Document ID: SEC-2010-0390-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2010-03-12T05:00Z

[Federal Register: March 12, 2010 (Volume 75, Number 48)]
[Notices]               
[Page 11955-11957]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12mr10-169]                         

[[Page 11955]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61663; File No. SR-CBOE-2010-015]

 
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 ETFS Palladium Trust and the ETFS 
Platinum Trust

March 5, 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 February 8, 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 ETFS Palladium Trust and the 
ETFS Platinum 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 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\ Now, 
the Exchange proposes to list and trade options on the ETFS Palladium 
Trust and the ETFS Platinum Trust.
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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).
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    Under current Rule 5.3, only Units (also referred to herein as 
exchange traded funds (``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 (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.\6\ This rule change proposes to expand 
the types of ETFs that may be approved for options trading on the 
Exchange to include the ETFS Palladium Trust and the ETFS Platinum 
Trust.
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    \6\ See Interpretation and Policy .06 to Rule 5.3.
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    Apart from allowing the ETFS Palladium Trust and the ETFS Platinum 
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 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

[[Page 11956]]

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 ETFS Palladium Trust 
and the ETFS Platinum 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 ETFS Palladium Trust and the ETFS Platinum 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 ETFS Palladium Trust and the 
ETFS Platinum Trust, if the ETFS Palladium Trust and the ETFS Platinum 
Trust ceases to be an ``NMS stock'' as provided for in paragraph (f) of 
Interpretation and Policy .01 of Rule 5.4 or the ETFS Palladium Trust 
and the ETFS Platinum Trust is halted from trading on its primary 
market.
    The addition of the ETFS Palladium Trust and the ETFS Platinum 
Trust to Interpretation and Policy .06 to Rule 5.3 will not have any 
effect on the rules pertaining to position and exercise limits \7\ or 
margin.\8\
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    \7\ See Rules 4.11, Position Limits, and 4.12, Exercise Limits.
    \8\ See Rule 12.3, Margin Requirements.
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    The Exchange represents that its surveillance procedures applicable 
to trading in options on the ETFS Palladium Trust and the ETFS Platinum 
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 
ETFS Palladium Trust and the ETFS Platinum 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 palladium or 
platinum.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) \9\ of the Act, in general, and furthers the objectives of 
Section 6(b)(5) \10\ 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 ETFS 
Palladium Trust and the ETFS Platinum Trust will benefit investors by 
providing them with valuable risk management tools.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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-2010-015 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-2010-015. 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 available publicly. All 
submissions should refer to File Number SR-CBOE-

[[Page 11957]]

2010-015 and should be submitted on or before April 2, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-5315 Filed 3-11-10; 8:45 am]
BILLING CODE 8011-01-P