
[Federal Register: July 14, 2008 (Volume 73, Number 135)]
[Notices]               
[Page 40400-40403]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14jy08-130]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58110; File No. SR-BSE-2008-34]

 
Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
to Permit the Listing and Trading of Options on Foreign Currency ETFs 
and Commodity Pool ETFs

July 7, 2008.
    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 June 27, 2008, the Boston Stock Exchange, Inc. (``BSE'' or 
``Exchange'') 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. 
The Exchange filed the proposed rule change as a ``non-controversial'' 
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 proposes to amend certain rules of the Boston Options 
Exchange (``BOX'') to permit the listing and trading of options on: (1) 
Shares of exchange-traded funds (``ETFs'') that hold specified non-U.S. 
currency options, futures, or options on futures on such currency, or 
any other derivatives based on such currency (referred collectively 
herein as ``Foreign Currency ETFs''); and (2) trust-issued receipts 
(``TIRs''), partnership units, and securities issued by other entities 
that hold or invest in commodity futures products (referred 
collectively herein as ``Commodity Pool ETFs'').
    The text of the proposed rule change is available at the principal 
office of the Exchange, the Commission's Public Reference Room, and 
http://www.bostonstock.com.

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. BSE 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 the proposed rule change is to enable the listing 
and trading on BOX of options on Foreign Currency ETFs and Commodity 
Pool ETFs. Currently, section 3(i) of Chapter IV of the BOX Rules 
provides that securities deemed appropriate for options trading shall 
include shares or other securities (``Exchange-Traded Fund Shares'') 
that are traded on a national securities exchange and represent 
interests in registered investment companies, unit investment trusts, 
or similar entities that hold portfolios of securities and/or financial 
instruments, including, but not limited to, stock index futures 
contracts, options on futures, options on securities and indexes, 
equity caps, collars and floors, swap agreements, forward contracts, 
repurchase agreements, and reverse repurchase agreements (``Financial 
Instruments''), and money market instruments, including but not limited 
to U.S. government securities and repurchase agreements (the ``Money 
Market Instruments''), comprising or otherwise based on or representing 
investments in broad-based indexes or portfolios of securities and/or 
Financial Instruments and Money Market Instruments (or that hold 
securities in one or more other registered investment companies that 
themselves hold such portfolios of securities and/or Financial 
Instruments and Money Market Instruments).
    The Exchange proposes to amend section 3(i) of Chapter IV of the 
BOX Rules to expand the types of options listed and traded on BOX to 
include options on:
     Trusts that hold a specified non-U.S. currency or 
currencies deposited which when aggregated in some specified minimum 
number may be surrendered to the trust by the beneficial owner to 
receive the specified non-U.S. currency or currencies and pays the 
beneficial owner interest and other distributions on the deposited non-
U.S. currency or currencies, if any, declared and paid by the trust; 
and
     Shares issued by an entity holding commodity pool 
interests principally engaged, directly or indirectly, in holding and/
or managing portfolios or baskets of securities, commodity futures 
contracts, options on commodity futures contracts, swaps, forward 
contracts, and/or options on physical commodities and/or non-U.S. 
currency.


[[Page 40401]]


In particular, the proposed amendment to section 3(i) of Chapter IV 
would permit the Exchange to list options on the CurrencyShares Euro 
Trust (``Trust'') \5\ which issues Euro CurrencyShares (``Shares'') \6\ 
and other similarly structured currency-based products.
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    \5\ Rydex Specialized Products LLC, d/b/a ``Rydex Investments,'' 
is the sponsor of the Trust (``Sponsor'') and may be deemed the 
``issuer'' of the Shares pursuant to Section 2(a)(4) of the 
Securities Act of 1933. The Bank of New York is the trustee of the 
Trust (``Trustee''); JPMorgan Chase Bank, N.A., London Branch, is 
the depository for the Trust (``Depository''); and Rydex 
Distributors, Inc. is the distributor for the Trust 
(``Distributor''). The Trust intends to issue additional Shares on a 
continuous basis through the Trustee.
    \6\ The Shares are listed and trade on NYSE Arca under the 
symbol ``FXE.'' The Shares may also trade in other markets.
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    The investment objective of Foreign Currency ETFs is for the shares 
of a particular fund to reflect the price of the particular foreign 
currency held therein. They are intended to provide institutional and 
retail investors with a simple, cost-effective means of gaining 
investment benefits similar to those of holding the particular foreign 
currency whose value is reflected.
    Additionally, the proposed amendment to section 3(i) of Chapter IV 
would permit the Exchange to list options on Commodity Pool ETFs. 
Commodity Pool ETFs may hold or trade in one or more types of 
investments that may include any combination of securities, commodity 
futures contracts, options on commodity futures contracts, swaps, and 
forward contracts. Proposed section 3(i) of Chapter IV of the BOX Rules 
sets forth that for BOX to list an option on a Commodity Pool ETF, the 
Commodity Pool ETF must be traded on a national securities exchange and 
defined as an ``NMS stock'' under Rule 600 of Regulation NMS.
    The Exchange believes that permitting options on Foreign Currency 
ETFs and Commodity Pool ETFs to be traded on BOX is consistent with the 
Commission's approvals of rule changes filed by the International 
Securities Exchange (``ISE'') and NYSE Arca to list and trade shares of 
the Trust and similarly structured currency-based products.\7\ This 
rule change to BOX's listing criteria for ETFs is intended to provide 
appropriate listing standards and is necessary to enable the Exchange 
to list and trade options shares of Foreign Currency ETFs and Commodity 
Pool ETFs that are now listed or may be listed in the future.\8\ The 
Exchange believes that it is reasonable to expect other types of 
Foreign Currency ETFs and Commodity Pool ETFs to be introduced for 
trading in the near future. The proposed amendment to the Exchange's 
listing criteria for options on Foreign Currency ETFs and Commodity 
Pool ETFs are necessary to ensure that the Exchange will be able to 
list options on existing Foreign Currency ETFs and Commodity Pool ETFs 
as well as any other similar ETFs that may be listed and traded in the 
future.
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    \7\ See Securities Exchange Act Release Nos. 54087 (June 30, 
2006), 71 FR 38918 (July 10, 2006) (SR-ISE-2005-60) (approving the 
listing and trading of options on ETFs that hold specified non-U.S. 
currency); 54730 (November 9, 2006), 71 FR 66999 (November 17, 2006) 
(SR-NYSEArca-2006-04) (approving the listing and trading of options 
on ETFs that hold specified non-U.S. currency); 55635 (April 16, 
2007), 72 FR 19999 (April 20, 2007) (SR-ISE-2007-16) (approving the 
listing and trading of options on Commodity Pool ETFs); and 56073 
(July 13, 2007) 72 FR 39654 (July 19, 2007) (SR-NYSEArca-2007-53) 
(approving the listing and trading of options on Commodity Pool 
ETFs).
    \8\ See, e.g., Securities Exchange Act Release Nos. 53105 
(January 11, 2006), 71 FR 3129 (SR-Amex-2005-59) (January 19, 2006) 
(approving the listing and trading of the DB Commodity Index 
Tracking Fund); 53582 (March 31, 2006), 71 FR 17510 (SR-Amex-2005-
127) (April 6, 2006) (approving the listing and trading of Units of 
the United States Oil Fund, L.P.); and 54450 (September 14, 2006), 
71 FR 51245 (September 21, 2006) (SR-Amex-2006-44) (approving the 
listing and trading of the PowerShares DB G10 Currency Harvest 
Fund).
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    ETFs on which BOX-listed options are based have to satisfy the 
listing standards in section 3(i) of Chapter IV of the BOX Rules. 
Specifically, the Exchange-Traded Fund Shares must be traded on a 
national securities exchange or through the facilities of a national 
securities association and must be an ``NMS stock'' as defined under 
Rule 600 of Regulation NMS. The ETF must also either: (1) Meet the 
criteria and guidelines under sections 3(a) and 3(b) of Chapter IV 
(Criteria for Underlying Securities); or (2) be available for creation 
or redemption each business day from and through the issuer in cash or 
in-kind at a price related to net asset value. In addition, the trust, 
commodity pool, or other similar entity shall provide that shares may 
be created even if some or all of the investment assets and/or cash 
required to be deposited have not been received by the issuer, subject 
to the condition that the person obligated to deposit the investment 
assets has undertaken to deliver the shares as soon as possible and 
such undertaking has been secured by the delivery and maintenance of 
collateral consisting of cash or cash equivalents satisfactory to the 
issuer.
    Under the applicable continued listing criteria in section 4(h) of 
Chapter IV of the BOX Rules, ETF options approved for trading would not 
be deemed to meet the requirements for continued approval, and Boston 
Options Exchange Regulation (``BOXR'') would not open for trading any 
additional series of options contracts of the class covering such ETF 
in any of the following circumstances:
     The ETF is halted from trading on its primary market;
     The ETF is delisted in accordance with the terms of 
Section 4(b)(vi) of Chapter IV of the BOX Rules;
     Following the initial 12-month period beginning upon the 
commencement of trading of the ETF, there are fewer than 50 record and/
or beneficial holders of such ETF for 30 or more consecutive trading 
days;
     The value of the index or portfolio of securities or non-
U.S. currency, 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 the ETF is based is 
no longer calculated or available; or
     Such other event occurs or condition exists that in the 
opinion of BOXR makes further dealing of the options on BOX 
inadvisable.
    As part of this revision, the Exchange proposes to add paragraphs 
(i)(B)(iv) and (i)(B)(v) to section 3 of Chapter IV of the BOX Rules to 
require that, for Foreign Currency ETFs and Commodity Pool ETFs, a 
comprehensive surveillance sharing agreement be in place with the 
marketplace(s) with last-sale reporting that represent the highest 
volume in the underlying derivatives. Such derivatives consist of 
options or futures on the specified non-U.S. currency, commodity 
futures contracts, and/or options on commodity futures contracts on the 
specified commodities or non-U.S. currency, which are utilized by the 
national securities exchange where the underlying Foreign Currency ETFs 
and Commodity Pool ETFs are listed and traded.
    The Exchange represents that it has an adequate surveillance 
program in place for options based on Foreign Currency ETFs and 
Commodity Pool ETFs, and intends to apply those same program procedures 
that it applies to ETF options currently traded on BOX. In addition, 
BOX may obtain trading information via the Intermarket Surveillance 
Group (``ISG'') from other exchanges who are members or affiliates of 
the ISG.\9\ The Exchange represents that prior to listing and trading 
options on Foreign Currency ETFs and Commodity Pool ETFs, it will have 
the ability to obtain specific trading

[[Page 40402]]

information either via ISG or from the exchange or exchanges where the 
particular underlying non-U.S. currency futures and/or options and 
commodity futures and/or options on commodity futures are traded.\10\
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    \9\ For a list of current members and affiliate members of the 
ISG, see http://www.isgportal.com.
    \10\ E-mail from Maura Looney, Associate Vice President 
Regulation and Enforcement, Exchange, to Michou H.M. Nguyen, Special 
Counsel, Division of Trading and Markets, Commission, on July 7, 
2008 (correcting drafting error in purpose section of Form 19b-4).
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    The Exchange is also proposing to amend section 4(a) of Chapter III 
of the BOX Rules to require each Options Participant to establish, 
maintain, and enforce written policies and procedures to prevent the 
misuse of material nonpublic information it might have or receive 
regarding applicable non-U.S. currency; non-U.S. currency options, 
futures, or options on futures on such currency; or any other 
derivatives on such currency, option, or derivative, or regarding the 
applicable related commodity, commodity futures, options on commodity 
futures, or any other related commodity derivatives.
    The Exchange is further proposing to amend section 7 of Chapter VI 
and Section 1 of Chapter VIII of the BOX Rules to ensure that market 
makers handling options on ETFs provide BOXR with all necessary 
information relating to their trading in the applicable non-U.S. 
currency; non-U.S. currency options, futures, or options on futures on 
such currency; any other derivatives based on such currency; physical 
commodities; physical commodity options; and commodity futures 
contracts, options on commodity futures contracts, or any other 
derivatives based on such commodity, and that all such trading occurs 
in an account which has been reported to BOXR.
    Finally, the Exchange represents that the addition of options on 
Foreign Currency ETFs and Commodity Pool ETFs would not have any effect 
on the rules pertaining to position and exercise limits \11\ or 
margin.\12\
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    \11\ See Section 7 and Section 9 of Chapter III of the BOX 
Rules.
    \12\ See Section 3 of Chapter XIII of the BOX Rules.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\13\ in general, and furthers the 
objectives of section 6(b)(5) of the Act,\14\ in particular, in that it 
is designed to promote just and equitable principles of trade, to 
prevent fraudulent and manipulative acts, and to remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that amending the BOX rules to accommodate 
the listing and trading of options on Foreign Currency ETFs and 
Commodity Pool ETFs would provide investors with greater risk 
management tools and, in general, would allow for the protection of 
investors and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
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 neither solicited nor received written comments on 
the proposed rule change.

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 after the date of filing (or such shorter time as the Commission 
may designate if consistent with the protection of investors and the 
public interest), the proposed rule change has become effective 
pursuant to section 19(b)(3)(A) of the Act \15\ and subparagraph (f)(6) 
of Rule 19b-4 thereunder.\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6). The Exchange has satisfied the 
five-day pre-filing requirement of Rule 19b-4(f)(6)(iii).
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    The Exchange has requested that the Commission waive the 30-day 
operative delay and designate the proposed rule change as operative 
upon filing. The Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest. The proposed rule change is substantially similar to those of 
other options exchanges that have been previously approved by the 
Commission \17\ and does not appear to present any novel regulatory 
issues. Therefore, the Commission designates the proposal operative 
upon filing.\18\
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    \17\ See Securities Exchange Act Release Nos. 54087 (June 30, 
2006), 71 FR 38918 (July 10, 2006) (SR-ISE-2005-60) and 54983 
(December 20, 2006), 71 FR 78476 (December 29, 2006)( SR-Amex-2006-
87) (approving the listing and trading of options on Foreign 
Currency ETFs); Securities Exchange Act Release Nos. 55547 (March 
28, 2007) 72 FR 16388 (April 4, 2007) (SR-AMEX-2006-110) and 55635 
(April 16, 2007) 72 FR 19999 (April 20, 2007) (SR-ISE-2007-16) 
(approving the listing and trading of options on Commodity Pool 
ETFs).
    \18\ For purposes only of waiving the operative delay of this 
proposal, the Commission has 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 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-BSE-2008-34 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BSE-2008-34. 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 3p.m. Copies of such filing also will be available for 
inspection and copying at

[[Page 40403]]

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-BSE-2008-34 and should be submitted on 
or before August 4, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-15886 Filed 7-11-08; 8:45 am]

BILLING CODE 8010-01-P
