#immediate effectiveness

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Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 6.1A To Adopt a Definition of “Professional Customer” on the Exchange

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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange is proposing to amend Rule 6.1A (Definitions and References—OX) to include a definition of “Professional Customer” and to amend Commentary .03 of Rule 6.69 to specify how all Professional Customer orders should be marked. As proposed, the new term, “Professional Customer” would be defined in Exchange Rule 6.1A(a)(4A), as a person or entity that (i) is not a broker or dealer in securities, and (ii) places more than 390 orders in listed options per day on average during a calendar month for its own beneficial account(s). In connection with this new definition, the Exchange proposes to add to Commentary of Rule 6.69 the origin code OTP Holders would be required to use to properly represent orders of a “Professional Customer.” [4] To determine whether an order is a Professional Customer order, OTP Holders would be required to review their customers’ activity on at least a quarterly basis to determine whether orders that are not for the account of a broker or dealer should be represented as Customer orders or Professional Customer orders. [5]

The Exchange believes that identifying Professional Customer accounts based upon the average number of orders entered in qualified accounts is an appropriate, objective approach that will reasonably distinguish such persons and entities from non-professional, retail investors or market participants. The Exchange believes that the proposed threshold of 390 orders per day on average over a calendar month far exceeds the number of orders that are entered by retail investors in a single day and therefore is an appropriate threshold for identifying non-retail Customers. [6] In addition, basing the standard on the number of orders that are entered in listed options for a qualified account(s) assures that Professional Customer account holders cannot inappropriately avoid the purpose of the rule by spreading their trading activity over multiple exchanges, and using an average number over a calendar month will prevent gaming of the 390 order threshold. The Exchange also proposes to make corresponding changes to Rule 6.69 regarding the marking of orders.

The Professional Customer definition proposed by the Exchange, including the 390 orders per day threshold, is similar to designations that have been adopted by all other options exchanges. [7] The Exchange is not proposing at this time to revise any order execution or processing rules, including its priority rules, to change the treatment of Professional Customers. [8] Instead, Professional Customer orders will be treated as Customer orders under Exchange rules for all purposes, except those related to order marking. [9] As the only options Exchange to have not yet adopted the Professional Customer definition, the Exchange’s proposal will allow OTP Holders to mark their Professional Customer orders similarly regardless of whether the order is placed on the Exchange or another options exchange. Moreover, with the proposed Professional Customer designation in place, the Exchange’s rules will facilitate cross-market initiatives (such as harmonizing rules relating to Obvious Errors).

The Exchange will announce by Trader Update when it will implement this proposed rule change and when the functionality to support the marking of Professional Customer orders is available. In order to provide sufficient time for OTP Holders to prepare any system changes, the date of implementation shall be no sooner than 30 calendar days after the publication of the Trader Update. 2. Statutory Basis The proposed rule change is consistent with Section 6(b) [10] of the Act, in general, and furthers the objectives of Section 6(b)(5), [11] in particular, in that it is designed to promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and, in general, to protect investors and the public interest.

The Exchange believes that the proposed rule change, by defining Professional Customer, will remove impediments to, and perfect the mechanism of, a free and open market and a national market system, by providing consistent regulation for OTP Holders that are members of other SROs with analogous rules, thus allowing market participants to route orders to all markets using the same capacity. Further, the Exchange believes that, by harmonizing its rules with every other options market to add the term Professional Customer, it will promote just and equitable principles of trade by better allowing the market participants to be treated similarly across exchanges. In requiring market participants to identify their orders, the Exchange believes it promotes just and equitable principles of trade by allowing it a better understanding of the trading activity on its market. Finally, the Exchange believes that amending Rule 6.69 to conform with the addition of the Professional Customer designation will protect investors and the public interest by providing guidance to OTP Holders regarding the marking of Professional Customer orders. 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 not designed to address any aspect of competition, whether between the Exchange and its competitors, or among market participants. Instead, the proposed rule change is designed to adopt a category of market participant on the same terms as that of every other options exchange. 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.

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Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Extend the Penny Pilot Program through June 30, 2015

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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The Penny Pilot Program (the “Pilot Program”) is scheduled to expire on December 31, 2014. CBOE proposes to extend the Pilot Program until June 30, 2015. CBOE believes that extending the Pilot Program will allow for further analysis of the Pilot Program and a determination of how the Pilot Program should be structured in the future. During this extension of the Pilot Program, CBOE proposes that it may replace any option class that is currently included in the Pilot Program and that has been delisted with the next most actively traded, multiply listed option class that is not yet participating in the Pilot Program (“replacement class”). Any replacement class would be determined based on national average daily volume in the preceding six months, [5] and would be added on the second trading day following January 1, 2015. CBOE will employ the same parameters to prospective replacement classes as approved and applicable in determining the existing classes in the Pilot Program, including excluding high-priced underlying securities. [6] CBOE will announce to its Trading Permit Holders by circular any replacement classes in the Pilot Program.

CBOE is specifically authorized to act jointly with the other options exchanges participating in the Pilot Program in identifying any replacement class. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act. [7] Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) [8] requirements that the rules of an exchange be 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 regulating, clearing, settling, processing information with respect to, and facilitation transactions in securities, 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. Additionally, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) [9] requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. In particular, the proposed rule change allows for an extension of the Pilot Program for the benefit of market participants.

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 the purposes of the Act. Specifically, the Exchange believes that, by extending the expiration of the Pilot Program, the proposed rule change will allow for further analysis of the Pilot Program and a determination of how the Program shall be structured in the future. In doing so, the proposed rule change will also serve to promote regulatory clarity and consistency, thereby reducing burdens on the marketplace and facilitating investor protection. In addition, the Exchange has been authorized to act jointly in extending the Pilot Program and believes the other exchanges will be filing similar extensions. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received from Members, Participants or Others The Exchange neither solicited nor received comments on the proposed rule change.

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Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Billing Policy

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 the proposed rule change is to amend Rule 7011, which was recently filed, [3] to require all pricing disputes to be submitted to the Exchange in writing [4] and accompanied by supporting documentation within sixty days of receipt of an invoice. The Exchange believes that this practice will conserve Exchange resources which are expended when untimely billing disputes require staff to research applicable fees and order information beyond two months after the transaction occurred.

The sixty days would first apply to invoices related to transactional billing in December 2014 and would apply thereafter. [5] The Exchange proposes to apply the billing policy in Rule 7011 to the following 7000 series Rules: 7001 (Membership Fees), 7015 (Access Services), 7016 (BX Pre-Trade Risk Management), 7018 (NASDAQ OMX BX Equities System Order Execution and Routing), 7021 (BX Trading and Compliance Data Package Fee), 7027 (Aggregation of Activity of Affiliated Members), 7029 (Installation, Removal or Relocation), 7030 (Other Services), 7034 (Co-Location Services), 7051 (Direct Connectivity to BX), 7055 (Short Sale Monitor), 7058 (QView).

Further, this proposal would provide a cost savings to the Exchange in that it would alleviate administrative processes related to the untimely review of billing disputes which divert staff resources away from the Exchange’s regulatory and business purposes. In addition, the Exchange proposes to amend the title of Exchange Rule 7011 from “Collection of Exchange Fees and Other Claims” to “Collection of Exchange Fees and Other Claims and Billing Policy.” The Exchange believes that the proposed title provides a more specific description of Rule 7011. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act [6] in general, and furthers the objectives of Section 6(b)(5) of the Act [7] 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, by providing a uniform practice for disputing fees.

The Exchange believes the requirement that all pricing disputes, for certain specified fees and rebates, must be submitted to the Exchange within sixty days from receipt of the invoice will provide its members with guidance on disputing pricing. The proposal equally applies to all BX members. Also, the Exchange’s administrative costs would be lowered as a result of this policy because staff resources would not be diverted to review untimely requests regarding billing. The Exchange believes that sixty days is ample time to review an invoice and dispute any pricing related to the transactions for that time period. This policy applies today with respect to BX Options billing. [8] The Exchange is seeking to apply this policy to all BX members alike in the same manner.

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 that is not necessary or appropriate in furtherance of the purposes of the Act. The billing policy would apply uniformly to all BX equity members as it does today with all Options Participants. All BX members would be subject to this policy. Further, this proposal would provide a cost savings to the Exchange in that it would alleviate administrative processes related to the untimely review of billing disputes which divert staff resources away from the Exchange’s regulatory and business purposes. 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.

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Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Collection of Exchange Fees

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 the proposed rule change is to amend Rule 7011 to require BX members, and all applicants for registration as such, to provide a clearing account number for an account at NSCC for purposes of permitting the Exchange to debit any undisputed or final fees, fines, charges and/or other monetary sanctions or other monies due and owing to the Exchange or other charges related to certain 7000 series rules [3] and the 8000 [4] series rules which are due and owing to BX. The Exchange would entitle Rule 7011 “Collection of Exchange Fees and Other Claims.”

Currently, the Exchange requires all Options Participants to provide such an NSCC account number. [5] The Exchange believes that the proposed debiting process for BX members that conduct an equities business would create an efficient method of collecting undisputed or final fees, fines, charges and/or other monetary sanctions or monies due and owing to the Exchange. [6] Further, this proposal would provide a cost savings to the Exchange in that it would alleviate administrative processes related to the collection of monies owed to the Exchange by BX members conducting an equities business, as it does today for BX Options Participants. Collection matters divert staff resources away from the Exchange’s regulatory and business purposes. In addition, the debiting process would prevent BX member accounts from becoming overdue.

The Exchange proposes to require BX members and applicants to provide a clearing account number for an account at NSCC in order to permit the Exchange to debit any undisputed or final fees, fines, charges and/or monetary sanctions or other monies due and owing to the Exchange or other charges related to the 7000 series rules, as specified below, and the 8000 series rules. Specifically, the following 7000 series rules will be subject to proposed Rule 7011: 7001 (Membership Fees), 7015 (Access Services), 7016 (BX Pre-Trade Risk Management), 7018 (NASDAQ OMX BX Equities System Order Execution and Routing), 7021 (BX Trading and Compliance Data Package Fee), 7027 (Aggregation of Activity of Affiliated Members), 7029 (Installation, Removal or Relocation), 7030 (Other Services), 7034 (Co-Location Services), 7051 (Direct Connectivity to BX), 7055 (Short Sale Monitor), 7058 (QView). The Exchange would send a monthly invoice [7] to each BX member on approximately the 3th-10th business day of the following month. [8] The Exchange would also send a file to NSCC each month on approximately the 23rd of the following month to initiate the debit of the appropriate amount stated on the BX member’s invoice for the prior month. Because the BX member would receive an invoice well before any monies are debited (normally within two weeks), the BX member would have adequate time to contact the staff with any questions concerning its invoice. If a BX member disagrees with the invoice, the Exchange would not commence the debit until the dispute is resolved. Specifically, the Exchange will not include the disputed amount in the debit if the member has disputed the amount in writing to the Exchange’s designated staff by the 15th of the month, or the following business day if the 15th is not a business day, and the amount in dispute is at least $10,000 or greater.

Once NSCC receives the file from the Exchange, NSCC would proceed to debit the amounts indicated from the clearing members account. In the instance where the BX member clears through an Exchange clearing member, the estimated transaction fees owed to the Exchange are typically debited by the clearing member on a daily basis in order to ensure adequate funds have been escrowed. The Exchange would debit any monies owed including undisputed or final fees, fines, charges and/or monetary sanctions or monies due and owed to the Exchange. [9] The Exchange believes that the debit process would eliminate the risk of unpaid invoices because of the large amounts of capital held at NSCC by BX members.

The Exchange proposes this rule change become operative with respect to December 2014 billing. The Exchange will debit December 2014 billing in January 2015 pursuant to the process described in this rule change. [10] The Exchange will notify BX members of this rule change in an Equity Trader Alert to provide its members ample time to provide the Exchange with the information necessary for the direct debit and prepare for the change to the collection process. BX members will be required to provide an NSCC number prior to January 1, 2015.

2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act [11] in general, and furthers the objectives of Section 6(b)(5) of the Act [12] 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 mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest by providing BX members with an efficient process to pay undisputed or final fees, fines, charges and/or monetary sanctions or monies dues and owing to the Exchange.

The Exchange believes that its proposal to debit NSCC accounts is reasonable because it would ease the BX member’s administrative burden in paying monthly invoices, avoid overdue balances and provide same day collection from all BX members who owe monies to the Exchange.

The Exchange believes that its proposal to debit NSCC accounts is equitable and not unfairly discriminatory because it will apply to all BX members in a uniform manner. Today, the debit process is applied to all Options Participants. 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 that is not necessary or appropriate in furtherance of the purposes of the Act. With this proposal, the proposed debit process would apply uniformly to all BX members as it does today with all Options Participants. Further, this proposal would provide a cost savings to the Exchange in that it would alleviate administrative processes related to the collection of monies owed to the Exchange for BX members conducting an equities business, as it does today for BX Options Participants. Collection matters divert staff resources away from the Exchange’s regulatory and business purposes. In addition, the debiting process would prevent BX member accounts from becoming overdue. 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.

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Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Make Changes to Settlement Procedures Regarding Seven CME Cleared OTC FX Spot, Forward and Swap Contracts

In its filing with the Commission, CME 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. CME has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of these statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change CME is registered as a DCO with the Commodity Futures Trading Commission (“CFTC”) and offers clearing services for many different futures and swaps products. The proposed rule changes that are the subject of this filing are limited to CME’s business as a DCO offering clearing services for CFTC-regulated swaps products. CME currently offers clearing services for cleared-only OTC FX contracts on a number of different currency pairs. These CME Cleared OTC FX Spot, Forward and Swap Contracts are non-deliverable foreign currency forward contracts and, as such, are considered to be “swaps” under applicable regulatory definitions. [5] CME proposes to make amendments to five of these contracts.

The amendments would impact the following CME contracts and associated rules: Rule 270H.02.A. Day of Cash Settlement of Cleared OTC U.S. Dollar/Chinese Renminbi (USD/RMB) Spot, Forwards and Swaps (Rulebook Chapter 270H: Commodity Code: USDCNY); Rule 270H.02.B.—Procedures if No Cash Settlement Price is Available for the USD/RMB Cleared OTC Spot, Forwards and Swaps Contracts;

Rule 271H.02.A. Day of Cash Settlement of Cleared OTC U.S. Dollar/ Korean Won (USD/KRW) Spot, Forwards and Swaps (Rulebook Chapter 271H: Commodity Code: USDKRW); Rule 271H.02.B.—Procedures if No Cash Settlement Price is Available for the USD/KRW Cleared OTC Spot, Forwards and Swaps Contracts; Rule 279H.02.A. Day of Cash Settlement of Cleared OTC U.S. Dollar/Indian Rupee (USD/INR) Spot, Forwards and Swaps (Rulebook Chapter 279H: Commodity Code: USDINR); Rule 280H.02.A. Day of Cash Settlement of Cleared OTC U.S. Dollar/Malaysian Ringgit (USD/MYR) Spot, Forwards and Swaps (Rulebook Chapter 280H: Commodity Code: USDMYR); Rule 281H.02.A. Day of Cash Settlement of Cleared OTC U.S. Dollar/Indonesian Rupiah (USD/IDR) Spot, Forwards and Swaps (Rulebook Chapter 281H: Commodity Code: USDIDR); Rule 282H.02.A. Day of Cash Settlement of Cleared OTC U.S. Dollar/Taiwan Dollar (USD/TWD) Spot, Forwards and Swaps (Rulebook Chapter 282H: Commodity Code: USDTWD); and Rule 283H.02.A. Day of Cash Settlement of Cleared OTC U.S. Dollar/Philippines Peso (USD/PHP) Spot, Forwards and Swaps (Rulebook Chapter 283H: Commodity Code: USDPHP). More specifically, CME is proposing to amend Rule 270H.02.B. and 271H.02.B. to remove an outdated interpretation reference regarding fallback procedures. CME will work with EMTA, a trade group focused on the global emerging markets trading and investment community, and other OTC organizations, to make sure CME is aligned in the event a rate is not determined or published. Further, CME is proposing rule changes to Rules 270H.02.A., 271H.02.A., 279H.02.A., Rule 280H.02.A., Rule 281H.02.A., Rule 282H.02.A. and Rule 283H.02.A. that would specify that in the event that a “Final Settlement Price” is not able to be determined for the applicable contracts, then the Final Settlement Price would be determined pursuant to existing CME Rule 812. [6] CME Rule 812 allows CME to establish a final settlement price in the event the final settlement price cannot be determined and alternative settlement procedures are not otherwise specified in the relevant product chapter.

The changes that are described in this filing are limited to CME’s business as a DCO clearing products under the exclusive jurisdiction of the CFTC and do not materially impact CME’s security-based swap clearing business in any way. The changes will be effective on filing. CME notes that it has also certified the proposed rule changes that are the subject of this filing to its primary regulator, the CFTC, in a separate filing, CME Submission No. 14-409. CME believes the proposed rule change is consistent with the requirements of the Act including Section 17A of the Act. [7] CME is proposing the amendments to clarify that CME would be allowed to establish a final settlement price for certain OTC FX contracts in the event a final settlement price cannot be determined and alternative settlement procedures are not otherwise specified in the relevant product chapter. These amendments to CME’s fallback procedures are designed to promote the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivatives agreements, contracts, and transactions, to assure the safeguarding of securities and funds which are in the custody or control of the clearing agency or for which it is responsible, and, in general, to protect investors and the public interest consistent with Section 17A(b)(3)(F) of the Act. [8]

Furthermore, the proposed changes are limited in their effect to products offered under CME’s authority to act as a DCO. The products that are the subject of this filing are under the exclusive jurisdiction of the CFTC. As such, the proposed CME changes are limited to CME’s activities as a DCO clearing swaps that are not security-based swaps, futures that are not security futures and forwards that are not security forwards. CME notes that the policies of the CFTC with respect to administering the Commodity Exchange Act are comparable to a number of the policies underlying the Act, such as promoting market transparency for over-the-counter derivatives markets, promoting the prompt and accurate clearance of transactions and protecting investors and the public interest. Because the proposed changes are limited in their effect to OTC FX products offered under CME’s authority to act as a DCO, the proposed changes are properly classified as effecting a change in an existing service of CME that: (a) Primarily affects the clearing operations of CME with respect to products that are not securities, including futures that are not security futures, swaps that are not security-based swaps or mixed swaps, and forwards that are not security forwards; and (b) does not significantly affect any securities clearing operations of CME or any rights or obligations of CME with respect to securities clearing or persons using such securities-clearing service. As such, the changes are therefore consistent with the requirements of Section 17A of the Act [9] and are properly filed under Section 19(b)(3)(A) [10] and Rule 19b-4(f)(4)(ii) [11] thereunder.

B. Self-Regulatory Organization’s Statement on Burden on Competition CME does not believe that the proposed rule change will have any impact, or impose any burden, on competition. The proposed amendments are designed to establish appropriate fallback settlement price procedures for several OTC FX contracts. Further, the changes are limited to CME’s derivatives clearing business and, as such, do not affect the security-based swap clearing activities of CME in any way and therefore would not impose any burden on competition that is inappropriate 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 CME has not solicited, and does not intend to solicit, comments regarding this proposed rule change. CME has not received any unsolicited written comments from interested parties.

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Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Functionality of Public Automated Routing System

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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to adopt new Rule 6.12A to describe its existing PAR operations and PAR workstation [3] functionality. The Exchange notes that PAR is currently in use on the Exchange and that PAR is referenced throughout the Rules [4] and in various Regulatory Circulars. [5] While there are various references to PAR throughout the Rules and in Regulatory Circulars, the Rules do not describe the substantive aspects of the order handling process available to users once orders are received on PAR (and thus how Trading Permit Holders (“TPHs”) or PAR Officials, [6] as applicable, may process such orders). The purpose of this rule filing is to codify the details of the Exchange’s existing PAR operations and functionalities within the Rules. The Exchange believes that adding details to the Rules regarding PAR would be useful to TPHs.

The Exchange is continuously evaluating additions to the Rules, particularly with respect to systems processes and order handling. The Exchange believes that the adoption of Rule 6.12A describing PAR functionality is consistent with this effort. Background PAR is a touch-screen order routing and handling tool that is used by TPHs and PAR Officials on the floor of the Exchange to manage and process orders that are routed to PAR for processing. PAR is equipped with a dynamic, graphical display that allows users to manually and automatically execute orders electronically through the Exchange’s central trading engine and in open outcry. In general, PAR allows users to specify execution quantities, split trades among multiple contra parties, report trades, route orders to the book, and generate trading reports, including a detailed history on all activity conducted on the workstation. The Exchange operates a dynamic order handling system (“OHS”), [7] which allows orders to be routed, processed, and transmitted to the Exchange’s trade engine, in a variety of ways on the Hybrid Trading System. The OHS may route orders directly to the Exchange’s trade engine for automatic execution and book entry, to PAR workstations located in the trading crowds for manual handling, and/or to other order management terminals (“OMTs”) located in booths on the floor of the Exchange. PAR receives orders through the OHS according to Exchange and TPH routing parameter configurations.

A TPH or PAR Official may select an order on the workstation and enter trade information such as execution quantity, price, and contra party information. The PAR interface also allows the user to direct an order to be executed or booked by the Exchange’s trade engine. Once execution of an order is completed, PAR transmits the completed execution (also referred to as a “fill”), back to the OHS. PAR users can also transmit to the trade engine a portion of a selected order to be executed or booked within the trade engine. In addition, PAR allows users to execute orders in open outcry and record information about open outcry trades for audit-trail purposes. These functions are described in greater detail below. PAR workstations may be used in the form of fixed workstation terminals or mobile devices. PAR was introduced at the Exchange in 1994 as an innovative trading automation solution. In general, PAR was developed to automate the manual trading process in open outcry, which previously required the use of paper tickets to execute customer orders. Rather than entering orders and executions into TPH computer systems, transmitting order and trade execution information to and from the Exchange’s trade engine, printing order tickets and fill reports, and physically delivering the order tickets and fill reports to counterparty brokers on the floor of the Exchange and to the Options Clearing Corporation, PAR allows users to process orders directly through the OHS and from TPH trading systems. Initially, PAR was placed in use in limited areas on the floor of the Exchange. [8] By 1997, PAR functionality was enhanced to allow the direct routing of various order types from the Exchange’s system to PAR, including the following types of orders: All or None; Opening Only; Immediate or Cancel; Market on Close; Fill or Kill; Closing Only; Minimum Quantity; Market if Touched; Stop; Not Held; and Stop Limit. [9] Notably, whether a particular order or order type routed to PAR was (and continues to be) a function of parameter controls, set by TPHs and the Exchange, that allow different order types to be selectively routed at the discretion of, and in accordance with, TPH order routing and handling instructions. [10] As technology, regulation, and trading practices have shifted, the Exchange has adapted and enhanced PAR to meet the trading needs of TPHs and the Exchange. The systemic flexibility of PAR has been (and continues to be) essential in maintaining PAR as an effective order management tool.

Until 2005, only Floor Brokers and DPMs used PAR on the floor of the Exchange, with DPMs handling agency orders on PAR including orders that could not be automatically executed and thus, routed to PAR for manual handling. In 2005, the Exchange adopted Rule 7.12, which prohibited DPMs from executing agency orders in their appointed classes and allowed the Exchange to place PAR Officials at PAR workstations for the handling of orders routed to PAR in accordance with Exchange and TPH order routing parameters. [11] TPHs and PAR Officials have continually used PAR on the floor of the Exchange since Rule 7.12 was adopted.

The Exchange considers PAR an important Exchange facility and order management tool for market participants on the Exchange. Many of the orders that cannot be automatically processed by the Exchange’s central trade engine are routed to PAR for handling. The functionalities provided on PAR that allow these orders to be processed are essential to the functioning of the Exchange and the maintenance of fair and orderly markets. The proposed rule describes the substantive functions of PAR and its central operation. Proposal The Exchange proposes to adopt Rule 6.12A to describe the operation of PAR and and [sic] functionality of its PAR workstations. Among other things, Rule 6.12A would describe how orders may be routed to PAR and what PAR users may do to process orders once they are received on PAR. Proposed Rule 6.12A describes the substantive operation of PAR and the primary functionality of the PAR workstation. The proposed Rule is not intended as a user manual or software tutorial. The Exchange notes that PAR does not allow market participants to perform any functions that are not already authorized under the Rules. Rather, PAR is a tool that may be used by market participants, at their discretion, to help facilitate the efficient and orderly processing of orders in a manner already authorized under the Rules. Thus, the purpose of the proposed rule is simply to describe and clarify the substantive functions of PAR. The Exchange believes that the proposed rule will add clarity to the Rules (inasmuch as PAR is already referenced throughout the Rules without a description of PAR or the substantive functions that may be performed on PAR) and that the proposed rule would be useful for TPHs. Under the Exchange’s proposal, the rule would describe the order processing functions of PAR including, but not limited to how PAR users may: Interact with the electronic trade engine (including executions with quotes and orders resting in the electronic book and exposure to applicable electronic auctions); execute orders in open outcry (including against other orders on the same PAR terminal (i.e., cross orders), or with other TPHs and PAR Officials); route orders to Order Management Terminals (“OMTs”) or otherwise return orders to order entry firms or the TPH that entered the order; route orders or portion thereof to an away exchange; route orders to the electronic book; reflect a price and/or quantity of orders or portion thereof in the CBOE BBO for classes trading on the Hybrid 3.0 Platform; [12]

and cancel unexecuted orders. Proposed Rule 6.12A(a) would describe the process by which orders may be routed to PAR. Proposed Rule 6.12A(b) would describe the order handling process on PAR, including the functionalities that may be achieved using a PAR workstation. Proposed Rule 6.12A(c) would describe the order types that may be handled on PAR. Proposed Rule 6.12A(d) would establish the controlling nature of the Rule with respect to previously issued Regulatory Circulars concerning PAR and its functionality. Each of these sections and the introductory paragraph of the proposed Rule are described in greater detail below.

The Exchange proposes to adopt an introductory paragraph to Rule 6.12A that would generally describe order handling and processing on PAR and PAR workstation functionality. Under the proposed introductory paragraph to Rule 6.12A, PAR would be described as an Exchange-provided order management tool for use on the Exchange’s trading floor by Trading Permit Holders or PAR Officials. The introductory paragraph would also describe the order routing process to PAR, explaining that the OHS allows for orders to be routed to and from a PAR workstation in accordance with Exchange and TPH routing parameters and as set forth in the Rules. [13]

Proposed Rule 6.12A(a) would reflect the process by which eligible orders will route to PAR. Where an order is routed for processing depends on various parameters configured by the Exchange and the TPH. TPHs are afforded discretion in where they route orders and may route orders onto various order management tools available on the Exchange according to preset or order- specific routing parameters. Depending on the order routing parameters, certain orders may route to PAR. For example, a TPH may or the Exchange may set default auto-execution “drill-through” protection limits in the Hybrid Trading System such that any order that exceeds a limit will be routed to PAR on the floor of the Exchange. These parameters may be used, to limit “drill-throughs” or protect against extreme and potentially erroneous limit prices as part of the Exchange’s risk controls. TPHs may also customize routing instructions to route certain orders to PAR for more detailed handling. Thus, the OHS provides TPHs with some flexibility in determining how best to process their orders on the Hybrid Trading System. The Exchange believes that the use of routing parameters supports TPHs’ various trading strategies, mitigates order handling and processing risks, assists the Exchange in attracting order flow and liquidity, and promotes the maintenance of a fair and orderly market. The Exchange views the use of routing parameters as an important tool to assist TPHs efficiently manage, process, and execute orders in the “hybrid” trading environment. The discretion to set order routing parameters to route an order to a preferred order management tool on the floor of the Exchange, including PAR, is codified throughout the Rules. [14] For example, under Rule 6.13(b)(i)(B), orders that are not eligible for automatic execution will route on a class-by-class basis to PAR or, at the order entry firm’s discretion, to the order entry firm’s booth or OMT. Similarly, under Rule 6.53C(e), complex orders that are marketable, but would executed at a price that is not within an acceptable percentage distance from the derived net price of the individual leg series that existed at the start of a Complex Order Auction (“COA”) will route on a class-by-class basis to PAR, or, at the order entry firm’s discretion, to the order entry firm’s booth. Accordingly, proposed Rule 6.12A(a) is modeled to reflect the discretion afforded to TPHs under the Rules with routing orders to PAR according to an order’s terms and Exchange order routing parameters.

In addition to TPH order routing parameters, the Exchange sets certain order eligibility requirements for orders routing to PAR. For example, reserve orders (which are limit orders that have both a displayed size as well as an additional non-displayed size amount) are currently not eligible to route to PAR. Accordingly, the Exchange’s proposal is modeled to reflect the fact that only eligible orders will be accepted on PAR. Under proposed Rule 6.12A(a) only “eligible” orders will be routed to PAR. Proposed paragraph 6.12A(b) would describe the substantive aspects of PAR functionality, which include: Routing an order for electronic processing; executing an order; booking an order; routing an order to an away exchange; and cancelling an order. Proposed Rule 6.12A(b)(i), would provide that orders may be submitted into the Hybrid System (including for execution against quotes and orders resting in the electronic book and exposure to appropriate electronic auctions including auctions pursuant to Rules 6.13A, 6.14A, 6.53C, 6.74B, and 24B.5B). PAR workstations are capable of handling both single-legged (“simple”) and multi-legged (“complex”) options orders, including those with a stock leg. Simple orders on PAR that are marketable may be automatically routed to the electronic book to trade with quotes or orders in the book or may be manually executed in open outcry in accordance with preset PAR user parameters and the order’s terms. Upon partial execution of an order on PAR, any remaining balance of an order that was previously on PAR may be returned to PAR or booked, provided it does not lock or cross a quote of another exchange. Similarly, complex orders on PAR that are marketable may automatically initiate an electronic auction or trade against orders in the Complex Order Book (“COB”) or with quotes of the individual leg series or may be manually executed in open outcry after the COB is cleared in accordance with preset user parameters and the order’s terms. The automatic routing functions available on PAR are reflected in the language of proposed Rule 6.12A(b), which provides orders on PAR shall be processed in accordance with the automatic settings established by the user and the order’s terms. Proposed Rule 6.12A(b)(i) would also reference the auction functions that may be performed on PAR. Eligible simple and complex orders routed to PAR in classes where electronic auction functionality is active may also be auctioned from PAR. The proposed rule would reference the auction functions available on the Hybrid Trading System under Rules 6.13A, 6.14A, 6.53C(d), 6.74B, and 24B.5B reflecting the fact that orders on PAR may be submitted for auction pursuant to routing parameter configurations and specific order handling instructions. Orders auctioned from PAR, which do not fully execute at the conclusion of the auction process, may be returned to PAR or booked in accordance with order routing parameters and order handling instructions as permitted under the Rules. [15]

Proposed Rule 6.12A(b)(ii) would provide for the execution of orders on PAR in open outcry, including against other orders on PAR and with other TPHs or PAR Officials in accordance with Rule 6.74 (Crossing Orders). Both simple and complex orders on PAR may be crossed with other orders on PAR by PAR users, including by PAR Officials. Proposed Rule 6.12A(b)(ii) would describe the process by which orders may be crossed on PAR in open outcry, including by PAR Officials, after being verbalized to the crowd. Orders that may be crossed on PAR include, but are not limited to buy and sell orders in the same options series that are marketable against each other and complex orders and inter-regulator spreads (as defined in Rule 1.1).

As provided in proposed Rule 6.12A(b)(iii), PAR workstations also allow users to route orders to an OMT designated by the TPH that entered the order or otherwise return the order to the TPH or order entry firm. Proposed Rule 6.12A(b)(iii) is a reflection of current rules which permit PAR users to route orders to a designated OMT or otherwise return an order to its originator. Under proposed Rule 6.12A(b)(iv), orders on PAR may also be routed to an away market for best execution in accordance with order protection rules under the Federal Securities Laws and the Rules including, but not limited to Rules 6.81 [16] and 7.12(b)(ii). [17]

Proposed Rule 6.12A(b)(v) describes the display functionality of a PAR workstation. CBOE PAR Officials may reflect bids and offers for orders, or portions of orders, in Hybrid 3.0 classes in the displayed CBOE BBO using the “PAR in the Quote” feature. Currently, there are no CBOE PAR Officials on the trading floor in Hybrid 3.0 trading crowds. Accordingly, PAR allows the user to reflect the price and/or quantity related to an order or portion of an order in the displayed Exchange BBO in classes of options on the Hybrid 3.0 Platform. This functionality allows PAR users to protect customer orders at specified price points while not displaying the full size of such orders (oftentimes customers may not want the full size of an order reflected in the quote). Proposed Rule 6.12A(b)(vi) would provide that unexecuted orders resting on PAR may be cancelled. All un-executed orders on PAR may be cancelled upon receipt of a cancel request from the order entry TPH or as prescribed in the routing parameters of the Exchange or order entry TPH. Proposed Rule 6.12A(c) would codify the ability of the Exchange to designate order types eligible to route to PAR and describe the types of orders that the Exchange may designate as eligible. Under the Exchange’s proposal, the Exchange would have the ability to designate any order type that it makes available to TPHs pursuant to Rule 6.53 eligible to route to PAR. Current Rule 6.53 describes and defines the order types that may be made available for trading on a class-by-class basis by the Exchange. Under the Exchange’s proposal, all order types specified in Rule 6.53 would be eligible to route to PAR, except that the order types defined in Rules 6.53(h), 6.53(o)-(r), and 6.53(t)-(v) would not be eligible to be routed to PAR. Proposed Rule 6.12A(c) is consistent with the current practices and Rules of the Exchange in that all of the order types listed in Rule 6.53 other that those listed in Rules 6.53(h), 6.53(o)-(r), and 6.53(t)-(v) are currently eligible to be routed to PAR. PAR is a technology that supports the processing of order types authorized for trading on the Exchange under Rule 6.53. Accordingly, the Exchange may make future enhancements that would permit other order types to be processed on PAR or technological issues may prevent the Exchange from processing certain order types on PAR at any given time. Proposed Rule 6.12A(c) reflects the fluidity of the PAR technology as well as the fact that PAR is an order handling tool, which only gives TPHs the ability to process orders pursuant to the Rules. Finally, under proposed Rule 6.12A(d) to the extent that any provision(s) of the proposed rule conflicts with any provision of any Regulatory Circular previously issued by the Exchange regarding the operation or functionality of PAR, the proposed rule would supersedes the limited conflicting provisions of any such Regulatory Circular. PAR has been in use for approximately a decade on the Exchange. Over the years, PAR has been enhanced and reconfigured and changed to reflect updates and changes in the Rules. Numerous Regulatory Circulars contemplate the use of PAR by DPMs rather than PAR Officials. [18] Other Regulatory Circulars reflect old Linkage rules no longer in effect under the new Order Protection rules. [19] Accordingly, to the extent that any provisions of any Regulatory Circular are in conflict with the proposed rule, such provisions would be superseded by the rule.

2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act. [20] Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) [21] requirements that the rules of an exchange be 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 regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, 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. Additionally, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) [22] requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers.

The Exchange views PAR as an important tool that allows TPHs on the trading floor of the Exchange to manage and process orders. The Exchange believes that the adoption of rules regarding the functionality of PAR will contribute to fair and orderly markets by making the Exchange’s order handling processes more transparent and understandable for users. The proposed rules are intended to assist TPHs and order entry firms in their ability to efficiently manage, process, and execute orders on the Exchange as well as assist the Exchange in its ability to effectively attract order flow and liquidity to the market. The Exchange also believes that adding transparency and efficiency to the market are goals that benefit all investors. The Exchange believes that the proposed would further these goals, which the Exchange believes are consistent with the Act. 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 that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes that proposed Rule 6.12A will promote competition by making the functionality of the Exchange’s order processing workstations more understandable to users and the general public. The Exchange believes that by better explaining its order management and order handling systems to PAR users and TPHs, PAR users and TPHs will better understand the Exchange’s systems. The Exchange believes that additional clarity and transparency in the Rules will make it easier for market participants to compete with one another on equal footing in the markets and ultimately benefits all investors.

C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received written comments on the proposed rule change.

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New Post has been published on http://www.brianbrown.net/2014/10/29/self-regulatory-organizations-chicago-board-options-exchange-incorporated-notice-of-filing-and-immediate-effectiveness-of-a-proposed-rule-change-to-renew-an-existing-pilot-program/

Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Renew an Existing Pilot Program

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 On September 14, 2010, the Commission approved a CBOE proposal to establish a pilot program under which the Exchange is permitted to list P.M.-settled options on broad-based indexes to expire on (a) any Friday of the month, other than the third Friday-of-the-month, and (b) the last trading day of the month. [3] Under the terms of the End of Week/End of Month Expirations Pilot Program (“Program”), EOWs and EOMs are permitted on any broad-based index that is eligible for regular options trading. EOWs and EOMs are cash-settled and have European-style exercise. The proposal became effective on a pilot basis for a period of fourteen months that commenced on the next full month after approval was received to establish the Program [4] and was subsequently extended. [5] The Program is scheduled to expire on November 3, 2014. The Exchange believes that the Program has been successful and well received by its Trading Permit Holders and the investing public during that the time that it has been in operation. The Exchange hereby proposes to extend the Program until May 3, 2016. This proposal does not request any other changes to the Program.

Pursuant to the order approving the establishment of the Program, two months prior to the conclusion of the pilot period, CBOE is required to submit an annual report to the Commission, which addresses the following areas: Analysis of Volume Open Interest, Monthly Analysis of EOW EOM Trading Patterns and Provisional Analysis of Index Price Volatility. The Exchange has submitted, under separate cover, the annual report in connection with the present proposed rule change. Confidential treatment under the Freedom of Information Act is requested regarding the annual report. If, in the future, the Exchange proposes an additional extension of the Program, or should the Exchange propose to make the Program permanent (which the Exchange currently intends to do), the Exchange will submit an annual report (addressing the same areas referenced above and consistent with the order approving the establishment of the Program) to the Commission at least two months prior to the expiration date of the Program. The annual report will be provided to the Commission on a confidential basis. Any positions established under the Program will not be impacted by the expiration of the Program. The Exchange believes there is sufficient investor interest and demand in the Program to warrant its extension. The Exchange believes that the Program has provided investors with additional means of managing their risk exposures and carrying out their investment objectives. Furthermore, the Exchange has not experienced any adverse market effects with respect to the Program. The Exchange believes that the proposed extension of the Program will not have an adverse impact on capacity. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act. [6] Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) [7] requirements that the rules of an exchange be 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 regulating, clearing, settling, processing information with respect to, and facilitation transactions in securities, 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. Additionally, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) [8] requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers.

In particular, the Exchange believes that the Program has been successful to date and states that it has not encountered any problems with the Program. The proposed rule change allows for an extension of the Program for the benefit of market participants. Additionally, the Exchange believes that there is demand for the expirations offered under the Program and believes that that EOWs and EOMs will continue to provide the investing public and other market participants increased opportunities to better manage their risk exposure. 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 the purposes of the Act. Specifically, the Exchange believes that, by extending the expiration of the Program, the proposed rule change will allow for further analysis of the Program and a determination of how the Program shall be structured in the future. In doing so, the proposed rule change will also serve to promote regulatory clarity and consistency, thereby reducing burdens on the marketplace and facilitating investor protection. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change.

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Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Use of Derivative Instruments by the AdvisorShares Global Echo ETF

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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The Commission has approved listing and trading on the Exchange of shares (“Shares”) of the Fund under NYSE Arca Equities Rule 8.600, which governs the listing and trading of Managed Fund Shares on the Exchange. [4] The Shares are offered by AdvisorShares Trust (“Trust”), a statutory trust organized under the laws of the State of Delaware and registered with the Commission as an open-end management investment company. [5]

The investment adviser to the Fund is AdvisorShares Investments, LLC (“Adviser”). The Fund’s sub-advisers (“Sub-Advisers” and each a “Sub-Adviser”), which provide day-to-day portfolio management of the Fund, are First Affirmative Financial Network LLC; Reynders, McVeigh Capital Management, LLC; Baldwin Brothers Inc.; and Community Capital Management Inc.

In this proposed rule change, the Exchange proposes to change the description of the Fund’s use of derivative instruments, as described below. [6]

On December 6, 2012, the staff of the Commission’s Division of Investment Management (“Division”) issued a no-action letter (“No-Action Letter”) relating to the use of derivatives by actively-managed exchange-traded funds (“ETFs”). [7] The No-Action Letter noted that, in March of 2010, the Commission announced in a press release that the staff was conducting a review to evaluate the use of derivatives by mutual funds, ETFs, and other investment companies and that, pending completion of this review, the staff would defer consideration of exemptive requests under the 1940 Act relating to, among others, actively-managed ETFs that would make significant investments in derivatives.

The No-Action Letter stated that the Division staff will no longer defer consideration of exemptive requests under the 1940 Act relating to actively-managed ETFs that make use of derivatives provided that they include representations to address some of the concerns expressed in the Commission’s March 2010 press release. These representations are: (i) That the ETF’s board periodically will review and approve the ETF’s use of derivatives and how the ETF’s investment adviser assesses and manages risk with respect to the ETF’s use of derivatives; and (ii) that the ETF’s disclosure of its use of derivatives in its offering documents and periodic reports is consistent with relevant Commission and staff guidance (together, the “No-Action Letter Representations”). The No-Action Letter stated that the Division would not recommend enforcement action to the Commission under sections 2(a)(32), 5(a)(1), 17(a), 22(d), and 22(e) of the 1940 Act, or rule 22c-1 under the 1940 Act if actively-managed ETFs operating in reliance on specified orders (which include the Trust’s Exemptive Order [8] ) invest in options contracts, futures contracts or swap agreements provided that they comply with the No-Action Letter Representations. [9]

The Prior Notice included the following representation: “Further, in accordance with the Exemptive Order, the Fund will not invest in options, futures, or swaps.” (the “Derivatives Representation”). In view of the No-Action Letter, the Exchange is proposing to delete the Derivatives Representation. The Exchange now proposes that, to pursue the Fund’s investment objective, the Fund be permitted to invest in options, futures, and forward contracts (“Derivative Instruments”), as described below. Going forward, the Fund may buy and sell futures contracts and options on futures contracts. The Fund will only enter into futures contracts and options on futures contracts that are traded on a national futures exchange that is regulated by the Commodities Futures Trading Commission (“CFTC”) and that is a member of the Intermarket Surveillance Group (“ISG”). [10] With respect to the Fund’s investments in futures contracts and options on futures contracts, the Fund may buy and sell only index futures contracts and options on futures contracts with respect to any index on which futures or options on futures are traded on a U.S. futures exchange. The Fund may use such index futures contracts and related options on futures contracts for bona fide hedging; attempting to offset changes in the value of securities held or expected to be acquired or be disposed of; attempting to gain exposure to a particular market, index or instrument; or other risk management purposes.

The Fund may invest in exchange-traded put and call options on securities indices and currencies. The Fund may purchase and write options only if such options are traded on a U.S. national securities exchange. The Fund may invest in currency forwards. Under normal market conditions, no more than 20% of the value of the Fund’s net assets will be invested in Derivative Instruments. [11]

The Prior Notice stated that the Fund’s investments would be consistent with the Fund’s investment objective and would not be used to enhance leverage. In view of the Exchange’s proposal to permit the Fund to use Derivative Instruments, the Fund’s investments in Derivative Instruments could potentially be used to enhance leverage. However, the Fund’s investments in Derivative Instruments will be consistent with the Fund’s investment objective and will not be used to seek to achieve a multiple or inverse multiple of an index.

Investments in Derivative Instruments will be made in accordance with the 1940 Act and consistent with the Fund’s investment objective and policies. The Fund will comply with the regulatory requirements of the Commission to maintain assets as “cover,” maintain segregated accounts, and/or make margin payments when it takes positions in Derivative Instruments involving obligations to third parties (i.e., instruments other than purchase options). If the applicable guidelines prescribed under the 1940 Act so require, the Fund will earmark or set aside cash, U.S. government securities, high grade liquid debt securities and/or other liquid assets permitted by the Commission in a segregated custodial account in the amount prescribed. [12]

The Fund will include appropriate risk disclosure in its offering documents, including leveraging risk. Leveraging risk is the risk that certain transactions of the Fund, including the Fund’s use of Derivative Instruments, may give rise to leverage, causing the Fund to be more volatile than if it had not been leveraged. [13]

Based on the above, the Exchange seeks this modification regarding the Fund’s use of Derivative Instruments. The Adviser represents that there is no change to the Fund’s investment objective. The Adviser and the Sub-Advisers believe that the ability to invest in Derivative Instruments will provide the Adviser and Sub-Advisers with additional flexibility to meet the Fund’s investment objective. The Fund will continue to comply with all initial and continued listing requirements under NYSE Arca Equities Rule 8.600. Except for the changes noted herein, all other facts presented and representations made in the Rule 19b-4 filing underlying the Prior Order remain unchanged. The changes described herein will be effective upon (i) the effectiveness of an amendment to the Trust’s Registration Statement disclosing the Fund’s intended use of Derivative Instruments and (ii) when this proposed rule change has become operative. The Adviser represents that the Adviser and Sub-Advisers have managed and will continue to manage the Fund in the manner described in the Prior Notice, and will not implement the changes described herein until this proposed rule change is operative. Impact on Arbitrage Mechanism The Adviser believes there will be minimal, if any, impact to the arbitrage mechanism as a result of the use of derivatives. Market makers and participants should be able to value derivatives as long as the positions are disclosed with relevant information. The Adviser believes that the price at which Shares trade will continue to be disciplined by arbitrage opportunities created by the ability to purchase or redeem Creation Units (as defined in the Prior Notice) at their net asset value (“NAV”), which should ensure that Shares will not trade at a material discount or premium in relation to their NAV. The Adviser does not believe there will be any significant impacts to the settlement or operational aspects of the Fund’s arbitrage mechanism due to the use of derivatives. Certain derivatives may not be eligible for in-kind transfer, and such derivatives will be substituted with a “cash in lieu” amount when the Fund processes purchases or redemptions of Creation Units (as defined in the Prior Notice) in-kind. Valuation for Purposes of Calculating Net Asset Value

As stated in the Prior Notice, the NAV per Share of the Fund is computed by dividing the value of the net assets of the Fund (i.e., the value of its total assets less total liabilities) by the total number of Shares of the Fund outstanding, rounded to the nearest cent. Expenses and fees, including without limitation, the management, administration, and distribution fees, are accrued daily and taken into account for purposes of determining NAV. The NAV per Share for the Fund is calculated by the Administrator (The Bank of New York Mellon Corporation) and determined as of the close of the regular trading session on the New York Stock Exchange (“NYSE”) (ordinarily 4:00 p.m., E.T.) on each day that the NYSE is open. U.S. exchange-traded options will be valued at the closing price determined by the applicable exchange. The Fund will generally value exchange-traded futures at the settlement price determined by the applicable exchange. Currency forward contracts will normally be valued on the basis of quotes obtained from a third party broker-dealer who makes markets in such securities or on the basis of quotes obtained from an independent third-party pricing service. Availability of Information

As described in the Prior Notice, on each business day, before commencement of trading in Shares in the Core Trading Session on the Exchange, the Fund discloses on its Web site the Disclosed Portfolio as defined in NYSE Arca Equities Rule 8.600(c)(2) that will form the basis for the Fund’s calculation of NAV at the end of the business day. See“Disclosed Portfolio” below. Pricing information for Derivative Instruments will be available from major broker-dealer firms, subscription services, and/or pricing services and, in addition, for exchange-traded Derivative Instruments, from the exchanges on which they are traded. Intra-day and closing price information regarding exchange traded options (including options on futures) and futures will be available from the exchange on which such instruments are traded. Quotation and last sale information for exchange-traded options cleared via the Options Clearing Corporation is available from the Options Price Reporting Authority. Disclosed Portfolio The Fund’s disclosure of derivative positions in the Disclosed Portfolio will include information that market participants can use to value these positions intraday. On a daily basis, the Fund will disclose on the Fund’s Web site the following information regarding each portfolio holding, as applicable to the type of holding: Ticker symbol, CUSIP number or other identifier, if any; a description of the holding (including the type of holding); the identity of the security or other asset or instrument underlying the holding, if any; for options, the option strike price; quantity held (as measured by, for example, par value, notional value or number of shares, contracts or units); maturity date, if any; coupon rate, if any; effective date, if any; market value of the holding; and the percentage weighting of the holding in the Fund’s portfolio. Surveillance The Exchange represents that trading in the Shares will be subject to the existing trading surveillances, administered by the Financial Industry Regulatory Authority (“FINRA”) on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws. [14] The Exchange represents that these procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules and federal securities laws applicable to trading on the Exchange.

The surveillances referred to above generally focus on detecting securities trading outside their normal patterns, which could be indicative of manipulative or other violative activity. When such situations are detected, surveillance analysis follows and investigations are opened, where appropriate, to review the behavior of all relevant parties for all relevant trading violations.

FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares, exchange-traded options, exchange-traded futures and exchange-traded options on futures with other markets and other entities that are members of the ISG, and FINRA, on behalf of the Exchange, may obtain trading information regarding trading in the Shares, exchange-traded options, exchange-traded futures and exchange-traded options on futures from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares, exchange-traded options, exchange-traded futures and exchange-traded options on futures, from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. [15]

In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. 2. Statutory Basis The basis under the Act for this proposed rule change is the requirement under Section 6(b)(5) [16] that an exchange have rules that are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to, and perfect the mechanism of a free and open market and, in general, to protect investors and the public interest.

The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that, under normal market conditions, no more than 20% of the value of the Fund’s net assets will be invested in Derivative Instruments. The Fund’s investments in Derivative Instruments will be consistent with the Fund’s investment objective and will not be used to seek to achieve a multiple or inverse multiple of an index. Investments in Derivative Instruments will be made in accordance with the 1940 Act and consistent with the Fund’s investment objective and policies. The Fund will comply with the regulatory requirements of the Commission to maintain assets as “cover,” maintain segregated accounts, and/or make margin payments when it takes positions in Derivative Instruments involving obligations to third parties (i.e., instruments other than purchase options). If the applicable guidelines prescribed under the 1940 Act so require, the Fund will earmark or set aside cash, U.S. government securities, high grade liquid debt securities and/or other liquid assets permitted by the Commission in a segregated custodial account in the amount prescribed. Moreover, the Fund will include appropriate risk disclosure in its offering documents, including leveraging risk. The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest in that the Fund’s disclosure of derivative positions in the Disclosed Portfolio will include information that market participants can use to value these positions intraday. On a daily basis, the Fund will disclose on the Fund’s Web site specific information regarding each portfolio holding, as applicable to the type of holding. The Fund may use futures contracts and related options for bona fide hedging; attempting to offset changes in the value of securities held or expected to be acquired or be disposed of; attempting to gain exposure to a particular market, index or instrument; or other risk management purposes. In addition, such proposed change will provide the Adviser and Sub-Advisers with additional flexibility in meeting the Fund’s investment objective. The Adviser does not believe there will be any significant impacts to the settlement or operational aspects of the Fund’s arbitrage mechanism due to the use of derivatives. In addition, the Commission has previously approved the use of derivatives similar to those proposed herein by issues of Managed Fund Shares traded on the Exchange. [17] Consistent with the Prior Notice, NAV will continue to be calculated daily and the NAV and Disclosed Portfolio (as defined in NYSE Arca Equities Rule 8.600(c)(2)) will be made available to all market participants at the same time.

The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of an actively-managed exchange-traded product that will enhance competition among market participants, to the benefit of investors and the marketplace. As noted, the additional flexibility to be afforded to the Adviser and Sub-Advisers by permitting the Fund to invest in Derivative Instruments under the proposed rule change is intended to enhance the Adviser’s and Sub-Advisers’ ability to meet the Fund’s investment objective. FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares, exchange-traded options, exchange-traded futures and exchange-traded options on futures with other markets and other entities that are members of the ISG, and FINRA, on behalf of the Exchange, may obtain trading information regarding trading in the Shares, exchange-traded options, exchange-traded futures and exchange-traded options on futures from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares, exchange-traded options, exchange-traded futures and exchange-traded options on futures from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. In addition, as indicated in the Prior Notice, investors will have ready access to information regarding the Fund’s holdings, the Portfolio Indicative Value (as defined in NYSE Arca Equities Rule 8.600(d)(2)(A)), the Disclosed Portfolio, and quotation and last sale information for the Shares. Consistent with the No-Action Letter, (i) the Board of Trustees of the Trust will periodically review and approve the Fund’s use of derivatives and how the Adviser assesses and manages risk with respect to the Fund’s use of derivatives and (ii) 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. 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 that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes the proposed rule change will permit the Adviser and Sub-Advisers additional flexibility in achieving the Fund’s investment objective, thereby offering investors additional investment options.

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.

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