67794 Federal Register / Vol. 75, No. 212 / Wednesday, November 3, 2010 / Notices 

9 15 U.S.C. 78s(b)(3)(A)(ii). 

10 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Release No. 62880 

(September 9, 2010), 75 FR 56628. 

4ETNs are also known as ‘‘Index-Linked 

Securities,’’ which are designed for investors who 

desire to participate in a specific market segment 

by providing exposure to one or more identifiable 

underlying securities, commodities, currencies, 

derivative instruments, or market indexes of the 

foregoing. Index-Linked Securities are nonconvertible debt of an issuer that have a term of at 

least one year but not greater than thirty years. 

Index-Linked Securities are traded as a single, 

exchange-listed security. As such, rules pertaining 

to the listing and trading of standard equity options 

apply to Index-Linked Securities. 

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. 

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)(ii) of the Act.9 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 shall 

institute proceedings to determine 

whether the proposed rule 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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NASDAQ–2010–136 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

Station Place, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NASDAQ–2010–136. This 

file number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

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

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

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 such filing 

also will be available for inspection and 

copying at the principal office of the 

Exchange. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

publicly available. All submissions 

should refer to File Number SR– 

NASDAQ–2010–136 and should be 

submitted on or before November 24, 

2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–27688 Filed 11–2–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63202; File No. SR–CBOE– 

2010–080] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Order Granting Approval 

of a Proposed Rule Change, as 

Modified by Amendment No. 1, to 

Trade Options on Leveraged 

Exchange-Traded Notes and To 

Broaden the Definition of ‘‘FuturesLinked Securities’’ 

October 28, 2010. 

I. Introduction 

On August 31, 2010, the Chicago 

Board Options Exchange (‘‘CBOE’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) 1 of the Securities Exchange Act 

of 1934 (‘‘Act’’), and Rule 19b–4 

thereunder,2 a proposed rule change to: 

(a) Permit the trading of options on 

leveraged (multiple or inverse) 

exchange-traded notes (‘‘ETNs’’), and (b) 

broaden the definition of ‘‘FuturesLinked Securities.’’ On September 9, 

2010, the Exchange filed Amendment 

No. 1 to the proposed rule change. The 

proposed rule change, as modified by 

Amendment No. 1, was published for 

comment in the Federal Register on 

September 16, 2010.3 The Commission 

received no comment letters on the 

proposed rule change. This order 

approves the proposed rule change as 

modified by Amendment No. 1. 

II. Description of the Proposal 

The purpose of CBOE’s proposed rule 

change is to amend Interpretation and 

Policy .13 to Rule 5.3 to: (a) Permit the 

trading of options on leveraged 

(multiple or inverse) ETNs,4 and (b) 

broaden the definition of ‘‘FuturesLinked Securities.’’ 

Leveraged ETN Options 

Multiple leveraged ETNs seek to 

provide investment results that 

correspond to a specified multiple of the 

percentage performance of a particular 

Reference Asset on a given day. Inverse 

leveraged ETNs seek to provide 

investment results that correspond to 

the inverse (opposite) of the percentage 

performance of a particular Reference 

Asset by a specified multiple on a given 

day. Multiple leveraged ETNs and 

inverse leveraged ETNs differ from 

traditional ETNs in that they do not 

merely correspond to the performance 

of a given Reference Asset, but rather 

attempt to match a multiple or inverse 

of a Reference Asset’s performance. 

The Barclays Long B Leveraged S&P 

500 TR ETN (‘‘BXUB’’), the Barclays 

Long C Leveraged S&P 500 TR ETN 

(‘‘BXUC’’) and the UBS AG 2x Monthly 

Leveraged Long Exchange Traded 

Access Securities (‘‘E–TRACS’’) linked 

to the Alerian MLP Infrastructure Index 

due July 9, 2040 (‘‘MLPL’’) currently 

trade on the NYSE Arca Stock Exchange 

and are examples of multiple leveraged 

ETNs. In addition, the Barclays ETN + 

Inverse S&P 500 VIX Short-Term 

Futures ETN (‘‘XXV’’) currently trades 

on the NYSE Arca Stock Exchange and 

is an example of an inverse leveraged 

ETN. 

Currently, Interpretation and Policy 

.13 to Rule 5.3 provides that securities 

deemed appropriate for options trading 


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Federal Register / Vol. 75, No. 212 / Wednesday, November 3, 2010 / Notices 67795 

5See Rules 4.11, Position Limits, and 4.12, 

Exercise Limits. 

6See Rule 12.3, Margin Requirements. 

shall include shares or other securities 

(‘‘Equity Index-Linked Securities,’’ 

‘‘Commodity-Linked Securities,’’ 

‘‘Currency-Linked Securities,’’ ‘‘Fixed 

Income Index-Linked Securities,’’ 

‘‘Futures-Linked Securities,’’ and 

‘‘Multifactor Index-Linked Securities,’’ 

collectively known as ‘‘Index-Linked 

Securities’’) that are principally traded 

on a national securities exchange and an 

‘‘NMS Stock’’ (as defined in Rule 600 of 

Regulation NMS under the Securities 

Exchange Act of 1934), and represent 

ownership of a security that provides for 

the payment at maturity, as described 

below: 

• Equity Index-Linked Securities are 

securities that provide for the payment 

at maturity of a cash amount based on 

the performance of an underlying index 

or indexes of equity securities (‘‘Equity 

Reference Asset’’); 

• Commodity-Linked Securities are 

securities that provide for the payment 

at maturity of a cash amount based on 

the performance of one or more physical 

commodities or commodity futures, 

options on commodities, or other 

commodity derivatives or CommodityBased Trust Shares or a basket or index 

of any of the foregoing (‘‘Commodity 

Reference Asset’’); 

• Currency-Linked Securities are 

securities that provide for the payment 

at maturity of a cash amount based on 

the performance of one or more 

currencies, or options on currencies or 

currency futures or other currency 

derivatives or Currency Trust Shares (as 

defined in Interpretation and Policy .06 

to this Rule 5.3), or a basket or index of 

any of the foregoing (‘‘Currency 

Reference Asset’’); 

• Fixed Income Index-Linked 

Securities are securities that provide for 

the payment at maturity of a cash 

amount based on the performance of 

one or more notes, bonds, debentures or 

evidence of indebtedness that include, 

but are not limited to, U.S. Department 

of Treasury securities (‘‘Treasury 

Securities’’), government-sponsored 

entity securities (‘‘GSE Securities’’), 

municipal securities, trust preferred 

securities, supranational debt and debt 

of a foreign country or a subdivision 

thereof or a basket or index of any of the 

foregoing (‘‘Fixed Income Reference 

Asset’’); 

• Futures-Linked Securities are 

securities that provide for the payment 

at maturity of a cash amount based on 

the performance of an index of (a) 

futures on Treasury Securities, GSE 

Securities, supranational debt and debt 

of a foreign country or a subdivision 

thereof, or options or other derivatives 

on any of the foregoing; or (b) interest 

rate futures or options or derivatives on 

the foregoing in this subparagraph (b); 

or (c) CBOE Volatility Index (VIX) 

futures (‘‘Futures Reference Asset’’); and 

• Multifactor Index-Linked Securities 

are securities that provide for the 

payment at maturity of a cash amount 

based on the performance of any 

combination of two or more Equity 

Reference Assets, Commodity Reference 

Assets, Currency Reference Assets, 

Fixed Income References Assets, or 

Futures Reference Assets (‘‘Multifactor 

Reference Asset’’). 

For purposes of Interpretation and 

Policy .13 to this Rule 5.3, Equity 

Reference Assets, Commodity Reference 

Assets, Currency Reference Assets, 

Fixed Income Reference Assets, Futures 

Reference Assets together with 

Multifactor Reference Assets, 

collectively are referred to as ‘‘Reference 

Assets.’’ 

In addition, Index-Linked Securities 

must meet the criteria and guidelines for 

underlying Securities set forth in 

Interpretation and Policy .01 to this 

Rule 5.3; or the Index-Linked Securities 

must be redeemable at the option of the 

holder at least on a weekly basis 

through the issuer at a price related to 

the applicable underlying Reference 

Asset. In addition, the issuing company 

is obligated to issue or repurchase the 

securities in aggregation units for cash, 

or cash equivalents, satisfactory to the 

issuer of Index-Linked Securities which 

underlie the option as described in the 

Index-Linked Securities prospectus. 

The Exchange proposes to amend 

Interpretation and Policy .13 to Rule 5.3 

to expand the type of Index-Linked 

Securities that may underlie options to 

include leveraged (multiple or inverse) 

ETNs. To affect this change, the 

Exchange proposes to amend Rule 

5.3.13 by adding the phrase, ‘‘or the 

leveraged (multiple or inverse) 

performance’’ to each of the 

subparagraphs ((A) through (F)) in that 

section which set forth the different 

eligible Reference Assets. 

The Exchange’s current continuing 

listing standards for ETN options will 

continue to apply. Specifically, under 

Interpretation and Policy .16 to Rule 5.4, 

ETN options shall not be deemed to 

meet the Exchange’s requirements for 

continued approval, and the Exchange 

shall not open for trading any additional 

series or option contracts of the class 

covering such Securities whenever the 

underlying Securities are delisted and 

trading in the Securities is suspended 

on a national securities exchange, or the 

Securities are no longer an ‘‘NMS Stock’’ 

(as defined in Rule 600 of Regulation 

NMS under the Securities Exchange Act 

of 1934). In addition, the Exchange shall 

consider the suspension of opening 

transactions in any series of options of 

the class covering Index-Linked 

Securities in any of the following 

circumstances: (1) The underlying 

Index-Linked Security fails to comply 

with the terms of Interpretation and 

Policy .13 to Rule 5.3; (2) in accordance 

with the terms of Interpretation and 

Policy .01 to Rule 5.4, in the case of 

options covering Index-Linked 

Securities when such options were 

approved pursuant to Interpretation and 

Policy .13 to Rule 5.3, except that, in the 

case of options covering Index-Linked 

Securities approved pursuant to 

Interpretation and Policy .13(3)(B) to 

Rule 5.3 that are redeemable at the 

option of the holder at least on a weekly 

basis, then option contracts of the class 

covering such Securities may only 

continue to be open for trading as long 

as the Securities are listed on a national 

securities exchange and are ‘‘NMS’’ 

stocks as defined in Rule 600 of 

Regulation NMS; (3) in the case of any 

Index-Linked Security trading pursuant 

to Interpretation and Policy .13 to Rule 

5.3, the value of the Reference Asset is 

no longer calculated; or (4) such other 

event shall occur or condition exist that 

in the opinion of the Exchange makes 

further dealing in such options on the 

Exchange inadvisable. Expanding the 

eligible types of ETNs for options 

trading under Interpretation and Policy 

.13 to Rule 5.3 will not have any effect 

on the rules pertaining to position and 

exercise limits 5 or margin.6

The Exchange has represented that its 

existing surveillance procedures 

applicable to trading in options are 

adequate to properly monitor the 

trading in leveraged (multiple and 

inverse) ETN options. 

It is expected that The Options 

Clearing Corporation will seek to revise 

the Options Disclosure Document 

(‘‘ODD’’) to accommodate the listing and 

trading of leveraged (multiple and 

inverse) ETN options. 

Definition of ‘‘Futures-Linked Securities’’ 

The second change being proposed by 

the Exchange’s filing is to amend the 

definition of ‘‘Futures-Linked 

Securities’’ set forth in Rule 5.3.13(1)(E). 

Rule 5.3 sets forth generic listing criteria 

for securities that may serve as 

underlyings for listed options. 

Currently, the definition of ‘‘FuturesLinked Securities’’ is limited to 

securities that provide for the payment 

at maturity of a cash amount based on 

the performance of an index of (a) 

futures on Treasury Securities, GSE 


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67796 Federal Register / Vol. 75, No. 212 / Wednesday, November 3, 2010 / Notices 

7 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 8 15 U.S.C. 78f(b). 

9 15 U.S.C. 78f(b)(5). 

10See CBOE Regulatory Circulars RG09–97 

(August 31, 2009), RG09–132 (November 20, 2009). 

See also FINRA Regulatory Notices 09–53 (August 

2009), 09–65 (November 2009). 

11 15 U.S.C. 78s(b)(2). 

12 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78s(b)(3)(A)(iii). 

3 17 CFR 240.19b–4(f)(4). 

4The Commission has modified the text of the 

summaries prepared by NSCC. 

Securities, supranational debt and debt 

of a foreign country or a subdivision 

thereof, or options or other derivatives 

on any of the foregoing; or (b) interest 

rate futures or options or derivatives on 

the foregoing in this subparagraph (b); 

or (c) CBOE Volatility Index (VIX) 

futures. The Exchange is proposing to 

revise the definition of ‘‘Futures-Linked 

Securities’’ to provide that they are 

securities that pay at maturity a cash 

amount based on the performance or the 

leveraged (multiple or inverse) 

performance of an index or indexes of 

futures contracts or options or 

derivatives on futures contracts 

(‘‘Futures Reference Asset’’). All ETNs 

eligible for options trading must still be 

principally traded on a national 

securities exchange and an ‘‘NMS 

Stock.’’ 

III. Commission Findings 

After careful consideration, the 

Commission finds that the proposed 

rule changes are consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange,7 and in 

particular, the requirements of Section 

6(b) of the Act.8 Specifically, the 

Commission finds that the proposed 

rule changes are consistent with Section 

6(b)(5) of the Act,9 which requires, 

among other things, that the rules of a 

national securities exchange be 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and in general, to protect 

investors and the public interest. 

Leveraged ETN Options 

The Commission notes that the 

Exchange has represented that, similar 

to its imposition of higher margin 

requirements for options on leveraged 

ETFs,10 the Exchange will impose 

higher margin requirements for 

leveraged ETNs, as allowed under CBOE 

Rules 12.3(h) and 12.10. The Exchange 

will also issue a Regulatory Circular 

announcing the new margin 

requirements prior to listing and trading 

options on leveraged ETNs. 

In addition, pursuant to the proposed 

rule change, the Exchange represented 

that the current listing standards for 

ETN options will continue to apply. The 

Exchange has also represented that its 

existing surveillance procedures 

applicable to trading options are 

adequate to properly monitor trading of 

options on leveraged ETNs. 

The Commission believes that these 

representations are adequate to protect 

investors. Furthermore, the Commission 

believes that the ability to trade options 

on leveraged ETNs will provide 

investors with additional risk 

management tools. Therefore, the 

Commission believes that this proposed 

rule change is appropriate. 

Broaden the Definition of ‘‘FuturesLinked Securities’’ 

The Commission believes that this 

proposal will provide a more efficient 

process for the Exchange to list and 

trade options on ETNs. The Exchange 

will be able to list and trade options 

overlying newly introduced ETNs that 

do not fall within the current definition 

of ‘‘Futures-Linked Securities,’’ without 

first filing a rule change proposal with 

the Commission to change the definition 

of ‘‘Futures-Linked Securities’’ to 

include each specific new product. The 

Commission notes that all ETNs that 

underlie options traded on the Exchange 

must still be principally traded on a 

national securities exchange and must 

be an ‘‘NMS stock.’’ In addition, 

pursuant to the proposed rule change, 

the Exchange represented that the 

current listing standards for options on 

ETNs will continue to apply to options 

on ETNs that fall within the proposed 

definition of ‘‘Futures-Linked 

Securities.’’ The Exchange has also 

represented that its existing surveillance 

procedures applicable to trading options 

are adequate to properly monitor trading 

of options on ETNs. Therefore, the 

Commission believes that this proposed 

rule change is appropriate. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,11 that the 

propose rule change (SR–CBOE–2010– 

080), as modified by Amendment No. 1, 

be, and is hereby, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–27768 Filed 11–2–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63194; File No. SR–NSCC– 

2010–12] 

Self-Regulatory Organizations; The 

National Securities Clearing 

Corporation; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Modify Procedures 

Related to the Automated Customer 

Account Transfer Service 

October 27, 2010. 

Pursuant to Section 19(b)(4) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 notice is hereby given that on 

October 15, 2010, The National 

Securities Clearing Corporation 

(‘‘NSCC’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’) 

the proposed rule change as described 

in Items I and II below, which Items 

have been prepared primarily by NSCC. 

NSCC filed the proposal pursuant to 

Section 19(b)(3)(A)(iii) of the Act 2 and 

Rule 19b–4(f)(4) 3 thereunder so that the 

proposal was effective upon filing with 

the Commission. 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 purpose of the proposed rule 

change is to modify NSCC’s Rules so 

that in certain circumstances shares 

delivered to a Member through NSCC’s 

Continuous Net Settlement System 

(‘‘CNS’’) would be allocated to a 

Member’s buy-in delivery obligation in 

a security before being allocated to 

satisfy an Automated Customer Account 

Transfer Service (‘‘ACATS’’) delivery 

obligation in the same security. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

NSCC 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. NSCC has prepared 

summaries, set forth in sections (A), (B) 

and (C) below, of the most significant 

aspects of such statements.4


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