Federal Register / Vol. 75, No. 46 / Wednesday, March 10, 2010 / Notices 11211 

7See http://pcaobus.org/News/Releases/Pages/ 

02032010_Progress_IntlInspections.aspx. The 

PCAOB also noted that that it intends to update its 

progress report semiannually to reflect information 

current as of June 30 and December 31. 

8Cf., PCAOB Release 2009–003 (June 25, 2009) 

(expressing the view that ‘‘There is long-term value 

in accepting a limited delay in inspections to 

continue working toward cooperative arrangements 

where it appears reasonably possible to reach 

them.’’). 

9See, PCAOB Release 2009–003 (June 25, 2009) 

(stating that ‘‘[I]nspection is the Board’s primary 

tool of oversight.’’). 

10As part of its semiannual disclosures, the 

PCAOB also discloses a list of those registered firms 

where inspections have not been completed by the 

PCAOB, even though more than four years have 

passed since the end of the calendar year in which 

the firm first issued an auditor report while 

registered with the PCAOB. 

11Separately, in the Commission’s order 

approving the PCAOB’s budget and annual 

accounting support fee for calendar year 2010, the 

Commission directed the PCAOB to include in its 

quarterly reports to the Commission information 

about the timing of the PCAOB’s international 

inspection program and updates on the PCAOB’s 

efforts to establish cooperative arrangements with 

respective non-U.S. authorities for inspections 

required in those countries. See SEC Release No. 

34–61212 (December 22, 2009); 74 FR 68875 

(December 29, 2009). 

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

2 17 CFR 240.19b–4. 

3The $0.50 Strike Program was initially approved 

on September 18, 2009. See Securities Exchange 

Act Release No. 60694 (September 18, 2009), 74 FR 

49048 (September 25, 2009) (SR–Phlx–2009–65) 

(order approving). 

In the Commission’s publication of 

the proposed rules for comment, the 

notice indicated the following: 

In determining the schedule for completion 

of the inspections subject to new paragraph 

(g), the Board will implement its proposal to 

sequence these 49 inspections such that 

certain minimum thresholds will be satisfied 

in each of the years from 2009 to 2012. The 

minimum thresholds relate to U.S. market 

capitalization of firms’ issuer audit clients. 

The Board will begin by ranking the 49 firms 

according to the total U.S. market 

capitalization of a firm’s foreign private 

issuer audit clients. Working from the top of 

the list (highest U.S. market capitalization 

total) down, the 49 firms will be distributed 

over 2009 to 2012 such that, at a minimum, 

the following criteria are satisfied: 

• by the end of 2009, the Board will 

inspect firms whose combined issuer audit 

clients’ U.S. market capitalization constitutes 

at least 35 percent of the aggregate U.S. 

market capitalization of the audit clients of 

all 49 firms; 

• by the end of 2010, the Board will 

inspect firms whose combined issuer audit 

clients’ U.S. market capitalization constitutes 

at least 90 percent of that aggregate; 

• by the end of 2011, the Board will 

inspect firms whose combined issuer audit 

clients’ U.S. market capitalization constitutes 

at least 99.9 percent of that aggregate; and 

• the Board will inspect the remaining 

firms in 2012. 

In addition to meeting those market 

capitalization thresholds, the Board also will 

satisfy certain criteria concerning the number 

of those 49 firms that will be inspected in 

each year. Specifically, the Board will 

conduct at least four of the 49 inspections in 

2009, at least 11 more in 2010, and at least 

14 more in 2011. (footnotes omitted) 

On February 3, 2010, the PCAOB 

released new and updated information 

about the status of its inspections of 

registered non-U.S. accounting firms, 

including reporting on the PCAOB’s 

progress in meeting the above target 

thresholds.7 Specifically, the PCAOB 

reported that, as of December 31, 2009, 

the PCAOB had inspected five firms that 

would meet the proposed Rule 4003(g) 

criteria for deferral. However, the 

PCAOB inspected only two of the four 

firms that the PCAOB had scheduled for 

inspection in 2009 based on their 

clients’ U.S. market capitalization. As a 

result, the PCAOB did not meet the 

target threshold for U.S. market 

capitalization for 2009. The PCAOB was 

unable to conduct the inspections of the 

remaining two firms it intended to 

inspect in 2009 because, on the basis of 

asserted restrictions under non-U.S. 

law, access to information necessary to 

conduct the inspections was denied. 

The PCAOB also reported that 

discussions are continuing with the 

relevant authorities in the affected 

jurisdictions in an effort to resolve their 

objections to PCAOB inspections. We 

agree that the PCAOB should continue 

to work toward cooperative 

arrangements with the appropriate local 

auditor oversight authorities where it is 

reasonably likely that appropriate 

cooperative arrangements can be 

obtained.8 We also recognize that 

formalization and finalization of such 

arrangements take time. However, as the 

Board has acknowledged, inspection is 

the cornerstone of the Board’s regulatory 

oversight of audit firms.9 Public 

companies and investors rely on the 

integrity of the auditing work performed 

by firms registered with the PCAOB, 

and the salutary effects of briefly 

delaying inspection of certain of these 

firms decrease as the period of delay 

increases or there no longer appears to 

be a reasonable possibility of reaching 

appropriate cooperative arrangements. 

Accordingly, we encourage the 

PCAOB to continue to work with 

deliberate speed with its foreign 

counterparts to finalize these 

cooperative arrangements. We continue 

to expect the PCAOB to satisfy its 

announced inspection schedule for 

2010–2012.10 We also direct the PCAOB 

to work closely with Commission staff 

in the PCAOB’s ongoing discussions 

with relevant authorities and efforts to 

meet its non-U.S. audit firm inspection 

schedule.11

V. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposed 

amendment of the Board’s rules 

governing inspections of registered 

public accounting firms are consistent 

with the requirements of the Act and the 

securities laws and are necessary or 

appropriate in the public interest or for 

the protection of investors. 

It is therefore ordered, pursuant to 

section 107 of the Act and section 

19(b)(2) of the Exchange Act, that the 

proposed rule amendment (File No. 

PCAOB 2009–01) be and hereby is 

approved. 

By the Commission. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–5046 Filed 3–9–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–61630; File No. SR–Phlx– 

2010–26] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by NASDAQ 

OMX PHLX, Inc. To Permit the 

Concurrent Listing of $3.50 and $4 

Strikes for Classes Participating in the 

$0.50 Strike Program and the $1 Strike 

Program 

March 2, 2010. 

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 February 

19, 2010, NASDAQ OMX PHLX, Inc. 

(‘‘Phlx’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘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 

The Exchange is filing with the 

Commission a proposal to amend 

Commentary .05 to Rule 1012 (Series of 

Options Open for Trading) to permit the 

concurrent listing of $3.50 and $4 

strikes for classes that participate in 

both the $0.50 Strike Price Program 

(‘‘$0.50 Strike Program’’) 3 and the $1 


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11212 Federal Register / Vol. 75, No. 46 / Wednesday, March 10, 2010 / Notices 

4The $1 Strike Program was initially approved as 

a pilot on June 11, 2003. See Securities Exchange 

Act Release Nos. 48013 (June 11, 2003), 68 FR 

35933 (June 17, 2003) (SR–Phlx–2002–55) (order 

approving). The program was subsequently made 

permanent and expanded. See Securities Exchange 

Act Release Nos. 57111 (January 8, 2008), 73 FR 

2297 (January 14, 2008) (SR–Phlx–2008–01) (notice 

of filing and immediate effectiveness); 59590 

(March 17, 2009), 74 FR 12412. (March 24, 2009) 

(SR–Phlx–2009–21) (notice of filing and immediate 

effectiveness); and 61277 (January 4, 2010), 75 FR 

1442 (January 11, 2010)(SR–Phlx–2009–108) (notice 

of filing and immediate effectiveness). 

5 17 CFR 240.19b–4(f)(6)(iii). 

6See Securities Exchange Act Release No. 60694 

(September 18, 2009), 74 FR 49048 (September 25, 

2009) (SR–Phlx–2009–65) (order approving); and 

Commentary .05(a)(ii) to Rule 1012. 

7See Commentary .05(a)(i)(C) of Rule 1012. 

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

9 15 U.S.C. 78f(b)(5). 

10 15 U.S.C. 78s(b)(3)(A). 

11 17 CFR 240.19b–4(f)(6)(iii). 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. The Exchange has satisfied this 

requirement. 

Strike Price Program (‘‘$1 Strike 

Program’’).4 The Exchange requests that 

the Commission waive the 30-day 

operative delay period contained in 

Exchange Act Rule 19b–4(f)(6)(iii).5

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http:// 

nasdaqomxphlx.cchwallstreet.com/ 

NASDAQOMXPHLX/Filings/, 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 these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

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

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of this proposal is to 

amend Commentary .05 to Rule 1012 to 

permit the concurrent listing of $3.50 

and $4 strikes for classes that participate 

in both the $0.50 Strike Program and the 

$1 Strike Program. 

The Exchange recently implemented a 

rule change that permits strike price 

intervals of $0.50 for options on stocks 

trading at or below $3.00 pursuant to 

the $0.50 Strike Program.6 As part of the 

filing to establish the $0.50 Strike 

Program, the Exchange contemplated 

that a class may be selected to 

participate in both the $0.50 Strike 

Program and the $1 Strike Program. 

Under the $1 Strike Program, new series 

with $1 intervals are not permitted to be 

listed within $0.50 of an existing $2.50 

strike price in the same series, except 

that strike prices of $2 and $3 are 

permitted to be listed within $0.50 of a 

$2.50 strike price for classes also 

selected to participate in the $0.50 

Strike Program.7 Under the Exchange’s 

current Rule 1012, for classes selected to 

participate in both the $0.50 Strike 

Program and the $1 Strike Program, the 

Exchange may either: (a) List a $3.50 

strike but not list a $4 strike; or (b) list 

a $4 strike but not list a $3.50 strike. For 

example, if a $3.50 strike for an option 

class in both the $0.50 and $1 Strike 

Programs was listed, the next highest 

permissible strike price would be $5.00. 

Alternatively, if a $4 strike was listed, 

the next lowest permissible strike price 

would be $3.00. The intent of the $0.50 

Strike Program was to expand the ability 

of investors to hedge risks associated 

with stocks trading at or under $3 and 

to provide finer intervals of $0.50, 

beginning at $1 up to $3.50. As a result, 

the Exchange believes that the current 

filing is consistent with the purpose of 

the $0.50 Strike Program and will 

permit the Exchange to fill in any 

existing gaps resulting from having to 

choose whether to list a $3.50 or $4 

strike for options classes in both the 

$0.50 and $1 Strike Programs. 

Therefore, the Exchange is submitting 

the current filing to permit the listing of 

concurrent $3.50 and $4 strikes for 

classes that are selected to participate in 

both the $0.50 Strike Program and the 

$1 Strike Program. To effect this change, 

the Exchange is proposing to amend 

Commentary .05(a)(i)(B) to Rule 1012 by 

adding $4 to the strike prices of $2 and 

$3 currently permitted if a class 

participates in both the $0.50 Strike 

Program and the $1 Strike Program. 

The Exchange is also proposing to 

amend the current rule text to delete 

references to ‘‘$2.50 strike prices’’ (and 

the example utilizing $2.50 strike 

prices) and to replace those references 

with broader language, e.g., ‘‘existing 

strike prices.’’ 

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 

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, by 

permitting the Exchange to list more 

granular strikes on options overlying 

lower priced securities, which the 

Exchange believes will provide 

investors with greater flexibility by 

allowing them to establish positions that 

are better tailored to meet their 

investment objectives. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The Exchange believes that the 

foregoing proposed rule change may 

take effect upon filing with the 

Commission pursuant to Section 

19(b)(3)(A) 10 of the Act and Rule 19b– 

4(f)(6)(iii) thereunder 11 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. 

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. 

The Exchange has requested that the 

Commission waive the 30-day operative 

delay to permit the Exchange to 

compete with other exchanges whose 

rules permit concurrent listing of $3.50 

and $4 strikes for classes similarly 


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Federal Register / Vol. 75, No. 46 / Wednesday, March 10, 2010 / Notices 11213 

12For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Orders designated to use these routing strategies 

check the NASDAQ book for the full size of the 

order prior to routing. The terms and conditions of 

NASDAQ’s routing strategies are described in 

NASDAQ Rule 4758. 

4For DOTI orders that execute in NASDAQ OMX 

BX, NASDAQ will continue to pass through fees 

and rebates associated with order execution on that 

venue. SCAN, SKNY, STGY, and SKIP orders 

executed at NASDAQ OMX BX are currently 

charged $0.0029, however, and will now be charged 

$0.0030. DOTI, STGY, SCAN, SKNY, and SKIP 

orders that execute at NYSE are charged $0.0018 

per share executed if they access liquidity at NYSE, 

or receive a $0.0010 per share executed credit if 

they add liquidity at NYSE. These fees and credits 

are unchanged. 

5 15 U.S.C. 78f. 

participating in both a $0.50 strike 

program and a $1 strike program. The 

Commission finds that waiver of the 

operative delay is consistent with the 

protection of investors and the public 

interest because such waiver will 

encourage fair competition among the 

exchanges. Therefore, the Commission 

designates the proposal operative upon 

filing.12

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–Phlx–2010–26 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–Phlx–2010–26. 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. Copies of the filing 

also will be available for inspection and 

copying at the principal office of the 

Exchange. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–Phlx– 

2010–26 and should be submitted on or 

before March 31, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–5078 Filed 3–9–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–61645; File No. SR– 

NASDAQ–2010–029] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Modify Fees 

for Members Using the NASDAQ 

Market Center 

March 4, 2010. 

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 February 

26, 2010, The NASDAQ Stock Market 

LLC (‘‘NASDAQ’’ or the ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

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 

NASDAQ proposes to modify pricing 

for NASDAQ members using the 

NASDAQ Market Center. NASDAQ will 

implement the proposed change on 

March 1, 2010. The text of the proposed 

rule change is available at http:// 

nasdaqomx.cchwallstreet.com/, at 

NASDAQ’s principal office, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

NASDAQ 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. 

NASDAQ 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 

NASDAQ is making minor 

modifications to its pricing schedule for 

execution and routing of orders through 

the NASDAQ Market Center. First, 

NASDAQ is increasing the fee for 

members using the STGY, SCAN, 

SKNY, SKIP, or DOTI routing 

strategies.3 For orders using these 

strategies that execute in destinations 

other than the New York Stock 

Exchange (‘‘NYSE’’) (or NASDAQ OMX 

BX, in the case of DOTI orders), 

NASDAQ will increase the fee from 

$0.0029 to $0.0030 per share executed.4

Second, NASDAQ is eliminating a 

temporary pricing incentive designed to 

encourage use of Mid-Point Pegged 

Orders in the NASDAQ Market Center. 

Currently, members providing an 

average daily volume of more than 95 

million shares of liquidity during a 

month pay no fee for the use of MidPoint Pegged Orders. As a result of the 

change, all members will pay the same 

rates for executions of Mid-Point Pegged 

Orders as they pay for executions of 

other orders in the NASDAQ Market 

Center: either $0.0028 or $0.0030 per 

share executed, depending on the type 

of security traded and the member’s 

trading volumes. 

2. Statutory Basis 

NASDAQ believes that the proposed 

rule change is consistent with the 

provisions of Section 6 of the Act,5 in 

general, and with Section 6(b)(4) of the 


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