[Federal Register Volume 79, Number 155 (Tuesday, August 12, 2014)]
[Notices]
[Pages 47165-47170]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-18978]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72777; File No. SR-MIAX-2014-39]
Self-Regulatory Organizations: Miami International Securities
Exchange LLC; Notice of Filing of a Proposed Rule Change To List and
Trade Options on Shares of the Market Vectors ETFs
August 6, 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 July 28, 2014, Miami International Securities
Exchange LLC (``MIAX'' or ``Exchange'') filed with the Securities and
Exchange Commission (``SEC'' or ``Commission'') a proposed rule change
as described in Items I, II, and III below, which Items have been
prepared by the Exchange. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to list and trade on the Exchange
options on shares of the Market Vectors Brazil Small-Cap ETF (``BRF''),
Market Vectors Indonesia Index ETF (``IDX''), Market Vectors Poland ETF
(``PLND''), and Market Vectors Russia ETF (``RSX'').
The text of the proposed rule change is available on the Exchange's
Web site at http://www.miaxoptions.com/filter/wotitle/rule_filing, at
MIAX's principal office, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list for trading on the Exchange options
on the shares of the Market Vectors Brazil Small-Cap ETF,\3\ Market
Vectors Indonesia Index ETF, Market Vectors Poland ETF, and Market
Vectors Russia ETF \4\ (collectively the ``Market Vector ETFs''). MIAX
Rule 402 establishes the Exchange's initial listing standards for
equity options (the ``Listing Standards''). The Listing Standards
permit the Exchange to list options on the shares of open-end
investment companies, such as the Market Vectors ETFs, without having
to file for approval with the Commission.\5\ The Exchange submits that
each of the Market Vectors ETFs substantially meet all of the initial
listing requirements. In particular, all of the requirements set forth
in Rule 402(i) for each of the Market Vectors ETFs are met except for
the requirement concerning the existence of a comprehensive
surveillance sharing agreement (``CSSA''). However, as explained below,
the Exchange submits that sufficient mechanisms exist in order to
provide adequate surveillance and regulatory information with respect
to the portfolio securities of each of the Market Vectors ETFs.
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\3\ Options on Market Vectors Brazil Small-Cap ETF are currently
listed on Chicago Board Options Exchange, Inc. (``CBOE''),
International Securities Exchange (``ISE''), and NASDAQ OMX PHLX
(``PHLX'').
\4\ Options on Market Vectors Russia ETF are currently listed on
BATS Options Exchange (``BATS''), BOX Options Exchange (``BOX''),
CBOE, PHLX, NYSE AMEX Options (``AMEX''), NYSE ARCA Options
(``ARCA''), ISE, and ISE Gemini.
\5\ MIAX Rule 402(i) provides the Listing Standards for shares
or other securities (``Exchange-Traded Fund Shares'') that are
traded on a national securities exchange and are defined as an ``NMS
stock'' under Rule 600 of Regulation NMS.
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[[Page 47166]]
Market Vectors Brazil Small-Cap ETF (``BRF'')
BRF 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 Market Vectors Brazil Small-Cap Index
(``Brazil Index'').\6\ The Brazil Index consists of stocks traded
primarily on BM&FBOVESPA. BRF employs a ``passive'' or indexing
approach to track the Brazil Index by investing in a portfolio of
securities that generally replicates the Brazil Index.\7\ Van Eck
Associates Corporation (the ``Adviser'') expects BRF to closely track
the Brazil Index so that, over time, a tracking error of 5%, or less,
is exhibited. BRF will normally invest at least eighty percent (80%) of
its assets in the securities comprising the Brazil Index. The Exchange
believes that these policies prevent BRF from being excessively
weighted in any single security or small group of securities and
significantly reduce concerns that trading in BRF could become a
surrogate for trading in unregistered securities.
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\6\ Market Vectors Index Solutions created and maintains the
Market Vectors Brazil Small-Cap Index.
\7\ As of March 20, 2014, BRF was comprised of 82 securities.
CIA HERING had the greatest individual weight at 3.39%. The
aggregate percentage weighting of the top 5 and 10 securities in the
Fund were 15.04% and 27.66%, respectively.
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Shares of the BRF (``BRF Shares'') are issued and redeemed, on a
continuous basis, at net asset value (``NAV'') in aggregation size of
50,000 shares, or multiples thereof (a ``Creation Unit''). Following
issuance, BRF Shares are traded on an exchange like other equity
securities. BRF Shares trade in the secondary markets in amounts less
than a Creation Unit and the price per BRF Share may differ from its
NAV which is calculated once daily as of the regularly scheduled close
of business of NYSE Arca.\8\
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\8\ The regularly scheduled close of trading on NYSE Arca is
normally 4:00 p.m. Eastern Time (``ET'') and 4:15 p.m. for ETFs.
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Bank of New York Mellon is the custodian, and transfer agent for
BRF. Detailed information on BRF can be found at www.vaneck.com.
The Exchange has reviewed BRF and determined that the BRF Shares
satisfy the initial listing standards, except for the requirement set
forth in MIAX Rule 402(i)(5)(ii)(B) which requires BRF to meet the
following condition:
Component securities of an index or portfolio of
securities on which the Exchange-Traded Fund Shares are based for which
the primary market is in any one country that is not subject to a
comprehensive surveillance agreement do not represent 20% or more of
the weight of the index.
The Exchange currently does not have in place a surveillance agreement
with BOVESPA.
The Exchange submits that the Commission, in the past, has been
willing to allow a national securities exchange to rely on a memorandum
of understanding entered into between regulators in the event that the
exchanges themselves cannot enter into a CSSA. The Exchange notes that
BM&FBOVESPA is under the regulatory oversight of the Comissao de
Valores Mobiliarios (``CMV''), which has the responsibility for both
Brazilian exchanges and over-the-counter markets. The Exchange further
notes that the Commission executed a memorandum of understanding with
the CMV dated as of July 24, 2012 (``Brazil-US MOU''), which provides a
framework for mutual assistance in investigatory and regulatory issues.
Based on the relationship between the SEC and CMV and the terms of the
Brazil-US MOU, the Exchange submits that both the Commission and the
CMV could acquire information from and provide information to the other
similar to that which would be required in a CSSA between exchanges.
Moreover, the Commission could make a request for information under the
Brazil-US MOU on behalf of an SRO that needed the information for
regulatory purposes. Thus, should MIAX need information on Brazilian
trading in the Brazil Index component securities to investigate
incidents involving trading of BRF options, the SEC could request such
information from the CMV under the Brazil-US MOU. While this
arrangement certainly would be enhanced by the existence of direct
exchange to exchange surveillance sharing agreements, it is nonetheless
consistent with other instances where the Commission has explored
alternatives when the relevant foreign exchange was unwilling or unable
to enter into a CSSA.\9\
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\9\ See, e.g., Securities Exchange Act Release No. 36415
(October 25, 1995), 60 FR 55620 (November 1, 1995) (SR-CBOE-95-45)
(Order Approving Proposed Rule Change Relating to the Listing and
Trading of Options on the CBOE Mexico 30 Index).
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The practice of relying on surveillance agreements or MOUs between
regulators when a foreign exchange was unable, or unwilling, to provide
an information sharing agreement was affirmed by the Commission in the
Commission's New Product Release (``New Product Release'').\10\ The
Commission noted in the New Product Release that if securing a CSSA is
not possible, an exchange should contact the Commission prior to
listing a new derivative securities product. The Commission also noted
that the Commission may determine instead that it is appropriate to
rely on a memorandum of understanding between the Commission and the
foreign regulator.
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\10\ See Securities Exchange Act Release No. 40761 (December 8,
1998), 63 FR 70952, 70959 at fn. 101 (December 22, 1998).
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The Exchange has recently contacted BM&FBOVESPA with a request to
enter into a CSSA. Until the Exchange is able to secure a CSSA with
BM&FBOVESPA, the Exchange requests that the Commission allow the
listing and trading of options on BRF without a CSSA, upon reliance of
the Brazil-US MOU entered into between the Commission and the CMV. The
Exchange believes this request is reasonable and notes that the
Commission has provided similar relief in the past. For example, the
Commission approved the Philadelphia Stock Exchange, Inc. (``PHLX'') to
rely on an MOU between the Commission and the CMV instead of a direct
CSSA with BM&FBOVESPA in order to list and trade options on Telebras
Portoflio Certicate American Depository Receipts.\11\ Additionally, the
Commission approved, on a pilot basis, proposals of competing exchanges
to list and trade options on the iShares MSCI Emerging Markets Fund
\12\ and the iShares MSCI Mexico Indext Fund.\13\
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\11\ See Securities Exchange Act Release No. 40298 (August 3,
1998), 63 FR 43435 (August 13, 1998) (SR-Phlx-1998-33).
\12\ 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).
\13\ See Securities Exchange Act Release Nos. 72213 (May 21,
2014), FR 30699 (May 28, 2014) (SR-MIAX-2014-19); 56778 (November 9,
2007), 72 FR 65113 (November 19, 2007) (SR-Amex-2007-100); 57013
(December 20, 2007), 72 FR 73923 (December 28, 2007) (SR-CBOE-2007-
140); 57014 (December 20, 2007), 72 FR 73934 (December 28, 2007)
(SR-ISE-2007-111).
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The Commission's approval of this request to list and trade options
on the BRF would otherwise render BRF compliant with all of the
applicable Listing Standards.
The Exchange shall continue to use its best efforts to obtain a
CSSA with BM&FBOVESPA, which shall reflect the following: (1) Express
language addressing market trading activity, clearing activity, and
customer identity; (2) BM&FBOVESPA's reasonable ability to obtain
access to and produce
[[Page 47167]]
requested information; and (3) based on the CSSA and other information
provided by the BM&FBOVESPA, the absence of existing rules, law or
practices that would impede the Exchange from obtaining foreign
information relating to market activity, clearing activity, or customer
identity, or in the event such rules, laws, or practices exist, they
would not materially impede the production of customer or other
information.
Market Vectors Indonesia Index ETF (``IDX'')
IDX 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 Market Vectors Indonesia Index (``Indonesia
Index'').\14\ The Indonesia Index consists of stocks traded primarily
on the Indonesia Stock Exchange. IDX employs a ``passive'' or indexing
approach to track the Indonesia Index by investing in a portfolio of
securities that generally replicates the Indonesia Index.\15\ The
Adviser expects IDX to closely track the Indonesia Index so that, over
time, a tracking error of 5%, or less, is exhibited. IDX will normally
invest at least eighty percent (80%) of its assets in the securities
comprising the Indonesia Index. IDX may concentrate its investments in
a particular industry or group of industries to the extent that the
Indonesia Index concentrates in an industry or group of industries. The
Exchange believes that these requirements and policies prevent the IDX
from being excessively weighted in any single security or small group
of securities and significantly reduce concerns that trading in IDX
could become a surrogate for trading in unregistered securities.
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\14\ Market Vectors Index Solutions created and maintains the
Market Vectors Indonesia Index.
\15\ As of June 30, 2014, IDX was comprised of 52 securities.
ASTRA INTERNATIONAL had the greatest individual weight at 8.05%. The
aggregate percentage weighting of the top 5 and 10 securities in the
Fund were 35.65% and 54.01%, respectively.
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Shares of the IDX (``IDX Shares'') are issued and redeemed, on a
continuous basis, at NAV in aggregation size of 50,000 shares, or
multiples thereof (a ``Creation Unit''). Following issuance, IDX Shares
are traded on an exchange like other equity securities. IDX Shares
trade in the secondary markets in amounts less than a Creation Unit and
the price per IDX Share may differ from its NAV which is calculated
once daily as of the regularly scheduled close of business of NYSE
Arca.\16\
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\16\ See supra note 8.
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Bank of New York Mellon is the custodian, and transfer agent for
IDX. Detailed information on IDX can be found at www.vaneck.com.
The Exchange has reviewed IDX and determined that the IDX Shares
satisfy the initial listing standards, except for the requirement set
forth in MIAX Rule 402(i)(5)(ii)(B) which requires IDX to meet the
following condition:
Component securities of an index or portfolio of
securities on which the Exchange-Traded Fund Shares are based for which
the primary market is in any one country that is not subject to a
comprehensive surveillance agreement do not represent 20% or more of
the weight of the index.
The Exchange currently does not have in place a surveillance
agreement with the Indonesia Stock Exchange. The Exchange submits that
the Commission, in the past, has been willing to allow a national
securities exchange to rely on a memorandum of understanding entered
into between regulators in the event that the exchanges themselves
cannot enter into a CSSA. The Exchange notes that the Indonesia Stock
Exchange is under the regulatory oversight of the Indonesia Financial
Services Authority (``FSA''), which has the responsibility for
Indonesian stock exchanges. The Exchange further notes that both the
Commission and FSA are signatories to the International Organization of
Securities Commissions (``IOSCO'') Multilateral Memorandum of
Understanding (``MMOU''), which provides a framework for mutual
assistance in investigatory and regulatory issues. Based on the
relationship between the SEC and FSA and the terms of the MMOU, the
Exchange submits that both the Commission and the FSA could acquire
information from and provide information to the other similar to that
which would be required in a CSSA between exchanges. Moreover, the
Commission could make a request for information under the MMOU on
behalf of an SRO that needed the information for regulatory purposes.
Thus, should MIAX need information on Indonesian trading in the
Indonesia Index component securities to investigate incidents involving
trading of IDX options, the SEC could request such information from the
FSA under the MMOU. While this arrangement certainly would be enhanced
by the existence of direct exchange to exchange surveillance sharing
agreements, it is nonetheless consistent with other instances where the
Commission has explored alternatives when the relevant foreign exchange
was unwilling or unable to enter into a CSSA.\17\
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\17\ See supra note 9.
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The practice of relying on surveillance agreements or MOUs between
regulators when a foreign exchange was unable, or unwilling, to provide
an information sharing agreement was affirmed by the Commission in the
New Product Release.\18\ The Commission noted in the New Product
Release that if securing a CSSA is not possible, an exchange should
contact the Commission prior to listing a new derivative securities
product. The Commission also noted that the Commission may determine
instead that it is appropriate to rely on a memorandum of understanding
between the Commission and the foreign regulator.
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\18\ See supra note 10.
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The Exchange has recently contacted the Indonesia Stock Exchange
with a request to enter into a CSSA. Until the Exchange is able to
secure a CSSA with the Indonesia Stock Exchange, the Exchange requests
that the Commission allow the listing and trading of options on IDX
without a CSSA, upon reliance of the MMOU entered into between the
Commission and the FSA. The Exchange believes this request is
reasonable and notes that the Commission has provided similar relief in
the past. Additionally, the Commission approved, on a pilot basis,
proposals of competing exchanges to list and trade options on the
iShares MSCI Emerging Markets Fund \19\ and the iShares MSCI Mexico
Index Fund.\20\
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\19\ See supra note 12.
\20\ See supra note 13.
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The Commission's approval of this request to list and trade options
on the IDX would otherwise render IDX compliant with all of the
applicable Listing Standards.
The Exchange shall continue to use its best efforts to obtain a
CSSA with the Indonesia Stock Exchange, which shall reflect the
following: (1) Express language addressing market trading activity,
clearing activity, and customer identity; (2) the Indonesia Stock
Exchange's reasonable ability to obtain access to and produce requested
information; and (3) based on the CSSA and other information provided
by the Indonesia Stock Exchange, 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
[[Page 47168]]
production of customer or other information.
Market Vectors Poland Index ETF (``PLND'')
PLND 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 Market Vectors Poland Index (``Poland
Index'').\21\ The Poland Index consists of stocks traded primarily on
the Warsaw Stock Exchange. PLND employs a ``passive'' or indexing
approach to track the Poland Index by investing in a portfolio of
securities that generally replicates the Poland Index.\22\ The Adviser
expects PLND to closely track the Poland Index so that, over time, a
tracking error of 5%, or less, is exhibited. PLND will normally invest
at least eighty percent (80%) of its assets in the securities
comprising the Poland Index. PLND may concentrate its investments in a
particular industry or group of industries to the extent that the
Poland Index concentrates in an industry or group of industries. The
Exchange believes that these requirements and policies prevent the PLND
from being excessively weighted in any single security or small group
of securities and significantly reduce concerns that trading in PLND
could become a surrogate for trading in unregistered securities.
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\21\ Market Vectors Index Solutions created and maintains the
Market Vectors Poland Index.
\22\ As of June 30, 2014, PLND was comprised of 30 securities.
PZU had the greatest individual weight at 8.13%. The aggregate
percentage weighting of the top 5 and 10 securities in the Fund were
36.20% and 60.49%, respectively.
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Shares of the PLND (``PLND Shares'') are issued and redeemed, on a
continuous basis, at NAV in aggregation size of 50,000 shares, or
multiples thereof (a ``Creation Unit''). Following issuance, PLND
Shares are traded on an exchange like other equity securities. PLND
Shares trade in the secondary markets in amounts less than a Creation
Unit and the price per PLND Share may differ from its NAV which is
calculated once daily as of the regularly scheduled close of business
of NYSE Arca.\23\
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\23\ See supra note 8.
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Bank of New York Mellon is the custodian, and transfer agent for
PLND. Detailed information on PLND can be found at www.vaneck.com.
The Exchange has reviewed PLND and determined that the PLND Shares
satisfy the initial listing standards, except for the requirement set
forth in MIAX Rule 402(i)(5)(ii)(B) which requires PLND to meet the
following condition:
Component securities of an index or portfolio of
securities on which the Exchange-Traded Fund Shares are based for which
the primary market is in any one country that is not subject to a
comprehensive surveillance agreement do not represent 20% or more of
the weight of the index.
The Exchange currently does not have in place a surveillance agreement
with the Warsaw Stock Exchange.
The Exchange submits that the Commission, in the past, has been
willing to allow a national securities exchange to rely on a memorandum
of understanding entered into between regulators in the event that the
exchanges themselves cannot enter into a CSSA. The Exchange notes that
the Warsaw Stock Exchange is under the regulatory oversight of the
Polish Financial Supervision Authority (``KNF''), which has the
responsibility for Polish stock exchanges. The Exchange further notes
that both the Commission and KNF are signatories to the IOSCO MMOU,
which provides a framework for mutual assistance in investigatory and
regulatory issues. Based on the relationship between the SEC and KNF
and the terms of the MMOU, the Exchange submits that both the
Commission and the KNF could acquire information from and provide
information to the other similar to that which would be required in a
CSSA between exchanges. Moreover, the Commission could make a request
for information under the MMOU on behalf of an SRO that needed the
information for regulatory purposes. Thus, should MIAX need information
on Polish trading in the Poland Index component securities to
investigate incidents involving trading of PLND options, the SEC could
request such information from the KNF under the MMOU. While this
arrangement certainly would be enhanced by the existence of direct
exchange to exchange surveillance sharing agreements, it is nonetheless
consistent with other instances where the Commission has explored
alternatives when the relevant foreign exchange was unwilling or unable
to enter into a CSSA.\24\
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\24\ See supra note 9.
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The practice of relying on surveillance agreements or MOUs between
regulators when a foreign exchange was unable, or unwilling, to provide
an information sharing agreement was affirmed by the Commission in the
New Product Release.\25\ The Commission noted in the New Product
Release that if securing a CSSA is not possible, an exchange should
contact the Commission prior to listing a new derivative securities
product. The Commission also noted that the Commission may determine
instead that it is appropriate to rely on a memorandum of understanding
between the Commission and the foreign regulator.
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\25\ See supra note 10.
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The Exchange has recently contacted the Warsaw Stock Exchange with
a request to enter into a CSSA. Until the Exchange is able to secure a
CSSA with the Warsaw Stock Exchange, the Exchange requests that the
Commission allow the listing and trading of options on PLND without a
CSSA, upon reliance of the MMOU entered into between the Commission and
the KNF. The Exchange believes this request is reasonable and notes
that the Commission has provided similar relief in the past.
Additionally, the Commission approved, on a pilot basis, proposals of
competing exchanges to list and trade options on the iShares MSCI
Emerging Markets Fund \26\ and the iShares MSCI Mexico Index Fund.\27\
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\26\ See supra note 12.
\27\ See supra note 13.
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The Commission's approval of this request to list and trade options
on the PLND would otherwise render PLND compliant with all of the
applicable Listing Standards.
The Exchange shall continue to use its best efforts to obtain a
CSSA with the Warsaw Stock Exchange, which shall reflect the following:
(1) Express language addressing market trading activity, clearing
activity, and customer identity; (2) the Warsaw Stock Exchange's
reasonable ability to obtain access to and produce requested
information; and (3) based on the CSSA and other information provided
by the Warsaw Stock Exchange, 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.
Market Vectors Russia Index ETF (``RSX'')
RSX 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 Market Vectors Russia Index (``Russia
Index'').\28\ The Russia Index consists of stocks traded primarily on
the Moscow Exchange. RSX employs
[[Page 47169]]
a ``passive'' or indexing approach to track the Russia Index by
investing in a portfolio of securities that generally replicates the
Russia Index.\29\ The Adviser expects RSX to closely track the Russia
Index so that, over time, a tracking error of 5%, or less, is
exhibited. RSX will normally invest at least eighty percent (80%) of
its assets in the securities comprising the Russia Index. The Exchange
believes that these requirements and policies prevent the RSX from
being excessively weighted in any single security or small group of
securities and significantly reduce concerns that trading in RSX could
become a surrogate for trading in unregistered securities.
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\28\ Market Vectors Index Solutions created and maintains the
Market Vectors Russia Index.
\29\ As of June 30, 2014, RSX was comprised of 51 securities.
GAZPROM OAO-SPON ADR had the greatest individual weight at 8.38%.
The aggregate percentage weighting of the top 5 and 10 securities in
the Fund were 35.90% and 60.25%, respectively.
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Shares of the RSX (``RSX Shares'') are issued and redeemed, on a
continuous basis, at NAV in aggregation size of 50,000 shares, or
multiples thereof (a ``Creation Unit''). Following issuance, RSX Shares
are traded on an exchange like other equity securities. RSX Shares
trade in the secondary markets in amounts less than a Creation Unit and
the price per RSX Share may differ from its NAV which is calculated
once daily as of the regularly scheduled close of business of NYSE
Arca.\30\
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\30\ See supra note 8.
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Bank of New York Mellon is the custodian, and transfer agent for
RSX. Detailed information on RSX can be found at www.vaneck.com.
The Exchange has reviewed RSX and determined that the RSX Shares
satisfy the initial listing standards, except for the requirement set
forth in MIAX Rule 402(i)(5)(ii)(B) which requires RSX to meet the
following condition:
Component securities of an index or portfolio of
securities on which the Exchange-Traded Fund Shares are based for which
the primary market is in any one country that is not subject to a
comprehensive surveillance agreement do not represent 20% or more of
the weight of the index.
The Exchange currently does not have in place a surveillance
agreement with the Moscow Exchange. The Exchange submits that the
Commission, in the past, has been willing to allow a national
securities exchange to rely on a memorandum of understanding entered
into between regulators in the event that the exchanges themselves
cannot enter into a CSSA. The Exchange notes that the Moscow Exchange
is under the regulatory oversight of the Federal Commission on
Securities Market of Russia (``FCSM''), which has the responsibility
for Russian stock exchanges. The Exchange further notes that Commission
executed a memorandum of understanding with the Federal Commission on
Securities and the Capital Market of the Government of the Russian
Federation (``FCSCM''), a forerunner of the FCSM, dated as of December
6, 1995 (``Russia-US MOU''). Based on the relationship between the SEC
and FCSM and the terms of the Russia-US MOU, the Exchange submits that
both the Commission and the FCSM could acquire information from and
provide information to the other similar to that which would be
required in a CSSA between exchanges. Moreover, the Commission could
make a request for information under the Russia-US MOU on behalf of an
SRO that needed the information for regulatory purposes. Thus, should
MIAX need information on Russian trading in the Russia Index component
securities to investigate incidents involving trading of RSX options,
the SEC could request such information from the FCSM under the Russia-
US MOU. While this arrangement certainly would be enhanced by the
existence of direct exchange to exchange surveillance sharing
agreements, it is nonetheless consistent with other instances where the
Commission has explored alternatives when the relevant foreign exchange
was unwilling or unable to enter into a CSSA.\31\
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\31\ See supra note 9.
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The practice of relying on surveillance agreements or MOUs between
regulators when a foreign exchange was unable, or unwilling, to provide
an information sharing agreement was affirmed by the Commission in the
New Product Release.\32\ 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.
---------------------------------------------------------------------------
\32\ See supra note 10.
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The Exchange has recently contacted the Moscow Exchange with a
request to enter into a CSSA. Until the Exchange is able to secure a
CSSA with the Moscow Exchange, the Exchange requests that the
Commission allow the listing and trading of options on RSX without a
CSSA, upon reliance of the Russia-US MOU entered into between the
Commission and the FCSM. The Exchange believes this request is
reasonable and notes that the Commission has provided similar relief in
the past. Additionally, the Commission approved, on a pilot basis,
proposals of competing exchanges to list and trade options on the
iShares MSCI Emerging Markets Fund \33\ and the iShares MSCI Mexico
Index Fund.\34\
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\33\ See supra note 12.
\34\ See supra note 13.
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The Commission's approval of this request to list and trade options
on the RSX would otherwise render RSX compliant with all of the
applicable Listing Standards.
The Exchange shall continue to use its best efforts to obtain a
CSSA with the Moscow Exchange, which shall reflect the following: (1)
Express language addressing market trading activity, clearing activity,
and customer identity; (2) the Moscow Exchange's reasonable ability to
obtain access to and produce requested information; and (3) based on
the CSSA and other information provided by the Moscow Exchange, the
absence of existing rules, law or practices that would impede the
Exchange from obtaining foreign information relating to market
activity, clearing activity, or customer identity, or in the event such
rules, laws, or practices exist, they would not materially impede the
production of customer or other information.
2. Statutory Basis
MIAX believes that its proposed rule change is consistent with
Section 6(b) of the Act \35\ in general, and furthers the objectives of
Section 6(b)(5) of the Act \36\ 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 Market Vectors ETFs will
benefit investors by providing them with valuable risk management
tools.
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\35\ 15 U.S.C. 78f(b).
\36\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes this proposed rule change will benefit
investors by providing additional methods to trade options on the
Market Vectors ETFs, and by providing them with valuable risk
management tools. Specifically, the
[[Page 47170]]
Exchange believes that market participants on MIAX would benefit from
the introduction and availability of options on the Market Vectors ETFs
in a manner that is similar to other exchanges and will provide
investors with yet another venue on which to trade these products. The
Exchange notes that the rule change is being proposed as a competitive
response to other competing options exchanges that already list and
trade options on the Market Vectors ETFs and believes this proposed
rule change is necessary to permit fair competition among the options
exchanges. For all the reasons stated above, the Exchange does not
believe that the proposed rule change will impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of the Act, and believes the proposed change will enhance competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission shall: (a) By order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
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-2014-39 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-2014-39. 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-2014-39 and should be
submitted on or before September 2, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
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\37\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-18978 Filed 8-11-14; 8:45 am]
BILLING CODE 8011-01-P