SEC approves listing, trading of options on index-linked securities on NYSE Arca

By Kenneth Lim

Boston, July 24 - The Securities and Exchange Commission approved a rule change by NYSE Arca, Inc. to allow the listing and trading of options on index-linked securities.

The change, first proposed by NYSE Arca on May 29, will treat options on index-linked securities similar to standard equity options.

"Despite the fact that index-linked securities are linked to at least one underlying index or asset, each trade as a single, exchange-listed security," the SEC stated in a notice. "Accordingly, rules pertaining to the listing and trading of standard equity options would apply to options on index-linked securities."

Index-linked securities are defined as the non-convertible debt of an issuer that has a term of at least one year but not greater than 30 years.

To be options eligible, the index-linked securities must meet NYSE Arca's usual standards on initial and continued listing, creation and redemption processes and trading halts. The securities must also be traded through a national securities exchange and must meet the transaction reporting requirements to qualify as an "NMS stock."

The index-linked securities must either meet the NYSE Arca rules on underlying securities or be redeemable at the option of the holder at least on a weekly basis through the issuer.

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