Federal Register / Vol. 76, No. 66 / Wednesday, April 6, 2011 / Notices 19171 

16 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Tag 111, also known as Max Floor, is a standard 

FIX protocol. 4See DirectEdge (EDGA and EDGX) Rule 11.5(e) 

and DirectEdge FIX Specifications Version 1.11 

(http://www.directedge.com/Portals/0/docs/

Direct%20Edge%20Next%20Gen%20FIX%

20Manual.pdf), at section 3.6.2 (providing that the 

Cancel/Replace functionality may be used to 

modify tag 111 (the displayed quantity of a Reserve 

Order)). The Exchange notes that, unlike the text of 

the cancel/replace rules of DirectEdge, the use of 

the Replace Message to adjust Tag 111 under the 

instant rule filing is proposed to be reflected in an 

Interpretation and Policy to NSX Rule 11.11(e) and 

not only in the Exchange’s FIX specification. 

5BATS (BZX and BYX) Rule 11.12(a)(3). See also 

DirectEdge (EDGA and EDGX) Rule 11.8(a)(4); Arca 

Rule 7.36(a)(3); and CBOE Rule 52.1(e). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–8123 Filed 4–5–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64158; File No. SR–NSX– 

2011–03] 

Self-Regulatory Organizations; 

National Stock Exchange, Inc.; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change To Enable 

the Use of a Replace Message To 

Modify the Display Quantity of a 

Reserve Order, and Certain Other 

Conforming Changes to Exchange 

Rules 

March 31, 2011. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that, on March 

30, 2011, National Stock Exchange, Inc. 

filed with the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

National Stock Exchange, Inc. 

(‘‘NSX®’’ or ‘‘Exchange’’) is proposing to 

enable a Replace Message to be used to 

modify the display quantity of a Reserve 

Order (as defined in Rule 11.11(c)(2)), 

and proposes certain other conforming 

changes to its rules. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.nsx.com, at the principal 

office of the Exchange, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of, and basis for, 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of those 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

With this rule change, the Exchange is 

proposing to enable the Replace 

Message under NSX Rule 11.11(d) to be 

used to modify the display quantity of 

a Reserve Order (as defined in Rule 

11.11(c)(2)). In addition, certain 

conforming modifications to the text 

and interpretation of Rule 11.14(a)(2) 

are proposed. 

The proposed rule change would 

allow the Exchange’s current ‘‘Cancel/ 

Replace’’ order modifier functionality 

under Rule 11.11(d) to apply to the 

display quantity of Reserve Orders (such 

field being Tag 111 3). Currently, the 

Cancel/Replace functionality under 

Rule 11.11(d)(iii) allows only an 

adjustment to an order’s price and 

quantity. As applied to Reserve Orders, 

the Exchange’s trading system currently 

allows a Replace Message to be used to 

adjust only the reserve quantity, but not 

the display quantity. The proposed rule 

change would allow ETP Holders the 

ability to use the Replace Message to 

also adjust the display quantity of 

Reserve Orders (the Tag 111 field). 

Under the proposed rule change, the 

Replace Message could adjust both the 

display and non-display portion of a 

Reserve Order, including where the 

aggregate size of the order remains 

unchanged. Accordingly, the instant 

rule filing proposes to add an 

explanatory ‘‘Interpretation and Policy’’ 

to Rule 11.11(d) to clarify that the term 

‘‘quantity term’’ in Rule 11.11(d)(iii) 

shall include either, or both, the display 

and non-display portion of a Reserve 

Order, including in cases where the 

aggregate size of the Reserve Order is 

not changed. The identical use of the 

Replace Message to adjust the Tag 111 

field is similarly offered by at least one 

other exchange.4

The instant rule change also proposes 

to modify the language of NSX Rule 

11.14 (Priority of Orders) with respect to 

how the use of cancel/replace affects an 

order’s priority. The instant rule filing 

modifies Rule 11.14(a)(2) to provide 

that, where the quantity of an order has 

been reduced pursuant to a Replace 

Message, such order maintains price/ 

time priority. This constitutes no 

changes to current Exchange system 

practice and is consistent with the 

trading systems of other markets.5 An 

Interpretation and Policy is also 

proposed to be added to rule 11.14 to 

clarify how a Reserve Order’s priority is 

impacted by quantity adjustments (to 

either the display or the non-display 

portion) through use of a Replace 

Message. Specifically, Interpretation 

and Policy .01 provides that a Replace 

Message’s size decrement of a Reserve 

Order’s display quantity (Tag 111) will 

not affect the order’s priority only if 

total order size remains the same or 

decreases. Similarly, a Replace Message 

size decrement of a Reserve Order’s total 

quantity will not affect the order’s 

priority only if the display quantity also 

remains constant or decreases. Any 

increase in size of either the display 

portion or the total size of a Reserve 

Order will result in a new timestamp 

and cause that order to lose time 

priority. 

The following chart summarizes the 

above-described impact on a Reserve 

Order’s time priority, if any, due to the 

use of a Replace Message to adjust the 

quantity. 

Display qty (Tag 111) increases Display qty (Tag 111) decreases Display qty (Tag 111) same 

Total Order Qty Increases ................ Lose Book Priority ............................ Lose Book Priority ............................ Lose Book Priority. 

Total Order Qty Decreases ............... Lose Book Priority ............................ Maintain Book Priority ...................... Maintain Book Priority. 

Total Order Qty Same ...................... Lose Book Priority ............................ Maintain Book Priority. ..................... n/a. 

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19172 Federal Register / Vol. 76, No. 66 / Wednesday, April 6, 2011 / Notices 

6 15 U.S.C. 78f(b). 

7 15 U.S.C. 78f(b)(5). 

8See supra, footnotes 2 and 3 [sic]. 

9 15 U.S.C. 78s(b)(3)(A). 

10 17 CFR 240.19b–4(f)(6). In addition, Rule 

19b–4(f)(6) requires a self-regulatory organization to 

give the Commission written notice of its intent to 

file 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. NSX has satisfied this requirement. 

The following examples illustrate the 

effect on a Reserve Order’s time priority, 

if any, due to the use of a Replace 

Message to adjust the quantity. Each 

example assumes ETP Holder A has a 

first-in-time priority resting Reserve 

Order to sell 1000 shares total, with a 

display quantity of 500 (denoted as 

‘‘1000/500’’). 

Example 1 (Tag 111 Increases, Total 

Order Increases): 

ETP Holder A submits a Replace 

Message to adjust quantity to 1100/600. 

Example 1 Result: The order loses 

time priority because display quantity is 

increased. 

Example 2 (Tag 111 Increases, Total 

Order Decreases): 

ETP Holder A submits a Replace 

Message to adjust quantity to 900/600. 

Example 2 Result: The order loses 

time priority because display quantity is 

increased, notwithstanding that total 

quantity is decreased. 

Example 3 (Tag 111 Increases, Total 

Order Remains Same): 

ETP Holder A submits a Replace 

Message to adjust quantity to 1000/600. 

Example 3 Result: The order loses 

time priority because display quantity is 

increased, notwithstanding that total 

quantity remains the same. 

Example 4 (Tag 111 Decreases, Total 

Order Increases): 

ETP Holder A submits a Replace 

Message to adjust quantity to 1100/300. 

Example 4 Result: The order loses 

time priority because total quantity is 

increased, notwithstanding that display 

quantity is decreased. 

Example 5 (Tag 111 Decreases, Total 

Order Decreases): 

ETP Holder A submits a Replace 

Message to adjust quantity to 800/400. 

Example 5 Result: The order’s time 

priority is maintained because display 

quantity is decreased and total quantity 

is not increased. 

Example 6 (Tag 111 Decreases, Total 

Order Remains Same): 

ETP Holder A submits a Replace 

Message to adjust quantity to 1000/400. 

Example 6 Result: The order’s time 

priority is maintained because display 

quantity is decreased and total quantity 

is not increased. 

Example 7 (Tag 111 Remains Same, 

Total Order Increases): 

ETP Holder A submits a Replace 

Message to adjust quantity to 1100/500. 

Example 7 Result: The order loses 

time priority because total quantity is 

increased, notwithstanding that display 

quantity remains the same. 

Example 8 (Tag 111 Remains Same, 

Total Order Decreases): 

ETP Holder A submits a Replace 

Message to adjust quantity to 900/500. 

Example 8 Result: The order’s time 

priority is maintained because display 

quantity remains the same and total 

quantity is decreased. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the provisions of Section 6(b) of the 

Act,6 in general, and Section 6(b)(5) of 

the Act,7 in particular, in that it is 

designed, among other things, to 

promote clarity, transparency and full 

disclosure, in so doing, to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. The proposed rule 

change advances these objectives by 

making available to ETP Holders an 

order modifier that is currently in use 

elsewhere within the national market 

system and by clarifying order priority.8

Moreover, the proposed rule change is 

not discriminatory in that it applies 

equally to those ETP Holders that 

choose to utilize such functionality. 

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 Exchange Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange has neither solicited 

nor received written comments on the 

proposed rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the 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 19(b)(3)(A) 

of the Act 9 and Rule 19b–4(f)(6) 

thereunder.10

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend 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 rulecomments@sec.gov. Please include File 

Number SR–NSX–2011–03 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NSX–2011–03. 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 Web site viewing and 

printing 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 

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Federal Register / Vol. 76, No. 66 / Wednesday, April 6, 2011 / Notices 19173 

11 17 CFR 200.30–3(a)(12). 

1 17 CFR 240.9b–1. 

2See letter from Jean M. Cawley, Senior Vice 

President and Deputy General Counsel, OCC, to 

Sharon Lawson, Senior Special Counsel, Division of 

Trading and Markets (‘‘Division’’), Commission, 

dated May 20, 2010. 

3See letter from Jean M. Cawley, Senior Vice 

President and Deputy General Counsel, OCC, to 

Sharon Lawson, Senior Special Counsel, Division, 

Commission, dated January 19, 2011. 

4See letter from Jean M. Cawley, Senior Vice 

President and Deputy General Counsel, OCC, to 

Sharon Lawson, Senior Special Counsel, Division, 

Commission, dated March 15, 2011. 

5The proposed March 2011 Supplement to the 

ODD amends the February 1994 version of the 

booklet entitled ‘‘Characteristics and Risks of 

Standardized Options,’’ and portions of the May 

2007, June 2008, December 2009 and May 2010 

Supplements. 

6See Securities Exchange Act Release No. 62139 

(May 19, 2010), 75 FR 29597 (May 26, 2010) (SR– 

CBOE–2010–018) (order approving CBOE’s 

proposed rules to list and trade CBOE Gold ETF 

Volatility Index options). 

7For purposes of the ODD, the disclosure will 

make clear that an equity-based volatility index 

measures the implied volatility, or the realized 

variance or volatility of a specified reference 

security. 

8See Securities Exchange Act Release No. 63860 

(February 7, 2011), 76 FR 7888 (February 11, 2011) 

(SR–Phlx–2010–176) (order approving Phlx’s 

proposed rules to list and trade Alpha Index 

options). 

9For purposes of the ODD, relative performance 

indexes are a special type of strategy-based indexes 

that measure the relative performance—generally 

the relative total return—of two index components 

(the target component and the benchmark 

component). The index is calculated by measuring 

the total return of the target component relative to 

the total return of the benchmark component. The 

index will rise as and to the extent that the target 

component outperforms the benchmark component, 

and will fall as and to the extent that the opposite 

occurs. As stated in the March 2011 Supplement, 

as of the date of this Supplement, the only relative 

performance options approved for trading are 

options on indexes of which both index 

components are equity securities, and one of which 

could be a fund share. 

10The Commission notes that the options markets 

must continue to ensure that the ODD is in 

compliance with the requirements of Rule 9b– 

1(b)(2)(i) under the Act, 17 CFR 240.9b–1(b)(2)(i), 

including when changes regarding variability index 

options and relative performance index options are 

made in the future. Any future changes to the rules 

of the options markets concerning variability index 

options and relative performance index options 

would need to be submitted to the Commission 

under Section 19(b) of the Act. 15 U.S.C. 78s(b). 

11 17 CFR 240.9b–1(b)(2)(i). 

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– 

2011–03 and should be submitted on or 

before April 27, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–8122 Filed 4–5–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64154; File No. SR–ODD– 

2011–02] 

Self-Regulatory Organizations; the 

Options Clearing Corporation; Order 

Granting Approval of Accelerated 

Delivery of Supplement to the Options 

Disclosure Document Reflecting 

Certain Changes to Disclosure 

Regarding Variability Index Options 

and Relative Performance Index 

Options and Amendment to the 

Options Disclosure Document Inside 

Front Cover 

March 31, 2011. 

On May 21, 2010, the Options 

Clearing Corporation (‘‘OCC’’) submitted 

to the Securities and Exchange 

Commission (‘‘ Commission’’), pursuant 

to Rule 9b–1 under the Securities 

Exchange Act of 1934 (‘‘Act’’),1 five 

preliminary copies of a supplement to 

amend its options disclosure document 

(‘‘ODD’’) to reflect certain changes to 

disclosure regarding variability index 

options.2 On January 20, 2011, the OCC 

submitted to the Commission five 

preliminary copies of a supplement to 

amend its ODD to add disclosure 

regarding relative performance index 

options.3 The OCC is also updating the 

front inside cover page of the ODD so 

that it contains a current list of the U.S. 

exchanges that trade options issued by 

the OCC, and the current names and 

corporate addresses of these options 

exchanges. On March 16, 2011, the OCC 

submitted to the Commission five 

definitive copies of the March 2011 

Supplement 4 to reflect all these 

changes, as described in more detail 

below.5

Variability Indexes 

The ODD currently contains general 

disclosures on the characteristics and 

risks of trading standardized options on 

variability indexes. The current ODD 

states that variability indexes are 

indexes intended to measure the 

implied volatility, or the realized 

variance or volatility, of specified stock 

indexes. In May of 2010, the 

Commission approved the Chicago 

Board Options Exchange’s (‘‘CBOE’’) 

proposal to list and trade options on the 

CBOE Gold ETF Volatility Index.6 The 

March 2011 Supplement amends 

disclosures in the ODD regarding 

variability index options to 

accommodate the listing and trading of 

options on the CBOE Gold ETF 

Volatility Index and similarly structured 

equity-based volatility indexes that are 

intended to measure the volatility of a 

single reference security. Specifically, 

the proposed March 2011 Supplement 

amends the discussion of variability 

index options to provide disclosure 

regarding the characteristics of options 

on equity-based volatility indexes 7 and 

their special risks. 

Relative Performance Indexes 

Currently, the ODD states that indexes 

that may underlie options include stock 

indexes, variability indexes, strategybased indexes, and dividend indexes. 

Recently, the Commission approved the 

NASDAQ OMX PHLX LLC’s (‘‘Phlx’’) 

proposal to list and trade Alpha Index 

options.8 Alpha Indexes measure the 

relative total return of one stock and one 

exchange-traded fund share. The 

proposed March 2011 Supplement 

amends disclosures in the ODD to add 

relative performance indexes as a type 

of index that can underlie an option in 

order to accommodate the listing and 

trading of options on the Alpha Index 

and similarly structured relative 

performance indexes.9 Specifically, the 

proposed March 2011 Supplement adds 

new disclosure regarding the 

characteristics of options on relative 

performance indexes and their special 

risks. The Commission notes that the 

intent of this proposed March 2011 

Supplement is to provide disclosure for 

relative performance options on indexes 

of which both index components are 

equity securities, and one of which 

could be a fund share. 

Inside Cover of ODD 

Lastly, the March 2011 Supplement 

amends the ODD to revise the inside 

front cover page. The revisions are as 

follows: (1) Adding the C2 Options 

Exchange, Incorporated and its 

corporate address to the inside front 

cover of the ODD; (2) updating Phlx’s 

name to incorporate the Phlx’s recent 

conversion to a limited liability 

company; and (3) to reflect NASDAQ 

OMX BX’s recent change in corporate 

address. These changes will ensure that 

the ODD accurately identifies the 

markets on which options currently 

trade and accurately reflects the 

corporate name and address of those 

entities. 

The proposed supplement is intended 

to be read in conjunction with the more 

general ODD, which discusses the 

characteristics and risks of options 

generally.10 Rule 9b–1(b)(2)(i) under the 

Act 11 provides that an options market 

must file five copies of an amendment 

or supplement to the ODD with the 

mstockstill on DSKH9S0YB1PROD with NOTICES