[Federal Register: May 17, 2007 (Volume 72, Number 95)]
[Notices]
[Page 27868-27871]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17my07-123]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55752; File No. SR-CBOE-2007-44]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Order Granting Accelerated Approval
of Proposed Rule Change to Trade the streetTRACKS Gold Shares Fund
Pursuant to Unlisted Trading Privileges
May 11, 2007.
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 May 8, 2007, the Chicago Board Options Exchange, Incorporated (the
``Exchange'' or ``CBOE''), filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I and II below, which Items have been substantially prepared by
the Exchange. This notice and order provides notice of the proposed
rule change and approves the proposal on an accelerated basis.
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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 Chicago Board Options Exchange, Incorporated proposes to: (1)
trade on its stock trading facility, CBOE Stock Exchange (``CBSX''),
the streetTRACKS Gold Shares (``GLD'' or ``Shares'') pursuant to
unlisted trading privileges (``UTP''), and (2) adopt Exchange Rule
54.8, which governs the trading of commodity-based trust shares. The
text of the proposed rule change is available on the Exchange's Web
site (http://www.cboe.org/Legal), 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 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 III 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
The Exchange is proposing to trade the Shares on CBSX pursuant to
UTP. The Shares represent fractional, undivided beneficial ownership
interests in the streetTRACKS Gold Trust (``Trust''). The Trust is an
investment trust, the sole assets of which are gold bullion, and from
time to time, cash.\3\ The Commission previously approved the original
listing and trading of the Shares on the New York Stock Exchange
(``NYSE'').\4\ The Exchange deems the Shares to be equity securities,
thus rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. The trading hours for
the Shares on the Exchange would be from 8:15 a.m. until 3:15 p.m.
(Central Time).
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\3\ Additional information regarding the streetTRACKS Gold
Shares is at http://www.streettracksgoldshares.com.
\4\ See Securities Exchange Act Release No. 50603 (October 28,
2004), 69 FR 64614 (November 5, 2004) (SR-NYSE-2004-22).
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The last-sale price for the Shares is disseminated over the
Consolidated Tape. Gold pricing information based on the spot price for
a troy ounce of gold from various financial information service
providers, such as Reuters and Bloomberg, is available on a 24-hour
basis. Complete real-time data for gold futures and options prices
traded on the COMEX (a division of the NYMEX) is available by
subscription from Reuters and Bloomberg. The NYMEX also provides
delayed futures and options information on current and past trading
sessions and market news free of charge on its Web site. CBOE, via a
link from its own public Web site (http://www.cboe.com) to the Trust Web site (http://www.streettracksgoldshares.com), will provide at no
charge continuously updated bids and offers indicative of the spot
price of gold.\5\
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\5\ The gold spot price at the Trust's Web site will be provided
by The Bullion Desk (http://www.thebulliondesk.com). The Trust's Web
site will indicate that there are other sources for obtaining the
gold spot price. If the Trust's Web site should cease to provide
this indicative spot price from an unaffiliated source (and the
intraday indicative value) of the Shares, CBOE would cease to trade
the Shares.
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The Trust Web site also will provide a calculation of the estimated
NAV (also known as the Intraday Indicative Value or IIV) of a Share as
calculated by multiplying the indicative spot price of gold by the
quantity of gold backing
[[Page 27869]]
each Share. Comparing the IIV with the last sale price of the Shares
helps an investor to determine whether, and to what extent, Shares may
be selling at a premium or a discount to the NAV. Although provided
free of charge, the indicative spot price and IIV per Share will be
provided on an essentially real-time basis.\6\ The Trust Web site
provides the NAV of the Trust as calculated each business day by the
Sponsor. In addition, the Trust Web site contains the following
information, on a per-Share basis, for the Trust: (a) The IIV as of the
close of the prior business day and the midpoint of the bid/ask price
\7\ in relation to such IIV (``Bid/Ask Price''), and a calculation of
the premium or discount of such price against such IIV; and (b) data in
chart format displaying the frequency distribution of discounts and
premiums of the Bid/Ask Price against the IIV, within appropriate
ranges, for each of the four previous calendar quarters. The Trust Web
site also provides the Trust's prospectus, as well as the two most
recent reports to stockholders. The Trust Web site provides the last
sale price of the Shares as traded in the U.S. market, subject to a 20-
minute delay.\8\
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\6\ The Trust's Web site, to which the CBOE Web site will link,
will disseminate an indicative spot price of gold and the IIV, and
indicate that these values are subject to an average delay of five
to ten seconds.
\7\ The bid/ask price is determined using the highest bid and
lowest offer on the Consolidated Tape as of the time of calculation
of the closing day IIV.
\8\ The last sale price of the Shares in the secondary market is
available on a real-time basis for a fee from regular data vendors.
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In connection with the trading of the Shares, CBOE would inform its
members in an Information Circular of the special characteristics and
risks associated with trading the Shares, such as loss, damage, or
theft of the Trust's gold, and unanticipated problems related to the
mechanisms and procedures that were specifically developed for this
relatively new securities product. CBOE also would require its members
to deliver a prospectus or product description to investors purchasing
Shares prior to or concurrently with a transaction in Shares. In
addition, CBOE Rule 53.6 requires member organizations to have a
reasonable basis for recommending the Shares when recommending a
transaction in the Shares.
CBOE believes that its surveillance procedures are adequate to
address any concerns about the trading of the Shares on the Exchange
because those procedures will be comparable to those used for exchange-
traded funds and trust-issued receipts currently trading on the
Exchange, and will incorporate and rely upon existing Exchange
surveillance procedures governing equities. In addition, for
intermarket surveillance purposes, the Exchange has entered into a
reciprocal Memorandum of Understanding with NYMEX for the sharing of
information related to any financial instrument based, in whole or in
part, upon an interest in or performance of gold.
Further, proposed CBOE Rule 54.8 would impose certain obligations
on Market-Makers that would apply in connection with trading the
Shares. CBOE Rule 54.8(e) would require that a Market-Maker in the
Shares provide the Exchange with information related to its trading in
physical gold, gold futures contracts, options on gold futures, or any
other gold derivatives. CBOE Rule 54.8(g) would prohibit a Market-Maker
in the Shares from using any material non-public information received
from any person associated with the Market-Maker or employee of such
person regarding trading by such person or employee in physical gold,
gold futures contracts, options on gold futures, or any other gold
derivatives. In addition, CBOE Rule 54.8(d) would prohibit a Market-
Maker in the Shares from being affiliated with a market maker in
physical gold, gold futures contracts, options on gold futures, or any
other gold derivatives unless the specified information barriers are in
place.
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares. Trading may be halted because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable. In addition, trading in the Shares
would be subject to trading halts caused by extraordinary market
volatility pursuant to the Exchange's ``circuit breaker'' rule.\9\
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\9\ CBOE Rule 6.3B.
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Moreover, the Exchange represents that it would cease trading the
Shares if the listing market stops trading the Shares because of a
regulatory halt similar to a halt based on CBOE Rule 6.3. UTP trading
in the Shares is also governed by the trading halts provisions of CBOE
Rule 52.3 relating to temporary interruptions in the calculation or
wide dissemination of the IIV.
2. Statutory Basis
CBOE believes that the proposal is consistent with Section 6(b) of
the Act \10\ in general, and Section 6(b)(5) of the Act \11\ in
particular, in that the proposal is designed to promote just and
equitable principles of trade, remove impediments to and perfect the
mechanism of a free and open market and a national market system, and
protect investors and the public interest. In addition, CBOE believes
that the proposal is consistent with Rule 12f-5 under the Act \12\
because it deems the Shares to be equity securities, thus rendering
trading in the Shares subject to the Exchange's existing rules
governing the trading of equity securities.
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\10\ 15 U.S.C. 78s(b).
\11\ 15 U.S.C. 78s(b)(5).
\12\ 17 CFR 240.12f-5.
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B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE does not believe that the proposed rule change will impose any
burden on competition 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 neither solicited nor received comments on the
proposal.
III. 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 rule-comments@sec.gov. Please include
File Number SR-CBOE-2007-44 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2007-44. 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
[[Page 27870]]
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 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-CBOE-2007-44 and should be
submitted on or before June 7, 2007.
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\13\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\14\ which
requires that an exchange have rules designed, among other things, 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 Commission believes that this proposal should benefit
investors by increasing competition among markets that trade the
Shares.
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\13\ In approving this rule change, the Commission notes that it
has considered the proposal's impact on efficiency, competition, and
capital formation. See 15 U.S.C. 78c(f).
\14\ 15 U.S.C. 78f(b)(5).
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In addition, the Commission finds that the proposal is consistent
with Section 12(f) of the Act,\15\ which permits an exchange to trade,
pursuant to UTP, a security that is listed and registered on another
exchange.\16\ The Commission notes that it previously approved the
listing and trading of the Shares on the NYSE.\17\ The Commission also
finds that the proposal is consistent with Rule 12f-5 under the
Act,\18\ which provides that an exchange shall not extend UTP to a
security unless the exchange has in effect a rule or rules providing
for transactions in the class or type of security to which the exchange
extends UTP. The Exchange has represented that it meets this
requirement because it deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities.
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\15\ 15 U.S.C. 78l(f).
\16\ Section 12(a) of the Act, 15 U.S.C. 78l(a), generally
prohibits a broker-dealer from trading a security on a national
securities exchange unless the security is registered on that
exchange pursuant to Section 12 of the Act. Section 12(f) of the Act
excludes from this restriction trading in any security to which an
exchange ``extends UTP.'' When an exchange extends UTP to a
security, it allows its members to trade the security as if it were
listed and registered on the exchange even though it is not so
listed and registered.
\17\ See supra note 4.
\18\ 17 CFR 240.12f-5.
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The Commission further believes that the proposal is consistent
with Section 11A(a)(1)(C)(iii) of the Act,\19\ which sets forth
Congress' finding that it is in the public interest and appropriate for
the protection of investors and the maintenance of fair and orderly
markets to assure the availability to brokers, dealers, and investors
of information with respect to quotations for and transactions in
securities. Quotations for and last-sale information regarding the
Shares are disseminated through the facilities of the CTA and the
Consolidated Quotation System. Furthermore, as noted by the Exchange,
various means exist for investors to obtain reliable gold price
information and thereby to monitor the underlying spot market in gold
relative to the NAV of their Shares. In addition, the IIV of each Fund
is disseminated every 15 seconds throughout the trading day by the
national securities exchange on which the Fund is listed or by other
information providers or market data vendors.
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\19\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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Furthermore, the Commission believes that the proposal is
reasonably designed to preclude trading of the Shares when transparency
is impaired. CBOE Rule 52.3 sets forth trading halt procedures when
CBOE trades an ETF pursuant to UTP. Under this rule, if the listing
market halts trading when the IIV is not being calculated or
disseminated, CBOE also would halt trading in the Shares. This rule is
substantially similar to those recently adopted by other exchanges and
found by the Commission to be consistent with the Act.\20\
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\20\ See e.g., NYSE Arca Equities Rule 7.34; Securities Exchange
Act Release No. 54997 (December 21, 2006), 71 FR 78501 (December 29,
2006).
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The Commission notes that, if the Shares should be delisted by the
listing market, the Exchange would no longer have authority to trade
the Shares pursuant to this order.
In support of this proposal, the Exchange has made the following
representations:
1. The Exchange's surveillance procedures are adequate to properly
monitor Exchange trading of the Shares and to deter and detect
violations of Exchange rules. Among other things, the Exchange entered
into a reciprocal Memorandum of Understanding with NYMEX for the
sharing of information related to any financial instrument based, in
whole or in part, upon an interest in or performance of gold.
2. Prior to the commencement of trading, the Exchange would inform
its members and member organizations in an Information Circular of the
special characteristics and risks associated with trading the Shares.
3. The Information Circular would include the requirement that
members and member firms deliver a prospectus to investors purchasing
newly issued Shares prior to or concurrently with the confirmation of a
transaction.
This approval order is conditioned on the Exchange's adherence to
these representations.
Finally, the Commission believes that proposed CBOE Rule 54.8,
which imposes information barriers and trading restrictions on a member
acting as a registered market maker in the Shares, is consistent with
the Act. The Commission notes that CBOE Rule 54.8 is substantially
similar to rules of other exchanges that previously have been approved
by the Commission.\21\
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\21\ See, e.g., Nasdaq Rule 4630; Securities Exchange Act
Release No. 54765 (November 16, 2006), 71 FR 67668 (November 22,
2006) (approving SR-Nasdaq-2006-009).
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The Commission finds good cause for approving this proposal before
the thirtieth day after the publication of notice thereof in the
Federal Register. As noted previously, the Commission previously found
that the listing and trading of the Shares on the NYSE is consistent
with the Act. The Commission presently is not aware of any regulatory
issue that should cause it to revisit that finding or would preclude
the trading of the Shares on the Exchange pursuant to UTP. Therefore,
accelerating approval of this proposal should benefit investors by
creating, without undue delay, additional competition in the market for
the Shares.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\22\ that the proposed rule change (SR-CBOE-2007-
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44) be and it hereby is, approved on an accelerated basis.
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\22\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E7-9464 Filed 5-16-07; 8:45 am]
BILLING CODE 8010-01-P