

[Federal Register: September 24, 2007 (Volume 72, Number 184)]
[Notices]               
[Page 54304-54306]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24se07-77]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56448; File No. SR-CBOE-2007-111]

 
Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Retire Two Existing Pilot Programs that Permit 
the Exchange To list Options on the Vanguard Emerging Markets Exchange 
Traded Fund and the iShares MSCI Emerging Markets Index Fund

September 17, 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 September 11, 2007, the Chicago Board Options Exchange, Incorporated 
(``CBOE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been substantially 
prepared by the Exchange. The Exchange has designated the proposed rule 
change as constituting a stated policy, practice or interpretation with 
respect to the meaning, administration or enforcement of an existing 
rule under Section 19(b)(3)(A)(i) of the Act,\3\ and Rule 19b-4(f)(1) 
thereunder,\4\ which renders the proposal effective upon filing of this 
proposal 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\1 15 U.S.C. 78s(b)(1).
    \2\2 17 CFR 240.19b-4.
    \3\3 15 U.S.C. 78s(b)(3)(A)(i).
    \4\4 17 CFR 240.19b-4(f)(1).

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[[Page 54305]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange submits this rule filing to retire two existing pilot 
programs that permit the Exchange to list options on the Vanguard 
Emerging Markets Exchange Traded Fund (``VWO Fund'') and on the iShares 
MSCI Emerging Markets Index Fund (``EEM Fund'').\5\ The Exchange is 
proposing to retire the two pilot programs because both the VWO Fund 
and the EEM Fund now meet all of the Exchange's generic initial and 
maintenance listings standards, which permit the Exchange to list 
options on the VWO Fund and the EEM Fund without having to file for 
Commission approval. The text of the proposed rule change is available 
on the Exchange's Web site (http://www.cboe.org/legal), at the 

Exchange's Office of the Secretary and at the Commission.
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    \5\ The VWO Fund pilot program commenced on March 19, 2007 and 
is scheduled to expire on September 19, 2007. See Securities 
Exchange Act Release No. 55491 (March 19, 2006), 72 FR 14145 (March 
26, 2007) (order granting accelerated approval of SR-CBOE-2006-95). 
The EEM Fund pilot program commenced on April 10, 2006 and has been 
renewed four times. The EEM Fund pilot program is scheduled to 
expire on December 7, 2007. See Securities Exchange Act Release No. 
53621 (April 10, 2006), 71 FR 19568 (April 14, 2006) (approval of 
SR-CBOE-2006-32, which established EEM Fund pilot program to expire 
on June 9, 2006); Securities Exchange Act Release No. 53930 (June 1, 
2006), 71 FR 33322 (June 8, 2006) (granting immediate effectiveness 
to SR-CBOE-2006-56, which renewed EEM Fund pilot through September 
7, 2006); Securities Exchange Act Release No. 54347 (August 22, 
2006), 71 FR 51242 (August 29, 2006) (granting immediate 
effectiveness to SR-CBOE-2006-72, which renewed EEM Fund pilot 
program through December 7, 2006); Securities Exchange Act Release 
No. 54876 (December 5, 2006), 71 FR 74968 (December 13, 2006) 
(granting immediate effectiveness to SR-CBOE-2006-103, which renewed 
EEM Fund pilot program through June 7, 2007); Securities Exchange 
Act Release No. 55758 (May 14, 2007), 72 FR 28090 (May 18, 2007) 
(granting immediate effectiveness to SR-CBOE-2007-43, which renewed 
EEM Fund pilot program through December 7, 2007).
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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 IV below. CBOE 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 purpose of this rule filing is to retire two existing pilot 
programs that permit the Exchange to list options on the VWO Fund and 
the EEM Fund.\6\ The Exchange is proposing to retire the two pilot 
programs because both the VWO Fund and the EEM Fund now meet all of the 
Exchange's generic initial and maintenance standards. Specifically, the 
Exchange has in place initial and maintenance listing standards set 
forth in Rules 5.3.06 and 5.4.08, respectively (``Listing Standards''), 
that are designed to allow the Exchange to list funds structured as 
open-end investment companies, such as the VWO Fund and the EEM Fund, 
without having to file for Commission approval to list for trading 
options on these types of funds.\7\
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    \6\ The VWO Fund is an open-end investment company that is 
designed to hold a portfolio of securities that tracks the Morgan 
Stanley Capital International, Inc. (``MSCI'') Emerging Markets 
Select Index, which consists of stocks that can be purchased free of 
restrictions in 18 emerging markets in Europe, Asia, Africa and 
Latin America. The EEM Fund is an open-end investment company that 
is designed to hold a portfolio of securities that tracks the MSCI 
Emerging Markets Free Index, which is designed to measure equity 
market performance in the global emerging markets.
    \7\ Rules 5.3.06 and 5.4.08 set forth the initial listing and 
maintenance standards for registered investment companies (or series 
thereof) organized as open-end management investment companies, unit 
investment trust or other similar entities traded on a national 
securities exchange or through the facilities of a national 
securities exchange. See Exchange Act Release, No. 40166 (July 2, 
1998), 63 FR 37430 (July 10, 1998) (approval order for SR-CBOE-97-
045, predating the Commission's adoption of Rule 19b-4(e) of the 
Act; see also Exchange Act Release No. 34-40761 (December 8, 1998), 
63 FR 70952 (December 22, 1998).
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    When the Exchange first sought to list options on the VWO Fund and 
EEM Fund, the Exchange had determined that the VWO Fund and the EEM 
Fund both met substantially all of the Exchange's Listing Standards 
requirements, but did not meet the Listing Standards requirement that 
no more than 50% of the weight of the securities in the VWO Fund and 
the EEM Fund be comprised of securities that are not subject to a 
comprehensive surveillance sharing agreement (``CSSA'').\8\ As to the 
VWO Fund, the Exchange had in place CSSAs with foreign exchanges that 
covered 48.10% of the securities in the VWO Fund. As to the EEM Fund, 
the Exchange had in place CSSAs with foreign exchanges that covered 
49.76% of the securities in the EEM Fund. In order to meet the 50% 
threshold, the Exchange requested the Commission's approval to rely 
upon a memorandum of understanding that the Commission had entered into 
with the Mexican Bolsa (``MOU'') because the securities traded on that 
exchange represented 6.6% of the weight of the securities in the VWO 
Fund and 7.54% of the weight of the securities in the EEM Fund.\9\
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    \8\ See Rule 5.3.06(A).
    \9\ See supra note 5. The Commission permitted the Exchange to 
rely on the MOU, and the Exchange agreed to use its best efforts to 
obtain a CSSA with the Bolsa during the respective pilot periods, 
which to date has not been obtained.
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    Since the Commission approved the VWO Fund pilot program in March 
2007 and since the last renewal of the EEM Fund pilot program in May 
2007, the VWO Fund and the EEM Fund have both become compliant with 
Rule 5.3.06(A) and more than 50% of the weight of the securities in the 
VWO Fund and the EEM Fund are now subject to a CSSA. Specifically, the 
Exchange represents that the Korean Exchange (``KRX'') recently became 
a member of the Intermarket Surveillance Group; therefore, securities 
and other products trading on its markets are now subject to a 
CSSA.\10\ As a result, the percentage of the weight of the VWO Fund and 
the EEM Fund represented by South Korean securities now renders both 
the VWO Fund and the EEM Fund compliant with the Exchange's Listing 
Standards requirements.
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    \10\ The KRX was created on January 27, 2005 through the 
consolidation of three domestic Korean exchanges: Korea Stock 
Exchange (KSE), KOSDAQ Market and Korea Futures Market (KOFEX). See 
http://eng.krx.co.kr/index.html.

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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations under the Act applicable to a 
national securities exchange and, in particular, the requirements of 
Section 6(b) of the Act.\11\ Specifically, the Exchange believes the 
proposed rule change is consistent with the Section 6(b)(5) Act \12\ 
requirements that the rules of an exchange be designed to promote just 
and equitable principles of trade, to prevent fraudulent and 
manipulative acts and, in general, to protect investors and the public 
interest.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(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.

[[Page 54306]]

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. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the proposed rule change constitutes a stated policy, 
practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\13\ and subparagraph (f)(1) of Rule 19b-4 thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(1).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate 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 the 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 rule-comments@sec.gov. Please include 

File Number SR-CBOE-2007-111 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-2007-111. 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 inspection and 
copying 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 such filing also will be available for 
inspection and copying at the principal office of CBOE. 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-2007-111 and should be 
submitted on or before October 15, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
Florence E. Harmon,
Deputy Secretary.
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    \15\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E7-18728 Filed 9-21-07; 8:45 am]

BILLING CODE 8010-01-P
