U.S. COMMODITY FUTURES TRADING COMMISSION 

Three Lafayette Centre 

Office of the Secretariat 

Mr. William H. Navin 

1155 21st Street, NW, Washington, DC 20581 

Telephone: (202) 418-5100 

Facsimile: (202) 418-5521 

www.cflc.gov 

June 14,2010 

Executive Vice President, General Counsel, and Secretary 

The Options Clearing Corporation 

One N. Wacker Drive, Suite 500 

Chicago, Illinois 60606 

Re: Request by the Options·Clearing Corporation for Approval of OCC Rule Filing SROCC-2009-20 

Dear Mr. Navin: 

By submission received December 15, 2009, the Options Clearing Corporation 

("OCC"), a registered derivatives clearing organization ("DCO"), submitted for Commission 

approval, pursuant to Section 5c(c)(2) of the Commodity Exchange Act ("CEA") and Section 

39.4(a) and 40.5 of the Commission's regulations, an interpretation to be inserted in Article I, 

Section 1 (F)(8) of OCC' s By-Laws. The itl.terpretation states that OCC will clear and .treat as 

options on securities any options on, inter alia, ETFS Physical Swiss Gold Shares ("Gold 

Products") or ETFS Physical Silver Shares ("Silver Products"), and will clear and treat as 

security futures any fuh1res contracts on Gold and Silver Products in its capacity as a registered 

securities clearing agency. The Commission extended the initial review period of the 

submissions by forty-five days to March 15, 2010. By letters dated March 12, 2010 and Mayl3, 

2010, ace consented to extend the review period, ultimately until June 14,2010. 

Section 5c(c)(3) of the CEA provides that the Commission shall approve any new rule or 

rule amendment of a registered entity (which includes interpretations of the type submitted by 

OCC) unless the Commission finds that such new rule or rule amendment would violate the 

CEA. The Commission has today issued an Order, pursuant to the Commission's authority 

under Section 4(c) of the CEA, exempting the trading of options on Gold Products or Silver 

Products on national securities exchanges and the trading of security futures on Gold Products 

and Silver Products on derivatives contract markets registered with the SEC as limited purpose 

national securities exchanges, and the clearing of both options and security fuh1res on Gold 

Products and Silver Products through the Options Clearing Corporation ("OCC") in its capacity 

as a registered securities clearing agency, from the provisions of the CEA and the regulations 

thereunder, to the extent necessary to permit the options and security futures to be so traded and 

cleared. The Commission has no basis on which to find that the proposed rule amendments 

violate the CEA. Accordingly, OCC's proposed rule amendments have been approved by the 

Commission pursuant to Section 5c(c)(3) of the CEA. 
COMMODITY FUTURES TRADING COMMISSION 

Order Exempting the Trading and Clearing of Certain Products Related to ETFS Physical Swiss 

Gold Shares and ETFS Physical Silver Shares. 

AGENCY: Commodity Futures Trading Conunission. 

ACTION: Final Order. 

SUMMARY: On April15, 2010, the Conunodity Futures Trading Commission ("CFTC" or the 

"Commission") published for public comment in the Federal Register1 a proposal to exempt the 

trading and clearing of certain contracts called "options" and other contracts called "security 

futures" on each of ETFS Physical Swiss Gold Shares ("Gold Products") and ETFS Physical 

Silver Shares ("Silver Products") (collectively, "Gold and Silver Products"), which would be 

traded on national securities exchanges (as to options) and designated contract markets registered 

with the Securities and Exchange Commission ("SEC") as limited purpose national securities 

exchanges (as to security futures), and in either case cleared through the Options Clearing 

Corporation ("OCC") in its capacity as a registered securities clearing agency, from the 

provisions of the Commodity Exchange Act ("CEA") 2 and the regulations thereunder, to the 

extent necessary to permit them to be so traded and cleared. Authority for this exemption is 

found in Section 4( c) of the CEA. 3 The Commission also requested comment on whether it 

should amend all orders issued exempting the trading and clearing of options on gold and silver 

11 75 FR 19619 (Aprill5, 2010). 2 7 U.S.C. I et seq. 3 7 U.S.C. 6(c). 
share-based products from CEA provisions and Commission regulations thereunder, to impose 

market and large trader reporting requirements under Commission regulations to the trading and 

clearing of the options in order to assist the Commission in monitoring and addressing, among 

other things, the effect on designated contract markets of trading in such products.4 

DATES: Effective Date: June 14,2010 

FOR FURTHER INFORMATION CONTACT: 

Robert B. Wasserman, Associate Director, 202-418-5092, rwassennan@cftc.gov, or Lois 

J. Gregory, Special Counsel, 202-418-5569, lgregory@cftc.gov, Division of Clearing and 

Intermediary Oversight, Commodity Futures Trading Commission, Tlu·ee 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, 5 and a securities clearing agency registered pursuant to Section 17 A of 

the Securities Exchange Act of 1934 ("the '34 Act"). 6 

4 The Commission has provided exemptions for gold and silver products in three prior cases. See Order Exempting 

the Trading and Clearing of Certain Products Related to SPDR® Gold Trust Shares, 73 FR 31981 (June 5, 2008), 

Order Exempting the Trading and Clearing of SPDR Gold Futures Contracts, 73 FR 31979 (June 5, 2008), and 

Order Exempting the Trading and Clearing of Certain Products Related to iShares® COMEX Gold Trust Shares and 

iShares® Silver Trust Shares, 73 FR 79830 (December 30, 2008). 

5 7 U.S.C. 7a-1 

6 15 U.S.C. 78q-l. 

2 
'occ has filed with the CFTC, pursuant to Section 5c(c) of the CEA and Commission 

Regulations 39.4(a) ancl40.5 thereunder/ a request for approval of rules and rule amendments 

that would enable OCC ( 1) to clear and settle contracts called "options" ("Options") on Gold and 

Silver Products traded on national securities exchanges, in its capacity as a registered securities 

clearing agency (and not in its capacity as a DCO) and (2) to clear and settle contracts called 

"security futures" ("Security Futures") on Gold and Silver Products traded on designated 

contract markets8 registered with the SEC as limited purpose national securities exchanges 

pursuant to Section 6(g) of the '34 Act9 ("DCMs") as security futures subject to the CEA and 

CFTC regulations thereunder governing security futures, in OCC's capacity as a registered 

securities clearing agency (and not in its capacity as a DCO). 

10 Section 5c( c )(3) provides that the 

CFTC must approve sttch rules and rule amendments submitted for approval unless it finds that 

the rules or rule amendments would violate the CEA. 

In each case, the shares of the ETFS Physical Swiss Gold Shares and the ETFS Physical 

Silver Shares are designed to reflect the performance of the price of gold and silver bullion, 

respectively, less the expenses of operations. The shares represent entitlement to a specified 

quantity of physical gold or silver bullion, or, in certain circumstances, the proceeds from the 

sale of such quantity of such physical gold or silver bullion. 

7 7 U.S.C. 7a-2(c), 17 C.F.R. §§39.4(a), 40.5. 

8 See Section 5 ofthe CEA, 7 U.S.C. 7. 

9 15 U.S.C. 78f(g). 

10 See Securities Exchange Act Release No. 61591 (February 25, 20 10), 75 FR 9981 (March 4, 201 O)(File No. SROCC-2009-20 filed with both the Commission and the Securities and Exchange Commission ("SEC")). See also 

Securities Exchange Act Release No. 61483 (Febmary 3, 2010), 75 FR 6753 (Februmy 10, 2010)(SEC approval of 

securities exchanges' listing and trading options on ETFS Physical Swiss Gold Shares and ETFS Physical Silver 

Shares). 

3 
The gold and silver bullion is held in vault by or on behalf of the custodian. All physical 

gold and silver conforms to the London Bullion Market Association's rules for good delivery. 

II. Section 4(c) of the Commodity Exchange Act 

Section 4( c )(I) 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. 11 The 

Commission may grant such an exemption by rule, regulation or order, after notice and 

oppm1unity for hearing, and may do so on application of any person or on its own initiative. 

Section 4( c) does not require the Commission determine the jurisdictional status of the 

Options and Security Futures on Gold and s·ilver Products. 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."12 Permitting Options and 

11 Section 4(c)(l) ofthc CEA, 7 U.S.C. 6(c)(l), provides in full that: 

fn order to promote responsible economic or financial innovation and fair competition, the Commission by 

rule, regulation, or order, after notice and opportunity for hearing, may (on its own initiative or on 

application of any person, including any board of trade designated or registered as a contract market or 

derivatives transaction execution facility for transactions for future delivery in any commodity under 

section 7 of this title) exempt any agreement, contract, or transaction (or class thereof) that is otherwise 

subject to subsection (a) of this section (including any person or class of persons offering, entering into, 

rendering advice or rendering other services with respect to, the agreement, contract, or transaction), either 

unconditionally or on stated terms or conditions or for stated.periods and either retroactively or 

prospectively, or both, fi·om. any of the requirements of subsection (a) of this section, or from any other 

provision of this chapter (except subparagraphs (c)(ii) and (D) of section 2(a)(l) of this title, except that the 

Commission and the Securities and Exchange Commission may by rule, regulation, or order jointly exclude 

any agreement, contract, or transaction from section 2(a)(1)(D) of this title), if the Commission determines 

that the exemption would be consistent with the public interest. 

12 HOUSE CONF. REPORT NO. 102-978, 1992 U.S.C.C.A.N. 3179, 3213 ("4(c) Conf. Report"). 

4 
Security Futures on Gold and Silver Products to trade on national securities exchanges (as to 

Options) and DCMs (as to Security Futures) and to be cleared by OCC in its capacity as a 

securities clearing agency, as discussed above, may foster both financial innovation and 

competition. 

The Options and Security Futures on Gold and Silver Products described above are novel 

instruments. Given, among other things, the fact that the Commission has previously exempted 

similar Gold and Silver Products, the Commission believes that this is an appropriate case for 

issuing an exemption without issuing 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. 13 

In the April15, 2010 Federal Register release, the CFTC requested comment as to 

whether this exeri1ption fromthe requirements of the CEA and regulations thereunder should be 

IJ Section 4(c)(2) of the CEA, 7 U.S.C. 6(c)(2), provides in full that: 

The Commission shall not grant any exemption under paragraph (I) from any of the requirements of 

subsection (a) of this section unless the Commission determines that--

(A) the requirement should not be applied to the agreement, contract, or transaction for which the 

exemption is sought and that the exemption would be consistent with the public interest and the purposes of 

this Act; and 

(B) the agreement, contract, or h·ansaction-

(i) will be entered into solely between appropriate persons; and 

(ii) 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 duties under this Act. 

5 
granted in the context of these transactions. The CFTC also requested comment as to whether 

national securities exchanges that list Options on Gold and Silver Products should comply with 

market reporting requirements and brokers and traders that carry accounts or trade in Options on 

Gold and Silver products should comply with large trader reporting requirements. 14 

Five comments were received: One from OCC, two from national securities exchanges, 15 

and two from private citizens. 16 Two of the comments (OCC and CBOE) support the current 

exemption, but urge the Commission to deal with the status of commodity-based ETFs on a 

categorical rather than a case-by-case basis. The Commission will consider this suggestion. 

OCC and CBOE also argue that any large trader reporting requirements imposed by the 

Commission would result in unnecessary and duplicative regulatory burdens, while ISE (which 

also suppmts the proposed exemption) notes that securities options exchanges have large option 

position reporting requirements in place, and that the Commission should consider coordinating 

these protections between markets in order to address its concern regarding the effective 

regulation of interconnected markets. By contrast, one public commenter (who opposes granting 

the exemption) suggests that, if the exemption is granted, it is crucial that reporting requirements 

be imposed. The Commission will consider these comments in deciding what action to take and 

or to propose with respect to market and large trader reporting for the trading and clearing of 

Options Gold and Silver Products and similar options on gold and silver products for which 

exemptions have previously been granted. 17 

14 See Parts 15 through 21 ofthe Commission's regulations. 

15 Chicago Board Options Exchange (CBOE) and International Securities Exchange (ISE). 

16 All five comments are available on the Commission's website, under comment file 10-04, at 

http://www .cftc. gov/LawRegu lation/PublicComments/ I 0-004.html. 

17 See footnote 4, supra. The other public commenter submitted an article suggesting that the silver and gold futures 

markets were being manipulated. There was no reference, however, to Options on Gold or Silver Products. 

6 
IV. 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." 18 

Particularly in light of the exemptions previously granted by the Commission with respect to 

Options and Security Futures on Gold and Silver Products, it appears consistent with these and 

the other purposes of the CEA, and with the public interest, for the mode of trading and clearing 

these Options and Security Futures -whether the mode applicable to options on securities or 

commodities, or to security futures or futures -to be determined by competitive market forces. 

Second, Options and Security Futures on Gold and Silver Products 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, and also in subparagraph (K) thereof "such 

other persons that the Conunission determines to be appropriate in light of . .. the applicability of 

appropriate regulatory protections." National securities exchanges and OCC, as well as their 

memb~rs who will intermediate Options on Gold and Silver Products, are subject to extensive 

and detailed regulation by the SEC under the '34 Act. Similarly, DCMs and OCC, as well as 

their members who will intermediate Security Futures on Gold and Silver Products, are subject 

to regulation by the SEC and CFTC. Given that the Options and Security Futures on Gold and 

Silver Products will be traded on national securities exchanges (as to Options) and DCMs (as to 

Security Futures), the regulatory protections available under securities laws and regulations 

governing security futures, and the goal of promoting fair competition, the Options and Security 

18 CEA §3(b), 7 U.S.C. §5(b). See also CEA §4(c)(l), 7 U.S.C. §6(c)(l) (purpose of exemptions is "to promote 

responsible economic or financial innovation and fair competition."). 

7 
Futures on Gold and Silver Products will be traded by appropriate persons. 

Third, in light of the previous exemptions granted for similar gold and silver products, the 

grant of this exemption would not have a material adverse effect on the ability of the 

Commission or any DCM to carry out their regulatory responsibilities under the CEA. 

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 Options on Gold and 

Silver Products on national securities exchanges and the trading of Security Futures on Gold and 

Silver Products on DCMs registered with the SEC as limited purpose national securities 

exchanges, and the clearing of both the Options and Security Futures through the Options 

Clearing Corporation ("OCC") in its capacity as a registered securities clearing agency, from the 

provisions of the CEA and the regulations thereunder, to the extent necessary to permit the 

Options and Security Futures 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. 

V. Related Matters 

A. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 ("PRA") 19 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 proposed exemptive order would not, 

19 44 U.S.C. 3507(d). 

8 
if approved, require a new collection of information from any entities that would be subject to 

the proposed order. 

B. Cost-Benefit Analysis 

Section 15( a) of the CEA,20 as amended by Section 119 of the Commodity Futures 

Modernization Act of 2000, 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) ofthe CEA, as follows? 1 

20 7 U.S.C. 19(a). 21 See also Previous Orders, 73 FRat 31982 (June 5, 2008), 73 FRat 3 FRat 31980 (June 5, 2008), and 73 FRat 

79832 (December 30, 2008). 

9 
1. Protection of market participants and the public. National securities exchanges, 

OCC, and their members who would intermediate the above-described Options and Security 

Futures on Gold and Silver Products are subject to extensive regulatory oversight. 

2. Efficiency, competition, and financial integrity. The exemptive order may 

enhance market efficiency and competition since it could encourage potential trading of Options 

and Security Futures on Gold and Silver Products through modes other than those normally 

applicable; that is, designated contract markets or derivatives transaction execution facilities. 

Financial integrity will not be affected since the Options and Security Futures on Gold and Silver 

Products will be cleared by OCC, a DCO and SEC-registered clearing agency, intermediated by 

SEC-registered broker-dealers. 

3. Price discovery. Price discovery may be ·enhanced through market competition. 

4. Sound risk management practices. The Options and Security Futures on Gold and 

Silver Products will be subject to OCC's current risk-management practices including its 

margining system. In addition, OCC is supervised by both the SEC and the Conunission, and the 

Conunission has found OCC's risk management practices, including its margining system, 

generally sound. 22 

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. As noted above, one. comment was received. 

After considering these factors, the Commission has determined to issue this order. 

22 One commenter questioned whether the Commission's conclusions regarding sound risk management practices at 

OCC were unduly reliant on supervision by others. In fact, the Commission itself conducts supervision of OCC and 

its risk management practices. 

10 
Issued in Washington .DC, on June 14, 20 l 0 by the Commission. 

c{~~~{t{{ ! "7rv;l ~ Assistant ~e a oQ Commission 

ll