[Federal Register Volume 75, Number 245 (Wednesday, December 22, 2010)]
[Notices]
[Pages 80557-80560]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-32087]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63555; File No. SR-NYSEAmex-2010-118]


Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending Commentary 
.11(a) to NYSE Amex Options Rule 915 To Permit Trading Options on 
Leveraged Exchange-Traded Notes and Broaden the Definition of Futures 
Linked Securities

December 15, 2010.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on December 9, 2010, NYSE Amex LLC (the ``Exchange'' or 
``NYSE Amex'') filed with the Securities and Exchange Commission (the 
``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 et seq.
    \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

    The Exchange proposes to amend Commentary .11(a) to NYSE Amex 
Options Rule 915 to: (1) Permit trading options on leveraged (multiple 
or inverse) exchange-traded notes, and (2) broaden the definition of 
``Futures-Linked [sic]. The text of the proposed rule change is 
available at the Exchange, the Commission's Public Reference Room, and 
http://www.nyse.com.

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 parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Commentary .11(a) to NYSE Amex 
Options Rule 915 to: (1) Permit trading options on leveraged (multiple 
or inverse) exchange-traded notes (``ETNs''), and (2) broaden the 
definition of ``Futures-Linked Securities.'' \4\ ETNs are also known as 
``Index-Linked Securities,'' which 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. Index-Linked Securities are the nonconvertible 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.
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    \4\ The amendments proposed herein are similar to changes 
approved for the Chicago Board Options Exchange (``CBOE''). See 
Securities Exchange Act Release No. 63202 (October 28, 2010), 75 FR 
67794 (November 3, 2010) (SR-CBOE-2010-080).
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Leveraged ETN Options
    The Exchange proposes to amend Commentary .11(a) to NYSE Amex 
Options Rule 915 to permit the listing of options on leveraged 
(multiple or inverse) ETNs. Multiple leveraged ETNs seek to provide 
investment results that correspond to a specified multiple of the 
percentage performance on a given day of a particular Reference Asset. 
Inverse leveraged ETNs seek to provide investment results that 
correspond to

[[Page 80558]]

the inverse (opposite) of the percentage performance on a given day of 
a particular Reference Asset by a specified multiple. Multiple 
leveraged ETNs and inverse leveraged ETNs differ from traditional ETNs 
in that they do not merely correspond to the performance of a given 
Reference Asset, but rather attempt to match a multiple or inverse of a 
Reference Asset's performance.
    The Barclays Long B Leveraged S&P 500 TR ETN (``BXUB''), the 
Barclays Long C Leveraged S&P 500 TR ETN (``BXUC''), and the UBS AG 2x 
Monthly Leveraged Long Exchange-Traded Access Securities (E-TRACS) 
linked to the Alerian MLP Infrastructure Index due July 9, 2040 
(``MLPL'') currently trade on the NYSE Arca equity platform and are 
examples of multiple leveraged ETNs. In addition, the Barclays ETN + 
Inverse S&P 500 VIX Short-Term Futures ETN (``XXV'') currently trades 
on the NYSE Arca equity platform and is an example of an inverse 
leveraged ETN. The NYSE Arca equity platform also lists several other 
inverse leveraged ETNs for trading.\5\
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    \5\ These ETNs include the Barclays Short B Leveraged Inverse 
S&P 500 TR ETN (``BXDB''), the Barclays Short C Leveraged Inverse 
S&P 500 TR ETN (``BXDC'') and the Barclays Short D Leveraged Inverse 
S&P 500 TR ETN (``BXDD'').
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    Currently, Commentary .11 to NYSE Amex Options Rule 915 provides 
that securities deemed appropriate for options trading shall include 
shares or other securities (``Index-Linked Securities,'' ``Commodity-
Linked Securities,'' ``Currency-Linked Securities,'' ``Fixed Income-
Linked Securities,'' ``Futures-Linked Securities,'' and ``Combination-
Linked Securities,'' collectively known as ``Section 107 Securities''), 
as defined in Sections 107D, 107E, 107F, 107G, 107H and 107I of the 
NYSE Amex Company Guide, that are principally traded on a national 
securities exchange and an ``NMS stock'' (as defined in Rule 600 of 
Regulation NMS under the Securities Exchange Act of 1934), and 
represent ownership of a security that provides for the payment at 
maturity, as described below:
     Index-Linked Securities are securities that provide for 
the payment at maturity of a cash amount based on the performance of an 
underlying index or indexes of equity securities (``Equity Reference 
Asset'');
     Commodity-Linked Securities are securities that provide 
for the payment at maturity of a cash amount based on the performance 
of one or more physical commodities or commodity futures, options on 
commodities or other commodity derivatives or Commodity-Based Trust 
Shares or a basket or index of any of the foregoing (``Commodity 
Reference Asset'');
     Currency-Linked Securities are securities that provide for 
the payment at maturity of a cash amount based on the performance of 
one or more currencies, or options on currencies or currency futures or 
other currency derivatives or Currency Trust Shares (as defined in NYSE 
Amex Rule 1200B-AEMI(b)), or a basket or index of any of the foregoing 
(``Currency Reference Asset'');
     Fixed Income-Linked Securities are securities that provide 
for the payment at maturity of a cash amount based on the performance 
of one or more notes, bonds, debentures or evidence of indebtedness 
that include, but are not limited to, U.S. Department of Treasury 
securities (``Treasury Securities''), government-sponsored entity 
securities (``GSE Securities''), municipal securities, trust preferred 
securities, supranational debt and debt of a foreign country or a 
subdivision thereof or a basket or index of any of the foregoing 
(``Fixed Income Reference Asset'');
     Futures-Linked Securities are securities that provide for 
the payment at maturity of a cash amount based on the performance of an 
index of: (a) Futures on Treasury Securities, GSE Securities, 
supranational debt and debt of a foreign country or a subdivision 
thereof, or options or other derivatives on any of the foregoing; (b) 
interest rate futures or options or derivatives on the foregoing in 
this subparagraph (b); or (c) CBOE Volatility Index (``VIX'') futures 
(``Futures Reference Asset''); and
     Combination-Linked Securities are securities that provide 
for the payment at maturity of a cash amount based on the performance 
of any combination of two or more Equity Reference Assets, Commodity 
Reference Assets, Currency Reference Assets, Fixed Income Reference 
Assets, or Futures Reference Assets (``Combination Reference Asset'').
    For purposes of Commentary .11 to NYSE Amex Options Rule 915, 
Equity Reference Assets, Commodity Reference Assets, Currency Reference 
Assets, Fixed Income Reference Assets, Futures Reference Assets, and 
Combination Reference Assets collectively are referred to as 
``Reference Assets.''
    In addition, Section 107 Securities must meet the criteria and 
guidelines for underlying securities set forth in Commentary .01 to 
NYSE Amex Options Rule 915 or the Section 107 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. 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 the Section 107 Securities 
that underlie the option as described in the Section 107 Securities 
prospectus.
    The Exchange proposes to amend Commentary .11(a) to NYSE Amex 
Options Rule 915 to expand the type of Section 107 Securities that may 
underlie options to include leveraged (multiple or inverse) ETNs. To 
effect this change, the Exchange proposes to amend Commentary .11(a) to 
NYSE Amex Options Rule 915 by adding the phrase ``or the leveraged 
(multiple or inverse) performance'' to each of the subparagraphs ((1) 
through (6)) in that section, which sets forth the different eligible 
Reference Assets.\6\
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    \6\ The Exchange also proposes technical corrections to the Rule 
to conform certain definitions. In particular, we are changing the 
defined term ``NMS Stock'' to ``NMS stock'' to conform to how it is 
defined in Rule 600 of Regulation NMS under the Securities and 
Exchange Act of 1934.
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    The Exchange's current continuing listing standards for ETN options 
will continue to apply. Specifically, under Commentary .12 to NYSE Amex 
Options Rule 916, ETN options shall not be deemed to meet the 
Exchange's requirements for continued approval, and the Exchange shall 
not open for trading any additional series or [sic] option contracts of 
the class covering such Section 107 Securities whenever the underlying 
securities are delisted and trading in the Section 107 Securities is 
suspended on a national securities exchange, or the Section 107 
Securities are no longer an ``NMS stock'' (as defined in Rule 600 of 
Regulation NMS under the Securities Exchange Act of 1934). In addition, 
the Exchange shall consider the suspension of opening transactions in 
any series of options of the class covering Section 107 Securities in 
any of the following circumstances: (1) The underlying Section 107 
Security fails to comply with the terms of Commentary .11 to NYSE Amex 
Options Rule 915; (2) in accordance with the terms of Commentary .01 to 
NYSE Amex Options Rule 916, in the case of options covering Section 107 
Securities when such options were approved pursuant to Commentary .11 
to NYSE Amex Options Rule 915, except that, in the case of options 
covering Section 107 Securities approved pursuant to Commentary 
.11(c)(2) that are redeemable at the option of the holder at least on a 
weekly basis, then option contracts of the class covering such 
Securities may only continue to be open for trading as long as the 
Securities are listed on a national securities exchange and are ``NMS 
stock'' as defined in Rule

[[Page 80559]]

600 of Regulation NMS; (3) in the case of any Section 107 Security 
trading pursuant to Commentary .11 to NYSE Amex Options Rule 915, the 
value of the Reference Asset is no longer calculated or available or 
(4) such other event shall occur or condition exist that in the opinion 
of the Exchange make further dealing in such options on the Exchange 
inadvisable. Expanding the eligible types of ETNs for options trading 
under Commentary .11 to NYSE Amex Options Rule 915 will not have any 
effect on the rules pertaining to position and exercise limits \7\ or 
margin.\8\
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    \7\ See NYSE Amex Options Rule 904, Position Limits, and Rule 
905, Exercise Limits.
    \8\ See NYSE Amex Options Rule 462, Minimum Margin.
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    This proposal is necessary to enable the Exchange to list and trade 
options on shares of BXUB, BXUC, XXV, BXDB, BXDC, BXDD and MLPL. The 
Exchange believes the ability to trade options on leveraged (multiple 
or inverse) ETNs will provide investors with greater risk management 
tools. The proposed amendment to the Exchange's listing criteria for 
options on ETNs is necessary to ensure that the Exchange will be able 
to list options on the above listed leveraged (multiple and inverse) 
ETNs as well as other leveraged (multiple and inverse) ETNs that may be 
introduced in the future.
    The Exchange represents that its existing surveillance procedures 
applicable to trading in options are adequate to properly monitor the 
trading in leveraged (multiple and inverse) ETN options.
    It is expected that The Options Clearing Corporation will seek to 
revise the Options Disclosure Document to accommodate the listing and 
trading of leveraged (multiple and inverse) ETN options.
Broaden the Definition of ``Futures-Linked Securities''
    The second change proposed by this filing is to amend the 
definition of ``Futures-Linked Securities'' set forth in Commentary 
.11(a)(5) to NYSE Amex Options Rule 915. Currently, the definition of 
``Futures-Linked Securities'' is limited to securities that provide for 
the payment at maturity of a cash amount based on the performance of an 
index of: (a) Futures on Treasury Securities, GSE Securities, 
supranational debt and debt of a foreign country or a subdivision 
thereof, or options or other derivatives on any of the foregoing; (b) 
interest rate futures or options or derivatives on the foregoing; or 
(c) CBOE VIX futures.
    NYSE Amex Options Rule 915 sets forth generic listing criteria for 
securities that may serve as underlyings for listed options trading. 
The Exchange believes that the current definition of ``Futures-Linked 
Securities'' is unnecessarily restrictive and requires the Exchange to 
submit a filing to amend the definition each time a new ETN is issued 
that tracks the performance of an index of futures/options on futures 
that is not enumerated in the existing rule. To address this issue, the 
Exchange is proposing to revise the definition of ``Futures-Linked 
Securities'' to provide that they are securities that provide for the 
payment at maturity of a cash amount based on the performance or the 
leveraged (multiple or inverse) performance of an index or indexes of 
futures contracts or options or derivatives on futures contracts 
(``Futures Reference Asset''). The Exchange notes that all ETNs 
eligible for options trading must be principally traded on a national 
securities exchange and an ``NMS stock.'' As a result, the Exchange 
believes that broadening the definition of ``Futures-Linked 
Securities'' by no longer specifically listing the types of futures and 
options on futures contracts that may be tracked by an ETN is 
appropriate.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\10\ in particular, in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, 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 the proposed rules applicable to trading pursuant to 
generic listing and trading criteria serve to foster investor 
protection.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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

    Because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this 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 \11\ and Rule 19b-4(f)(6) 
thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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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    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 requested that the Commission waive 
the 30-day operative delay so that the Exchange can list and trade 
options on leveraged (multiple or inverse) ETNs and implement the 
amended definition of ``Futures-Linked Securities'' immediately. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public 
interest.\13\ The Commission notes the proposal is substantively 
identical a proposal that was recently approved by the Commission, and 
does not raise any new regulatory issues.\14\ For these reasons, the 
Commission designates the proposed rule change as operative upon 
filing.
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    \13\ 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).
    \14\ See supra note 4.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may

[[Page 80560]]

temporarily suspend 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-NYSEAmex-2010-118 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-NYSEAmex-2010-118. 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 the filing also will be 
available for inspection and copying at the principal office of the 
Exchange.\15\ 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-
NYSEAmex-2010-118 and should be submitted on or before January 12, 
2011.
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    \15\ The text of the proposed rule change is available on the 
Commission's Web site at http://www.sec.gov.

    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,
Deputy Secretary.
[FR Doc. 2010-32087 Filed 12-21-10; 8:45 am]
BILLING CODE 8011-01-P