[Federal Register Volume 79, Number 102 (Wednesday, May 28, 2014)]
[Notices]
[Pages 30669-30671]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-12227]
[[Page 30669]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72213; File No. SR-MIAX-2014-19]
Self-Regulatory Organizations; Miami International Securities
Exchange LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change by Miami International Securities Exchange LLC To
List and Trade on the Exchange Options on Shares of the iShares MSCI
Mexico Index Fund
May 21, 2014.
Pursuant to the provisions of Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that, on May 13, 2014, Miami International Securities
Exchange LLC (``MIAX'' or ``Exchange'') filed with the Securities and
Exchange Commission (``Commission'') a proposed rule change as
described in Items I 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 list and trade on the Exchange options on
shares of the iShares MSCI Mexico Index Fund.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list for trading on the Exchange, options
on the shares of the iShares MSCI Mexico Index Fund (the ``Fund'')
(``EWW''). MIAX Rule 402 establishes the Exchange's initial listing
standards for equity options (the ``Listing Standards''). This proposed
rule change is based on similar filings submitted by NYSE Amex
(``Amex''), Chicago Board Options Exchange (``CBOE''), and
International Securities Exchange (``ISE'').\3\ The Listing Standards
permit the Exchange to list options on the shares of open-end
investment companies, such as the Fund, without having to file for
approval with the Commission.\4\ The Exchange submits that the shares
of the Fund substantially meet all of the initial listing requirements.
In particular, all of the requirements set forth in Rule 402(i) are met
except for the requirement concerning the existence of a comprehensive
surveillance sharing agreement (``CSSA''). However, the Exchange
submits that sufficient mechanisms exist in order to provide adequate
surveillance and regulatory information with respect to the portfolio
securities of the Fund.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release Nos. 56778 (November 9,
2007), 72 FR 65113 (November 19, 2007) (SR-Amex-2007-100); 57013
(December 20, 2007), 72 FR 73923 (December 28, 2007) (SR-CBOE-2007-
140); 57014 (December 20, 2007), 72 FR 73934 (December 28, 2007)
(SR-ISE-2007-111).
\4\ MIAX Rule 402(i) provides the Listing Standards for shares
or other securities (``Exchange-Traded Fund Shares'') that are
traded on a national securities exchange and are defined as an ``NMS
stock'' under Rule 600 of Regulation NMS.
---------------------------------------------------------------------------
The Fund is registered pursuant to the Investment Company Act of
1940 as a management investment company designed to hold a portfolio of
securities which track the MSCI Mexico Index (``Index'').\5\ The Index
consists of stocks traded primarily on the Bolsa Mexicana de Valores
(the ``Bolsa''). The Fund employs a ``representative sampling''
methodology to track the Index by investing in a representative sample
of Index securities having a similar investment profile as the
Index.\6\ BlackRock Fund Advisors (``BFA'' or the ``Adviser'') expects
the Fund to closely track the Index so that, over time, a tracking
error of 5%, or less, is exhibited. Securities selected by the Fund
have aggregate investment characteristics (based on market
capitalization and industry weightings), fundamental characteristics
(such as return variability, earnings valuation and yield) and
liquidity measures similar to those of the Index. The Fund will not
concentrate its investments (i.e., hold 25% or more of its total assets
in the stocks of a particular industry or group of industries), except,
to the extent practicable, to reflect the concentration in the Index.
The Fund will invest at least eighty percent (80%) of its assets in the
securities comprising the Index and/or related American Depositary
Receipts (``ADRs''). In addition, at least ninety percent (90%) of the
Fund's assets will be invested in the securities comprising the Index
or other related Mexican securities or ADRs. The Fund may also invest
its other assets in futures contracts, options on futures contracts,
listed options, over-the-counter (``OTC'') options, and swaps related
to the Index, as well as cash and cash equivalents. The Exchange
believes that these requirements and policies prevent the Fund from
being excessively weighted in any single security or small group of
securities and significantly reduce concerns that trading in the Fund
could become a surrogate for trading in unregistered securities.
---------------------------------------------------------------------------
\5\ Morgan Stanley Capital International Inc. (``MSCI'') created
and maintains the Index.
\6\ As of February 28, 2014, the Fund was comprised of 51
securities. America Movil SA de CV-Series L had the greatest
individual weight at 16.69%. The aggregate percentage weighting of
the top 5 and 10 securities in the Fund were 43.68% and 62.82%,
respectively.
---------------------------------------------------------------------------
Shares of the Fund (``Fund Shares'') are issued and redeemed, on a
continuous basis, at net asset value (``NAV'') in aggregation size of
100,000 shares, or multiples thereof (a ``Creation Unit''). Following
issuance, Fund Shares are traded on an exchange like other equity
securities.
The Fund Shares trade in the secondary markets in amounts less than
a Creation Unit and the price per Fund Share may differ from its NAV
which is calculated once daily as of the regularly scheduled close of
business of NYSE Arca.\7\
---------------------------------------------------------------------------
\7\ The regularly scheduled close of trading on NYSE Arca is
normally 4:00 p.m. Eastern Time (``ET'') and 4:15 p.m. for ETFs.
---------------------------------------------------------------------------
State Street Bank and Trust Company, the administrator, custodian,
and transfer agent for the Fund, calculates the Fund's NAV. Detailed
information on the Fund can be found at www.ishares.com.
The Exchange has reviewed the Fund and determined that the Fund
Shares satisfy the initial listing standards, except for the
requirement set forth in MIAX Rule 402(i)(5)(ii)(A) which requires the
Fund to meet the following condition:
any non-U.S. component securities of an index or portfolio
of securities on which the Exchange-Traded Fund Shares are based that
are not subject to comprehensive surveillance agreements do not in the
aggregate represent more than 50% of the weight of the index or
portfolio.
[[Page 30670]]
The Exchange currently does not have in place a surveillance
agreement with Bolsa.
The Exchange submits that the Commission, in the past, has been
willing to allow a national securities exchange to rely on a memorandum
of understanding entered into between regulators in the event that the
exchanges themselves cannot enter into a CSSA. Other options exchanges
have previously attempted to enter into a CSSA with Bolsa.\8\ The CBOE
previously attempted to enter into a CSSA with Bolsa at or about the
time when the CBOE sought approval to list for trading options on the
CBOE Mexico 30 Index in 1995, which was comprised of stocks trading on
Bolsa.\9\ Since Bolsa was unable to provide a surveillance agreement,
the Commission allowed the CBOE to rely on the memorandum of
understanding executed by the Commission and the CNBV,\10\ dated as of
October 18, 1990 (``MOU'').\11\ The Commission noted that in cases
where it would be impossible to secure a CSSA, the Commission relied in
the past on surveillance sharing agreements between the relevant
regulators.\12\ The Commission further noted that, pursuant to the
terms of the MOU, it was the Commission's understanding that both the
Commission and the CNBV could acquire information from, and provide
information to, the other similar to that which would be required in a
CSSA between exchanges and, therefore, should the CBOE need information
on Mexican trading in the component securities of the CBOE Mexico 30
Index, the Commission could request such information from the CNBV
under the MOU.\13\
---------------------------------------------------------------------------
\8\ See e.g., Securities Exchange Act Release Nos. 34500 (August
8, 1994) 59 FR 41534 (August 12, 1994) (SR-Amex-94-20); 56778
(November 9, 2007), 72 FR 65113 (November 19, 2007) (SR-Amex-2007-
100).
\9\ See Securities Exchange Act Release No. 36415 (October 25,
1995), 60 FR 55620 (November 1, 1995) (SR-CBOE-95-45).
\10\ The National Commission for Banking and Securities, or
``CNBV,'' is Mexico's regulatory body for financial markets and
banking.
\11\ See Securities Exchange Act Release No. 36415 (October 25,
1995), 60 FR 55620 at fn. 23 (November 1, 1995) (SR-CBOE-95-45).
\12\ Id.
\13\ Id.
---------------------------------------------------------------------------
The practice of relying on surveillance agreements or MOUs between
regulators when a foreign exchange was unable, or unwilling, to provide
an information sharing agreement was affirmed by the Commission in the
Commission's New Product Release (``New Product Release'').\14\ The
Commission noted in the New Product Release that if securing a CSSA is
not possible, an exchange should contact the Commission prior to
listing a new derivative securities product. The Commission also noted
that the Commission may determine instead that it is appropriate to
rely on a memorandum of understanding between the Commission and the
foreign regulator.
---------------------------------------------------------------------------
\14\ See Securities Exchange Act Release No. 40761 (December 8,
1998), 63 FR 70952, 70959 at fn. 101 (December 22, 1998).
---------------------------------------------------------------------------
The Exchange has recently contacted Bolsa with a request to enter
into a CSSA. Until the Exchange is able to secure a CSSA with Bolsa,
the Exchange requests that the Commission allow the listing and trading
of options on the Fund without a CSSA, upon reliance of the MOU entered
into between the Commission and the CNBV. The Exchange believes this
request is reasonable and notes that the Commission has provided
similar relief in the past. For example, the Commission approved, on a
pilot basis, proposals of competing exchanges to list and trade options
on the iShares MSCI Emerging Markets Fund.\15\
---------------------------------------------------------------------------
\15\ See Securities Exchange Act Release Nos. 53824 (May 17,
2006), 71 FR 30003 (May 24, 2006) (SR-Amex-2006-43); 54081 (June 30,
2006), 71 FR 38911 (July 10, 2006) (SR-Amex-2006-60); 54553
(September 29, 2006), 71 FR 59561 (October 10, 2006) (SR-Amex-2006-
91); 55040 (January 3, 2007), 72 FR 1348 (January 11, 2007) (SR-
Amex-2007-01); and 55955 (June 25, 2007), 72 FR 36079 (July 2, 2007)
(SR-Amex-2007-57); 56324 (August 27, 2007), 72 FR 50426 (August 31,
2007) (SR-ISE-2007-72).
---------------------------------------------------------------------------
The Commission's approval of this request to list and trade options
on the Fund would otherwise render the Fund compliant with all of the
applicable Listing Standards.
The Exchange shall continue to use its best efforts to obtain a
CSSA with Bolsa, which shall reflect the following: (1) Express
language addressing market trading activity, clearing activity, and
customer identity; (2) the Bolsa's reasonable ability to obtain access
to and produce requested information; and (3) based on the CSSA and
other information provided by the Bolsa, the absence of existing rules,
law or practices that would impede the Exchange from obtaining foreign
information relating to market activity, clearing activity, or customer
identity, or in the event such rules, laws, or practices exist, they
would not materially impede the production of customer or other
information.
2. Statutory Basis
The Exchange believes that its proposed rule change is consistent
with Section 6(b) \16\ of the Act in general, and furthers the
objectives of Section 6(b)(5) \17\ of the Act in particular, in that it
is designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, to remove impediments to and perfect the
mechanisms of a free and open market and a national market system and,
in general, to protect investors and the public interest. In
particular, the Exchange believes listing and trading of options on the
iShares MSCI Mexico Index Fund will benefit investors by providing them
with valuable risk management tools.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes this proposed rule change will benefit
investors by providing additional methods to trade options on the
iShares MSCI Mexico Index Fund, and by providing them with valuable
risk management tools. Specifically, the Exchange believes that market
participants on MIAX would benefit from the introduction and
availability of options on the iShares MSCI Mexico Index Fund in a
manner that is similar to other exchanges and will provide investors
with yet another venue on which to trade these products. The Exchange
notes that the rule change is being proposed as a competitive response
to other competing options exchanges \18\ and believes this proposed
rule change is necessary to permit fair competition among the options
exchanges. For all the reasons stated above, the Exchange does not
believe that the proposed rule change will impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of the Act, and believes the proposed change will enhance competition.
---------------------------------------------------------------------------
\18\ See Securities Exchange Act Release Nos. 56778 (November 9,
2007), 72 FR 65113 (November 19, 2007) (SR-AMEX-2007-100); 57013
(December 20, 2007), 72 FR 73923 (December 28, 2007) (SR-CBOE-2007-
140); 57014 (December 20, 2007), 72 FR 73934 (December 28, 2007)
(SR-ISE-2007-111).
---------------------------------------------------------------------------
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
[[Page 30671]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change does not (i) significantly affect
the protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \19\ and Rule 19b-4(f)(6)
thereunder.\20\
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission.
---------------------------------------------------------------------------
The Exchange has asked the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. The Commission believes that waiving the 30-day operative delay
is consistent with the protection of investors and the public interest.
The Commission notes that options on the iShares MSCI Mexico Index Fund
currently trade on other exchanges. The Commission designates the
proposed rule change to be operative upon filing.\21\
---------------------------------------------------------------------------
\21\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
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 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-MIAX-2014-19 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-MIAX-2014-19. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-MIAX-2014-19 and should be
submitted on or before June 18, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
---------------------------------------------------------------------------
\22\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-12227 Filed 5-27-14; 8:45 am]
BILLING CODE 8011-01-P