Daily Rules, Proposed Rules, and Notices of the Federal Government
The Exchanges each propose to amend certain of their respective rules to enable the listing and trading of iShares Trust Options on their markets. The text of the Proposals is available at each of the respective Exchanges, the Commission's Public Reference Room, and
In their filings with the Commission, the Exchanges included statements concerning the purpose of, and basis for, the Proposals. The text of these statements may be examined at the places specified in Item III below. The Exchanges have prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
Recently, the Commission approved the Exchanges' proposals to list and trade options on the SPDR Gold Trust.
Currently, the rules of the Exchanges permit only certain "Units" (also referred to herein as exchange traded funds ("ETFs")) to underlie options traded on their markets.
Apart from allowing iShares Trust Options to be traded on the Exchanges as described above, the Exchanges' listing standards would remain unchanged. ETFs on which options may be listed and traded would still have to be listed and traded on a national securities exchange and satisfy the other listing standards set forth in the respective rules of each of the Exchanges.
Specifically, all ETFs underlying options would also continue to be required to: (1) Meet the criteria and guidelines under the Exchanges' rules for underlying ETFs; or (2) be available for creation or redemption each business day from or through the issuer in cash or in kind at a price related to net asset value, and the issuer must be obligated to issue Units in a specified aggregate number even if some or all of the investment assets required to be deposited have not been received by the issuer, subject to the condition that the person obligated to deposit the investments has undertaken to deliver the investment assets 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 Exchanges each propose that the current continued listing standards for options on ETFs would apply to iShares Trust Options. Specifically, options on Units 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 Units, there are fewer than 50 record and/or beneficial holders of the Units for 30 or more consecutive trading days; (2) the value of the index or portfolio of securities, non-U.S. currency, or portfolio of commodities including commodity futures contracts, options on commodity futures contracts, swaps, forward contracts and/or options on physical commodities and/or Financial Instruments and Money Market Instruments on which Units are based is no longer calculated or available; or (3) such other event occurs or condition exists that in the opinion of the exchanges makes further dealing on the exchange inadvisable.
In addition, shares of the iShares COMEX Gold Trust and the iShares Silver Trust would not be deemed to meet the requirements for continued approval, and the Exchanges would not open for trading any additional series of option contracts of the class covering shares of the iShares COMEX Gold Trust and the iShares Silver Trust, if the shares cease to be an "NMS stock" as provided for in rules of the Exchanges
The Exchanges each represent that the addition of the iShares COMEX Gold Trust and the iShares Silver Trust to types of Units that may underlie listed options traded on the respective exchange would not have any effect on the rules pertaining to position and exercise limits
The Exchanges also represent that the respective surveillance procedures applicable to iShares Trust Options would be similar to those applicable to all other options on ETFs currently traded on the Exchanges. In addition, the Exchanges note that they may obtain information from the New York Mercantile Exchange, Inc. ("NYMEX") through the Intermarket Surveillance Group ("ISG") related to any financial instrument traded there that is based, in whole or in part, upon an interest in, or performance of, gold or silver.
The Exchanges each state that amending its rules to accommodate the listing and trading of iShares Trust Options will benefit investors by providing them with valuable risk management tools. Accordingly, the Exchanges believe that the proposed rule changes are consistent with the requirements of Section 6(b) of the Act
The Exchanges each believe that the proposed rule changes will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
The Exchanges each state that no written comments were solicited or received with respect to the proposed rule changes.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule changes are consistent with the Act. Comments may be submitted by any of the following methods:
* Use the Commission's Internet comment form (
* Send an e-mail to
* Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
After careful consideration, the Commission finds that the Proposals are consistent with the requirements of the Act and the rules and regulations thereunder applicable to national securities exchanges
As national securities exchanges, each of the Exchanges is required under Section 6(b)(1) of the Act
iShares Trust Options will trade as options under the trading rules of each of the Exchanges. These rules, among other things, are designed to avoid trading through better displayed prices for iShares Trust Options available on other exchanges and, thereby, satisfy each exchange's obligation under the Options Intermarket Linkage Plan.
The Exchanges have all represented that they have surveillance programs in place for the listing and trading of options based on the iShares COMEX Gold Trust and the iShares Silver Trust. For example, the Exchanges may obtain trading information via the ISG from the NYMEX related to any financial instrument traded there that is based, in whole or in part, upon an interest in, or performance of, gold or silver. Additionally, the listing and trading of iShares Trust Options will be subject to the Exchanges' rules pertaining to position and exercise limits
In addition, the Commission finds good cause, pursuant to Section 19(b)(2) of the Act,