Federal Register / Vol. 75, No. 42 / Thursday, March 4, 2010 / Notices 9987 

1 15 U.S.C. 78s(b)(1). 

2Securities Exchange Act Release No. 61249 

(December 29, 2009), 75 FR 0947. 

3The trading platforms will support trading 

activity of U.S. issues in U.S. dollars. The platforms 

currently operate from 8 a.m. to 4:30 p.m. London 

time. 

4Each single settlement obligation calculated by 

EuroCCP will settle at DTC on T+3. 

5EuroCCP will be given a reason code for the 

transactions it processes through its DTC account. 

As part of this filing, DTC proposes updating its 

Settlement Service Guide to reflect this reason code. 

In addition, DTC will update the language in the 

Memo Segregation section of the Settlement Service 

Guide and the reason codes that receive Memo 

Segregation treatment to reflect this reason code 

and to reflect certain other technical, nonsubstantive changes to the reason codes. 

6Before completing a transaction in which a 

participant is the receiver, DTC calculates the 

resulting effect the transaction would have on the 

participant’s account to determine whether the 

resulting net settlement balance would exceed the 

participant’s assigned net debit cap. Any 

transaction that would cause the participant’s net 

settlement debit to exceed its net debit cap is placed 

in a pending queue that recycles until another 

transaction or payment creates credits in the 

participant’s account such that the participant’s net 

settlement debit is below its net debit cap. 

7 DTC tracks collateral in a participant’s account 

through its collateral monitor. At all times, the 

collateral monitor reflects the amount by which the 

collateral in the account exceeds the net debit in the 

account. When processing a transaction, DTC 

verifies that the deliverer’s and receiver’s collateral 

monitors will not become negative when the 

transaction completes. If the transaction would 

cause either party to have a negative collateral 

monitor, the transaction will recycle until the 

deficient account has sufficient collateral. 

8The following seven elements must be 

consistent for the system to process a reclaim as 

matched: Receiver, deliverer, CUSIP, quantity, 

dollar amount, shares, and settlement date. 

9 If the reclaim drops at the recycle cutoff, then 

the receiving participant will retain the securities 

and the debit for the delivery it received from 

EuroCCP. 

10 Items that will drop will include deliveries to 

EuroCCP failing due to lack of position by the 

delivering participant and items failing DTC’s risk 

management controls. 

11 DTC’s current cutoff time for pending valued 

transactions is 3:10 p.m. and for pending free 

transactions is 6:35 p.m. 

12RAD is a control mechanism which allows a 

participant to review transactions prior to 

completion of processing. It limits the exposure 

from misdirected or erroneously entered deliver 

orders, payment orders, and pledges. 

13 15 U.S.C. 78q–1. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–61593; File No. SR–DTC– 

2009–17] 

Self-Regulatory Organizations; The 

Depository Trust Company; Order 

Approving Proposed Rule Change To 

Allow The Depository Trust Company 

To Provide Settlement Services to 

European Central Counterparty 

Limited for U.S. Securities Traded on 

European Trading Venues 

February 25, 2010. 

I. Introduction 

On December 17, 2009, The 

Depository Trust Company (‘‘DTC’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) proposed 

rule change SR–DTC–2009–17 pursuant 

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

Exchange Act of 1934 (‘‘Act’’).1 The 

proposed rule change was published for 

comment in the Federal Register on 

January 5, 2010.2 No comment letters 

were received on the proposal. This 

order approves the proposal. 

II. Description 

European Central Counterparty 

Limited (‘‘EuroCCP’’) is a clearing house 

recognized by the United Kingdom and 

regulated by the Financial Services 

Authority (‘‘FSA’’). It provides central 

counterparty clearance and settlement 

services to its participants for their 

securities transactions executed on or 

through European trading venues. 

Several of the trading platforms 

EuroCCP services asked EuroCCP to 

clear and settle trades in U.S. equities, 

Exchange Traded Funds (‘‘ETFs’’), and 

American Depositary Receipts 

(‘‘ADRs’’)(collectively, ‘‘U.S. Securities’’) 

that are executed on or through them.3

Trades in these securities will be routed 

to EuroCCP through existing interfaces 

with the trading platforms and will be 

novated and netted in accordance with 

EuroCCP’s Rules and Procedures. DTC 

will notify Participants by Important 

Notice of the effective date of the 

service. EuroCCP will employ its 

current trade day netting methodology 

to produce each day for each of its 

participants in the EuroCCP U.S. 

Program a single settlement obligation 

for each U.S. Security.4

Under the EuroCCP U.S. Program, 

EuroCCP will use DTC’s settlement 

services for these netted securities 

obligations by opening and operating an 

account at DTC. Each EuroCCP 

participant in the EuroCCP U.S. 

Program will be required to appoint a 

DTC participant U.S. settlement agent to 

settle obligations on its behalf.5

EuroCCP will be subject to the same net 

debit cap 6 and collateral monitor (‘‘Risk 

Management Controls’’) 7 as any other 

DTC participant. 

DTC is modifying its Settlement 

Service Guide in three ways to 

maximize settlement efficiencies for 

DTC participants acting as U.S. 

settlement agents in the EuroCCP U.S. 

Program. First, reclaims to EuroCCP’s 

account will not be ‘‘matched’’. A 

reclaim is an instruction from a 

participant to DTC to return a delivery. 

It is generally used in the event of an 

error where a participant does not 

recognize the delivery. DTC’s systems 

attempt to identify a corresponding 

original transaction for every reclaim 

presented for processing. If DTC’s 

systems identify a corresponding 

original transaction, the reclaim is 

processed.8

Under DTC’s existing Settlement 

Service Guide procedures, a matched 

reclaim for less than $15 million is not 

subject to DTC’s risk management 

controls. As a result a matched reclaim 

to EuroCCP for less than $15 million 

would not be subject to DTC’s risk 

management controls for EuroCCP’s 

account and could create a debit in the 

EuroCCP account that could exceed 

EuroCCP’s liquidity resources and cause 

EuroCCP to be unable to complete 

settlement with DTC. To avoid this 

outcome, DTC is changing its 

procedures so that all reclaims to the 

EuroCCP account, including matched 

reclaims under $15 million, will be 

subject to DTC’s risk management 

controls. Consequently, all reclaims 

violating EuroCCP’s net debit cap or 

collateral monitor will recycle until the 

reclaim can settle without violating the 

risk management controls or until the 

reclaim drops at the recycle cutoff.9

This is how DTC currently treats 

reclaims that are over $15 million 

dollars. 

Second, DTC is modifying its 

Settlement Service Guide so that 

pending valued transactions and 

pending free transactions to or from the 

EuroCCP account will fail to settle or 

‘‘drop’’ 10 at 3:10 p.m.11 This cutoff time 

will allow EuroCCP to close its business 

day. 

Third, the Receiver Authorized 

Delivery (‘‘RAD’’) cutoff time will be 

3:30 p.m. for both valued transactions 

and free delivery transactions.12 DTC’s 

current RAD deadline for valued 

transactions is 3:30 p.m., and the RAD 

deadline for free delivery transactions is 

6:30 p.m. To allow EuroCCP to halt 

transaction processing in the EuroCCP 

account and end its processing day, 

DTC will require a synchronized RAD 

cutoff time of 3:30 p.m. 

III. Discussion 

The Commission finds that the 

proposed rule change is consistent with 

the requirements of the Act 13 and the 

rules and regulations thereunder 

applicable to DTC. In particular, the 

Commission believes that the 

amendments DTC is making to its rules 

in connection to it providing settlement 

services to EuroCCP for U.S. Securities 

traded on European trading venues are 

consistent with DTC’s obligations under 

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9988 Federal Register / Vol. 75, No. 42 / Thursday, March 4, 2010 / Notices 

14 15 U.S.C. 78q–1(b)(3)(F). 

15 15 U.S.C. 78q–1. 

16 15 U.S.C. 78s(b)(2). 

17 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). 

18 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 61326 

(January 11, 2010), 75 FR 2902 (‘‘Notice’’). 

4The SIG Indexes noted herein are trademarks of 

SIG Indices, LLLP. 5Specifically, Phlx Rule 1001A(b)(i) currently 

provides for the following position limits for 

narrow-based index options: (1) 18,000 contracts if 

the Exchange determines that any single underlying 

stock accounted, on average, for 30% or more of the 

index value during the 30-day period immediately 

preceding the semi-annual review of the pertinent 

index option required by Phlx Rule 1001A(b)(ii); (2) 

24,000 contracts if the Exchange determines, at the 

time of the required semi-annual review, that any 

single underlying stock accounted, on average, for 

20% or more of the index value or that any five 

underlying stocks together accounted, on average, 

for more than 50% of the index value, but that no 

single stock in the group accounted, on average, for 

30% or more of the index value, during the 30-day 

period immediately preceding the review; or (3) 

31,500 contracts if the Exchange determines that the 

conditions specified above which would require the 

establishment of a lower limit have not occurred. 

In addition, the rule provides that position limits 

with respect to options on the KBW Bank Index are 

44,000 contracts. 

6Phlx exercise limits in Phlx Rule 1002A, 

Exercise Limits, are established by reference to 

position limits. The proposed increase in position 

limits for the Specified Index Options would 

therefore effectively increase exercise limits for 

these options. See Phlx Rule 1002A. 

7 In approving this rule, 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). 

8 15 U.S.C. 78f(b)(5). 

9The Exchange states that it dedicates substantial 

resources to monitoring the markets for evidence of 

manipulation or disruption caused by investors 

with positions at or near current position or 

exercise limits, and that the proposed increased 

position limits would not diminish the surveillance 

function in this regard. See Notice, supra note 3. 

10 15 U.S.C. 78s(b)(2). 

11 17 CFR 200.30–3(a)(12). 

Section 17A(b)(3)(F),14 which requires, 

among other things, that the rules of a 

clearing agency are designed to provide 

for the safekeeping of securities and 

funds under its possession or control or 

for which it is responsible. 

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 17A of the 

Act 15 and the rules and regulations 

thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,16 that the 

proposed rule change (File No. SR– 

DTC–2009–17) be, and hereby is, 

approved.17

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–4457 Filed 3–3–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–61590; File No. SR–Phlx– 

2009–113] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX, Inc.; Order 

Granting Approval of Proposed Rule 

Change Relating to Index Option 

Position Limits 

February 25, 2010. 

On December 29, 2009, NASDAQ 

OMX PHLX, Inc. (‘‘Phlx’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to increase the position limits 

for certain narrow-based (industry) 

index option contracts. The Commission 

published the proposed rule change for 

comment in the Federal Register on 

January 19, 2010.3 The Commission 

received no comments on the proposed 

rule change. This order approves the 

proposed rule change. 

The Exchange proposes to revise the 

three tiered levels of position limits that 

are set forth in Phlx Rule 1001A by 

increasing those limits for options on 

the PHLX Oil Service Sector, PHLX 

Semiconductor Sector, PHLX Utility 

Sector, PHLX Gold/Silver Sector, PHLX 

Housing Sector, SIG Energy MLP Index, 

SIG Oil Exploration & Production Index, 

and the NASDAQ China Index 

(collectively, the ‘‘Specified Index 

Options’’).4 Currently, the Specified 

Index Options are subject to position 

limits of 18,000, 24,000, or 31,500 

contracts based generally on the degree 

of concentration of a single component 

stock or groups of component stocks 

comprising the index.5 The Exchange 

proposes to increase these limits to 

54,000, 72,000, and 94,500 contracts, 

respectively, for the Specified Index 

Options. In addition, the Exchange 

proposes to delete certain obsolete 

references in Rule 1001A.6

The Exchange states that it recognizes 

that the purpose of position limits is to 

prevent manipulation and protect 

against disruption of the markets for 

both the option as well as the 

underlying security. The Exchange 

states that it has considered the effects 

of increased position limits for the 

Specified Index Options on the 

marketplace, and believes that 

manipulation and disruption concerns 

are addressed by a combination of 

existing surveillance functions and the 

implementation of tiered position 

limits. 

The Commission finds that the 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder that 

are applicable to a national securities 

exchange.7 In particular, the 

Commission believes that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,8 which requires, 

among other things, that the rules of a 

national securities exchange be 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. 

The Commission believes that the 

Exchange’s proposal to increase the 

three tiered levels of position limits for 

the Specified Index Options is 

reasonable. Specifically, the 

Commission believes that increasing the 

three tiered levels of position limits for 

the Specified Index Options may bring 

additional depth and liquidity to these 

index options classes without 

significantly increasing concerns 

regarding manipulation or disruption of 

the market for index options or the 

underlying component securities.9

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,10 that the 

proposed rule change (SR–Phlx–2009– 

113) be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–4458 Filed 3–3–10; 8:45 am] 

BILLING CODE 8011–01–P 

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