[Federal Register Volume 77, Number 250 (Monday, December 31, 2012)]
[Notices]
[Pages 77122-77128]
[FR Doc No: 2012-31235]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30316; 812-13489-01]

Pyxis Capital, L.P., et al.; Notice of Application

December 21, 2012.
AGENCY: Securities and Exchange Commission (the ``Commission'').

ACTION: Notice of an application for an order under section 6(c) of the
Investment Company Act of 1940 (the ``Act'') for an exemption from
sections 2(a)(32), 5(a)(1), 22(d) and 22(e) of the Act and rule 22c-1
under the Act, and under sections 6(c) and 17(b) of the Act for an
exemption from sections 17(a)(1) and (2) of the Act, and under section
12(d)(1)(J) for an exemption from sections 12(d)(1)(A) and (B) of the
Act.

-----------------------------------------------------------------------

    Applicants: Pyxis Capital, L.P. (``Pyxis''), Pyxis Funds II (the
``Trust''), and Nexbank Securities, Inc. (``Nexbank'').
    Summary of Application: Applicants request an order that permits:
(a) Actively-managed series of the Trust to issue shares (``Shares'')
redeemable in large aggregations only (``Creation Units''); (b)
secondary market transactions in Shares to occur at negotiated market
prices; (c) certain series to pay redemption proceeds, under certain
circumstances, more than seven days after the tender of Shares for
redemption; (d) certain affiliated persons of the series to deposit
securities into, and receive securities from, the series in connection
with the purchase and redemption of Creation Units; and (e) certain
registered management investment companies and unit investment trusts
outside of the same group of investment companies as the series to
acquire Shares.

DATES: Filing Dates: The application was filed on February 5, 2008, and
amended on March 14, 2008, November 21, 2011, April 6, 2012, August 20,
2012, and December 20, 2012.
    Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on January 15, 2013, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.

ADDRESSES: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange
Commission, 100 F Street, NE., Washington, DC 20549. Applicants, c/o W.
John McGuire, Esq. and Michael Berenson, Esq., Bingham McCutchen LLP,
2020 K Street NW., Washington, DC 20006.

FOR FURTHER INFORMATION CONTACT: Mark N. Zaruba, Senior Counsel, at
(202) 551-6878 or Mary Kay Frech, Branch Chief, at<PHONE_NUMBER>
(Division of Investment Management, Office of Investment Company
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or an applicant
using the Company name box, at http://www.sec.gov/search/search.htm or
by calling<PHONE_NUMBER>.

Applicants' Representations

    1. The Trust is registered as an open-end management investment
company under the Act and is organized as a Delaware statutory trust.
The Trust will initially offer one actively-managed series (the
``Initial Fund''), whose investment objective will be to provide a high
level of current income, consistent with the preservation of capital.
    2. Pyxis, a Delaware limited partnership, is, and any other Adviser
(as defined below) will be, registered as an investment adviser under
the Investment Advisers Act of 1940 (the ``Advisers Act''). An Adviser
will be the investment adviser to each Fund (as defined below) and,
subject to the oversight and authority of the board of trustees (the
``Board'') of the Trust, will implement each Fund's investment program
and oversee the day-to-day portfolio activities of each Fund. A Fund
may engage one or more subadvisers (``Subadvisers'') to manage specific
strategies suited to their expertise. Any Subadviser will be registered
under the Advisers Act. Nexbank, a Delaware corporation and an
affiliate of Pyxis, is registered as a broker-dealer (``Broker) under
the Securities Exchange Act of 1934 (the ``Exchange Act'') and will
serve as the principal underwriter and distributor

for each of the Funds (the ``Distributor'').\1\
---------------------------------------------------------------------------

    \1\ For purposes of the requested order, the term
``Distributor'' shall include any other entity that acts as the
distributor and principal underwriter of the Creation Units of
Shares of the Funds in the future and complies with the terms and
conditions of the application. Any future Distributor will be a
Broker registered under the Exchange Act.
---------------------------------------------------------------------------

    3. Applicants request that the order apply to the Initial Fund and
to any future series of the Trust or to any other open-end investment
company or series thereof that may be created in the future that, in
each case, (a) is an actively managed exchange-traded fund (``ETF''),
(b) is advised by Pyxis or any entity controlling, controlled by, or
under common control with Pyxis (each such entity or any successor
entity thereto, an ``Adviser'')\2\ and (c) complies with the terms and
conditions of the application (collectively, the ``Future Funds,'' and
together with the Initial Fund, the ``Funds'').\3\ The Funds may invest
in equity securities (``Equity Funds'') or fixed income securities
(``Fixed Income Funds'') traded in the U.S. or non-U.S. markets. Equity
Funds that invest in equity securities traded in the U.S. market
(``Domestic Equity Funds''), Fixed Income Funds that invest in fixed
income securities traded in the U.S. market (``Domestic Fixed Income
Funds'') and Funds that invest in equity and fixed income securities
traded in the U.S. market (``Domestic Blend Funds'') together are
``Domestic Funds.'' Funds that invest in foreign and domestic equity
securities are ``Global Equity Funds.'' Funds that invest in foreign
and domestic fixed income securities are ``Global Fixed Income Funds.''
Funds that invest in equity securities and fixed income securities
traded in the U.S. or non-U.S. markets are ``Global Blend Funds'' (and
collectively with Global Equity Funds and Global Fixed Income Funds,
``Global Funds''). Funds that invest solely in foreign equity
securities are ``Foreign Equity Funds,'' Funds that invest solely in
foreign fixed income securities are ``Foreign Fixed Income Funds'' and
Funds that invest solely in foreign equity and foreign fixed income
securities are ``Foreign Blend Funds'' (and collectively with Foreign
Equity Funds and Foreign Fixed Income Funds, ``Foreign Funds''). The
Funds may also invest in ``Depositary Receipts.'' \4\ Each Fund will
consist of a portfolio of securities (including equity and fixed income
securities), currencies traded in the U.S. or in non-U.S. markets
(``Portfolio Securities''), and other assets.\5\
---------------------------------------------------------------------------

    \2\ For the purposes of the requested order, ``successor'' is
limited to those one or more entities that would result from a
reorganization into another jurisdiction or a change in the type of
business organization.
    \3\ All entities that currently intend to rely on the order are
named as applicants. Any entity that relies on the order in the
future will comply with the terms and conditions of the application.
    \4\ Depositary Receipts are typically issued by a financial
institution (a ``Depositary'') and evidence ownership in a security
or pool of securities that have been deposited with the Depositary.
A Fund will not invest in any Depositary Receipts that the Adviser
or any Subadviser deems to be illiquid or for which pricing
information is not readily available. No affiliated persons of
applicants or any Subadviser will serve as the Depositary for any
Depositary Receipts held by a Fund.
    \5\ If a Fund invests in derivatives, then (a) the Fund's Board
will periodically review and approve the Fund's use of derivatives
and how the Fund's investment adviser assesses and manages risk with
respect to the Fund's use of derivatives and (b) the Fund's
disclosure of its use of derivatives in its offering documents and
periodic reports will be consistent with relevant Commission and
staff guidance.
---------------------------------------------------------------------------

    4. Applicants also request that any exemption under section
12(d)(1)(J) of the Act from sections 12(d)(1)(A) and (B) apply to: (i)
Any Fund; (ii) any Acquiring Fund (as defined below); and (iii) any
Brokers selling Shares of a Fund to an Acquiring Fund or any principal
underwriter of a Fund.\6\ A management investment company or unit
investment trust registered under the Act that is not part of the same
``group of investment companies'' as the Fund within the meaning of
section 12(d)(1)(G)(ii) of the Act and that acquires Shares of a Fund
in excess of the limits of Section 12(d)(1)(A) of the Act is referred
to as an ``Acquiring Management Company'' or an ``Acquiring Trust,''
respectively, and the Acquiring Management Companies and Acquiring
Trusts are referred to collectively as ``Acquiring Funds.'' Acquiring
Funds do not include the Funds.\7\
---------------------------------------------------------------------------

    \6\ Any future principal underwriter of a Fund will be a Broker
registered under the Exchange Act and will comply with the terms and
conditions of the application.
    \7\ An Acquiring Fund may rely on the order only to invest in a
Fund and not in any other registered investment company.
---------------------------------------------------------------------------

    5. Applicants anticipate that a Creation Unit will consist of at
least 25,000 Shares and that the trading price of a Share will range
from $20 to $200. All orders to purchase Creation Units must be placed
with the Distributor by or through an ``Authorized Participant,'' which
is either (a) a Broker or other participant in the Continuous Net
Settlement System of the National Securities Clearing Corporation
(``NSCC'', and such process the ``NSCC Process''), or (b) a participant
in the Depository Trust Company (``DTC,'' such participant ``DTC
Participant'' and such process the ``DTC Process''), which, in either
case, has executed an agreement with the Distributor with respect to
the purchase and redemption of Creation Units.
    6. Shares will be purchased and redeemed in Creation Units and
generally on an in-kind basis. Except where the purchase or redemption
will include cash under the limited circumstances specified below,
purchasers will be required to purchase Creation Units by making an in-
kind deposit of specified instruments (``Deposit Instruments''), and
shareholders redeeming their Shares will receive an in-kind transfer of
specified instruments (``Redemption Instruments'').\8\ On any given
Business Day \9\ the names and quantities of the instruments that
constitute the Deposit Instruments and the names and quantities of the
instruments that constitute the Redemption Instruments will be
identical, and these instruments may be referred to, in the case of
either a purchase or a redemption, as the ``Creation Basket.'' In
addition, the Creation Basket will correspond pro rata to the positions
in a Fund's portfolio (including cash positions),\10\ except: (a) In
the case of bonds, for minor differences when it is impossible to break
up bonds beyond certain minimum sizes needed for transfer and
settlement; (b) for minor differences when rounding is necessary to
eliminate fractional shares or lots that are not tradeable round lots;
\11\ or (c) TBA Transactions \12\ and other positions that cannot be
transferred in kind \13\ will be

excluded from the Creation Basket.\14\ If there is a difference between
the NAV attributable to a Creation Unit and the aggregate market value
of the Creation Basket exchanged for the Creation Unit, the party
conveying instruments with the lower value will also pay to the other
an amount in cash equal to that difference (the ``Cash Amount'').
---------------------------------------------------------------------------

    \8\ The Funds must comply with the federal securities laws in
accepting Deposit Instruments and satisfying redemptions with
Redemption Instruments, including that the Deposit Instruments and
Redemption Instruments are sold in transactions that would be exempt
from registration under the Securities Act of 1933 (``Securities
Act''). In accepting Deposit Instruments and satisfying redemptions
with Redemption Instruments that are restricted securities eligible
for resale pursuant to Rule 144A under the Securities Act, the Funds
will comply with the conditions of Rule 144A.
    \9\ Each Fund will sell and redeem Creation Units on any day
that the Fund is open, including as required by section 22(e) of the
Act (each, a ``Business Day'').
    \10\ The portfolio used for this purpose will be the same
portfolio used to calculate the Fund's net asset value (``NAV'') for
that Business Day.
    \11\ A tradeable round lot for a security will be the standard
unit of trading in that particular type of security in its primary
market.
    \12\ A TBA Transaction is a method of trading mortgage-backed
securities. In a TBA Transaction, the buyer and seller agree on
general trade parameters such as agency, settlement date, par amount
and price.
    \13\ This includes instruments that can be transferred in kind
only with the consent of the original counterparty to the extent the
Fund does not intend to seek such consents.
    \14\ Because these instruments will be excluded from the
Creation Basket, their value will be reflected in the determination
of the Cash Amount (defined below).
---------------------------------------------------------------------------

    7. Purchases and redemptions of Creation Units may be made in whole
or in part on a cash basis, rather than in kind, solely under the
following circumstances: (a) To the extent there is a Cash Amount, as
described above; (b) if, on a given Business Day, a Fund announces
before the open of trading that all purchases, all redemptions or all
purchases and redemptions on that day will be made entirely in cash;
(c) if, upon receiving a purchase or redemption order from an
Authorized Participant, a Fund determines to require the purchase or
redemption, as applicable, to be made entirely in cash; (d) if, on a
given Business Day, a Fund requires all Authorized Participants
purchasing or redeeming Shares on that day to deposit or receive (as
applicable) cash in lieu of some or all of the Deposit Instruments or
Redemption Instruments, respectively, solely because: (i) such
instruments are not eligible for transfer through either the NSCC
Process or DTC Process; or (ii) in the case of Global Funds and Foreign
Funds, such instruments are not eligible for trading due to local
trading restrictions, local restrictions on securities transfers or
other similar circumstances; or (e) if a Fund permits an Authorized
Participant to deposit or receive (as applicable) cash in lieu of some
or all of the Deposit Instruments or Redemption Instruments,
respectively, solely because: (i) Such instruments are, in the case of
the purchase of a Creation Unit, not available in sufficient quantity;
(ii) such instruments are not eligible for trading by an Authorized
Participant or the investor on whose behalf the Authorized Participant
is acting; or (iii) a holder of Shares of a Global Fund or Foreign Fund
would be subject to unfavorable income tax treatment if the holder
receives redemption proceeds in kind.\15\
---------------------------------------------------------------------------

    \15\ A ``custom order'' is any purchase or redemption of Shares
made in whole or in part on a cash basis in reliance on clause
(e)(i) or (e)(ii).
---------------------------------------------------------------------------

    8. Each Business Day, before the open of trading on a national
securities exchange, as defined in section 2(a)(26) of the Act (an
``Exchange''), on which Shares are listed and traded, each Fund will
cause to be published through the NSCC the names and quantities of the
instruments comprising the Creation Basket, as well as the estimated
Cash Amount (if any), for that day. The published Creation Basket will
apply until a new Creation Basket is announced on the following
Business Day, and there will be no intra-day changes to the Creation
Basket except to correct errors in the published Creation Basket. For
each Fund, the relevant Exchange will disseminate every 15 seconds
throughout the trading a calculation of the estimated NAV of a Share
(which estimate is expected to be accurate to within a few basis
points).
    9. Each Fund will recoup the settlement costs charged by NSCC and
DTC by imposing a fee (the ``Transaction Fee'') on investors purchasing
or redeeming Creation Units.\16\ All orders to purchase Creation Units
must be placed with the Distributor by or through an Authorized
Participant and the Distributor will transmit such orders to the Funds.
The Distributor will be responsible for maintaining records of both the
orders placed with it and the confirmations of acceptance furnished by
it.
---------------------------------------------------------------------------

    \16\ Cash purchases and redemptions of Shares may involve a
higher Transaction Fee to cover the costs of purchasing and selling
the applicable Deposit and Redemption Instruments. In all cases, the
Transaction Fee will be limited in accordance with requirements of
the Commission applicable to management investment companies
offering redeemable securities.
---------------------------------------------------------------------------

    10. Purchasers of Shares in Creation Units may hold such Shares or
may sell such Shares into the secondary market. Shares will be listed
and traded at negotiated prices on an Exchange and it is expected that
the relevant Exchange will designate one or more member firms to
maintain a market for the Shares.\17\ The price of Shares trading on an
Exchange will be based on a current bid-offer in the secondary market.
Purchases and sales of Shares in the secondary market will not involve
a Fund and will be subject to customary brokerage commissions and
charges.
---------------------------------------------------------------------------

    \17\ If Shares are listed on The NASDAQ Stock Market LLC
(``Nasdaq'') or a similar electronic Exchange (including NYSE Arca,
Inc.), one or more member firms of that Exchange will act as market
maker (a ``Market Maker'') and maintain a market for Shares trading
on that Exchange. On Nasdaq, no particular Market Maker would be
contractually obligated to make a market in Shares. However, the
listing requirements on Nasdaq stipulate that at least two Market
Makers must be registered in Shares to maintain a listing.
Registered Market Makers are required to make a continuous two-sided
market or subject themselves to regulatory sanctions. No Market
Maker will be an affiliated person, or an affiliated person of an
affiliated person, of the Funds, except within the meaning of
section 2(a)(3)(A) or (C) of the Act due solely to ownership of
Shares.
---------------------------------------------------------------------------

    11. Applicants expect that purchasers of Creation Units will
include institutional investors and arbitrageurs. Applicants expect
that secondary market purchasers of Shares will include both
institutional and retail investors.\18\ Applicants believe that the
structure and operation of the Funds will be designed to enable
efficient arbitrage and, thereby, minimize the probability that Shares
will trade at a material premium or discount to a Fund's NAV.
---------------------------------------------------------------------------

    \18\ Shares will be registered in book-entry form only. DTC or
its nominee will be the registered owner of all outstanding Shares.
Beneficial ownership of Shares will be shown on the records of DTC
or DTC Participants.
---------------------------------------------------------------------------

    12. Shares will not be individually redeemable and owners of Shares
may acquire those Shares from a Fund, or tender such shares for
redemption to the Fund, in Creation Units only. To redeem, an investor
must accumulate enough Shares to constitute a Creation Unit. Redemption
requests must be placed by or through an Authorized Participant. As
discussed above, redemptions of Creation Units will generally be made
on an in-kind basis, subject to certain specified exceptions under
which redemptions may be made in whole or in part on a cash basis, and
will be subject to a Transaction Fee.
    13. Neither the Trust nor any Fund will be advertised or marketed
or otherwise held out as a traditional open-end investment company or
mutual fund. Instead, each Fund will be marketed as an ``exchange-
traded fund.'' All marketing materials that describe the features or
method of obtaining, buying, or selling Creation Units, or Shares
traded on an Exchange, or refer to redeemability, will prominently
disclose that Shares are not individually redeemable and that the
owners of Shares may acquire those Shares from a Fund or tender those
Shares for redemption to the Fund in Creation Units only.
    14. The Trust's Web site (the ``Web site''), which will be publicly
available prior to the offering of Shares, will include each Fund's
prospectus (``Prospectus''), Statement of Additional Information
(``SAI''), and summary prospectus, if used. The Web site will contain,
on a per Share basis for each Fund, the prior Business Day's NAV and
the market closing price or mid-point of the bid/ask spread at the time
of calculation of such NAV (``Bid/Ask Price''), and a calculation of
the premium or discount of the market closing price or the Bid/Ask
Price against such NAV. On each Business Day, prior to the commencement
of trading in Shares on an Exchange, the

Adviser shall post on the Web site the identities and quantities of the
Portfolio Securities and other assets held by each Fund that will form
the basis for the calculation of the NAV at the end of that Business
Day.\19\
---------------------------------------------------------------------------

    \19\ Under accounting procedures followed by each Fund, trades
made on the prior Business Dat (``T'') will be booked and reflected
in NAV on the current Business Day (T+1). Accoprdingly, the Funds
will be able to disclose at the beginning of the Business Day the
portfolio that will form the basis for the NAV calculation at the
end of the Business Day.
---------------------------------------------------------------------------

Applicants' Legal Analysis

    1. Applicants request an order under section 6(c) of the Act
granting an exemption from sections 2(a)(32), 5(a)(1), 22(d) and 22(e)
of the Act and rule 22c-1 under the Act; and under sections 6(c) and
17(b) of the Act granting an exemption from sections 17(a)(1) and (2)
of the Act, and under section 12(d)(1)(J) for an exemption from
sections 12(d)(1)(A) and (B) of the Act.
    2. Section 6(c) of the Act provides that the Commission may exempt
any person, security or transaction, or any class of persons,
securities or transactions, from any provision of the Act, if and to
the extent that such exemption is necessary or appropriate in the
public interest and consistent with the protection of investors and the
purposes fairly intended by the policy and provisions of the Act.
Section 17(b) of the Act authorizes the Commission to exempt a proposed
transaction from section 17(a) of the Act if evidence establishes that
the terms of the transaction, including the consideration to be paid or
received, are reasonable and fair and do not involve overreaching on
the part of any person concerned, and the proposed transaction is
consistent with the policies of the registered investment company and
the general provisions of the Act. Section 12(d)(1)(J) of the Act
provides that the Commission may exempt any person, security, or
transaction, or any class or classes of persons, securities or
transactions, from any provision of section 12(d)(1) if the exemption
is consistent with the public interest and the protection of investors.

Sections 5(a)(1) and 2(a)(32) of the Act

    3. Section 5(a)(1) of the Act defines an ``open-end company'' as a
management investment company that is offering for sale or has
outstanding any redeemable security of which it is the issuer. Section
2(a)(32) of the Act defines a redeemable security as any security,
other than short-term paper, under the terms of which the holder, upon
its presentation to the issuer, is entitled to receive approximately a
proportionate share of the issuer's current net assets, or the cash
equivalent. Because Shares will not be individually redeemable,
applicants request an order that would permit the Trust and each Fund
to redeem Shares in Creation Units only. Applicants state that
investors may purchase Shares in Creation Units from each Fund and that
Creation Units will always be redeemable in accordance with the
provisions of the Act. Applicants further state that because the market
price of Shares will be disciplined by arbitrage opportunities,
investors should be able to sell Shares in the secondary market at
prices that do not vary substantially from their NAV.

Section 22(d) of the Act and Rule 22c-1 under the Act

    4. Section 22(d) of the Act, among other things, prohibits a dealer
from selling a redeemable security that is currently being offered to
the public by or through a principal underwriter, except at a current
public offering price described in the prospectus. Rule 22c-1 under the
Act generally requires that a dealer selling, redeeming, or
repurchasing a redeemable security do so only at a price based on its
NAV. Applicants state that secondary market trading in Shares will take
place at negotiated prices, not at a current offering price described
in the Prospectus, and not at a price based on NAV. Thus, purchases and
sales of Shares in the secondary market will not comply with section
22(d) of the Act and rule 22c-1 under the Act. Applicants request an
exemption under section 6(c) from these provisions.
    5. Applicants assert that the concerns sought to be addressed by
section 22(d) of the Act and rule 22c-1 under the Act with respect to
pricing are equally satisfied by the proposed method of pricing Shares.
Applicants maintain that, while there is little legislative history
regarding section 22(d), its provisions, as well as those of rule 22c-
1, appear to have been designed to (a) prevent dilution caused by
certain riskless-trading schemes by principal underwriters and contract
dealers, (b) prevent unjust discrimination or preferential treatment
among buyers resulting from sales at different prices, and (c) assure
an orderly distribution of investment company shares by eliminating
price competition from brokers offering shares at less than the
published sales price and repurchasing shares at more than the
published redemption price.
    6. Applicants believe that none of these purposes will be thwarted
by permitting Shares to trade in the secondary market at negotiated
prices. Applicants state that (a) secondary market trading in Shares
does not involve the Funds as parties and cannot result in dilution of
an investment in Shares, and (b) to the extent different prices exist
during a given trading day, or from day to day, such variances occur as
a result of third-party market forces, such as supply and demand.
Therefore, applicants assert that secondary market transactions in
Shares will not lead to discrimination or preferential treatment among
purchasers. Finally, applicants contend that the proposed distribution
system will be orderly because arbitrage activity will ensure that the
difference between the market price of Shares and their NAV remains
narrow.

Section 22(e) of the Act

    7. Section 22(e) generally prohibits a registered investment
company from suspending the right of redemption or postponing the date
of payment of redemption proceeds for more than seven days after the
tender of a security for redemption. Applicants observe that the
settlement of redemptions of Creation Units of the Foreign and Global
Funds is contingent not only on the settlement cycle of the U.S.
securities markets but also on the delivery cycles present in foreign
markets for underlying foreign Portfolio Securities in which those
Funds invest. Applicants have been advised that, under certain
circumstances, the delivery cycles for transferring Portfolio
Securities to redeeming investors, coupled with local market holiday
schedules, will require a delivery process of up to fourteen (14)
calendar days. Applicants therefore request relief from section 22(e)
in order to provide payment or satisfaction of redemptions within a
longer number of calendar days as required for such payment or
satisfaction in the principal local markets where transactions in the
Portfolio Securities of each Foreign and Global Fund customarily clear
and settle, but in all cases no later than fourteen (14) days following
the tender of a Creation Unit.\20\
---------------------------------------------------------------------------

    \20\ Rule 15c6-1 under the Exchange Act requires that most
securities transactions be settled within three business days of the
trade. Applicants acknowledge that no relief obtained from the
requirements of section 22(e) will affect any obligations applicants
may have under rule 15c6-1.
---------------------------------------------------------------------------

    8. Applicants state that section 22(e) was designed to prevent
unreasonable, undisclosed or unforeseen delays in the actual payment of
redemption proceeds. Applicants assert that the requested relief will
not lead to the problems that section 22(e) was designed to prevent.

Applicants state that the Prospectus and/or SAI will identify those
instances in a given year where, due to local holidays, more than seven
calendar days, up to a maximum of fourteen calendar days, will be
needed to deliver redemption proceeds and will list such holidays.
Applicants are not seeking relief from section 22(e) for Foreign and
Global Funds that do not effect redemptions of Creation Units in-kind.

Section 12(d)(1) of the Act

    9. Section 12(d)(1)(A) of the Act prohibits a registered investment
company from acquiring shares of an investment company if the
securities represent more than 3% of the total outstanding voting stock
of the acquired company, more than 5% of the total assets of the
acquiring company, or, together with the securities of any other
investment companies, more than 10% of the total assets of the
acquiring company. Section 12(d)(1)(B) of the Act prohibits a
registered open-end investment company, its principal underwriter, or
any other broker or dealer from selling its shares to another
investment company if the sale will cause the acquiring company to own
more than 3% of the acquired company's voting stock, or if the sale
will cause more than 10% of the acquired company's voting stock to be
owned by investment companies generally.
    10. Applicants request relief to permit Acquiring Funds to acquire
Shares in excess of the limits in section 12(d)(1)(A) of the Act and to
permit the Funds, their principal underwriters and any Broker to sell
Shares to Acquiring Funds in excess of the limits in section
12(d)(l)(B) of the Act.
    11. Applicants assert that the proposed transactions will not lead
to any of the abuses that section 12(d)(1) was designed to prevent.
Applicants submit that the proposed conditions to the requested relief
address the concerns underlying the limits in section 12(d)(1), which
include concerns about undue influence, excessive layering of fees and
overly complex structures.
    12. Applicants submit that their proposed conditions address any
concerns regarding the potential for undue influence. To limit the
control that an Acquiring Fund may have over a Fund, applicants propose
a condition prohibiting the adviser of an Acquiring Management Company
(``Acquiring Fund Adviser''), sponsor of an Acquiring Trust
(``Sponsor''), any person controlling, controlled by, or under common
control with the Acquiring Fund Adviser or Sponsor, and any investment
company or issuer that would be an investment company but for sections
3(c)(1) or 3(c)(7) of the Act that is advised or sponsored by the
Acquiring Fund Adviser, the Sponsor, or any person controlling,
controlled by, or under common control with the Acquiring Fund Adviser
or Sponsor (``Acquiring Fund's Advisory Group'') from controlling
(individually or in the aggregate) a Fund within the meaning of section
2(a)(9) of the Act. The same prohibition would apply to any subadviser
to an Acquiring Fund (``Acquiring Fund Subadviser''), any person
controlling, controlled by or under common control with the Acquiring
Fund Subadviser, and any investment company or issuer that would be an
investment company but for sections 3(c)(1) or 3(c)(7) of the Act (or
portion of such investment company or issuer) advised or sponsored by
the Acquiring Fund Subadviser or any person controlling, controlled by
or under common control with the Acquiring Fund Subadviser (``Acquiring
Fund's Subadvisory Group'').
    13. Applicants propose a condition to ensure that no Acquiring Fund
or Acquiring Fund Affiliate \21\ (except to the extent it is acting in
its capacity as an investment adviser to a Fund) will cause a Fund to
purchase a security in an offering of securities during the existence
of an underwriting or selling syndicate of which a principal
underwriter is an Underwriting Affiliate (``Affiliated Underwriting'').
An ``Underwriting Affiliate'' is a principal underwriter in any
underwriting or selling syndicate that is an officer, director, member
of an advisory board, Acquiring Fund Adviser, Acquiring Fund
Subadviser, employee or Sponsor of the Acquiring Fund, or a person of
which any such officer, director, member of an advisory board,
Acquiring Fund Adviser, Acquiring Fund Subadviser, employee or Sponsor
is an affiliated person (except any person whose relationship to the
Fund is covered by section 10(f) of the Act is not an Underwriting
Affiliate).
---------------------------------------------------------------------------

    \21\ An ``Acquiring Fund Affiliate'' is any Acquiring Fund
Adviser, Acquiring Fund Subadviser, Sponsor, promoter and principal
underwriter of an Acquiring Fund, and any person controlling,
controlled by or under common control with any of these entities.
``Fund Affiliate'' is an investment adviser, promoter, or principal
underwriter of a Fund or any person controlling, controlled by or
under common control with any of these entities.
---------------------------------------------------------------------------

    14. Applicants propose several conditions to address the potential
for layering of fees. Applicants note that the board of directors or
trustees of any Acquiring Management Company, including a majority of
the directors or trustees who are not ``interested persons'' within the
meaning of section 2(a)(19) of the Act (for any board of directors or
trustees, the ``Independent Directors''), will be required to find that
the advisory fees charged under the contract are based on services
provided that will be in addition to, rather than duplicative of,
services provided under the advisory contract of any Fund in which the
Acquiring Management Company may invest. Applicants also state that any
sales charges and/or service fees charged with respect to shares of an
Acquiring Fund will not exceed the limits applicable to a fund of funds
as set forth in NASD Conduct Rule 2830.\22\
---------------------------------------------------------------------------

    \22\ Any reference to NASD Conduct Rule 2830 includes any
successor or replacement rule that may be adopted by the Financial
Industry Regulatory Authority.
---------------------------------------------------------------------------

    15. Applicants submit that the proposed arrangement will not create
an overly complex fund structure. Applicants note that a Fund will be
prohibited from acquiring securities of any investment company or
company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of
the limits contained in section 12(d)(1)(A) of the Act, except to the
extent permitted by exemptive relief from the Commission permitting the
Fund to purchase shares of other investment companies for short-term
cash management purposes.
    16. To ensure that an Acquiring Fund is aware of the terms and
conditions of the requested order, the Acquiring Funds must enter into
an agreement with the respective Funds (``Acquiring Fund Agreement'').
The Acquiring Fund Agreement will include an acknowledgement from the
Acquiring Fund that it may rely on the order only to invest in a Fund
and not in any other investment company.

Section 17(a) of the Act

    17. Section 17(a) of the Act generally prohibits an affiliated
person of a registered investment company, or an affiliated person of
such person (``Second Tier Affiliates''), from selling any security to
or purchasing any security from the company. Section 2(a)(3) of the Act
defines ``affiliated person'' to include any person directly or
indirectly owning, controlling, or holding with power to vote 5% or
more of the outstanding voting securities of the other person and any
person directly or indirectly controlling, controlled by, or under
common control with, the other person. Section 2(a)(9) of the Act
provides that a control relationship will be presumed where one person
owns more than 25% of another person's

voting securities. The Funds may be deemed to be controlled by the
Adviser or an entity controlling, controlled by or under common control
with the Adviser and hence affiliated persons of each other. In
addition, the Funds may be deemed to be under common control with any
other registered investment company (or series thereof) advised by the
Adviser or an entity controlling, controlled by or under common control
with the Adviser (an ``Affiliated Fund'').
    18. Applicants request an exemption under sections 6(c) and 17(b)
of the Act from sections 17(a)(1) and 17(a)(2) of the Act to permit in-
kind purchases and redemptions of Creation Units from the Funds by
persons that are affiliated persons or Second Tier Affiliates of the
Funds solely by virtue of one or more of the following: (a) holding 5%
or more, or more than 25%, of the Shares of the Trust of one or more
Funds; (b) having an affiliation with a person with an ownership
interest described in (a); or (c) holding 5% or more, or more than 25%,
of the shares of one or more Affiliated Funds. Applicants also request
an exemption in order to permit each Fund to sell Shares to and redeem
Shares from, and engage in the transactions that would accompany such
sales and redemptions with, any Acquiring Fund of which the Fund is an
affiliated person or Second-Tier Affiliate.\23\
---------------------------------------------------------------------------

    \23\ Applicants anticipate that most Acquiring Funds will
purchase Shares in the secondary market and will not purchase or
redeem Creation Units directly from a Fund. To the extent that
purchases and sales of Shares occur in the secondary market and not
through principal transactions directly between an Acquiring Fund
and a Fund, relief from section 17(a) would not be necessary.
However, the requested relief would apply to direct sales of Shares
in Creation Units by a Fund to an Acquiring Fund and redemptions of
those Shares in Creation Units. The requested relief is intended to
cover transactions that would accompany such sales and redemptions.
Applicants are not seeking relief from section 17(a) for, and the
requested relief will not apply to, transactions where a Fund could
be deemed an affiliated person, or an affiliated person of an
affiliated person of an Acquiring Fund because the Adviser is also
an investment adviser to that Acquiring Fund.
---------------------------------------------------------------------------

    19. Applicants contend that no useful purpose would be served by
prohibiting such affiliated persons or Second Tier Affiliates from
acquiring or redeeming Creation Units through in-kind transactions.
Both the deposit procedures for in-kind purchases of Creation Units and
the redemption procedures for in-kind redemptions will be the same for
all purchases and redemptions. Deposit Instruments and Redemptions
Instruments will be valued in the same manner as the Portfolio
Securities held by the relevant Fund. Applicants thus believe that in-
kind purchases and redemptions will not result in self-dealing or
overreaching of the Fund.
    20. Applicants also submit that the sale of Shares to and
redemption of Shares from an Acquiring Fund satisfies the standards for
relief under sections 17(b) and 6(c) of the Act. Applicants note that
any consideration paid for the purchase or redemption of Creation Units
directly from a Fund will be based on the NAV of the Fund.\24\ The
Acquiring Fund Agreement will require any Acquiring Fund that purchases
Creation Units directly from a Fund to represent that the purchase will
be in compliance with its investment restrictions and consistent with
the investment policies set forth in its registration statement.
Applicants also state that the proposed transactions are consistent
with the general purposes of the Act and appropriate in the public
interest.
---------------------------------------------------------------------------

    \24\ Applicants acknowledge that the receipt of compensation by
(a) an affiliated person of an Acquiring Fund, or an affiliated
person of such person, for the purchase by the Acquiring Fund of
Shares of a Fund or (b) an affiliated person of a Fund, or an
affiliated person of such person, for the sale by the Fund of its
Shares to an Acquiring Fund, may be prohibited by section 17(e)(1)
of the Act. The Acquiring Fund Agreement also will include this
acknowledgment.
---------------------------------------------------------------------------

Applicants' Conditions

    Applicants agree that any order of the Commission granting the
requested relief will be subject to the following conditions:
A. Actively Managed Exchange-Traded Fund Relief
    1. Neither the Trust nor any Fund will be advertised or marketed as
an open-end investment company or mutual fund. Any advertising material
that describes the purchase or sale of Creation Units or refers to
redeemability will prominently disclose that the Shares are not
individually redeemable and that owners of the Shares may acquire those
Shares from the Fund and tender those Shares for redemption to the Fund
in Creation Units only.
    2. The Web site, which is and will be publicly accessible at no
charge, will contain, on a per Share basis for each Fund, the prior
Business Day's NAV and the market closing price or the Bid/Ask Price,
and a calculation of the premium or discount of the market closing
price or Bid/Ask Price against such NAV.
    3. As long as a Fund operates in reliance on the requested order,
its Shares will be listed on an Exchange.
    4. On each Business Day, before commencement of trading in Shares
on an Exchange, each Fund will disclose on its Web site the identities
and quantities of the Portfolio Securities and other assets held by the
Fund that will form the basis for the Fund's calculation of NAV at the
end of that Business Day.
    5. The Adviser or any Subadvisers, directly or indirectly, will not
cause any Authorized Participant (or any investor on whose behalf an
Authorized Participant may transact with the Fund) to acquire any
Deposit Instrument for a Fund through a transaction in which the Fund
could not engage directly.
    6. The requested relief to permit ETF operations will expire on the
effective date of any Commission rule under the Act that provides
relief permitting the operation of actively-managed exchange-traded
funds.
B. Section 12(d)(1) Relief
    7. The members of an Acquiring Fund's Advisory Group will not
control (individually or in the aggregate) a Fund within the meaning of
section 2(a)(9) of the Act. The members of an Acquiring Fund's
Subadvisory Group will not control (individually or in the aggregate) a
Fund within the meaning of section 2(a)(9) of the Act. If, as a result
of a decrease in the outstanding voting securities of a Fund, the
Acquiring Fund's Advisory Group or the Acquiring Fund's Subadvisory
Group, each in the aggregate, becomes a holder of more than 25 percent
of the outstanding voting securities of a Fund, it will vote its Shares
of the Fund in the same proportion as the vote of all other holders of
that Fund's Shares. This condition does not apply to the Acquiring
Fund's Subadvisory Group with respect to a Fund for which the Acquiring
Fund Subadviser or a person controlling, controlled by, or under common
control with the Acquiring Fund Subadviser acts as the investment
adviser within the meaning of section 2(a)(20)(A) of the Act.
    8. No Acquiring Fund or Acquiring Fund Affiliate will cause any
existing or potential investment by the Acquiring Fund in a Fund to
influence the terms of any services or transactions between the
Acquiring Fund or an Acquiring Fund Affiliate and the Fund or a Fund
Affiliate.
    9. The board of trustees or directors of an Acquiring Management
Company, including a majority of the Independent Directors, will adopt
procedures reasonably designed to ensure that the Acquiring Fund
Adviser and any Acquiring Fund Subadviser are conducting the investment
program of the Acquiring Management Company without taking into account
any consideration received by the Acquiring Management Company or an
Acquiring Fund Affiliate from a Fund or a Fund

Affiliate in connection with any services or transactions.
    10. Once an investment by an Acquiring Fund in the Shares of a Fund
exceeds the limit in section l2(d)(1)(A)(i) of the Act, the Board,
including a majority of the Independent Directors, will determine that
any consideration paid by the Fund to the Acquiring Fund or an
Acquiring Fund Affiliate in connection with any services or
transactions: (i) is fair and reasonable in relation to the nature and
quality of the services and benefits received by the Fund; (ii) is
within the range of consideration that the Fund would be required to
pay to another unaffiliated entity in connection with the same services
or transactions; and (iii) does not involve overreaching on the part of
any person concerned. This condition does not apply with respect to any
services or transactions between a Fund and its investment adviser(s),
or any person controlling, controlled by or under common control with
such investment adviser(s).
    11. No Acquiring Fund or Acquiring Fund Affiliate (except to the
extent it is acting in its capacity as an investment adviser to a Fund)
will cause the Fund to purchase a security in any Affiliated
Underwriting.
    12. The Board, including a majority of the Independent Directors,
will adopt procedures reasonably designed to monitor any purchases of
securities by the Fund in an Affiliated Underwriting, once an
investment by an Acquiring Fund in the securities of the Fund exceeds
the limit of section 12(d)(1)(A)(i) of the Act, including any purchases
made directly from an Underwriting Affiliate. The Board will review
these purchases periodically, but no less frequently than annually, to
determine whether the purchases were influenced by the investment by
the Acquiring Fund in the Fund. The Board will consider, among other
things: (i) whether the purchases were consistent with the investment
objectives and policies of the Fund; (ii) how the performance of
securities purchased in an Affiliated Underwriting compares to the
performance of comparable securities purchased during a comparable
period of time in underwritings other than Affiliated Underwritings or
to a benchmark such as a comparable market index; and (iii) whether the
amount of securities purchased by the Fund in Affiliated Underwritings
and the amount purchased directly from an Underwriting Affiliate have
changed significantly from prior years. The Board will take any
appropriate actions based on its review, including, if appropriate, the
institution of procedures designed to ensure that purchases of
securities in Affiliated Underwritings are in the best interest of
shareholders of the Fund.
    13. Each Fund will maintain and preserve permanently in an easily
accessible place a written copy of the procedures described in the
preceding condition, and any modifications to such procedures, and will
maintain and preserve for a period of not less than six years from the
end of the fiscal year in which any purchase in an Affiliated
Underwriting occurred, the first two years in an easily accessible
place, a written record of each purchase of securities in Affiliated
Underwritings, once an investment by an Acquiring Fund in the
securities of the Fund exceeds the limit of section 12(d)(1)(A)(i) of
the Act, setting forth from whom the securities were acquired, the
identity of the underwriting syndicate's members, the terms of the
purchase, and the information or materials upon which the
determinations of the Board were made.
    14. Before investing in Shares of a Fund in excess of the limits in
section 12(d)(1)(A), each Acquiring Fund and the Fund will execute an
Acquiring Fund Agreement stating, without limitation, that their boards
of directors or boards of trustees and their investment adviser(s), or
their Sponsors or trustees (each a ``Trustee''), as applicable,
understand the terms and conditions of the requested order, and agree
to fulfill their responsibilities under the requested order. At the
time of its investment in Shares of a Fund in excess of the limit in
section 12(d)(1)(A)(i), an Acquiring Fund will notify the Fund of the
investment. At such time, the Acquiring Fund will also transmit to the
Fund a list of the names of each Acquiring Fund Affiliate and
Underwriting Affiliate. The Acquiring Fund will notify the Fund of any
changes to the list of the names as soon as reasonably practicable
after a change occurs. The Fund and the Acquiring Fund will maintain
and preserve a copy of the requested order, the Acquiring Fund
Agreement, and the list with any updated information for the duration
of the investment and for a period of not less than six years
thereafter, the first two years in an easily accessible place.
    15. The Acquiring Fund Adviser, Trustee or Sponsor, as applicable,
will waive fees otherwise payable to it by the Acquiring Fund in an
amount at least equal to any compensation (including fees received
pursuant to any plan adopted under rule 12b-l under the Act) received
from a Fund by the Acquiring Fund Adviser, Trustee or Sponsor, or an
affiliated person of the Acquiring Fund Adviser, Trustee or Sponsor,
other than any advisory fees paid to the Acquiring Fund Adviser,
Trustee or Sponsor, or its affiliated person by the Fund, in connection
with the investment by the Acquiring Fund in the Fund. Any Acquiring
Fund Subadviser will waive fees otherwise payable to the Acquiring Fund
Subadviser, directly or indirectly, by the Acquiring Fund in an amount
at least equal to any compensation received from a Fund by the
Acquiring Fund Subadviser, or an affiliated person of the Acquiring
Fund Subadviser, other than any advisory fees paid to the Acquiring
Fund Subadviser or its affiliated person by the Fund, in connection
with any investment by the Acquiring Management Company in the Fund
made at the direction of the Acquiring Fund Subadviser. In the event
that the Acquiring Fund Subadviser waives fees, the benefit of the
waiver will be passed through to the Acquiring Management Company.
    16. Any sales charges and/or service fees charged with respect to
shares of an Acquiring Fund will not exceed the limits applicable to a
fund of funds as set forth in NASD Conduct Rule 2830.
    17. No Fund will acquire securities of any other investment company
or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess
of the limits contained in section 12(d)(1)(A) of the Act, except to
the extent permitted by exemptive relief from the Commission permitting
the Fund to purchase shares of other investment companies for short-
term cash management purposes.
    18. Before approving any advisory contract under section 15 of the
Act, the board of trustees or directors of each Acquiring Management
Company, including a majority of the Independent Trustees, will find
that the advisory fees charged under such advisory contract are based
on services provided that will be in addition to, rather than
duplicative of, the services provided under the advisory contract(s) of
any Fund in which the Acquiring Management Company may invest. These
findings and their basis will be recorded fully in the minute books of
the appropriate Acquiring Management Company.

    For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-31235 Filed 12-28-12; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register: September 21, 2009 (Volume 74, Number 181)]
[Notices]
[Page 48112-48114]
[DOCID:fr21se09-86]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60666; File No. SR-CBOE-2009-062]

Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Relating to Dissemination of Certain Index Data

September 14, 2009.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on August 28, 2009, the Chicago Board Options Exchange,
Incorporated (``CBOE'' or the ``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 prepared by
CBOE. The Exchange filed the proposal as ``non-controversial'' pursuant
to Section 19(b)(3)(A)(iii) of the Act \4\ and Rule 19b-4(f)(6)
thereunder, which renders it effective upon filing.\5\ The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \5\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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

    Chicago Board Options Exchange, Incorporated (``CBOE'' or
``Exchange'') is not proposing any textual changes to the Constitution
or Rules of CBOE in this filing. The Exchange is proposing to update
statements that it made in Item 3 of previous filings made by the
Exchange pursuant to Rule 19b-4, as described in subsection (a)(1) of
Item 3 of this filing. 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.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, CBOE 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, Proposed Rule Change

1. Purpose
    CBOE currently disseminates values of its proprietary indexes and
many of the indexes licensed by CBOE to underlie options traded on CBOE
through the Options Price Reporting Authority (``OPRA''). Some of these
indexes underlie options approved for listing and trading on CBOE by
the Commission pursuant to filings submitted by CBOE pursuant to Rule
19b-4. In some of these filings, CBOE stated that the values of the
respective indexes would be disseminated through OPRA.\6\
---------------------------------------------------------------------------

    \6\ For example, in its filing with respect to the options on
the RVX, CBOE stated that ``Volatility index levels [of the RVX]
will be calculated by CBOE and disseminated at 15-second intervals
to market information vendors via the Options Price Reporting
Authority (``OPRA''),'' and the Commission noted this statement in
its approval order for these options. See Securities Exchange Act
Release No. 54643 (October 23, 2006), 71 FR 63367 (October 30, 2006)
(notice of filing of File No. SR-CBOE-2006-73) and Securities
Exchange Act Release No. 55425 (March 8, 2007), 72 FR 12238 (March
15, 2007) (approval of File No. SR-CBOE-2006-73). Similar statements
were made in CBOE filings with respect to options on the following
indexes: See Securities Exchange Act Release Nos. 32893 (September
14, 1993), 58 FR 49070 (September 21, 1993) (XSP); 58207 (July 22,
2008), 73 FR 43963 (July 29, 2008) (BXM); 32244 (April 29, 1993), 58
FR 27005 (May 6, 1993) (CEX); 48807 (November 19, 2003), 68 FR 66516
(November 26, 2003) (VIX, VXD, VXN); 49698 (May 13, 2004), 69 FR
29152 (May 20, 2004) (VXB); 39011 (September 3, 1997), 62 FR 47840
(September 11, 1997) (DJX, DXL, WDX); 39012 (September 3, 1997), 62
FR 47850 (September 11, 1997) (DTX); 39013 (September 3, 1997), 62
FR 47845 (September 11, 1997) (DUX, LDU); 41112 (February 25, 1999),
64 FR 10517 (March 4, 1999) (ECM, ZJ); 41009 (February 1, 1999), 64
FR 6410 (February 9, 1999) (DJR); 38353 (February 28, 1997), 62 FR
10888 (March 10, 1997) (NFT); 31382 (October 30, 1992), 57 FR 52802
(November 5, 1992) (RUT); 48591 (October 2, 2003), 68 FR 58728
(October 10, 2003) (RUI, RUA); 51220 (February 17, 2005), 70 FR
09398 (February 25, 2005) (RMN); 32238 (April 29, 1993), 58 FR 27020
(May 6, 1993) (BIX); 32241 (April 29, 1993), 58 FR 27012 (May 6,
1993) (HCX); 32239 (April 29, 1993), 58 FR 27024 (May 6, 1993)
(IUX); 32240 (April 29, 1993), 58 FR 27016 (May 6, 1993) (RLX); and
34124 (May 27 1994), 59 FR 29310 (June 6 1994) (SGX, SVX).
---------------------------------------------------------------------------

    Since 2006, CBOE has also disseminated values of its proprietary
indexes and certain licensed indexes to major market data vendors
outside of OPRA. For its proprietary and other indexes subject to a
requirement that dissemination of the index values occur through OPRA
pursuant to the filings noted above, the Exchange proposes to amend
such requirement to permit dissemination of these values to major
market data vendors solely outside of OPRA.
    CBOE believes that its proposal to permit dissemination of its
proprietary and certain other index values to major market data vendors
solely outside of OPRA will continue to be in full compliance with the
Commission's requirements with respect to the dissemination of values
of indexes underlying options and CBOE's own applicable rules. CBOE
Rule 24.2 requires that values of an underlying index be widely
disseminated at least once every fifteen seconds if the listing of a
class of options on the index is not the subject of a separate filing,
and this will continue to be the case for index values that cease to be
disseminated on OPRA.\7\ CBOE Rule 24.3(a) requires that ``The Exchange
shall disseminate or shall assure that the current index value is
disseminated after the close of business and from time-to-time on days
on which transactions in index options are made on the Exchange,'' and
this also will continue to be the case for index values that cease to
be disseminated on OPRA.
---------------------------------------------------------------------------

    \7\ See CBOE Rules 24.2(b)(10) (values of narrow-based index
options must be ``reported at least once every fifteen seconds
during the time the index options are traded on the Exchange''),
24.2(d)(8) (values of micro narrow-based index options must be
``reported at least once every fifteen seconds during the time the
index options are traded on the Exchange''), and 24.2(f)(11) (the
Exchange may trade options on a broad-based index pursuant to Rule
19b-4(c) of the Exchange act if `` * * * (11) The current index
value is widely disseminated at least once every fifteen (15)
seconds by the Options Price Reporting Authority, CTA/CQ, NIDS or
one or more major market data vendors during the time options on the
index are traded on the Exchange''). It has been pointed out to CBOE
that the language of 24.2(f)(11) is not parallel to the language of
24.2(b)(10) and 24.2(d)(8), particularly in the use of the word
``disseminated'' in the first of these provisions and the word
``reported'' in the second and third of them. CBOE believes that the
three provisions are intended to be substantively parallel, and CBOE
intends to amend these Rules in a separate filing to conform their
language by using the word ``disseminate'' in all three provisions.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
Section 6(b) of the Act \8\ in general, and Section 6(b)(5) of the Act
\9\ in particular, in that it updates statements made by the Exchange
in previous filings that would either become inaccurate or impede the
Exchange from modifying its dissemination of index values in a manner
that is consistent with the objectives of the Act.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 that is not necessary or appropriate in
furtherance of purposes of the Act.

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

    No written comments were solicited or received with respect to the
proposed rule change.

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

    Because the forgoing 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 \10\ and Rule 19b-
4(f)(6) thereunder.\11\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to provide the Commission
with written notice of its intent to file the proposed rule change,
along with a brief description and 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. The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    The long standing policy of the Commission with respect to the
dissemination of values of indexes underlying index options has been to
ensure the wide dissemination and wide availability of index values to
market participants. This policy is reflected in CBOE Rule 24.2, which
requires that values of an underlying index be widely disseminated at
least once every fifteen seconds if the listing of a class of options
on the index is not the subject of a separate filing.\12\ The Exchange
believes the proposed rule change is consistent both with CBOE Rule
24.2 and this Commission policy. Based on the foregoing, the Exchange
designates this proposed rule change as

immediately effective under Rule 19b-4(f)(6) \13\ of the Act.
---------------------------------------------------------------------------

    \12\ See supra note 2.
    \13\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    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 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<EMAIL_ADDRESS>Please include
File Number SR-CBOE-2009-062 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2009-062. 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-2009-062 and should be
submitted on or before October 13, 2009.
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-22684 Filed 9-18-09; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register Volume 87, Number 242 (Monday, December 19, 2022)]
[Notices]
[Pages 77649-77651]
[FR Doc No: 2022-27380]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96486; File No. SR-BX-2022-025]

Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Address an
Erroneous Reference in Equity 4, Rule 4780(e)

December 13, 2022.
    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 December 1, 2022, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I and II 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to address an erroneous reference in Equity
4, Rule 4780(e).
    The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/bx/rules, 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 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 purpose of this filing is to correct an erroneous reference in
Equity 4, Rule 4780(e) involving the dissemination process of the
Retail Liquidity Identifier as part of the Exchange's Retail Price
Improvement Program (``RPI Program''). Under the RPI Program, all
Retail Price Improvement Orders (``RPI Orders'') provide liquidity at a
price at least $0.001 better than the National Best Bid and Offer
(``NBBO'') through a special execution process.\3\ Currently, unless a
Participant opts out of identifying their RPI Interest, the Exchange
disseminates the Retail Liquidity Identifier when RPI interest is
present on the Exchange.
---------------------------------------------------------------------------

    \3\ Equity 4, Rule 4702(b)(5)(A) states that, ``A ``Retail Price
Improving Order'' or ``RPI Order'' is an Order Type with a Non-
Display Order Attribute that is held on the Exchange Book in order
to provide liquidity at a price at least $0.001 better than the NBBO
through a special execution process described in Rule 4780. A Retail
Price Improving Order may be entered in price increments of $0.001.
RPI Orders collectively may be referred to as ``RPI Interest.''
---------------------------------------------------------------------------

    Equity 4, Rule 4780(e) states that the Retail Liquidity Identifier
will be disseminated when RPI interest is priced at least $0.001 per
share better than the ``Exchange's'' Protected Bid or Protected Offer.
However, this language is erroneous. In intent and practice, the
Exchange disseminates the Retail Liquidity when RPI interest is priced
at least $0.001 better than the NBBO. The Exchange's intent in this
regard is evident in Equity 4, Rule 4702(b)(5)(A), which describes an
RPI Order as being priced better than the NBBO. Moreover, measuring
retail price improvement with reference to the NBBO, rather than to the
Exchange's Best Bid or Offer, ensures that the RPI Program will alert
participants to real price improvement opportunities that exist on
Nasdaq [sic], i.e., prices that are better than the NBBO, rather than
prices better than the Exchange's Best Bid or Offer, but not better
than the NBBO.
    The Exchange proposes to correct this erroneous reference in Equity
4, Rule 4780(e). The correction is necessary to ensure that the
provision is consistent with the circumstances in which the Exchange
intends to and actually disseminates the Retail Liquidity Identifier.
It will also ensure that the Retail Liquidity Identifier will alert
participants to genuine retail price improvement opportunities on the
Nasdaq Book [sic], as discussed above.
    The Exchange noticed the error in the language and promptly sought
to correct the inconsistency. The Exchange notes that it has not
received any complaints or notices from Exchange Members expressing
confusion or alerting the Exchange to the error.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with section
6(b) of the Act,\4\ in general, and furthers the objectives of section
6(b)(5) of the Act,\5\ in particular, in that it is designed to promote
just and equitable principles of trade, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general to protect investors and the public interest.
The proposal would correct an error that otherwise renders inaccurate
an example of the application of Equity 4, Rule 4780(e). The Exchange
believes that it is consistent with the interest of the public,
investors, and the market for the Exchange to take steps to ensure that
its Rulebook is accurate.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change is
non-substantive and it will have no impact on competition because it
simply corrects an error in the Rule text to render the text more
accurate.

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

    No written comments were either solicited or received.

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

    The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \6\ and Rule 19b-4(f)(6) thereunder.\7\
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, 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 \8\ and Rule 19b-
4(f)(6) thereunder.\9\
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \7\ 17 CFR 240.19b-4(f)(6).
    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and 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. The
Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \10\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\11\ the Commission
may 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 proposed
rule change may become operative immediately. The Exchange requests
this waiver so that it can correct an error in its rulebook as soon as
possible to avoid any potential confusion regarding the operation of
the Retail Liquidity Identifier. The Commission believes that waiving
the 30-day operative delay is consistent with the protection of
investors and the public interest so that the Exchange's rulebook
accurately represents the operation of the Retail Liquidity Identifier
without undue delay. For this reason, the Commission hereby waives the
30-day operative delay and designates the proposal operative upon
filing.\12\
---------------------------------------------------------------------------

    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------

    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-BX-2022-025 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-BX-2022-025. 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 website (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 website 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 offices of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-BX-2022-025, and should be submitted on
or before January 9, 2023.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12), (59).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-27380 Filed 12-16-22; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register: May 5, 2008 (Volume 73, Number 87)]
[Notices]
[Page 24594-24595]
[DOCID:fr05my08-475]

-----------------------------------------------------------------------

ENVIRONMENTAL PROTECTION AGENCY

[EPA-R09-OAR-2008-0326; FRL-8561-7]

Adequacy Status of Motor Vehicle Emissions Budgets in Submitted
Early Progress Plan Western Mojave Desert 8-Hour Ozone for
Transportation Conformity Purposes; California

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of Adequacy.

-----------------------------------------------------------------------

SUMMARY: In this notice, EPA is notifying the public that the Agency
has found that the motor vehicle emissions budgets for 8-hour ozone in
the Western Mojave Desert 8-hour Ozone Early Progress Plan are adequate
for transportation conformity purposes. The Western Mojave Desert 8-
hour Ozone Early Progress Plan was submitted to EPA on March 24, 2008
by the

California Air Resources Board as a revision to the California State
Implementation Plan (SIP). As a result of our adequacy findings, the
Southern California Association of Governments and the U.S. Department
of Transportation must use these budgets in future conformity analyses
once the finding becomes effective.

DATES: This finding is effective May 20, 2008.

FOR FURTHER INFORMATION CONTACT: Adrienne Priselac, U.S. EPA, Region
IX, Air Division AIR-2, 75 Hawthorne Street, San Francisco, CA 94105-
3901;<PHONE_NUMBER> or<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: Throughout this document, whenever ``we,''
``us,'' or ``our'' is used, we mean EPA.
    Today's notice is simply an announcement of a finding that we have
already made. EPA Region IX sent a letter to the California Air
Resources Board on April 16, 2008 stating that the motor vehicle
emissions budgets in the submitted Western Mojave Desert 8-hour Ozone
Early Progress Plan for 2009 are adequate. The finding is available at
EPA's conformity Web site: http://www.epa.gov/otaq/stateresources/
transconf/adequacy.htm. The adequate motor vehicle emissions budgets
are provided in the following table:

                     Motor Vehicle Emissions Budgets
------------------------------------------------------------------------
                                     Volatile organic
            Budget year               compounds \1\     Nitrogen oxides
                                      (tons per day)     (tons per day)
------------------------------------------------------------------------
2009..............................                22                77
------------------------------------------------------------------------
\1\ The plan uses a comparable State term, reactive organic gases (ROG).

    Transportation conformity is required by Clean Air Act section
176(c). EPA's conformity rule requires that transportation plans,
transportation improvement programs, and projects conform to state air
quality implementation plans (SIPs) and establishes the criteria and
procedures for determining whether or not they do. Conformity to a SIP
means that transportation activities will not produce new air quality
violations, worsen existing violations, or delay timely attainment of
the national ambient air quality standards.
    The criteria by which we determine whether a SIP's motor vehicle
emission budgets are adequate for conformity purposes are outlined in
40 CFR 93.118(e)(4). We have described our process for determining the
adequacy of submitted SIP budgets in our July 1, 2004 preamble starting
at 69 FR 40038 and we used the information in these resources in making
our adequacy determination. Please note that an adequacy review is
separate from EPA's completeness review, and should not be used to
prejudge EPA's ultimate approval action for the SIP. Even if we find a
budget adequate, the SIP could later be disapproved.

    Authority: 42 U.S.C. 7401 et seq.

    Dated: April 16, 2008.
Laura Yoshii,
Deputy Regional Administrator, Region IX.
[FR Doc. E8-9822 Filed 5-2-08; 8:45 am]

BILLING CODE 6560-50-P


[Federal Register: October 7, 2010 (Volume 75, Number 194)]
[Notices]
[Page 62167-62169]
[DOCID:fr07oc10-91]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63026; File No. SR-CBOE-2010-046]

Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing of a Proposed Rule Change To Amend
Certain Rules Pertaining to Credit Options

October 1, 2010.
    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 20, 2010, the Chicago Board Options Exchange, Incorporated
(``CBOE'' or the ``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 prepared by the Exchange.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    CBOE proposes to amend certain rules pertaining to Credit Options.
The text of the rule proposal is available on the Exchange's Web site
(http://www.cboe.org/legal), at the Exchange'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 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 those 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 parts 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 received approval to list and trade Credit Default
Options and Credit Default Basket Options (collectively ``Credit
Options'') in 2007, and is planning to re-launch these products.\3\ In
connection with the Exchange's planned re-launching of Credit Options,
the Exchange will be introducing contracts that have a payout that is
less than $100,000.\4\ In addition, the Exchange would like to: (1)
Change the quoting convention for Credit Default Options, (2) change
the minimum price variation for Credit Option, and (3) designate a
single applicable Credit Event for Credit Options.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release Nos. 55871(June 6,
2007), 72 FR 32372 (June 12, 2007) (SR-CBOE-2006-84); 56275 (August
17, 2007), 72 FR 47097 (August 22, 2007).
    \4\ See Securities Exchange Act Release No. 56380 (September 10,
2007), 72 FR 52948 (September 17, 2007) (SR-CBOE-2007-105)
(immediately effective filing pertaining to contract multiplier for
Credit Default Options).
---------------------------------------------------------------------------

Quoting Convention and Minimum Price Variation Changes
    When CBOE launched Credit Default Options, the Exchange designated
the cash settlement amount to be $100,000, which was equal to an
exercise settlement value of $100 multiplied by a contract multiplier
of 1,000 (which was specified by the Exchange at listing).\5\ Because
the exercise settlement value is currently fixed by rule at $100,\6\
bids and offers for contracts are expressed in amounts ranging from $0
(no bid) to $100. The range of bids and offers is not hard coded into
CBOE's rules and is a function of pricing options that have a fixed
payout.\7\ To arrive at the total amount a bid or offer represents per
contract, the bid or offer is multiplied by the contract multiplier.
For example, if a Credit Default Option has a cash settlement amount of
$100,000 ($100 x 1,000), bids of $0.05, $45.15 and $67.50 equate to
premium amounts of $50, $45,150 and $67,500, respectively.
---------------------------------------------------------------------------

    \5\ The Exchange may vary the particular contract multiplier on
a class-by-class basis within a range of 1 to 1,000. See 29.1(a).
    \6\ See Rule 29.1(a)(i).
    \7\ The Exchange notes that with a fixed exercise settlement
value of $100, any quote above $100 (e.g., $150) would not make
economic sense since it would represent a premium cost ($150 x 1,000
= $150,000) that exceeds than [sic] the exercise settlement amount
of the contract ($100 x 1,000 = $100,000).
---------------------------------------------------------------------------

    CBOE proposes to change the quoting conventions for Credit Default
Options by permitting the exercise settlement value to be an amount
determined by the Exchange on a class-by-class basis and that would be
equal to $1 or $100, or a value between those values. By permitting the
Exchange to vary the exercise settlement value, the range of bids and
offers would vary in tandem. For example, if the Exchange sets the
exercise settlement value at $10, bids and offers for that contract
would range from $0 (no bid) to $10, and the total premium amount would
be determined by multiplying the bid or offer by the contract
multiplier.
    In addition, by permitting the Exchange to set the exercise
settlement value on a class-by-class basis, the Exchange would be able
to list a contract having a cash settlement amount that could be
arrived at in different ways. For example, for a Credit Default Option
with a cash settlement amount of $1,000, the Exchange could: (1) Set
the exercise settlement value at $1 with a contract multiplier of
$1,000, (2) set the exercise settlement value at $10 with a contract
multiplier of 100, (3) set the exercise settlement value at $100 with a
contract multiplier of 10, or (4) set the exercise settlement value at
$1,000 with a contract multiplier of 1. The Exchange notes that it will
not list more than one Credit Default Option contract with a cash
settlement amount

arrived at in difference [sic] ways.\8\ The Exchange notes that it has
the discretion to set the exercise settlement value for binary options
on a class-by-class and is seeking to introduce that same flexibility
to Credit Default Options.\9\
---------------------------------------------------------------------------

    \8\ See e-mail from Jennifer L. Klebes, Senior Attorney, CBOE,
to Jennifer Dodd, Special Counsel, and Andrew Madar, Special
Counsel, Commission, dated September 27, 2010.
    \9\ See Rule 22.1(e).
---------------------------------------------------------------------------

    The Exchange is also proposing to change the minimum price
variation (``MPV'') for Credit Default Options. Currently, the MPV for
bids and offers on both simple and complex orders for Credit Options is
fixed at $0.05.\10\ Similar to binary options, the Exchange would like
to build in the flexibility to establish the MPV on a class-by-class
basis at an increment not less then $0.01.\11\ The ability to designate
$0.01 as the MPV would permit more pricing points than is currently
allowed and would allow for more granular pricing points when lower
exercise settlement values are designated. The Exchange believes that
the introduction of more pricing points creates tighter spreads between
quotes, which in turn benefits investors. For example, if the Exchange
designates the exercise settlement value as $1 bids and offers for that
contract would range from $0 (no bid) to $1 and only 20 price points
would be available since the MPV is $0.05 ($0.05, $0.10, etc.). If the
MPV is $0.01 and the designated exercise settlement value is $1, there
would be 100 price points available for quoting. The Exchange notes
that it has the discretion to establish the MPV on a class-by-class
basis for binary options and believes that permitting more price points
for options having a lower exercise settlement value will benefit
market participants.
---------------------------------------------------------------------------

    \10\ See Rule 29.14(b).
    \11\ See Rule 22.13(b).
---------------------------------------------------------------------------

Designation of Single Credit Event Change
    Currently, CBOE Rules 29.2, Designation of Credit Default Options,
and 29.2A, Designation of Credit Default Basket Option Contracts,
provide that a failure-to-pay default will always be a designated
Credit Event for Credit Options. In addition, the Exchange may
designate other event(s) of default and/or restructuring as Credit
Events. The Exchange believes that there may be a market for Credit
Options that specify a single Credit Event (e.g., bankruptcy as defined
in accordance with the terms of the Relevant Obligation(s)) and is
therefore proposing to provide the Exchange with the ability to
designate a single Credit Event. To make this change, the Exchange is
proposing revisions to Rules 29.2(a) and 29.2A(a)(6) respectively.
Technical Change
    The Exchange is also proposing to make a technical, non-substantive
change to Rule 29.3.
Capacity
    CBOE has analyzed its capacity and represents that it believes the
Exchange and the Options Price Reporting Authority have the necessary
systems capacity to handle the additional traffic associated with the
ability to designate $0.01 as the MPV for Credit Options. The Exchange
does not believe that this change will lead to a proliferation of
quotes and notes that the change will affect one series [sic] a product
and not multiple series (i.e., various strikes) since Credit Options do
not have strikes.
2. Statutory Basis
    The Exchange believes this rule proposal 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.\12\ Specifically, the Exchange believes that the
proposed rule change is consistent with the Section 6(b)(5) Act \13\
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, and thereby will provide investors with additional tools to
hedge risk and tailor their investment needs.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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.

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

    No written comments were solicited or received with respect to the
proposed rule change.

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 self-regulatory organization consents, the Commission will:
    (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:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number SR-CBOE-2010-046 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2010-046. 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 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
a.m. and 3 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 publicly available. All submissions
should refer to File Number SR-CBOE-2010-046 and should be submitted on
or before October 28, 2010.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-25251 Filed 10-6-10; 8:45 am]
BILLING CODE 8011-01-P