
[Federal Register Volume 79, Number 128 (Thursday, July 3, 2014)]
[Notices]
[Pages 38099-38105]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-15608]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72492; File No. SR-MIAX-2014-30]


Self-Regulatory Organizations: Notice of Filing of a Proposed 
Rule Change by Miami International Securities Exchange LLC To List and 
Trade Options on Shares of the iShare ETFs

June 27, 2014.
    Pursuant to the provisions of 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 17, 2014, Miami International Securities 
Exchange LLC (``MIAX'' or ``Exchange'') filed with the Securities and 
Exchange Commission (``Commission'') a proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by the Exchange. 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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[[Page 38100]]

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

    The Exchange is filing a proposal to list and trade on the Exchange 
options on shares of the iShares MSCI Brazil Capped ETF (``EWZ''), 
iShares MSCI Chile Capped ETF (``ECH''), iShares MSCI Peru Capped ETF 
(``EPU''), and iShares MSCI Spain Capped ETF (``EWP'').
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.miaxoptions.com/filter/wotitle/rule_filing, at 
MIAX'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 IV 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 proposes to list for trading on the Exchange options 
on the shares of the iShares MSCI Brazil Capped ETF, iShares MSCI Chile 
Capped ETF, iShares MSCI Peru Capped ETF, and iShares MSCI Spain Capped 
ETF (collectively the ``iShare ETFs''). MIAX Rule 402 establishes the 
Exchange's initial listing standards for equity options (the ``Listing 
Standards''). The Listing Standards permit the Exchange to list options 
on the shares of open-end investment companies, such as the iShare 
ETFs, without having to file for approval with the Commission.\3\ The 
Exchange submits that each of the iShare ETFs substantially meet all of 
the initial listing requirements. In particular, all of the 
requirements set forth in Rule 402(i) for each of the iShare ETFs are 
met except for the requirement concerning the existence of a 
comprehensive surveillance sharing agreement (``CSSA''). However, as 
explained below, the Exchange submits that sufficient mechanisms exist 
in order to provide adequate surveillance and regulatory information 
with respect to the portfolio securities of each of the iShare ETFs.
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    \3\ MIAX Rule 402(i) provides the Listing Standards for shares 
or other securities (``Exchange-Traded Fund Shares'') that are 
traded on a national securities exchange and are defined as an ``NMS 
stock'' under Rule 600 of Regulation NMS.
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iShares MSCI Brazil Capped ETF (``EWZ'')
    EWZ is registered pursuant to the Investment Company Act of 1940 as 
a management investment company designed to hold a portfolio of 
securities which track the MSCI Brazil 25/50 Index (``Brazil 
Index'').\4\ The Brazil Index consists of stocks traded primarily on 
BM&FBOVESPA. EWZ employs a ``representative sampling'' methodology to 
track the Brazil Index by investing in a representative sample of 
Brazil Index securities having a similar investment profile as the 
Brazil Index.\5\ BlackRock Fund Advisors (``BFA'' or the ``Adviser'') 
expects EWZ to closely track the Brazil Index so that, over time, a 
tracking error of 5%, or less, is exhibited. Securities selected by EWZ 
have aggregate investment characteristics (based on market 
capitalization and industry weightings), fundamental characteristics 
(such as return variability, earnings valuation and yield) and 
liquidity measures similar to those of the Brazil Index. EWZ will not 
concentrate its investments (i.e., hold 25% or more of its total assets 
in the stocks of a particular industry or group of industries), except, 
to the extent practicable, to reflect the concentration in the Brazil 
Index. EWZ will invest at least eighty percent (80%) of its assets in 
the securities comprising the Brazil Index and/or related American 
Depositary Receipts (``ADRs''). EWZ may also invest its other assets in 
futures contracts, options on futures contracts, other types of options 
and swaps related to the Brazil Index, as well as cash and cash 
equivalents. The Exchange believes that these requirements and policies 
prevent the EWZ from being excessively weighted in any single security 
or small group of securities and significantly reduce concerns that 
trading in EWZ could become a surrogate for trading in unregistered 
securities.
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    \4\ Morgan Stanley Capital International Inc. (``MSCI'') created 
and maintains the Brazil 25/50 Index.
    \5\ As of March 20, 2014, EWZ was comprised of 78 securities. 
ITAU UNIBANCO HOLDING SA PREF had the greatest individual weight at 
8.51%. The aggregate percentage weighting of the top 5 and 10 
securities in the Fund were 33.30% and 49.78%, respectively.
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    Shares of the EWZ (``EWZ Shares'') are issued and redeemed, on a 
continuous basis, at net asset value (``NAV'') in aggregation size of 
50,000 shares, or multiples thereof (a ``Creation Unit''). Following 
issuance, EWZ Shares are traded on an exchange like other equity 
securities. EWZ Shares trade in the secondary markets in amounts less 
than a Creation Unit and the price per EWZ Share may differ from its 
NAV which is calculated once daily as of the regularly scheduled close 
of business of NYSE Arca.\6\
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    \6\ The regularly scheduled close of trading on NYSE Arca is 
normally 4:00 p.m. Eastern Time (``ET'') and 4:15 p.m. for ETFs.
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    State Street Bank and Trust Company, the administrator, custodian, 
and transfer agent for EWZ. Detailed information on EWZ can be found at 
www.ishares.com.
    The Exchange has reviewed EWZ and determined that the EWZ Shares 
satisfy the initial listing standards, except for the requirement set 
forth in MIAX Rule 402(i)(5)(ii)(A) which requires EWZ to meet the 
following condition:
     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.
    The Exchange currently does not have in place a surveillance 
agreement with BOVESPA.
    The Exchange submits that the Commission, in the past, has been 
willing to allow a national securities exchange to rely on a memorandum 
of understanding entered into between regulators in the event that the 
exchanges themselves cannot enter into a CSSA. The Exchange notes that 
BM&FBOVESPA is under the regulatory oversight of the Comissao de 
Valores Mobiliarios (``CMV''), which has the responsibility for both 
Brazilian exchanges and over-the-counter markets. The Exchange further 
notes that the Commission executed a memorandum of understanding with 
the CMV dated as of July 24, 2012 (``Brazil-US MOU''), which provides a 
framework for mutual assistance in investigatory and regulatory issues. 
Based on the relationship between the SEC and CMV and the terms of the 
Brazil-US MOU, the Exchange submits that both the Commission and the 
CMV could acquire information from and provide information to the other 
similar to that which would be required in a

[[Page 38101]]

CSSA between exchanges. Moreover, the Commission could make a request 
for information under the Brazil-US MOU on behalf of an SRO that needed 
the information for regulatory purposes. Thus, should MIAX need 
information on Brazilian trading in the Brazil Index component 
securities to investigate incidents involving trading of EWZ options, 
the SEC could request such information from the CMV under the Brazil-US 
MOU. While this arrangement certainly would be enhanced by the 
existence of direct exchange to exchange surveillance sharing 
agreements, it is nonetheless consistent with other instances where the 
Commission has explored alternatives when the relevant foreign exchange 
was unwilling or unable to enter into a CSSA.\7\
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    \7\ See, e.g., Securities Exchange Act Release No. 36415 
(October 25, 1995), 60 FR 55620 (November 1, 1995) (SR-CBOE-95-45) 
(Order Approving Proposed Rule Change Relating to the Listing and 
Trading of Options on the CBOE Mexico 30 Index).
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    The practice of relying on surveillance agreements or MOUs between 
regulators when a foreign exchange was unable, or unwilling, to provide 
an information sharing agreement was affirmed by the Commission in the 
Commission's New Product Release (``New Product Release'').\8\ The 
Commission noted in the New Product Release that if securing a CSSA is 
not possible, an exchange should contact the Commission prior to 
listing a new derivative securities product. The Commission also noted 
that the Commission may determine instead that it is appropriate to 
rely on a memorandum of understanding between the Commission and the 
foreign regulator.
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    \8\ See Securities Exchange Act Release No. 40761 (December 8, 
1998), 63 FR 70952, 70959 at fn. 101 (December 22, 1998).
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    The Exchange has recently contacted BM&FBOVESPA with a request to 
enter into a CSSA. Until the Exchange is able to secure a CSSA with 
BM&FBOVESPA, the Exchange requests that the Commission allow the 
listing and trading of options on EWZ without a CSSA, upon reliance of 
the Brazil-US MOU entered into between the Commission and the CMV. The 
Exchange believes this request is reasonable and notes that the 
Commission has provided similar relief in the past. For example, the 
Commission approved the Philadelphia Stock Exchange, Inc. (``PHLX'') to 
rely on an MOU between the Commission and the CMV instead of a direct 
CSSA with BM&FBOVESPA in order to list and trade options on Telebras 
Portoflio Certicate American Depository Receipts.\9\ Additionally, the 
Commission approved, on a pilot basis, proposals of competing exchanges 
to list and trade options on the iShares MSCI Emerging Markets Fund 
\10\ and the iShares MSCI Mexico Indext Fund [sic].\11\
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    \9\ See Securities Exchange Act Release No. 40298 (August 3, 
1998), 63 FR 43435 (August 13, 1998) (SR-Phlx-1998-33).
    \10\ See Securities Exchange Act Release Nos. 53824 (May 17, 
2006), 71 FR 30003 (May 24, 2006) (SR-Amex-2006-43); 54081 (June 30, 
2006), 71 FR 38911 (July 10, 2006) (SR-Amex-2006-60); 54553 
(September 29, 2006), 71 FR 59561 (October 10, 2006) (SR-Amex-2006-
91); 55040 (January 3, 2007), 72 FR 1348 (January 11, 2007) (SR-
Amex-2007-01); and 55955 (June 25, 2007), 72 FR 36079 (July 2, 2007) 
(SR-Amex-2007-57); 56324 (August 27, 2007), 72 FR 50426 (August 31, 
2007) (SR-ISE-2007-72).
    \11\ See Securities Exchange Act Release Nos. 72213 (May 21, 
2014), [sic] FR 30699 (May 28, 2014) (SR-MIAX-2014-19); 56778 
(November 9, 2007), 72 FR 65113 (November 19, 2007) (SR-Amex-2007-
100); 57013 (December 20, 2007), 72 FR 73923 (December 28, 2007) 
(SR-CBOE-2007-140); 57014 (December 20, 2007), 72 FR 73934 (December 
28, 2007) (SR-ISE-2007-111).
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    The Commission's approval of this request to list and trade options 
on the EWZ would otherwise render EWZ compliant with all of the 
applicable Listing Standards.
    The Exchange shall continue to use its best efforts to obtain a 
CSSA with BM&FBOVESPA, which shall reflect the following: (1) Express 
language addressing market trading activity, clearing activity, and 
customer identity; (2) BM&FBOVESPA's reasonable ability to obtain 
access to and produce requested information; and (3) based on the CSSA 
and other information provided by the BM&FBOVESPA, the absence of 
existing rules, law or practices that would impede the Exchange from 
obtaining foreign information relating to market activity, clearing 
activity, or customer identity, or in the event such rules, laws, or 
practices exist, they would not materially impede the production of 
customer or other information.
iShares MSCI Chile Capped ETF (``ECH'')
    ECH is registered pursuant to the Investment Company Act of 1940 as 
a management investment company designed to hold a portfolio of 
securities which track the MSCI Chile Investable Market Index (IMI) 25/
50 (``Chile Index'').\12\ The Chile Index consists of stocks traded 
primarily on the Santiago Stock Exchange (``SSE''). ECH employs a 
``representative sampling'' methodology to track the Chile Index by 
investing in a representative sample of Chile Index securities having a 
similar investment profile as the Chile Index.\13\ BFA, ECH's Adviser 
expects ECH to closely track the Chile Index so that, over time, a 
tracking error of 5%, or less, is exhibited. Securities selected by ECH 
have aggregate investment characteristics (based on market 
capitalization and industry weightings), fundamental characteristics 
(such as return variability, earnings valuation and yield) and 
liquidity measures similar to those of the Chile Index. ECH will not 
concentrate its investments (i.e., hold 25% or more of its total assets 
in the stocks of a particular industry or group of industries), except, 
to the extent practicable, to reflect the concentration in the Chile 
Index. ECH will invest at least ninety percent (90%) of its assets in 
the securities comprising the Chile Index and/or related ADRs. ECH may 
also invest its other assets in futures contracts, options on futures 
contracts, other types of options and swaps related to the Chile Index, 
as well as cash and cash equivalents. The Exchange believes that these 
requirements and policies prevent the ECH from being excessively 
weighted in any single security or small group of securities and 
significantly reduce concerns that trading in ECH could become a 
surrogate for trading in unregistered securities.
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    \12\ Morgan Stanley Capital International Inc. (``MSCI'') 
created and maintains the MSCI Chile Investable Market Index (IMI) 
25/50.
    \13\ As of March 21, 2014, ECH was comprised of 41 securities. 
S.A.C.I. FALABELLA had the greatest individual weight at 9.25%. The 
aggregate percentage weighting of the top 5 and 10 securities in the 
Fund were 39.92% and 62.57%, respectively.
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    Shares of the ECH (``ECH Shares'') are issued and redeemed, on a 
continuous basis, at NAV in aggregation size of 50,000 shares, or 
multiples thereof (a ``Creation Unit''). Following issuance, ECH Shares 
are traded on an exchange like other equity securities. ECH Shares 
trade in the secondary markets in amounts less than a Creation Unit and 
the price per ECH Share may differ from its NAV which is calculated 
once daily as of the regularly scheduled close of business of NYSE 
Arca.\14\
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    \14\ See supra note 6.
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    State Street Bank and Trust Company, the administrator, custodian, 
and transfer agent for ECH. Detailed information on ECH can be found at 
www.ishares.com.
    The Exchange has reviewed ECH and determined that the ECH Shares 
satisfy the initial listing standards, except for the requirement set 
forth in MIAX Rule 402(i)(5)(ii)(A) which requires ECH to meet the 
following condition:
     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

[[Page 38102]]

comprehensive surveillance agreements do not in the aggregate represent 
more than 50% of the weight of the index or portfolio. The Exchange 
currently does not have in place a surveillance agreement with SSE.
    The Exchange submits that the Commission, in the past, has been 
willing to allow a national securities exchange to rely on a memorandum 
of understanding entered into between regulators in the event that the 
exchanges themselves cannot enter into a CSSA. The Exchange notes that 
SSE is under the regulatory oversight of the Superintendencia de 
Valores y Seguros de Chile (``SVS''), which has the responsibility for 
Chilean securities markets. The Exchange further notes that the 
Commission executed a memorandum of understanding with the SVS dated as 
of June 3, 1993 (``Chile-US MOU''), which provides a framework for 
mutual assistance in investigatory and regulatory issues. Based on the 
relationship between the SEC and SVS and the terms of the Chile-US MOU, 
the Exchange submits that both the Commission and the SVS could acquire 
information from and provide information to the other similar to that 
which would be required in a CSSA between exchanges. Moreover, the 
Commission could make a request for information under the Chile-US MOU 
on behalf of an SRO that needed the information for regulatory 
purposes. Thus, should MIAX need information on Chilean trading in the 
Chile Index component securities to investigate incidents involving 
trading of ECH options, the SEC could request such information from the 
SVS under the Chile-US MOU. While this arrangement certainly would be 
enhanced by the existence of direct exchange to exchange surveillance 
sharing agreements, it is nonetheless consistent with other instances 
where the Commission has explored alternatives when the relevant 
foreign exchange was unwilling or unable to enter into a CSSA.\15\
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    \15\ See supra note 7.
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    The practice of relying on surveillance agreements or MOUs between 
regulators when a foreign exchange was unable, or unwilling, to provide 
an information sharing agreement was affirmed by the Commission in the 
Commission's New Product Release.\16\ The Commission noted in the New 
Product Release that if securing a CSSA is not possible, an exchange 
should contact the Commission prior to listing a new derivative 
securities product. The Commission also noted that the Commission may 
determine instead that it is appropriate to rely on a memorandum of 
understanding between the Commission and the foreign regulator.
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    \16\ See supra note 8.
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    The Exchange has recently contacted SSE with a request to enter 
into a CSSA. Until the Exchange is able to secure a CSSA with SSE, the 
Exchange requests that the Commission allow the listing and trading of 
options on ECH without a CSSA, upon reliance of the MOU entered into 
between the Commission and the SVS. The Exchange believes this request 
is reasonable and notes that the Commission has provided similar relief 
in the past. For example, the Commission approved, on a pilot basis, 
proposals of competing exchanges to list and trade options on the 
iShares MSCI Emerging Markets Fund \17\ and the iShares MSCI Mexico 
Index Fund.\18\
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    \17\ See supra note 10.
    \18\ See supra note 11.
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    The Commission's approval of this request to list and trade options 
on the ECH would otherwise render ECH compliant with all of the 
applicable Listing Standards.
    The Exchange shall continue to use its best efforts to obtain a 
CSSA with SSE, which shall reflect the following: (1) Express language 
addressing market trading activity, clearing activity, and customer 
identity; (2) SSE's reasonable ability to obtain access to and produce 
requested information; and (3) based on the CSSA and other information 
provided by SSE, the absence of existing rules, law or practices that 
would impede the Exchange from obtaining foreign information relating 
to market activity, clearing activity, or customer identity, or in the 
event such rules, laws, or practices exist, they would not materially 
impede the production of customer or other information.
iShares MSCI Peru Capped ETF (``EPU'')
    EPU is registered pursuant to the Investment Company Act of 1940 as 
a management investment company designed to hold a portfolio of 
securities which track the MSCI All Peru Capped Index (``Peru 
Index'').\19\ The Peru Index consists of stocks traded primarily on 
Bolsa de Valores de Lima (``BVL''). EPU employs a ``representative 
sampling'' methodology to track the Peru Index by investing in a 
representative sample of Peru Index securities having a similar 
investment profile as the Peru Index.\20\ BFA expects EPU to closely 
track the Peru Index so that, over time, a tracking error of 5%, or 
less, is exhibited. Securities selected by EPU have aggregate 
investment characteristics (based on market capitalization and industry 
weightings), fundamental characteristics (such as return variability, 
earnings valuation and yield) and liquidity measures similar to those 
of the Peru Index. EPU will not concentrate its investments (i.e., hold 
25% or more of its total assets in the stocks of a particular industry 
or group of industries), except, to the extent practicable, to reflect 
the concentration in the Peru Index. EPU will invest at least eighty 
percent (80%) of its assets in the securities comprising the Peru Index 
and/or related ADRs. EPU may also invest its other assets in futures 
contracts, options on futures contracts, other types of options and 
swaps related to the Peru Index, as well as cash and cash equivalents. 
The Exchange believes that these requirements and policies prevent the 
EPU from being excessively weighted in any single security or small 
group of securities and significantly reduce concerns that trading in 
EPU could become a surrogate for trading in unregistered securities.
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    \19\ Morgan Stanley Capital International Inc. (``MSCI'') 
created and maintains the All Peru Capped Index.
    \20\ As of March 20, 2014, EPU was comprised of 25 securities. 
CREDICORP LTD had the greatest individual weight at 26.72%. The 
aggregate percentage weighting of the top 5 and 10 securities in the 
Fund were 55.60% and 73.11%, respectively.
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    Shares of the EPU (``EPU Shares'') are issued and redeemed, on a 
continuous basis, at NAV in aggregation size of 50,000 shares, or 
multiples thereof (a ``Creation Unit''). Following issuance, EPU Shares 
are traded on an exchange like other equity securities. EPU Shares 
trade in the secondary markets in amounts less than a Creation Unit and 
the price per EPU Share may differ from its NAV which is calculated 
once daily as of the regularly scheduled close of business of NYSE 
Arca.\21\
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    \21\ See supra note 6.
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    State Street Bank and Trust Company, the administrator, custodian, 
and transfer agent for EPU. Detailed information on EPU can be found at 
www.ishares.com.
    The Exchange has reviewed EPU and determined that the EPU Shares 
satisfy the initial listing standards, except for the requirement set 
forth in MIAX Rule 402(i)(5)(ii)(A) which requires EPU to meet the 
following condition:
     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.
    The Exchange currently does not have in place a surveillance 
agreement with BVL.

[[Page 38103]]

    The Exchange submits that the Commission, in the past, has been 
willing to allow a national securities exchange to rely on a memorandum 
of understanding entered into between regulators in the event that the 
exchanges themselves cannot enter into a CSSA. The Exchange notes that 
BVL is under the regulatory oversight of the Superintendencia del 
Mercado de Valores (``SMV''), which has the responsibility for Peruvian 
stock exchanges. The Exchange further notes that both the Commission 
and SMV are signatories to the International Organization of Securities 
Commissions (``IOSCO'') Multilateral Memorandum of Understanding 
(``MMOU''), which provides a framework for mutual assistance in 
investigatory and regulatory issues. Based on the relationship between 
the SEC and SMV and the terms of the MMOU, the Exchange submits that 
both the Commission and the SMV could acquire information from and 
provide information to the other similar to that which would be 
required in a CSSA between exchanges. Moreover, the Commission could 
make a request for information under the MMOU on behalf of an SRO that 
needed the information for regulatory purposes. Thus, should MIAX need 
information on Peruvian trading in the Peru Index component securities 
to investigate incidents involving trading of EPU options, the SEC 
could request such information from the SMV under the MMOU. While this 
arrangement certainly would be enhanced by the existence of direct 
exchange to exchange surveillance sharing agreements, it is nonetheless 
consistent with other instances where the Commission has explored 
alternatives when the relevant foreign exchange was unwilling or unable 
to enter into a CSSA.\22\
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    \22\ See supra, note 7.
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    The practice of relying on surveillance agreements or MOUs between 
regulators when a foreign exchange was unable, or unwilling, to provide 
an information sharing agreement was affirmed by the Commission in the 
New Product Release.\23\ The Commission noted in the New Product 
Release that if securing a CSSA is not possible, an exchange should 
contact the Commission prior to listing a new derivative securities 
product. The Commission also noted that the Commission may determine 
instead that it is appropriate to rely on a memorandum of understanding 
between the Commission and the foreign regulator.
---------------------------------------------------------------------------

    \23\ See supra, note 8.
---------------------------------------------------------------------------

    The Exchange has recently contacted BVL with a request to enter 
into a CSSA. Until the Exchange is able to secure a CSSA with BVL, the 
Exchange requests that the Commission allow the listing and trading of 
options on EPU without a CSSA, upon reliance of the MMOU entered into 
between the Commission and the SMV. The Exchange believes this request 
is reasonable and notes that the Commission has provided similar relief 
in the past. Additionally, the Commission approved, on a pilot basis, 
proposals of competing exchanges to list and trade options on the 
iShares MSCI Emerging Markets Fund \24\ and the iShares MSCI Mexico 
Index Fund.\25\
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    \24\ See supra note 10.
    \25\ See supra note 11.
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    The Commission's approval of this request to list and trade options 
on the EPU would otherwise render EPU compliant with all of the 
applicable Listing Standards.
    The Exchange shall continue to use its best efforts to obtain a 
CSSA with BVL, which shall reflect the following: (1) Express language 
addressing market trading activity, clearing activity, and customer 
identity; (2) BVL's reasonable ability to obtain access to and produce 
requested information; and (3) based on the CSSA and other information 
provided by the BVL, the absence of existing rules, law or practices 
that would impede the Exchange from obtaining foreign information 
relating to market activity, clearing activity, or customer identity, 
or in the event such rules, laws, or practices exist, they would not 
materially impede the production of customer or other information.
iShares MSCI Spain Capped ETF (``EWP'')
    EWP is registered pursuant to the Investment Company Act of 1940 as 
a management investment company designed to hold a portfolio of 
securities which track the MSCI Spain 25/50 Index (``Spain 
Index'').\26\ The Spain Index consists of stocks traded primarily on 
Bolsa de Madrid (``BME''). EWP employs a ``representative sampling'' 
methodology to track the Spain Index by investing in a representative 
sample of Spain Index securities having a similar investment profile as 
the Spain Index.\27\ BFA expects EWP to closely track the Spain Index 
so that, over time, a tracking error of 5%, or less, is exhibited. 
Securities selected by EWP have aggregate investment characteristics 
(based on market capitalization and industry weightings), fundamental 
characteristics (such as return variability, earnings valuation and 
yield) and liquidity measures similar to those of the Spain Index. EWP 
will not concentrate its investments (i.e., hold 25% or more of its 
total assets in the stocks of a particular industry or group of 
industries), except, to the extent practicable, to reflect the 
concentration in the Spain Index. EWP will invest at least eighty 
percent (80%) of its assets in the securities comprising the Spain 
Index and/or related ADRs. EWP may also invest its other assets in 
futures contracts, options on futures contracts, other types of options 
and swaps related to the Spain Index, as well as cash and cash 
equivalents. The Exchange believes that these requirements and policies 
prevent the EWP from being excessively weighted in any single security 
or small group of securities and significantly reduce concerns that 
trading in EWP could become a surrogate for trading in unregistered 
securities.
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    \26\ Morgan Stanley Capital International Inc. (``MSCI'') 
created and maintains the Spain 25/50 Index.
    \27\ As of March 28, 2014, EWP was comprised of 24 securities. 
BANCO SANTANDER SA had the greatest individual weight at 22.37%. The 
aggregate percentage weighting of the top 5 and 10 securities in the 
Fund were 56.88% and 74.52%, respectively.
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    Shares of the EWP (``EWP Shares'') are issued and redeemed, on a 
continuous basis, at NAV in aggregation size of 75,000 shares, or 
multiples thereof (a ``Creation Unit''). Following issuance, EWP Shares 
are traded on an exchange like other equity securities. EWP Shares 
trade in the secondary markets in amounts less than a Creation Unit and 
the price per EWP Share may differ from its NAV which is calculated 
once daily as of the regularly scheduled close of business of NYSE 
Arca.\28\
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    \28\ See supra note 6.
---------------------------------------------------------------------------

    State Street Bank and Trust Company, the administrator, custodian, 
and transfer agent for EWP. Detailed information on EWP can be found at 
ww.ishares.com.
    The Exchange has reviewed EWP and determined that the EWP Shares 
satisfy the initial listing standards, except for the requirement set 
forth in MIAX Rule 402(i)(5)(ii)(A) which requires EWP to meet the 
following condition:
     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.

[[Page 38104]]

    The Exchange currently does not have in place a surveillance 
agreement with BME.
    The Exchange submits that the Commission, in the past, has been 
willing to allow a national securities exchange to rely on a memorandum 
of understanding entered into between regulators in the event that the 
exchanges themselves cannot enter into a CSSA. The Exchange notes that 
BME is under the regulatory oversight of the Comision Nacional del 
Mercado de Valores (``CNMV''), which has the responsibility for Spanish 
stock exchanges. The Exchange further notes that the Commission 
executed a memorandum of understanding with the CNMV dated as of July 
22, 2013 (``Spain-US MOU''), which provides a framework for mutual 
assistance in investigatory and regulatory issues. Based on the 
relationship between the SEC and CNMV and the terms of the Spain-US 
MOU, the Exchange submits that both the Commission and the CNMV could 
acquire information from and provide information to the other similar 
to that which would be required in a CSSA between exchanges. Moreover, 
the Commission could make a request for information under the Spain-US 
MOU on behalf of an SRO that needed the information for regulatory 
purposes. Thus, should MIAX need information on Spanish trading in the 
Spain Index component securities to investigate incidents involving 
trading of EWP options, the SEC could request such information from the 
CNMV under the Spain-US MOU. While this arrangement certainly would be 
enhanced by the existence of direct exchange to exchange surveillance 
sharing agreements, it is nonetheless consistent with other instances 
where the Commission has explored alternatives when the relevant 
foreign exchange was unwilling or unable to enter into a CSSA.\29\
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    \29\ See supra, note 7.
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    The practice of relying on surveillance agreements or MOUs between 
regulators when a foreign exchange was unable, or unwilling, to provide 
an information sharing agreement was affirmed by the Commission in the 
New Product Release.\30\ The Commission noted in the New Product 
Release that if securing a CSSA is not possible, an exchange should 
contact the Commission prior to listing a new derivative securities 
product. The Commission also noted that the Commission may determine 
instead that it is appropriate to rely on a memorandum of understanding 
between the Commission and the foreign regulator.
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    \30\ See supra, note 8.
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    The Exchange has recently contacted BME with a request to enter 
into a CSSA. Until the Exchange is able to secure a CSSA with BME, the 
Exchange requests that the Commission allow the listing and trading of 
options on EWP without a CSSA, upon reliance of the Spain-US MOU 
entered into between the Commission and the CNMV. The Exchange believes 
this request is reasonable and notes that the Commission has provided 
similar relief in the past. Additionally, the Commission approved, on a 
pilot basis, proposals of competing exchanges to list and trade options 
on the iShares MSCI Emerging Markets Fund \31\ and the iShares MSCI 
Mexico Index Fund.\32\
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    \31\ See supra note 10.
    \32\ See supra note 11.
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    The Commission's approval of this request to list and trade options 
on the EWP would otherwise render EWP compliant with all of the 
applicable Listing Standards.
    The Exchange shall continue to use its best efforts to obtain a 
CSSA with BME, which shall reflect the following: (1) Express language 
addressing market trading activity, clearing activity, and customer 
identity; (2) BME's reasonable ability to obtain access to and produce 
requested information; and (3) based on the CSSA and other information 
provided by the BME, the absence of existing rules, law or practices 
that would impede the Exchange from obtaining foreign information 
relating to market activity, clearing activity, or customer identity, 
or in the event such rules, laws, or practices exist, they would not 
materially impede the production of customer or other information.
2. Statutory Basis
    MIAX believes that its proposed rule change is consistent with 
Section 6(b) of the Act \33\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act \34\ 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 Exchange 
believes listing and trading of options on the iShare ETFs will benefit 
investors by providing them with valuable risk management tools.
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    \33\ 15 U.S.C. 78f(b).
    \34\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes this proposed rule change will benefit 
investors by providing additional methods to trade options on the 
iShares ETFs, and by providing them with valuable risk management 
tools. Specifically, the Exchange believes that market participants on 
MIAX would benefit from the introduction and availability of options on 
the iShares ETFs in a manner that is similar to other exchanges and 
will provide investors with yet another venue on which to trade these 
products. The Exchange notes that the rule change is being proposed as 
a competitive response to other competing options exchanges that 
already list and trade options on the iShare ETFs and believes this 
proposed rule change is necessary to permit fair competition among the 
options exchanges. 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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission shall: (a) By order approve 
or disapprove such proposed rule change, or (b) institute proceedings 
to determine whether the proposed rule change should be 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:

[[Page 38105]]

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-MIAX-2014-30 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-MIAX-2014-30. 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 the 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-MIAX-2014-30 and should be 
submitted on or before July 24, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
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    \35\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-15608 Filed 7-2-14; 8:45 am]
BILLING CODE 8011-01-P


