[Federal Register Volume 75, Number 114 (Tuesday, June 15, 2010)]
[Notices]
[Pages 33882-33883]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-14358]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62250; File Nos. SR-NYSEAmex-2010-37 and SR-NYSEArca-
2010-25]
Self-Regulatory Organizations; NYSE Amex LLC and NYSE Arca, Inc.;
Order Granting Approval of Proposed Rule Changes Relating to Listing
and Trading Options on the ETFS Palladium Trust and the ETFS Platinum
Trust
June 9, 2010.
On April 8, 2010, NYSE Amex LLC (``NYSE Amex'') and NYSE Arca, Inc.
(``NYSE Arca'') (collectively the ``Exchanges'') each filed with the
Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\
and Rule 19b-4 thereunder,\2\ proposed rule changes (collectively the
``Proposals'') to list and trade options on the ETFS Palladium Trust
and the ETFS Platinum Trust (collectively ``ETFS Options''). The NYSE
Amex proposed rule change was published for comment in the Federal
Register on May 5, 2010 \3\ and the NYSE Arca rule change was published
on May 6, 2010.\4\ No comments were received on the proposed rule
changes. This order approves the proposed rule changes.
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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. 61989 (April 27,
2010), 75 FR 24769.
\4\ See Securities Exchange Act Release No. 61990 (April 27,
2010), 75 FR 25005.
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I. Description of Proposal
The Commission previously authorized the Exchanges to list and
trade options on the SPDR Gold Trust \5\ (``GLD''), the iShares COMEX
Gold Trust (``IAU''), the iShares Silver Trust \6\ (``SLV''), the ETFS
Silver Trust (``SIVR''), and the ETFS Gold Trust \7\ (``SGOL''). Now,
the Exchanges propose to list and trade options on the ETFS Palladium
Trust (``PALL'') and the ETFS Platinum Trust (``PPLT'').
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\5\ See Securities Exchange Act Release No. 57894 (May 30,
2008), 73 FR 32061 (June 5, 2008) (order approving SR-Amex-2008-15
and SR-NYSEArca-2008-52).
\6\ See Securities Exchange Act Release No. 59055 (December 4,
2008), 73 FR 75148 (December 10, 2008) (order approving SR-Amex-
2008-68 and SR-NYSEArca-2008-66).
\7\ See Securities Exchange Act Release No. 61483 (February 3,
2010), 75 FR 6753 (February 10, 2010) (order approving SR-NYSEAmex-
2009-86; and SR-NYSEArca-2009-110).
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Under current NYSE Amex Rule 915 and NYSE Arca Rule 5.3, 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(b)(47) of Regulation NMS,\8\ 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, options on securities and
indices, equity caps, collars and floors, swap agreements, forward
contracts, repurchase agreements and reverse repurchase agreements (the
``Financial Instruments''),\9\ 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 GLD, IAU, SLV, SIVR, and SGOL; \10\ or (v) represent
interests 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
NYSE Amex and NYSE Arca, respectively.\11\ The Proposals would expand
the types of ETFs that may be approved for options trading on the
Exchanges to include the PALL and the PPLT.
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\8\ 17 CFR 242.600.
\9\ NYSE Amex Rule 915 also includes stock index futures
contracts and options on futures within this category.
\10\ See NYSE Amex Rule 915, Commentary .10 and NYSE Arca
5.3(g).
\11\ See NYSE Amex Rule 915, Commentary .06 and NYSE Arca Rule
5.3(g).
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Apart from allowing the PALL and the PPLT to be underlyings for
options traded on the Exchanges as described above, the listing
standards for ETFs will remain unchanged from those that apply under
current rules of both exchanges. 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 NYSE
Amex Rule 915, Commentary .06 and NYSE Arca Rule 5.3(g).
Specifically, in addition to satisfying the aforementioned listing
requirements, ETFs must meet either: (1) The criteria and guidelines
under NYSE Amex Rule 915, Commentary .01 and NYSE Arca Rule 5.3(a) and
(b); or (2) 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 ETFs 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 respective Exchange's current continued listing standards for
options
[[Page 33883]]
on ETFs will apply to options on the PALL and the PPLT. Both Exchanges
will consider the suspension of opening transactions in PALL or PPLT in
any of the following circumstances: (1) Following the initial twelve-
month period beginning upon the commencement of trading of the ETFs,
there are fewer than 50 record and/or beneficial holders of the ETFs
for 30 or more consecutive trading days; (2) the value of the
underlying palladium or underlying platinum is no longer calculated or
available; or (3) such other event occurs or condition exists that in
the opinion of each Exchange makes further dealing on each Exchange
inadvisable.
Additionally, the PALL and the PPLT shall not be deemed to meet the
requirements for continued approval, and the Exchanges shall not open
for trading any additional series of option contracts of the class
covering the PALL and the PPLT, respectively, if the PALL and the PPLT
ceases to be an ``NMS stock'' as provided for in NYSE Amex Rule 916,
Commentary .07(2) and NYSE Arca Rule 5.4(b)(5), or if the PALL or the
PPLT is halted from trading on its primary market, or, for NYSE Amex,
if PALL or PPLT is delisted.
The addition of the PALL and PPLT will not have any effect on the
Exchanges' rules pertaining to position and exercise limits \12\ or
margin.\13\
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\12\ See NYSE Amex Rules 904 and 905; NYSE Arca Rules 6.8 and
6.9.
\13\ See NYSE Amex Rule 462 and NYSE Arca Rules 4.15 and 4.16.
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The Exchanges represent that their surveillance procedures
applicable to trading in options on the PALL and PPLT will be similar
to those applicable to all other options on other ETFs currently traded
on the respective Exchange. Also, the Exchanges may obtain information
from the New York Mercantile Exchange, Inc. (``NYMEX'') (a member of
the Intermarket Surveillance Group) related to any financial instrument
traded there that is based, in whole or part, upon an interest in the
performance of palladium or platinum.
II. Commission Findings
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 a national securities
exchange,\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 general 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 these proposed rule changes, the Commission
has considered the proposed rules' 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, NYSE Amex and NYSE Arca are
required, under Section 6(b)(1) of the Act,\17\ to enforce compliance
by their members, and persons associated with their members, with the
provisions of the Act, Commission rules and regulations thereunder, and
their own rules. In addition, brokers that trade ETFS 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 ETFS 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 NASD Rule 2320.
\19\ See NYSE Amex Rule 926; and NYSE Arca Rule 9.18(g).
\20\ See FINRA Rule 2360(b) and NYSE Amex Rule 923; and NYSE
Arca Rule 9.18(b)-(c).
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ETFS Options will trade as options under the trading rules of NYSE
Amex and NYSE Arca. These rules, among other things, are designed to
avoid trading through better displayed prices for ETFS Options
available on other exchanges and, thereby, satisfy NYSE Amex and NYSE
Arca's obligations under the Options Order Protection and Locked/
Crossed Market Plan.\21\ Series of the ETFS Options will be subject to
the Exchanges' rules regarding continued listing requirements,
including standards applicable to the underlying ETFS Palladium and
ETFS Platinum Trusts. Shares of the PALL and PPLT 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(b)(47) 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. If the PALL or PPTL shares
fail to meet these requirements, the exchanges will not open for
trading any new series of the respective ETFS Options.
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\21\ See NYSE Amex Rule 991NY and NYSE Arca Rule 6.94. Each of
the exchanges is a participant in the Options Order Protection and
Locked/Crossed Market Plan.
\22\ 17 CFR 242.600.
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NYSE Amex and NYSE Arca have represented that they have
surveillance programs in place for the listing and trading of ETFS
Options. For example, NYSE Amex and NYSE Arca 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, palladium or platinum. Additionally,
the listing and trading of ETFS Options will be subject to the
Exchanges' rules pertaining to position and exercise limits \23\ and
margin.\24\
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\23\ See NYSE Amex Rules 904 and 905; NYSE Arca Rules 6.8 and
6.9.
\24\ See NYSE Amex Rule 462 and NYSE Arca Rules 4.15 and 4.16;
see also FINRA Rule 2360(b) and Commentary .01 to FINRA Rule 2360.
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III. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\25\ that the proposed rule changes (SR-NYSEAmex-2010-37 and SR-
NYSEArca-2010-25) be, and are hereby, approved.
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\25\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-14358 Filed 6-14-10; 8:45 am]
BILLING CODE 8011-01-P