Federal Register: October 24, 2008 (Volume 73, Number 207)
DOCID: fr24oc08-136 FR Doc E8-25372
SECURITIES AND EXCHANGE COMMISSION
Securities and Exchange Commission
DOCUMENT ID: [Release No. 34-58799; File No. SR-NYSEArca-2008-108]
NOTICE: NOTICES
DOCID: fr24oc08-136
ACTION: Self-Regulatory Organizations; Proposed Rule Changes:
SUBJECT CATEGORY:
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Revising NYSE Arca Rule 5.3 To Enable the Listing and Trading of Options on Managed Fund Shares
DOCUMENT SUMMARY:
October 16, 2008.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b4 thereunder,\2\ notice is hereby given that
on October 9, 2008, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I, II, and
[[Page 63535]]
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.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to revise NYSE Arca Rule 5.3 to enable the listing and trading of options on Managed Fund Shares. The text of the proposed rule change is available at the Exchange, the Commission's Public Reference Room, and http://www.nyse.com. II. SelfRegulatory 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 Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such statements.
A. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to revise NYSE Arca Rule 5.3 to enable the listing and trading of options on managed fund shares (``Managed Fund Shares'') that are listed and traded on a national securities exchange and are considered to be an ``NMS Stock'' (as defined in Rule 600 of Regulation NMS under the Securities and Exchange Act of 1934 (the ``Act'')).
Managed Fund Shares represent an interest in a registered investment company (``Investment Company'') organized as an openend management investment company or similar entity. Unlike traditional exchange traded funds Managed Fund Shares are actively managed. Managed Fund Shares, although, based upon a publicly disclosed portfolio of securities, each trade as a single exchangelisted equity security.
Accordingly, rules pertaining to the listing and trading of standard equity options will apply to Managed Fund Shares.
Listing Criteria
The Exchange will consider listing and trading options on Managed Fund Shares provided the Managed Fund Shares meet (1) the criteria for underlying securities set forth in NYSE Arca Rule 5.3(a) \3\ (b),\4\ or (2) the Managed Fund Shares are available for creation and redemption each business day as set forth in NYSE Arca Rule 5.3(g)(1)(B). The Exchange proposes that Managed Fund Shares deemed appropriate for options trading represent an interest in an openend management investment company or similar entity, as described below: \3\ See NYSE Arca Rule 5.3(a) which sets forth minimum requirements for the underlying security which include, but are not limited to, 7,000,000 underlying shares, 2,000 shareholders, and trading volume of 2,400,000 shares over the preceding twelve months. \4\ See NYSE Arca Rule 5.3(b) which states that the underlying securities shall be registered and be an ``NMS Stock'' as defined in Rule 600 of Regulation NMS under the Act.
Managed Fund Shares are securities that represents an interest in a registered investment company (``Investment Company'') organized as an openend 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.
For the purposes of NYSE Arca Rule 5.3(g)(v), Managed Fund Shares
are a class of exchangetraded fund shares that are actively managed as defined in NYSE Arca Equities Rule 8.600.\5\
\5\ See NYSE Arca Equities Rule 8.600 and Securities and
Exchange Release No. 57619 (April 4, 2008), 73 FR 19544 (April 10,
2008) (SRNYSEArca200825) approving rules permitting the listing and trading of Managed Fund Shares.
Continued Listing Requirements
Options on Managed Fund Shares will be subject to all Exchange
rules governing the trading of equity options and furthermore, the
rules pertaining to position and exercise limits \6\ or margin \7\
shall apply. The current continuing or maintenance listing standards for options traded on NYSE Arca will continue to apply.
\6\ Pursuant to NYSE Arca Rule 6.8, Commentary .05 and .06,
Managed Fund Shares are subject to the same position limits
applicable to options on stocks and ExchangeTraded Fund Shares.
NYSE Arca Rule 6.9 stipulates that exercise limits for options on
stocks and other securities, including Managed Fund Shares, shall be
the same as the position limits applicable under NYSE Arca Rule 6.8.
\7\ See NYSE Arca Rules 4.15(a)4.16(d), the Exchange's rules governing margin.
The Exchange will utilize its existing surveillance procedures
applicable to options on exchange traded funds (which will include
Managed Fund Shares) to monitor trading. In addition, the Exchange will
implement any new surveillance procedures it deems necessary to
effectively monitor the trading of options on Managed Fund Shares,
including adequate comprehensive surveillance sharing agreements
(``CSSA'') with markets trading in nonU.S. components,\8\ as
applicable. Also, the Exchange may obtain trading information via the
Intermarket Surveillance Group (``ISG'') \9\ from other exchanges who
are members or affiliates of the ISG. NYSE Arca represents that these
procedures will be adequate to properly monitor Exchange trading of
options on these the securities and to deter and detect violations of Exchange rules.
\8\ See NYSE Arca Rule 5.3(g)(2), the Exchange's rule governing
the applicable CSSA requirements for options on exchangetraded
funds. We note that any nonU.S. component securities (including
fixedincome) in an index or portfolio of securities on which the
Fund Shares are based that are not subject to comprehensive
surveillance agreements may in the aggregate represent an amount equal to 50% of the weight of the index or portfolio.
\9\ A complete list of the current members of the ISG, is
available at http://www.isgportal.org. 2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) \10\ of the Securities Exchange Act of 1934 (``Act'')
in general, and furthers the objectives of Section 6(b)(5) of the Act
\11\ 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 mechanism of a free and open
market and a national market system, and, in general, to protect
investors and the public interest. The Exchange believes that the
proposed rules applicable to trading pursuant to generic listing and
trading criteria, together with the Exchange's surveillance procedures
applicable to trading in the securities covered by the proposed rules, serve to foster investor protection.
\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
[[Page 63536]]
B. SelfRegulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
C. SelfRegulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others
No written comments were solicited or received with respect to the proposed rule change.
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 Exchange 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
Paper Comments
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\12\
\12\ 17 CFR 200.303(a)(12).
Florence E. Harmon,
Acting Secretary.
[FR Doc. E825372 Filed 102308; 8:45 am]
BILLING CODE 801101P
SUMMARY:
NYSE Arca, Inc.,
DOCUMENT BODY 2:
October 16, 2008.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b4 thereunder,\2\ notice is hereby given that
on October 9, 2008, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I, II, and
[[Page 63535]]
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.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to revise NYSE Arca Rule 5.3 to enable the listing and trading of options on Managed Fund Shares. The text of the proposed rule change is available at the Exchange, the Commission's Public Reference Room, and http://www.nyse.com. II. SelfRegulatory 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 Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such statements.
A. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to revise NYSE Arca Rule 5.3 to enable the listing and trading of options on managed fund shares (``Managed Fund Shares'') that are listed and traded on a national securities exchange and are considered to be an ``NMS Stock'' (as defined in Rule 600 of Regulation NMS under the Securities and Exchange Act of 1934 (the ``Act'')).
Managed Fund Shares represent an interest in a registered investment company (``Investment Company'') organized as an openend management investment company or similar entity. Unlike traditional exchange traded funds Managed Fund Shares are actively managed. Managed Fund Shares, although, based upon a publicly disclosed portfolio of securities, each trade as a single exchangelisted equity security.
Accordingly, rules pertaining to the listing and trading of standard equity options will apply to Managed Fund Shares.
Listing Criteria
The Exchange will consider listing and trading options on Managed Fund Shares provided the Managed Fund Shares meet (1) the criteria for underlying securities set forth in NYSE Arca Rule 5.3(a) \3\ (b),\4\ or (2) the Managed Fund Shares are available for creation and redemption each business day as set forth in NYSE Arca Rule 5.3(g)(1)(B). The Exchange proposes that Managed Fund Shares deemed appropriate for options trading represent an interest in an openend management investment company or similar entity, as described below: \3\ See NYSE Arca Rule 5.3(a) which sets forth minimum requirements for the underlying security which include, but are not limited to, 7,000,000 underlying shares, 2,000 shareholders, and trading volume of 2,400,000 shares over the preceding twelve months. \4\ See NYSE Arca Rule 5.3(b) which states that the underlying securities shall be registered and be an ``NMS Stock'' as defined in Rule 600 of Regulation NMS under the Act.
Managed Fund Shares are securities that represents an interest in a registered investment company (``Investment Company'') organized as an openend 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.
For the purposes of NYSE Arca Rule 5.3(g)(v), Managed Fund Shares
are a class of exchangetraded fund shares that are actively managed as defined in NYSE Arca Equities Rule 8.600.\5\
\5\ See NYSE Arca Equities Rule 8.600 and Securities and
Exchange Release No. 57619 (April 4, 2008), 73 FR 19544 (April 10,
2008) (SRNYSEArca200825) approving rules permitting the listing and trading of Managed Fund Shares.
Continued Listing Requirements
Options on Managed Fund Shares will be subject to all Exchange
rules governing the trading of equity options and furthermore, the
rules pertaining to position and exercise limits \6\ or margin \7\
shall apply. The current continuing or maintenance listing standards for options traded on NYSE Arca will continue to apply.
\6\ Pursuant to NYSE Arca Rule 6.8, Commentary .05 and .06,
Managed Fund Shares are subject to the same position limits
applicable to options on stocks and ExchangeTraded Fund Shares.
NYSE Arca Rule 6.9 stipulates that exercise limits for options on
stocks and other securities, including Managed Fund Shares, shall be
the same as the position limits applicable under NYSE Arca Rule 6.8.
\7\ See NYSE Arca Rules 4.15(a)4.16(d), the Exchange's rules governing margin.
The Exchange will utilize its existing surveillance procedures
applicable to options on exchange traded funds (which will include
Managed Fund Shares) to monitor trading. In addition, the Exchange will
implement any new surveillance procedures it deems necessary to
effectively monitor the trading of options on Managed Fund Shares,
including adequate comprehensive surveillance sharing agreements
(``CSSA'') with markets trading in nonU.S. components,\8\ as
applicable. Also, the Exchange may obtain trading information via the
Intermarket Surveillance Group (``ISG'') \9\ from other exchanges who
are members or affiliates of the ISG. NYSE Arca represents that these
procedures will be adequate to properly monitor Exchange trading of
options on these the securities and to deter and detect violations of Exchange rules.
\8\ See NYSE Arca Rule 5.3(g)(2), the Exchange's rule governing
the applicable CSSA requirements for options on exchangetraded
funds. We note that any nonU.S. component securities (including
fixedincome) in an index or portfolio of securities on which the
Fund Shares are based that are not subject to comprehensive
surveillance agreements may in the aggregate represent an amount equal to 50% of the weight of the index or portfolio.
\9\ A complete list of the current members of the ISG, is
available at http://www.isgportal.org. 2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) \10\ of the Securities Exchange Act of 1934 (``Act'')
in general, and furthers the objectives of Section 6(b)(5) of the Act
\11\ 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 mechanism of a free and open
market and a national market system, and, in general, to protect
investors and the public interest. The Exchange believes that the
proposed rules applicable to trading pursuant to generic listing and
trading criteria, together with the Exchange's surveillance procedures
applicable to trading in the securities covered by the proposed rules, serve to foster investor protection.
\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
[[Page 63536]]
B. SelfRegulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
C. SelfRegulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others
No written comments were solicited or received with respect to the proposed rule change.
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 Exchange 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
Paper Comments
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\12\
\12\ 17 CFR 200.303(a)(12).
Florence E. Harmon,
Acting Secretary.
[FR Doc. E825372 Filed 102308; 8:45 am]
BILLING CODE 801101P