80 FR 25738 - Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 502

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 86 (May 5, 2015)

Page Range		25738-25740
FR Document		2015-10402
Federal Register, Volume 80 Issue 86 (Tuesday, May 5, 2015)
[Federal Register Volume 80, Number 86 (Tuesday, May 5, 2015)]
[Notices]
[Pages 25738-25740]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-10402]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74832; File No. SR-ISE-2015-16]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Amend Rule 502

April 29, 2015.
    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 April 22, 2015, 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 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\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The ISE proposes to amend Rule 502 to allow the listing of options 
overlying Exchange-Traded Fund Shares (``ETFs'') that are listed 
pursuant to generic listing standards on equities exchanges for series 
of portfolio depositary receipts and index fund shares based on 
international or global indexes under which a comprehensive 
surveillance agreement is not required. 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 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 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
    The Exchange proposes to amend Rule 502 to allow the listing of 
options overlying ETFs that are listed pursuant to generic listing 
standards on equities exchanges for series of portfolio depositary 
receipts and index fund shares based on international or global indexes 
under which a comprehensive surveillance sharing agreement 
(``comprehensive surveillance agreement'' or ``CSSA'') is not 
required.\3\ This proposal will enable the Exchange to list and trade 
options on ETFs without a CSSA provided that the ETF is listed on an 
equities exchange pursuant to the generic listings standards that do 
not require a CSSA pursuant to Rule 19b-4(e) \4\ of the Exchange Act. 
Rule 19b-4(e) provides that the listing and trading of a new derivative 
securities product by a self-regulatory organization (``SRO'') shall 
not be deemed a proposed rule change, pursuant to paragraph (c)(1) of 
Rule 19b-4, if the Commission has approved, pursuant to Section 19(b) 
of the Exchange Act, the SRO's trading rules, procedures and listing 
standards for the product class that would include the new derivatives 
securities product, and the SRO has a surveillance program for the 
product class.\5\ In other words, the proposal will amend the listing 
standards to allow the Exchange to list and trade options on ETFs based 
on international or global indexes to a similar degree that they are 
allowed to be listed on several equities exchanges.\6\
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    \3\ See e.g., NYSE MKT Rule 1000 Commentary .03(a)(B); NYSE Arca 
Equities Rule 5.2(j)(3) Commentary .01(a)(B); NASDAQ Rule 
5705(a)(3)(A)(ii); and BATS Rule 14.11(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(e).
    \5\ When relying on Rule 19b-4(e), the SRO must submit Form 19b-
4(e) to the Commission within five business days after the SRO 
begins trading the new derivative securities products. See 
Securities Exchange Act Release No. 40761 (December 8, 1998), 63 FR 
70952 (December 22, 1998).
    \6\ See NYSE MKT Rule 1000 Commentary .03(a)(B); NYSE Arca 
Equities Rule 5.2(j)(3) Commentary .01(a)(B); NASDAQ Rule 
5705(a)(3)(A)(ii); and BATS Rule 14.11(b)(3)(A)(ii). See also 
Securities Exchange Act Release Nos. 54739 (November 9, 2006), 71 FR 
66993 (SR-Amex-2006-78); 55269 (February 9, 2007), 72 FR 7490 
(February 15, 2007) (SR-NASDAQ-2006-050); 55621 (April 12, 2007), 72 
FR 19571 (April 18, 2007) (SR-NYSEArca-2006-86).
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Exchange-Traded Funds
    The Exchange allows for the listing and trading of options on ETFs. 
Rule 502(h)(B)(1)-(3) provide the listings standards for options on 
ETFs with non-U.S. component securities, such as ETFs based on 
international or global indexes. Rule 502(h)(B)(1) requires that any 
non-U.S. component securities of an index or portfolio of securities on 
which the Exchange-Traded 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.\7\ Rule 
502(h)(B)(2) requires that component securities of an index or 
portfolio of securities on which the Exchange-Traded Fund Shares are 
based 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.\8\ Rule 502(h)(B)(3) requires that 
component securities of an index or portfolio of securities on which 
the Exchange-Traded Fund Shares are based 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.\9\
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    \7\ See Rule 502(h)(B)(1).
    \8\ See Rule 502(h)(B)(2).
    \9\ See Rule 502(h)(B)(3).
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Generic Listing Standards for Exchange-Traded Funds
    The Exchange notes that the Commission has previously approved 
generic listing standards pursuant to Rule 19b-4(e) \10\ of the 
Exchange Act for ETFs based on indexes that consist of stocks listed on 
U.S. exchanges.\11\ In

[[Page 25739]]

general, the criteria for the underlying component securities in the 
international and global indexes are similar to those for the domestic 
indexes, but with modifications as appropriate for the issues and risks 
associated with non-U.S. securities.
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    \10\ 17 CFR 240.19b-4(e).
    \11\ See Commentary .03 to Amex Rule 1000 and Commentary .02 to 
Amex Rule 1000A. See also Securities Exchange Act Release No. 42787 
(May 15, 2000), 65 FR 33598 (May 24, 2000).
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    In addition, the Commission has previously approved the listing and 
trading of ETFs based on international indexes--those based on non-U.S. 
component stocks--as well as global indexes--those based on non-U.S. 
and U.S. component stocks.\12\
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    \12\ See, e.g., Securities Exchange Act Release Nos. 50189 
(August 12, 2004), 69 FR 51723 (August 20, 2004) (approving the 
listing and trading of certain Vanguard International Equity Index 
Funds); 44700 (August 14, 2001), 66 FR 43927 (August 21, 2001) 
(approving the listing and trading of series of the iShares Trust 
based on certain S&P global indexes).
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    In approving ETFs for equities exchange trading, the Commission 
thoroughly considered the structure of the ETFs, their usefulness to 
investors and to the markets, and SRO rules that govern their trading. 
The Exchange believes that allowing the listing of options overlying 
ETFs that are listed pursuant to the generic listing standards on 
equities exchanges for ETFs based on international and global indexes 
and applying Rule 19b-4(e) \13\ should fulfill the intended objective 
of that Rule by allowing options on those ETFs that have satisfied the 
generic listing standards to commence trading, without the need for the 
public comment period and Commission approval. The proposed rule has 
the potential to reduce the time frame for bringing options on ETFs to 
market, thereby reducing the burdens on issuers and other market 
participants. The failure of a particular ETF to comply with the 
generic listing standards under Rule 19b-4(e) \14\ would not, however, 
preclude the Exchange from submitting a separate filing pursuant to 
Section 19(b)(2),\15\ requesting Commission approval to list and trade 
options on a particular ETF.
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    \13\ 17 CFR 240.19b-4(e).
    \14\ 17 CFR 240.19b-4(e).
    \15\ 15 U.S.C. 78s(b)(2).
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Requirements for Listing and Trading Options Overlying ETFs Based on 
International and Global Indexes
    Options on ETFs listed pursuant to these generic standards for 
international and global indexes would be traded, in all other 
respects, under the Exchange's existing trading rules and procedures 
that apply to options on ETFs and would be covered under the Exchange's 
surveillance program for options on ETFs.
    Pursuant to the proposed rule, the Exchange may list and trade 
options on an ETF without a CSSA provided that the ETF is listed 
pursuant to generic listing standards for series of portfolio 
depositary receipts and index fund shares based on international or 
global indexes under which a comprehensive surveillance agreement is 
not required. The Exchange believes that these generic listing 
standards are intended to ensure that stocks with substantial market 
capitalization and trading volume account for a substantial portion of 
the weight of an index or portfolio.
    The Exchange believes that this proposed listing standard for 
options on ETFs is reasonable for international and global indexes, 
and, when applied in conjunction with the other listing 
requirements,\16\ will result in options overlying ETFs that are 
sufficiently broad-based in scope and not readily susceptible to 
manipulation. The Exchange also believes that allowing the Exchange to 
list options overlying ETFs that are listed on equities exchanges 
pursuant to generic standards for series of portfolio depositary 
receipts and index fund shares based on international or global indexes 
under which a CSSA is not required, will result in options overlying 
ETFs that are adequately diversified in weighting for any single 
security or small group of securities to significantly reduce concerns 
that trading in options overlying ETFs based on international or global 
indexes could become a surrogate for trading in unregistered 
securities.
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    \16\ All of the other listing criteria under the Exchange's 
rules will continue to apply to any options listed pursuant to the 
proposed rule change.
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    The Exchange believes that ETFs based on international and global 
indexes that have been listed pursuant to the generic standards are 
sufficiently broad-based enough as to make options overlying such ETFs 
not susceptible instruments for manipulation. The Exchange believes 
that the threat of manipulation is sufficiently mitigated for 
underlying ETFs that have been listed on equities exchanges pursuant to 
generic listing standards for series of portfolio depositary receipts 
and index fund shares based on international or global indexes under 
which a comprehensive surveillance agreement is not required and for 
the overlying options, that the Exchange does not see the need for CSSA 
to be in place before listing and trading options on such ETFs. The 
Exchange notes that its proposal does not replace the need for a CSSA 
as provided in the current rule. The provisions of the current rule, 
including the need for a CSSA, remain materially unchanged in the 
proposed rule and will continue to apply to options on ETFs that are 
not listed on an equities exchange pursuant to generic listing 
standards for series of portfolio depositary receipts and index fund 
shares based on international or global indexes under which a 
comprehensive surveillance agreement is not required. Instead, the 
proposed rule adds an additional listing mechanism for certain 
qualifying options on ETFs to be listed on the Exchange.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\17\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\18\ 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, to remove impediments to and perfect the 
mechanisms of a free and open market and a national market system and, 
in general, to protect investors and the public interest. In 
particular, the proposed rules have the potential to reduce the time 
frame for bringing options on ETFs to market, thereby reducing the 
burdens on issuers and other market participants. The Exchange also 
believes enabling the listing and trading of options on ETFs pursuant 
to this new listing standard will benefit investors by providing them 
with valuable risk management tools. The Exchange notes that its 
proposal does not replace the need for a CSSA as provided in the 
current rule. The provisions of the current rule, including the need 
for a comprehensive surveillance sharing agreement, remain materially 
unchanged in the proposed rule and will continue to apply to options on 
ETFs that are not listed on an equities exchange pursuant to generic 
listing standards for series of portfolio depositary receipts and index 
fund shares based on international or global indexes under which a 
comprehensive surveillance agreement is not required. Instead, the 
proposed rule adds an additional listing mechanism for certain 
qualifying options on ETFs to be listed on the Exchange in a manner 
that is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster

[[Page 25740]]

cooperation and coordination with persons engaged in facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanisms of a free and open market and a national market system and, 
in general, to protect investors and the public interest.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b) [sic].
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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. To the contrary, the 
proposed rule change is a competitive change that is substantially 
similar to recent rule changes filed by the MIAX Options Exchange 
(``MIAX'') and NASDAQ OMX PHLX, LLC (``Phlx'').\19\ Furthermore, the 
Exchange believes this proposed rule change will benefit investors by 
providing additional methods to trade options on ETFs, and by providing 
them with valuable risk management tools. Specifically, the Exchange 
believes that market participants on the Exchange would benefit from 
the introduction and availability of options on ETFs in a manner that 
is similar to equities exchanges and will provide investors with a 
venue on which to trade options on these products. For all the reasons 
stated above, the Exchange 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, and believes the 
proposed change will enhance competition.
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    \19\ See Securities Exchange Act Release Nos. 74509 (March 13, 
2015), 80 FR 14425 (March 19, 2015) (SR-MIAX-2015-04); 74553 (March 
20, 2015), 80 FR 16072 (March 26, 2015) (SR-Phlx-2015-27).
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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

    Because the proposed rule change does not (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \20\ and Rule 19b-4(f)(6) thereunder.\21\
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \22\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \23\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The Exchange 
stated that waiver of the operative delay will permit the Exchange to 
list and trade certain ETF options on the same basis as other options 
markets.\24\ The Commission believes the waiver of the operative delay 
is consistent with the protection of investors and the public interest. 
Therefore, the Commission hereby waives the operative delay and 
designates the proposal operative upon filing.\25\
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    \22\ 17 CFR 240.19b-4(f)(6).
    \23\ 17 CFR 240.19b-4(f)(6)(iii).
    \24\ See Securities Exchange Act Release Nos. 74509 and 74553, 
supra note 19.
    \25\ 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).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may 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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
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 email to [email protected]. Please include 
File Number SR-ISE-2015-16 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2015-16. This file 
number should be included on the subject line if email 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 
10:00 a.m. and 3:00 p.m. 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-ISE-2015-16, and should be 
submitted on or before May 26, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-10402 Filed 5-4-15; 8:45 am]
 BILLING CODE 8011-01-P
25738 Federal Register / Vol. 80, No. 86 / Tuesday, May 5, 2015 / Notices

provisions of 5 U.S.C. 552, will be series of portfolio depositary receipts the SRO has a surveillance program for
available for Web site viewing and and index fund shares based on the product class.5 In other words, the
printing in the Commission’s Public international or global indexes under proposal will amend the listing
Reference Section, 100 F Street NE., which a comprehensive surveillance standards to allow the Exchange to list
Washington, DC 20549 on official agreement is not required. The text of and trade options on ETFs based on
business days between 10:00 a.m. and the proposed rule change is available on international or global indexes to a
3:00 p.m. Copies of the filing will also the Exchange’s Web site (http:// similar degree that they are allowed to
be available for inspection and copying www.ise.com), at the principal office of be listed on several equities exchanges.6
at the NYSE’s principal office and on its the Exchange, and at the Commission’s
Exchange-Traded Funds
Internet Web site at www.nyse.com. All Public Reference Room.
comments received will be posted The Exchange allows for the listing
II. Self-Regulatory Organization’s and trading of options on ETFs. Rule
without change; the Commission does
Statement of the Purpose of, and 502(h)(B)(1)–(3) provide the listings
not edit personal identifying
Statutory Basis for, the Proposed Rule standards for options on ETFs with non-
information from submissions. You
Change U.S. component securities, such as ETFs
should submit only information that
you wish to make available publicly. All In its filing with the Commission, the based on international or global indexes.
submissions should refer to File self-regulatory organization included Rule 502(h)(B)(1) requires that any non-
Number SR–NYSEArca–2015–23 and statements concerning the purpose of, U.S. component securities of an index
should be submitted on or before May and basis for, the proposed rule change or portfolio of securities on which the
26, 2015. and discussed any comments it received Exchange-Traded Fund Shares are based
on the proposed rule change. The text that are not subject to comprehensive
For the Commission, by the Division of
Trading and Markets, pursuant to delegated of these statements may be examined at surveillance agreements do not in the
authority.27 the places specified in Item IV below. aggregate represent more than 50% of
Brent J. Fields, The self-regulatory organization has the weight of the index or portfolio.7
Secretary. prepared summaries, set forth in Rule 502(h)(B)(2) requires that
sections A, B and C below, of the most component securities of an index or
[FR Doc. 2015–10406 Filed 5–4–15; 8:45 am]
significant aspects of such statements. portfolio of securities on which the
BILLING CODE 8011–01–P
Exchange-Traded Fund Shares are based
A. Self-Regulatory Organization’s for which the primary market is in any
Statement of the Purpose of, and one country that is not subject to a
SECURITIES AND EXCHANGE Statutory Basis for, the Proposed Rule comprehensive surveillance agreement
COMMISSION Change do not represent 20% or more of the
[Release No. 34–74832; File No. SR–ISE– 1. Purpose weight of the index.8 Rule 502(h)(B)(3)
2015–16] requires that component securities of an
The Exchange proposes to amend
index or portfolio of securities on which
Self-Regulatory Organizations; Rule 502 to allow the listing of options
the Exchange-Traded Fund Shares are
International Securities Exchange, overlying ETFs that are listed pursuant
based for which the primary market is
LLC; Notice of Filing and Immediate to generic listing standards on equities
in any two countries that are not subject
Effectiveness of Proposed Rule exchanges for series of portfolio
to comprehensive surveillance
Change To Amend Rule 502 depositary receipts and index fund
agreements do not represent 33% or
shares based on international or global
April 29, 2015. more of the weight of the index.9
indexes under which a comprehensive
Pursuant to Section 19(b)(1) of the surveillance sharing agreement Generic Listing Standards for Exchange-
Securities Exchange Act of 1934 (the (‘‘comprehensive surveillance Traded Funds
‘‘Act’’),1 and Rule 19b–4 thereunder,2 agreement’’ or ‘‘CSSA’’) is not required.3
notice is hereby given that on April 22, The Exchange notes that the
This proposal will enable the Exchange Commission has previously approved
2015, the International Securities to list and trade options on ETFs
Exchange, LLC (the ‘‘Exchange’’ or the generic listing standards pursuant to
without a CSSA provided that the ETF Rule 19b–4(e) 10 of the Exchange Act for
‘‘ISE’’) filed with the Securities and is listed on an equities exchange ETFs based on indexes that consist of
Exchange Commission (‘‘Commission’’) pursuant to the generic listings stocks listed on U.S. exchanges.11 In
the proposed rule change as described standards that do not require a CSSA
in Items I and II below, which Items pursuant to Rule 19b–4(e) 4 of the 5 When relying on Rule 19b–4(e), the SRO must
have been prepared by the self- Exchange Act. Rule 19b–4(e) provides submit Form 19b–4(e) to the Commission within
regulatory organization. The that the listing and trading of a new five business days after the SRO begins trading the
Commission is publishing this notice to new derivative securities products. See Securities
derivative securities product by a self- Exchange Act Release No. 40761 (December 8,
solicit comments on the proposed rule regulatory organization (‘‘SRO’’) shall 1998), 63 FR 70952 (December 22, 1998).
change from interested persons. not be deemed a proposed rule change, 6 See NYSE MKT Rule 1000 Commentary

pursuant to paragraph (c)(1) of Rule .03(a)(B); NYSE Arca Equities Rule 5.2(j)(3)
I. Self-Regulatory Organization’s Commentary .01(a)(B); NASDAQ Rule
Statement of the Terms of the Substance 19b–4, if the Commission has approved, 5705(a)(3)(A)(ii); and BATS Rule 14.11(b)(3)(A)(ii).
of the Proposed Rule Change pursuant to Section 19(b) of the See also Securities Exchange Act Release Nos.
Exchange Act, the SRO’s trading rules, 54739 (November 9, 2006), 71 FR 66993 (SR–
asabaliauskas on DSK5VPTVN1PROD with NOTICES

The ISE proposes to amend Rule 502 Amex–2006–78); 55269 (February 9, 2007), 72 FR
procedures and listing standards for the
to allow the listing of options overlying 7490 (February 15, 2007) (SR–NASDAQ–2006–050);
product class that would include the 55621 (April 12, 2007), 72 FR 19571 (April 18,
Exchange-Traded Fund Shares (‘‘ETFs’’)
new derivatives securities product, and 2007) (SR–NYSEArca–2006–86).
that are listed pursuant to generic listing 7 See Rule 502(h)(B)(1).
standards on equities exchanges for 3 See e.g., NYSE MKT Rule 1000 Commentary 8 See Rule 502(h)(B)(2).
9 See Rule 502(h)(B)(3).
.03(a)(B); NYSE Arca Equities Rule 5.2(j)(3)
27 17 CFR 200.30–3(a)(12). Commentary .01(a)(B); NASDAQ Rule 10 17 CFR 240.19b–4(e).
1 15 U.S.C. 78s(b)(1). 5705(a)(3)(A)(ii); and BATS Rule 14.11(b)(3)(A)(ii). 11 See Commentary .03 to Amex Rule 1000 and
2 17 CFR 240.19b–4. 4 17 CFR 240.19b–4(e). Commentary .02 to Amex Rule 1000A. See also

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Federal Register / Vol. 80, No. 86 / Tuesday, May 5, 2015 / Notices 25739

general, the criteria for the underlying Pursuant to the proposed rule, the including the need for a CSSA, remain
component securities in the Exchange may list and trade options on materially unchanged in the proposed
international and global indexes are an ETF without a CSSA provided that rule and will continue to apply to
similar to those for the domestic the ETF is listed pursuant to generic options on ETFs that are not listed on
indexes, but with modifications as listing standards for series of portfolio an equities exchange pursuant to
appropriate for the issues and risks depositary receipts and index fund generic listing standards for series of
associated with non-U.S. securities. shares based on international or global portfolio depositary receipts and index
In addition, the Commission has indexes under which a comprehensive fund shares based on international or
previously approved the listing and surveillance agreement is not required. global indexes under which a
trading of ETFs based on international The Exchange believes that these comprehensive surveillance agreement
indexes—those based on non-U.S. generic listing standards are intended to is not required. Instead, the proposed
component stocks—as well as global ensure that stocks with substantial rule adds an additional listing
indexes—those based on non-U.S. and market capitalization and trading mechanism for certain qualifying
U.S. component stocks.12 volume account for a substantial portion options on ETFs to be listed on the
In approving ETFs for equities of the weight of an index or portfolio. Exchange.
exchange trading, the Commission The Exchange believes that this
thoroughly considered the structure of proposed listing standard for options on 2. Statutory Basis
the ETFs, their usefulness to investors ETFs is reasonable for international and The Exchange believes that the
and to the markets, and SRO rules that global indexes, and, when applied in proposed rule change is consistent with
govern their trading. The Exchange conjunction with the other listing Section 6(b) of the Act,17 in general, and
believes that allowing the listing of requirements,16 will result in options furthers the objectives of Section 6(b)(5)
options overlying ETFs that are listed overlying ETFs that are sufficiently of the Act,18 in particular, in that it is
pursuant to the generic listing standards broad-based in scope and not readily designed to prevent fraudulent and
on equities exchanges for ETFs based on susceptible to manipulation. The manipulative acts and practices, to
international and global indexes and Exchange also believes that allowing the promote just and equitable principles of
applying Rule 19b–4(e) 13 should fulfill Exchange to list options overlying ETFs trade, to foster cooperation and
the intended objective of that Rule by that are listed on equities exchanges coordination with persons engaged in
allowing options on those ETFs that pursuant to generic standards for series facilitating transactions in securities, to
have satisfied the generic listing of portfolio depositary receipts and remove impediments to and perfect the
standards to commence trading, without index fund shares based on mechanisms of a free and open market
the need for the public comment period international or global indexes under and a national market system and, in
and Commission approval. The which a CSSA is not required, will general, to protect investors and the
proposed rule has the potential to result in options overlying ETFs that are public interest. In particular, the
reduce the time frame for bringing adequately diversified in weighting for proposed rules have the potential to
options on ETFs to market, thereby any single security or small group of reduce the time frame for bringing
reducing the burdens on issuers and securities to significantly reduce options on ETFs to market, thereby
other market participants. The failure of concerns that trading in options reducing the burdens on issuers and
a particular ETF to comply with the overlying ETFs based on international other market participants. The Exchange
generic listing standards under Rule or global indexes could become a also believes enabling the listing and
19b–4(e) 14 would not, however, surrogate for trading in unregistered trading of options on ETFs pursuant to
preclude the Exchange from submitting securities. this new listing standard will benefit
a separate filing pursuant to Section The Exchange believes that ETFs investors by providing them with
19(b)(2),15 requesting Commission based on international and global valuable risk management tools. The
approval to list and trade options on a indexes that have been listed pursuant Exchange notes that its proposal does
particular ETF. to the generic standards are sufficiently not replace the need for a CSSA as
broad-based enough as to make options provided in the current rule. The
Requirements for Listing and Trading
overlying such ETFs not susceptible provisions of the current rule, including
Options Overlying ETFs Based on
instruments for manipulation. The the need for a comprehensive
International and Global Indexes
Exchange believes that the threat of surveillance sharing agreement, remain
Options on ETFs listed pursuant to manipulation is sufficiently mitigated materially unchanged in the proposed
these generic standards for international rule and will continue to apply to
for underlying ETFs that have been
and global indexes would be traded, in options on ETFs that are not listed on
listed on equities exchanges pursuant to
all other respects, under the Exchange’s an equities exchange pursuant to
generic listing standards for series of
existing trading rules and procedures generic listing standards for series of
portfolio depositary receipts and index
that apply to options on ETFs and portfolio depositary receipts and index
fund shares based on international or
would be covered under the Exchange’s fund shares based on international or
global indexes under which a
surveillance program for options on global indexes under which a
comprehensive surveillance agreement
ETFs. comprehensive surveillance agreement
is not required and for the overlying
options, that the Exchange does not see is not required. Instead, the proposed
Securities Exchange Act Release No. 42787 (May rule adds an additional listing
15, 2000), 65 FR 33598 (May 24, 2000). the need for CSSA to be in place before
asabaliauskas on DSK5VPTVN1PROD with NOTICES

12 See, e.g., Securities Exchange Act Release Nos. listing and trading options on such mechanism for certain qualifying
50189 (August 12, 2004), 69 FR 51723 (August 20, ETFs. The Exchange notes that its options on ETFs to be listed on the
2004) (approving the listing and trading of certain proposal does not replace the need for Exchange in a manner that is designed
Vanguard International Equity Index Funds); 44700 to prevent fraudulent and manipulative
(August 14, 2001), 66 FR 43927 (August 21, 2001) a CSSA as provided in the current rule.
(approving the listing and trading of series of the The provisions of the current rule, acts and practices, to promote just and
iShares Trust based on certain S&P global indexes). equitable principles of trade, to foster
13 17 CFR 240.19b–4(e). 16 All of the other listing criteria under the
14 17 CFR 240.19b–4(e). 17 15 U.S.C. 78f(b).
Exchange’s rules will continue to apply to any
15 15 U.S.C. 78s(b)(2). options listed pursuant to the proposed rule change. 18 15 U.S.C. 78f(b) [sic].

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25740 Federal Register / Vol. 80, No. 86 / Tuesday, May 5, 2015 / Notices

cooperation and coordination with as the Commission may designate, it has Electronic Comments
persons engaged in facilitating become effective pursuant to Section
transactions in securities, to remove 19(b)(3)(A) of the Act 20 and Rule 19b– • Use the Commission’s Internet
impediments to and perfect the 4(f)(6) thereunder.21 comment form (http://www.sec.gov/
mechanisms of a free and open market rules/sro.shtml); or
A proposed rule change filed
and a national market system and, in pursuant to Rule 19b–4(f)(6) under the • Send an email to rule-comments@
general, to protect investors and the Act 22 normally does not become sec.gov. Please include File Number SR–
public interest. operative for 30 days after the date of its ISE–2015–16 on the subject line.
B. Self-Regulatory Organization’s filing. However, Rule 19b–4(f)(6)(iii) 23 Paper Comments
Statement on Burden on Competition permits the Commission to designate a
The Exchange does not believe that shorter time if such action is consistent • Send paper comments in triplicate
the proposed rule change will impose with the protection of investors and the to Brent J. Fields, Secretary, Securities
any burden on competition that is not public interest. The Exchange has asked and Exchange Commission, 100 F Street
necessary or appropriate in furtherance the Commission to waive the 30-day NE., Washington, DC 20549–1090.
of the purposes of the Act. To the operative delay so that the proposal may
become operative immediately upon All submissions should refer to File
contrary, the proposed rule change is a
filing. The Exchange stated that waiver Number SR–ISE–2015–16. This file
competitive change that is substantially
similar to recent rule changes filed by of the operative delay will permit the number should be included on the
the MIAX Options Exchange (‘‘MIAX’’) Exchange to list and trade certain ETF subject line if email is used. To help the
and NASDAQ OMX PHLX, LLC options on the same basis as other Commission process and review your
(‘‘Phlx’’).19 Furthermore, the Exchange options markets.24 The Commission comments more efficiently, please use
believes this proposed rule change will believes the waiver of the operative only one method. The Commission will
benefit investors by providing delay is consistent with the protection post all comments on the Commission’s
additional methods to trade options on of investors and the public interest. Internet Web site (http://www.sec.gov/
ETFs, and by providing them with Therefore, the Commission hereby rules/sro.shtml). Copies of the
valuable risk management tools. waives the operative delay and submission, all subsequent
Specifically, the Exchange believes that designates the proposal operative upon amendments, all written statements
market participants on the Exchange filing.25 with respect to the proposed rule
would benefit from the introduction and At any time within 60 days of the change that are filed with the
availability of options on ETFs in a filing of the proposed rule change, the Commission, and all written
manner that is similar to equities Commission summarily may communications relating to the
exchanges and will provide investors temporarily suspend such rule change if proposed rule change between the
with a venue on which to trade options it appears to the Commission that such Commission and any person, other than
on these products. For all the reasons action is necessary or appropriate in the those that may be withheld from the
stated above, the Exchange does not public interest, for the protection of public in accordance with the
believe that the proposed rule change investors, or otherwise in furtherance of provisions of 5 U.S.C. 552, will be
will impose any burden on competition the purposes of the Act. If the available for Web site viewing and
not necessary or appropriate in Commission takes such action, the
furtherance of the purposes of the Act, printing in the Commission’s Public
Commission shall institute proceedings Reference Room, 100 F Street NE.,
and believes the proposed change will to determine whether the proposed rule
enhance competition. Washington, DC 20549 on official
change should be approved or
business days between the hours of
C. Self-Regulatory Organization’s disapproved.
10:00 a.m. and 3:00 p.m. Copies of such
Statement on Comments on the IV. Solicitation of Comments filing also will be available for
Proposed Rule Change Received From inspection and copying at the principal
Members, Participants, or Others Interested persons are invited to office of the Exchange. All comments
The Exchange has not solicited, and submit written data, views, and received will be posted without change;
does not intend to solicit, comments on arguments concerning the foregoing, the Commission does not edit personal
this proposed rule change. The including whether the proposed rule identifying information from
Exchange has not received any change is consistent with the Act.
submissions. You should submit only
unsolicited written comments from Comments may be submitted by any of
information that you wish to make
members or other interested parties. the following methods:
available publicly. All submissions
III. Date of Effectiveness of the 20 15
should refer to File Number SR–ISE–
U.S.C. 78s(b)(3)(A).
Proposed Rule Change and Timing for 21 17 CFR 240.19b–4(f)(6). As required under Rule
2015–16, and should be submitted on or
Commission Action 19b–4(f)(6)(iii), the Exchange provided the before May 26, 2015.
Commission with written notice of its intent to file
Because the proposed rule change the proposed rule change, along with a brief
For the Commission, by the Division of
does not (i) significantly affect the description and the text of the proposed rule Trading and Markets, pursuant to delegated
protection of investors or the public change, at least five business days prior to the date authority.26
interest; (ii) impose any significant of filing of the proposed rule change, or such
Brent J. Fields,
asabaliauskas on DSK5VPTVN1PROD with NOTICES

shorter time as designated by the Commission.
burden on competition; and (iii) become 22 17 CFR 240.19b–4(f)(6). Secretary.
operative for 30 days from the date on 23 17 CFR 240.19b–4(f)(6)(iii).
[FR Doc. 2015–10402 Filed 5–4–15; 8:45 am]
which it was filed, or such shorter time 24 See Securities Exchange Act Release Nos.
BILLING CODE 8011–01–P
74509 and 74553, supra note 19.
19 SeeSecurities Exchange Act Release Nos. 25 For purposes only of waiving the 30-day

74509 (March 13, 2015), 80 FR 14425 (March 19, operative delay, the Commission has also
2015) (SR–MIAX–2015–04); 74553 (March 20, considered the proposed rule’s impact on
2015), 80 FR 16072 (March 26, 2015) (SR–Phlx– efficiency, competition, and capital formation. See
2015–27). 15 U.S.C. 78c(f). 26 17 CFR 200.30–3(a)(12).

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Document Created: 2015-12-16 07:53:49
Document Modified: 2015-12-16 07:53:49
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		80 FR 25738