ICE Futures Europe, Tokyo and Osaka Exchanges Inform SEC of Intent to Rely on Class No-Action Relief for Non-U.S. Options Exchanges
Commentary by Steven Lofchie
ICE Futures Europe ("IFEU"), the Tokyo Stock Exchange ("TSE") and Osaka Securities Exchange Co., Ltd ("OSE") submitted letters to notify the SEC of their intent to rely on the class no-action relief, issued by the SEC's Division of Trading and Markets, permitting non-U.S. options exchanges and their members to familiarize eligible broker-dealers and QIBs with equity and index options traded on non-U.S. options exchanges.
In the class relief, the Division of Trading and Markets stated that it would not recommend enforcement action against non-U.S. options exchanges and their members that familiarize eligible broker-dealers and QIBs regarding options traded on those exchanges. Under the terms of the class relief, a non-U.S. options exchange that does not already have individual no-action relief from the SEC may rely on the class relief, provided that it notifies the SEC of its intent to do so. The IFEU provides the requisite notification to the SEC, thereby permitting the IFEU and its members to familiarize eligible broker-dealers and QIBs concerning equity and index options traded on the exchange. While the TSE and OSE had previously obtained individual no-action letters, they also submitted notices of intent to rely on the class relief, which permits non-U.S. exchanges to post relevant disclosure materials on their website, instead of providing an options disclosure document to U.S. investors (as was required by prior individual no-action letters).
See: Intent of IFEU to Rely on Class No-Action Relief; Intent of TSE and OSE to Rely on Class No-Action Relief.
See also: Class No-Action Relief to LIFFE A&M (July 1, 2013).
Related news: Class No-Action Letter Issued by the SEC Staff as to Foreign Options Markets (with Lofchie Comment) (July 1, 2013).
Commentary
Prior to the SEC's class no-action relief, non-U.S. options exchanges that sought to make their equity and index options available to U.S. investors were required to obtain individual no-action relief from the SEC. The SEC issued several such letters to non-U.S. options exchanges over the years concerning largely the same conditions. Given the similarity of these letters, the SEC issued class no-action relief to non-U.S. options exchanges in July 2013, thereby relieving the exchanges of the requirement to obtain individual no-action letters. Instead, non-U.S. options exchanges were required to file a letter with the SEC, notifying the SEC of the exchange's intent to rely on the class relief. The SEC indicated that it would make these notification letters available to the public, thereby enabling market participants to know which non-U.S. options exchanges were relying on the class relief and, thus, which non-U.S. listed options broker-dealers may enter into transactions in with U.S. investors. These are the first such letters that non-U.S. options exchanges have filed pursuant to the class relief.
Note that broker-dealers entering into transactions in non-U.S. listed options with U.S. investors must each obtain a letter from the investor containing specified representations, including that the U.S. investor is a QIB with prior experience trading in U.S.-listed options.