Federal Register / Vol. 73, No. 109 / Thursday, June 5, 2008 / Notices 31981 

18Proposed Order at 13870. 

1 73 FR 21917 (April 23, 2008) 

2 7 U.S.C. 1 et seq. 

3 7 U.S.C. 6(c). 

4 7 U.S.C. 7a–1. 

5 15 U.S.C. 78q–l. 

6 7 U.S.C. 7a–2(c), 17 CFR 39.4(a), 40.5. 

7 streetTRACKS Gold Trust Shares, which 

underlie ST Gold Options, are described in greater 

detail in the ‘‘Proposed Exemptive Order for ST 

Gold Futures Contracts,’’ 73 FR 13867, 13868 

(March 14, 2008). On May 20, 2008, streetTRACKS

Gold Trust Shares were renamed SPDR Gold Trust 

Shares. See Prospectus for SPDR Gold Trust, 

available at http://www.spdrgoldshares.com/pdf/ 

SPDRGoldTrustProspectus.pdf (reviewed May 22, 

2008). 

8The request for approval concerning the ST 

Gold Options was filed effective February 4, 2008, 

and Amendment No. 1 thereto was filed effective 

March 7, 2008. See SR–OCC–2008–04 and 

Amendment No. 1. OCC has also filed these 

proposed rule changes with the SEC. See SEC 

Release No. 34–57695; File No. SR–OCC–2008–07 

(April 21, 2008), 73 FR 22452 (April 25, 2008). On 

May 22, 2008, OCC filed Amendment No. 2 to the 

request for approval, reflecting the change in the 

name of streetTRACKS Gold Trust Shares. 

9House Conf. Report No. 102–978, 1992 

U.S.C.C.A.N. 3179, 3213 (‘‘4(c) Conf. Report’’). 

that, notwithstanding potential costs, a 

particular order is necessary or 

appropriate to protect the public interest 

or to effectuate any of the provisions or 

to accomplish any of the purposes of the 

CEA. 

In the Proposed Order, the 

Commission analyzed the costs and 

benefits associated with the 

implementation of an exemption under 

Section 4(c) of the Act. The Commission 

invited public comment on its analysis 

of the costs and benefits associated with 

the issuance of an exemptive order 

under Section 4(c) of the Act.18 No 

comments were submitted to the 

Commission. 

After considering the factors 

presented in this release, the 

Commission has determined to issue 

this Order. 

Issued in Washington, DC, on May 30, 

2008 by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

[FR Doc. E8–12579 Filed 6–4–08; 8:45 am] 

BILLING CODE 6351–01–P 

COMMODITY FUTURES TRADING 

COMMISSION 

Order Exempting the Trading and 

Clearing of Certain Products Related to 

SPDR Gold Trust Shares 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Final Order. 

SUMMARY: On April 23rd, 2008, the 

Commodity Futures Trading 

Commission (‘‘CFTC’’ or the 

‘‘Commission’’) published for public 

comment in the Federal Register 1 a 

proposal to exempt the trading and 

clearing of products called options on 

streetTRACKS  Gold Trust Shares (‘‘ST 

Gold Options’’), proposed to be traded 

on national securities exchanges, and 

cleared by The Options Clearing 

Corporation (‘‘OCC’’), from the 

provisions of the Commodity Exchange 

Act (‘‘CEA’’) 2 and Commission 

regulations thereunder to the extent 

necessary for them to be so traded and 

cleared. The Commission has 

determined to issue this Order 

essentially as proposed. Authority for 

this exemption is found in Section 4(c) 

of the CEA.3

DATES: Effective Date: May 30, 2008. 

FOR FURTHER INFORMATION CONTACT: 

Robert B. Wasserman, Associate 

Director, 202–418–5092, 

rwasserman@cftc.gov, Division of 

Clearing and Intermediary Oversight, 

Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1151 21st Street, NW., Washington, DC 

20581. 

SUPPLEMENTARY INFORMATION: 

I. Introduction 

The OCC is both a Derivatives 

Clearing Organization (‘‘DCO’’) 

registered pursuant to Section 5b of the 

CEA,4 and a securities clearing agency 

registered pursuant to Section 17A of 

the Securities Exchange Act of 1934 

(‘‘the ’34 Act’’).5

OCC filed with the CFTC, pursuant to 

Section 5c(c) of the CEA and 

Commission Regulations 39.4(a) and 

40.5 thereunder,6 requests for approval 

of rules and rule amendments that 

would enable OCC to clear and settle ST 

Gold Options 7 traded on national 

securities exchanges in its capacity as a 

registered securities clearing agency 

regulated by the Securities and 

Exchange Commission (‘‘SEC’’) (and not 

in its capacity as a DCO).8 Section 

5c(c)(3) provides that the CFTC must 

approve any such rules and rule 

amendments submitted for approval 

unless it finds that the rules or rule 

amendments would violate the CEA. 

II. Section 4(c) of the Commodity 

Exchange Act 

Section 4(c)(1) of the CEA empowers 

the CFTC to ‘‘promote responsible 

economic or financial innovation and 

fair competition’’ by exempting any 

transaction or class of transactions from 

any of the provisions of the CEA 

(subject to exceptions not relevant here) 

where the Commission determines that 

the exemption would be consistent with 

the public interest. The Commission 

may grant such an exemption by rule, 

regulation or order, after notice and 

opportunity for hearing, and may do so 

on application of any person or on its 

own initiative. 

In enacting Section 4(c), Congress 

noted that the goal of the provision ‘‘is 

to give the Commission a means of 

providing certainty and stability to 

existing and emerging markets so that 

financial innovation and market 

development can proceed in an effective 

and competitive manner.’’ 9 Permitting 

ST Gold Options to trade on national 

securities exchanges and be cleared on 

OCC as discussed above appears likely 

to foster both financial innovation and 

competition. In accordance with the 

Memorandum of Understanding entered 

into between the CFTC and the 

Securities and Exchange Commission 

(‘‘SEC’’) on March 11, 2008, and in 

particular the addendum thereto 

concerning Principles Governing the 

Review of Novel Derivative Products, the 

Commission believes that novel 

derivative products that implicate areas 

of overlapping regulatory concern 

should be permitted to trade in either or 

both a CFTC- or SEC-regulated 

environment, in a manner consistent 

with laws and regulations (including the 

appropriate use of all available 

exemptive and interpretive authority). 

ST Gold Options are novel 

instruments and, given their potential 

usefulness to the market, the 

Commission believes that this is an 

appropriate case for issuing an 

exemption without making a finding as 

to the nature of these particular 

instruments. 

Section 4(c)(2) provides that the 

Commission may grant exemptions only 

when it determines that the 

requirements for which an exemption is 

being provided should not be applied to 

the agreements, contracts or transactions 

at issue, and the exemption is consistent 

with the public interest and the 

purposes of the CEA; that the 

agreements, contracts or transactions 

will be entered into solely between 

appropriate persons; and that the 

exemption will not have a material 

adverse effect on the ability of the 

Commission or any contract market or 

derivatives transaction execution 

facility to discharge its regulatory or 

self-regulatory responsibilities under the 

CEA. 

In the April 23, 2008 Federal Register 

Release, the Commission requested 

public comment on the matters 

discussed above and all issues raised by 

its proposed exemptive order. No 

comments were received. 


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31982 Federal Register / Vol. 73, No. 109 / Thursday, June 5, 2008 / Notices 

10CEA Section 3(b), 7 U.S.C. 5(b). 

11 44 U.S.C. 3507(d). 

12 7 U.S.C. 19(a). 

III. Findings and Conclusions 

After considering the complete record 

in this matter, the Commission has 

determined that the requirements of 

Section 4(c) have been met. First, the 

exemption is consistent with the public 

interest and with the purposes of the 

CEA, including ‘‘promot[ing] 

responsible innovation and fair 

competition among boards of trade, 

other markets and market 

participants.’’ 10 It appears to be 

consistent with these and the other 

purposes of the CEA, with the public 

interest, with the CFTC-SEC 

Memorandum of Understanding of 

March 11, 2008, and with the 

addendum thereto, for the mode of 

trading of these transactions—whether it 

is to be through CFTC-regulated markets 

and clearing organizations or SECregulated markets and clearing 

agencies—to be determined by 

competitive market forces. 

Second, the ST Gold Options will be 

entered into solely between appropriate 

persons. Section 4(c)(3) includes within 

the term ‘‘appropriate persons’’ a 

number of specified categories of 

persons, but also in subparagraph (K), 

‘‘such other persons that the 

Commission determines to be 

appropriate in light of * * * the 

applicability of appropriate regulatory 

protections.’’ National securities 

exchanges, OCC and broker-dealers who 

will intermediate transactions in ST 

Gold Options are subject to extensive 

and detailed oversight by the SEC and, 

in the case of the intermediaries, the 

securities self-regulatory organizations. 

Given that the products will be traded 

on national securities exchanges, the 

regulatory protections available under 

the securities laws, and the goal of 

promoting fair competition, the ST Gold 

Options will be traded by appropriate 

persons. 

Third, the exemption would not have 

a material adverse effect on the ability 

of the Commission or any designated 

contract market to carry out their 

regulatory responsibilities under the 

CEA. There is no reason to believe that 

granting an exemption here would 

interfere with the Commission’s or a 

designated contract market’s ability to 

oversee the trading of similar products 

or otherwise carry out their duties. 

Therefore, upon due consideration, 

pursuant to its authority under Section 

4(c) of the CEA, the Commission hereby 

issues this Order and exempts the 

trading of ST Gold Options on national 

securities exchanges and clearing of ST 

Gold Options by OCC in its capacity as 

a registered securities clearing agency 

from the CEA and the Commission’s 

Regulations thereunder to the extent 

necessary to permit them to be so traded 

and cleared. 

This Order is subject to termination or 

revision, on a prospective basis, if the 

Commission determines upon further 

information that this exemption is not 

consistent with the public interest. If the 

Commission believes such exemption 

becomes detrimental to the public 

interest, the Commission may revoke 

this Order on its own motion. 

IV. Related Matters 

A. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(‘‘PRA’’) 11 imposes certain 

requirements on federal agencies 

(including the Commission) in 

connection with their conducting or 

sponsoring any collection of 

information as defined by the PRA. The 

exemptive order will not require a new 

collection of information from any 

entities. 

B. Cost-Benefit Analysis 

Section 15(a) of the CEA, as amended 

by Section 119 of the Commodity 

Futures Modernization Act of 2000 

(‘‘CFMA’’),12 requires the Commission 

to consider the costs and benefits of its 

action before issuing an order under the 

CEA. By its terms, Section 15(a) as 

amended does not require the 

Commission to quantify the costs and 

benefits of an order or to determine 

whether the benefits of the order 

outweigh its costs. Rather, Section 15(a) 

simply requires the Commission to 

‘‘consider the costs and benefits’’ of its 

action. 

Section 15(a) of the CEA further 

specifies that costs and benefits shall be 

evaluated in light of five broad areas of 

market and public concern: protection 

of market participants and the public; 

efficiency, competitiveness, and 

financial integrity of futures markets; 

price discovery; sound risk management 

practices; and other public interest 

considerations. Accordingly, the 

Commission could in its discretion give 

greater weight to any one of the five 

enumerated areas and could in its 

discretion determine that, 

notwithstanding its costs, a particular 

order was necessary or appropriate to 

protect the public interest or to 

effectuate any of the provisions or to 

accomplish any of the purposes of the 

CEA. 

The Commission has considered the 

costs and benefits of the order in light 

of the specific provisions of Section 

15(a) of the CEA, as follows: 

1. Protection of market participants 

and the public. National securities 

exchanges, OCC and their members who 

will intermediate ST Gold Options are 

subject to extensive regulatory 

oversight. 

2. Efficiency, competition, and 

financial integrity. The exemptive order 

appears likely to enhance market 

efficiency and competition since it 

could encourage potential trading of ST 

Gold Options on markets other than 

designated contract markets or 

derivative transaction execution 

facilities. Financial integrity will not be 

affected since the ST Gold Options will 

be cleared by OCC, a DCO and SECregistered clearing agency, and 

intermediated by SEC-registered brokerdealers. 

3. Price discovery. Price discovery 

may be enhanced through market 

competition. 

4. Sound risk management practices. 

The ST Gold Options will be subject to 

OCC’s current risk-management 

practices including its margining 

system. 

5. Other public interest 

considerations. The exemptive order 

appears likely to encourage 

development of derivative products 

through market competition without 

unnecessary regulatory burden. 

The Commission requested comment 

on its application of these factors in the 

proposing release. No comments were 

received. 

After considering these factors, the 

Commission has determined to issue 

this Order. 

Issued in Washington, DC, on May 30, 

2008 by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

Dissenting in Part and Concurring in 

Part to Exemptive Order Under Section 

4(c) of the Commodity Exchange Act 

(CEA) To Exempt Certain Products 

Related to SPDR  Gold Trust Shares 

Traded on a National Securities 

Exchange and Cleared by the Options 

Clearing Corporation (OCC) From 

Provisions of the CEA, and Approval of 

OCC’s Request for Approval of Rules 

I applaud the agencies’ efforts today 

to enhance cooperation and 

coordination in approving innovative 

and novel products. I respectfully 

dissent, however, from the 

Commission’s issuance of the abovereferenced order. In the promulgation of 

such an exemptive order in furtherance 

of the approval process, I believe the 

Commission should have adequate basis 


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Federal Register / Vol. 73, No. 109 / Thursday, June 5, 2008 / Notices 31983 

for confidence that the Securities and 

Exchange Commission will similarly 

fully exercise its broad statutory 

exemptive authority under the securities 

laws to permit futures exchanges to 

trade products that are economically 

equivalent to those that are or may be 

approved for trading on national 

securities exchanges, and to allow 

derivatives clearing organizations to 

clear such products, to ensure that the 

futures markets are not competitively 

disadvantaged with regard to such 

products. I dissent from today’s action, 

because I do not believe this exemptive 

order provides sufficient basis for or 

assurance of such reciprocity in the 

future. Given the issuance of today’s 

orders, I concur in the approval of the 

Options Clearing Corporation’s abovereferenced request for approval of rules. 

Bart Chilton, 

Commissioner, Commodity Futures Trading 

Commission. 

[FR Doc. E8–12624 Filed 6–4–08; 8:45 am] 

BILLING CODE 6351–01–P 

DEPARTMENT OF DEFENSE 

Office of the Secretary 

[Transmittal Nos. 08–55] 

36(b)(1) Arms Sales Notification 

AGENCY: Department of Defense, Defense 

Security Cooperation Agency. 

ACTION: Notice. 

SUMMARY: The Department of Defense is 

publishing the unclassified text of a 

section 36(b)(1) arms sales notification. 

This is published to fulfill the 

requirements of section 155 of Public 

Law 104–164 dated 21 July 1996. 

FOR FURTHER INFORMATION CONTACT: Ms. 

B. English, DSCA/DBO/CFM, (703) 601–

3740. 

The following is a copy of a letter to 

the Speaker of the House of 

Representatives, Transmittals 08–55 

with attached transmittal, policy 

justification, and Sensitivity of 

Technology. 

Dated: May 28, 2008. 

Patricia L. Toppings, 

OSD Federal Register Liaison Officer, 

Department of Defense. 

BILLING CODE 5001–06–M 


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