[Federal Register: August 1, 2003 (Volume 68, Number 148)]
[Notices]
[Page 45298-45299]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01au03-111]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48226; File No. SR-ISE-2003-19]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the International Securities
Exchange, Inc., To Provide for the Trading of Options on Fixed-Income
Exchange-Traded Funds
July 25, 2003.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on July 22, 2003, the International Securities Exchange, Inc. (``ISE''
or ``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the ISE.
ISE filed the proposed rule change pursuant to section 19(b)(3)(A) of
the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the
proposal effective upon filing with the Commission. 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).
\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 is proposing to amend Rule 500(h) to allow the listing
of options on fixed-income exchange-traded funds. Below is the text of
the proposed rule change. New text is in italics. Proposed deletions
are in [brackets].
* * * * *
Rule 500. Criteria for Underlying Securities
* * * * *
(h) Securities deemed appropriate for options trading shall include
shares or other securities (``Fund Shares'') that represent interests
in registered investment companies (or series thereof) organized as
open-end management investment companies, unit investment trusts or
similar entities that are principally traded on a national securities
exchange or through the facilities of a national securities association
and reported as ``national market'' securities, and that hold
portfolios of securities comprising or otherwise based on or
representing investments in broad-based indexes or portfolios of
securities (or that hold securities in one or more other registered
investment companies that themselves hold such portfolios of
securities) (``Funds''); provided that all of the following conditions
are met:
(1) any non-U.S. component securities [stocks] of the index or
portfolio on which the Fund Shares are based that are not subject to
comprehensive surveillance agreements do not in the aggregate represent
more than 50% of the weight of the index or portfolio;
(2) securities [Stocks] for which the primary market is in any one
country that is not subject to a comprehensive surveillance agreement
do not represent 20% or more of the weight of the index;
(3) securities [stocks] for which the primary market is in any two
countries that are not subject to comprehensive surveillance agreements
do not represent 33% or more of the weight of the index; and
(4) the Fund Shares either (i) meet the criteria and guidelines set
forth in paragraphs (a) and (b) above; or (ii) the Fund Shares are
available for creation or redemption each business day from or through
the Fund in cash or in kind at a price related to net asset value, and
the Fund is obligated to issue Fund Shares in a specified aggregate
number even if some or all of the securities required to be deposited
have not been received by the Fund, subject to the condition that the
person obligated to deposit the securities has undertaken to deliver
the securities 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 Fund, all as described in the Fund's
prospectus.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, ISE 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 ISE 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
The Exchange states that it proposes to amend its rules to allow
the trading of options on fixed-income exchange-traded funds. This rule
change is consistent with a change to the rules of the Chicago Board of
Options Exchange (``CBOE'') previously approved by the Commission.\5\
Specifically, under ISE Rule 500(e), the Exchange may list options on
Fund Shares provided that certain conditions are met with respect to
the components of the underlying exchange-traded fund. The Exchange
proposes to amend the conditions contained in Rule 500(h) to refer to
the component ``securities'' of a fund, rather than the component
``stocks'' of the fund, so that fixed-income funds will be covered by
the Rule.
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\5\ Release No. 34-46435 (August 29, 2002), 67 FR 57046
(September 6, 2002) (File No. SR-CBOE-2002-47).
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2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under section 6(b)(5)\6\ 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.
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\6\ 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
The ISE provided the SEC with written notice of its intention to
file the proposed rule change at least five business days before its
filing. Moreover, the ISE has designated the
[[Page 45299]]
proposed rule change as one that: (i) Does not significantly affect the
protection of investors or the public interest; (ii) does not impose
any significant burden on competition; and (iii) does not become
operative for 30 days from the date on which it was filed, or such
shorter time as the Commission may designate. Therefore, the foregoing
rule change has become effective pursuant to section 19(b)(3)(A) of the
Act \7\ and Rule 19b-4(f)(6) thereunder.\8\ At any time within 60 days
of the filing of the proposed rule change, the Commission may summarily
abrogate the rule change if it appears to the Commission that the
action is necessary or appropriate in the public interest, for the
protection of investors, or would otherwise further the purposes of the
Act.
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-4(f)(6).
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Pursuant to Rule 19b-4(f)(6)(iii) under the Act,\9\ the proposal
does not become operative for 30 days after the date of its filing, or
such shorter time as the Commission may designate if consistent with
the protection of investors and the public interest. The ISE has
requested that the Commission waive the 30-day operative date so that
the proposed rule change will become immediately effective upon filing.
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\9\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiving the 30-day operative date is
consistent with the protection of investors and the public
interest.\10\ Accelerating the operative date will allow the ISE to
implement immediately listing standards similar to ones already in
place at the CBOE, and allow customers greater choices in their order
routing decisions.\11\ For these reasons, the Commission designates
that the proposed rule change as effective and operative immediately.
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\10\ For purposes only of accelerating the operative date of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
\11\ See n. 5, supra.
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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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609.
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. Copies of such filing will also be
available for inspection and copying at the principal office of the
ISE. All submissions should refer to File No. SR-ISE-2003-19 and should
be submitted by August 22, 2003.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 03-19616 Filed 7-31-03; 8:45 am]
BILLING CODE 8010-01-P