[Federal Register Volume 75, Number 135 (Thursday, July 15, 2010)]
[Notices]
[Pages 41247-41250]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-17194]
-----------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\9\ See ISE Rule 502(h).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\10\ See ISE Rules 412 and 414.
\11\ See ISE Rule 1202.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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 [email protected]. 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\
---------------------------------------------------------------------------
\18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-17194 Filed 7-14-10; 8:45 am]
BILLING CODE 8010-01-P