Document ID: SEC-2008-1666-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: American Stock Exchange LLC et al.
Posted Date: 2008-12-10T05:00Z

[Federal Register: December 10, 2008 (Volume 73, Number 238)]
[Notices]               
[Page 75148-75150]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10de08-100]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59055; File Nos. SR-Amex-2008-68; SR-BSE-2008-51; SR-
CBOE-2008-72; SR-ISE-2008-58; SR-NYSEArca-2008-66; and SR-Phlx-2008-58]

 
Self-Regulatory Organizations; American Stock Exchange LLC, 
Boston Stock Exchange, Inc., Chicago Board Options Exchange, 
Incorporated, International Securities Exchange, LLC, NYSE Arca, Inc., 
and Philadelphia Stock Exchange, Inc.; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Changes Relating to the 
Listing and Trading Options on Shares of the iShares COMEX Gold Trust 
and the iShares Silver Trust

December 4, 2008.
    Six options exchanges filed with the Securities and Exchange 
Commission (``Commission'') proposed rule changes pursuant to Section 
19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 
19b-4 \2\ thereunder to list and trade options on shares of the iShares 
COMEX Gold Trust and the iShares Silver Trust (``iShares Trust 
Options''). Specifically, NYSE Arca, Inc. (``NYSE Arca'') submitted its 
proposal on June 24, 2008; the Chicago Board Options Exchange, 
Incorporated (``CBOE'') submitted its proposal on July 3, 2008; the 
International Securities Exchange, LLC (``ISE'') submitted its proposal 
on July 14, 2008; the Philadelphia Stock Exchange, Inc. (``Phlx'') 
submitted its proposal on July 23, 2008; the American Stock Exchange 
LLC (``Amex'') \3\ submitted its proposal on August 20, 2008; and the 
Boston Stock Exchange, Inc. (``BSE'') submitted its proposal on 
November 12, 2008. The proposals (collectively, the ``Proposals'') 
submitted by the Amex, BSE, CBOE, ISE, NYSE Arca, and Phlx 
(collectively, the ``Exchanges'') are substantively identical. The 
Commission is publishing this notice to solicit comments on the 
Proposals from interested persons and is approving the Proposals on an 
accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On September 29, 2008, the Commission approved the merger of 
The Amex Membership Corporation, Amex's parent, with NYSE Euronext. 
See Securities Exchange Act Release No. 58673 (September 29, 2008), 
73 FR 57707 (October 3, 2008) (SR-NYSE-2008-60 and SR-Amex-2008-62) 
(approving the merger). As a result, Amex was renamed NYSE Alternext 
US LLC. For the purposes of this order, the Commission will still 
refer to Amex.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchanges each propose to amend certain of their respective 
rules to enable the listing and trading of iShares Trust Options on 
their markets. The text of the Proposals is available at each of the 
respective Exchanges, the Commission's Public Reference Room, and 
http://www.amex.com, http://www.bostonoptions.com, http://www.cboe.com, 
http://www.iseoptions.com, http://www.nysearca.com, and http://
www.phlx.com.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In their filings with the Commission, the Exchanges included 
statements concerning the purpose of, and basis for, the Proposals. The 
text of these statements may be examined at the places specified in 
Item III below. The Exchanges have prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organizations' Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Recently, the Commission approved the Exchanges' proposals to list 
and trade options on the SPDR Gold Trust.\4\ Now, the Exchanges propose 
to list and trade iShares Trust Options.
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    \4\ See Securities Exchange Act Release Nos. 57894 (May 30, 
2008), 73 FR 32061 (June 5, 2008) (SR-Amex-2008-15; SR-CBOE-2005-11; 
SR-ISE-2008-12; SR-NYSEArca-2008-52; and SR-Phlx-2008-17); 58136 
(July 10, 2008), 73 FR 40884 (July 16, 2008) (SR-BSE-2008-41) 
(``SPDR Gold Trust Options Approval Orders'').
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    Currently, the rules of the Exchanges permit only certain ``Units'' 
(also referred to herein as exchange traded funds (``ETFs'')) to 
underlie options traded on their markets.\5\ Specifically, to be 
eligible as an underlying security for options traded on the Exchanges, 
an ETF must represent: (i) Interests in registered investment companies 
(or series thereof) organized as open-end management investment 
companies, unit investment trusts or similar entities that hold 
portfolios of securities, and/or financial instruments including, but 
not limited to, stock index futures contracts, options on futures, 
options on securities and indexes, equity caps, collars and floors, 
swap agreements, forward contracts, repurchase agreements and reverse 
purchase agreements (``Financial Instruments''), and money market 
instruments, including, but not limited to, U.S. government securities 
and repurchase agreements (``Money Market Instruments'') comprising or 
otherwise based on or representing investments in indexes or portfolios 
of securities and/or Financial Instruments and Money Market Instruments 
(or that hold securities in one or more other registered investment 
companies that themselves hold such portfolios of securities and/or 
Financial Instruments and Money Market Instruments); or (ii) interests 
in a trust or similar entity that holds a specified non-U.S. currency 
deposited with the trust or similar entity when aggregated in some 
specified minimum number may be surrendered to the trust by the 
beneficial owner to receive the specified non-U.S. currency and pays 
the beneficial owner interest and other distributions on deposited non-
U.S. currency, if any, declared and paid by the trust; or (iii) 
commodity pool interests principally engaged, directly or indirectly, 
in holding and/or managing portfolios or baskets of securities, 
commodity futures contracts, options on commodity futures contracts, 
swaps, forward contracts and/or options on physical commodities and/or 
non-U.S. currency; or (iv) are shares of the SPDR Gold Trust. The 
Proposals would expand the types of ETFs that may be

[[Page 75149]]

approved for options trading on the Exchanges to include shares of the 
iShares COMEX Gold Trust and the iShares Silver Trust.
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    \5\ See Amex Rule 915 Commentary .06 and .10; Boston Options 
Exchange (``BOX'') Rules, Chapter IV, Section 3(i); Interpretation 
and Policy .06 to CBOE Rule 5.3; ISE Rule 5.2(h); NYSE Arca Rule 
5.3(g); and Phlx Rule 1009 Commentary .06.
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    Apart from allowing iShares Trust Options to be traded on the 
Exchanges as described above, the Exchanges' listing standards would 
remain unchanged. ETFs on which options may be listed and traded would 
still have to be listed and traded on a national securities exchange 
and satisfy the other listing standards set forth in the respective 
rules of each of the Exchanges.\6\
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    \6\ Id.
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    Specifically, all ETFs underlying options would also continue to be 
required to: (1) Meet the criteria and guidelines under the Exchanges' 
rules for underlying ETFs; or (2) be available for creation or 
redemption each business day from or through the issuer in cash or in 
kind at a price related to net asset value, and the issuer must be 
obligated to issue Units in a specified aggregate number even if some 
or all of the investment assets required to be deposited have not been 
received by the issuer, subject to the condition that the person 
obligated to deposit the investments has undertaken to deliver the 
investment assets as soon as possible and such undertaking is secured 
by the delivery and maintenance of collateral consisting of cash or 
cash equivalents satisfactory to the issuer, as provided in the 
respective prospectus.\7\
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    \7\ See Amex Rule 915 Commentary .06 and .10; BOX Rule Chapter 
IV, Section 3(i)(A)-(B); Interpretation and Policy .01 and .06 to 
CBOE Rule 5.3; ISE Rule 502(h)(A)-(B); NYSE Arca Rule 5.3(g)(1)(A)-
(B); and Phlx Rule 1009 Commentary .06.
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    The Exchanges each propose that the current continued listing 
standards for options on ETFs would apply to iShares Trust Options. 
Specifically, options on Units may be subject to the suspension of 
opening transactions as follows: (1) Following the initial twelve-month 
period beginning upon the commencement of trading of the Units, there 
are fewer than 50 record and/or beneficial holders of the Units for 30 
or more consecutive trading days; (2) the value of the index or 
portfolio of securities, non-U.S. currency, or portfolio of commodities 
including commodity futures contracts, options on commodity futures 
contracts, swaps, forward contracts and/or options on physical 
commodities and/or Financial Instruments and Money Market Instruments 
on which Units are based is no longer calculated or available; or (3) 
such other event occurs or condition exists that in the opinion of the 
exchanges makes further dealing on the exchange inadvisable.\8\
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    \8\ See Amex Rule 916 Commentary .07 and .11; BOX Rule Chapter 
IV, Section 3(i); Interpretation and Policy .08 to CBOE Rule 5.4; 
ISE Rule 503(h); NYSE Arca Rule 5.4(k); and Phlx Rule 1010 
Commentary .08.
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    In addition, shares of the iShares COMEX Gold Trust and the iShares 
Silver Trust would not be deemed to meet the requirements for continued 
approval, and the Exchanges would not open for trading any additional 
series of option contracts of the class covering shares of the iShares 
COMEX Gold Trust and the iShares Silver Trust, if the shares cease to 
be an ``NMS stock'' as provided for in rules of the Exchanges \9\ or 
are halted from trading on their primary market.
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    \9\ See Amex Rule 916 Commentary .07 and .11; BOX Rule Chapter 
IV, Section 3(i); Interpretation and Policy .01 to CBOE Rule 5.4; 
ISE Rule 503(h); NYSE Arca Rule 5.4(b); and Phlx Rule 1010.
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    The Exchanges each represent that the addition of the iShares COMEX 
Gold Trust and the iShares Silver Trust to types of Units that may 
underlie listed options traded on the respective exchange would not 
have any effect on the rules pertaining to position and exercise limits 
\10\ or margin.\11\
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    \10\ See Amex Rules 904 and 905; BOX Rules Chapter III, Sections 
7 and 9; CBOE Rules 4.11 and 4.12; ISE Rules 412 and 414; NYSE Arca 
Rules 6.8 and 6.9; and Phlx Rules 1001 and 1002.
    \11\ See Amex Rule 462; BOX Rules Chapter XIII, Sections 3; CBOE 
Rule 12.3; ISE Rule 1202; NYSE Arca Rules 4.15 and 4.16; and Phlx 
Rule 722.
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    The Exchanges also represent that the respective surveillance 
procedures applicable to iShares Trust Options would be similar to 
those applicable to all other options on ETFs currently traded on the 
Exchanges. In addition, the Exchanges note that they may obtain 
information from the New York Mercantile Exchange, Inc. (``NYMEX'') 
through the Intermarket Surveillance Group (``ISG'') related to any 
financial instrument traded there that is based, in whole or in part, 
upon an interest in, or performance of, gold or silver.
2. Statutory Basis
    The Exchanges each state that amending its rules to accommodate the 
listing and trading of iShares Trust Options will benefit investors by 
providing them with valuable risk management tools. Accordingly, the 
Exchanges believe that the proposed rule changes are consistent with 
the requirements of Section 6(b) of the Act \12\ in general, and 
further the objectives of Section 6(b)(5) \13\ of the Act in 
particular, in that they are designed 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.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchanges each believe that the proposed rule changes will not 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchanges each state that no written comments were solicited or 
received with respect to the proposed rule changes.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
changes are 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 rule-comments@sec.gov. Please include 
File Nos. SR-Amex-2008-68; SR-BSE-2008-51; SR-CBOE-2008-72; SR-ISE-
2008-58; SR-NYSEArca-2008-66; and SR-Phlx-2008-58 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 Numbers SR-Amex-2008-68; SR-BSE-
2008-51; SR-CBOE-2008-72; SR-ISE-2008-58; SR-NYSEArca-2008-66; and SR-
Phlx-2008-58. 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

[[Page 75150]]

public in accordance with the provisions of 5 U.S.C. 552, will be 
available for inspection and copying 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 available publicly. All submissions should refer to 
File Numbers SR-Amex-2008-68; SR-BSE-2008-51; SR-CBOE-2008-72; SR-ISE-
2008-58; SR-NYSEArca-2008-66; and SR-Phlx-2008-58 and should be 
submitted on or before December 31, 2008.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    After careful consideration, the Commission finds that the 
Proposals are consistent with the requirements of the Act and the rules 
and regulations thereunder applicable to national securities exchanges 
\14\ and, in particular, the requirements of Section 6 of the Act.\15\ 
Specifically, the Commission finds that the Proposals are consistent 
with Section 6(b)(5) of the Act,\16\ which requires, among other 
things, that the rules of a national securities exchange be designed 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. In accordance with the Memorandum of 
Understanding entered into between the Commodity Futures Trading 
Commission (``CFTC'') and the Commission 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 
Commission-regulated environment, in a manner consistent with laws and 
regulations (including the appropriate use of all available exemptive 
and interpretive authority).
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    \14\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \15\ 15 U.S.C. 78f.
    \16\ 15 U.S.C. 78f(b)(5).
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    As national securities exchanges, each of the Exchanges is required 
under Section 6(b)(1) of the Act \17\ to enforce compliance by its 
members, and persons associated with its members, with the provisions 
of the Act, Commission rules and regulations thereunder, and its own 
rules. In addition, brokers that trade iShares Trust Options will also 
be subject to best execution obligations and FINRA rules.\18\ 
Applicable rules of the Exchanges also require that customers receive 
appropriate disclosure before trading iShares Trust Options.\19\ 
Further, brokers opening accounts and recommending options transactions 
must comply with relevant customer suitability standards.\20\
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    \17\ 15 U.S.C. 78f(b)(1).
    \18\ See FINRA Rule 2320.
    \19\ See Amex Rule 926; BOX Rules Chapter XI, Section 17; CBOE 
Rule 9.15; ISE Rule 616; NYSE Arca Rule 9.18(g); and Phlx Rule 1029.
    \20\ See FINRA Rules 2860, 2860-2 and 2310; Amex Rule 923; BOX 
Rules Chapter XI, Section 11; CBOE Rules 9.7 and 9.9; ISE Rules 608 
and 610; NYSE Arca Rule 918(b)-(c); and Phlx Rules 1024 and 1026.
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    iShares Trust Options will trade as options under the trading rules 
of each of the Exchanges. These rules, among other things, are designed 
to avoid trading through better displayed prices for iShares Trust 
Options available on other exchanges and, thereby, satisfy each 
exchange's obligation under the Options Intermarket Linkage Plan.\21\ 
Series of the iShares Trust Options will be subject to the Exchanges' 
rules regarding continued listing requirements, including standards 
applicable to the underlying iShares COMEX Gold Trust and the iShares 
Silver Trust. Shares of the iShares COMEX Gold Trust and the iShares 
Silver Trust must continue to be traded through a national securities 
exchange or through the facilities of a national securities 
association, and must be ``NMS stock'' as defined under Rule 600 of 
Regulation NMS.\22\ In addition, the underlying shares must continue to 
be available for creation or redemption each business day from or 
through the issuer in cash or in kind at a price related to net asset 
value.\23\ If shares of the iShares COMEX Gold Trust and the iShares 
Silver Trust fail to meet these requirements, the Exchanges will not 
open for trading any new series of iShares Trust Options.
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    \21\ See Amex Rule 942; BOX Rules Chapter XII, Section 3; CBOE 
Rule 6.83; ISE Rule 1902; NYSE Arca Rule 6.94; and Phlx Rule 1085. 
Specifically, each of the exchanges is a participant in the Options 
Intermarket Linkage Plan.
    \22\ 17 CFR 242.600.
    \23\ See Amex Rule 915 Commentary .06 and .10; BOX Rules Chapter 
IV, Section 3(i); Interpretation and Policy .06 to CBOE Rule 5.3; 
ISE Rule 502(a)-(b); NYSE Arca Rule 5.3(a)-(b); and Phlx Rule 1009 
Commentary .06.
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    The Exchanges have all represented that they have surveillance 
programs in place for the listing and trading of options based on the 
iShares COMEX Gold Trust and the iShares Silver Trust. For example, the 
Exchanges may obtain trading information via the ISG from the NYMEX 
related to any financial instrument traded there that is based, in 
whole or in part, upon an interest in, or performance of, gold or 
silver. Additionally, the listing and trading of iShares Trust Options 
will be subject to the Exchanges' rules pertaining to position and 
exercise limits \24\ and margin.\25\
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    \24\ See Amex Rules 904 and 905; BOX Rules Chapter III, Sections 
7 and 9; CBOE Rules 4.11 and 4.12; ISE Rules 412 and 414; NYSE Arca 
Rules 6.8 and 6.9; and Phlx Rules 1001 and 1002.
    \25\ See Amex Rule 462; BOX Rules Chapter XIII, Section 3; CBOE 
Rule 12.3; ISE Rule 1202; NYSE Arca Rules 4.15 and 4.16; and Phlx 
Rule 722. See also FINRA Rules 2860 and 2860-1.
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    In addition, the Commission finds good cause, pursuant to Section 
19(b)(2) of the Act,\26\ for approving the Proposals prior to the 
thirtieth day after the date of publication of notice in the Federal 
Register. The Proposals are similar to proposals previously approved by 
the Commission to list and trade options on shares of the SPDR Gold 
Trust.\27\ Therefore, the Commission does not believe that the 
Proposals raise any new regulatory issues. Accordingly, the Commission 
finds that there is good cause, consistent with Section 6(b)(5) of the 
Act,\28\ to approve the Proposals on an accelerated basis.
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    \26\ 15 U.S.C. 78s(b)(2).
    \27\ See SPDR Gold Trust Options Approval Orders, supra note 4.
    \28\ 15 U.S.C. 78s(b)(5).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\29\ that the Proposals (SR-Amex-2008-68; SR-BSE-2008-51; SR-CBOE-
2008-72; SR-ISE-2008-58; SR-NYSEArca-2008-66; and SR-Phlx-2008-58) are 
hereby approved on an accelerated basis.
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    \29\ 15 U.S.C. 78s(b)(2).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
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    \30\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E8-29200 Filed 12-9-08; 8:45 am]

BILLING CODE 8011-01-P