Document ID: SEC-2010-0816-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2010-06-04T04:00Z

[Federal Register: June 4, 2010 (Volume 75, Number 107)]
[Notices]               
[Page 31823-31825]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04jn10-97]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62193; File No. SR-CBOE-2010-043]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of Proposed Rule Change To Enable the 
Listing and Trading of Options on the Sprott Physical Gold Trust

May 28, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on May 11, 2010, the Chicago Board Options Exchange, Incorporated 
(``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CBOE proposes to amend certain rules to enable the listing and 
trading on the Exchange of options on the Sprott Physical Gold Trust. 
The text of the rule proposal is available on the Exchange's Web site 
(http://www.cboe.org/legal), at the Exchange's Office of the Secretary 
and at the Commission.

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

    In its filing with the Commission, the self-regulatory organization 
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 those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

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

1. Purpose
    Recently the U.S. Securities and Exchange Commission (``SEC'' or 
``Commission'') authorized CBOE to list and trade options on the SPDR 
Gold Trust,\3\ the iShares COMEX Gold Trust, the iShares Silver 
Trust,\4\ the ETFS Silver Trust and the ETFS Gold Trust,\5\ the ETFS 
Palladium Trust and the ETFS Platinum Trust.\6\ Now, the Exchange 
proposes to list and trade options on the Sprott Physical Gold Trust 
(``PHYS'').
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    \3\ See Securities Exchange Act Release No. 57897 (May 30, 
2008), 73 FR 32061 (June 5, 2008) (order approving SR-CBOE-2005-11).
    \4\ See Securities Exchange Act Release No. 59055 (December 4, 
2008), 73 FR 75148 (December 10, 2008) (order approving SR-CBOE-
2008-72).
    \5\ See Securities Exchange Act Release No. 61483 (February 3, 
2010) (order approving SR-CBOE-2010-007).
    \6\ See Securities Exchange Act Release No. 61892 (April 13, 
2010), 75 FR 20649 (April 20, 2010) (order approving SR-CBOE-2010-
015).
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    Under current Rule 5.3, only Units (also referred to herein as 
exchange traded fund (``ETFs'')) representing (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 (the ``Financial 
Instruments''), and money market instruments, including, but not 
limited to, U.S. government securities and repurchase agreements (the 
``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 (``Commodity Pool Units''); or (iv) represent interests in the 
streetTRACKS Gold Trust or the iShares COMEX Gold Trust or the iShares 
Silver Trust or the ETFS Silver Trust or the ETFS Gold Trust or the 
ETFS Palladium Trust or the ETFS Platinum Trust; or (v) represents an 
interest in a registered investment company (``Investment Company'') 
organized as an open-end management investment company or similar 
entity, that invests in a portfolio of securities selected by the 
Investment Company's investment adviser consistent with the Investment 
Company's investment objectives and policies, which is issued in a 
specified aggregate minimum number in return for a deposit of a 
specified portfolio of securities and/or a cash amount with a value 
equal to the next determined net asset value (``NAV''), and when 
aggregated in the same specified minimum number, may be redeemed at a 
holder's request, which holder will be paid a specified portfolio of 
securities and/or cash with a value equal to the next determined NAV 
(``Managed Fund Share'') are eligible as underlying securities for 
options traded on the Exchange.\7\ This rule change proposes to expand 
the types of ETFs that may be approved for options trading on the 
Exchange to include the Sprott Physical Gold Trust.
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    \7\ See Interpretation and Policy .06 to Rule 5.3.
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    Apart from allowing Sprott Physical Gold Trust to be an underlying 
for options traded on the Exchange as described above, the listing 
standards for ETFs will remain unchanged from those that apply under 
current Exchange rules. ETFs on which options may be listed and traded 
must still be listed and traded on a national securities exchange and 
must satisfy the other listing standards set forth in Interpretation 
and Policy .06 to Rule 5.3.
    Specifically, in addition to satisfying the aforementioned listing 
requirements, Units must meet either (1) the criteria and guidelines 
under Rule 5.3 and Interpretation and Policy .01 to Rule 5.3, Criteria 
for Underlying Securities; or (2) they must be available for creation 
or redemption each

[[Page 31824]]

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.
    The Exchange states that the current continued listing standards 
for options on ETFs will apply to options on the Sprott Physical Gold 
Trust. Specifically, under Interpretation and Policy .08 to Rule 5.4, 
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 Exchange makes 
further dealing on the Exchange inadvisable.
    Additionally, the Sprott Physical Gold Trust shall not be deemed to 
meet the requirements for continued approval, and the Exchange shall 
not open for trading any additional series of option contracts of the 
class covering the Sprott Physical Gold Trust, if the Sprott Physical 
Gold Trust ceases to be an ``NMS stock'' as provided for in paragraph 
(f) of Interpretation and Policy .01 of Rule 5.4 or the Sprott Physical 
Gold Trust is halted from trading on its primary market.
    The addition of the Sprott Physical Gold Trust to Interpretation 
and Policy .06 to Rule 5.3 will not have any effect on the rules 
pertaining to position and exercise limits \8\ or margin.\9\
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    \8\ See Rules 4.11, Position Limits, and 4.12, Exercise Limits.
    \9\ See Rule 12.3, Margin Requirements.
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    The Exchange represents that its surveillance procedures applicable 
to trading in options on the Sprott Physical Gold Trust will be similar 
to those applicable to all other options on other Units currently 
traded on the Exchange. The Exchange represents that its surveillance 
procedures applicable to trading in options on the Sprott Physical Gold 
Trust will be similar to those applicable to all other options on other 
ETFs currently traded on the Exchange. Also, the Exchange may obtain 
information from the New York Mercantile Exchange, Inc. (``NYMEX'') (a 
member of the Intermarket Surveillance Group) related to any financial 
instrument that is based, in whole or in part, upon an interest in or 
performance of gold.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) \10\ of the Act, in general, and furthers the objectives 
of Section 6(b)(5) \11\ in particular in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanisms of a free and open 
market in a manner consistent with the protection of investors and the 
public interest. In particular, the Exchange believes that amending its 
rules to accommodate the listing and trading of options on the Sprott 
Physical Gold Trust will benefit investors by providing them with 
valuable risk management tools.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE does not believe that the proposed rule change will impose any 
burden on competition 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 Exchange neither solicited nor received comments on the 
proposal.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be 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 rule-comments@sec.gov. Please include 
File Number SR-CBOE-2010-043 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2010-043. 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 Web site 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. 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

[[Page 31825]]

available publicly. All submissions should refer to File Number SR-
CBOE-2010-043 and should be submitted on or before June 25, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-13437 Filed 6-3-10; 8:45 am]
BILLING CODE 8011-01-P