[Federal Register Volume 74, Number 249 (Wednesday, December 30, 2009)]
[Notices]
[Pages 69180-69182]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-30917]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61228; File No. SR-ISE-2009-106]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing of Proposed Rule Change To List and Trade Options 
on the ETFS Gold Trust and the ETFS Silver Trust

December 22, 2009.

    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 December 10, 2009, 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, II, and 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 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

    The Exchange proposes to amend its rules to enable the listing and 
trading on the Exchange of options on the ETFS Gold Trust and the ETFS 
Silver 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 \3\ and on the iShares COMEX Gold Trust and the iShares 
Silver Trust.\4\ Now, the Exchange proposes to list and trade options 
on the ETFS Gold Trust and the ETFS Silver Trust.
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    \3\ See Securities Exchange Act Release No. 57894 (May 30, 
2008), 73 FR 32061 (June 5, 2008) (SR-ISE-2008-12).
    \4\ See Securities Exchange Act Release No. 59055 (December 4, 
2008), 73 FR 75148 (December 10, 2008) (SR-ISE-2008-58).
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    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) are issued by the SPDR[reg] 
Gold Trust are eligible as underlying securities for options traded on 
the Exchange 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'').\5\ This rule change proposes to expand the 
types of ETFs that may be approved for options trading on the Exchange 
to include the ETFS Gold Trust and the ETFS Silver Trust.
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    \5\ See ISE Rule 502(h).
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    Apart from allowing the ETFS Gold Trust and the ETFS Silver Trust 
to be underlyings 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 (1) the criteria and guidelines under ISE 
Rules 502(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 
Exchange-Traded Fund Shares in a

[[Page 69181]]

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 ETFS Gold Trust and 
the ETFS Silver Trust. Specifically, under ISE Rule 503(h), options on 
Exchange-Traded Fund Shares may be subject to the suspension of opening 
transactions as follows: (1) 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 holders of the 
Exchange-Traded Fund Shares for 30 or more consecutive trading days; 
(2) the value of the underlying silver or underlying gold is no longer 
calculated or available; or (3) such other event occurs or condition 
exists that in the opinion of the Exchange makes further dealing on the 
Exchange inadvisable.
    Additionally, the ETFS Gold Trust and the ETFS Silver 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 ETFS Gold Trust or the ETFS Silver 
Trust, respectively, if the ETFS Gold Trust or the ETFS Silver Trust 
ceases to be an ``NMS stock'' as provided for in ISE Rule 503(b)(5) or 
the ETFS Gold Trust or the ETFS Silver Trust is halted from trading on 
its primary market.
    The addition of the ETFS Gold Trust and the ETFS Silver Trust to 
ISE Rule 502(h) will not have any effect on the rules pertaining to 
position and exercise limits \6\ or margin.\7\
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    \6\ See ISE Rules 412 and 414.
    \7\ See ISE Rule 1202.
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    The Exchange represents that its surveillance procedures applicable 
to trading in options the ETFS Gold Trust and the ETFS Silver 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 or silver.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \8\ of the 
Securities Exchange Act of 1934 (the ``Act''), in general, and furthers 
the objectives of Section 6(b)(5) \9\ 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 ETFS Gold Trust 
and the ETFS Silver Trust will benefit investors by providing them with 
valuable risk management tools.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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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

    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 self-regulatory organization 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

     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-2009-106 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-2009-106. 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-ISE-2009-106 and should be 
submitted on or before January 20, 2010.


[[Page 69182]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-30917 Filed 12-29-09; 8:45 am]
BILLING CODE 8011-01-P