[Federal Register: October 29, 2003 (Volume 68, Number 209)]
[Notices]
[Page 61708-61710]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29oc03-77]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48670; File No. SR-NQLX-2003-06]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by Nasdaq Liffe Markets, LLC To
Amend Rules 412(g) and 420(b) To Make Its Allocation and Claim
Requirements for Block Trades and Exchange for Physical Trades
Consistent With the Commodity Futures Trading Commission's Rule
Relating to Allocation of Bunched Orders
October 21, 2003.
Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-7 under the Act,\2\ notice is hereby given
that on July 16, 2003, Nasdaq Liffe Markets, LLC (``NQLX'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change described in Items I, II, and III below, which Items have
been prepared by the NQLX. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
On July 15, 2003, NQLX filed the proposed rule change with the
Commodity Futures Trading Commission (``CFTC''), together with a
written certification under Section 5c(c) of the Commodity Exchange Act
\3\ (``CEA'') in which NQLX indicated that the effective date of the
proposed rule change would be July 16, 2003.
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\1\ 15 U.S.C. 78s(b)(7).
\2\ 17 CFR 240.19b-7.
\3\ 7 U.S.C. 7a-2(c).
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I. Self-Regulatory Organization's Description of the Proposed Rule
Change
NQLX proposes to amend NQLX Rules 419(g) and 420(b) to make NQLX's
allocation and claim requirements for block trades and exchange for
physical trades consistent with the CFTC's new Rule 1.35(a-
1)(5)(iii)(A) \4\ requirement that allocations of bunched orders must
occur as soon as practicable but ``no later than a time sufficiently
before the end of the day the order is executed to ensure that clearing
records identify the ultimate customer for each trade.'' Also, in NQLX
Rule 419(g)(2)(x), NQLX proposes to remove the term ``and'' as
redundant.
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\4\ 17 CFR 1.35(a-1)(5)(iii)(A).
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The text of the proposed rule change appears below. New text is in
italics. Deleted text is in [brackets].
* * * * *
Rule 419 Block Trades
(a)-(f) No change.
(g) Information Recording, Submission, and Dissemination
(1) No change.
(2) (i)-(ix) No change.
(x) price or prices of each leg of a Strategy trade (if
applicable), [and]
(xi)-(xiv) No change.
(3) NQLX will review the information submitted for the proposed
Block Trade by the Member for the Initiator and will post both sides of
the Block Trade in NQLX's Trade Registration System to the account of[,
and send a confirmation to,] the Member for the Initiator if, at the
time, the Block Trade appears to have satisfied the requirements of
Rule 419.
(4) After [sending the Block Trade confirmation to the Member for
the Initiator]posting both sides of the Block Trade in the Trade
Registration System to the account of the Member for the Initiator,
NQLX will immediately disseminate through the ATS the following
information concerning the Block Trade:
(i)-(iv) No change.
(5) No change.
(6) As soon as practicable [, but no longer than 10 minutes, after
receipt of the Block Trade confirmation from NQLX,] but no later than
sufficiently before the close of the Trade Registration System to allow
for the orderly allocation and claim of the Block Trade, the Member for
the Initiator (or its Clearing Member, if applicable) must transfer
through the Trade Registration System the applicable portion of the
Block Trade to the Member for the Responder (or its Clearing Member, if
applicable) and the designated Market Maker, if applicable.
(7) As soon as practicable [,but no longer than 10 minutes,] after
the applicable portion of the Block Trade appears on the Trade
Registration System pursuant to Rule 419(g)(6) and before the close of
the Trade Registration System, the Member for the Responder (or its
Clearing Member, if applicable) and the designated Market Maker, if
applicable, must accept its applicable portion through, and designate
the Responder's Customer
[[Page 61709]]
account number or identifier in, the Trade Registration System.
Rule 420 Exchange for Physical Trades
(a) No change.
(b) Information Recording, Submission, and Dissemination
(1)-(2) No change.
(3) NQLX will review the information submitted by the Member
pursuant to Rule 420(b) for the proposed Exchange for Physical Trade
and will post both sides of the Futures Leg in NQLX's Trade
Registration System to the account of[, and send a confirmation to,]
the submitting Member if, at the time, the Exchange for Physical Trade
appears to have satisfied the requirements of Rule 420.
(4) After [sending the confirmation for the Exchange for Physical
Trade] posting both sides of the Futures Leg in the Trade Registration
System to the account of the submitting Member, NQLX will disseminate
through the ATS the following information:
(i)-(vi) No change.
(5) No change.
(6) As soon as practicable[, but no longer than 10 minutes, after
receipt of confirmation for the Exchange for Physical Trade from NQLX,]
but no later than sufficiently before the close of the Trade
Registration System to allow for the orderly allocation and claim of
the Futures Leg, the submitting Member (or its Clearing Member, if
applicable) must transfer through the Trade Registration System the
applicable Futures Contract to the Member for the buyer of the Futures
Leg (or its Clearing Member, if applicable).
(7) As soon as practicable[, but no longer than 10 minutes,] after
the Futures Leg appears on the Trade Registration System pursuant to
Rule 420(b)(6) and before the close of the Trade Registration System,
the Member for the buyer of the Futures Leg (or its Clearing Member, if
applicable) must accept the Futures Leg through, and designate the
buyer's Customer account number or identifier in, the Trade
Registration System.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
NQLX has prepared statements concerning the purpose of, and basis
for, the proposed rule change, burdens on competition, and comments
received from members, participants, and others. The text of these
statements may be examined at the places specified in Item IV below.
These statements are set forth in Sections A, B, and C below.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
NQLX proposes revising NQLX Rules 419(g) and 420(b) to make NQLX's
allocation and claim requirements for block trades and exchange for
physical trades consistent with the CFTC's new Rule 1.35(a-
1)(5)(iii)(A) \5\ requirement that allocations of bunched orders must
occur as soon as practicable but ``no later than a time sufficiently
before the end of the day the order is executed to ensure that clearing
records identify the ultimate customer for each trade.''
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\5\ 17 CFR 1.35(a-1)(5)(iii)(A).
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NQLX believes that amended NQLX Rules 419(g) and 420(b) are
consistent with the CFTC's new rule relating to allocation of bunched
orders while providing the necessary and appropriate trade audit trail
for block and exchange for physical trades, specifically in the areas
of trade processing and clearing. NQLX also believes that the proposed
rule change is consistent with the requirements, where applicable,
under Section 6(h)(3)(J) of the Act \6\ and the criteria, where
applicable, under Section 2(a)(1)(D)(i)(IX) of the CEA,\7\ as modified
by joint orders of the Commission and the CFTC.\8\
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\6\ 15 U.S.C. 78f(h)(3)(J).
\7\ 7 U.S.C. 2(a)(1)(D)(i)(IX).
\8\ See Joint Order Granting the Modification of Listing
Standards Requirements (Exchange-Traded Funds, Trust-Issued Receipts
and shares of Closed-End Funds), Securities Exchange Act Release No.
46090 (June 19, 2002), 67 FR 42760 (June 25, 2002) and Joint Order
Granting the Modification of Listing Standards Requirements
(American Depository Receipts), Securities Exchange Act Release No.
44725 (August 20, 2001), 67 FR 42760 (June 25, 2002).
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2. Statutory Basis
NQLX files the proposed rule change pursuant to Section 19(b)(7) of
the Act.\9\ NQLX believes that the proposed rule change is consistent
with the requirements of the Commodity Futures Modernization Act of
2000,\10\ including the requirement that NQLX have audit trails
necessary and appropriate to facilitate coordinated surveillance to
detect, among other things, manipulation.\11\ NQLX further believes
that its proposed rule change complies with the requirements under
Section 6(h)(3) of the Act \12\ and the criteria under Section
2(a)(1)(D)(i) of the CEA,\13\ as modified by joint orders of the
Commission and the CFTC. In addition, NQLX believes that its proposed
rule change is consistent with the provisions of Section 6 of the
Act,\14\ in general, and Section 6(b)(5) of the Act,\15\ in particular,
in that it is designed to foster cooperation and coordination with
persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities and, in general, to protect investors and the public
interest.
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\9\ 15 U.S.C. 78s(b)(7).
\10\ Pub. L. 106-554, 114 Stat. 2763 (2000).
\11\ 15 U.S.C. 78f(h)(3)(J).
\12\ 15 U.S.C. 78f(h)(3).
\13\ 7 U.S.C. 2(a)(1)(D)(i).
\14\ 15 U.S.C. 78f.
\15\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
NQLX does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement of Comments on the Proposed
Rule Change Received From Members, Participants, or Others
NQLX neither solicited nor received written comment on the proposed
rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The proposed rule change has become effective on July 16, 2003.
Within 60 days of the date of effectiveness of the proposed rule
change, the Commission, after consultation with the CFTC, had the
authority to summarily abrogate the proposed rule change and require
that the proposed rule change be refiled in accordance with the
provisions of Section 19(b)(1) of the Act.\16\
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\16\ 15 U.S.C. 78s(b)(1).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change conflicts with the Act. Persons making written submissions
should file nine copies of the submission with the Secretary,
Securities and Exchange Commission, 450 Fifth Street, NW, Washington,
DC 20549-0609. Comments also may be submitted electronically to the following e-mail address: rule-comments@sec.gov. 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
[[Page 61710]]
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 inspection and copying in the Commission's Public
Reference Room. Copies of these filings also will be available for
inspection and copying at the principal office of NQLX. All submissions
should refer to File No. SR-NQLX-2003-06 and should be submitted by
November 19, 2003.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\17\
Margaret H. McFarland,
Deputy Secretary.
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\17\ 17 CFR 200.30-3(a)(75).
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[FR Doc. 03-27228 Filed 10-28-03; 8:45 am]
BILLING CODE 8010-01-P