Notices. Notice of request for public comments
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BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56880; File No. SR-Amex-2006-96] Self-Regulatory Organizations; American Stock Exchange LLC; Order Approving Proposed Rule Change, as Modified by Amendment Nos. 1, 2, 3, 4, 5, and 6 Thereto, Relating to the Listing and Trading of Trust Units of the Nuveen Commodities Income and Growth Fund December 3, 2007. I. Introduction On October 12, 2006, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) a proposed rule change pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder 2 to list and trade trust units of the Nuveen Commodities Income and Growth Fund (“Fund”) (“Shares”) pursuant to proposed Amex Rules 1600 *et. seq.* On March 2, 2007, March 21, 2007, May 14, 2007, August 15, 2007, August 28, 2007, and September 17, 2007 the Amex submitted Amendment Nos. 1, 2, 3, 4, 5, and 6, respectively, to the proposed rule change.
The proposed rule change, as amended, was published for comment in the **Federal Register** on September 25, 2007. 3 The Commission received one comment letter regarding the proposal. 4 This order approves the proposed rule change, as amended. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* Securities Exchange Act Release No. 56465 (September 19, 2007), 72 FR 54489 (“Notice”). 4 *See* letter to Nancy M. Morris, Secretary, Commission, from John G. Gaine, President, Managed Funds Association (“MFA”), dated October 15, 2007 (“MFA Letter”).
II. Description of the Proposal The Exchange proposes to add Amex rules 1600 *et seq.* that would permit the listing and trading of units of a trust or other similar entity (“Trust Units”) that invests in the assets of a trust, partnership, limited liability company, corporation or other similar entity constituted as a commodity pool that holds investments comprising or otherwise based on futures contracts, options on futures contracts, forward contracts, commodities and high credit quality short-term fixed income securities or other securities.
Pursuant to these proposed rules, the Amex proposes to list and trade the Shares, which represent beneficial ownership interests in the assets of the Fund, which in turn, consist solely of units (“Master Fund Units”) of the Nuveen Commodities Income and Growth Master Fund LLC (the “Master Fund”). The Exchange also proposes to amend section 141 of the Amex *Company Guide* (“Company Guide”) regarding listing fees to accommodate the listing of Trust Units. 5 5 The Amex original listing fee applicable to the listing of the Fund is $5,000.
Under Section 141 of the Company Guide, the annual listing fee will be based upon the year-end aggregate number of units in all series of the Fund outstanding at the end of each calendar year. As described in the Exchange's proposal, 6 the Fund's primary investment objective is to seek total return through broad exposure to the commodities markets. The Fund's secondary objective is to provide investors with monthly income and capital distributions not commonly associated with commodity investments.
The Master Fund will invest in commodity futures and forward contracts, options on commodity futures and forward contracts, and over-the-counter (“OTC”) commodity options in the following commodity groups: energy, industrial metals, precious metals, livestock, agriculturals, and tropical foods and fibers and may in the future include other commodity investments that become the subject of commodity futures trading. 7 6 For a more detailed description of the Fund and Master Fund, including their structure, investment objectives, holdings, applicable exchange listing and trading rules, disclosure of pricing information, surveillance, and other regulation, *see* Notice at 54489-94. 7 For information regarding the futures contracts and other investments in which the Master Fund may invest, *see* Notice at 54490.
The Fund and the Master Fund are commodity pools. The Master Fund is managed by Nuveen Commodities Asset Management, LLC (the “Manager”). The Manager is registered as a commodity pool operator (the “CPO”) and a commodity trading advisor (the “CTA”) with the Commodity Futures Trading Commission (“CFTC”) and is a member of the National Futures Association (“NFA”). The Manager will serve as the CPO and CTA of the Fund and the Master Fund. The Manager will determine the Master Fund's overall investment strategy, including:
(i)The selection and ongoing monitoring of the Master Fund's sub-advisors;
(ii)the management of the Fund's and Master Fund's business affairs; and
(iii)the provision of certain clerical, bookkeeping and other administrative services. Gresham Investment Management LLC (the “Commodity Sub-Advisor”) will invest on a notional basis substantially all of the Master Fund's assets in commodity futures and forward contracts pursuant to a proprietary commodity investment strategy (the Tangible Asset Program® (“TAP®”)) 8 and a risk management program. The Commodity Sub-Advisor is a Delaware limited liability company and is registered with the CFTC as a CTA and a CPO and is a member of the NFA. The Commodity Sub-Advisor is also registered with the Commission as an investment adviser. Nuveen Asset Management (the “Collateral Sub-Advisor”), an affiliate of the Manager, will invest the Master Fund's collateral in short-term, investment grade quality debt instruments. The Collateral Sub-Advisor is registered with the Commission as an investment adviser. 8 TAP® is an actively managed, rules-based commodity investment strategy. TAP® is fundamental in nature and is designed to maintain consistent, fully collateralized exposure to commodities as an asset class. TAP® does not require the existence of price trends in order to be successful. TAP® currently requires investment in futures or forward contracts for three commodities in each of the energy, industrial metals, livestock, agriculturals, tropical foods and fibers and precious metal commodity groups. Commodity group weightings and individual commodity weightings are chosen by a process that blends two-thirds of five year global production value and one-third of five year value of commodity futures contracts traded in dollars. The process constrains the weightings of each commodity group such that no group may constitute more than 35% of TAP® and no single commodity interest can constitute more than 70% of its group. In addition, each commodity is rebalanced. The Exchange submits that proposed Amex Rules 1600 *et seq* . will accommodate the listing and trading of Trust Units. 9 9 Pursuant to Commentary .01 to proposed Amex Rule 1602, the Exchange shall file separate proposals under Section 19(b) of the Act before listing and trading separate and distinct Trust Units designated on different underlying investments, commodities, assets and/or portfolios. III. Comment Letter and Response The Commission received one comment letter, submitted by the MFA, 10 which expressed concerns about the daily disclosure of the Fund's holdings and net asset value (“NAV”). MFA believed that such daily disclosure is proper in the case of traditional exchange-traded funds (“ETFs”) because it facilitates the daily creation and redemption of units, which lowers the tracking error between an ETF's NAV and the trading price of such ETF. 11 In the case of the Fund, however, which does not provide for a continuous creation and redemption process, MFA argued that disclosure of the Fund's assets has no “commercially reasonable purpose,” and may frustrate continued innovation and ultimately harm investors. The MFA believed that daily disclosure could allow market participants to discover proprietary trading strategies through reverse engineering. MFA argued that this could result in front-running and also remove incentives for the formation of new closed-end funds and strategies. 12 Likewise, daily disclosure of the Fund's NAV, in the MFA's view, is not necessary and may have negative consequences. MFA believed that closed-end exchange-traded commodity pools such as the Fund should be subject to the same NAV and portfolio holding disclosure requirements applicable to closed-end exchange-traded registered investment companies. 13 10 *See* MFA Letter, *supra* note 4. 11 *See id.* at 1-2. 12 *See id.* at 2-4. 13 *See id.* at 4-5. MFA noted that many closed-end registered investment companies report their NAV weekly and the Investment Company Act of 1940 requires only quarterly portfolio holdings disclosure for closed-end registered investment companies. In its response, 14 the Exchange disagreed with the MFA regarding disclosure of the Fund's NAV. Amex argued that daily disclosure allows investors to determine whether actual discounts or premiums to NAV per share based on supply and demand and future expectation are consistent with market fundamentals. 15 With respect to the daily disclosure of the Fund's holdings, Amex largely agreed with MFA's comments, noting that it did not believe the daily portfolio holdings disclosure requirement to be particularly helpful or necessary, and agreeing that the Fund's structure does not provide for a mechanism to cause the market price per share to track NAV per share. 16 14 *See* letter to Nancy M. Morris, Secretary, Commission, from Jeffrey P. Burns, Vice President and Associate General Counsel, Exchange, dated November 7, 2007. 15 *Id.* at 3. 16 *Id.* at 1-2. Though the Exchange in its current letter believed that there was significant justification to eliminate the proposed requirement or daily portfolio holdings disclosure, the Exchange did not file an amendment to propose such a change with respect to the Fund. IV. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. 17 In particular, the Commission finds that the proposed rule change is consistent with section 6(b)(5) of the Act, 18 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 a national market system, and, in general, to protect investors and the public interest. 17 In approving this proposed 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). 18 15 U.S.C. 78f(b)(5). The Commission further believes that the proposal is consistent with section 11A(a)(1)(C)(iii) of the Act, 19 which sets forth Congress's finding that it is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure the availability to brokers, dealers, and investors of information with respect to quotations for and transactions in securities. As described in the Notice, the Exchange represents that futures, forwards and related exchange traded options, quotes and last sale information for the commodity contracts held by the Fund are widely disseminated through a variety of market data vendors worldwide, including Bloomberg and Reuters. In addition, the Exchange further represents that complete real-time data for such futures, forwards and exchange traded options is available by subscription from Reuters and Bloomberg. The relevant futures and forward exchanges also provide delayed futures and forward contract information on current and past trading sessions and market news free of charge on their respective Web sites. The contract specifications for the futures and forward contracts are also available from the futures and forward exchanges on their Web sites as well as other financial informational sources. Finally, the Web site for the Fund and the Manager, which will be publicly accessible at no charge, will contain the following information:
(a)The prior business day's NAV and the reported closing price;
(b)calculation of the premium or discount of such price against such NAV; and
(c)other applicable quantitative information. 19 15 U.S.C. 78k-1(a)(1)(C)(iii). Furthermore, the Commission believes that the proposal to list and trade the Shares is reasonably designed to promote fair disclosure of information that may be necessary to price the Shares appropriately. The Commission notes that the Exchange will, prior to listing, obtain a representation from the Fund that the NAV per share will be calculated daily and made available to all market participants at the same time. 20 In addition, the Exchange represents that disclosure of the portfolio composition of the Fund will be made to all market participants at the same time. 21 Moreover, the Exchange notes that each of the Manager, the Commodity Broker, and the Commodity Sub-Advisor has represented to the Exchange that it will establish firewall procedures with respect to personnel who have access to information concerning changes and adjustments to components of the Fund to prevent the use and dissemination of material non-public information. 22 Further, the trading of the Shares is subject to the specialist prohibitions in Proposed Amex Rule 1603. 20 *See* proposed Amex Rule 1602(a)(ii). 21 *See* Notice, *supra* note 3, at note 15. 22 *See* Notice at 54492. The Commission also believes that the Exchange's trading halt rules are reasonably designed to prevent trading in the Shares when transparency is impaired. Proposed Amex Rule 1602(b)(ii) provides that the Exchange will halt trading in the Shares if the circuit breaker parameters of Amex Rule 117 have been reached. In exercising its discretion to halt or suspend trading in the Shares, the Exchange may consider factors such as those set forth in Amex Rule 918C(b) in addition to other factors that may be relevant. In particular, if the portfolio holdings and net asset value per share are not being disseminated as required, the Exchange may halt trading during the day in which the interruption to the dissemination of the portfolio holdings or net asset value per share occurs. If the interruption to the dissemination of the portfolio holdings or net asset value per share persists past the trading day in which it occurred, the Exchange will halt trading no later than the beginning of the trading day following the interruption. The Commission further believes that the trading rules and procedures to which the Shares will be subject pursuant to this proposal are consistent with the Act. The Exchange has represented that the Shares are equity securities subject to Amex's rules governing the trading of equity securities. In support of this proposal, the Exchange has made the following representations:
(1)The Exchange's surveillance procedures are adequate to properly monitor the trading of the Shares. Specifically, Amex will rely on its existing surveillance procedures governing Index Fund Shares. In addition, Amex has represented that it has information sharing agreements with the InterContinental Exchange, the Chicago Mercantile Exchange, and the New York Mercantile Exchange and may obtain market surveillance information from other exchanges, including the Chicago Board of Trade, London Metals Exchange, and the New York Board of Trade through the Intermarket Surveillance Group.
(2)Prior to the commencement of trading, the Exchange will inform its members and member organizations in an Information Circular regarding the prospectus or delivery requirements that apply to the Shares. The Information Circular will also provide guidance with regard to member firm compliance responsibilities when effecting transactions in the Shares and highlighting the special risks and characteristics of the Funds and Shares, as well as applicable Exchange rules. In addition, the Information Circular will also reference the fact that there is no regulated source of last sale information regarding physical commodities and note the respective jurisdictions of the SEC and CFTC . This approval order is based on the Exchange's representations. Finally, the Commission believes that the daily disclosure requirements relating to the Fund's holdings and NAV are appropriate. Specifically, the Commission believes that daily disclosure of the Fund's NAV per share should aid investors in determining the degree to which the Shares are tracking the Fund's NAV per share. The Commission believes that the same is true for daily disclosure of the holdings of the Fund as such disclosure provides additional transparency. In addition, the Commission notes that the Exchange did not file an amendment seeking to change this disclosure requirement. Accordingly, the Commission does not believe that the commenter's assertions form a basis either to disapprove or to delay approval of the Exchange's proposed rule change and listing of the Fund. V. Conclusion *It is therefore ordered,* pursuant to section 19(b)(2) of the Act, 23 that the proposed rule change (SR-Amex-2006-96), as modified, be, and it hereby is, approved. 23 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 24 24 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-23747 Filed 12-6-07; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56882; File No. SR-Amex-2007-56] Self-Regulatory Organizations; American Stock Exchange LLC; Order Approving a Proposed Rule Change Relating To Resolving Uncompared Transactions December 3, 2007. I. Introduction On June 4, 2007, the American Stock Exchange LLC (“Amex”) filed and on September 18, 2007, amended, a proposed rule change 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 to amend Rule 724 (“Agents to Resolve DKs”) and the corresponding Commentary. As proposed, the amendments would require each member to designate a representative that is away from the Amex's trading floor and that is authorized to resolve uncompared transactions (“DKs”) on the member's behalf. The proposed rule change was published for comment in the **Federal Register** on October 16, 2007. 3 No comment letters were received on the proposal. This order approves the proposal. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 Securities Exchange Act Release No. 56635 (Oct. 10, 2007), 72 FR 58693. II. Description of the Proposal Amex is revising Rule 724 to require each member that executes transactions on Amex's trading floor (“Floor”) to designate another member firm, allied member, registered representative, or any other person required to be registered as a broker-dealer under the Act that is physically located away from the Floor to act in a DK resolution capacity by means of telephone, e-mail, or fax submission. Each member will retain the option to also designate a Floor member to act on its behalf regarding DK notices. III. Discussion The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a registered securities exchange. In particular, the Commission believes the proposal is consistent with Section 6(b)(5) of the Act, 4 which requires, among other things, that the rules of a national securities exchange be designed to foster cooperation and coordination among persons engaged in facilitating transactions in securities. The new requirements that each Amex member must designate an off-Floor representative that is equipped with electronic communication capabilities to act on its behalf to resolve DK notices in its absence will clarify the protocol for and reduce the delays associated with resolving such uncompared transactions, thereby facilitating a more prompt and reliable processing of securities transactions among Amex members. 4 15 U.S.C. 78f(b)(5). IV. Conclusion On the basis of the foregoing, the Commission finds that the proposal is consistent with the requirements of the Act and in particular with the requirements of Section 6 of the Act 5 and the rules and regulations thereunder. 5 15 U.S.C. 78q-1. *It is therefore ordered* , pursuant to Section 19(b)(2) of the Act, 6 that the proposed rule change (File No. SR-Amex-2007-56) be, and hereby is, approved. 7 6 15 U.S.C. 78s(b)(2). 7 In approving the proposed rule change, the Commission considered the proposal's impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f). 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. E7-23788 Filed 12-6-07; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISISON [Release No. 34-56873; File No. SR-CBOT-2007-01] Self-Regulatory Organization; Board of Trade of the City of Chicago, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Changes Relating to the Renumbering and Reorganization of Rules Relating to Listing Standards for Security Futures Products November 30, 2007. Pursuant to section 19(b)(7) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-7 under the Act, 2 notice is hereby given that on November 1, 2007, the Board of Trade of the City of Chicago, Inc. (“CBOT®” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rules described in Items I, II, and III below, which Items have been substantially prepared by the CBOT. The Commission is publishing this notice to solicit comments on the proposed rules from interested persons. The CBOT also has filed the proposed rules with the Commodity Futures Trading Commission (“CFTC”), together with a written certification under section 5c(c) of the Commodity Exchange Act (“CEA”) 3 on October 25, 2007. 1 15 U.S.C. 78s(b)(7). 2 17 CFR 240.19b-7. 3 7 U.S.C. 7a-2(c). I. Self-Regulatory Organization's Description of the Proposed Rules The proposed rule changes delete CBOT Rulebook Chapter 57 (Single Stock Futures) and Chapter 58 (Narrow-Based Stock Index Futures) in their entirety and substitute new CBOT Rulebook Chapter 34 (Single Stock Futures) and Chapter 35 (Narrow-Based Stock Index Futures). In addition, the proposed rule changes renumber current CBOT Regulations 431.07 (Customer Margins for Security Futures Positions Held in Futures Accounts) and 431.08 (Acceptable Margin for Security Futures and Treatment of Undermargined Accounts) as Rules 931 and 932. The text of the proposed rule change is available on the Exchange's Web site ( *http://www.cmegroup.com* ), at the Exchange'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 Rules The CBOT has prepared statements concerning the purpose of, and basis for, the proposed rules, burdens on competition, and comments received from members, participants, and others. The text of these statements may be examined at the places specified in Item IV below. These statements are set forth in sections A, B, and C below. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rules 1. Purpose The CBOT has proposed to substitute new rulebook Chapters 34 and 35 for current Chapters 57 and 58, and to renumber current Regulations 431.07 and 431.08 as Rules 931 and 932 in connection with the adoption of a new rulebook for the CBOT as a result of the merger between the CBOT's former holding company, CBOT Holdings, Inc., and the former holding company of Chicago Mercantile Exchange Inc., CME Holdings Inc., to form the CME Group. 4 The CBOT is adopting a new rulebook, in order to harmonize its rules with those of Chicago Mercantile Exchange Inc. (“CME”), which utilizes the formatting and numbering system of the CME rulebook. New CBOT rulebook Chapters 34 and 35 mirror current CBOT Chapters 57 and 58 in content, although the organization and numbering of the rules has changed. Several minor non-substantive changes have also been made, as follows:
(1)All references to the “Clearing Services Provider” have been changed to the “Clearing House” to reflect the new relationship of the CME Clearing House to the CBOT post-merger;
(2)all references to CBOT “regulations” have been changed to “rules” because the CBOT will no longer make any distinctions between Exchange “rules” and “regulations”; and
(3)current Regulation 5702.01 and its parallel Regulation 5802.01 (Emergencies, Acts of God, Acts of Government) have been deleted as unnecessary since the CBOT is adopting a similar Rule in its new Chapter 7 (Delivery Facilities and Delivery Procedures) that applies generally to all CBOT products. 5 New Rules 931 and 932 are identical to current Regulations 431.07 and 431.08. 4 The CBOT certified its new rulebook to the CFTC on October 25, 2007, notifying the CFTC that most of its new rules would be implemented on November 29, 2007, including the proposed rule changes that are addressed in this filing. 5 *See* CBOT Rule 701, as certified to the CFTC on October 25, 2007. 2. Statutory Basis The Exchange has filed these proposed regulations pursuant to section 19(b)(7) of the Act. 6 The CBOT believes that these rules, as renumbered and reorganized, continue to be authorized by, and consistent with, section 6(b)(5) of the Act, 7 because they are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and to protect investors and the public interest. 6 15 U.S.C. 78s(b)(7). 7 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The CBOT does not believe that the proposed rule changes will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Since the proposed rule changes will permit the CBOT to provide a trading venue for security futures, these rules will serve to enhance and promote competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rules Received From Members, Participants, or Others The CBOT neither solicited nor received any written comments on the proposed regulations. III. Date of Effectiveness of the Proposed Rules and Timing for Commission Action Pursuant to section 19(b)(7)(B) of the Act, 8 the proposed regulations became effective on October 26, 2007. 9 Within 60 days of the date of effectiveness of the proposed regulations, the Commission, after consultation with the CFTC, may summarily abrogate the proposed regulations and require that the proposed regulations be re-filed in accordance with the provisions of section 19(b)(1) of the Act. 10 8 15 U.S.C. 78s(b)(7)(B). 9 The CBOT filed the proposed regulations with the CFTC, together with a written certification under Section 5c(c) of the CEA, 7 U.S.C. 7a-2(c), on October 25, 2007. 10 15 U.S.C. 78s(b)(1). 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-CBOT-2007-01 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-CBOT-2007-01. 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 will also be available for inspection and copying at the principal office of the CBOT. All comments received will be posted without change; the Commission does not edit identifying personal information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR-CBOT-2007-01 and should be submitted on or before December 28, 2007. 11 17 CFR 200.30-3(a)(73). For the Commission by the Division of Trading and Markets, pursuant to delegated authority. 11 Florence E. Harmon, Deputy Secretary. [FR Doc. E7-23721 Filed 12-6-07; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56867; File No. SR-NASDAQ-2007-065] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Conform SRO Rules to Changes to Rule 10a-1 and Regulation SHO November 29, 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 July 11, 2007, The NASDAQ Stock Market LLC (“Nasdaq”) 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 Nasdaq. Nasdaq has designated the proposed rule change as constituting a non-controversial rule change under Rule 19b-4(f)(6) under the Act, 3 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 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes a rule change to eliminate Nasdaq Rule 3350 and IM-3350 and to make conforming changes to other Nasdaq rules, as required by recent Commission rulemaking. The text of the proposed rule change is below. Proposed new language is underlined; proposed deletions are in brackets. 3350. *Reserved.* [Short Sale Rule] [(a) With respect to trades executed on Nasdaq, no member shall effect a short sale for the account of a customer or for its own account in a Nasdaq Global Market security at or below the current best (inside) bid displayed in the National Market System when the current best (inside) bid is below the preceding best (inside) bid in the security. For purposes of this rule, the term “customer” includes a non-member broker-dealer.
(b)In determining the price at which a short sale may be effected after a security goes ex-dividend, ex-right, or ex-any other distribution, all quotation prices prior to the “ex” date may be reduced by the value of such distribution.
(c)The provisions of paragraph
(a)shall not apply to:
(1)Sales by a registered market maker registered in the security on Nasdaq in connection with bona fide market making activity. For purposes of this paragraph, transactions unrelated to normal market making activity, such as index arbitrage and risk arbitrage that are independent from a member's market making functions, will not be considered bona fide market-making activity.
(2)Any sale by any person, for an account in which he has an interest, if such person owns the security sold and intends to deliver such security as soon as possible without undue inconvenience or expense.
(3)Sales by a member, for an account in which the member has no interest, pursuant to an order to sell which is marked “long”.
(4)Sales by a member to offset odd-lot orders of customers.
(5)Sales by a member to liquidate a long position which is less than a round lot, provided that such sale does not change the position of the member by more than one unit of trading.
(6)Sales by a person of a security for a special arbitrage account if the person then owns another security by virtue of which the person is, or presently will be, entitled to acquire an equivalent number of securities of the same class of securities sold; provided such sale, or the purchase which such sale offsets, is effected for the bona fide purpose of profiting from a current difference between the price of the security sold and the security owned and that such right of acquisition was originally attached to or represented by another security or was issued to all the holders of any such class of securities of the issuer.
(7)Sales by a person of a security effected for a special international arbitrage account for the bona fide purpose of profiting from a current difference between the price of such security on a securities market not within or subject to the jurisdiction of the United States and on such a securities market subject to the jurisdiction of the United States; provided the person at the time of such sale knows or, by virtue of information currently received, has reasonable grounds to believe that an offer enabling the person to cover such sale is then available to the person in such foreign securities market and intends to accept such offer immediately.
(8)Sales by an underwriter, or any member of a syndicate or group participating in the distribution of a security, in connection with an over-allotment of securities, or any layoff sale by such a person in connection with a distribution of securities through rights or a standby underwriting commitment.
(9)Sales of securities as to which all short sale price tests have been suspended by operation of a Pilot Order issued by the Commission pursuant to SEC Rule 202T.
(10)Sales of securities included in the Nasdaq 100 Index.
(11)Short sales of securities in the Nasdaq Crossing Network pursuant to NASDAQ Rule 4770 provided that:
(a)Such short sales involve securities that comprise the S&P 500 Index;
(b)Such short sales involve securities that qualify as “actively-traded securities” under Regulation M; or
(c)Such short sales are part of a basket transaction of 20 or more securities in which the subject security does not comprise more than five percent of the value of the basket traded.
(d)No member shall effect a short sale for the account of a customer or for its own account indirectly or through the offices of a third party to avoid the application of this Rule.
(e)No member shall knowingly, or with reason to know, effect sales for the account of a customer or for its own account to avoid the application of this Rule.
(f)A member that is not currently registered as a Nasdaq market maker in a security and that has acquired a security while acting in the capacity of a block positioner shall be deemed to own such security for the purposes of this Rule notwithstanding that such member may not have a net long position in such security if and to the extent that the member's short position in the security is the subject of offsetting positions created in the course of bona fide arbitrage, risk arbitrage, or bona fide hedge activities.
(g)For purposes of this Rule, a depositary receipt of a security shall be deemed to be the same security as the security represented by such receipt. (h)(1) A member shall be permitted, consistent with its quotation obligations, to execute a short sale for the account of an options market maker that would otherwise be in contravention of this Rule, if:
(A)The options market maker is registered with a qualified options exchange as a qualified options market maker in a stock options class on a Nasdaq Global Market security or an options class on a qualified stock index; and
(B)The short sale is an exempt hedge transaction.
(2)For purposes of this paragraph: (A)(i) An “exempt hedge transaction,” in the context of qualified options market makers in stock options classes, shall mean a short sale in a Nasdaq Global Market security that was effected to hedge, and in fact serves to hedge, an existing offsetting options position or an offsetting options position that was created in a transaction(s) contemporaneous with the short sale, 1 provided that when establishing the short position the options market maker is eligible to receive(s) good faith margin pursuant to section 220.12 of Regulation T under the Act for that transaction.
(ii)An “exempt hedge transaction,” in the context of qualified options market makers in stock index options classes, shall mean a short sale in a Nasdaq Global Market security that was effected to hedge, and in fact serves to hedge, an existing offsetting stock index options position or an offsetting stock index options position that was created in a transaction(s) contemporaneous with the short sale, provided that: a. The security sold short is a component security of the index underlying such offsetting index options position; b. The index underlying such offsetting index options position is a “qualified stock index;” and c. The dollar value of all exempt short sales effected to hedge the offsetting stock index options position does not exceed the aggregate current index value of the offsetting options position.
(iii)Notwithstanding any other provision of this paragraph (h), any transaction unrelated to normal options market making activity, such as index arbitrage or risk arbitrage that in either case is independent of an options market maker's market making functions, will not be considered an “exempt hedge transaction.”
(B)A “qualified options market maker” shall mean an options market maker who has received an appointment as a “qualified options market maker” for certain classes of stock options on Nasdaq Global Market securities and/or index options on qualified stock indexes pursuant to the rules of a qualified options exchange.
(C)A “qualified options exchange” shall mean a national securities exchange that has approved rules and procedures providing for:
(i)Designating market makers as qualified options market makers, which standards shall be designed to identify options market makers who regularly engage in market making activities in the particular options class(es);
(ii)The surveillance of its market maker's utilization of the exemption set forth in paragraph (h)(1) to assure that short sales effected by qualified options market makers are exempt hedge transactions and that other non-qualified market makers are not utilizing the exemption; and
(iii)Authorization of Nasdaq to withdraw, suspend or modify the designation of a qualified options market maker but only if a qualified options exchange has determined that the qualified options market maker has failed to comply with the terms of the exemption, and that such a withdrawal, suspension or modification of the market maker's exemption is warranted in light of the substantial, willful, or continuing nature of the violation.
(D)A “qualified stock index” shall mean any stock index that includes one or more Nasdaq Global Market securities, provided that more than 10% of the weight of the index is accounted for by Nasdaq Global Market securities and provided further that the qualification of an index as a qualified stock index shall be reviewed as of the end of each calendar quarter, and the index shall cease to qualify if the value of the index represented by one or more Nasdaq Global Market securities is less than 8% at the end of any subsequent calendar quarter.
(E)“Aggregate current index value” shall mean the current index value times the index multiplier.
(F)A member will not be in violation of paragraph
(a)above if the member executes a short sale for the account of an options market maker that is in contravention of this paragraph (h), provided that the member did not know or have reason to know that the options market maker's short sale was in contravention of this paragraph (h). (i)(1) A member shall be permitted, consistent with its quotation obligations, to execute a short sale for the account of a warrant market maker that would otherwise be in contravention of this Rule, if:
(A)The warrant market maker is a registered Nasdaq market maker for the warrant; and
(B)The short sale is an exempt hedge transaction that results in a fully hedged position.
(2)For purposes of this paragraph, an “exempt hedge transaction” shall mean a short sale in a Nasdaq Global Market security that was effected to hedge, and in fact serves to hedge, an existing offsetting warrant position or an offsetting warrant position that was created in a transaction(s) contemporaneous with the short sale. 2 Notwithstanding any other provision of this paragraph, any transaction unrelated to normal warrant market making activity, such as index arbitrage or risk arbitrage that in either case is independent of a warrant market maker's market making functions, will not be considered an “exempt hedge transaction.”
(3)Nasdaq may withdraw, suspend or modify the exemption for a warrant market maker upon determination that the market maker has failed to comply with the terms of the exemption, and that such a withdrawal, suspension or modification of the market maker's exemption is warranted in light of the substantial, willful, or continuing nature of the violation.
(4)A member will not be in violation of paragraph
(a)above if the member executes a short sale for the account of a warrant market maker that is in contravention of this paragraph (i), provided that the member did not know or have reason to know that the warrant market maker's short sale was in contravention of paragraph (i).
(j)Pursuant to the Rule 9600 Series or on Nasdaq's own motion, Nasdaq may exempt either unconditionally, or on specified terms and conditions, any transaction or class of transactions from the provisions of this Rule.
(k)Definitions:
(1)The term “short sale” shall have the same meaning as contained in SEC Rule 200, adopted pursuant to the Act.
(2)The term “block positioner” shall have the same meaning as contained in SEC Rule 3b-8(c) for “Qualified Block Positioner” adopted pursuant to the Act.
(l)This section shall be in effect until December 15, 2006.] [ 1 The phrase contemporaneously established includes transactions occurring simultaneously as well as transactions occurring within the same brief period of time.] [ 2 The phrase contemporaneously established includes transactions occurring simultaneously as well as transactions occurring within the same brief period of time.] [IM-3350. Short Sale Rule] [(a)(1) In developing a Short Sale Rule for Nasdaq Global Market securities, Nasdaq has adopted an exemption to the Rule for certain market making activity. This exemption is an essential component of the Rule because bona fide market making activity is necessary and appropriate to maintain continuous, liquid markets in Nasdaq Global Market securities. Rule 3350(c)(1) states that short selling prohibitions shall not apply to sales by registered Nasdaq market makers in connection with bona fide market making activity and specifies that transactions unrelated to normal market making activity, such as index arbitrage and risk arbitrage that are independent from a member's market making functions, will not be considered as bona fide market making. Thus two standards are to be applied: One must be a registered Nasdaq market maker and one must engage in “bona fide” market making activity to take advantage of this exemption. With this interpretation, Nasdaq wishes to clarify for members some of the factors that will be taken into consideration when reviewing market making activity that may not be deemed to be bona fide market making activity and therefore would not be exempted from the Rule's application.
(2)First, as the Rule indicates, bona fide market making activity does not include activity that is unrelated to market making functions, such as index arbitrage and risk arbitrage that is independent from a member's market making functions. While these types of arbitrage activity appear to be suitable for the firm's overall hedging or risk management concerns, they do not warrant an exemption from the Rule. However, short sales of a security of a company involved in a merger or acquisition will be deemed bona fide market-making activity if made to hedge the purchase or prospective purchase (based on communicated indications of interest) of another security of a company involved in the merger or acquisition, which purchase was made, or is to be made, in the course of bona fide market making activity. The purchase of a security of a company involved in a merger or acquisition made to hedge a short sale of another security involved in the merger or acquisition, which sale was made in the course of bona fide market making activity, will not cause the sale to be deemed unrelated to normal market-making activity. Short sales made to hedge any such purchases or prospective purchases must be reasonably consistent with the exchange ratio (or exchange ratio formula) specified by the terms of the merger or acquisition.
(3)Similarly, bona fide market making would exclude activity that is related to speculative selling strategies of the member or investment decisions of the firm and is disproportionate to the usual market making patterns or practices of the member in that security. Nasdaq does not anticipate that a firm could properly take advantage of its market maker exemption to effectuate such speculative or investment short selling decisions. Disproportionate short selling in a market making account to effectuate such strategies will be viewed by Nasdaq as inappropriate activity that does not represent bona fide market making and would therefore be in violation of Rule 3350.
(b)With respect to trades executed on or reported to Nasdaq, Rule 3350 requires that no member shall effect a short sale for the account of a customer or for its own account in a Nasdaq Global Market security at or below the current best (inside) bid displayed in the Nasdaq Market Center when the current best (inside) bid is below the proceeding best (inside) bid in the security. For purposes of this rule, the term “customer” includes a non-member broker-dealer. Nasdaq has determined that in order to effect a “legal” short sale when the current best bid is lower than the preceding best bid the short sale must be executed at a price of at least $0.01 above the current inside bid when the current inside spread is $0.01 or greater. The last sale report for such a trade would, therefore, be above the inside bid by at least $0.01. (c)(1) Rule 3350 prohibits a member from effecting a short sale for the account of a customer or for its own account directly or through the offices of a third party for the purpose of avoiding the application of the Short Sale Rule. Further, the Rule prohibits a member from knowingly, or with reason to know, effecting sales for the account of a customer or for its own account for the purpose of avoiding the Rule. With this interpretation, Nasdaq wishes to clarify some of the circumstances under which a member would be deemed to be in violation of Rule 3350.
(2)For example, in instances where the current best bid is below the preceding best bid, if a market maker alone at the inside best bid were to lower its bid and then raise it to create an “up bid” for the purpose of facilitating a short sale, Nasdaq would consider such activity to be a manipulative act and a violation of Nasdaq's Short Sale Rule. Nasdaq also would consider it a manipulative act and a violation of the Rule if a market maker with a long stock position were to raise its bid above the inside bid and then lower it to create a “down bid” for the purpose of precluding market participants from selling short. In addition, if a market maker agrees to an arrangement proposed by a member or a customer whereby the market maker raises its bid in Nasdaq in order to effect a short sale for the other party and is protected against any loss on the trade or on any other executions effected at its new bid price, the market maker would be deemed to be in violation of Rule 3350. Similarly, a market maker would be deemed in violation of the Rule if it entered into an arrangement with a member or a customer whereby it used its exemption from the rule to sell short at the bid at successively lower prices, accumulating a short position, and subsequently offsetting those sales through a transaction at a prearranged price, for the purpose of avoiding compliance with the Rule, and with the understanding that the market maker would be guaranteed by the member or customer against losses on the trades.
(3)Nasdaq believes that members' activities to circumvent the Rule through indirect actions such as executions with other members or through facilitation of customer orders while being protected from loss are antithetical to the purposes of the Rule. Accordingly, Nasdaq will consider any such activity as a violation of Rule 3350.
(d)Nasdaq calculates changes to the inside bid displayed in the Nasdaq Market Center and disseminates a “bid arrow” via Nasdaq data feeds for market participants to use to comply with Rule 3350 when utilizing the execution functionality of the Nasdaq Market Center. The initial bid arrow each day shall be calculated at market open as follows.
(1)For stocks subject to Rule 4709(c), the initial bid arrow after completing the process described in Rule 4709(c)(1) through
(3)shall be up and the next and subsequent bid arrows shall be calculated by comparing the bid arrow with each quotation update processed by the Nasdaq system after the system begins processing pursuant to Rule 4709(c)(4).
(2)For stocks described in Rule 4704(d), the initial bid arrow at the conclusion of the Nasdaq Opening Cross shall be up and the next and subsequent bid arrows shall be calculated by comparing the bid arrow with each quotation update processed by the Nasdaq system after the Nasdaq Opening Cross concludes.] 3360. Short-Interest Reporting
(a)To the extent such information is not otherwise reported to the NASD in conformance with NASD Rule 3360, each member shall maintain a record of total “short” positions in all customer and proprietary firm accounts in securities listed on Nasdaq and shall regularly report such information to Nasdaq in such a manner as may be prescribed by Nasdaq. Reports shall be made as of the close of the settlement date designated by Nasdaq. Reports shall be received by Nasdaq no later than the second business day after the reporting settlement date designated by Nasdaq.
(b)For purposes of this Rule:
(1)“short” positions to be reported are those resulting from “short sales” as that term is defined in SEC Rule 200(a) of Regulation SHO, with the exception of positions that meet the *following* requirements: [of Subsections (e)(1), (6), (7), (8), and
(10)of SEC Rule 10a-1 adopted under the Act; and] *(A) any sale by any person, for an account in which he has an interest, if such person owns the security sold and intends to deliver such security as soon as is possible without undue inconvenience or expense;* *(B) any sale of a security covered by a short sale rule on a national securities exchange (except a sale to a stabilizing bid complying with Rule 104 of Regulation M) effected with the approval of such exchange which is necessary to equalize the price of such security thereon with the current price of such security on another national securities exchange which is the principal exchange market for such security;* *(C) any sale of a security for a special arbitrage account by a person who then owns another security by virtue of which he is, or presently will be, entitled to acquire an equivalent number of securities of the same class as the securities sold; provided such sale, or the purchase which such sale offsets, is effected for the bona fide purpose of profiting from a current difference between the price of the security sold and the security owned and that such right of acquisition was originally attached to or represented by another security or was issued to all the holders of any such class of securities of the issuer;* *(D) any sale of a security registered on, or admitted to unlisted trading privileges on, a national securities exchange effected for a special international arbitrage account for the bona fide purpose of profiting from a current difference between the price of such security on a securities market not within or subject to the jurisdiction of the United States and on a securities market subject to the jurisdiction of the United States; provided the seller at the time of such sale knows or, by virtue of information currently received, has reasonable grounds to believe that an offer enabling him to cover such sale is then available to him in such foreign securities market and intends to accept such offer immediately; and* *
(E)any sale by an underwriter, or any member of a syndicate or group participating in the distribution of a security, in connection with an over-allotment of securities, or any lay-off sale by such a person in connection with a distribution of securities through rights or a standby underwriting commitment. *
(2)No change. IM-4390 Impact of Non-Designation of Dually Listed Securities To foster competition among markets and further the development of the national market system following the repeal of NYSE Rule 500, Nasdaq shall permit issuers whose securities are listed on the New York Stock Exchange to apply also to list those securities on the Nasdaq Global Market (“NGM”). Nasdaq shall make an independent determination of whether such issuers satisfy all applicable listing requirements and shall require issuers to enter into a dual listing agreement with Nasdaq. While Nasdaq shall certify such dually listed securities for listing on the NGM, Nasdaq shall not exercise its authority under Rule 4390 separately to designate or register such dually listed securities as Nasdaq national market system securities within the meaning of Section 11A of the Act or the rules thereunder. As a result, these securities, which are already designated as national market system securities under the Consolidated Quotation Service (“CQS”) and Consolidated Tape Association national market system plans (“CQ and CTA Plans”), shall remain subject to those plans and shall not become subject to the Nasdaq UTP Plan, the national market system plan governing securities designated by Nasdaq. For purposes of the national market system, such securities shall continue to trade under their current one, two, or three-character ticker symbol. Nasdaq shall continue to send all quotations and transaction reports in such securities to the processor for the CTA Plan. In addition, dually listed issues that are currently eligible for trading via the Intermarket Trading System (“ITS”) shall remain so and continue to trade on the Nasdaq Intermarket trading platform as they do today. Through this interpretation, Nasdaq also resolves any potential conflicts that arise under Nasdaq rules as a result of a single security being both a security subject to the CQ and CTA Plans (a “CQS security”), which is subject to one set of rules, and a listed NGM security, which is subject to a different set of rules. Specifically, dually listed securities shall be Nasdaq securities for purposes of rules related to listing and delisting, and shall remain as CQS securities under all other Nasdaq rules. Treating dually listed securities as CQS securities under Nasdaq rules is consistent with their continuing status as CQS securities under the CTA, CQ, and ITS national market system, as described above. This interpretation also preserves the status quo and avoids creating potential confusion for investors and market participants that currently trade these securities on Nasdaq. For example, Nasdaq shall continue to honor the trade halt authority of the primary market under the CQ and CT Plans. Nasdaq Rule 4120(a)(2) and
(3)governing CQS securities shall apply to dually listed securities, whereas Nasdaq Rule 4120(a)(1), (4), (5), (6), and
(7)shall not. [SEC Rule 10a-1 governing short sales of CQS securities shall continue to apply to dually listed securities, rather than Nasdaq Rule 3350 governing short sales of Nasdaq-listed securities.] Market makers in dually listed securities shall retain all obligations imposed by the Nasdaq Rule 5200 Series regarding CQS securities rather than assuming the obligations appurtenant to Nasdaq-listed securities. The fees applicable to CQS securities set forth in Nasdaq Rule 7010 shall continue to apply to dually listed issues. 4755. Order Entry Parameters
(a)System Orders
(1)General—A System order is an order that is entered into the System for display and/or execution as appropriate. Such orders are executable against marketable contra-side orders in the System.
(A)All System Orders shall indicate limit price and whether they are a buy, short sale, [short-sale exempt,] or long sale. Systems Orders can be designated as Market Hours Immediate or Cancel (“MIOC”), Market Hours Good-till-Cancelled (“MGTC”), Market Hours Day (“MDAY”), System Hours Expire Time (“SHEX”), System Hours Day (“SDAY”), System Hours Immediate or Cancel (“SIOC”), System Hours Good-till-Cancelled (“SGTC”), or Good-til-Market Close “GTMC”). (B)-(C) No change.
(2)*Reserved* [Short Sale Compliance—System orders to sell short shall not be executed if the execution of such an order would violate any applicable short sale regulation of the SEC or Nasdaq. For Nasdaq securities, the System shall validate for short sale compliance using a bid tick based upon changes to the national best bid and offer disseminated pursuant to an effective transaction reporting plan. For NYSE and Amex securities, the System shall validate for short sale compliance based upon changes to the consolidated last sale disseminated pursuant to an effective transaction reporting plan.] (3)-(4) No change. 4758. Order Routing
(a)Order Routing Process
(1)No change. The Order Routing Process shall be available to Participants from 7 a.m. until 8 p.m. Eastern Time, and shall route orders as described below: Beginning March 5, 2007, in connection with the trading of securities governed by Regulation NMS, all routing of orders shall comply with Rule 611 of Regulation NMS under the Exchange Act. (A)-(B) No change.
(C)Priority of Routed Orders. Regardless of the routing option selected, orders sent by the System to other markets do not retain time priority with respect to other orders in the System and the System shall continue to execute other orders while routed orders are away at another market center. Once routed by the System, an order becomes subject to the rules and procedures of the destination market including, but not limited to, [short-sale regulation and] order cancellation. If a routed order is subsequently returned, in whole or in part, that order, or its remainder, shall receive a new time stamp reflecting the time of its return to the System. 4759. ITS Commitments Until such time as Nasdaq withdraws from the ITS Plan, Quotes and Orders that are eligible for ITS will be processed by the System and routed to the appropriate Non-Nasdaq Participant Market as an ITS Commitment in accordance with the requirements of the ITS Plan and all applicable Nasdaq rules. Nasdaq shall participate in the ITS Plan as set forth below.
(a)No change.
(b)Inbound ITS Commitments
(1)No change.
(2)[If the ITS Commitment, if executed, would result in a violation of SEC Rule 10a-1, the Nasdaq Market Center will decline it.] *Reserved*
(3)No change.
(c)Outbound Commitments: Any “commitment to trade,” which is transmitted by Nasdaq to another Non-Nasdaq ITS Participant Market through ITS, shall be firm and irrevocable for the period of thirty seconds following transmission by the sender. All such commitments to trade shall, at a minimum: (1)-(5) No change. [(6) designate the commitment “short” or “short exempt” whenever it is a commitment to sell which, if it should result in an execution in the receiving market, would result in a short sale to which the provisions of SEC Rule 10a-1(a) under the Act would apply.] (d)-(e) No change. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Nasdaq included statements concerning the purpose of, and basis for, the proposed rule change. The text of these statements may be examined at the places specified in Item IV below, and is set forth in sections A, B, and C below. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On June 13, 2007, the SEC voted to adopt certain amendments to SEC Rule 10a-1 and Regulation SHO under the Act. The amendments, among other things:
(1)Eliminate the short sale price test contained in SEC Rule 10a-1;
(2)add Rule 201(a) of Regulation SHO to provide that no price test, including any price test of any self-regulatory organization (“SRO”), shall apply to short sales in any security;
(3)add Rule 201(b) of Regulation SHO to prohibit any SRO from having a price test; and
(4)amend Rule 200(g) of Regulation SHO to remove the requirement that a broker-dealer mark a sell order of an equity security as “short exempt” if the seller is relying on an exception from the price test of Rule 10a-1, or any price test of any exchange or national securities association. The amendments to SEC Rule 10a-1 and Regulation SHO became effective on July 3, 2007, and had a July 6, 2007 compliance date. The purpose of this proposed rule change is to make conforming changes to Nasdaq rules to reflect the elimination of SEC Rule 10a-1 and other amendments to Regulation SHO by:
(1)Eliminating references to SEC Rule 10a-1 in Nasdaq rules; and
(2)repealing Nasdaq's short sale rule contained in Rule 3350 and IM-3350, as well as amending Nasdaq rules that reference Rule 3350 or IM-3350. *Eliminating References to SEC Rule 10a-1 in Nasdaq Rules* . Currently, Rule 3360 (Short-Interest Reporting) requires members to record and report short interest information to Nasdaq. Reportable short positions are those resulting from “short sales” as the term is defined in SEC Rule 200 of Regulation SHO, with the exception of positions that meet the requirements of subsections (e)(1), (6), (7), (8), and
(10)of Rule 10a-1 of the Act. 4 As a result of the repeal of SEC Rule 10a-1, these subsections will no longer exist. Therefore, Nasdaq is proposing a technical change to Rule 3360 to replace the references to these exceptions to SEC Rule 10a-1 with the underlying rule text of each provision. Nasdaq also is proposing to make conforming amendments to IM-4390 and Rules 4744, 4758, and 4759 to remove references to SEC Rule 10a-1. 4 See Nasdaq Rule 3360(b)(1). *Repeal of Nasdaq's Short Sale Rule* . As noted above, the SEC has removed the restrictions on the execution prices of short sales and prohibited SROs from having price tests. Rule 3350 and IM-3350 generally prohibit a member from effecting short sales in Nasdaq Global Market securities otherwise than on an exchange for a customer account, or the member's own account, at or below the current national best (inside) bid, when the current national best (inside) bid is below the preceding national best (inside) bid. As an SRO, Nasdaq now is prohibited from having such a short sale price test under newly adopted SEC Rule 201 of Regulation SHO. Accordingly, Nasdaq proposes to repeal its short sale rule contained in Rule 3350 and the related interpretive material in IM-3350 and is proposing conforming changes to IM-4390 and Rules 4755, 4758, and 4759 to delete references to Rule 3350 in such rules. *Technical Changes* . Nasdaq also proposes to make a technical change to the text of Rule 3360. Specifically, Rule 3360(b) provides that, subject to certain limited exceptions, short positions required to be reported under the rule are those resulting from short sales as the term is defined in Rule 200 of Regulation SHO. The term “short sale” is actually defined in Rule 200(a) of Regulation SHO. Therefore, Nasdaq is proposing to amend the text of Rule 3360 to reference Regulation SHO Rule 200(a), instead of Rule 200, to eliminate any confusion. *Implementation* . As noted above, Nasdaq has filed the proposed rule change for immediate effectiveness. Nasdaq proposes to make the proposed rule change operative on July 6, 2007, to coincide with the operative date of the amendments to SEC Rule 10a-1 and Regulation SHO. 2. Statutory Basis Nasdaq believes that the proposed rule change is consistent with the provisions of section 6(b)(5) of the Act, 5 which requires, among other things, that Nasdaq rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. Nasdaq believes that the proposed rule change is necessary and appropriate to comply with the amendments to SEC Rule 10a-1 and Regulation SHO. 5 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition Nasdaq 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 Written comments on the proposed rule change were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing 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 from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to section 19(b)(3)(A) of the Act 6 and Rule 19b-4(f)(6) thereunder. 7 Nasdaq has requested that the Commission waive the 5-day pre-filing notice and 30-day pre-operative period requirements for “non-controversial” proposals, based upon a representation that such waivers will allow Nasdaq to implement the rule changes to conform to currently effective changes in Regulation SHO and Rule 10a-1. In light of the foregoing, the Commission believes that waiver of the 5-day notice and 30-day operative delay is consistent with the protection of investors and the public interest. Accordingly, the Commission has determined to waive the notice requirement and the operative delay, 8 and the proposed rule change has become effective pursuant to section 19(b)(3)(A) of the Act, 9 and Rule 19b-4(f)(6) thereunder, 10 with no operative delay. 6 15 U.S.C. 78s(b)(3)(A). 7 17 CFR 240.19b-4(f)(6). 8 For purposes only of waiving the 30 day pre-operative period, the Commission has considered the impact of the proposed rule change on efficiency, competition and capital formation. 15 U.S.C. 78c(f). 9 15 U.S.C. 78s(b)(3)(A). 10 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. 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-NASDAQ-2007-065 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NASDAQ-2007-065. 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 offices 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-NASDAQ-2006-065 and should be submitted on or before December 28, 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. E7-23769 Filed 12-6-07; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56883; File No. SR-NSX-2007-11] Self-Regulatory Organizations; The National Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change as Modified by Amendment Nos. 1 and 2 Thereto, To Modify Rebate Programs for Automatic Execution Transactions in Certain Designated ETFs December 3, 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 1, 2007, the National Stock Exchange, Inc. (“NSX” or “Exchange”) filed with the Securities and Exchange Commission (the “Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by the Exchange. On October 31, 2007 NSX filed Amendment No. 1 to the proposed rule change. On November 13, 2007 NSX filed Amendment No. 2 to the proposed rule change. The Exchange filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(2) thereunder, 4 which renders it effective upon filing with the Commission. 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. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change NSX is proposing a change to its Rules and Fee Schedule to modify its market data rebate program and its liquidity provider rebate program for transactions that are executed through NSX BLADE SM , the Exchange's trading platform, effective October 1, 2007. The Exchange wishes to modify these rebate programs for only those transactions in certain Designated ETF Shares in which the User effecting such order has chosen the automatic execution mode of order interaction as set forth in Exchange Rule 11.13(b)(1). The text of the proposed rule change is available at the Exchange's Web site, *http://www.nsx.com* , the Exchange and 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, NSX 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. NSX 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 Pursuant to Exchange Rule 16.1(a), the Exchange maintains a Fee Schedule that contains its current fees, dues and other charges applicable to transactions in NSX BLADE (the “NSX BLADE Fee Schedule”). Currently, the NSX BLADE Fee Schedule provides for a rebate of $0.0030 per share for adding liquidity into NSX BLADE through transactions in which ETP Holders have selected the Automatic Execution mode of order interaction (“AutoEx”), regardless of which symbol such transaction involves. Similarly, orders that are AutoEx at less than $1.00 per share will result in a rebate for a dollar amount equal to 0.3% of the price per share, multiplied by the number of shares executed. The Exchange also currently provides a 100% pro rata transaction credit of gross Tape “A”, “B” and “C” market data revenue associated with trading regardless of the symbol that is the subject of such trades. 5 5 *See* Securities Exchange Act Release No. 56008 (July 3, 2007), 72 FR 37809 (July 11, 2007) (SR-NSX-2007-07). The Exchange is proposing that the NSX BLADE Fee Schedule be modified to include the concept of Designated ETF Shares, which are certain Exchange Traded Funds and Exchange Traded Notes (hereinafter “ETF Shares”) that the Exchange has determined should be subject to different liquidity providing and market data rebates than other symbols. These Designated ETF Shares are generally all Exchange Traded Funds and Exchange Traded Notes that are eligible to trade on the Exchange except for the Nasdaq-100 Index, more commonly referred to as the QQQQs. The Designated ETF Shares are listed by the Exchange on Exhibit A to the NSX BLADE Fee Schedule. ETP Holders providing liquidity using AutoEx in Designated ETF Shares will receive a rebate of $0.0035 per share executed. Similarly, ETP Holders providing liquidity on orders executed at less than $1.00 per share using AutoEx in Designated ETF Shares will result in a rebate for a dollar amount equal to 0.35% of the price per share, multiplied by the number of shares executed. However, trades using AutoEx in Designated ETF Shares would no longer be eligible for market data revenue transaction credits as reflected in the amendments to Exchange Rule 16.2(b). The change in the liquidity provider and market data rebates is being proposed in order to increase trading volume in these Designated ETF Shares. There is no need to provide a similar incentive to increase trading volume in the securities that are not contained in the Exhibit A. These changes would be effective October 1, 2007. The same trades in non-Designated ETF Shares using AutoEx, as well as all trades using the Order Delivery mode of order interaction as set forth in Exchange Rule 11.13(b)(2) (“Order Delivery”), would continue to receive the current rebate. Thus, for orders executed at $1.00 or more per share for non-Designated ETF shares, the liquidity provider rebate remains $0.0030 per share executed and, for all orders executed at a $1.00 or more per share using Order Delivery, the liquidity provider rebate remains $0.0028 per share executed. 6 These trades will continue to receive market data revenue transaction credits. 6 For orders executed at less than $1.00 per share, the rebate for non-Designated ETF shares using AutoEx remains 0.30% of the price per share, multiplied by the number of shares executed and the rebate for all trades using Order Delivery remains 0.28% of the price per share, multiplied by the number of shares executed. The Exchange is also proposing to delete the provision relating to ITS Transactions in the Fee Schedule as the Intermarket Trading System Plan has expired and therefore, the provision is no longer applicable. Pursuant to Exchange Rule 16.1(c), the Exchange will “provide ETP Holders with notice of all relevant dues, fees, assessments and charges of the Exchange” through the issuance of a Regulatory Circular of the changes to the NSX BLADE Fee Schedule and will provide a copy of the rule filing on the Exchange's Web site ( *www.nsx.com* ). The Exchange liquidity provider rebates and market data rebates have been designed in this manner in order to ensure that the Exchange can continue to fulfill its obligations under the Act. Moreover, the proposed liquidity provider and market data rebates are not discriminatory in that all ETP Holders are eligible to trade in Designated ETF Shares listed on Exhibit A using AutoEx and may do so at their discretion. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6(b) of the Act, 7 in general, and Section 6(b)(4) of the Act, 8 in particular, in that it is designed to provide for the equitable allocation of reasonable dues, fees and other charges. NSX believes that the change is consistent with an equitable allocation of fees, because decreased market data revenue sharing for liquidity providers is offset by enhanced liquidity provider credits for the same market participants, which allows a more direct and readily calculated incentive for liquidity provision. Moreover, the proposed liquidity provider and market data rebates are not discriminatory in that all ETP Holders are eligible to trade in Designated ETF Shares listed on Exhibit A using AutoEx and may do so at their discretion. 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(4). B. Self Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments on the proposed rule change were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing proposed rule change is filed pursuant to Section 19(b)(3)(A)(ii) of the Act 9 and subparagraph (f)(2) of Rule 19b-4 thereunder 10 because it establishes or changes a due, fee, or other charge applicable only to a member imposed by a self-regulatory organization. Accordingly, the proposal is effective upon Commission receipt of the filing. 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. 11 9 15 U.S.C. 78s(b)(3)(A)(ii). 10 17 CFR 240.19b-4(f)(2). 11 For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposed rule change under Section 19(b)(3)(C) of the Act, the Commission considers the period to commence on November 13, 2007, the date on which NSX filed Amendment No. 2. *See* 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-NSX-2007-11 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-NSX-2007-11. 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 NSX. 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-NSX-2007-11 and should be submitted on or before December 28, 2007. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 12 12 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-23753 Filed 12-6-07; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56879; File No. SR-NYSEArca-2007-110] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of a Proposed Rule Change Relating to Certain Modifications to the Initial Listing and Trading Standards for Equity Index-Linked Securities December 3, 2007. I. Introduction On October 18, 2007, NYSE Arca, Inc. (“NYSE Arca” or “Exchange”), through its wholly owned subsidiary, NYSE Arca Equities, Inc. (“NYSE Arca Equities”), 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 proposal to modify certain initial listing and trading standards for Equity Index-Linked Securities. 3 The proposed rule change was published for comment in the **Federal Register** on November 1, 2007. 4 The Commission received no comments 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 NYSE Arca Equities Rule 5.2(j)(6) defines Equity Index-Linked Securities as securities that provide for the payment at maturity of a cash amount based on the performance of an underlying index or indexes of equity securities, also referred to as the “Equity Reference Asset.” *See* NYSE Arca Equities Rule 5.2(j)(6). 4 *See* Securities Exchange Act Release No. 56696 (October 24, 2007), 72 FR 61927 (“Notice”). II. Description of the Proposal NYSE Arca Equities Rule 5.2(j)(6)(B)(I) currently permits the Exchange to list and trade, pursuant to Rule 19b-4(e) under the Act, 5 Equity Index-Linked Securities if, among other requirements, all component securities included in the underlying index are either:
(1)Securities (other than foreign country securities and American Depository Receipts (“ADRs”)) that are
(a)issued by a reporting company under the Act that is listed on a national securities exchange and
(b)an “NMS stock,” as defined in Rule 600 of Regulation NMS; 6 or
(2)foreign country securities or ADRs, subject to certain limitations. The Exchange proposes to amend NYSE Arca Equities Rule 5.2(j)(6)(B)(I) to permit the listing and trading of Equity Index-Linked Securities where the underlying index consists, in whole or in part, of
(1)securities of closed-end management investment companies (“Closed-End Fund Securities”) or
(2)investment company units (“ETF Securities”), which, in each case, are registered under the Investment Company Act of 1940 (the “1940 Act”) and listed on a national securities exchange. 5 *See* 17 CFR 240.19b-4(e). Rule 19b-4(e) provides that the listing and trading of a new derivative securities product by a self-regulatory organization (“SRO”) shall not be deemed a proposed rule change, pursuant to paragraph (c)(1) of Rule 19b-4, if the Commission has approved, pursuant to Section 19(b) of the Act (15 U.S.C. 78s(b)), the SRO's trading rules, procedures, and listing standards for the product class that would include the new derivative securities product, and the SRO has a surveillance program for such product class. 6 *See* 17 CFR 242.600(b)(47). NMS stock means any security or class of securities (other than options) for which transaction reports are collected, processed, and made available pursuant to an effective transaction reporting plan. In its proposal, the Exchange stated its belief that trading in exchange-listed Closed-End Fund Securities and ETF Securities is subject to the same level of regulation as trading in exchange-listed equity securities. In addition, the Exchange stated that Closed-End Fund Securities and ETF Securities trade on the same exchange platforms as equity securities registered under the Act and are subject to the same exchange trading rules as equity securities. As such, the Exchange believes that it is appropriate to permit their inclusion as components of indexes underlying Equity Index-Linked Securities. The Exchange also proposes to amend NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(2)(v) to incorporate a limited exception to the requirement that 90% of the index's numerical value and at least 80% of the total number of component securities underlying an Equity Reference Asset must meet the then current criteria for standardized options trading set forth in NYSE Arca Rule 5.3. The Exchange proposes that an underlying index would not be subject to such requirement if
(1)no underlying component security represents more than 10% of the dollar weight of such index, and
(2)such index has a minimum of 20 component securities. All of the options exchanges apply the same criteria to securities underlying exchange-traded options. 7 These criteria relate primarily to the distribution and trading volume of the securities underlying an option, 8 and, as such, the Exchange believes that such criteria are duplicative of the minimum market capitalization and trading volume requirements for securities underlying Equity Index-Linked Securities set forth in NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(2)(i) and (ii), respectively. The Exchange notes that the current requirement of NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(2)(ii), in particular, that relates to minimum trading volume for each component security is more stringent than the trading volume requirement related to options trading. 9 Notwithstanding the foregoing, while a significant number of listed equity securities meet the minimum market capitalization and trading volume requirements for components of equity indexes under NYSE Arca Equities Rule 5.2(j)(6), the Exchange represents that many do not meet the current criteria for standardized options trading. The Exchange believes that the explicit market capitalization and trading volume requirements of NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(2)(i) and (ii), respectively, are sufficient to ensure that any component security comprising an Equity Reference Asset underlying a series of Equity Index-Linked Securities will have an adequate liquid trading market. In addition, the Exchange believes that, by requiring that both proposed conditions to NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(2)(v) ( *i.e.* , enhancing concentration limits for component securities and increasing the minimum number of component securities) be met in order to avail of the proposed exemption to such rule, the proposal would significantly reduce the possibility of manipulation of the index. Based on the foregoing, the Exchange believes that the protection of requiring such securities to be qualified for options trading is unnecessary. 7 *See* , *e.g.* , Rule 1009 of the Philadelphia Stock Exchange, Inc.; Rule 5.3 of the Chicago Board Options Exchange, Incorporated; Rule 5.3 of NYSE Arca; and Rule 502 of the International Securities Exchange, LLC. 8 The rules generally require a minimum of 7,000,000 publicly-held shares, 2,000 holders, a trading volume of at least 2,400,000 shares in the preceding 12 months, and a market price per share of the underlying security of at least $3.00 per share for securities that are “covered securities,” as defined in Section 18(b)(1) of the Securities Act of 1933 (15 U.S.C. 77r(b)(1)), and a market price per share of the underlying security of at least $7.50 for securities that are not “covered securities.” *See,* *e.g.* , NYSE Arca Rule 5.3. 9 NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(2)(ii) requires that each component security must have trading volume in each of the last six months or not less than 1,000,000 shares per month, except that for each of the lowest dollar weighted component securities in the index that, in the aggregate, account for no more than 10% of the dollar weight of the index, the trading volume shall be at least 500,000 shares per month in each of the last six months. In contrast, the options criteria for underlying securities generally require a minimum trading volume (in all markets in which the underlying security is traded) of 2,400,000 shares in the preceding twelve months, as stated above. III. Commission's Findings and Order Granting Approval of the Proposed Rule Change After careful review and based on the Exchange's representations, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. 10 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act 11 in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. 10 In approving this proposed 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). 11 15 U.S.C. 78f(b)(5). With respect to the proposal to permit the inclusion of Closed-End Fund Securities and ETF Securities in an underlying index of a series of Equity Index-Linked Securities, the Commission notes that issuers of Closed-End Fund Securities and ETF Securities must register under the 1940 Act, and such securities must be listed on a national securities exchange. The Commission also notes that Closed-End Securities and ETF Securities trade on the same platforms as equity securities and are generally subject to the same exchange trading rules as equity securities. In addition, in order for such securities to be included in an underlying index of an issue of Equity Index-Linked Securities, it must be an NMS stock, as defined in Rule 600(b)(47) of Regulation NMS. 12 The Commission believes that this proposal should benefit investors by creating additional alternatives to investing in such regulated products and competition in the market for Equity Index-Linked Securities, while maintaining transparency of the underlying components comprising an index. 12 *See supra* note 6. The Commission further believes that the proposal to provide for a limited exception to NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(2)(v) reasonably balances the removal of impediments to a free and open market with the protection of investors and the public interest, two principles set forth in Section 6(b)(5) of the Act. The Commission notes that the minimum trading volume standard relating to the eligibility of securities underlying options overlaps with, and is less stringent than, the equivalent trading volume standards provided in NYSE Arca Equities Rules 5.2(j)(6)(B)(I)(1)(b)(2)(ii) and (iii). Because the overall purpose of the current criteria for standardized options trading is to ensure proper liquidity of the underlying security, the Commission believes that the minimum market value thresholds of NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(2)(i), the minimum trading volume requirements provided in NYSE Arca Equities Rules 5.2(j)(6)(B)(I)(1)(b)(2)(ii) and (iii), together with the enhanced concentration limits and increased minimum number of component securities needed in order to avail of the proposed exemption to NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(2)(v), will help ensure adequate liquidity of each component comprising an underlying index of Equity Index-Linked Securities. As such, the Commission believes it is reasonable and consistent with the Act for the Exchange to modify the listing standards for Equity Index-Linked Securities in the manner described in the proposal. IV. Conclusion *It is therefore ordered,* pursuant to Section 19(b)(2) of the Act, 13 that the proposed rule change (SR-NYSEArca-2007-110), be, and it hereby is, approved. 13 15 U.S.C. 78s(b)(2). 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. E7-23750 Filed 12-6-07; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56885; File No. SR-NYSEArca-2007-123] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change as Modified by Amendment No. 1 Relating to the Extension of the Pilot Program for Initial and Continued Financial Listing Standards for Common Stock of Operating Companies Until May 31, 2008 December 3, 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 29, 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 and II below, which Items have been substantially prepared by the Exchange. On November 30, 2007, the Exchange filed Amendment No. 1 to the proposed rule change. 3 The Exchange filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 4 and Rule 19b-4(f)(6) thereunder, 5 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 In Amendment No. 1, the Exchange corrected a typographical error on the proposed Pilot Program (as defined below) extension date and explained the amendment to the Pilot Program. 4 15 U.S.C. 78s(b)(3)(A). 5 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, through its wholly-owned subsidiary NYSE Arca Equities, Inc. (“NYSE Arca Equities”), has amended the rules governing NYSE Arca, LLC (also referred to as the “NYSE Arca Marketplace”), which is the equities trading facility of NYSE Arca Equities, on a pilot program basis (“Pilot Program”) to amend the initial and continued financial listing standards for common stock of operating companies. The Pilot Program expires on November 30, 2007. The Exchange proposes to extend the Pilot Program until May 31, 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 self-regulatory organization included statements concerning the purpose of and basis for the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The self-regulatory organization 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 NYSE Arca has amended on a pilot program basis the rules governing the NYSE Arca Marketplace to amend the financial listing standards for common stock of operating companies. 6 On October 3, 2007, the Commission approved the Exchange's proposal to amend the Pilot Program to, among other things, make the initial listing standards more restrictive and to exclude from qualification some companies that qualified to list but whose size or financial performance is not consistent with the kind of issuer the Exchange intended to list. 7 Based on the results of the Pilot Program, the Exchange has determined that the Pilot Program has met its expectations. As a result, the Exchange intends to file a proposal to permanently adopt the Pilot Program. 6 The Commission initially approved the Pilot Program for six months, until May 29, 2007. *See* Securities Exchange Act Release No. 54796 (November 20, 2006), 71 FR 69166 (November 29, 2006) (SR-NYSEArca-2006-85). The Pilot Program was subsequently extended for an additional six months, until November 30, 2007. *See* Securities Exchange Act Release No. 55838 (May 31, 2007), 72 FR 31642 (June 7, 2007) (SR-NYSEArca-2007-51). 7 *See* Securities Exchange Act Release No. 56606, 72 FR 57982 (October 11, 2007) (SR-NYSEArca-2007-69). The Pilot Program expires on November 30, 2007. The Exchange proposes to extend the Pilot Program until May 31, 2008. This extension will permit Exchange staff to prepare the rule filing proposing to permanently adopt the Pilot Program. 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 The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 10 and Rule 19b-4(f)(6) 11 thereunder because the proposal does not:
(i)Significantly affect the protection of investors or the public interest;
(ii)impose any significant burden on competition; and
(iii)by its terms, 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, provided that the Exchange has given the Commission notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. 10 15 U.S.C. 78s(b)(3)(A). 11 17 CFR 240.19b-4(f)(6). A proposed rule change filed under Rule 19b-4(f)(6) normally may not become operative prior to 30 days after the date of filing. However, Rule 19b-4(f)(6)(iii) 12 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 requested that the Commission waive the 30-day operative delay period. The Commission believes that waiver of the 30-day operative delay period is consistent with the protection of investors and the public interest. Specifically, the Commission believes that the proposal would allow the Pilot Program to continue without any interruption, until May 31, 2008. 13 The Commission further notes that no comments were received on the Pilot Program. 12 17 CFR 240.19b-4(f)(6)(iii). 13 For purposes only of waiving the operative delay for this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 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 proposed 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. 14 14 15 U.S.C. 78s(b)(3)(C). For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposal, the Commission considers the period to commence on November 30, 2007, the date on which the Exchange submitted Amendment No. 1. 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-2007-123 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-2007-123. 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-2007-123 and should be submitted on or before December 28, 2007. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 15 15 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-23755 Filed 12-6-07; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56875; File No. SR-OCC-2007-08] Self-Regulatory Organizations; The Options Clearing Corporation; Order Granting Approval of a Proposed Rule Change Relating to Binary Options November 30, 2007. I. Introduction On June 28, 2007, The Options Clearing Corporation (“OCC”) filed with the Securities and Exchange Commission (“Commission”) proposed rule change SR-OCC-2007-08 pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”). 1 Notice of the proposal was published in the **Federal Register** on September 26, 2007. 2 No comment letters were received. For the reasons discussed below, the Commission is granting approval of the proposed rule change. 1 15 U.S.C. 78s(b)(1). 2 Securities Exchange Act Release No. 56471 (September 19, 2007), 72 FR 54705. II. Description The proposed rule change permits OCC to clear and settle binary options, including fixed return options (“FROs”) to be listed and traded by Amex 3 and binary options on broad-based indexes proposed to be listed and traded by CBOE. 4 Binary options (sometimes referred to as “digital” options) are all-or-nothing options that pay a fixed amount if exercised in the money and otherwise pay nothing. Until recently, OCC did not clear any binary options other than credit default options (“CDOs”) traded on CBOE. The Commission recently granted approval of proposed rule changes filed by OCC and CBOE so that CBOE could trade and OCC could clear related products called credit default basket options (“CDBOs”). 5 General characteristics of binary options, excluding features unique to CDOs and/or CDBOs that were already described in OCC's prior rule filings, are described below followed by an explanation of the specific rule changes now being made by OCC. 3 Securities Exchange Act Release No. 56251 (August 14, 2007), 72 FR 46523 (August 20, 2007) (File No. SR-Amex-2004-27). 4 File No. SR-CBOE-2006-105. 5 Securities Exchange Act Release Nos. 56275 (August 17, 2007), 72 FR 47097 (August 22, 2007) (File No. SR-CBOE-2007-026) and 56288 (August 20, 2007), 72 FR 49034 (August 27, 2007) (File No. SR-OCC-2007-06). *Description of Binary Options.* Binary options are cash-settled options that have only two possible payoff outcomes, either a fixed exercise settlement amount or nothing at all. They are subject to automatic exercise. The underlying interest of a binary option may be one or more securities, an index of securities, or some other measure; however, OCC presently intends to clear only binary options that are within the definition of a “security” as determined by the Commission. In its capacity as a “derivatives clearing organization” regulated by the Commodity Futures Trading Commission (“CFTC”), OCC may in the future propose to clear binary options that are commodity options subject to the jurisdiction of the CFTC. A binary option, other than a CDO or CDBO, is in the money and will be automatically exercised if its underlying interest value as measured against its exercise price is determined to meet the criteria for automatic exercise as specified in the Exchange Rules of the listing Exchange. 6 For example, in the case of a “finish high fixed return option,” such option will be automatically exercised and settled for a fixed amount of cash if its underlying interest value is above its exercise price at expiration. In the case of a “finish low fixed return option,” such option will be automatically exercised and settled for a fixed amount of cash if its underlying interest value is below its exercise price at expiration. The rule changes in this current filing for binary options are intended to be sufficiently generic to be the basis for clearing binary options to be listed by Amex and proposed to be listed by CBOE as well as other binary options in the future. 6 CDOs and CDBOs, on the other hand, do not have exercise prices. A CDO or CDBO is deemed to be in the money and is automatically exercised if a “credit event” occurs at any time prior to the last day of trading. *By-Law and Rule Amendments Applicable to Binary Options.* In order to provide a framework of rules that can accommodate the clearance and settlement of various kinds of binary option products, OCC is broadening the By-Law Article and Rule Chapter covering CDOs and CDBOs.
(1)*Terminology—Article I, Section 1 and Article XIV, Section 1* “Binary option” is defined in Article XIV, Section 1 of the By-Laws, and the definition is cross-referenced in Article I of the By-Laws. The definitions of “option contract” and “type of option” in Article I of the By-Laws is amended to include a binary option. OCC is redefining the term “class” in Article XIV, Section 1 so that it will apply to binary options generally. To be within the same class, binary options other than CDOs or CDBOs must cover the same underlying interest and have otherwise identical terms except for exercise price (if any) and expiration date. The definition of “exercise price” in Article I is replaced with respect to binary options with a revised definition in Article XIV, Section 1 that will recognize that binary options will be settled by a fixed cash payment. The exercise price of a binary option neither is an amount that is paid in exchange for an underlying interest nor is used to determine the exercise settlement amount as in the case of other cash-settled options. In the case of a binary option other than a CDO or CDBO, the exercise price of a binary option is simply a defined value or range of values for the underlying interest. If the underlying interest value falls within the defined range at expiration of such binary option, the option will be automatically exercised; otherwise, the option will expire unexercised. A CDO or CDBO is said to have no exercise price. OCC is redefining the term “underlying interest” in Article XIV, Section 1 so that it will apply to binary options generally. In the case of a binary option other than a CDO or CDBO, the underlying interest is the underlying security, securities, index, basket, or measure whose value is compared to such option's exercise price to determine whether the option is in the money and will be automatically exercised. In conjunction with the revised definitions of “exercise price” and “underlying interest,” OCC is also adding a new defined term, “underlying interest value,” to Article XIV, Section 1. When used with respect to a binary option other than a CDO or CDBO, underlying interest value means the value or level of the unit of trading of the underlying interest at any point in time as reported by the reporting authority. A new definition for the term “unit of trading” states “unit of trading” when used with respect to a binary option means the quantity of the underlying interest on which the underlying interest value is based and is ordinarily a single share in the case of binary options on individual equity securities or one
(1)in the case of binary index options. The terms “unit of trading” and “underlying interest value” will not be applicable to CDOs and CDBOs. Other terms that were created or amended for CDOs and CDBOs are modified to apply to binary options generally.
(2)*Terms of Cleared Contracts—Article VI, Section 10(e)* Paragraph
(e)of Article VI, Section 10 are further amended to apply to binary options generally.
(3)*General Rights and Obligations—Article XIV, Section 2B* Article XIV, Section 2B defines the general rights and obligations of holders and writers of binary options other than CDOs or CDBOs. As noted above, the holder of a binary option that is automatically exercised will have the right to receive the fixed exercise settlement amount from OCC, and the assigned writer will have the obligation to pay that amount to OCC.
(4)*Adjustments of Binary Options Other Than CDOs or CDBOs—Article XIV, Section 3A; Unavailability or Inaccuracy of Final Underlying Interest Value—Article XIV, Section 5; Determination of Final Underlying Interest Value—Article XIV, Section 6* Article XIV, Section 3A describes the methods by which binary options other than CDOs or CDBOs generally will be adjusted if adjustments are deemed to be necessary. Special adjustment rules are needed because of the fixed, cash-settlement feature of binary options. For instance, under Article VI, Section 11A(d), which governs adjustment of other equity options, if there is a stock dividend, distribution, or split whereby a whole number of shares of the underlying security is issued for each outstanding share, the exercise price is proportionately reduced, and the number of option contracts is increased by the number of shares issued with respect to each share of the underlying security. This adjustment would be inappropriate for binary options where the underlying interest is an equity security. For example, an XYZ option with an exercise price of $50 would be adjusted to become two XYZ options, each with an exercise price of $25. While the fixed exercise settlement amount of such binary option would be intended to remain at $100, such an adjustment would increase the total payout upon exercise to $200. To avoid this result, Article XIV, Section 3A(a)(4) will provide that the number of option contracts will not proportionally increase and only the exercise price will be adjusted. The other provisions of Article XIV, Section 3A are similar to Article VI, Section 11A with appropriate modifications for binary options. In order to maintain consistency with adjustment policies for physically settled stock options where such consistency is appropriate, certain changes in the treatment of dividends that were approved in SR-OCC-2006-01 and were to become effective at a future date will become effective on the same date for binary options on single stocks. Article XIV, Section 3A(b) will govern adjustments of binary options for which the underlying interest is an index of equity securities and will be similar to Article XVII, Section 3, which governs index options, with appropriate modifications to reflect unique features of binary options. For instance, because binary options do not have an index multiplier, the Securities Committee will generally adjust the exercise price of a binary option of which the underlying interest is an index of equity securities to get the appropriate result. Article XIV, Section 5, will give OCC the authority to fix the underlying interest value for a binary option other than a CDO or CDBO and to rely on that value for determining whether such binary option will be exercised under circumstances similar to those in which OCC may currently fix the exercise settlement amount for index options. Article XIV, Section 6 will provide, in essence, that the underlying interest value of a series of binary options at expiration, other than CDOs or CDBOs, will be determined by the Exchange or Exchanges on which such series is traded subject to any overriding provision of OCC's By-Laws and Rules. If a series of options is traded on more than one Exchange, OCC could use the underlying interest value received from the Exchange deemed by OCC to be the principal Exchange, or OCC could employ a procedure to derive a single value based on some or all of the values received.
(5)*Exercise and Settlement—Chapter XV of the Rules and Rule 801* Binary options will not be subject to the exercise-by-exception procedures applicable to most other options under OCC's Rules but will instead be automatically exercised prior to or at expiration if the specified criterion for exercise is met. The procedures for the automatic exercise of binary options, as well as assignment and settlement of exercises (including provisions applicable to a suspended Clearing Member), will be set forth in Rules 1501 through 1505 of new Chapter XV and in revised Rule 801(b).
(6)*Margin Requirements—Rule 601; Deposits in Lieu of Margin—Rule 1506* OCC will margin binary options through its usual “STANS” system. STANS has been modified to accommodate the particular binary options to be traded by Amex and the binary index product currently proposed by CBOE. CDOs and CDBOs will be margined as described in the applicable rule filings cited above. OCC is not proposing to accept escrow deposits in lieu of clearing margin for binary options. Therefore, Rule 1506 will state that Rule 610, which otherwise would permit such deposits, does not apply to binary options.
(7)*Acceleration of Expiration Date—Rule 1507(d)* This new provision will accelerate the expiration date of a binary option other than a CDO or CDBO when OCC determines in its discretion that the underlying interest value of such option has become fixed prior to the expiration of the option ( *e.g.* , where the equity security underlying a binary option has been converted by a merger into the right to receive a fixed amount of cash). If the option is out of the money, it will expire unexercised. Otherwise, it will be automatically exercised. III. Discussion Section 17A(b)(3)(F) of the Act requires, among other things, that the rules of a clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions. 7 After careful review the Commission finds that the proposed rule change meets the requirements of Section 17A(b)(3)(F) of the Act because, by amending OCC's By-Laws so that OCC may clear and settle options on binary options that have been approved to be listed and traded on Amex and that have been proposed to be listed and traded on CBOE, it should help promote the prompt and accurate clearance and settlement of such securities transactions. 7 15 U.S.C. 78q-1(b)(3)(F). IV. Conclusion On the basis of the foregoing, the Commission finds that the proposed rule change is consistent with the requirements of the Act and in particular Section 17A of the Act and the rules and regulations thereunder. 8 8 In approving the proposed rule change, the Commission considered the proposal's impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f). *It is therefore ordered* , pursuant to Section 19(b)(2) of the Act, that the proposed rule change (File No. SR-OCC-2007-08) be and hereby is approved. 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. E7-23768 Filed 12-6-07; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56881; File No. SR-Phlx-2007-72] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment Nos. 3 and 4 Thereto, Relating to Delisting Securities Underlying Low ADV Options December 3, 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 September 21, 2007, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) 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 Phlx. On October 26, 2007, the Exchange filed Amendment No. 1 to the proposed rule change. The Exchange withdrew Amendment No. 1 on October 31, 2007. The Exchange filed Amendment No. 2 to the proposed rule change on October 31, 2007. 3 On November 29, 2007, the Exchange filed Amendment No. 3 to the proposed rule change. 4 On November 30, 2007, the Exchange filed Amendment No. 4 to the proposed rule change. 5 The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment Nos. 3 and 4, from interested persons and to approve the proposal, as amended, on an accelerated basis. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 Amendment No. 2 superseded and replaced the original filing in its entirety. 4 Amendment No. 3 superseded and replaced Amendment No. 2 in its entirety. 5 Partial Amendment No. 4 made a technical change to the title of Phlx Rule 1010. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Phlx proposes to amend Phlx Rule 1010 (“Withdrawal of Approval of Underlying Securities”) to enable the Exchange to cease listing additional series of equity options and to delist the class of equity options where the option has been trading on the Exchange not less than six
(6)months and the Exchange average daily volume (“ADV”) of the entire class of options was less than twenty
(20)contracts over the last six
(6)month period. The text of the proposed rule change is available at Phlx, the Commission's Public Reference Room, and *http://www.phlx.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 Phlx 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 Phlx has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to amend Phlx Rule 1010 to enable the Exchange to cease listing additional series of options and to delist the class of options where the option has been listed on the Exchange not less than six
(6)months and the ADV of the entire class of options overlying the security over the last six
(6)month period was less than twenty
(20)contracts. The Exchange's current Rule 1010 indicates that, allowing for exceptional circumstances, where requirements for continued listing (also known as maintenance criteria) for listed options are not met, additional series of options will not be opened and the options contracts may be delisted. The continued listing criteria in Phlx Rule 1010 is specific to the type of underlying security ( *e.g.* , equity securities, Exchange Traded Fund Shares, Trade Issued Receipts, American Depository Receipts, Holding Company Depository Receipts) and may include the number of outstanding shares of the underlying security, the number of security holders, trading volume, and price. The Exchange proposes to enhance Phlx Rule 1010 by providing that the Exchange will not open for trading any additional series of equity option contracts of the class overlying a security and may delist the class of options if: • The option has been listed on the Exchange not less than six
(6)months; and • The Exchange average daily volume of the entire class of options over the last six
(6)month period was less than twenty
(20)contracts. The proposal also would provide that if an option is singly listed only on the Exchange, the Exchange will cease to add new series and may delist the option when there is no remaining open interest in the product. The proposal further indicates that if the Exchange determines to delist an option it will notify the affected specialist (the specialist allocated trading in the option in question) not less than ten
(10)days before the scheduled delisting date. Within two
(2)days after receiving the notification, the specialist has the opportunity to respond in writing with a justification for and/or explanation of the low ADV in the relevant option and why he or she believes that the Exchange should continue to list the option. While the specialist's justification will not be dispositive to the Exchange's decision to delist, the Exchange may take the justification into consideration. The Exchange will indicate its delisting decision in writing to the specialist that submitted the justification letter. The Exchange believes that its low ADV delisting proposal is consistent with the Phlx maintenance and delisting criteria in Phlx Rule 1010 and should reduce or eliminate the quotation traffic attendant to low volume options listings that may nevertheless experience significant quoting activity. The Exchange believes that this should in turn diminish the total number of strikes that need to be maintained by the Exchange and potentially may thereby reduce technology costs for the Exchange and its member organizations and free up Exchange capacity. The Phlx further believes that expanding the Exchange's ability to manage its quotation traffic should benefit not only the Exchange and its members, but also public and professional traders and ultimately the industry. Moreover, the proposal complements and extends the Exchange's efforts with respect to quote mitigation. 6 6 *See, e.g.* , Securities Exchange Act Release Nos. 55080 (January 10, 2007), 72 FR 2324 (January 18, 2007) (SR-Phlx-2006-51) (establishing performance evaluations for streaming quote traders (“SQTs”) and remote SQTs (“RSQTs”) to measure efficient quoting); 55027 (December 29, 2006), 72 FR 1358 (January 11, 2007) (SR-Phlx-2006-53) (permitting options allocations to SQTs and RSQTs by root symbol to promote quoting efficiency); 55114 (January 17, 2007), 72 FR 3185 (January 24, 2007) (SR-Phlx-2006-81) (establishing maximum number of quoters (“MNQ”) in equity options to manage quote traffic and bandwidth capacity); and 56261 (August 15, 2007), 72 FR 47112 (August 22, 2007) (SR-Phlx-2007-51) (increasing the MNQ levels to include additional participants). The Exchange notes that the proposal to stop adding series of equity options and to delist low ADV options is similar to low volume options delisting procedures in use by other options exchanges. 7 7 *See, e.g.* , Securities Exchange Act Release Nos. 55154 (January 23, 2007), 72 FR 4743 (February 1, 2007) (SR-CBOE-2006-92) (delisting equity options classes where ADV is less than 20 contracts); 56154 (July 27, 2007), 72 FR 43303 (August 3, 2007) (SR-CBOE-2007-85) (providing exceptions to delisting policy under certain circumstances); 55161 (January 24, 2007), 72 FR 4754 (February 1, 2007) (SR-ISE-2006-62) (delisting equity options classes where ADV is less than 20 contracts); and 55162 (January 24, 2007), 72 FR 4738 (February 1, 2007) (SR-Amex-2006-106) (delisting equity options classes where equity options ADV is less than 25 contracts). 2. Statutory Basis The Exchange believes that its proposal 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 perfect the mechanism of a free and open market and the national market system, protect investors and the public interest, and promote just and equitable principles of trade. The proposal would achieve this by enhancing Phlx Rule 1010 regarding maintenance listings to allow for delisting historically low volume options, thereby reducing or eliminating attendant quote traffic. 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 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. 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-Phlx-2007-72 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-Phlx-2007-72. 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 Phlx. 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-Phlx-2007-72 and should be submitted on or before December 28, 2007. IV. Commission's Findings and Order Granting Accelerated Approval of Proposed Rule Change. After careful consideration, the Commission finds that the Exchange's proposal to modify its rule regarding maintenance listings to allow for delisting of historically low volume options and to cease listing additional series of options is consistent with the requirements of the Section 6(b) of the Act 10 and the rules and regulations thereunder applicable to a national securities exchange. 11 In particular, the Commission believes that the proposed rule change is consistent with Section 6(b)(5) of the Act, which requires, among other things, that the rules of a national securities exchange be designed to promote just and equitable principles of trade, to perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. 12 The Commission proposal should help to mitigate quote traffic of the Exchange and manage capacity concerns by providing the Exchange with the ability to cease listing new series in, and possibly delist, options classes with low trading volume, thus reducing or eliminating quotations in such classes that may experience significant quoting activity, but very little trading activity. 10 15 U.S.C. 78f(b). 11 In approving this proposed rule change, the Commission has considered its impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 12 15 U.S.C. 78f(b)(5). The Phlx has requested that the Commission find good cause for approving the proposed rule change prior to the thirtieth day after publication of the notice thereof in the **Federal Register** . The Commission believes that granting accelerated approval of the proposal will allow the Phlx to immediately implement its delisting policy, which should help to reduce options quote traffic on the Exchange. The Commission notes that Phlx's proposal is similar to delisting strategies adopted by other exchanges, which also were adopted to mitigate options quote traffic. 13 Accordingly, the Commission finds good cause, pursuant to Section 19(b)(2) of the Act, 14 for approving the proposed rule change prior to the thirtieth day after publication of the notice thereof in the **Federal Register** . 13 *See supra,* note 6. 14 15 U.S.C. 78s(b)(2). V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 15 that the proposed rule change, as amended (SR-Phlx-2007-72), is hereby approved on an accelerated basis. 15 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 16 16 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-23754 Filed 12-6-07; 8:45 am] BILLING CODE 8011-01-P DEPARTMENT OF STATE [Public Notice: 6010] 60-Day Notice of Proposed Information Collection: DS-160, Nonimmigrant Visa Electronic Application, OMB 1405-XXXX ACTION: Notice of request for public comments. SUMMARY: The Department of State is seeking Office of Management and Budget
(OMB)approval for the information collection described below. The purpose of this notice is to allow 60 days for public comment in the **Federal Register** preceding submission to OMB. We are conducting this process in accordance with the Paperwork Reduction Act of 1995. • *Title of Information Collection:* Nonimmigrant Visa Electronic Application. • *OMB Control Number:* None. • *Type of Request:* New Collection. • *Originating Office:* Bureau of Consular Affairs, Visa Services (CA/VO). • *Form Number:* DS-160. • *Respondents:* All nonimmigrant visa applicants. • *Estimated Number of Respondents:* 12,300,000. • *Estimated Number of Responses:* 12,300,000. • *Average Hours Per Response:* 75 minutes. • *Total Estimated Burden:* 153,750,000 hours. • *Frequency:* Once per visa application. • *Obligation to Respond:* Required to Obtain Benefit. DATES: The Department will accept comments from the public up to 60 days from December 7, 2007. ADDRESSES: You may submit comments by any of the following methods: • *Web* : Persons with access to the internet may also view and comment on this notice by going to the regulations.gov Web site at *http:www.regulations.gov/index/cfm* . • *Mail (paper, disk, or CD-ROM submissions):* Chief, Legislation and Regulations Division, Visa Services—DS-160, 2401 E Street, NW., Washington DC 20520-30106. You must include the DS form number (if applicable), information collection title, and OMB control number in any correspondence. FOR FURTHER INFORMATION CONTACT: Direct requests for additional information regarding the collection listed in this notice, including requests for copies of the proposed information collection and supporting documents, to Andrea Lage, who may be reached at
(202)663-1399. SUPPLEMENTARY INFORMATION: We are soliciting public comments to permit the Department to: • Evaluate whether the proposed information collection is necessary for the proper performance of our functions. • Evaluate the accuracy of our estimate of the burden of the proposed collection, including the validity of the methodology and assumptions used. • Enhance the quality, utility, and clarity of the information to be collected. • Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of technology. Abstract of Proposed Collection The Nonimmigrant Visa Electronic Application (DS-160) will be used to collect biographical information from individuals seeking a nonimmigrant visa. The consular officer uses the information collected to determine the applicant's eligibility for a visa. This collection combines questions from current information collections DS-156 (Nonimmigrant Visa Application), DS-156E (Nonimmigrant Treaty Trader Investor Application), DS-156K (Nonimmigrant Fiancé Application), DS-157 (Nonimmigrant Supplemental Visa Application), DS-158 (Contact Information and Work History Application), and DS-3052 (Nonimmigrant V Visa Application). Methodology The DS-160 will be submitted electronically to the Department via the Internet. The applicant will be instructed to print a confirmation page containing a bar-coded record locator, which will be scanned at the time of processing. Applicants who submit the electronic application will no longer submit paper-based applications to the Department. Dated: November 20, 2007. June H. Kunsman, Managing Director, Bureau of Consular Affairs, Department of State. [FR Doc. E7-23814 Filed 12-6-07; 8:45 am] BILLING CODE 4710-06-P DEPARTMENT OF STATE [Public Notice 6009] Culturally Significant Objects Imported for Exhibition Determinations: “The Dancer: Degas, Forain, and Toulouse-Lautrec” SUMMARY: Notice is hereby given of the following determinations: Pursuant to the authority vested in me by the Act of October 19, 1965 (79 Stat. 985; 22 U.S.C. 2459), Executive Order 12047 of March 27, 1978, the Foreign Affairs Reform and Restructuring Act of 1998 (112 Stat. 2681, *et seq.* ; 22 U.S.C. 6501 Note, *et seq.* ), Delegation of Authority No. 234 of October 1, 1999, Delegation of Authority No. 236 of October 19, 1999, as amended, and Delegation of authority No. 257 of April 15, 2003 [68 FR 19875], I hereby determine that the object to be included in the exhibition “The Dancer: Degas, Forain, and Toulouse-Lautrec”, imported from abroad for temporary exhibition within the United States, is of cultural significance. The object is imported pursuant to a loan agreement with the foreign owner or custodian. I also determine that the exhibition or display of the exhibit object at the Portland Art Museum, from on or about February 2, 2008, until on or about May 11, 2008, and at possible additional exhibitions or venues yet to be determined, is in the national interest. Public Notice of these Determinations is ordered to be published in the **Federal Register.** FOR FURTHER INFORMATION CONTACT: For further information, including a list of the exhibit objects, contact Carol B. Epstein, Attorney-Adviser, Office of the Legal Adviser, U.S. Department of State (telephone: 202/453-8048). The address is U.S. Department of State, SA-44, 301 4th Street, SW., Room 700, Washington, DC 20547-0001. Dated: December 3, 2007. C. Miller Crouch, Principal Deputy Assistant Secretary for Educational and Cultural Affairs, Department of State. [FR Doc. 07-5981 Filed 12-6-07; 8:45 am]
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U.S. Code
- Registration, responsibilities, and oversight of self-regulatory organizations§ 78s
- Definitions and application§ 78c
- National securities exchanges§ 78f
- National market system for securities; securities information processors§ 78k–1
- National system for clearance and settlement of securities transactions§ 78q–1
- Common provisions applicable to registered entities§ 7a–2
- Public information; agency rules, opinions, orders, records, and proceedings§ 552
- Exemption from State regulation of securities offerings§ 77r
- Immunity from seizure under judicial process of cultural objects imported for temporary exhibition or display§ 2459
- Purposes§ 6501
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- 17 CFR 240.19
- 79 Stat. 985
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