arrangements under which the 

Applicant will (i) deposit and maintain, 

with one or more Custodians, the 

Reserves associated with the 

Certificates, pursuant to Section 28(c) of 

the Act, and (ii) enter into custody 

agreements (‘‘Custodial Agreements’’), 

the substantive portions of which will 

not vary in any material respects from 

those contained in the form of 

agreement attached to the application as 

Attachment 1 (the ‘‘Form of 

Agreement’’). Under the requested 

order, Applicant would be free to 

employ or terminate the Custodians 

from time to time in its sole discretion. 

4. Under the proposed custodial 

arrangements, one or more of the 

Custodians would be responsible for 

maintaining the safekeeping of all of 

Applicant’s assets, including the 

aggregate amount that Applicant must 

maintain as Reserves pursuant to 

Section 28(a) of the Act. The Custodian 

would (i) maintain Applicant’s Assets in 

compliance with Section 17(f) of the Act 

and the rules thereunder as though 

Section 17(f) and the rules thereunder 

were applicable to a face-amount 

certificate company and (ii) maintain 

Applicant’s Reserves to ensure the 

Applicant meets its payment obligations 

under the terms and conditions of any 

outstanding Certificate. If the Applicant 

were to default on any obligation under 

a Certificate, the Custodian would be 

authorized to cure such default by 

liquidating so much of the assets held 

by it as necessary to discharge 

Applicant’s obligations. The Custodian 

also would perform the duties and 

functions typically performed by a 

custodian, such as securities registration 

and delivery, income collection, 

periodic reporting, payment of monies, 

and other safekeeping and processing 

functions. 

Applicant’s Legal Analysis 

1. Section 28(c) provides that ‘‘[t]he 

Commission shall by rule, regulation, or 

order, in the public interest or for the 

protection of investors, require a 

registered face-amount certificate 


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