Document ID: SEC-2008-0778-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: American Stock Exchange LLC.; Chicago Board Options Exchange, Inc.; et al.
Posted Date: 2008-06-05T04:00Z

[Federal Register: June 5, 2008 (Volume 73, Number 109)]
[Notices]               
[Page 32061-32063]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05jn08-94]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57894; File Nos. SR-Amex-2008-15; SR-CBOE-2005-11; SR-
ISE-2008-12; SR-NYSEArca-2008-52; and SR-Phlx-2008-17]

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

May 30, 2008.
    On January 25, 2005, the Chicago Board Options Exchange, 
Incorporated (``CBOE'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') a proposed rule change 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 SPDR Gold Trust (formerly, the streetTRACKS Gold Trust) (``Gold 
Trust Options''). On April 12, 2005, CBOE submitted Amendment No. 1 to 
the proposed rule change. On March 7, 2008, CBOE submitted Amendment 
No. 2 to the proposed rule change. The proposed rule change, as 
amended, was published for comment in the Federal Register on March 17, 
2008 for a 21-day comment period.\3\ On May 21, 2008, CBOE submitted 
Amendment No. 3 to the proposed rule change.\4\ This order approves the 
proposed rule change, as modified by Amendment Nos. 1, 2, and 3.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 57465 (March 11, 
2008), 73 FR 14284.
    \4\ In Amendment No. 3, CBOE updated its proposed rule text to 
reflect the change in name, effective May 21, 2008, of the 
underlying trust from streetTRACKS Gold Trust to SPDR Gold Trust. 
This is a technical amendment and is not subject to notice and 
comment.
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    In addition, four other exchanges submitted proposals to list and 
trade Gold Trust Options. Specifically, the International Securities 
Exchange, LLC (``ISE'') submitted its proposal on February 7, 2008, the 
American Stock Exchange LLC (``Amex'') filed on February 20, 2008, the 
Philadelphia Stock Exchange, Inc. (``Phlx'') filed on February 28, 
2008, and NYSE Arca, Inc. (``NYSE Arca'') filed on May 21, 2008 with 
the Commission the proposed rule changes as described in Items I and II 
below, which items have been prepared substantially by the Amex, ISE, 
NYSE Arca, and Phlx. On May 20, 2008, ISE and Phlx submitted Amendment 
No. 1 to their respective proposals. On May 21, 2008, ISE and Phlx 
submitted Amendment No. 2 to their respective proposals and Amex 
submitted Amendment No. 1 to its proposal. The proposals submitted by 
the Amex, ISE, NYSE Arca, and Phlx are substantively identical to 
CBOE's proposal. Pursuant to Section 19(b)(1) of the Act \5\ and Rule 
19b-4 \6\ thereunder, the Commission is publishing this notice to 
solicit comments on these four proposed rule changes, as modified, from 
interested persons and is approving the proposals, as modified, on an 
accelerated basis.
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    \5\ 15 U.S.C. 78s(b)(1).
    \6\ 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

    Amex, ISE, NYSE Arca, and Phlx each propose to amend certain of 
their respective rules to enable the listing and trading of Gold 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.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 Amex, ISE, NYSE Arca, and 
Phlx included statements concerning the purpose of, and basis for, the 
proposed rule change. The text of these statements may be examined at 
the places specified in Item III below. These 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
    Amex, ISE, NYSE Arca, and Phlx each state that the purpose of its 
proposed rule changes is to permit the listing and trading of Gold 
Trust Options.
    Currently, the rules of these exchanges permit only certain 
``Units'' (also referred to herein as exchange traded funds (``ETFs'')) 
to underlie options traded on their markets.\7\ Specifically, to be 
eligible as an underlying security for options traded on the Amex, ISE, 
NYSE Arca, or Phlx, 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-

[[Page 32062]]

U.S. currency. The proposed rule change would expand the types of ETFs 
that may be approved for options trading on the Exchanges to include 
the SPDR Gold Trust.
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    \7\ See Amex Rule 915 Commentary .06; ISE Rule 5.2(h); NYSE Arca 
Rule 5.3; and Phlx Rule 1009 Commentary .06.
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    Apart from allowing the SPDR Gold Trust to be an underlying for 
options traded on Amex, ISE, NYSE Arca, and Phlx as described above, 
the listing standards for ETFs would remain unchanged from those that 
apply under the current rules of these exchanges. 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 these exchanges.\8\
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    \8\ See Amex Rule 916 Commentary .07; ISE Rule 502(h); NYSE Arca 
Rule 5.3(g); and Phlx Rule 1009 Commentary .06.
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    Specifically, in addition to satisfying the aforementioned listing 
requirements, Units would have to continue 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.\9\
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    \9\ See Amex Rule 915 Commentary .06; 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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    Amex, ISE, NYSE Arca, and Phlx each propose that the current 
continued listing standards for options on ETFs would apply to Gold 
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.\10\
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    \10\ See Amex Rule 916 Commentary .07; 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 SPDR Gold Trust would not be deemed to 
meet the requirements for continued approval, and the Amex, ISE, NYSE 
Arca, and Phlx would not open for trading any additional series of 
option contracts of the class covering shares of the SPDR Gold Trust, 
if the shares of the SPDR Gold Trust cease to be an ``NMS stock'' as 
provided for in rules of these exchanges \11\ or shares of the SPDR 
Gold Trust are halted from trading on their primary market.
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    \11\ See Amex Rule 916 Commentary .07; ISE Rule 503(h); NYSE 
Arca Rule 5.4(b); and Phlx Rule 1010.
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    Amex, ISE, NYSE Arca, and Phlx each represented that the addition 
of the SPDR Gold Trust to types of Units that may underlie listed 
options traded on the exchange would not have any effect on the rules 
pertaining to position and exercise limits \12\ or margin.\13\
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    \12\ See Amex Rules 904 and 905; ISE Rules 412 and 414; NYSE 
Arca Rules 6.8 and 6.9; and Phlx Rules 1001 and 1002.
    \13\ See Amex Rule 462; ISE Rule 1202; NYSE Arca Rules 4.15 and 
4.16; and Phlx Rule 722.
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    Amex, ISE, NYSE Arca, and Phlx also represent that the respective 
surveillance procedures applicable to Gold Trust Options would be 
similar to those applicable to all other options on ETFs currently 
traded on these exchanges. In addition, the Amex, ISE, NYSE Arca, and 
Phlx 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.\14\
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    \14\ The Commission noted a surveillance arrangement between the 
New York Stock Exchange, Inc. and NYMEX in its order approving 
proposed rule changes to permit the listing and trading of shares of 
the SPDR Gold Trust. See Securities Exchange Act Release No. 50603 
(October 28, 2004), 69 FR 64614 (November 5, 2004) (SR-NYSE-2004-
22).
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2. Statutory Basis
    Amex, ISE, NYSE Arca, and Phlx each state that amending its rules 
to accommodate the listing and trading of Gold Trust Options will 
benefit investors by providing them with valuable risk management 
tools. Accordingly, these exchanges believe that the proposed rule 
changes are consistent with the requirements of Section 6(b) of the Act 
\15\ in general, and further the objectives of Section 6(b)(5) \16\ of 
the Act in particular, in that they are designed to remove impediments 
to, and perfect the mechanism of, a free and open market in a manner 
consistent with the protection of investors and the public interest.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Amex, ISE, NYSE Arca, and Phlx 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

    Amex, ISE, NYSE Arca, and Phlx 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-2008-15; SR-ISE-2008-12; SR-NYSEArca-2008-52; and SR-
Phlx-2008-17 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-2008-15; SR-
ISE-2008-12; SR-NYSEArca-2008-52; and SR-Phlx-2008-17. 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

[[Page 32063]]

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 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-2008-15; SR-ISE-2008-12, SR-
NYSEArca-2008-52; and SR-Phlx-2008-17 and should be submitted on or 
before June 26, 2008.

IV. 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 \17\ and, in particular, the requirements of Section 6 of the 
Act.\18\ Specifically, the Commission finds that the proposed rule 
changes are consistent with Section 6(b)(5) of the Act,\19\ 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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    \17\ 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).
    \18\ 15 U.S.C. 78f.
    \19\ 15 U.S.C. 78f(b)(5).
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    As national securities exchanges, each of Amex, CBOE, ISE, NYSE 
Arca, and Phlx is required under Section 6(b)(1) of the Act \20\ 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 Gold Trust Options will also be subject to best execution 
obligations and FINRA rules.\21\ Applicable exchange rules also require 
that customers receive appropriate disclosure before trading Gold Trust 
Options.\22\ Further, brokers opening accounts and recommending options 
transactions must comply with relevant customer suitability 
standards.\23\
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    \20\ 15 U.S.C. 78f(b)(1).
    \21\ See FINRA Rule 2320.
    \22\ See Amex Rule 926; CBOE Rule 9.15; ISE Rule 616; NYSE Arca 
Rule 9.18(g); and Phlx Rule 1029.
    \23\ See FINRA Rules 2860, 2860-2 and 2310; Amex Rule 923; 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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    Gold 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 Gold Trust Options 
available on other exchanges and, thereby, satisfy each exchange's 
obligation under the Options Intermarket Linkage Plan.\24\ Series of 
the Gold Trust Options will be subject to exchange rules regarding 
continued listing requirements, including standards applicable to the 
underlying SPDR Gold Trust. Shares of the SPDR Gold 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.\25\ 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.\26\ If the SPDR Gold Trust 
shares fail to meet these requirements, the exchanges will not open for 
trading any new series of Gold Trust Options.
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    \24\ See Amex Rule 942; 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.
    \25\ 17 CFR 242.600.
    \26\ See Amex Rule 915 Commentary .06, 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 Amex, CBOE, ISE, NYSE Arca, and Phlx have all represented that 
they have surveillance programs in place for the listing and trading of 
options based on the SPDR Gold Trust. For example, these 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. Additionally, the listing 
and trading of Gold Trust Options will be subject to the exchanges' 
rules pertaining to position and exercise limits \27\ and margin.\28\
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    \27\ See Amex Rules 904 and 905; 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.
    \28\ See Amex Rule 462; 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,\29\ for approving the proposed rule changes of the 
Amex, ISE, Phlx, and NYSE Arca prior to the thirtieth day after the 
date of publication of notice in the Federal Register. The Commission 
notes that proposals of the Amex, ISE, Phlx, and NYSE Arca are 
substantively identical to the CBOE proposal, which was published for a 
21-day comment period and generated no comments. Therefore, the 
Commission does not believe that the proposals of the Amex, ISE, Phlx, 
and NYSE Arca raise any new regulatory issues different from that of 
the CBOE proposal. Accordingly, the Commission finds that there is good 
cause, consistent with Section 6(b)(5) of the Act,\30\ to approve the 
proposals by Amex, ISE, NYSE Arca, and Phlx on an accelerated basis.
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    \29\ 15 U.S.C. 78s(b)(2).
    \30\ 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,\31\ that the proposed rule change (SR-CBOE-2005-11), as modified, 
be and is hereby approved and that the proposed rule changes (SR-SR-
Amex-2008-15; SR-ISE-2008-12, SR-NYSEArca-2008-52; and SR-Phlx-2008-
17), as modified, be, and are hereby approved on an accelerated basis.
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    \31\ 15 U.S.C. 78s(b)(2).

    By the Commission.
Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-12520 Filed 6-4-08; 8:45 am]

BILLING CODE 8010-01-P