[Federal Register Volume 73, Number 211 (Thursday, October 30, 2008)]
[Notices]
[Pages 64647-64649]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-25923]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58855; File No. SR-NYSEArca-2008-111]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Proposing To Amend NYSE Arca Equities Rule 
5.2(j)(6)(v) in Order To Add the CBOE Volatility Index[reg] (VIX[reg]) 
Futures (``VIX Futures'') to the Definition of Futures Reference Asset

October 24, 2008.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on October 17, 2008, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') 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 self-regulatory 
organization. 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\ 15 U.S.C. 78A.
    \3\ 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

    NYSE Arca, Inc. (``NYSE Arca'' or the ``Exchange''), through its 
wholly-owned subsidiary, NYSE Arca Equities, Inc. (``NYSE Arca 
Equities'' or the ``Corporation''), is proposing to amend NYSE Arca 
Equities Rule 5.2(j)(6)(v) in order to add the CBOE Volatility 
Index[reg] (VIX[reg]) Futures (``VIX Futures'') to the definition of 
Futures Reference Asset.

[[Page 64648]]

The text of the proposed rule change is available on the Exchange's Web 
site at http://www.nyse.com, at the Exchange's principal office 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 self-regulatory organization 
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 those 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. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Rule 19b-4(e) \4\ under the Securities Exchange Act of 1934 
(``Act'') \5\ provides that the listing and trading of a new derivative 
securities product by a self-regulatory organization (``SRO'') shall 
not be deemed a proposed rule change, pursuant to section (c)(1) of 
Rule 19b-4,\6\ if the Commission has approved, pursuant to Section 
19(b) of the Act,\7\ the SRO's trading rules, procedures, and listing 
standards for the product class including products linked to VIX 
Futures, and the SRO has a surveillance program for the product 
class.\8\
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    \4\ 17 CFR 240.19b-4(e).
    \5\ 17 U.S.C. 78a.
    \6\ 17 CFR 240.19b-4(c)(1).
    \7\ 15 U.S.C. 78s(b).
    \8\ See Securities Exchange Act Release No. 40761 (December 8, 
1998), 63 FR 70952 (December 22, 1998).
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    The Commission has approved the listing pursuant to NYSE Arca 
Equities Rule 5.2(j)(6), including listing pursuant to Rule 19b-4(e), 
of Index-Linked Securities, which term currently is defined in NYSE 
Arca Equities Rule 5.2(j)(6) to encompass Equity Index-Linked 
Securities, Commodity-Linked Securities, Currency-Linked Securities, 
Fixed Income Index-Linked Securities, Futures-Linked Securities and 
Multifactor Index-Linked Securities.\9\
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    \9\ See Securities Exchange Act Release Nos. 56637 (October 10, 
2007), 72 FR 58704 (October 16, 2007) (SR-NYSEArca-2007-92) and 
57701 [sic] (March 14, 2008), 73 FR 15550 (March 24, 2008) (SR-
NYSRArca-2008-20).
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    The Exchange is proposing to amend its generic listing standards 
under amended NYSE Arca Equities Rule 5.2(j)(6) for Index-Linked 
Securities pursuant to which it will be able to trade securities linked 
to VIX Futures without Commission approval of each individual product 
pursuant to Section 19(b)(2) of the Act.\10\ Specifically, the Exchange 
proposes to amend NYSE Arca Equities Rule 5.2(j)(6)(v) to add the VIX 
Futures as an underlying financial instrument of a Futures-Linked 
Securities and included VIX Futures within the definition of a futures 
reference asset. The Exchange represents that any securities it lists 
and/or trades pursuant to NYSE Arca Equities Rule 5.2(j)(6) will 
satisfy the standards set forth therein, and all applicable Exchange 
and Federal Securities rules. The Exchange states that within five 
business days after commencement of trading of an Index-Linked Security 
in reliance on NYSE Arca Equities Rule 5.2(j)(6), the Exchange will 
file a Form 19b-4(e).\11\
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    \10\ 15 U.S.C. 78s(b)(2).
    \11\ 17 CFR 240.19b-4(e)(2)(ii); 17 CFR 249.820.
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    The Commission has previously approved the listing and trading of 
options on the VIX.\12\
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    \12\ See Securities Exchange Release No. 48807 (November 19, 
2003), 68 FR 66516 (November 26, 2003) (SR-CBOE-2003-40).
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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[reg] 500 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.
    The VIX is calculated using put and call options on the SPX in the 
two nearest-term expiration months in order to bracket a 30-day 
calendar period. However, when there is 8 days left to expiration, the 
VIX ``rolls'' to the second and third contract months in order to 
minimize the pricing anomalies that might occur close to expiration.
    For each contract month, CBOE will determine the at-the-money 
strike price. It will then select the at-the-money and out-of-the money 
series with non-zero bid prices and determine the midpoint of the bid-
ask quote for each of these series. The midpoint quote of each series 
is then weighted so that the further away that series is from the at 
the-money strike, the less weight that is accorded to the quote. Then, 
to compute the index level, CBOE will calculate a volatility measure 
for the nearest term options and then for the next term options. This 
is done using the weighted mid-point of the prevailing bid-ask quotes 
for all included option series with the same expiration date. These 
volatility measures are then interpolated to arrive at a single, 
constant 30-day measure of volatility.
    The CBOE will compute the index on a real-time basis throughout 
each trading day, from 8:30 AM until 3:15 PM (Chicago Time) CST. The 
CBOE has calculated historical index values for the new VIX back to 
1986. VIX levels will be calculated by CBOE and disseminated at 15-
second intervals to market information vendors via the Options Price 
Reporting Authority (``OPRA'').
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). The CFE is a member of the 
Intermarket Surveillance Group (``ISG'').\13\
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    \13\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.org.
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    The monthly volume and open interest, in USD, as of the last day of 
each of the last six months for the VIX Futures was as follows:

------------------------------------------------------------------------
                                       Monthly volume     Open interest
------------------------------------------------------------------------
Mar--08.............................      $266,990,096    $2,621,925,695
Apr--08.............................       220,242,675     2,539,855,183
May--08.............................       214,255,026     2,574,362,763

[[Page 64649]]

 
Jun--08.............................       210,130,373     2,506,392,108
Jul--08.............................       216,902,870     2,476,056,292
Aug--08.............................       254,239,715     2,113,750,676
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    The Exchange believes that the proposed criteria to add VIX Futures 
as an underlying Futures Reference asset will facilitate the listing 
and trading of additional Futures-Linked Security that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) \14\ of the Act, in general, and furthers the 
objectives of Section 6(b)(5) \15\ 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, and, in general, 
to protect investors and the public interest. The Exchange believes 
that the proposed rule change will facilitate the listing and trading 
of additional Futures-Linked Security that will enhance competition 
among market participants, to the benefit of investors and the 
marketplace.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory 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. Self-Regulatory 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.
    The Exchange has requested accelerated approval of this proposed 
rule change prior to the 30th day after the date of publication of the 
notice of the filing thereof. The Commission has determined that a 15-
day comment period is appropriate in this case.

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-NYSEArca-2008-111 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 Number SR-NYSEArca-2008-111. 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 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 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-NYSEArca-2008-111 and should 
be submitted on or before November 14, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-25923 Filed 10-29-08; 8:45 am]
BILLING CODE 8011-01-P