[Federal Register Volume 75, Number 97 (Thursday, May 20, 2010)]
[Notices]
[Pages 28314-28315]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-12068]
[[Page 28314]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62101; File No. SR-ISE-2010-40]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend ISE Rule 502(k)
May 13, 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 May 3, 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.
The Exchange has filed the proposal as a ``non-controversial'' proposed
rule change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and
Rule 19b-4(f)(6) thereunder.\4\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to revise ISE Rule 502(k) to amend the
definition of Futures-Linked Securities for the trading of options on
Index-Linked Securities. 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
ISE Rule 502(k) designates the listing and trading of options on
equity index-linked securities (``Equity Index-Linked Securities''),
commodity-linked securities (``Commodity-Linked Securities''),
currency-linked securities (``Currency-Linked Securities''), fixed
income index-linked securities (``Fixed Income Index-Linked
Securities''), futures-linked securities (``Futures-Linked
Securities'') and multifactor index-linked securities (``Multifactor
Index-Linked Securities''), collectively known as ``Index-Linked
Securities'' that are principally traded on a national securities
exchange and an ``NMS Stock'' (as defined in Rule 600 of Regulation NMS
under the Securities and Exchange Act of 1934). The Exchange proposes
to amend the definition of Futures-Linked Securities for the trading of
options on Index-Linked Securities to include products linked to CBOE
Volatility Index (``VIX'') Futures. Specifically, the Exchange proposes
to add the VIX Futures to the definition of a Futures Reference Asset
in ISE Rule 502(k)(1)(v).
Index-Linked Securities are designed for investors who desire to
participate in a specific market segment by providing exposure to one
or more identifiable underlying securities, commodities, currencies,
derivative instruments or market indexes of the foregoing (``Underlying
Index'' or ``Underlying Indexes''). Index-Linked Securities are the
non-convertible debt of an issuer that have a term of at least one (1)
year but not greater than thirty (30) years. Despite the fact that
Index-Linked Securities are linked to an underlying index, each trade
as a single, exchange-listed security. Accordingly, rules pertaining to
the listing and trading of standard equity options apply to Index-
Linked Securities.
Currently, the Exchange will consider listing and trading options
on Index-Linked Securities provided the Index-Linked Securities meet
the criteria for underlying securities set forth in ISE Rule 502(a)-(b)
or the criteria set forth in ISE Rule 502(k)(3)(ii).
Index-Linked Securities must meet the criteria and guidelines for
underlying securities set forth in ISE Rule 502(b); or the Index-Linked
Securities must be redeemable at the option of the holder at least on a
weekly basis through the issuer at a price related to the applicable
underlying Reference Asset.\5\ In addition, the issuing company is
obligated to issue or repurchase the securities in aggregation units
for cash or cash equivalents satisfactory to the issuer of Index-Linked
Securities which underlie the option as described in the Index-Linked
Securities prospectus.
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\5\ For the purposes of Rule 502(k), Equity Reference Assets,
Commodity Reference Assets, Currency Reference Assets, Fixed Income
Reference Assets, Futures Reference Assets and Multifactor Reference
Assets, will be collectively referred to as ``Reference Assets.''
See Rule 502(k)(2).
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Options on Index-Linked Securities will continue to be subject to
all Exchange rules governing the trading of equity options. The current
continuing or maintenance listing standards for options traded on ISE
will continue to apply.
The VIX
The information in this filing relating to the VIX was taken from
the Web site of the Chicago Board Options Exchange (the ``CBOE'').
The VIX was originally developed by the CBOE in 1993 and was
calculated using S&P 100[reg] Index options. The current methodology
for the VIX was introduced by the CBOE in September 2003 and it is now
an index that uses the quotes of certain S&P 500[reg] Index (``SPX'')
option series to derive a measure of the volatility of the U.S. equity
market. The VIX measures market expectations of near term volatility
conveyed by the prices of options on the SPX. It provides investors
with up-to-the-minute market estimates of expected stock market
volatility over the next 30 calendar days by extracting implied
volatilities from real-time index option bid/ask quotes.
VIX Futures
Information regarding VIX Futures can be found on the Web site of
the CBOE Futures Exchange (the ``CFE'').
The CFE began listing and trading VIX Futures since March 26, 2004
under the ticker symbol VX. VIX Futures trade between the hours of 8:30
a.m.-3:15 p.m. Central Time (Chicago Time).
2. Statutory Basis
The basis under the Securities Exchange Act of 1934 (``Exchange
Act'') for this proposed rule change is the requirement under Section
6(b)(5) that an exchange have rules that are designed to promote just
and equitable principles of trade, and to remove impediments to and
perfect the mechanism for a free and open market and a national market
system, and in general, to protect investors and the public interest.
In particular, the
[[Page 28315]]
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.
B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change does 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: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of filing (or such shorter
time as the Commission may designate if consistent with the protection
of investors and the public interest), the proposed rule change has
become effective pursuant to Section 19(b)(3)(A) of the Act \6\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\7\
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\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to provide 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 of the
proposed rule change, or such shorter time as designated by the
Commission. The Exchange has fulfilled this requirement.
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The Exchange has requested that the Commission waive the 30-day
operative delay and designate the proposed rule change as operative
upon filing. The Commission believes that waiving the 30-day operative
delay is consistent with the protection of investors and the public
interest. The proposed rule change is substantially similar to those of
other options exchanges that have been previously approved by the
Commission \8\ and does not appear to present any novel regulatory
issues. Therefore, the Commission designates the proposal operative
upon filing to enable the Exchange to list and trade options on index-
linked securities without delay.\9\
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\8\ See Securities Exchange Act Release Nos. 60822 (October 14,
2009), 74 FR 54114 (October 21, 2009) (SR-NYSEArca-2009-77); 60823
(October 14, 2009), 74 FR 54112 (October 21, 2009) (SR-NYSEAmex-
2009-59); and 60857 (October 21, 2009), 74 FR 55611 (October 28,
2009) (SR-CBOE-2009-74).
\9\ For purposes only of waiving the operative delay of this
proposal, the Commission has considered the proposed rule's impact
on efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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 the 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-2010-40 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-ISE-2010-40. 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 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 Number SR-ISE-2010-40 and should be
submitted on or before June 10, 2010.
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\10\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-12068 Filed 5-19-10; 8:45 am]
BILLING CODE 8010-01-P