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Code · REGISTER · 2007-11-23 · Office of the United States Trade Representative · Notices

Notices. Invitation for applications

36,392 words·~165 min read·/register/2007/11/23/07-5776·

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BILLING CODE 4410-15-M OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE North American Free Trade Agreement; Invitation for Applications for Inclusion on the Chapter 19 Roster AGENCY: Office of the United States Trade Representative. ACTION: Invitation for applications. SUMMARY: Chapter 19 of the North American Free Trade Agreement (“NAFTA”) provides for the establishment of a roster of individuals to serve on binational panels convened to review final determinations in antidumping or countervailing duty (“AD/CVD”) proceedings and amendments to AD/CVD statutes of a NAFTA Party.
The United States annually renews its selections for the Chapter 19 roster. Applications are invited from eligible individuals wishing to be included on the roster for the period April 1, 2008, through March 31, 2009. DATES: Applications should be received no later than December 7, 2008. ADDRESSES: Applications should be submitted
(i)electronically, to *FR0801@ustr.eop.gov, Attn:* “Chapter 19 Roster Applications” in the subject line, or
(ii)by fax to Sandy McKinzy at 202-395-3640. FOR FURTHER INFORMATION CONTACT: J. Daniel Stirk, Assistant General Counsel, Office of the United States Trade Representative,
(202)395-9617. SUPPLEMENTARY INFORMATION: Binational Panel Reviews Under NAFTA Chapter 19 Article 1904 of the NAFTA provides that a party involved in an AD/CVD proceeding may obtain review by a binational panel of a final AD/CVD determination of one NAFTA Party with respect to the products of another NAFTA Party. Binational panels decide whether such AD/CVD determinations are in accordance with the domestic laws of the importing NAFTA Party, and must use the standard of review that would have been applied by a domestic court of the importing NAFTA Party. A panel may uphold the AD/CVD determination, or may remand it to the national administering authority for action not inconsistent with the panel's decision. Panel decisions may be reviewed in specific circumstances by a three-member extraordinary challenge committee, selected from a separate roster composed of fifteen current or former judges. Article 1903 of the NAFTA provides that a NAFTA Party may refer an amendment to the AD/CVD statutes of another NAFTA Party to a binational panel for a declaratory opinion as to whether the amendment is inconsistent with the General Agreement on Tariffs and Trade (“GATT”), the GATT Antidumping or Subsidies Codes, successor agreements, or the object and purpose of the NAFTA with regard to the establishment of fair and predictable conditions for the liberalization of trade. If the panel finds that the amendment is inconsistent, the two NAFTA Parties shall consult and seek to achieve a mutually satisfactory solution. Chapter 19 Roster and Composition of Binational Panels Annex 1901.2 of the NAFTA provides for the maintenance of a roster of at least 75 individuals for service on Chapter 19 binational panels, with each NAFTA Party selecting at least 25 individuals. A separate five-person panel is formed for each review of a final AD/CVD determination or statutory amendment. To form a panel, the two NAFTA Parties involved each appoint two panelists, normally by drawing upon individuals from the roster. If the Parties cannot agree upon the fifth panelist, one of the Parties, decided by lot, selects the fifth panelist from the roster. The majority of individuals on each panel must consist of lawyers in good standing, and the chair of the panel must be a lawyer. Upon each request for establishment of a panel, roster members from the two involved NAFTA Parties will be requested to complete a disclosure form, which will be used to identify possible conflicts of interest or appearances thereof. The disclosure form requests information regarding financial interests and affiliations, including information regarding the identity of clients of the roster member and, if applicable, clients of the roster member's firm. Criteria for Eligibility for Inclusion on Chapter 19 Roster Section 402 of the NAFTA Implementation Act (Pub. L. 103-182, as amended (19 U.S.C. 3432)) (“Section 402”) provides that selections by the United States of individuals for inclusion on the Chapter 19 roster are to be based on the eligibility criteria set out in Annex 1901.2 of the NAFTA, and without regard to political affiliation. Annex 1901.2 provides that Chapter 19 roster members must be citizens of a NAFTA Party, must be of good character and of high standing and repute, and are to be chosen strictly on the basis of their objectivity, reliability, sound judgment, and general familiarity with international trade law. Aside from judges, roster members may not be affiliated with any of the three NAFTA Parties. Section 402 also provides that, to the fullest extent practicable, judges and former judges who meet the eligibility requirements should be selected. Adherence to the NAFTA Code of Conduct for Binational Panelists The “Code of Conduct for Dispute Settlement Procedures Under Chapters 19 and 20” ( *see* *http://www.nafta-sec-alena.org/DefaultSite/index_e.aspx?DetailID=246* ), which was established pursuant to Article 1909 of the NAFTA, provides that current and former Chapter 19 roster members “shall avoid impropriety and the appearance of impropriety and shall observe high standards of conduct so that the integrity and impartiality of the dispute settlement process is preserved.” The Code also provides that candidates to serve on chapter 19 panels, as well as those who are ultimately selected to serve as panelists, have an obligation to “disclose any interest, relationship or matter that is likely to affect [their] impartiality or independence, or that might reasonably create an appearance of impropriety or an apprehension of bias.” Annex 1901.2 of the NAFTA provides that roster members may engage in other business while serving as panelists, subject to the Code of Conduct and provided that such business does not interfere with the performance of the panelist's duties. In particular, Annex 1901.2 states that “[w]hile acting as a panelist, a panelist may not appear as counsel before another panel.” Procedures for Selection of Chapter 19 Roster Members Section 402 establishes procedures for the selection by the Office of the United States Trade Representative (“USTR”) of the individuals chosen by the United States for inclusion on the Chapter 19 roster. The roster is renewed annually, and applies during the one-year period beginning April 1 of each calendar year. Under section 402, an interagency committee chaired by USTR prepares a preliminary list of candidates eligible for inclusion on the Chapter 19 Roster. After consultation with the Senate Committee on Finance and the House Committee on Ways and Means, USTR selects the final list of individuals chosen by the United States for inclusion on the Chapter 19 roster. Remuneration Roster members selected for service on a Chapter 19 binational panel will be remunerated at the rate of 800 Canadian dollars per day. Applications Eligible individuals who wish to be included on the Chapter 19 roster for the period April 1, 2008, through March 31, 2009, are invited to submit applications. Persons submitting applications may either send one copy by fax to Sandy McKinzy at 202-395-3640, or transmit a copy electronically to *FR0801@ustr.eop.gov* , with “Chapter 19 Roster Applications” in the subject line. USTR encourages the submission of documents in Adobe PDF format, as attachments to an electronic mail. Interested persons who make submissions by electronic mail should not provide separate cover letters; information that might appear in a cover letter should be included in the submission itself. Similarly, to the extent possible, any attachments to the submission should be included in the same file as the submission itself, and not as separate files. Applications must be typewritten, and should be headed “Application for Inclusion on NAFTA Chapter 19 Roster.” Applications should include the following information, and each section of the application should be numbered as indicated: 1. Name of the applicant. 2. Business address, telephone number, fax number, and e-mail address. 3. Citizenship(s). 4. Current employment, including title, description of responsibility, and name and address of employer. 5. Relevant education and professional training. 6. Spanish language fluency, written and spoken. 7. Post-education employment history, including the dates and addresses of each prior position and a summary of responsibilities. 8. Relevant professional affiliations and certifications, including, if any, current bar memberships in good standing. 9. A list and copies of publications, testimony, and speeches, if any, concerning AD/CVD law. Judges or former judges should list relevant judicial decisions. Only one copy of publications, testimony, speeches, and decisions need be submitted. 10. Summary of any current and past employment by, or consulting or other work for, the Governments of the United States, Canada, or Mexico. 11. The names and nationalities of all foreign principals for whom the applicant is currently or has previously been registered pursuant to the Foreign Agents Registration Act, 22 U.S.C. 611 *et seq* ., and the dates of all registration periods. 12. List of proceedings brought under U.S., Canadian, or Mexican AD/CVD law regarding imports of U.S., Canadian, or Mexican products in which the applicant advised or represented (for example, as consultant or attorney) any U.S., Canadian, or Mexican party to such proceeding and, for each such proceeding listed, the name and country of incorporation of such party. 13. A short statement of qualifications and availability for service on Chapter 19 panels, including information relevant to the applicant's familiarity with international trade law and willingness and ability to make time commitments necessary for service on panels. 14. On a separate page, the names, addresses, telephone and fax numbers of three individuals willing to provide information concerning the applicant's qualifications for service, including the applicant's character, reputation, reliability, judgment, and familiarity with international trade law. Current Roster Members and Prior Applicants Current members of the Chapter 19 roster who remain interested in inclusion on the Chapter 19 roster must submit updated applications. Individuals who have previously applied but have not been selected may reapply. If an applicant, including a current or former roster member, has previously submitted materials referred to in item 9, such materials need not be resubmitted. Public Disclosure Applications normally will not be subject to public disclosure. They may be referred to other federal agencies in the course of determining eligibility for the roster, and shared with foreign governments and the NAFTA Secretariat in the course of panel selection. False Statements Pursuant to section 402(c)(5) of the NAFTA Implementation Act, false statements by applicants regarding their personal or professional qualifications, or financial or other relevant interests that bear on the applicants' suitability for placement on the Chapter 19 roster or for appointment to binational panels, are subject to criminal sanctions under 18 U.S.C. 1001. Paperwork Reduction Act This notice contains a collection of information provision subject to the Paperwork Reduction Act (“PRA”) that has been approved by the Office of Management and Budget (“OMB”). Notwithstanding any other provision of law, no person is required to respond to nor shall a person be subject to a penalty for failure to comply with a collection of information subject to the requirements of the PRA unless that collection of information displays a currently valid OMB number. This notice's collection of information burden is only for those persons who wish voluntarily to apply for nomination to the NAFTA Chapter 19 roster. It is expected that the collection of information burden will be under 3 hours. This collection of information contains no annual reporting or record keeping burden. This collection of information was approved by OMB under OMB Control Number 0350-0014. Please send comments regarding the collection of information burden or any other aspect of the information collection to USTR at the above e-mail address or fax number. Privacy Act The following statements are made in accordance with the Privacy Act of 1974, as amended (5 U.S.C. 552a). The authority for requesting information to be furnished is section 402 of the NAFTA Implementation Act. Provision of the information requested above is voluntary; however, failure to provide the information will preclude your consideration as a candidate for the NAFTA Chapter 19 roster. This information is maintained in a system of records entitled “Dispute Settlement Panelists Roster.” Notice regarding this system of records was published in the **Federal Register** on November 30, 2001. The information provided is needed, and will be used by USTR, other federal government trade policy officials concerned with NAFTA dispute settlement, and officials of the other NAFTA Parties to select well-qualified individuals for inclusion on the Chapter 19 roster and for service on Chapter 19 binational panels. Daniel E. Brinza, Assistant United States Trade Representative for Monitoring and Enforcement. [FR Doc. E7-22807 Filed 11-21-07; 8:45 am] BILLING CODE 3190-W8-P SECURITIES AND EXCHANGE COMMISSION Proposed Collection; Comment Request *Upon Written Request, Copies Available From:* Securities and Exchange Commission, Office of Investor Education and Advocacy, Washington, DC 20549-0213. *Extension:* Rule 17e-1; SEC File No. 270-224; OMB Control No. 3235-0217. Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), the Securities and Exchange Commission (the “Commission”) is soliciting comments on the collections of information summarized below. The Commission plans to submit these existing collections of information to the Office of Management and Budget (“OMB”) for extension and approval. Rule 17e-1 (17 CFR 270.17e-1) under the Investment Company Act of 1940 (15 U.S.C. 80a-1) (the “Act”) is entitled “Brokerage Transactions on a Securities Exchange.” The rule governs the remuneration that a broker affiliated with a registered investment company (“fund”) may receive in connection with securities transactions by the fund. The rule requires a fund's board of directors to establish, and review as necessary, procedures reasonably designed to provide that the remuneration to an affiliated broker is a fair amount compared to that received by other brokers in connection with transactions in similar securities during a comparable period of time. Each quarter, the board must determine that all transactions with affiliated brokers during the preceding quarter complied with the procedures established under the rule. Rule 17e-1 also requires the fund to
(i)maintain permanently a written copy of the procedures adopted by the board for complying with the requirements of the rule; and
(ii)maintain for a period of six years a written record of each transaction subject to the rule, setting forth: the amount and source of the commission; fee or other remuneration received; the identity of the broker; the terms of the transaction; and the materials used to determine that the transactions were effected in compliance with the procedures adopted by the board. The Commission's examination staff uses these records to evaluate transactions between funds and their affiliated brokers for compliance with the rule. The Commission staff estimates that 3583 portfolios of approximately 649 fund complexes use the services of one or more subadvisers. Based on discussions with industry representatives, the staff estimates that it will require approximately 6 hours to draft and execute revised subadvisory contracts in order for funds and subadvisers to be able to rely on the exemptions in rule 17e-1. 1 The staff assumes that all existing funds amended their advisory contracts following amendments to rule 17e-1 in 2002 that conditioned certain exemptions upon these contractual alterations, and therefore there is no continuing burden for those funds. 2 1 Rules 12d3-1, 10f-3, 17a-10, and 17e-1 require virtually identical modifications to fund advisory contracts. The Commission staff assumes that funds would rely equally on the exemptions in these rules, and therefore the burden hours associated with the required contract modifications should be apportioned equally among the four rules. 2 We assume that funds formed after 2002 that intended to rely on rule 17e-1 would have included the contract provision in their initial subadvisory contracts. Based on an analysis of fund filings, the staff estimates that approximately 600 fund portfolios enter into subadvisory agreements each year. 3 Based on discussions with industry representatives, the staff estimates that it will require approximately 3 attorney hours 4 to draft and execute additional clauses in new subadvisory contracts in order for funds and subadvisers to be able to rely on the exemptions in rule 17e-1. Because these additional clauses are identical to the clauses that a fund would need to insert in their subadvisory contracts to rely on rules 12d3-1, 10f-3, 17a-10, and because we believe that funds that use one such rule generally use all of these rules, we apportion this 3-hour time burden equally to all four rules. Therefore, we estimate that the burden allocated to rule 17e-1 for this contract change would be 0.75 hours. 5 Assuming that all 600 funds that enter into new subadvisory contracts each year make the modification to their contract required by the rule, we estimate that the rule's contract modification requirement will result in 450 burden hours annually, with an associated cost of approximately $131,400. 6 3 The use of subadvisers has grown rapidly over the last several years, with approximately 600 portfolios that use subadvisers registering between December 2005 and December 2006. Based on information in Commission filings, we estimate that 31 percent of funds are advised by subadvisers. 4 The Commission staff's estimates concerning the wage rates for attorney time are based on salary information for the securities industry compiled by the Securities Industry Association. The $292 per hour figure for an attorney is from the SIA Report on Management & Professional Earnings in the Securities Industry 2006, modified to account for an 1800-hour work-year and multiplied by 5.35 to account for bonuses, firm size, employee benefits and overhead. 5 This estimate is based on the following calculation (3 hours ÷ 4 rules = .75 hours). 6 These estimates are based on the following calculations: (0.75 hours × 600 portfolios = 450 burden hours); ($292 per hour × 450 hours = $131,400 total cost). Based on an analysis of fund filings, the staff estimates that approximately 300 funds use at least one affiliated broker. Based on conversations with fund representatives, the staff estimates that rule 17e-1's exemption would free approximately 40 percent of transactions that occur under rule 17e-1 from the rule's recordkeeping and review requirements. This would leave approximately 180 funds (300 funds × .6 = 180) still subject to the rule's recordkeeping and review requirements. The staff estimates that each of these funds spends approximately 60 hours per year (40 hours by accounting staff, 15 hours by an attorney, and 5 director hours) 7 at a cost of approximately $10,495 per year to comply with rule 17e-1's requirements that
(i)the fund retain records of transactions entered into pursuant to the rule, and
(ii)the fund's directors review those transactions quarterly. 8 We estimate, therefore, that the total yearly hourly burden for all funds relying on this exemption is 10,800 hours, 9 with yearly costs of approximately $1,889,100. 10 Therefore, the annual aggregate burden hour associated with rule 17e-1 is 11,250, 11 and the annual aggregate cost associated with it is $2,020,500. 12 7 The Commission staff's estimates concerning the wage rate for professional time are based on salary information for the securities industry compiled by the Securities Industry Association. The $292 per hour estimate for an attorney, $116 per hour estimate for accountant time, and $295 per hour estimate for directors (based on comparable position) is from the SIA Report on Management & Professional Earnings in the Securities Industry 2006, modified to account for an 1800-hour work-year and multiplied by 5.35 to account for bonuses, firm size, employee benefits and overhead. 8 This estimate is based on the following calculations: (40 hours accounting staff × $116 per hour = $4640) (15 hours by an attorney × $292 per hour = $4380); (5 hours by directors × $295 = $1475) ($4640 + $4380 + $1475 = $10,495 total cost). 9 This estimate is based on the following calculation: (180 funds × 60 hours = 10,800). 10 This estimate is based on the following calculation: ($10,495 × 180 funds = $1,889,100). 11 This estimate is based on the following calculation: (450 hours + 10,800 hours = 11,250 total hours). 12 This estimate is based on the following calculation: ($131,400 + $1,889,100 = $2,020,500). The estimate of average burden hours is made solely for the purposes of the Paperwork Reduction Act, and is not derived from a comprehensive or even a representative survey or study. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. Written comments are invited on:
(a)Whether the collections of information are necessary for the proper performance of the functions of the Commission, including whether the information has practical utility;
(b)the accuracy of the Commission's estimate of the burdens of the collections of information;
(c)ways to enhance the quality, utility, and clarity of the information collected; and
(d)ways to minimize the burdens of the collections of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. Please direct your written comments to R. Corey Booth, Director/Chief Information Officer, Securities and Exchange Commission, c/o Shirley Martinson, 6432 General Green Way, Alexandria, VA 22312; or send an e-mail to: *PRA_Mailbox@sec.gov* . Dated: November 15, 2007. Florence E. Harmon, Deputy Secretary. [FR Doc. E7-22843 Filed 11-21-07; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 28040; 812-13376] MyShares Trust, et al.; Notice of Application November 19, 2007. Correction In FR Document No. E7-21739, beginning on page 62701 for Tuesday, November 6, 2007, the release number was incorrectly stated. The release number is revised to read as noted above. Florence E. Harmon, Deputy Secretary. [FR Doc. E7-22846 Filed 11-21-07; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56806; File No. 4-429] Joint Industry Plan; Order Approving Joint Amendment No. 24 to the Plan for the Purpose of Creating and Operating an Intermarket Option Linkage Regarding Elimination of the Class Gate November 16, 2007. I. Introduction On September 14, 2007, September 19, 2007, August 29, 2007, August 30, 2007, and September 26, 2007, American Stock Exchange LLC (“Amex”), Boston Stock Exchange, Inc. (“BSE”), Chicago Board Options Exchange, Incorporated (“CBOE”), International Securities Exchange, LLC (“ISE”), NYSE Arca, Inc. (“NYSE Arca”), and Philadelphia Stock Exchange, Inc. (“Phlx”) (collectively, the “Participants”), respectively, filed with the Securities and Exchange Commission (“Commission”) pursuant to Section 11A of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 608 thereunder 2 an amendment (“Joint Amendment No. 24”) to the Plan for the Purpose of Creating and Operating an Intermarket Option Linkage (“Linkage Plan”). 3 In Joint Amendment No. 24, the Participants propose to eliminate the “Class Gate” restriction on Principal Order (“P Order”) access through the Linkage. The proposed Joint Amendment No. 24 was published in the **Federal Register** on October 12, 2007. 4 The Commission received no comments on Joint Amendment No. 24. This order approves Joint Amendment No. 24. 1 15 U.S.C. 78k-1. 2 17 CFR 242.608. 3 On July 28, 2000, the Commission approved a national market system plan for the purpose of creating and operating an intermarket options market linkage (“Linkage”) proposed by Amex, CBOE, and ISE. *See* Securities Exchange Act Release No. 43086 (July 28, 2000), 65 FR 48023 (August 4, 2000). Subsequently, Phlx, Pacific Exchange, Inc. (n/k/a NYSE Arca), and BSE joined the Linkage Plan. *See* Securities Exchange Act Release Nos. 43573 (November 16, 2000), 65 FR 70851 (November 28, 2000); 43574 (November 16, 2000), 65 FR 70850 (November 28, 2000); and 49198 (February 5, 2004), 69 FR 7029 (February 12, 2004). 4 *See* Securities Exchange Act Release No. 56596 (October 2, 2007), 72 FR 58133. II. Description of the Proposed Amendment In Joint Amendment No. 24, the Participants proposed to modify section 7(a)(ii)(C) of the Linkage Plan so as to eliminate the Class Gate restriction on P Order access through the Linkage. Currently, section 7(a)(ii)(C) of the Linkage Plan provides that, once a Participant automatically executes a P Order in a series of an Eligible Option Class, it may reject any other P Orders sent in the same Eligible Option Class by the same Participant for 15 seconds after the initial execution unless there is a price change in the receiving Participant's disseminated offer
(bid)in the series in which there was the initial execution and such price continues to be the NBBO. After the 15 second period, and until the sooner of one minute after the initial execution or a change in its disseminated offer (bid), section 7(a)(ii)(C) provides that the Participant that provided the initial execution is not obligated to execute any P Orders received from the same Participant in the same Eligible Option Class in its automatic execution system. In Joint Amendment No. 24, the Participants proposed to eliminate the Class Gate restriction because all Participants have removed restrictions on non-customer access to the automatic execution systems, rendering the Class Gate restriction unnecessary. III. Discussion and Commission Findings After careful consideration of Joint Amendment No. 24, the Commission finds that approving Joint Amendment No. 24 is consistent with the requirements of the Act and the rules and regulations thereunder. Specifically, the Commission finds that Joint Amendment No. 24 is consistent with section 11A of the Act 5 and Rule 608 thereunder 6 in that it is appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets. The Commission recognizes that, at the time of the creation of the Linkage, certain Participants had restrictions on non-customer access to their automatic execution systems. The Class Gate provision served to protect those Participants that did not limit non-customer access against being obligated to automatically execute an unlimited number of P Orders. Since the implementation of the Linkage, all Participants have removed restrictions on non-customer access to their automatic execution systems. All of the exchanges, therefore, allow access to their trading platforms orders on behalf of non-member market makers. The Commission believes that the greater access to automatic execution systems has rendered the Class Gate provision unnecessary and that eliminating the Class Gate provision should facilitate the more efficient operation of the options markets. 5 15 U.S.C. 78k-1. 6 17 CFR 242.608. IV. Conclusion *It is therefore ordered* , pursuant to section 11A of the Act 7 and Rule 608 thereunder, 8 that Joint Amendment No. 24 is approved. 7 15 U.S.C. 78k-1. 8 17 CFR 242.608. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 9 9 17 CFR 200.30-3(a)(29). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-22842 Filed 11-21-07; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56787; File No. SR-Amex-2007-108] Self-Regulatory Organizations; American Stock Exchange LLC; Order Approving a Proposed Rule Change To Increase the Annual Listing Fees for Certain Stock Issues of Listed Companies November 15, 2007. On October 3, 2007, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 a proposed rule change to amend Section 141 of the Amex *Company Guide* to increase the annual listing fees for certain stock issues of listed companies. The proposed rule change was published for comment in the **Federal Register** on October 16, 2007. 3 The Commission received no comment letters on the proposal. This order approves the proposed rule change. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* Securities Exchange Act Release No. 56636 (October 10, 2007), 72 FR 58691. Amex proposes to amend Section 141 of the Amex *Company Guide* to raise the annual listing fee, for any stock issue of 50 million shares or less, to $27,500 per year. Currently, for such issues, Amex charges between $16,500 and $24,500 per year, depending on the number of shares outstanding. After careful review, the Commission finds that Amex's proposal is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. 4 In particular, the Commission finds that the proposal is consistent with Section 6(b)(4) of the Act, 5 which requires, among other things, that the rules of the Exchange provide for the equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using the Exchange's facilities. The Commission notes that no comments were received on the proposed fee increase, which is comparable to the annual listing fee imposed by another exchange that has been approved by the Commission. 6 4 In approving this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 5 15 U.S.C. 78f(b)(4). 6 *See* Securities Exchange Act Release No. 55202 (January 30, 2007), 72 FR 6017 (February 8, 2007) (SR-NASDAQ-2006-040) (approving $27,500 annual fee on Nasdaq Capital Market issuers for any amount of shares outstanding). *It is therefore ordered* , pursuant to Section 19(b)(2) of the Act, 7 that the proposed rule change (SR-Amex-2007-108), be, and hereby is, approved. 7 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 8 8 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-22777 Filed 11-21-07; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56805; File No. SR-Amex-2007-122] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Exchange Liability for the Actions or Omission of Amex Book Clerks November 16, 2007. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on November 16, 2007, the American Stock Exchange LLC (“Exchange” or “Amex”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been substantially prepared by the Exchange. The Exchange has designated this proposal as non-controversial under section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposed rule change effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to adopt new Rule 996—ANTE providing for the limited liability of the Exchange in connection with the actions of Amex Book Clerks (“ABCs”). The text of the proposed rule change is available at Amex, the Commission's Public Reference Room, and *http://amex.com* . II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to permit members, member organizations, and associated persons of member organizations to bring a claim or claims against the Exchange, in limited circumstances, for the actions of an ABC. The Commission, in April 2007, published for public comment in the **Federal Register** the Exchange's proposal to eliminate the agency obligations of specialists and establish ABCs. 5 In connection with the approval of the ABC proposal, the Exchange submits this filing relating to the liability of the Exchange for the actions of ABCs. 5 *See* Securities Exchange Act Release No. 55583 (April 5, 2007), 72 FR 18695 (April 13, 2007) (notice of filing of SR-Amex-2006-107). The ABC will be an Exchange employee or independent contractor designated by the Exchange to be responsible for:
(i)Maintaining and operating the customer limit order book and display book for assigned options classes; and
(ii)effecting proper executions of orders placed in the customer order limit book. The ABC will be prohibited from having an affiliation with any member that is approved to act as a specialist, registered options trader (“ROT”), remote registered options trader (“RROT”) and supplemental registered options trader (“SROT”) on the Exchange. In addition, ABCs are also responsible for handling Linkage Orders 6 in all appointed options classes. As a result, the ABC will have the means to:
(1)Utilize an options specialist's account to route P/A Orders and Satisfaction Orders to away markets based on prior instructions that must be provided by the options specialist to the ABC, and
(2)handle all Linkage Orders or portions of Linkage Orders received by the Exchange that are not automatically executed. The ABC also would have the means to utilize the options specialist's account to fill Satisfaction Orders that result from a trade-through that the Exchange effects. 6 “Linkage Order” means an immediate or cancel order routed through the Linkage as permitted under the Linkage Plan. There are three types of Linkage Orders:
(i)“Principal Acting as Agent (“P/A”) Order,” which is an order for the principal account of a specialist (or equivalent entity on another Participant Exchange that is authorized to represent Public Customer orders), reflecting the terms of a related unexecuted Public Customer order for which the specialist is acting as agent;
(ii)“Principal Order,” which is an order for the principal account of an Eligible Market Maker (or equivalent entity on another Participant Exchange) and is not a P/A Order; and
(iii)“Satisfaction Order,” which is an order sent through the Linkage to notify a Participant Exchange of a Trade-Through and to seek satisfaction of the liability arising from that Trade-Through. Article IV, section 1(e) of the Amex Constitution provides that the Exchange, its affiliates, officers, Governors, committee members, employees or agents shall not be liable to a member, member organization, or a person associated with a member or a member organization for any loss, expense, damages or claims that arise out of the use or enjoyment of the facilities or services afforded by the Exchange, any interruption in or failure or unavailability of any such facilities or services, or any action taken or omitted to be taken in respect to the business of the Exchange except to the extent such loss, expense, damages or claims are attributable to the willful misconduct, gross negligence, bad faith or fraudulent or criminal acts of the Exchange or its officers, employees or agent acting within the scope of their authority. However, Article IV, section 1(e) does permit the Board of Governors of the Exchange to provide, by rule, Exchange liability with respect to Exchange facilities which implement the electronic transmission of orders for the purchase or sale of securities traded on the Exchange to the floor of the Exchange or between the floor of the Exchange and other markets. Accordingly, proposed Rule 996—ANTE would permit Exchange liability, in limited circumstances, relating to the actions of ABCs for:
(i)Maintaining and operating the customer limit order book and display book; and
(ii)effecting proper executions of orders placed in the customer order limit book. *Limitation of Liability* . The liability of the Exchange for claims arising out of errors or omissions made by ABCs will be limited as follows: • As to any one or more claims made by a single member on a single trading day, the Exchange shall not be liable in excess of the larger of $75,000 or the amount of any recovery obtained by the Exchange under any applicable insurance maintained by the Exchange. • As to the aggregate of all claims made by all members on a single trading day, the Exchange shall not be liable in excess of the larger of $100,000 or the amount of the recovery obtained by the Exchange under any applicable insurance maintained by the Exchange. • As to the aggregate of all claims made by all members during a single calendar month, the Exchange shall not be liable in excess of the larger of $250,000 or the amount of the recovery obtained by the Exchange under any applicable insurance maintained by the Exchange. If all of the claims arising out of errors or omissions by an ABC cannot be fully satisfied because they exceed the applicable maximum amount of liability provided for above, then the maximum amount will be allocated among all such claims arising on a single trading day or during a single calendar month, as applicable, based upon the proportion that each such claim bears to the sum of all such claims. Exchange liability will also be limited if a member, member organization or the Exchange fails to close out an uncompared trade as set forth in Rule 960. 7 In such a case, the opposing party's liability with respect to any claims arising from such trade will be limited to the lesser of:
(1)The loss which would have been experienced by the claimant if the uncompared trade had been closed out at the opening off trading on the next business day as provided in Rule 960; or
(2)the actual loss realized by the claimant. 7 Commentary .01(b) to Rule 960 provides that all rejected options transaction notices (“ROTNs”) must be “OK'd” or “DK'd” not later than one-half hour prior to the opening of trading on the first business day following the trade date unless an agent (including a specialist) was involved in the execution of a transaction, where the time limit shall be extended to fifteen minutes prior to such opening (these time limits may be extended by a Floor Official). Furthermore, the Exchange's potential liability is also limited if any damage is caused by an error or omission of an ABC which is the result of any error or omission of a member organization. Under such circumstances, the member organization will be required to indemnify the Exchange and hold it harmless from any claim of liability resulting from or relating to such damage. *Procedure.* Absent reasonable justification or excuse, any claim by a member, member organization, or persons associated with a member or member organization for losses arising from errors or omissions of an ABC, and any claim by the Exchange for indemnification under paragraph
(g)of Proposed Rule 996—ANTE, must be presented in writing to the opposing party within ten
(10)business days following the transaction giving rise to the claim; provided, that if an error or omission has resulted in an unmatched trade, then any claim based thereon shall be presented after the unmatched trade has been closed out but within ten
(10)business days following such resolution of the unmatched trade. For purposes of proposed Rule 996—ANTE, the term “transaction” means any single order or instruction which is placed with an ABC, or any series of orders or instructions, which is placed with an ABC at substantially the same time by the same member and which relates to any one or more series of options of the same class. All errors and omissions made by an ABC with respect to or arising out of any transaction will give rise to a “single claim” against the Exchange. The Exchange will retain any defenses to such claim or claims that it may have. In addition, no claim will be permitted to arise as to errors or omissions which are found to have resulted from any failure by a member or by any person acting on behalf of a member, to enter or cancel an order with such ABC on a timely basis or clearly and accurately to communicate to such ABC:
(i)The description or symbol of the security involved; or
(ii)The exercise price or option contract price; or
(iii)The type of option; or
(iv)The number of trading units; or
(v)The expiration month; or
(vi)Any other information or data which is material to the transaction. *Arbitration.* Pursuant to proposed Rule 996—ANTE, all disputed claims will be referred to binding arbitration with the decision of a majority of the arbitrators selected to hear and determine the controversy deemed final. There will be no appeal right to the Board of Governors from any decision of an arbitration panel. The arbitration panel will be composed of an odd number of panelists. Each of the parties to the dispute will select one Exchange member to serve as panelist on the arbitration panel. The panelists so selected shall then select one or more additional panelist(s); provided that the additional panelist(s) so selected are members of the Exchange and that no member of the arbitration panel may have any direct or indirect financial interest in the claim. In the event that the initial panelists selected by the parties to the dispute cannot agree on the selection of the additional panelist(s), such additional panelist(s) shall be appointed by a Floor Official chosen by a random draw who has no direct or indirect financial interest in the claim. The NASD Code of Arbitration Procedure for Industry Disputes (Article VIII of the Amex Constitution) shall apply to any arbitration proceeding. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6 of the Act 8 in general and furthers the objectives of section 6(b)(5) of the Act 9 in particular in that it would remove impediments to and perfect the mechanism of a free and open market in a manner consistent with the protection of investors and the public interest. 8 15 U.S.C. 78f. 9 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange believes that the proposed rule change will not impose any burden on competition that is not necessary or appropriate 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 No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to section 19(b)(3)(A) of the Act 10 and subparagraph (f)(6) of Rule 19b-4 thereunder. 11 Because the foregoing proposed rule change:
(i)Does not significantly affect the protection of investors or the public interest;
(ii)does not impose any significant burden on competition; and
(iii)does not become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6)(iii) thereunder. 12 10 15 U.S.C. 78s(b)(3)(A). 11 17 CFR 240.19b-4(f)(6). 12 The Exchange has satisfied the requirement under Rule 19b-4(f)(6)(iii) that it give written notice to the Commission of its intent to file the proposed rule change at least five business days prior to filing. A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative for 30 days after the date of filing. However, Rule 19b-4(f)(6)(iii) permits the Commission to waive the operative delay if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the operative delay to permit the proposed rule change to become effective prior to the 30th day after filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. The Commission notes that the proposal is substantially identical to the Chicago Board Options Exchange's (“CBOE”) rules regarding limitation of exchange liability for acts and omission of CBOE Par Officials, 13 previously published for comment and approved by the Commission, 14 and the Exchange's proposal raises no new issues of regulatory concern. Waiving the operative delay will allow the proposal to become effective simultaneously with Amex's proposal to establish ABCs, which we are approving separately today. 15 Therefore, the Commission has determined to waive the 30-day delay and allow the proposed rule change to become operative immediately. 16 13 *See* CBOE Rules 6.7, “Exchange Liability,” and 7.11, “Liability of Exchange for Actions of Order Book Officials, and PAR Officials.” 14 *See* Securities Exchange Act Release Nos. 52017 (July 12, 2005), 70 FR 41453 (July 19, 2005) (notice of filing of SR-CBOE-2005-46) and 52798 (November 18, 2005), 70 FR 71344 (November 28, 2005) (order approving SR-CBOE-2005-46). 15 *See* Securities Exchange Act Release No. 56804 (November 16, 2007) (order approving SR-Amex-2006-107). 16 For purposes only of waiving the operative delay of this proposal, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File No. SR-Amex-2006-67 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-Amex-2007-122. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commissions Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Amex-2007-122 and should be submitted on or before December 14, 2007. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 17 17 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-22840 Filed 11-21-07; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56792; File No. SR-CBOE-2006-99] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Amendment Nos. 2 and 3 to Proposed Rule Change Relating to FLEX Options Trading and Order Granting Accelerated Approval to Proposed Rule Change as Amended November 15, 2007. I. Introduction On November 27, 2006, the Chicago Board Options Exchange, Incorporated (“Exchange” or “CBOE”) filed with the Securities and Exchange Commission (“Commission”), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 a proposed rule change providing for the trading of Flexible Exchange (“FLEX”) Options on a new electronic platform, and to make certain corresponding revisions to its existing open-outcry FLEX rules. On August 17, 2007, CBOE filed Amendment No. 1 to the proposed rule change. On August 30, 2007, the proposed rule change, as amended, was published for comment in the **Federal Register** . 3 No comments were received on the proposal. On November 7, 2007 and November 15, 2007, CBOE filed Amendment Nos. 2 and 3, respectively, to the proposed rule change. 4 This notice and order solicits comments from interested persons on Amendment Nos. 2 and 3 and grants accelerated approval to the proposed rule change, as amended. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 Securities Exchange Act Release No. 56311 (August 23, 2007), 72 FR 50133. 4 *See infra* Section II(D). II. Description of Proposal FLEX Options provide investors with the ability to customize basic option features including size, expiration date, exercise style, and certain exercise prices. Currently, Exchange members may trade FLEX Options in open outcry. Markets are created when a member submits a request for quotes (“RFQ”) to the crowd. This system is referred to herein as the “FLEX RFQ System.” The Exchange has proposed an alternate framework for trading FLEX Options using a “hybrid” platform, which will incorporate both open outcry and electronic trading functionality (referred to herein as the “FLEX Hybrid Trading System” or the “System”). Some key features of the new FLEX Hybrid Trading System are the following: • *Method of Operation:* Transactions can take place through either an open-outcry RFQ process similar to the existing FLEX RFQ System or a new, Internet- and API-based electronic trading platform. Currently, the FLEX RFQ System does not provide for a book, and quotes and orders expire at the conclusion of the RFQ process. By contrast, the new System may allow FLEX Orders to be entered and trade via an electronic book (the “Book”). The Exchange would determine on a class-by-class basis whether to make a Book available. 5 5 *See* Rule 24B.5(b)(1). • *Access:* CBOE members seeking to use the new System must apply to and be approved by the Exchange. Approved members are collectively referred to as “FLEX Traders.” In addition, non-members that meet certain conditions may be offered “sponsored access” to the new System. • *Market-Maker Participation:* As with the existing FLEX rules, there are two types of FLEX Market-Makers: FLEX Appointed Market-Makers and FLEX Qualified Market-Makers. The responsibilities and obligations of FLEX Market-Makers on the new System, and changes to the corresponding rules of the existing FLEX RFQ System, are discussed further below. Detailed Summary of Proposed Rule Change A. Proposed FLEX Hybrid Trading System Rules (Chapter XXIVB) The rules governing the existing FLEX RFQ System are contained, and will continue to be maintained, in Chapter XXIVA of the Exchange rules. The proposed rules governing the new FLEX Hybrid Trading System are found in proposed Chapter XXIVB. The Exchange currently intends to maintain and operate both systems and will determine which system to use on a class-by-class basis. These determinations will be announced to the membership via regulatory circular. This rule further explains that Chapters I through XIX and XXIV of the Exchange rules apply to the new System, except as otherwise indicated. If the rules in Chapter XXIVB are inconsistent with other Exchange rules, the rules in Chapter XXIVB take precedence in relation to the trading of FLEX Options on the new System. 1. Definitions (Proposed Rule 24B.1) Proposed Rule 24B.1, *Definitions* , corresponds with existing Rule 24A.1 but contains several new definitions necessary to accommodate the new System. For example, the term “FLEX Hybrid Trading System” means the Exchange's trading platform that allows FLEX Traders to submit RFQs, FLEX Quotes, and FLEX Orders. A “FLEX Quote” is a bid or offer entered by a FLEX Market-Maker or an order to purchase or sell entered by a FLEX Trader, in either case in response to an RFQ. A “FLEX Order” is a bid or offer entered by a FLEX Market-Maker or an order to purchase or sell entered by a FLEX Trader, in either case into the Book. Proposed Rule 24B.1 also defines several terms relating to the RFQ process. The “Submitting Member” is the FLEX Trader who initiates the RFQ or who enters a FLEX Order into the Book. The “RFQ Response Period” is the period during which FLEX Traders may provide FLEX Quotes in response to an RFQ. The “RFQ Reaction Period” is the period during which the Submitting Member determines whether to accept or reject the RFQ Market. 6 The “RFQ Market” consists of the FLEX Quotes entered in response to an RFQ and FLEX Orders resting in the Book. An “RFQ Order” is an order to buy or an order to sell entered by the Submitting Member during the RFQ Reaction Period. 6 *See* proposed Rule 24B.1(u) (as modified by Amendment No. 3). Proposed Rule 24B.1 also identifies certain trade conditions that can be placed on an RFQ Order or FLEX Order, such as fill-or-kill, all-or-none, minimum fill, “lots of,” and hedge. FLEX Orders except for fill-or-kill orders would be designated by the System as day orders and, if unexecuted, would be canceled at the close of each trade day. An RFQ may include a hedge or “Intent to Cross” trade condition, discussed more fully below. Hedge and Intent to Cross trade conditions will be disclosed on the System. 2. Terms of FLEX Options (Proposed Rule 24B.4) Proposed Rule 24B.4, *Terms of FLEX Options* , is similar to existing Rule 24A.4. Both rules set forth the variable terms of FLEX Options (such as the underlying security or index, put or call type, exercise style, expiration date, and exercise price). Other terms are not variable and are the same as those that apply to Non-FLEX Options. Both rules set forth the information required from a member who initiates an RFQ, such as the type and form of quote sought, any trade conditions, and the length of the RFQ Response Period. 7 7 The length of the RFQ Response Period is defined by the Submitting Member but must fall within the time ranges established by the appropriate Procedure Committee on a class-by-class basis. The period cannot be less than three seconds. *See* proposed Rule 24B.4(a)(3)(iii). Proposed Rule 24B.4 lists additional contract and transaction specifications for RFQs, FLEX Quotes, FLEX Orders, and RFQ Orders. These specifications pertain in part to maximum expiration terms and second to minimum value size requirements. The maximum expiration terms are the same as in the existing FLEX rules. 8 The minimum value size specifications are substantially similar to those in Rule 24A.4, though additional language has been added to clarify the minimum value size requirements for FLEX Orders entered in the Book. There are additional special terms for FLEX Index Options 9 and FLEX Equity Options, 10 which correspond to provisions in existing Rule 24A.4. 8 For FLEX Equity Options, the maximum term is generally three years, although the Submitting Member may request up to five years. For FLEX Index Options, the maximum term is generally five years, although a Submitting Member may request up to ten years. *See* existing Rule 24A.4(a)(4); proposed Rule 24B.4(a)(5). 9 *See* proposed Rule 24B.4(b). 10 *See* proposed Rule 24B.4(c). For example, settlement of a FLEX Equity Option shall be by physical delivery of the underlying security. 3. FLEX Trading Procedures and Principles (Proposed Rule 24B.5) On the new System, there will be no trading rotations in FLEX Options, either at the open or the close. 11 Instead, trading will result from RFQs submitted through the System or in open outcry, or from transactions on the Book. 11 *See* proposed Rule 24B.3.
(a)Electronic RFQ Process Upon receipt of an RFQ in proper form, the System will cause the terms and specifications of the RFQ to be communicated to all FLEX Traders. Any FLEX Trader, including the Submitting Member, may then enter a FLEX Quote during the RFQ Response Period. Any FLEX Quote or FLEX Order may be entered, modified, or withdrawn at any point during the RFQ Response Period. 12 The System will dynamically calculate and disseminate to all FLEX Traders the RFQ Market. 13 12 However, a FLEX Appointed Market-Maker must meet certain FLEX Quote maintenance obligations. *See* proposed Rule 24B.5(a)(1)(ii)(B). 13 *See* proposed Rule 24B.5(a)(1)(ii)(C) (as modified by Amendment No. 2). Following the RFQ Response Period, the Submitting Member may trade against the RFQ Market during the RFQ Reaction Period. The length of this period will be established by the appropriate Procedure Committee on a class-by-class basis and will not be more than five minutes. 14 Failure of the Submitting Member to trade against the RFQ Market before expiration of the RFQ Reaction Period would equate to a rejection. During the RFQ Reaction Period:
(1)FLEX Traders can continue to enter, modify, or withdraw FLEX Quotes and FLEX Orders;
(2)FLEX Orders that are entered or modified during the RFQ Response and Reaction Periods will be treated the same as FLEX Quotes for purposes of the priority allocation; and
(3)the System will dynamically calculate and disseminate to all FLEX Traders the RFQ Market given the current FLEX Quotes and resting FLEX Orders. 15 14 The Exchange originally proposed to cap the RFQ Reaction Period at 30 seconds. In Amendment No. 2, the Exchange proposed to increase the maximum period to five minutes “to address feedback received from members and potential users that the RFQ Reaction Period should be lengthened to provide Submitting Members with additional time to assess an RFQ Market, determine whether to accept or reject it, and process a response accordingly.” 15 *See* proposed Rule 24B.5(a)(1)(iii)(B)(II) (as modified by Amendment No. 2). The Submitting Member may decline to trade against the RFQ Market by canceling the RFQ or letting it expire. If the Submitting Member chooses to trade but has not indicated an Intent to Cross, he or she may enter an RFQ Order to trade with one side of the RFQ Market (but not both). The Submitting Member's RFQ Order will be eligible to trade with FLEX Quotes and FLEX Orders at a single price that will leave bids and offers which cannot trade with each other (the “BBO clearing price”). In determining the priority of FLEX Quotes and FLEX Orders, the System gives priority to those priced better than the BBO clearing price, then to FLEX Quotes and FLEX Orders at the BBO clearing price. Priority among FLEX Quotes and FLEX Orders at the BBO clearing price is as follows:
(1)any FLEX Quotes that are subject to a FLEX Appointed Market-Maker participation entitlement;
(2)FLEX Orders resting in the Book, based on the Book priority algorithm;
(3)FLEX Quotes for the account of public customers and non-member broker-dealers based on time priority; and
(4)all other FLEX Quotes based on time priority. If the RFQ Market is locked or crossed, priority among FLEX Quotes and FLEX Orders at the BBO clearing price and on the same side as the RFQ Order is as follows:
(1)FLEX Orders in the Book, based on the Book priority algorithm;
(2)if applicable, an RFQ Order for the account of a public customer or non-member broker-dealer, then any FLEX Quote that is subject to a FLEX Appointed Market-Maker participation entitlement;
(3)FLEX Quotes for the account of public customers and non-member broker-dealers, based on time priority;
(4)if applicable, an RFQ Order for the account of a member, then any FLEX Quote that is subject to a FLEX Appointed Market-Maker participation entitlement; and
(5)all other FLEX Quotes, based on time priority. The System will enter any remaining balance of the incoming RFQ Order in the Book (if available), unless the Submitting Member has indicated that the balance of the RFQ Order is to be automatically canceled if it is not traded. If the Submitting Member has indicated an “Intent to Cross” in its RFQ request, the Submitting Member may receive a crossing participation entitlement if one has been established in that class by the appropriate Procedure Committee, and if the RFQ Order entered by the Submitting Member during the RFQ Reaction Period matches or improves the BBO clearing price. The RFQ Order will be eligible to trade with FLEX Quotes and FLEX Orders at the BBO clearing price giving priority to the FLEX Quotes and FLEX Orders priced better than the BBO clearing price, then to FLEX Quotes and FLEX Orders at the BBO clearing price. Priority among multiple FLEX Quotes and FLEX Orders at the BBO clearing price is as follows:
(1)FLEX Orders in the Book, based on the Book priority algorithm;
(2)FLEX Quotes for the account of public customers and non-member broker-dealers, based on time priority;
(3)the crossing participation entitlement;
(4)any FLEX Quotes that are subject to a FLEX Appointed Market-Maker participation entitlement; 16 and
(5)then all other FLEX Quotes, based on time priority. 16 The crossing participation entitlement and the FLEX Appointed Market-Maker entitlement together may not exceed a certain percentage of the original order. See proposed Rule 24B.5(d)(2)(i)(A)-(B). If a Book is available in that class, the System would enter any remaining balance of the incoming RFQ Order in the Book and treat it the same as other FLEX Orders. If there is no Book available, the System will expose any remaining balance of the incoming RFQ Order so other FLEX Traders can trade against it. After the remaining balance of the RFQ Order has been exposed for at least the Crossing Exposure Period, 17 the Submitting Member may enter a contra-side order to trade all or any portion of the remaining balance. 18 17 The length of this Crossing Exposure Period shall be determined by the appropriate Procedure Committee on a class-by-class basis and shall not be less than three seconds. *See* proposed Rule 24B.5(a)(1)(iii)(D)(IV). 18 The Submitting Member must, however, enter a contra-side order when necessary to satisfy applicable minimum value size requirements. *See id.* If the Submitting Member rejects the RFQ Market or to the extent the RFQ Market size exceeds the Submitting Member's size, the System automatically would execute any remaining FLEX Quotes and FLEX Orders that are marketable against each other at the BBO clearing price. Then, if a Book is available, any remaining balance of any FLEX Quote would be automatically entered into the Book unless the FLEX Trader who entered it had indicated that the FLEX Quote is to be automatically canceled if not traded. If no Book is available, any remaining balance of the FLEX Quotes will be automatically canceled at the conclusion of the RFQ Reaction Period. 19 19 *See* proposed Rule 24B.5(a)(1)(F).
(b)Open-Outcry RFQ Process To initiate a FLEX transaction using the open-outcry RFQ process under proposed Rule 24B.5, a Submitting Member would submit an RFQ to a FLEX Official. The Submitting Member would then immediately announce the terms and specifications of the RFQ to the crowd. FLEX Traders present in the crowd may respond orally with FLEX Quotes during the RFQ Response Period. A FLEX Trader could enter, modify, or withdraw its FLEX Quote at any point during the RFQ Response Period. At the expiration of the RFQ Response Period, the Submitting Member would identify the BBO (considering responsive FLEX Quotes and, if applicable, FLEX Orders resting in the Book) and announce the BBO to the crowd. If the Submitting Member does not indicate an Intent to Cross or act as principal with respect to any part of the trade, the Submitting Member may submit an agency RFQ Order to trade against the RFQ Market. If the Submitting Member rejects the BBO or is given a BBO for less than the entire size requested, the FLEX Traders in the crowd other than the Submitting Member would have an opportunity to match or improve the BBO during a BBO Improvement Interval. At the expiration of any BBO Improvement Interval, the Submitting Member must promptly accept or reject the BBO. If the Submitting Member indicates an Intent to Cross or act as principal with respect to any part of the trade, acceptance of the displayed BBO would be automatically delayed until the expiration of the BBO Improvement Interval. Prior to the BBO Improvement Interval, the Submitting Member must announce to the crowd the price at which it expects to trade. In these circumstances, the Submitting Member may participate with all other FLEX Traders present in the crowd in attempting to improve or match the BBO during the BBO Improvement Interval. At the expiration of the BBO Improvement Interval, the Submitting Member could trade against the BBO or reject it. If the Submitting Member rejects the BBO after an RFQ Response Period or BBO Improvement Interval, or the BBO size exceeds the FLEX transaction size indicated in the RFQ, FLEX Traders present in the crowd could accept the unfilled balance of the BBO. Such acceptance must occur by public outcry immediately following the Submitting Member's rejection of the BBO or any BBO Improvement Interval, or the Submitting Member's trade that does not exhaust the full size of the BBO. The highest bid (lowest offer) would have priority. Among bids (offers) at the same price, priority generally is as follows:
(1)The crossing participation entitlement, if the Submitting Member has indicated an Intent to Cross and an entitlement is available in that class;
(2)any FLEX Quote subject to a FLEX Appointed Market-Maker participation entitlement;
(3)all other FLEX Quotes, in the sequence in which they are entered; 20 and
(4)FLEX Orders resting in the Book, based on the Book priority algorithm. However, if a member is relying on the “G” exception to section 11(a) of the Act, 21 the member's bid (offer) must yield to any bid (offer) at the same price on the Book and all other bids (offers) that have priority over the Book. If a Submitting Member is asserting a crossing participation entitlement on behalf of a proprietary account of a member relying on the “G” exception and a FLEX Appointed Market-Maker is also asserting a participation entitlement, the Submitting Member's crossing participation entitlement combined with any guaranteed participation for FLEX Appointed Market-Makers shall not exceed 40% of the original order. 20 If two or more best bids (offers) are submitted in open outcry at the same time and same price or if the Submitting Member cannot reasonably determine the sequence in which they were made, priority would be apportioned equally among those open-outcry bids (offers). *See* proposed Rule 24B.5(a)(2)(v)(A)(III) (as modified by Amendment No. 2). 21 15 U.S.C. 78k(a)(1)(G). The proposed open-outcry RFQ process is similar to the existing process, with a few distinctions. Under the new System, the Submitting Member is responsible for announcing the terms and specifications of the RFQ to the crowd, receiving responsive FLEX Quotes, and at the conclusion of the RFQ Response Period announcing the BBO to the crowd. Under the existing process, the FLEX Post Official communicates the RFQ to the crowd over facilities maintained by the Exchange, responsive FLEX Quotes may be entered at the post, and the BBO is visibly displayed at the post and over the network. 22 The proposed priority algorithm takes into consideration the Book, which does not exist currently, and provides that two bids submitted in open outcry at the same time and same price will be apportioned equally, as compared to the existing practice of affording priority to FLEX Appointed or Qualified Market-Makers. 23 22 *Compare* proposed Rules 24B.5(a)(2)(i)(B), (ii)(A), and (ii)(B) to existing Rule 24A.5(a)(ii), (b)(i), and (b)(iii). 23 *Compare* proposed Rules 24B.5(a)(2)(v) and
(d)to existing Rules 24A.5(e) and (f).
(c)The FLEX Book and FLEX Orders The Exchange may determine to make a FLEX Book available on a class-by-class basis. If a Book has been enabled, a Submitting Member may enter a FLEX Order if it satisfies the applicable minimum value size requirements and the FLEX Order is in compliance with section 11(a) of the Act. A FLEX Order submitted on behalf of the proprietary account of a member relying on the “G” exception to Section 11(a) may be entered only to hit the Book and may not rest in the Book. 24 24 *See* proposed Rule 24B.5(b)(2)(ii). FLEX Orders in the Book are ranked and matched based on price/time priority. However, if a FLEX Appointed Market-Maker is quoting at the best bid (offer) and a FLEX Appointed Market-Maker participation entitlement has been established, then priority at the same price is as follows:
(1)Any FLEX Orders for the account of public customer ranked ahead of the FLEX Appointed Market-Maker;
(2)any FLEX Orders subject to a FLEX Appointed Market-Maker entitlement; and
(3)all other FLEX Orders, based on time priority. 25 25 *See* proposed Rule 24B.5(b)(2)(iii). A Submitting Member may not execute as principal against a FLEX Order on the Book that it represents as agent unless:
(1)The Submitting Member has been bidding or offering for at least the Crossing Exposure Period before receiving the agency FLEX Order that is executable against such bid or offer; 26 or
(2)the agency FLEX Order is first subject to an RFQ and the agency FLEX Order (or any remaining balance not executed during the RFQ Reaction Period) is exposed on the System for at least the Crossing Exposure Period. 27 A Submitting Member may not execute a solicited order against a FLEX Order that the Submitting Member is representing as agent unless the agency FLEX Order is first subject to any RFQ and the agency FLEX Order (or any remaining balance not executed during the RFQ Reaction Period) is exposed on the System for at least the Crossing Exposure Period. 28 The Crossing Exposure Period referenced in the above provisions will be established by the appropriate Procedure Committee on a class-by-class basis and will not be less than three seconds. 29 26 *See* proposed Rule 24B.5(b)(3)(i)(B). 27 *See* proposed Rule 24B.5(b)(3)(i)(A) (as modified by Amendment No. 2). 38 *See* proposed Rule 24B.5(b)(3)(ii) (as modified by Amendment No. 2). 26 *See* proposed Rule 24B.5(b)(3)(iii) (added by Amendment No. 2).
(d)Creation of Binding Contracts Proposed Rule 24B.5(c) provides that acceptance of any bid or offer creates a binding contract under Rule 6.48. This provision is the same as in existing Rule 24A.5(d) and applies to both RFQ and Book transactions.
(e)Guarantees For FLEX Equity Options, the Exchange's appropriate Procedure Committee may determine on a class-by-class basis to establish a crossing participation entitlement for facilitations and/or solicitations with respect to open-outcry and/or electronic trades. The entitlement percentage may not exceed 40% of the original order. 30 If the Submitting Member matches or improves the BBO or BBO clearing price, as applicable, the Submitting Member would have priority to execute the contra-side of the order up to the crossing participation entitlement percentage. The appropriate Procedure Committee similarly may determine on a class-by-class basis to establish a crossing participation entitlement for FLEX Index Options, which may not exceed 40% of the trade. With respect to FLEX Index Options, if the Submitting Member matches or improves the BBO or BBO clearing price, as applicable, the Submitting Member would have priority to execute the contra-side of the order up to the largest of:
(1)The crossing entitlement percentage;
(2)a proportional share of the trade;
(3)$1 million underlying equivalent value; or
(4)the remaining underlying equivalent value on a closing transactions valued at less than $1 million. 31 30 *See* proposed Rule 24B.5(d)(2)(i)(A). 31 *See* proposed Rule 24B.5(d)(2)(i)(B). In the FLEX RFQ System rules, the crossing participation entitlement for transactions in FLEX Index Options is currently 20%, and there are similar provisions for FLEX Index Options that could permit an entitlement of greater than 40% in certain cases. *See* existing Rule 24A.5(e)(iii)(B). In the past, the establishment of FLEX Appointed Market-Maker entitlements were the subject of separate rule filings. 32 In lieu of submitting separate rule filings, the Exchange has now proposed to include specific parameters within the rule text, similar to its rules respecting crossing participation entitlements and market-maker participation entitlements for Non-FLEX Options. 33 Henceforth, the appropriate Procedure Committee may establish a participation entitlement for FLEX Appointed Market-Makers on a class-by-class basis with respect to open-outcry RFQs, electronic RFQs, and/or Book transactions. Any such entitlement shall:
(1)Be divided equally by the number of FLEX Appointed Market-Makers quoting at the BBO or BBO clearing price, as applicable;
(2)collectively be no more than:
(a)50% of the remaining order when one other FLEX Market-Maker is quoting at the same price,
(b)40% when two other FLEX Market-Makers are quoting at the same price, and
(c)30% when three or more FLEX Market-Makers are quoting at the same price; and
(3)when combined with any Submitting Member's crossing participation entitlement, shall not exceed 40% of the size of the original order. 34 Pronouncements regarding the applicable participation entitlements must be announced to the membership via regulatory circular. 32 *See* Rule 24A.5(e)(iv); Securities Exchange Act Release No. 45934 (May 15, 2002), 67 FR 36276 (May 23, 2002) (SR-CBOE-2002-09). 33 *See* , *e.g.* , Rule 8.87, *Participation Entitlement of DPMs and e-DPMs* (providing for a DPM/e-DPM participation entitlement after all public customer orders are satisfied). 34 *See* proposed Rule 24B.5(d)(2)(ii).
(f)Solicited Orders A Submitting Member trading in open outcry may not cross an order that he or she is holding with an order that he or she solicited from a FLEX Market-Maker who is then in the trading crowd, except in accordance with CBOE Rule 6.55, *Multiple Representation Prohibited.* A Submitting Member utilizing the electronic System may not cross an order that he or she is holding with:
(1)a solicited order for a FLEX Market-Maker's individual or joint account; or
(2)a solicited order initiated by the FLEX Market-Maker for an account in which the FLEX Market-Maker has an interest, unless the FLEX Market-Maker refrains from participating on the same trade. 35 35 *See* proposed Rule 24B.5(d)(2)(i)(C).
(g)FLEX Standard Minimum Increments The applicable increments for FLEX Index Options will be identical to the increments in the existing FLEX rules, which permit decimal bids and offers in the designated currency that meet or exceed certain minimum parameters. 36 For example, the minimum increment in U.S. dollars is $0.01 (or such other minimum as the appropriate Procedure Committee may set from time to time to ensure fair and orderly markets). The applicable increments for FLEX Equity Options will be determined by the appropriate Procedure Committee on a class-by-class basis, but may not be smaller than $0.01. This represents a change from the existing FLEX rules, under which the trading increments applicable to FLEX Equity Options are the same as those applicable to Non-FLEX Equity Options ( *i.e.* , $0.10 for simple bids and offers in series quoted at or above $3 a contract, $0.05 for simple bids and offers in series quoted below $3 a contract, and $0.01 for series quoted in the penny pilot program 37 ). 36 *See* existing Rule 24A.5(g) (which is proposed to be renumbered as Rule 24A.5(f)); proposed Rule 24B.5(e). 37 *See* CBOE Rule 6.42. 4. FLEX Market-Maker Appointments and Obligations (Proposed Rule 24B.9) Under the rules for the new System, the Exchange will appoint two or more FLEX Qualified Market-Makers to each FLEX Index Option class and settlement currency, and two or more FLEX Qualified Market-Makers to each FLEX Equity Option class. In making such appointments and in taking other action with respect to FLEX Qualified Market-Makers, the Exchange shall take into account the factors enumerated in, and shall refer to the requirements of, existing CBOE Rule 8.3, Appointment of Market-Makers. As a condition to receiving and maintaining a FLEX Qualified Market-Maker appointment in a FLEX Index Option (FLEX Equity Option), the FLEX Qualified Market-Maker must maintain an appointment in one or more Non-FLEX Index Option classes (Non-FLEX Equity Option classes). The Non-FLEX Option class need not include the FLEX Option class's underlying index or security. Notwithstanding the above, the appropriate Market Performance Committee may determine to solicit applications and appoint:
(1)One or more FLEX Appointed Market-Makers in addition to appointing FLEX Qualified Market-Makers to such classes; or
(2)two or more FLEX Appointed Market-Makers in lieu of appointed FLEX Qualified Market-Makers. Thus, under this revised structure applicable to both platforms, a FLEX Option class could be structured as a FLEX Qualified Market-Maker-only crowd with at least two participants, a mixed FLEX Qualified/Appointed Market-Maker crowd with at least three participants, or a FLEX Appointed Market-Maker-only crowd with at least two participants. A FLEX Appointed Market-Maker must provide a FLEX Quote in response to any open-outcry RFQ in a class of FLEX Options to which it is appointed and trades in open outcry. 38 In addition, a FLEX Appointed Market-Maker must provide FLEX Quotes in response to a designated percentage of electronic RFQs, such percentage to be determined by the appropriate Procedure Committee and not less than 80%. 39 Although a FLEX Qualified Market-Maker need not enter a FLEX Quote in response to an RFQ in a class of FLEX Options to which it is appointed, 40 the FLEX Qualified Market-Maker (like the FLEX Appointed Market-Maker) must submit a FLEX Quote if called upon by a FLEX Official, including when no FLEX Quotes are submitted in response to a specific RFQ. 41 38 *See* proposed Rule 24B.9(c)(i). 39 *See* proposed Rule 24B.4(a)(5)(iv). 40 *See* proposed Rule 24B.9(c). 41 *See* proposed Rule 24B.9(d). 5. FLEX Officials (Proposed Rule 24B.14) Existing FLEX Rule 24A.12 provides that a FLEX Post Official is responsible for:
(1)Reviewing the conformity of RFQs and FLEX Quotes to the terms and specifications contained in Rule 24A.4;
(2)posting RFQs for dissemination;
(3)determining the BBO;
(4)ensuring that contracts are executed in conformance with the priority principles set forth in Rule 24A.5(e);
(5)calling for Indicative FLEX Quotes in accordance with the requirements of Rule 24A.12(c); and
(6)calling upon FLEX Qualified Market-Makers to provide FLEX Quotes in specific classes of FLEX Equity Options as provided in Rule 24A.9(c). 42 42 *See* existing Rule 24A.12(b). Proposed Rule 24B.14, *FLEX Official* , corresponds with existing Rule 24A.12 and describes the functions of a FLEX Official for the new System. The FLEX Official would continue to be responsible for reviewing the conformity of open-outcry RFQs to the applicable terms and specifications in proposed Rule 24B.4. However, because open-outcry FLEX Quotes will now be provided to the Submitting Member, the FLEX Official is no longer responsible for reviewing them for conformity to the applicable terms and specifications or for determining the BBO. In addition, a FLEX Official may nullify a FLEX transaction, whether electronic or open-outcry, if he or she determines that it does not conform to the terms of proposed Rules 24B.4 or 24B.5. As noted above, a FLEX Official may call upon FLEX Market-Makers, whether Qualified or Appointed to a given class, to provide FLEX Quotes in certain circumstances, as provided in proposed Rule 24B.9. A FLEX Official may be an employee of the Exchange or an independent contractor. The Exchange may designate other qualified employees or independent contractors to assist the FLEX Official as the need arises. 43 43 *See* proposed Rule 24B.14(a). 6. Position and Exercise Limits Proposed Rules 24B.7, *Position Limits and Reporting Requirements* , and 24B.8, *Exercise Limits* , are modeled after existing Rules 24A.7 and 24A.8. However, the Exchange is proposing to make certain revisions to existing Rules 24A.7 and 24A.8, and to include the same language in proposed Rules 24B.7 and 24B.8, relating to the applicable position and exercise limits for FLEX Index Options and the aggregation of certain FLEX and non-FLEX positions. The Exchange has proposed changes to Rule 24A.7 to conform the language of that rule to reflect changes that were recently approved by the Commission in a separate proposed rule change. 44 44 *See* Securities Exchange Act Release No. 56350 (September 4 2007), 72 FR 51878 (September 11, 2007) (SR-CBOE-2007-79). In addition, the proposal would amend Rule 24A.7 to establish new position limits for certain industry-based FLEX Index Option classes: 1. No more than four times the applicable position limits established pursuant to Rule 24.4A for FLEX Options on:
(a)The Dow Jones Transportation Average or the Dow Jones Utility Average; or
(b)an industry-based index that is not a “narrow-based security index,” as defined under Section 3(a)(55)(B) of the Act. 45 45 15 U.S.C. 78c(a)(55)(B). 2. For all other industry-based FLEX Index Option classes, no more than one times the applicable number of Non-FLEX Index Option contracts (whether long or short) of the put class and the call class on the same side of the market, as determined on the basis of the position limits established pursuant to Rule 24.4A, *Position Limits for Industry Index Options* . The proposal also would amend Rule 24A.7 to provide that position limits for a micro narrow-based FLEX Index Option class shall not exceed one times the applicable number of Non-FLEX Index Option contracts (whether long or short) of the put class and the call class on the same side of the market, as determined on the basis of the position limits established pursuant to Rule 24.4B, *Position Limits for Options on Micro Narrow-Based Indexes As Defined Under Rule 24.2(d).* Finally, new language to Rule 24A.7 would provide that, except as otherwise provided, the position limit for a broad-based FLEX Index Option class may not exceed 200,000 contracts on the same side of the market. Proposed Rule 24B.7 replicates amended Rule 24A.7 in the rules applying to the new System. Both rules would contain new language requiring that positions in FLEX Options must be aggregated with positions in Non-FLEX Options in certain circumstances: • *QIX Options:* Commencing at the close of trading two business days prior to the last trading day of the calendar, positions in FLEX Index Options having an exercise settlement value determined by the level of the index at the close of trading on the last trading day before expiration shall be aggregated with positions in Quarterly Index
(QIX)Options on the same index with the same expiration and shall be subject to the position limits set forth in Rule 24.4, 24.4A, or 24.4B, as applicable. • *Weekly Options:* Commencing at the close of trading two business days prior to the last trading day of the week, positions in FLEX Options that are cash-settled 46 shall be aggregated with positions in Short Term Option Series on the same underlying index with the same means for determining exercise settlement value ( *e.g.* , opening or closing prices of the underlying index) with the same expiration and shall be subject to the position limits set forth in Rule 24.4, 24.4A, 24.4B or 29.5, as applicable. 46 FLEX Index Options and FLEX Credit Default Options are cash settled. FLEX Equity Options are settled by physical delivery. *See* existing Rules 24A.4(b)(4) and (c)(3) and 29.19; *see also* proposed Rules 24B.4(b)(4) and (c)(3). Proposed Rule 24B.8 replicates existing Rule 24A.8 regarding exercise limits. Both rules generally provide that the exercise limit for a FLEX Index Option is equivalent to the position limit. Both rules also set forth certain minimum value size requirements for exercises of FLEX Equity Options and FLEX Index Options. In an earlier proposed rule change, CBOE represented that, when it files a proposed rule change to list and trade a new Non-FLEX Index Option, it also would propose to list and trade the FLEX Index Options in the same filing and include proposed position and exercise limits. 47 Because the maximum FLEX Index Option position and exercise limits will now be explicitly set out in Rules 24A.7, 24A.8, 24B.7, and 24B.8, the Exchange seeks to eliminate this earlier commitment. 47 *See* Securities Exchange Act Release No. 43108 (August 2, 2000), 65 FR 48770 (August 9, 2000) (SR-CBOE-00-26) (immediately effective proposal providing for the listing and trading of FLEX Options on all indices that underlie Non-FLEX Options listed and traded by the Exchange). 7. Financial Requirements Under the proposal, a FLEX Index Market-Maker may not effect a FLEX Index Option transaction unless it has demonstrated to the satisfaction of the Exchange that the net liquidating equity maintained in the FLEX Appointed Market-Maker's individual or joint accounts with any one clearing member in which transactions in FLEX Index Options will be conducted is at least $100,000. 48 In addition, a FLEX Index Appointed Market-Maker is required to maintain at least $1 million net liquidating equity and/or $1 million net capital, as applicable. 49 A FLEX Index Appointed Market-Maker or its clearing member must immediately inform the Exchange whenever the FLEX Index Appointed Market-Maker fails to be in compliance with any of the above requirements. FLEX Market-Makers and floor brokers must file letters of guarantee accepting financial responsibility for all FLEX transactions they make. 50 These provisions parallel existing Rules 24A.13, 24A.14, and 24A.15 that apply to the FLEX RFQ System. 48 *See* proposed Rule 24B.11. 49 *See* proposed Rule 24B.12. 50 *See* proposed Rule 24B.13. 8. Other Rules for New System Other rules in proposed Chapter XXIVB are the same as, or closely modeled after, the existing rules of the FLEX RFQ System. Proposed Rules 24B.2, *Hours of Trading* ; 24B.3, *Trading Rotations* ; 24B.10, *Related Securities* ; 24B.15, *Nonavailability of RAES* ; and 24B.16, *Inapplicability of Split Price and Accommodation Liquidation Rules* , are identical to Rules 24A.2, 24A.3, 24A.11, 24A.16, and 24A.17, respectively. Proposed Rules 24B.6, *Discretionary Transactions* , and 24B.13, *Letter of Guarantee or Authorization* are virtually identical to Rules 24A.6 and 24A.15, respectively, except for non-substantive grammatical changes. Proposed Rules 24B.11, *FLEX Index Appointed Market-Maker Account Equity* , and 24B.12, *FLEX Index Appointed Market-Maker Financial Requirements* , are virtually identical to Rules 24A.13 and 24A.14, respectively, except that revisions are being made to clarify that these rules apply only to FLEX Appointed Market-Makers in FLEX Index Options. 51 51 The special account equity and financial requirements under existing Rules 24A.13 and 24A.14 apply only to FLEX Appointed Market-Makers, who currently are appointed only to FLEX Index Option classes and currently are subject to certain heightened minimum value size requirements under Rule 24A.4(a)(4)(iv). Given the proposed changes to the FLEX Market-Maker appointments discussed above, which would allow for the appointment of a FLEX Equity Appointed Market-Maker, proposed Rules 24B.11 and 24B.12 make clear that these special account equity and financial requirements would apply only to FLEX Appointed Market-Makers in FLEX Index Options (who would continue to be subject to the heightened minimum value size requirements under proposed Rule 24B.4(a)(5)(iv)) and not FLEX Appointed Market-Makers in FLEX Equity Options (who would not be subject to heightened minimum value size requirements). The Exchange has proposed corresponding changes to existing Rules 24A.13 and 24A.14. B. Changes to Existing FLEX Rules The Exchange is proposing various changes to the existing FLEX rules to conform them to the corresponding new System rules. In addition, the term “Indicative FLEX Quote” in Rule 24A.1 and a related reference in Rule 24A.12 are being deleted. Indicative FLEX Quotes are non-binding indications of the market that were periodically supplied by FLEX Market-Makers and displayed on the FLEX communication network. This functionality is no longer utilized, so these references in Rules 24A.1 and 24A.12 are being deleted. The Exchange is also proposing to increase the crossing participation entitlement percentage available on the FLEX RFQ System. Currently, the Submitting Member may obtain a crossing participation entitlement of 25% of the incoming order for a FLEX Equity Option or 20% of the incoming order for a FLEX Index Option. 52 Under the proposal, the appropriate Procedure Committee could determine on a class-by-class basis whether to establish a crossing participation entitlement for facilitations and/or solicitations and the applicable crossing participation entitlement percentage, which may not exceed 40% of the incoming order. 53 These revisions would make the crossing participation entitlements equivalent on the FLEX RFQ System and the FLEX Hybrid Trading System. 52 *See* Rule 24A.5(e)(iii)(A)-(B). Other existing provisions could allow the Submitting Member to receive in excess of 20% of an incoming order for a FLEX Index Option. *See* Rule 24A.5(e)(iii)(B). 53 *See* proposed Rule 24A.5(e)(iii)(A)-(B). C. Other Changes to CBOE Rules The Exchange is proposing to allow sponsored access to the new System. Under proposed Rule 6.20A, a CBOE member (“Sponsoring Member”) may provide a non-member (“Sponsored User”) with electronic access to the System. The proposed rule outlines the requirements that Sponsored Users and Sponsoring Members are required to meet prior to engaging in a sponsorship arrangement. A Sponsored User may be a person, such as an institutional investor, who has entered into a sponsorship arrangement with a Sponsoring Member for purposes of entering orders on the System. This would include entering and responding to electronic RFQs and entering FLEX Orders into the Book. A Sponsored User may utilize the System only if authorized in advance by one or more Sponsoring Members in accordance with the provisions of proposed Rule 6.20A. D. Amendment Nos. 2 and 3 In Amendment No. 2, the Exchange made the following changes to the proposal: • In proposed Rule 24B.5(a)(1), modifying the procedures that apply during the electronic RFQ Reaction Period to:
(i)Permit FLEX Quotes and FLEX Orders to be entered, modified, or canceled during the RFQ Reaction Period;
(ii)increase the maximum RFQ Reaction Period from the proposed 30 seconds to five minutes;
(iii)provide that, if the Submitting Member enters a FLEX Quote during the RFQ Reaction Period, the Submitting Member must be bidding (offering) for at least the Crossing Exposure Period prior to entering an RFQ Order; and
(iv)provide that the RFQ Market is dynamically updated during both the RFQ Response and RFQ Reaction Periods; • Also in proposed Rule 24B.5(a)(2), modifying the open-outcry priority provisions to clarify the Exchange's original intent that, after the application of any participation entitlements, all other FLEX Quotes submitted in response to an open-outcry RFQ have priority based on the sequence in which those FLEX Quotes are made in open outcry and, to the extent two or more best bid (offer) FLEX Quotes are submitted in open outcry at the same time and same price (or the Submitting Member cannot reasonably determine the sequence), priority will be apportioned equally; • In proposed Rule 24B.5(b), modifying the Book crossing provisions to clarify the Exchange's original intent that an agency FLEX Order must first be subject to an RFQ and the agency FLEX Order (or any remaining balance not executed during the RFQ Reaction Period) must also be exposed on the System for at least the Crossing Exposure Period prior to entering a contra-side principal or solicitation order that is executable against the agency FLEX Order. Previously, the proposed rule text had simply indicated that the agency FLEX Order must first be subject to an RFQ; • Updating the text of Rules 24A.7 and 24A.8, as well as proposed Rules 24B.7 and 24B.8, to reflect unrelated changes that have been approved in a separate rule filing 54 and to make certain non-substantive corrections; 54 *See* Securities Exchange Act Release No. 56350 (September 4, 2007), 72 FR 51878 (September 11, 2007) (SR-CBOE-2007-79). • Inserting corresponding changes to the discussion sections of the Form 19b-4 and the Exhibit 1 **Federal Register** notice to reflect the above-noted changes; • Providing information regarding its plans respecting dissemination of FLEX data via the Options Price Reporting Authority (“OPRA”). Specifically, with respect to price reporting, the Exchange currently plans to continue disseminating via OPRA information regarding executed FLEX transactions. However, the Exchange currently does not plan to disseminate via OPRA information respecting pending electronic and open-outcry RFQs or information on resting orders in the Book; and • Submitting as part of Exhibit 5 the text of the Sponsored User Agreement form that the Exchange proposes to use in connection with proposed Rule 6.20A. In Amendment No. 3, the Exchange made the following changes to the proposal: • Revising the text of Rule 24B.1(u), RFQ Reaction Period, to reflect that during this time a Submitting Member determines whether to accept or reject the RFQ Market, which consists of both FLEX Quotes and FLEX Orders; and • Correcting the text of proposed Rule 24B.5(a)(2)(iii) that was submitted as part of Amendment No. 2. III. Discussion After careful consideration, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. 55 In particular, the Commission finds that the proposal is consistent with section 6(b)(5) of the Act, 56 which requires that the rules of an exchange be designed, among other things, 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 Commission also finds that the proposal is consistent with section 11A(a)(1)(C) of the Act, 57 which sets forth Congress's findings that it is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure, among other things, economically efficient execution of securities transactions; fair competition among brokers and dealers, among exchange markets, and between exchange markets and markets other than exchange markets; and the practicability of brokers executing investors' orders in the best market. The Commission generally believes that an exchange furthers these principles when developing products and trading functionality that compete with the over-the-counter markets. This order approves the amended proposal in its entirety, although only certain aspects of the proposed rule change are discussed below. 55 In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 56 15 U.S.C. 78f(b)(5). 57 15 U.S.C. 78k-1(a)(1)(C). A. Execution Algorithm and Priority and Allocation Rules 1. Electronic Trading The Commission believes that the priority and allocation rules for electronic trading on the new System are reasonable and consistent with the Act. These rules generally provide for allocation pursuant to price/time priority, with some allowance for market-maker and crossing participation guarantees. The proposed guarantees appear reasonably designed to balance incentives for providing liquidity in the FLEX market (in the case of the market-maker entitlement) and for bringing trades to the Exchange (in the case of the crossing participation entitlement) with incentives for all other market participants to quote competitively. The Commission also believes that the priority and allocation rules for electronic FLEX trading are consistent with section 11(a) of the Act. 58 The Commission believes, however, that neither a Submitting Member who trades against an electronic RFQ Market nor any other FLEX Trader who itself submits an RFQ Quote electronically qualifies for the “effect-versus-execute” exception to section 11(a). 59 Nevertheless, the Commission believes that other exceptions may apply. FLEX Market-Makers qualify for the market-maker exception. With respect to non-market-maker members, the new System appears reasonably designed to cause RFQ Quotes constituting the RFQ Market and the RFQ Order that trades against the RFQ Market to yield to non-member interest, consistent with the “G” exception. 60 58 15 U.S.C. 78k(a). Section 11(a)(1) prohibits a member of a national securities exchange from effecting transactions on that exchange for its own account, the account of an associated person, or an account over which it or its associated person exercises discretion unless an exception applies. 59 17 CFR 240.11a2-2(T). 60 *See* 15 U.S.C. 78k(a)(1)(G) (setting forth all requirements for the “G” exception). 2. Open-Outcry Trading on New System The Commission believes that the priority and allocation rules for open-outcry trading on the new System are reasonable and consistent with the Act. These provisions are generally modeled on the priority and allocation rules of the existing FLEX RFQ System, which were previously found by the Commission to be consistent with the Act. 61 There is one significant difference, however, the addition of an electronic Book. Generally, an order resting on the Book will be filled only after all FLEX Quotes submitted in open outcry, even if the order was booked before the RFQ began and any oral responses to the RFQ were submitted. 62 The Commission generally believes that displayed limit orders of public customers must be able to compete freely and openly for executions on an equitable basis. However, with a highly customized product such as FLEX Options, there are likely to be few booked orders. Therefore, solely with respect to the FLEX Hybrid Trading System, the Commission believes at the present time that it is appropriate to approve CBOE's proposal to allow FLEX Quotes submitted in response to an open-outcry RFQ to have priority over same priced bids (offers) on the Book. 63 The Commission also notes that an open-outcry FLEX Quote must yield to the Book and all other bids (offers) that have priority over the Book if the member entering the FLEX Quote is relying on the “G” exception to Section 11(a) of the Act. 64 61 *See* Securities Exchange Act Release No. 31920 (February 24, 1993), 58 FR 12280 (March 3, 1993) SR-CBOE-92-17). 62 *See* proposed Rule 24B.5(a)(2)(v)(A). 63 If circumstances change and the FLEX Book becomes frequently used, the Commission may revisit this issue. 64 *See* proposed Rule 24B.5(a)(2)(v)(B). 3. Orders on the Book If the Exchange enables an electronic Book in a FLEX Option class, any transaction involving a booked order must comply with section 11(a) of the Act. If a FLEX Trader cannot avail itself of any other exception, it must rely on the “G” exception, which requires, among other things, that a member order yield to a non-member order at the same price, even if the member order has time priority. The new System has not been programmed to cause a member order on the Book to yield to a later-arriving non-member order at the same price, although proposed Rule 24B.5(b)(2)(ii) prohibits a member order that is relying on the “G” exemption from resting on the Book. The Commission believes that a member may rely on the “G” exception if it sends an order to the Book and then cancels it immediately if it is not executed in full. 4. Changes to Allocation Rules of FLEX RFQ System CBOE has proposed certain changes to its allocation rules under the existing FLEX RFQ System. Under the proposal, a FLEX Appointed Market-Maker will have priority over a FLEX Qualified Market-Maker when the two submit orders at the same time and same price. The Commission believes that this is consistent with the Act in light of the greater quoting obligations of the FLEX Appointed Market-Maker. CBOE also is proposing to increase the percentages of an incoming order that can be reserved for a crossing guarantee or FLEX Appointed Market-Maker participation entitlement. 65 These percentages appear reasonably designed to balance incentives for providing liquidity with incentives for all other market participants to quote competitively. 65 *See* proposed Rule 24A.5(e)(iii)-(iv). 5. Best Execution The proposed rules do not explicitly require an RFQ Trader to trade against an RFQ Market. The Commission reminds RFQ Traders that the duty of best execution requires them to assess the quality of competing markets to ensure that a customer order is directed to the market providing the most advantageous terms for the customer. If a Submitting Member declines to trade a customer order against an RFQ Market and subsequently facilitates the customer order at a price inferior to the RFQ Market, there would be a presumption that the Submitting Member did not fulfill its best execution obligation. B. Market-Maker Benefits and Obligations The Commission believes that the balance of benefits and obligations of FLEX Market-Makers under the rules for the new System is consistent with the Act. A FLEX Appointed Market-Maker must provide a FLEX Quote in response to any open-outcry RFQ in a class of FLEX Options to which it is appointed and trading in open outcry. 66 In addition, the FLEX Appointed Market-Maker must provide FLEX Quotes in response to a designated percentage of electronic RFQs, such percentage to be determined by the appropriate Procedure Committee and not less than 80%. 67 Although a FLEX Qualified Market-Maker need not enter a FLEX Quote in response to an RFQ in its assigned class, 68 the FLEX Qualified Market-Maker (like the FLEX Appointed Market-Maker) must submit a FLEX Quote if called upon by a FLEX Official, including when no FLEX Quotes are submitted in response to a specific RFQ. 69 FLEX Appointed Market-Makers may be awarded a participation entitlement, noted above. Both FLEX Market-Makers qualify for the market-maker exception to section 11(a) of the Act. 66 *See* proposed Rule 24B.9(c)(i). 67 *See* proposed Rule 24B.4(a)(5)(iv). 68 *See* proposed Rule 24B.9(c). 69 *See* proposed Rule 24B.9(d). C. Position and Exercise Limits The Commission believes that the proposed position and exercise limits in FLEX Options are reasonable and consistent with the Act. They appear reasonably designed to prevent a member from establishing an imprudent position in FLEX Options. Moreover, the Commission believes that these rules are reasonably designed to prevent a FLEX Trader from using FLEX Options to evade the position limits applicable to comparable Non-FLEX Options. In view of the explicit standards for position and exercise limits set forth in Rules 24A.7, 24A.8, 24B.7, and 24B.8, the Commission believes it is reasonable to relieve the Exchange of the obligation to propose new position and exercise limits for FLEX Options whenever it lists and trades a comparable non-FLEX product. D. Sponsored Access The Commission believes that the proposed sponsored access provisions are reasonable and consistent with the Act. The Commission notes that these provisions are substantially similar to those of another exchange, which previously were approved by the Commission. 70 The Exchange has proposed to offer sponsored access only to the new FLEX Hybrid Trading System, not to open-outcry FLEX trading or to other Exchange trading facilities. If the Exchange in the future would seek to offer sponsored access to its other trading facilities, it would have to file a proposed rule change pursuant to section 19(b) of the Act. 70 *See* NYSE Arca Equities Rule 7.29; Securities Exchange Act Release No. 44983 (October 25, 2001), 66 FR 55225 (November 1, 2001) (SR-PCX-00-25) (approving proposal to establish Archipelago Exchange as the equities trading facility of the Pacific Exchange). E. Acceleration The Commission finds good cause for approving the proposal, as modified by Amendment Nos. 2 and 3, prior to the thirtieth day after the date of publication of notice of the amended proposal in the **Federal Register** . Amendment Nos. 2 and 3 made only minor changes to the overall proposal, which was subject to a notice-and-comment period. Because no comments were received, the Commission believes that good cause exists to grant accelerated approval and thereby allow the Exchange to implement the proposal without further delay. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning Amendment Nos. 2 and 3, including whether it is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-CBOE-2006-99 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-CBOE-2006-99. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CBOE-2006-99 and should be submitted on or before December 14, 2007. V. Conclusion *It is therefore ordered* , pursuant to section 19(b)(2) of the Act, 71 that the proposed rule change (SR-CBOE-2006-99), as amended, is approved. 71 15 U.S.C. 78s(b)(2). 72 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 72 Florence E. Harmon, Deputy Secretary. [FR Doc. E7-22779 Filed 11-21-07; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56801; File No. SR-CBOE-2007-125] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of Proposed Rule Change and Amendment No. 2 Thereto Relating to the $1 Strike Pilot Program November 16, 2007. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on October 31, 2007, the Chicago Board Options Exchange, Incorporated (“CBOE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by the Exchange. On November 14, 2007, the Exchange filed Amendment No. 1 to the proposed rule change. The Exchange subsequently withdrew Amendment No. 1 and filed Amendment No. 2 to the proposed rule change on November 15, 2007. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change CBOE proposes to amend its rules relating to the $1 Strike Pilot Program (“Pilot Program”). 3 The text of the proposed rule change is available at the Exchange, the Commission's Public Reference Room, and *http://www.cboe.com* . 3 The Commission approved the Pilot Program on June 5, 2003. *See* Securities Exchange Act Release No. 47991 (June 5, 2003), 68 FR 35243 (June 12, 2003) (SR-CBOE-2001-60). The Pilot Program has been subsequently extended through June 5, 2008. *See* Securities Exchange Act Release Nos. 49799 (June 3, 2004), 69 FR 32642 (June 10, 2004) (SR-CBOE-2004-34) (extending the Pilot Program through June 5, 2005); 51771 (May 31, 2005), 70 FR 33228 (June 7, 2005) (SR-CBOE-2005-37) (extending the Pilot Program through June 5, 2006); 53805 (May 15, 2006), 71 FR 29690 (May 23, 2006) (SR-CBOE-2006-31) (extending the Pilot Program through June 5, 2007); and 55673 (April 26, 2007), 72 FR 24646 (May 3, 2007) (SR-CBOE-2007-38) (extending the Pilot Program through June 5, 2008). II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to expand the Pilot Program and to request permanent approval of the Pilot Program. The Pilot Program currently allows CBOE to select a total of 5 individual stocks on which option series may be listed at $1 strike price intervals. 4 In order to be eligible for selection into the Pilot Program, the underlying stock must close below $20 in its primary market on the previous trading day. If selected for the Pilot Program, the Exchange may list strike prices at $1 intervals from $3 to $20, but no $1 strike price may be listed that is greater than $5 from the underlying stock's closing price in its primary market on the previous day. The Exchange also may list $1 strikes on any other option class designated by another securities exchange that employs a similar Pilot Program under their respective rules. The Exchange may not list long-term option series (“LEAPS”) at $1 strike price intervals for any class selected for the Pilot Program. The Exchange also is restricted from listing any series that would result in strike prices being $0.50 apart. 4 Although the Pilot Program generally allows CBOE to select a total of 5 individual stocks on which option series may be listed at $1 strike price interval, the Pilot Program was amended to provide that CBOE can designate no more than 4 individual stocks for inclusion in the Pilot Program at the same time there are strike prices listed for $1 intervals on Mini-SPX options in accordance with Interpretation and Policy .11 to CBOE Rule 24.9. If CBOE decides to discontinue listing Mini-SPX option series at $1 strike price intervals, CBOE would again be free to select up to 5 option classes for inclusion in the Pilot Program. *See* Securities Exchange Act Release No. 52625 (October 18, 2005), 70 FR 61479 (October 24, 2005) (SR-CBOE-2005-81) (providing that as long as there are open Mini-SPX option series listed at $1 strike price intervals, the Exchange would be required to surrender one of its five selections under the Pilot Program). The Exchange proposes to amend Interpretation and Policy .01 to CBOE Rule 5.5 to expand the Pilot Program and allow it to select a total of 10 individual stocks on which option series may be listed at $1 strike price intervals. Additionally, CBOE proposes to expand the price range on which it may list $1 strikes from $3 to $50. The existing restrictions on listing $1 strikes would continue, *i.e.* , no $1 strike price may be listed that is greater than $5 from the underlying stock's closing price in its primary market on the previous day, and CBOE is restricted from listing any series that would result in strike prices being $0.50 apart. In addition, because the Pilot Program has been very successful by allowing investors to establish equity options positions that are better tailored to meet their investment objectives, CBOE requests that the Pilot Program be approved on a permanent basis. As stated in the Commission order approving CBOE's Pilot Program and in the subsequent extensions of the Pilot Program, 5 CBOE believes that $1 strike price intervals provide investors with greater flexibility in the trading of equity options that overlie lower priced stocks by allowing investors to establish equity options positions that are better tailored to meet their investment objectives. Indeed, member firms representing customers have repeatedly requested that CBOE seek to expand the Pilot Program, both in terms of the number of classes which can be selected and the range in which $1 strikes may be listed. 5 *See supra* note 3. With regard to the impact on systems capacities, CBOE's analysis of the Pilot Program shows that the impact on CBOE's, OPRA's, and market data vendors' respective automated systems has been minimal. Specifically, in March 2007, CBOE states that the 21 classes participating in the Pilot Program industry-wide accounted for 12,950,404 average quotes per day or 1.20% of the industry's 337,744,725 average quotes per day. The 21 classes averaged 412,007 contracts per day or 3.96% of the industry's 10,412,091 average contracts per day. The 21 classes involved totaled 2,754 series or 1.80% of all series listed. 6 CBOE notes that these quoting statistics may overstate the contribution of $1 strike prices because these figures also include quotes for series listed in intervals higher than $1 ( *i.e.* , $2.50 strikes) in the same option classes. Even with the non-$1 strike series quotes included in these figures, CBOE believes that the overall impact on capacity is still minimal. CBOE represents that it has sufficient capacity to handle an expansion of the Pilot Program, as proposed. 6 *See* Securities Exchange Act Release No. 55673 (April 26, 2007), 72 FR 24646 (May 3, 2007) (SR-CBOE-2007-38) (Pilot Program report). Finally, the Exchange proposes to make a corresponding change to Interpretation and Policy .11(e) to CBOE Rule 24.9, which pertains to the expansion of the Pilot Program. In addition, CBOE proposes to make a technical correction to paragraph
(a)of Interpretation and Policy .01 to CBOE Rule 5.5 where it references “Interpretation and Policy .14 to Rule 24.9.” Paragraph
(a)of Interpretation .01 should reference Interpretation .11 to Rule 24.9. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with section 6(b) of the Act, 7 in general, and furthers the objectives of section 6(b)(5) of the Act, 8 in particular, in that it is designed to promote just and equitable principles of trade, serve to remove impediments to and perfect the mechanism of a free and open market and a national market system, and protect investors and the public interest. 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(5). 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. 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 proposal. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period
(i)as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or
(ii)as to which CBOE consents, the Commission will: A. By order approve such proposed rule change, or B. Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments: • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-CBOE-2007-125 on the subject line. Paper Comments: • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-CBOE-2007-125. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CBOE-2007-125 and should be submitted on or before December 14, 2007. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 9 9 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-22841 Filed 11-21-07; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56796; File No. SR-MSRB-2007-05] Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Rule G-27, on Supervision November 15, 2007. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on November 8, 2007, the Municipal Securities Rulemaking Board (“MSRB” or “Board”), filed with the Securities and Exchange Commission (“Commission” or “SEC”) the proposed rule change as described in Items I, II and III below, which Items have been substantially prepared by the MSRB. The MSRB has filed the proposal as a “non-controversial” rule change pursuant to Section 19(b)(3)(A)(iii) of the Act, 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The MSRB is filing with the Commission a proposed rule change consisting of amendments to Rule G-27 to clarify that the requirements of the rule apply solely in connection with the municipal securities activities of brokers, dealers and municipal securities dealers (“dealers”) and their associated persons. The text of the proposed rule change is available on the MSRB's Web site ( *http://www.msrb.org* ), at the MSRB, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the MSRB 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 MSRB 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 proposed rule change will amend Rule G-27, on supervision, to clarify that the requirements of the rule apply solely in connection with the municipal securities activities of dealers and their associated persons. Rule G-27 has previously been amended, with an effective date of February 29, 2008, to strengthen the supervisory procedures and controls of dealers effecting transactions in municipal securities, as well as to ensure a coordinated regulatory approach with, and to facilitate inspection and enforcement in this area by, the Financial Industry Regulatory Authority (the “new supervisory requirements”). 5 In its filing with the SEC of the new supervisory requirements, the MSRB had stated that, as a general principle, the requirements of Rule G-27 apply only with respect to those registered persons who engage in municipal securities activities and those offices in which municipal securities activities are undertaken. 6 The proposed rule change will explicitly incorporate this limitation on the applicability of Rule G-27 throughout the language of the rule, in addition to correcting certain cross-references and making certain formatting changes to improve clarity. 5 *See* Securities Exchange Act Release No. 55830 (May 30, 2007), 72 FR 31122 (June 5, 2007) (SR-MSRB-2006-09). *See also* Securities Exchange Act Release No. 56478 (September 20, 2007), 72 FR 54702 (September 26, 2007) (SR-MSRB-2007-03). 6 *See* Securities Exchange Act Release No. 54930 (December 13, 2006), 71 FR 76400 (December 20, 2006) (SR-MSRB-2006-10). 2. Statutory Basis The MSRB believes that the proposed rule change is consistent with Section 15B(b)(2)(C) of the Act, 7 which provides that the MSRB's rules shall: 7 15 U.S.C. 78o-4(b)(2)(C). 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 municipal securities, to remove impediments to and perfect the mechanism of a free and open market in municipal securities, and, in general, to protect investors and the public interest. The Board believes that the proposed rule change will facilitate transactions in municipal securities and protect investors and the public interest by clarifying that the requirements of Rule G-27 apply solely in connection with the municipal securities activities of dealers and their associated persons. B. Self-Regulatory Organization's Statement on Burden on Competition The Board 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 since it does not modify existing rule obligations and applies equally to all brokers, dealers and municipal securities dealers. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The MSRB has received four letters requesting guidance on or amendments to the new supervisory requirements in Rule G-27, as well as a delay in the effectiveness of the new supervisory requirements. In summary, these commentators sought to understand the circumstances under which individuals must be qualified as either municipal securities principals or municipal fund securities limited principals in dealers' offices in which supervisory responsibilities are undertaken. The clarification provided by the proposed rule change that the new supervisory requirements of the rule apply solely in connection with the municipal securities activities of dealers and their associated persons, as the MSRB had previously enunciated in the original filing of the new supervisory requirements, should resolve these and other ambiguities regarding the operation of these new provisions. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the proposed rule change:
(i)Does not significantly affect the protection of investors or the public interest;
(ii)does not impose any significant burden on competition; and
(iii)does not become operative for 30 days from November 8, 2007, the date on which it was filed, and the MSRB provided the Commission with written notice of its intent to file the proposed rule change at least five business days prior to the filing date, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 8 and Rule 19b-4(f)(6) thereunder. 9 8 15 U.S.C. 78s(b)(3)(A). 9 17 CFR 240.19b-4(f)(6). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 10 10 *See* Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-MSRB-2007-05 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-MSRB-2007-05. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the MSRB. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-MSRB-2007-05 and should be submitted on or before December 14, 2007. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 11 11 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-22780 Filed 11-21-07; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56798; File No. SR-NYSE-2007-102] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change Relating to NYSE Rule 1500 (NYSE MatchPoint SM ) November 15, 2007. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on November 8, 2007, the New York Stock Exchange LLC (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change NYSE proposes to adopt NYSE Rule 1500 to establish NYSE MatchPoint SM (“MatchPoint”), an electronic facility that matches aggregated orders at predetermined, one-minute sessions throughout regular hours and after hours of the Exchange. MatchPoint will trade securities listed on all major exchanges. 3 The text of the proposed rule change is available on the Exchange's Web site ( *http://www.nyse.com* ), at the Exchange, and at the Commission's Public Reference Room. 3 The major exchanges include the NYSE (including securities otherwise admitted to dealing on the NYSE pursuant to the Joint Self-Regulatory Organization Plan Governing the Collection, Consolidation and Dissemination of Quotation and Transaction Information for Nasdaq-Listed Securities Traded on an Unlisted Trading Privilege Basis (“UTP Plan”)), the NYSE Arca, Inc. Stock Exchange LLC (“NYSE Arca”), the NASDAQ Stock Market, Inc. (“Nasdaq”), the American Stock Exchange (“Amex”) and regional stock exchanges. The Exchange is a participant in the UTP Plan, a National Market System Plan that accommodates trading on participant exchanges of non-NYSE-listed securities on an unlisted trading privileges (“UTP”) basis. *See* Securities Exchange Act Release No. 55192 (January 29, 2007), 72 FR 5456 (February 6, 2007) (File No. S7-24-89) (Plan amendment admitting the Exchange as a Plan Participant). The Exchange is proposing to permit UTP trading of non-NYSE-listed securities in MatchPoint matching sessions during the regular hours and after hours of the Exchange. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the NYSE 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 NYSE 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 seeks to establish the MatchPoint matching system to provide its customers with an ability to execute securities at a predetermined, externally derived, single trading price in accordance with algorithmic calculations during one-minute matching sessions at predetermined times during the regular hours (9:30 a.m. Eastern Time (“ET”) to 4 p.m. ET) and after hours of the Exchange. 4 MatchPoint participants (“users”) transmit their market and limit orders, which are undisplayed, by means of an electronic interface. MatchPoint matches aggregated, anonymous orders of securities listed on the primary exchanges such as the NYSE, as well as securities admitted to trading on the NYSE pursuant to the UTP Plan that are listed on NYSE Arca, Nasdaq, Amex and regional stock exchanges. 4 NYSE MatchPoint will operate on an Eastern Time basis. All references to time herein and in the MatchPoint rules will mean Eastern Time. The Exchange believes that MatchPoint will provide its customers a greater ability to execute single, block and portfolio ( *i.e.* , basket, list, etc.) orders efficiently and reduce the trading risks and costs associated with market volatility. MatchPoint customers who enter single orders, block orders and portfolio orders will reap the benefits of this centralized, neutral matching environment. 5 Additionally, the Exchange believes that customers that rely on index-based or model-driven trading and investment strategies will find MatchPoint to be a very effective trading tool. 5 The Exchange notes that portfolio matches have been in existence for over twenty years. Instinet's crossing network has been matching portfolios since December 1986 and Investment Technology Group Inc.'s Portfolio System for Institutional Trading (POSIT) has been matching portfolios since July 1987. Because MatchPoint is an anonymous trading platform, no order information will be displayed and clearance and settlement of executions will be anonymous. Trade reports will be disseminated after each matching session. All NYSE Members, Member Organizations and Sponsored Participants of Sponsoring Member Organizations are automatically eligible for access to MatchPoint. Before access is granted to MatchPoint users, all users must go through a connectivity authorization process. 6 After NYSE Members, Member Organizations and Sponsored Participants of Sponsoring Member Organizations obtain connectivity authorization they may access MatchPoint. 6 MatchPoint can only be accessed through an electronic Financial Information eXchange (“FIX”) application and/or an internet based password-protected order entry application. Users must fill out an application for connectivity through either of these two electronic connectivity capabilities. Once granted connectivity through the authorization process, eligible users may access MatchPoint. NYSE MatchPoint Matching Sessions The first MatchPoint matching session of the trading day will commence at 9:45 a.m. Thereafter, during the trading day of the Exchange, there will be a matching session at 10 a.m., 11 a.m., 12 p.m., 1 p.m., 2 p.m. and 3 p.m. A MatchPoint after hours matching session will occur at 4:45 p.m. 7 7 Because transactions from the MatchPoint after hours matching session, which occurs at 4:45 p.m., occur outside of regular trading hours, they cannot fall within the definition of trade-throughs and will not be subject to the provisions of Rule 611 of Regulation NMS. *See* 17 CFR 242.600(b)(64) and (77). MatchPoint matching sessions are predetermined one-minute trading periods that occur through an automated matching mechanism. During the matching sessions, the Matchpoint Reference Price (“Reference Price”) is determined and eligible orders are executed at the designated hour, as stated in the rule, at the randomly selected time during the predetermined one-minute trading session. The matching and execution of orders occurs immediately after the algorithm selects a Reference Price. No user can be assured of a match unless they enter an eligible portfolio or single order with an internal match designation that corresponds with contra side eligible portfolio or single orders with internal match designations from the same user. No user knows precisely when the match will occur. If an order is not executed in a particular matching session it will be immediately cancelled back to the user upon completion of the matching session. The user may resubmit the order in any one of the subsequent matching sessions. NYSE MatchPoint Reference Prices The Reference Price is the single trading price at which MatchPoint orders will execute during a predetermined one-minute “matching session.” MatchPoint employs a passive pricing system. The Reference Price is derived from external market data of the Exchange and other primary securities markets. There is no price discovery as orders are not displayed and all trades occur in accordance with a predetermined algorithm. The Reference Price is calculated differently for regular hour matching sessions and the after hours matching session. During the regular hours of the Exchange, the Reference Price shall be the midpoint of the national best bid and offer (“NBBO”) which is randomly selected during a predetermined one-minute pricing period. For the after hours MatchPoint matching session, the Reference Price is the official closing price of the primary market ( *i.e.* , the listing market) for securities listed on the NYSE, NYSE Arca, Amex, Nasdaq and regional stock exchanges. If, however, there is no official closing price for a particular security, the Reference Price will be the last sale price of the primary market for a particular security. Half Penny Increments The MatchPoint Reference Price for the matching sessions that occur during the regular hours ( *i.e.* , the midpoint of the NBBO), may be calculated to three
(3)decimal places when the NBBO is an odd penny spread ( *i.e.* , one
(1)penny, three
(3)pennies, five
(5)pennies, etc.). For example, if the NBBO of Stock XYZ is $23.01 to $23.02, the Reference Price is $23.015. As a consequence, executions at the midpoint of the NBBO may be in half penny increments, requiring the use of three decimal places, as demonstrated in the example. 8 8 MatchPoint will not display, rank or execute orders in any NMS stock priced below one dollar ($1.00). In addition, MatchPoint will not display, rank or execute orders in increments smaller than a penny. However, when there is an odd penny spread, as described above, MatchPoint will execute it in a half penny increment. The Exchange notes that, in response to public comments to the Regulation NMS Proposing Release, the Commission wrote, “Executions occurring at a sub-penny price resulting from a midpoint, VWAP, or similar volume-weighted pricing algorithm are not prohibited by Rule 612 [of Regulation NMS].” *See* Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005) (“Regulation NMS Release”) at note 831. Securities Priced Below One Dollar As discussed above, MatchPoint orders in securities are not subject to auction-market price discovery procedures, as Reference Prices of securities are not determined until a matching session commences and the algorithm calculates the price of the securities. If the MatchPoint algorithm prices a security ( *i.e.* , the Reference Price) below one dollar ($1.00), MatchPoint will not execute orders in these securities but will cancel these orders back to the user immediately upon completion of the matching session. Entry and Processing of NYSE MatchPoint Orders MatchPoint Orders MatchPoint users may enter, correct or cancel orders beginning at 3:30 a.m. until 4:45 p.m. The MatchPoint system will not accept any orders before 3:30 a.m. or after 4:45 p.m. MatchPoint will accept and execute single orders and NYSE MatchPoint Portfolios (“portfolios”). Orders may be either market or limit orders and must have a minimum size of one round lot. As discussed in more detail below, MatchPoint will permit odd lot and partial round lot orders to be entered into the system. Odd lot orders and the odd lot portion of partial round lot orders will be reported as unexecuted. Orders may not be cancelled or replaced while a matching session is in progress or when trading in the applicable security is halted in the MatchPoint system. MatchPoint orders shall not be available for execution until the next eligible matching session. All orders must be available for automatic execution. MatchPoint has no order delivery capability and will not route to other market centers. Users, however, would be able to enter eligible orders into MatchPoint through a FIX 9 application and/or an internet based order entry system provided the orders are available for automatic execution. MatchPoint orders will not trade-through a Protected Bid or Protected Offer as defined in Regulation NMS. 10 9 FIX Protocol is a messaging standard developed specifically for the real-time electronic exchange of securities transactions. 10 *See* Regulation NMS Release, *supra* note 8. Because the MatchPoint Reference Price during the regular hours of the Exchange is calculated to be the midpoint of the NBBO, no trade-through executions will occur and, therefore, Rule 611 of Regulation NMS (“Order Protection Rule”) will not be violated. MatchPoint Order Parameters All MatchPoint orders, single and portfolio, must have the following parameters:
(1)List name; 11
(2)matching session (if a user fails to designate a specific matching session, the system will provide a default function and direct the order to the next eligible matching session);
(3)side of the market ( *i.e.* , buy, sell or short side);
(4)symbol; and
(5)minimum and maximum amount of shares available for execution. Additionally, a user may include an optional constraint ( *i.e.* , net cash and internal match constraints) for a MatchPoint order. 11 A portfolio must have a unique portfolio name that is distinct from the names of other portfolios of the same user. MatchPoint Order Designation MatchPoint orders must be designated for only one of the matching sessions during regular hours of the Exchange or for the single after hours matching session. If a MatchPoint order does not execute in the designated matching session, it will be cancelled back to the user immediately upon completion of the matching session. If a user fails to designate a particular matching session for a MatchPoint order, the order, by default, shall be available for execution in the next scheduled matching session. If an undesignated order does not execute in the next scheduled regular hours matching session it will be cancelled back to the user immediately upon completion of such matching session. If a user fails to designate an order and enters the order after 3 p.m., which is the last regular hours matching session, the order will participate in the after hours matching session at 4:45 p.m. If the order does not execute in the after hours matching session it will be cancelled back to the user immediately upon completion of the after hours matching session. As discussed above, a user must designate an order for only one matching session at a time. For example, if a user wishes to have an order available for execution in the 11 a.m. matching session, the user must designate the order for the 11 a.m. matching session and must enter the order into the MatchPoint system anytime between 3:30 a.m., when the system opens to receive orders, and 11 a.m., when the designated matching session commences. If the order does not execute in the 11 a.m. matching session, such order will be immediately cancelled back to the User upon completion of the matching session. Thereafter, the user must submit a new order for execution in another matching session, *e.g.* , the 12 p.m. matching session. The user must submit the subsequent order with a designation for the 12 p.m. matching session. Such order must then be entered into the system before commencement of the 12 p.m. matching session. Again, if the order does not execute in the 12 p.m. matching session, such order will be immediately cancelled back to the user upon completion of the 12 p.m. matching session. Round Lot Orders MatchPoint will execute orders only in round lots. The MatchPoint system will accept odd lot orders but not execute them. Odd lot orders entered into the MatchPoint system will be reported to the user as unexecuted. Similarly, orders containing partial round lots ( *i.e.* , “mixed lots”) may be entered into MatchPoint in the form of a portfolio but the odd lot portion of the order will not be executed and will be reported to the user as unexecuted. The system will permit the entry of odd lot and partial round lot orders to accommodate portfolio orders. The Exchange believes that to require the portfolio-based users to first strip their orders of odd lots and partial round lots before entering their orders into MatchPoint would introduce operational risk into the administration of the portfolios and, for example, disturb the tracking of the portfolios that follow the underlying index. Additionally, the Exchange believes that excluding odd lot and partial round lot orders from MatchPoint will discourage portfolio trading and significantly reduce liquidity in the MatchPoint market. The following example demonstrates how odd lot and partial round lot orders are processed through MatchPoint: A portfolio of buy orders is entered into MatchPoint: Stock A: 12,300 shares. Stock B: 5,650 shares. Stock C: 35 shares. Stock D: 17,099 shares. Depending upon available contra side interest, the following portfolio executions could occur: Order A could execute up to 12,300 shares. Order B could execute up to 5,600 shares with at least 50 shares immediately cancelled back to the user upon completion of the matching session. Order C will result in all 35 shares being immediately cancelled back to the user upon completion of the matching session. Order D will execute up to 17,000 shares and at least 99 shares will be immediately cancelled back to the user upon completion of the matching session. NYSE MatchPoint Order Allocation MatchPoint orders will be allocated on a *pro rata* basis, such that shares will be allocated *pro rata* in round lots (rounded down to the nearest 100 shares) to eligible orders based on the original size of the order. In this process MatchPoint will honor all user-directed constraints. If the allocation to an eligible order is less than the minimum acceptable execution quantity for that order, the order shall not be eligible for execution in that matching session. If additional shares remain after the initial *pro rata* allocation, those shares will continue to be allocated *pro rata* to eligible orders. If additional shares remain thereafter that are the same size or are unexecuted because of rounding or minimum trade size constraints, the remaining shares will be allocated in 100 share lots to the oldest eligible orders. The example below demonstrates how MatchPoint will allocate shares on a *pro rata* basis: User Side Shares entered Price Shares executed User A Buy 100,000 MKT 100,000 User B Buy 100,000 MKT 100,000 User C Sell 100,000 MKT *74,100 User D Sell 75,000 MKT *55,600 User E Sell 50,000 MKT 37,000 User F Sell 25,000 MKT 18,500 User G Sell 10,000 MKT 7,400 User H Sell 5,000 MKT 3,700 User I Sell 5,000 MKT 3,700 In this example the total amount of buy orders is 200,000 shares. The total amount of sell orders is 270,000 shares. There are 70,000 more shares to sell than to buy. The greatest number of shares that may execute in the MatchPoint system is 200,000 shares. 200,000 shares is 74.074% (rounded percentage) of 270,000. Therefore, the *pro rata* percentage that will be allocated to each of the seven sell orders is 74.074%. Based on the order size of each order, MatchPoint will prorate the available liquidity (200,000 shares) accordingly (see “Shares Executed” in the example above). (* Users C and D each receive an additional 100 shares because C and D are the oldest eligible orders after the *pro rata* share allocations.) The second example (below) will illustrate the allocation of MatchPoint shares when all orders are equal in size. Under these circumstances, MatchPoint will allocate shares based on order entry sequence. The oldest order will get the larger fill if residual shares remain after the initial *pro rata* allocation. In the example below, assume the following orders are received in the following sequence: MatchPoint Orders: 1. Broker-dealer A: Buy 10,000 @ mkt 2. Broker-dealer B: Sell 10,000 @ mkt 3. Broker-dealer C: Sell 10,000 @ mkt 4. Broker-dealer D: Sell 10,000 @ mkt MatchPoint Executions: 1. 10,000 fully allocated order 2. 3,300 shares + 100 residual shares = 3,400 (oldest sell order) 3. 3,300 shares executed 4. 3,300 shares executed The results of the matching session are as follows: Broker-dealer A's order is allocated 9,900 shares from a *pro rata* fill from each of the three sell orders from broker-dealers B, C and D in the amount of 3,300 shares. Each sell order has an equal residual of 6,700 shares, but because broker-dealer B has the oldest order of the three sell orders, B's residual 100 shares of stock will be allocated to A's buy order resulting in a fully allocated order of 10,000 shares. Portfolio Trading A MatchPoint user may submit NYSE MatchPoint Portfolios into the MatchPoint system for execution. An NYSE MatchPoint Portfolio is a group of linked orders with user-directed parameters and a unique, user-defined portfolio name. The portfolio orders may represent separate and distinct broker dealer-customer orders and separate and distinct proprietary broker dealer orders. A user may enter one portfolio of buy and sell/short orders or many portfolios of buy and sell/short orders. Internal Match Constraints MatchPoint portfolio users may effectuate internal matches and simultaneously match residual shares against orders from other users within a single matching session when using an optional internal match constraint. This type of constraint enables the user to execute trades between the same user's portfolios first before trading with other available orders in a particular matching session. If, after an internal match occurs and residual orders remain, the residual portfolios will trade with all other orders. Single orders may be designated for internal matches as well. Internal matches have priority over other executions. MatchPoint will first process internal matches and then process all other orders in the matching session. All user-directed constraints will be honored in the internal match. An internal match constraint, like a MatchPoint order, is active only for a single matching session. A user may resubmit a new internal match constraint when resubmitting an order for a different matching session. All orders that are designated with an internal match designation, single or portfolio orders, and entered by the same user are eligible for matching with all such orders. For example, single orders that have internal match designation are capable of matching with all other orders that have internal match designations entered by the same user. Portfolio orders within a portfolio that are designated for internal matches are also capable of matching with one another when entered by the same user. Such orders are allocated on a *pro rata* basis as described above. An internal match is illustrated in the following example: Broker-dealer A enters one order in a portfolio to buy 20,000 shares of XYZ stock and in another portfolio Broker-dealer A enters an order to sell 10,000 shares of XYZ stock. Broker-dealer B enters an order to sell 10,000 shares of XYZ stock, and broker-dealer C enters an order to sell 10,000 shares of XYZ stock. The internal match will result in the following executions: Broker-dealer A's buy order for 20,000 shares of XYZ stock will trade with broker-dealer A's sell order of 10,000 and 5,000 shares of XYZ stock from broker dealer B and 5,000 shares of XYZ stock from broker dealer C respectively, leaving broker-dealers B and C with residual amounts of 5,000 shares each of XYZ stock. The unexecuted shares of XYZ stock for broker-dealers B and C (5,000 shares each) will be immediately cancelled back to broker-dealers B and C upon completion of the matching session. Net Cash Constraints An optional “net cash” constraint provides valuable risk and cash management tools for portfolio users. A user entering a single order may also place a net cash constraint on that order. To execute a net cash constraint, a user must enter a specific net buy dollar amount and a specific net sell dollar amount for a portfolio. A net cash constraint is active only for a single matching session. A user may resubmit a new net cash constraint when resubmitting an order for a different matching session. MatchPoint users may utilize such net cash constraints as the primary vehicle for controlling how much a user may spend or raise in an individual portfolio. This functionality enables users to keep their purchases and sales in line with each other and to fund additional purchases. When calculating a customer's net cash constraint position, the matching algorithm takes into account the eligible portfolio order shares in a specific security, the reference price of the security and the customer's net cash constraint. MatchPoint first processes the stock with the largest orders in the largest portfolios. In order to honor all cash constraints, the matching algorithm processes all single and portfolio orders in a particular security that have net cash constraints and calculates share allocation by applying a percentage of the original order size to contra side shares that are available to fill the order. The algorithm takes this percentage calculation and multiplies it by the Reference Price. This calculation is then compared to the order's net cash constraint and determines if the allocation of the available contra side shares will violate the order's net cash constraint. If the calculation violates the net cash constraint, these shares will not be allocated to the contra side order but may be allocated to other eligible orders. This algorithmic process continues until all eligible orders are executed. There is no priority given to orders with a net cash constraint. The example below demonstrates how portfolios, with and without a net cash constraint, execute in MatchPoint. Specifically, the example illustrates the portfolios of users A, B and C in three different scenarios: The pre-match scenario, the post-match scenario with no net cash constraint and a post match scenario with a net cash constraint. In that third scenario, user B has a net cash constraint of plus or minus $1,000,000 (+/−$1,000,000). In the matching session, user B's portfolio cannot sell (raise) $1 million more than it buys (spends) and it cannot buy (spend) $1 million more than it sells (raises). Users A and C have no net cash constraints on their portfolios. Users A and B are on the same side of the market and user C represents the contra side interest in the matching session. User B entered orders first and would therefore receive any residual shares to be allocated. As previously mentioned, allocated shares are rounded down to the nearest 100 shares. Side Symbol Shares entered Price PRE-MATCH User A Portfolio: Buy ABC 67,600 MKT Buy QRS 82,500 MKT Sell XYZ 86,300 MKT Sell DEF 41,200 MKT User B Portfolio: Buy ABC 47,600 MKT Buy QRS 98,600 MKT Sell XYZ 61,800 MKT Sell DEF 62,200 MKT User C Portfolio: Buy XYZ 139,200 MKT Buy DEF 88,800 MKT Sell ABC 146,400 MKT Sell QRS 258,300 MKT POST MATCH WITH NO NET CASH CONSTRAINTS User A Portfolio: Buy ABC 67,600 32.66 Buy QRS 82,500 23.55 Sell XYZ 81,100 38.71 Sell DEF 35,300 72.03 User B Portfolio: Buy ABC 47,600 32.66 Buy QRS 98,600 23.55 Sell XYZ 58,100 38.71 Sell DEF 53,500 72.03 User C Portfolio: Buy XYZ 139,200 38.71 Buy DEF 88,800 72.03 Sell ABC 115,200 32.66 Sell QRS 181,100 23.55 POST MATCH WITH NET CASH CONSTRAINT User A Portfolio: Buy ABC 67,600 32.66 Buy QRS 82,500 23.55 Sell XYZ 86,300 38.71 Sell DEF 41,200 72.03 User B Portfolio: +/−$1 Million Cash Constraint Buy ABC 47,600 32.66 Buy QRS 98,600 23.55 Sell XYZ 45,500 38.71 Sell DEF 43,100 72.03 User C Portfolio: Buy XYZ 131,800 38.71 Buy DEF 84,300 72.03 Sell ABC 115,200 32.66 Sell QRS 181,100 23.55 As the example shows, the allocation of shares may vary significantly with and without the net cash constraint. User B's portfolio executes fewer shares with a net cash constraint than without the constraint. Users A and C, with no net cash constraints, are able to obtain more executions and have a more competitive position than user B when user B has a net cash constraint in place. Below is a chart comparing the post match customer net cash position results ( *i.e.* , total dollars raised and total dollars spent) from the example above. Post match 1 Net cash position Post match 2 Net cash position Post match 1 and 2 Cash difference Customer A $1,535,220 $2,157,618 $622,398 Customer B $2,222,139 $989,152 12 ($1,232,987) Customer C ($3,757,359) ($3,146,770) ($610,589) Post Match 1 reflects the net cash position for Customers A, B and C when their portfolios match with one another and when Customer B has no net cash constraint. Customer A raised $1,535,220 more than he spent; Customer B raised $2,222,139 more than he spent and Customer C spent $3,757,359 more than she raised. 12 Numbers that appear in parentheses represent expenditures. Post Match 2 reflects the net cash position for Customers A, B and C when they match with one another and Customer B has a net cash constraint of plus or minus $1,000,000 (+/−$1,000,000). Customer B raised $989,152 more than he spent, which is within his net cash constraint of $1,000,000, but is $1,232,987 less than what he raised in Post Match 1 (when he had no net cash constraint). This shows the effect of Customer B's net cash constraint on his eligible portfolio orders, which limits the dollar amount that he can raise (or spend). The matching algorithm honors Customer B's net cash constraint before allocating shares. Customer B has an additional $10,848 that he could raise up to the $1 million constraint, but because the algorithmically calculated percentage of the available shares would violate his constraint if allocated, the available shares are not allocated to Customer B and he stops raising cash. The example demonstrates how the matching algorithm honors Customer B's net cash constraint before allocating shares. Further, in Post Match 2, Customer A raised $2,157,618 more than he spent and $622,398 more than he raised in Post Match 1. Customer A was able to match more shares because of Customer B's net cash constraint, which restricted Customer B's ability to raise or spend more than $1,000,000. Customer C spent $3,146,770 more than she raised and spent $610,589 less than she spent in Post Match 1. This reflects Customer A's ability to increase the number of his executions and Customer B's ability to limit the number of his executions through his net cash constraint. The above example also illustrates the following MatchPoint principles for net cash constraints:
(1)A net cash constraint placed on a portfolio may affect the execution of other orders in the matching session by generally allowing additional shares for such other orders to be executed, and
(2)net cash constraints will generally result in fewer executions of a portfolio and may inhibit the maximum order execution potential of a particular security in a particular matching session. Price Collar Threshold in the After Hours Matching Session In the after hours matching session, the Exchange will place parameters on the prices of all MatchPoint eligible securities in order to dampen volatility and provide accurate pricing for executions. Such parameters will be referred to as a “Price Collar Threshold.” A Price Collar Threshold is an after hours market price beyond which a MatchPoint order will not be executed. The Price Collar Threshold will protect against unusual occurrences when the market has moved significantly from the official closing price of the primary market based on information that becomes available after the market close. In this situation, the Exchange will cancel the after hours MatchPoint matching session rather than execute the matching session at a price that no longer reflects the market accurately. All unexecuted orders will be immediately cancelled back to the user upon completion of the matching session. The Price Collar Threshold will be set at a predetermined percentage of the MatchPoint after hours Reference Price. Initially, the Price Collar Threshold will be set at two percent (2%). Therefore, if the difference between the Price Collar Threshold and the consolidated last sale price of the security is two percent or more, the matching session in that particular security will not occur. All unexecuted orders will be cancelled back to the user upon completion of the scheduled matching session. For example, if the Reference Price of XYZ stock is $100, and at 4:45 p.m. the consolidated last sale price for XYZ stock is either $98 or less or $102 or more, the Price Collar Threshold will cause the stock to be halted in the after hours matching session. In the future, if the Exchange determines that the Price Collar Threshold should be adjusted in order to protect users and provide more accurate trades, the Exchange may make such adjustments, up to and including five percent (5%) of the MatchPoint after hours Reference Price. The Exchange will inform its users of such an adjustment via the NYSE MatchPoint Web site at *http://www.nyse.com/MatchPoint* and the Member Firm Notice, and notice of such adjustments will be provided to all users reasonably in advance of any such adjustments. Locked and Crossed Markets If the NBBO for a particular security is locked at the time of a MatchPoint matching session during the regular trading hours of the Exchange, the matching session shall execute orders at the locked price. Unexecuted MatchPoint orders in that security shall be cancelled back to the user immediately upon completion of the matching session. If the NBBO for a particular security is crossed at the time of a MatchPoint matching session during the regular trading hours of the Exchange, the matching session in that particular security shall not occur. Unexecuted MatchPoint orders in that security shall be cancelled back to the user immediately upon completion of the matching session. Trading Ahead of Customer Orders In the event a MatchPoint Order executes at the midpoint of the NBBO resulting in a Member or Member Organization's trading ahead of a held customer order at the same price, the Exchange believes that NYSE Rule 92 (Limitations on Member's Trading Because of Customers' Orders) may be implicated. NYSE Rule 92(a) generally restricts a Member or Member Organization from entering a proprietary order while in possession of a customer order. NYSE Rule 92(b) through
(d)provides several exceptions to the general restrictions of Rule 92(a). When trading on the MatchPoint system, all users will be expected to comply with Rule 92(a) unless such trading falls within an applicable exception in NYSE Rule 92(b) through (d). Halting, Suspending and Closing of NYSE MatchPoint Trading on the Exchange Trading on MatchPoint will be halted, suspended or closed 13 when necessary in order to maintain a fair and orderly market, and in certain other conditions, as described below. If trading in a particular security is halted, suspended or closed due to regulatory or unusual market conditions at the time a matching session commences, the matching session will not occur in that security and all unexecuted orders will be immediately cancelled back to the user upon completion of the matching session. 13 The use of the word “close” in the context of this rule refers to the intentional closing of the market due to regulatory or other unusual circumstances as described above, and does not refer to the predetermined “close” or end of the regular trading day at 4 p.m. MatchPoint trading may be halted, suspended or closed when:
(1)In the exercise of its regulatory capacity, the Exchange determines such action is necessary or appropriate to maintain a fair and orderly market, to protect investors, or otherwise is in the public interest due to extraordinary circumstances or unusual market conditions;
(2)in the case of a particular security whenever, for regulatory purposes, trading in the related security has been halted, suspended or closed on the Exchange or the primary listing exchange;
(3)in the case of a particular security trading on the Exchange pursuant to unlisted trading privileges, whenever, for regulatory purposes, trading in that security has been halted, suspended or closed on the primary listing exchange;
(4)with respect to a particular security trading on the Exchange pursuant to unlisted trading privileges, if the authority under which a security trades on the Exchange or its primary market is revoked ( *i.e.* , because it is delisted); or
(5)in the after hours matching session, news reports and/or corporate actions are disclosed after the close of the regular hours of the market that have a material impact on a particular security, which may include the following situations:
(a)New corporate earnings;
(b)major market index company deletions or additions;
(c)corporate takeovers;
(d)other significant corporate actions;
(e)court decisions and injunctions; and
(f)governmental announcements. No terms or conditions specified in this rule shall be interpreted to be inconsistent with any other rules of the Exchange. Clearance and Settlement of MatchPoint Executions Details of each MatchPoint trade will be automatically matched and compared by the Exchange and will be submitted to a registered clearing agency for clearing and settlement on a locked-in basis. 14 All executions effected by a Member or Member Organization will be cleared and settled using the Member's and Member Organization's account, and all executions effected by a Sponsored Participant will be cleared and settled using the relevant Sponsoring Member Organization's account. 14 MatchPoint executions will be compared through the Regional Interface Organization Online process (“RIO Online”). RIO Online is NYSE Arca's internal processing interface that sends order execution information to the Depository Trust & Clearing Corporation (DTCC). RIO Online gathers the trades that are executed on any given day, places the trades into the appropriate message format and sends them to DTCC. RIO Online provides a record of all trades that were sent to DTCC. RIO Online is also used to manage any approved trade corrections. Because MatchPoint is an anonymous trading facility, the proposed rule will require MatchPoint transaction reports to indicate the details of the transaction, but not to reveal contra party and clearing firm identities, 15 except under the following circumstances:
(1)In the event the National Securities Clearing Corporation (“NSCC”) 16 ceases to act for a Member or Member Organization, which is the unidentified contra side of any such trade processing, and/or the relevant clearing firm, the NYSE shall have the responsibility to identify to Members or Member Organizations the trades included in reports produced by the NSCC which are with the affected Member or Member Organization, and
(2)for regulatory purposes or to comply with an order of a court or arbitrator. 15 Post-trade anonymity described herein has been previously approved by the Commission for other exchanges. See, *e.g.* , Securities Exchange Act Release Nos. 48527 (September 23, 2003), 68 FR 56361 (September 30, 2003) (SR-NASD-2003-85); and 49786 (May 28, 2004), 69 FR 32087 (June 8, 2004) (SR-PCX-2004-40). 16 The Exchange will submit completed MatchPoint trades for clearance and settlement to NSCC, which is a subsidiary of DTCC. The trade reports that the NSCC will receive from MatchPoint for anonymous trades will contain the identities of the parties to the trade. This measure will enable the NSCC to conduct its risk management functions and settle anonymous trades. The trade report sent to the NSCC will contain an indicator noting that the trade is anonymous. On the contract sheets the NSCC issues to its participants, the NSCC will substitute “ANON” for the acronym of the contra-party. The purpose of this masking is to preserve anonymity through settlement. The Exchange states that it will be able to maintain anonymity with respect to disputed or erroneous trades because the Exchange resolves disputes through a centralized process and conducts the process on behalf of its Members and Member Organizations. Dissemination of Trading Information The MatchPoint system will report trade information to the Securities Information Processors for all MatchPoint eligible securities. Trades will be reported as one print for each security with the total volume of the transaction reported with the price. Market data for NYSE-listed securities will be disseminated via the consolidated tape pursuant to the Consolidated Tape Association Plan (“CTA Plan”). Trade reports of securities that are governed by the UTP Plan will be disseminated pursuant to the UTP Plan. All trades will indicate the market of execution as the NYSE for CTA and UTP purposes. Member Organization and Non-Member Access to the NYSE MatchPoint System Members and Member Organizations of the Exchange are automatically eligible for access to MatchPoint by their membership on the Exchange. A non-member who wishes to trade securities on MatchPoint may do so as a “Sponsored Participant” of a Member Organization, *i.e.* , “Sponsoring Member Organization,” and must enter into a written agreement with the Sponsoring Member Organization and with the Exchange. As previously explained, all Members, Member Organizations and Sponsored Participants of Sponsoring Member Organizations must first obtain connectivity authorization before they can access MatchPoint. The proposed rule requires the Sponsoring Member Organization and the Sponsored Participant to enter into a sponsorship arrangement and maintain a written “sponsorship agreement.” The sponsorship agreement must be agreed to by both the Sponsoring Member Organization and the Sponsored Participant and include provisions for Authorized Traders. Such written agreement must include the Sponsoring Member's consent to sponsor the Sponsored Participant. The proposed sponsorship agreement must also include the following provisions: Sponsorship Provisions
(A)Sponsored Participant and its Sponsoring Member Organization must have entered into and maintained a written agreement with the Exchange. The Sponsoring Member Organization must designate the Sponsored Participant by name in its written agreement as such.
(B)Sponsoring Member Organization acknowledges and agrees that:
(i)All orders entered by the Sponsored Participants and any person acting on behalf of or in the name of such Sponsored Participant and any executions occurring as a result of such orders are binding in all respects on the Sponsoring Member Organization and
(ii)Sponsoring Member Organization is responsible for any and all actions taken by such Sponsored Participant and any person acting on behalf of or in the name of such Sponsored Participant.
(C)Sponsoring Member Organization shall comply with the rules of the Exchange, the rules and procedures with regard to MatchPoint and Sponsored Participant shall comply with the rules of the Exchange and the rules and procedures with regard to MatchPoint, as if Sponsored Participant were a Sponsoring Member Organization.
(D)Sponsored Participant shall maintain, keep current and provide to the Sponsoring Member Organization a list of Authorized Traders who may obtain access to the MatchPoint on behalf of the Sponsored Participant.
(E)Sponsored Participant shall familiarize its Authorized Traders with all of the Sponsored Participant's obligations under this Rule and will assure that they receive appropriate training prior to any use or access to MatchPoint.
(F)Sponsored Participant may not permit anyone other than Authorized Traders to use or obtain access to MatchPoint.
(G)Sponsored Participant shall take reasonable security precautions to prevent unauthorized use or access to MatchPoint, including unauthorized entry of information into MatchPoint, or the information and data made available therein. Sponsored Participant understands and agrees that Sponsored Participant is responsible for any and all orders, trades and other messages and instructions entered, transmitted or received under identifiers, passwords and security codes of Authorized Traders, and for the trading and other consequences thereof.
(H)Sponsored Participant acknowledges its responsibility to establish adequate procedures and controls that permit it to effectively monitor its employees, agents and customers' use and access to MatchPoint for compliance with the terms of this agreement.
(I)Sponsored Participant shall pay when due all amounts, if any, payable to Sponsoring Member Organization, MatchPoint or any other third parties that arise from the Sponsored Participants access to and use of MatchPoint. Such amounts include, but are not limited to applicable exchange and regulatory fees.
(J)Sponsored Participant shall maintain and keep current all records and documents relating to its trading activities on MatchPoint, and shall provide all such records and documents to the Sponsoring Member Organization upon request. Notice of Consent to the Exchange
(A)The Sponsoring Member Organization must provide the Exchange with a notice of consent acknowledging its responsibility for the orders, executions and actions of its Sponsored Participant at issue prior to providing the Sponsored Participant with authorized access to MatchPoint. Authorized Traders
(A)Sponsoring Member Organization shall maintain a list of Authorized Traders who may obtain access to MatchPoint on behalf of the Sponsoring Member Organization or the Sponsoring Member Organization's Sponsored Participants. The Sponsoring Member Organization shall update the list of Authorized Traders as necessary. Sponsoring Member Organizations must provide the list of Authorized Traders to the Exchange upon request.
(B)A Sponsoring Member Organization must have reasonable procedures to ensure that all Authorized Traders comply with the trading rules and procedures related to MatchPoint and all other rules of the Exchange.
(C)A Sponsoring Member Organization must suspend or withdraw a person's status as an Authorized Trader if the Exchange has determined that the person has caused the Sponsoring Member Organization to fail to comply with the rules of the Exchange and the Exchange has directed the Sponsoring Member Organization to suspend or withdraw the person's status as an Authorized Trader.
(D)A Sponsoring Member Organization must have reasonable procedures to ensure that an Authorized Trader maintain the physical security of the equipment for accessing the facilities of MatchPoint to prevent the improper use or access to the system, including unauthorized entry of information into the system. Limitations on the Use of MatchPoint
(A)Specialists on the Floor of the Exchange are not authorized to access MatchPoint. The off-Floor operations of specialist firms may obtain authorized access to MatchPoint provided they have policies and procedures and barriers in place that preclude improper information sharing between the specialist firm and the firm's specialist on the Floor of the Exchange. 17 17 Currently, all specialist organizations on the Exchange utilize information barrier procedures pursuant to NYSE Rule 98 (Restrictions on Approved Person Associated with a Specialist's Member Organization). Information barrier procedures that would be utilized to block access by a specialist to any MatchPoint trading information generated by the off-Floor personnel of the specialist organization would be similar in design and utilization.
(B)Members who have authorized access to MatchPoint are not permitted to enter orders into the MatchPoint system from the Floor of the Exchange when such orders are for their own accounts, the accounts of associated persons, or accounts over which it or an associated person exercises investment discretion. Similarly, Members on the Floor may not have such orders entered into MatchPoint by sending them to an off-Floor facility for entry. Members with authorized access to MatchPoint may only enter customer orders into MatchPoint from the Floor of the Exchange. Members that have authorized access to MatchPoint may enter proprietary and customer orders into MatchPoint from off the Floor of the Exchange. Applicability of Section 11(a) and
(b)of the Act Section 11(a) of the Act prohibits a member of a national securities exchange from effecting transactions on that exchange for its own account, the account of an associated person, or an account over which it or its associated person exercises investment discretion, unless an exception applies. The “Effect versus Execute Rule,” as Rule 11a2-2(T) under the Act is known, permits an exchange member, subject to certain conditions, to effect a transaction for such accounts, utilizing an unaffiliated member to execute transactions on the exchange floor. The Rule requires that:
(1)The order must be transmitted from off-floor;
(2)once the order has been transmitted, the member may not participate in the execution;
(3)the transmitting member may not be affiliated with the executing member; and
(4)neither the member or associated person may retain any compensation in connection with effecting such transaction, respecting accounts over which either has investment discretion, without the express written consent of the person authorized to transact business for the account. The Exchange requests interpretation that MatchPoint orders entered from off-floor comply with the following provisions of the Rule: 1. *Off -Floor Transmissions:* Orders are electronically entered into the MatchPoint system from on and off the Floor of the Exchange; however, Members are not permitted to enter orders into the MatchPoint system from the Floor of the Exchange when such orders are for their own accounts, the accounts of associated persons, or accounts over which it or an associated person exercises investment discretion. Also, specialists on the Floor are not permitted to enter any orders into the MatchPoint system and they do not have access to the MatchPoint system from the Floor, as described in more detail below. However, “upstairs” specialist firms are permitted to be MatchPoint users and may enter orders from off the Floor provided such firms have adequate policies, procedures and “barriers” in place between the upstairs firm and the Floor specialists, which will preclude improper sharing of trading information. 2. *Non-Participation in Order Execution:* In accordance with Rule 11a2-2(T), once orders are entered into the MatchPoint system, a member may not participate in, guide or influence the execution of such orders. MatchPoint orders are sent by electronic means ( *i.e.* , FIX application or an internet-based application) to the MatchPoint trading platform. Users may enter, correct or cancel MatchPoint orders any time prior to the commencement of a matching session. However, once the matching session has commenced, the system will not permit a user to affect the order or its execution in any way. Thus, when the matching session commences, the member relinquishes all control of MatchPoint orders. Users have no special or unique order handling or trading advantages when trading on MatchPoint. 3. *Affiliated Executing Members:* Rule 11a2-2(T) provides that the transmitting member may not be affiliated with the executing member. The Commission has previously recognized that this requirement may be satisfied when automated exchange facilities are used. 18 MatchPoint is a fully automated, electronic trading facility. As described above, MatchPoint orders are sent by electronic means to the MatchPoint trading platform. Matching sessions commence automatically at a predetermined time. Matching, trading and pricing of orders is effectuated through an algorithm, which does not permit entry, correction or cancellation of orders during the matching session. At the completion of a matching session, transaction reports, including order cancellation reports for orders that were not executed, are sent back to the user. Reference Prices are derived from outside sources. The intra-day Reference price is the midpoint of the NBBO, and the after hours Reference Price is the official closing price or last sale price of a particular security. 18 In considering the operation of automated execution systems by an exchange, the Commission has noted in the past that the execution of an order is automatic once it has been transmitted into a system, and therefore satisfies the independent execution requirement of rule 11a2-2(T). *See, e.g.,* Securities Exchange Act Release Nos. 49068 (January 13, 2004), 69 FR 2775 (January 20, 2004) (order approving the Boston Options Exchange as an options trading facility of the Boston Stock Exchange); 29237 (May 24, 1991), 56 FR 24853 (May 31, 1991) (regarding NYSE's Off-Hours Trading Facility); and 53128 (January 13, 2006), 71 FR 3550 (January 23, 2006) (File No. 10-131). The Exchange believes that MatchPoint complies with the “Affiliated Executing Member” provision of Rule 11a2-2(T) because the automatic execution function of MatchPoint ensures that all authorized MatchPoint users have the same abilities with respect to entering orders, and no users can effect an order once the matching session has commenced. The design of the MatchPoint system ensures that members do not possess any special or unique trading advantages in the handling of orders. Thus, the Rule's provision respecting the use of affiliated members to execute orders is not implicated by the MatchPoint system. 4. *Non-Retention of Compensation:* The Exchange represents that members that rely on Rule 11a2-2(T) for a managed account transaction must comply with the limitations on compensation set forth in the rule. Section 11(b) of the Act and Rule 11b-1 thereunder, which pertains to specialists, are not applicable to the operation of the MatchPoint system for several reasons. First, as stated above, specialists on the Floor of the Exchange are not able to access MatchPoint. MatchPoint can only be accessed through an electronic FIX application and/or an internet based, password-protected order entry application, which are not available to individual specialists on the Floor. Although the upstairs firms that employ specialists are able to access MatchPoint through these two applications, such firms must be authorized to access MatchPoint, and the firms must have policies and procedures and information barriers in place to preclude the improper sharing of trading information between the specialists on the Floor and in the upstairs firm. Further, the specialist firms will be subject to examinations by the Financial Industry Regulatory Authority, Inc. (“FINRA”) as agent for NYSE Group pursuant to a Regulatory Services Agreement dated July 30, 2007, to ensure that such policies and procedures and information barriers are in place and are adequate to preclude improper sharing of trading information. Specifically, FINRA examiners will perform an on-site review of the combined specialist firm's written policies and procedures and determine if they are adequate in relation to trading on MatchPoint. In addition, FINRA will interview appropriate individuals both within the affected departments as well as other areas of the specialist firm to determine whether firm policies have been appropriately disseminated and appear to be followed in relation to MatchPoint trading. The examination will also determine whether there have been any apparent breaches of the information barriers. Second, the MatchPoint system is independent of all other electronic trading platforms, including the specialists' API (“Application Programmed Interface”) which is also known as the specialists' “algorithm.” As a consequence, the specialists' algorithm cannot interface with the MatchPoint system and has no access to order entry information or MatchPoint market data. Similarly, the individual specialist on the Floor has no MatchPoint order entry information or MatchPoint market data. Without access to MatchPoint and without access to MatchPoint order entry information and market data, specialists will not be able to manipulate MatchPoint trading. Third, the Exchange has an internal authorization process that authorizes MatchPoint users to access MatchPoint through the FIX application and internet by providing an authorized user name and protected password. Individual specialists on the Floor will not be authorized through the internal process. Upstairs firms that employ specialists may be authorized to access MatchPoint through MatchPoint's internal authorization process, provided, as noted above, FINRA, as agent for NYSE Group, examines such firms to ensure that policies, procedures and barriers are in place and are adequate to preclude improper sharing of trading information. Therefore, because specialists on the Floor do not have access to the MatchPoint system or MatchPoint order information, and because the specialist firms are subject to regulatory examinations to ensure the integrity of information barriers between the firms and their specialists on the Floor, the Exchange believes that section 11(b) of the Act and Rule 11b-1 thereunder, which pertains to specialists, is not applicable to the operation of the MatchPoint system. Regulation of the MatchPoint System The Exchange notes that NYSE Regulation represents that it has appropriate policies and procedures in place to adequately and effectively regulate the MatchPoint system. A surveillance plan describing the various surveillances that will be in place to monitor the operation of MatchPoint has been submitted to the Commission under separate cover, and will be implemented prior to any trading on the MatchPoint system. Also, FINRA, as agent for NYSE Group, will perform examinations of specialist firms that trade on MatchPoint as described above. 2. Statutory Basis The Exchange states that the statutory basis for proposed rule change is the requirement under section 6(b)(5) 19 of the Act that an Exchange have rules that are 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. 19 15 U.S.C. 78f(b)(5). 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. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period
(i)as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or
(ii)as to which the NYSE consents, the Commission will:
(A)By order approve such proposed rule change, or
(B)Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NYSE-2007-102 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSE-2007-102. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the NYSE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2007-102 and should be submitted on or before December 14, 2007. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 20 20 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-22782 Filed 11-21-07; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56790; File No. SR-NYSEArca-2007-113] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the Mid-Point Passive Liquidity Order November 15, 2007. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on November 5, 2007, NYSE Arca, Inc. (“NYSE Arca” or “Exchange”), through its wholly owned subsidiary, NYSE Arca Equities, Inc. (“NYSE Arca Equities” or “Corporation”), filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been substantially prepared by the Exchange. The Exchange filed the proposed rule change as a “non-controversial” proposed rule change pursuant to Section 19(b)(3)(A) 3 of the Act and Rule 19b-4(f)(6) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend NYSE Arca Rule 7.31(h)(5) in order to reduce the Mid-Point Passive Liquidity Order's (“MPL Order”) minimum order entry size and minimum executable size from 1000 to 100. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for the proposed rule change, and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has substantially 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 As part of its continuing efforts to provide additional flexibility and increased functionality to its system and its Users, 5 the Exchange proposes to amend Rule 7.31(h)(5) in order to reduce the MPL Order's minimum order entry size and minimum executable size from 1000 to 100. The MPL Order 6 is a version of the NYSE Arca Passive Liquidity Order, 7 except that it is executable only at the midpoint of the Protected Best Bid and Offer (“PBBO”). 5 *See* NYSE Arca Rule 1.1(yy) for the definition of “User.” 6 *See* Securities Exchange Act Release No. 56072 (July 13, 2007), 72 FR 39867 (July 20, 2007) (SR-NYSEArca-2007-61). 7 *See* NYSE Arca Rule 7.31(h)(4). Presently, the MPL Order's minimum order entry and execution size is 1000. The Exchange represents that this MPL Order type was initially designed to accommodate larger customer transactions. However, since its inception, it has become clear that Users with a typical order flow less than this threshold are frequently unable to use it. This proposed reduction of the order entry and execution size from 1000 to 100 will allow all Users the same flexibility in using this order type. The Exchange is not proposing any other changes or amendments to the MPL order. The Exchange intends to offer this functionality in concert with other planned technological upgrades presently scheduled to be implemented on November 19, 2007, or such later date as communicated to its Users through a customer notice. The Exchange believes that reducing the minimum order entry size and the minimum execution size will further enhance order entry and execution opportunities on the Exchange. Retail customers, whose orders are typically smaller than 1000, will particularly benefit from this reduction and thus the proposed rule change will allow those Users the same opportunities as larger institutional customers. 2. Statutory Basis The proposed rule change is consistent with Section 6(b) of the Act, 8 in general, and furthers the objectives of Section 6(b)(5) of the Act, 9 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, and to remove impediments to and perfect the mechanisms of a free and open market and a national market system. 8 15 U.S.C. 78f(b). 9 15 U.S.C. 78f(b)(5). 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. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the proposed rule change does not:
(i)Significantly affect the protection of investors or the public interest;
(ii)impose any significant burden on competition; and
(iii)become operative for 30 days after the date of filing (or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest) the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 10 and subparagraph (f)(6) of Rule 19b-4(f)(6) thereunder. 11 10 15 U.S.C. 78s(b)(3)(A). 11 17 CFR 240.19b-4(f)(6). A proposed rule change filed under 19b-4(f)(6) normally may not become operative prior to 30 days after the date of filing. 12 However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has satisfied the five-day pre-filing requirement. In addition, the Exchange has requested that the Commission waive the 30-day pre-operative delay and designate the proposed rule change to become operative upon filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because reducing the MPL Order's minimum size from 1000 to 100 will provide greater potential for all Users to be able to use this MPL Order type without delay. Further, the Commission believes that this change to an existing order type does not impose any burden on competition or significantly affect the protection of investors. Therefore, the Commission designates the proposal to become operative upon filing. 13 12 17 CFR 240.19b-4(f)(6)(iii). 13 For purposes only of waiving the 30-day operative delay of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in the furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NYSEArca-2007-113 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSEArca-2007-113. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549-1090, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2007-113 and should be submitted on or before December 14, 2007. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 14 14 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-22778 Filed 11-21-07; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56797; File No. SR-NYSEArca-2007-106] Self-Regulatory Organizations; NYSEArca, Inc.; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade Options Already Listed on Another National Securities Exchange November 15, 2007. Pursuant to section 19(b)(1) 1 of the Securities Exchange Act of 1934 (“Act”) 2 and Rule 19b-4 thereunder, 3 notice is hereby given that on October 9, 2007, NYSE Arca, Inc. (“NYSE Arca” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. On November 6, 2007, the Exchange filed Amendment No. 1 to the proposed rule change. 4 This order provides notice of the proposal, as amended, and approves the proposal, as amended, on an accelerated basis. 1 15 U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b-4. 4 In Amendment No. 1, the Exchange corrected typographical errors in the rule text and the purpose section where NYSE Arca Rule 5.4 was incorrectly referenced as NYSE Arca Rule 5.6. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change NYSE Arca proposes to revise the options original listing guidelines so that as long as the continued listing standards set forth in NYSE Arca Rule 5.4 are met and the option is listed and traded on another national securities exchange, the Exchange would be able to list and trade the option. The text of the proposed rule change is available at on NYSE Arca's Web site ( *http://www.nyse.com* ), at NYSE's principal office and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item III 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 this proposed rule change is to revise the options original listing guidelines so that as long as the options maintenance listing standards set forth in NYSE Arca Rule 5.4 are met and the option is listed and traded on another national securities exchange, NYSE Arca would be able to list and trade the option. NYSE Arca Rule 5.3(a)-(c) sets forth the guidelines that an underlying individual equity security must meet before the Exchange may initially list options on that security. These guidelines or requirements are uniform among the options exchanges. NYSE Arca Rule 5.3(a)(4) relates to the minimum market price at which an underlying security must trade for an option to be listed on it. NYSE Arca Rule 5.3(a)(4) permits the listing of individual equity options on both “covered” and “uncovered” underlying securities. 5 In the case of an underlying security that is a “covered security” as defined under section 18(b)(1)(A) of the Securities Act of 1933 (“1933 Act”), the closing market price of the underlying security must be at least $3 per share for the five
(5)previous consecutive business days prior to the date on which the Exchange submits an option class certification to The Options Clearing Corporation (“OCC”). In connection with underlying securities deemed to be “uncovered,” Exchange rules require that such underlying security be at least $7.50 for the majority of business days during the three
(3)calendar months preceding the date of selection for such listing. In addition, an alternative listing procedure for “uncovered” securities also permits the listing of such options so long as:
(1)The underlying security meets the guidelines for continued listing contained in NYSE Arca Rule 5.4; 6
(2)options on such underlying security are traded on at least one other registered national securities exchange; and
(3)the average daily trading volume (“ADTV”) for such options over the last three calendar months preceding the date of selection has been at least 5,000 contracts. Paragraphs
(1)through
(3)of NYSE Arca Rule 5.3(a) further set forth minimum requirements for an underlying security such as shares outstanding, number of holders and trading volume. 5 Section 18(b)(1)(A) of the 1933 Act provides that, “[a] security is a covered security if such security is-listed, or authorized for listing, on the New York Stock Exchange or the American Stock Exchange, or listed, or authorized for listing, on the National Market System of the Nasdaq Stock Market (or any successor to such entities) * * * ” *See* 15 U.S.C. 77r(b)(1)(A). 6 The rule text of NYSE Arca Rule 5.3 refers to NYSE Arca Rule 5.6 instead of NYSE Arca Rule 5.4, which contains NYSE Arca's continued listing standards. The Exchange submits that the alternative listing procedure has limited usefulness. The options exchange (or exchanges) that may be fortunate enough to list an option that at first met the original listing standards but subsequently fails to do so, is provided a trading monopoly inconsistent with the multiple trading of options, fostering competition and the maintenance of a national market system. Under this proposal, an option may be multiply-listed and traded as long as one other options exchange is trading the particular option and such underlying security of the option meets existing continued listing guidelines or requirements. The Exchange notes that the requirements for listing additional series of an existing listed option ( *i.e.* , continued listing guidelines) are less stringent, largely because, in total, the Exchange's guidelines assure that options will be listed and traded on securities of companies that are financially sound and subject to adequate minimum standards. NYSE Arca believes that although the continued listing requirements are uniform among the options exchanges, the application of both the original and continued listing standards in the current market environment has had an anti-competitive effect. Specifically, the Exchange notes that on several occasions it has been unable to list and trade options classes that trade elsewhere because the underlying security of such option did not at that time meet original listing standards. However, the other options exchange(s) may continue to trade such options (and list additional series) based on the lower maintenance listing standards, while NYSE Arca may not list any options on such underlying security. The Exchange believes that this is anti-competitive and inconsistent with the aims and goals of a national market system in options. To address this situation, the Exchange proposes to add new paragraph
(6)to NYSE Arca Rule 5.3(a) and amend the alternative original listing requirement set forth in paragraph (4)(b) of NYSE Arca Rule 5.3(a). Specifically, paragraph
(6)would be added to provide that notwithstanding that a particular underlying security may not meet the requirements set forth in Paragraphs 1 through 4 of NYSE Arca Rule 5.3(a), the Exchange nonetheless could list and trade an option on such underlying security if
(i)the underlying security meets the guidelines for continued listing in NYSE Arca Rule 5.4 and
(ii)options on such underlying security are listed and traded on at least one other registered national securities exchange. Paragraph (4)(b) of NYSE Arca Rule 5.3(a) would be amended to delete the reference to the alternative original listing guideline for “uncovered” securities. In connection with the proposed changes, the Exchange represents that the procedures currently employed to determine whether a particular underlying security meets the initial listing criteria will similarly be applied to the continued listing criteria. The Exchange believes that this proposal is narrowly tailored to address the circumstances where an options class is currently ineligible for listing on NYSE Arca while at the same time, such option is trading on another options exchange(s). The Exchange notes that when an underlying security meets the maintenance listing guidelines and at least one other exchange lists and trades options on the underlying security, the option is available to the investing public. Therefore, the Exchange does not believe that the current proposal will introduce any inappropriate additional listed options classes. The Exchange submits that the adoption of the proposal is essential for competitive purposes and to promote a free and open market for the benefit of investors. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act, 7 in general, and furthers the objectives of section 6(b)(5) 8 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, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(5). 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. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NYSEArca-2007-106 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSEArca-2007-106. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSEArca-2007-106 and should be submitted on or before December 14, 2007. IV. Commission's Findings and Order Granting Accelerated Approval of the Proposed Rule Change After careful consideration, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the regulations thereunder applicable to a national securities exchange. 9 In particular, the Commission finds that the proposed rule change is consistent with section 6(b)(5) of the Act, 10 which requires 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 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. The proposal is narrowly tailored to address the circumstances where an equity option class is currently ineligible for initial listing on the Exchange even though it meets the Exchange's continued listing standards and is trading on another options exchange. Allowing NYSE Arca to list and trade options on such underlying securities should help promote competition among the exchanges that list and trade options. The Commission notes, and the Exchange represents, that the procedures that the Exchange currently employs to determine whether a particular underlying security meets the initial equity option listing criteria for the Exchange will similarly be applied when determining whether an underlying security meets the Exchange's continued listing criteria. 9 In approving this rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 10 15 U.S.C. 78f(b)(5). The Commission finds good cause, pursuant to section 19(b)(2)(B) of the Act, 11 for approving the proposed rule change prior to the 30th day after the publication of the notice of the filing thereof in the **Federal Register** . The Commission notes that the proposed rule change is substantially identical to the proposed rule change submitted by American Stock Exchange LLC, 12 which was previously approved by the Commission after an opportunity for notice and comment, and therefore does not raise any new regulatory issues. 11 15 U.S.C. 78s(b)(2)(B). 12 *See* Securities Exchange Act Release No. 56598 (October 2, 2007), 72 FR 57615 (October 10, 2007) (SR-Amex-2007-48). *See also* Securities Exchange Act Release Nos. 56647 (October 11, 2007), 72 FR 58702 (October 16, 2007) (SR-ISE-2007-80) (substantially identical proposed rule change approved on an accelerated basis); 56717 (October 29, 2007), 72 FR 62508 (November 5, 2007) (SR-Phlx-2007-73) (substantially identical proposed rule change approved on an accelerated basis); and 56774 (November 8, 2007) (SR-CBOE-2007-114) (substantially identical proposed rule change approved on an accelerated basis). V. Conclusion *It is therefore ordered,* pursuant to section 19(b)(2) of the Act, 13 that the proposed rule change (SR-NYSEArca-2007-106), as amended, be, and it hereby is, approved on an accelerated basis. 13 *Id.* For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 14 14 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-22781 Filed 11-21-07; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56799; File No. SR-Phlx-2007-60] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Order Approving a Proposed Rule Change Relating to Structured Equity Products November 15, 2007. On August 14, 2007, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 a proposed rule change to update its rules and its fee schedule regarding the listing of equity securities. The proposed rule change was published for comment in the **Federal Register** on October 16, 2007. 3 The Commission received no comments on the proposal. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* Securities Exchange Act Release No. 56626 (October 5, 2007), 72 FR 58711 (“Notice”). According to the Exchange, currently, the vast majority of equity securities that trade on Phlx are listed on other exchanges and traded on the Phlx pursuant to unlisted trading privileges. Phlx has a series of rules (the “800 Series”) that create standards governing both the issuer of the security and the security to be listed and traded on Phlx. To attract the listing of structured equity securities on the Exchange (“Structured Equity Products”), 4 Phlx proposes modifications to the 800 Series that would accommodate the specific attributes of many of those types of securities. 5 4 For purposes of this proposed rule change, Structured Equity Products are securities listed pursuant to the categories in Phlx Rule 803 entitled Other Securities, Equity Linked Notes, Basket Linked Notes, Index Linked Exchangeable Notes and Index Linked Securities. *See* Phlx Rule 803(f), (h), (k),
(m)and (n). 5 The Exchange proposes to modify Phlx Rules 802, 806 (Initial Public Offerings), 807 (Registration Under the Exchange Act), 837 (Annual Reports) and the Phlx Fee Schedule as described in the Notice. The Commission finds that the proposed rule change is consistent with Section 6(b) of the Act, 6 in general, and with Section 6(b)(5) of the Act, 7 which requires that the rules of a national securities exchange be designed to, among other things, 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. 8 The Commission believes that the proposed rule change should promote competition among national securities exchanges and should benefit investors by removing impediments to the listing and trading of Structured Equity Products. The Commission also notes that the proposed amendments to Phlx Rules 807 and 837 would conform those rules with similar provisions of another national securities exchange. 9 6 15 U.S.C. 78f(b). 7 15 U.S.C. 78f(b)(5). 8 In approving this rule change, the Commission notes that it has considered the proposal's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 9 *See* Sections 210 and 1101 of the American Stock Exchange Company Guide. In addition, the Commission finds that the proposed rule change furthers the objectives of Section 6(b)(4) of the Act, 10 which requires that the Exchange's rules provide for an equitable allocation of reasonable dues, fees, and other charges among Exchange members and issuers and other persons using its facilities. The Exchange also proposes that, for the two Structured Equity Products that it currently lists (Pharmaceutical Basket Opportunity Exchangeable Securities and Biotechnology Basket Opportunity Exchangeable Securities), the $500 per month continuing listing fee begin in January 2008 because the issuer of those securities was invoiced the current annual continuing listing fee ($1,250 for the first product and $250 for the second product) in January 2007. The Commission believes that, with respect to the two Structured Equity Products currently listed on Phlx, it is appropriate for the Exchange to delay application of the proposed continuing listing fee until January 2008 11 because the issuer of those products may have reasonably expected that the current fee would cover its obligation for these two products through the end of 2007. 10 15 U.S.C. 78f(b)(4). 11 By contrast, new Structured Equity Products will begin to pay the proposed fee in the month subsequent to initial listing on Phlx. *It is therefore ordered* , pursuant to Section 19(b)(2) of the Act, 12 that the proposed rule change (SR-Phlx-2007-60) be, and hereby is, approved. 12 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 13 13 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-22776 Filed 11-21-07; 8:45 am] BILLING CODE 8011-01-P SMALL BUSINESS ADMINISTRATION [License No. 09/79-0454] Emergence Capital Partners SBIC, L.P.; Notice Seeking Exemption Under Section 312 of the Small Business Investment Act, Conflicts of Interest Notice is hereby given that Emergence Capital Partners SBIC, L.P., 160 Bovet Road, Suite 300, San Mateo, CA 94402, a Federal Licensee under the Small Business Investment Act of 1958, as amended (“the Act”), in connection with the financing of a small concern, has sought an exemption under section 312 of the Act and section 107.730, Financings which Constitute Conflicts of Interest of the Small Business Administration (“SBA”) Rules and Regulations (13 CFR 107.730). Emergence Capital Partners SBIC, L.P. proposes to provide equity/debt security financing to Goodmail Systems, Inc., 2465 Latham Street, Mountain View, CA 94040. The financing is contemplated for working capital and general corporate purposes. The financing is brought within the purview of § 107.730(a)(1) of the Regulations because Emergence Capital Partners, L.P. and Emergence Capital Associates, L.P., all Associates of Emergence Capital Partners SBIC, L.P., own more than ten percent of Goodmail Systems, Inc., and therefore Goodmail Systems, Inc. is considered an Associate of Emergence Capital Partners SBIC, L.P. as detailed in § 107.50 of the Regulations. Notice is hereby given that any interested person may submit written comments on the transaction to the Associate Administrator for Investment, U.S. Small Business Administration, 409 Third Street, SW., Washington, DC 20416. Dated: October 22, 2007. A. Joseph Shepard, Associate Administrator for Investment. [FR Doc. E7-22870 Filed 11-21-07; 8:45 am] BILLING CODE 8025-01-P SMALL BUSINESS ADMINISTRATION [License No. 09/79-0456] HorizonVentures Fund II, L.P.; Notice Seeking Exemption Under Section 312 of the Small Business Investment Act, Conflicts of Interest Notice is hereby given that Horizon Ventures Fund II, L.P., 4 Main Street, Suite 50, Los Altos, CA 94022, a Federal Licensee under the Small Business Investment Act of 1958, as amended (“the Act”), in connection with the financing of a small concern, has sought an exemption under Section 312 of the Act and Section 107.730, Financings which Constitute Conflicts of Interest of the Small Business Administration (“SBA”) Rules and Regulations (13 CFR 107.730). Horizon Ventures Fund II, L.P. proposes to provide equity/debt security financing to Venturi Wireless, Inc., 1320 Chesapeake Terrace, Sunnyvale, CA 94089. The financing is contemplated for working capital, research and development, and expansion of domestic workforce. The financing is brought within the purview of § 107.730(a)(1) of the Regulations because Horizon Ventures Fund I, L.P. and Horizon Ventures Advisors Fund I, L.P., both Associates of Horizon Ventures Fund II, L.P., own more than ten percent of Venturi Wireless, Inc. Therefore, Venturi Wireless, Inc. is considered an Associate of Horizon Ventures Fund II, L.P., as defined at 13 CFR 107.50 of the SBIC Regulations. Notice is hereby given that any interested person may submit written comments on the transaction to the Associate Administrator for Investment, U.S. Small Business Administration, 409 Third Street, SW., Washington, DC 20416. Dated: October 24, 2007. A. Joseph Shepard, Associate Administrator for Investment. [FR Doc. E7-22875 Filed 11-21-07; 8:45 am] BILLING CODE 8025-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration # 11103 and # 11104] Illinois Disaster # IL-00011 AGENCY: U.S. Small Business Administration. ACTION: Notice. SUMMARY: This is a notice of an Administrative declaration of a disaster for the State of ILLINOIS dated 11/16/2007. *Incident:* Severe Storms and Flooding. *Incident Period:* 08/20/2007 through 08/31/2007. *Effective Date:* 11/16/2007. *Physical Loan Application Deadline Date:* 01/15/2008. *Economic Injury
(EIDL)Loan Application Deadline Date:* 08/18/2008. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the Administrator's disaster declaration, applications for disaster loans may be filed at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: *Primary Counties:* Cook. *Contiguous Counties:* Illinois: Dupage, Kane, Lake. Mchenry, Will, Indiana, Lake. *The Interest Rates are:* Percent Homeowners With Credit Available Elsewhere: 6.250 Homeowners Without Credit Available Elsewhere: 3.125 Businesses With Credit Available Elsewhere: 8.000 Businesses & Small Agricultural Cooperatives Without Credit Available Elsewhere: 4.000 Other (Including Non-Profit Organizations) With Credit Available Elsewhere: 5.250 Businesses And Non-Profit Organizations Without Credit Available Elsewhere: 4.000 The number assigned to this disaster for physical damage is 11103 6 and for economic injury is 11104 0. The States which received an EIDL Declaration # are Illinois and Indiana. (Catalog of Federal Domestic Assistance Numbers 59002 and 59008). Dated: November 16, 2007. Steven C. Preston, Administrator. [FR Doc. E7-22857 Filed 11-21-07; 8:45 am] BILLING CODE 8025-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration # 11101 and # 11102] Pennsylvania Disaster # PA-00015 AGENCY: U.S. Small Business Administration. ACTION: Notice. SUMMARY: This is a notice of an Administrative declaration of a disaster for the Commonwealth of PENNSYLVANIA dated 11/15/2007. *Incident:* Fire. *Incident Period:* 11/08/2007. *Effective Date:* 11/15/2007. *Physical Loan Application Deadline Date:* 01/15/2008. *Economic Injury
(EIDL)Loan Application Deadline Date:* 08/15/2008. ADDRESSES: Submit Completed Loan Applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the Administrator's disaster declaration, applications for disaster loans may be filed at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: *Primary Counties:* Montgomery. *Contiguous Counties:* Pennsylvania: Berks, Bucks, Chester Delaware, Lehigh, Philadelphia. *The Interest Rates are:* Percent Homeowners With Credit Available Elsewhere 5.875 Homeowners Without Credit Available Elsewhere 2.937 Businesses With Credit Available Elsewhere 8.000 Businesses & Small Agricultural Cooperatives Without Credit Available Elsewhere 4.000 Other (Including Non-Profit Organizations) With Credit Available Elsewhere 5.250 Businesses And Non-Profit Organizations Without Credit Available Elsewhere 4.000 The number assigned to this disaster for physical damage is 11101 5 and for economic injury is 11102 0. The State which received an EIDL Declaration # is Pennsylvania. (Catalog of Federal Domestic Assistance Numbers 59002 and 59008). Dated: November 15, 2007 Steven C. Preston, Administrator. [FR Doc. E7-22860 Filed 11-21-07; 8:45 am] BILLING CODE 8025-01-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration Notice of Opportunity for Public Comment on Surplus Property Release at George M. Bryan Field Airport, Starkville, MS AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Notice of intent to rule on land release request. SUMMARY: Under the provisions of Title 49, U.S.C. Section 47153(c), notice is being given that the FAA is considering a request from the City of Starkville to waive the requirement that a 1.87 acre parcel of surplus property, located at the George M. Bryan Field Airport, be used for aeronautical purposes. DATES: Comments must be received on or before December 24, 2007. ADDRESSES: Comments on this notice may be mailed or delivered in triplicate to the FAA at the following address: Jackson Airports District Office, 100 West Cross Street, Suite B, Jackson, MS 39208-2307. In addition, one copy of any comments submitted to the FAA must be mailed or delivered to Ms. Lynn Sprull, Chief Administrative Officer, City of Starkville, Starkville, MS, at the following address: City Hall, 101 Lampkin Street, Starkville, MS 39759. FOR FURTHER INFORMATION CONTACT: David Shumate, Program Manager, Jackson Airports District Office, 100 West Cross Street, Suite B, Jackson, MS 39208-2307,
(601)664-9882. The land release request may be reviewed in person at this same location. SUPPLEMENTARY INFORMATION: The FAA is reviewing a request by City of Starkville, Starkville, MS to release 1.87 acres of surplus property at the George M. Bryan Field Airport. The property, located on the West side of the airport, will be sold for fair market value. Any person may inspect the request in person at the FAA office listed above under FOR FURTHER INFORMATION CONTACT . In addition, any person may, upon request, inspect the request, notice and other documents germane to the request in person at the George M. Bryan Field Airport, Starkville, Mississippi. Issued in Jackson, Mississippi, on November 8, 2007. Rans Black, Manager, Jackson Airports District Office, Southern Region. [FR Doc. 07-5776 Filed 11-21-07; 8:45 am]
Connectionstraces to 18
Traces to 18 documents
6 references not yet in our index
  • Pub. L. 103-182
  • 19 USC 3432
  • 44 USC 3501-3520
  • 17 CFR 270.17
  • 17 CFR 240.19
  • 17 CFR 240.11
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cites case law
Notices
Invitation for applications
U.S.C.§ 611
U.S.C.§ 1001
U.S.C.§ 552a
U.S.C.§ 80a–1
U.S.C.§ 78k–1
C.F.R.§ 242.608
C.F.R.§ 200.30-3
U.S.C.§ 78s
U.S.C.§ 78c
Pub. L.Pub. L. 103-182
Cite19 USC 3432
Cite44 USC 3501-3520
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