Document ID: SEC-2010-1073-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2010-07-15T04:00Z

[Federal Register: July 15, 2010 (Volume 75, Number 135)]
[Notices]               
[Page 41247-41250]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15jy10-104]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62473; File No. SR-ISE-2010-74]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change to List and Trade Options on the Sprott Physical Gold Trust

July 8, 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 July 7, 2010, the International Securities Exchange, LLC (the 
``Exchange'' or the ``ISE'') 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 by the Exchange. 
ISE filed the proposal pursuant to Section 19(b)(3)(A) of the Act \3\ 
and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. The Commission is publishing 
this notice to solicit

[[Page 41248]]

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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its rules to enable the listing and 
trading on the Exchange of options on the Sprott Physical Gold Trust. 
The text of the proposed rule change is available on the Exchange's Web 
site http://www.ise.com, at the principal office of the Exchange, and 
at the Commission's Public Reference Room.

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 Exchange 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. The self-regulatory organization has prepared summaries, 
set forth in Sections A, B and C below, of the most significant aspects 
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 ISE to list and trade options on the SPDR 
Gold Trust,\5\ the iShares COMEX Gold Trust and the iShares Silver 
Trust,\6\ the ETFS Gold Trust and the ETFS Silver Trust,\7\ the ETFS 
Palladium Trust and the ETFS Platinum Trust.\8\ Now, the Exchange 
proposes to list and trade options on the Sprott Physical Gold Trust.
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    \5\ See Securities Exchange Act Release No. 57894 (May 30, 
2008), 73 FR 32061 (June 5, 2008) (SR-ISE-2008-12).
    \6\ See Securities Exchange Act Release No. 59055 (December 4, 
2008), 73 FR 75148 (December 10, 2008) (SR-ISE-2008-58).
    \7\ See Securities Exchange Act Release No. 61483 (February 3, 
2010), 75 FR 6753 (February 10, 2010) (SR-ISE-2009-106).
    \8\ See Securities Exchange Act Release No. 61983 (April 26, 
2010), 75 FR 23314 (May 3, 2010) (SR-ISE-2010-19).
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    Under current Rule 502(h), only Exchange-Traded Fund Shares, or 
ETFs, that are traded on a national securities exchange and are defined 
as an ``NMS'' stock under Rule 600 of Regulation NMS, and that (i) 
represent 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 indices, equity caps, collars and floors, swap 
agreements, forward contracts, repurchase agreements and reverse 
repurchase 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 broad-based 
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) represent interests in a trust that holds a specified non-U.S. 
currency or currencies deposited with the trust 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 or 
currencies and pays the beneficial owner interest and other 
distributions on the deposited non-U.S. currency or currencies, if any, 
declared and paid by the trust (``Funds'') or (iii) represent 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 ETFs'') or (iv) represent interests in the 
SPDR[supreg] Gold Trust, the iShares COMEX Gold Trust, the iShares 
Silver Trust, the ETFS Gold Trust, the ETFS Silver Trust, 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 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.\9\ 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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    \9\ See ISE Rule 502(h).
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    Apart from allowing the 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 ISE 
Rule 502(h).
    Specifically, in addition to satisfying the aforementioned listing 
requirements, ETFs must meet either (1) the criteria and guidelines 
under ISE Rules 502(a) and (b) or (2) they must be available for 
creation or redemption each business day from or through the issuing 
trust, investment company, commodity pool or other entity in cash or in 
kind at a price related to net asset value, and the issuer must be 
obligated to issue Exchange-Traded Fund Shares in a specified aggregate 
number even if some or all of the investment assets and/or cash 
required to be deposited have not been received by the issuer, subject 
to the condition that the person obligated to deposit the investment 
assets has undertaken to deliver them 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 ISE Rule 503(h), options on Exchange-Traded 
Fund Shares may be subject to the suspension of opening transactions in 
any of the following circumstances: (1) In the case of options covering 
Exchange-Traded Fund Shares approved pursuant to Rule 502(h)(A)(i), in 
accordance with the terms of subparagraphs (b)(1), (2), (3) and (4) of 
Rule 503; (2) in the case of options covering Exchange-Traded Fund 
Shares approved pursuant to Rule 502(h)(A)(ii), following the initial 
twelve-month period beginning upon the commencement of trading of the 
Exchange-Traded Fund Shares, there are fewer than 50 record and/or 
beneficial

[[Page 41249]]

holders of the Exchange-Traded Fund Shares for 30 or more consecutive 
trading days; (3) the value of the underlying gold is no longer 
calculated or available; or (4) 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 ISE Rule 
503(b)(5) or the Sprott Physical Gold Trust is halted from trading on 
its primary market.
    The addition of the Sprott Physical Gold Trust to ISE Rule 502(h) 
will not have any effect on the rules pertaining to position and 
exercise limits \10\ or margin.\11\
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    \10\ See ISE Rules 412 and 414.
    \11\ See ISE Rule 1202.
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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 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 proposed rule change is consistent with Section 6(b) \12\ of 
the Securities Exchange Act of 1934 (the ``Act''), in general, and 
furthers the objectives of Section 6(b)(5) \13\ 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 and a national market system 
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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    \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 proposed rule change does 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 Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from members or other interested 
parties.

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

    Because the foregoing proposed rule change does not significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not become operative for 30 days from the date on which it was filed, 
or such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) \14\ of the Act and Rule 19b-
4(f)(6) \15\ thereunder. The Exchange provided the Commission with 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at least 
five business days prior to the date of filing the proposed rule 
change.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange requests that the Commission waive 
the 30-day operative delay so that the Exchange can list and trade 
options on the Sprott Physical Gold Trust immediately. The Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest to permit the Exchange 
to list and trade options on the Sprott Physical Gold Trust without 
delay.\16\ The Commission notes the proposal is substantively identical 
to a proposal that was recently approved by the Commission, and does 
not raise any new regulatory issues.\17\ For these reasons, the 
Commission designates the proposed rule change as operative upon 
filing.
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    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \17\ See Securities Exchange Act Release No. 62463 (July 7, 
2010) (SR-CBOE-2010-043).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate 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.

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-ISE-2010-74 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-ISE-2010-74. 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

[[Page 41250]]

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 available publicly. All submissions should refer to 
File Number SR-ISE-2010-74 and should be submitted on or before August 
5, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-17194 Filed 7-14-10; 8:45 am]
BILLING CODE 8010-01-P