5692 Federal Register / Vol. 74, No. 19 / Friday, January 30, 2009 / Notices 

16For 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). 

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

2OCC filed a proposed rule change (File No. SR– 

OCC–2008–20) with the Commission that is being 

approved simultaneously with this proposed rule 

change to describe proposed changes in its rules for 

purposes of establishing the Market Loan Program. 

3The Commission has modified the text of the 

summaries prepared by DTC. 

Commission may designate a shorter 

time if such action is consistent with the 

protection of investors and the public 

interest. The Exchange has asked the 

Commission to waive the 30-day 

operative delay so that the proposal may 

become operative immediately upon 

filing. The Commission has determined 

that waiving the 30-day operative delay 

of the Exchange’s proposal is consistent 

with the protection of investors and the 

public interest because such waiver will 

reduce duplicative qualification 

standards that foreign registered 

representatives encounter to qualify as a 

U.S. general securities registered 

representative. Additionally, the 

Commission notes that other selfregulatory organizations currently 

accept certain foreign examination 

modules as equivalent to the Series 7 

examination as satisfactory proficiency 

examinations. Therefore, the 

Commission designates the proposal as 

operative upon filing.16 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 rulecomments@sec.gov. Please include File 

Number SR–BATS–2009–003 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–BATS–2009–003. 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 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 BATS. 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–BATS– 

2009–003 and should be submitted on 

or before February 20, 2009. 

For the Commission, by the Division of 

Trading & Markets, pursuant to delegated 

authority.17

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–2020 Filed 1–29–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59298; File No. SR–DTC– 

2008–15] 

Self-Regulatory Organizations; The 

Depository Trust Company; Notice of 

Filing and Order Granting Accelerated 

Approval of a Proposed Rule Change 

To Provide The Options Clearing 

Corporation With Settlement Services 

for Stock Loan Transactions Entered 

Into Under the Market Loan Program 

January 26, 2009. 

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

Securities Exchange Act of 1934 

(‘‘Act’’),1 notice is hereby given that on 

December 23, 2008, The Depository 

Trust Company (‘‘DTC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which items have been prepared 

primarily by DTC. The Commission is 

publishing this notice and order to 

solicit comments on the proposed rule 

change and to grant accelerated 

approval of the proposal. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

DTC is seeking to provide settlement 

services for stock loan transactions 

entered into under The Options Clearing 

Corporation’s (‘‘OCC’’) proposed Market 

Loan Program.2

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

DTC 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. DTC has prepared 

summaries, set forth in sections (A), (B), 

and (C) below, of the most significant 

aspects of these statements.3

(A) Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

OCC has approached DTC seeking 

DTC’s settlement services for its 

proposed Market Loan Program in 

which OCC will act as a central 

counterparty for stock loan transactions. 

Under the proposal, OCC will submit 

stock loan deliver orders to DTC on a 

locked-in basis on behalf of the parties 

to the transactions. OCC will open a 

new account at DTC for this service. 

Under OCC’s proposed Market Loan 

Program, a stock loan is initiated when 

a lender is matched with a borrower 

through an electronic platform that 

supports securities lending and 

borrowing transactions by matching 

lenders and borrowers based on loan 

terms that each party is willing to 

accept. Once matched, the electronic 

platform will send details of the 

matched stock loan transaction to OCC. 

If the matched transaction passes OCC’s 

validation process, OCC will create and 

send to DTC a pair of delivery orders, 

one message instructing DTC to transfer 

a specified number of shares of a 

specified eligible stock from the lending 

Participant to OCC’s account and the 

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Federal Register / Vol. 74, No. 19 / Friday, January 30, 2009 / Notices 5693 

4The debit or credit will depend on whether the 

Participant is the borrower or the lender in the 

stock loan transaction. DTC Participants that wish 

to use this service will also be required to 

acknowledge that reclaims to OCC under $15 

million will not override OCC’s net debit cap and 

will recycle until OCC submits a redelivery to the 

lender or until the reclaim drops at the recycle 

cutoff. 

5A new Participant-level master file indicator 

will be used to signify that both Participants, the 

borrower and lender, have agreed to use the service. 

6 DTC’s Account Transaction Processor (‘‘ATP’’) 

is the core processing system for all transaction 

activity affecting security positions held at DTC. It 

checks receiver’s collateral before it checks for debit 

cap. If DTC did not bypass the collateral monitor 

then the deliveries into OCC account would pend 

for collateral first and would not be processed by 

look-ahead. 

7Before completing a transaction in which a 

Participant is the receiver, DTC calculates the 

resulting effect the transaction would have on such 

Participant’s account, and determines whether the 

resulting net balance would exceed the Participant’s 

net debit cap. Any transaction that would cause the 

net settlement debit to exceed the net debit cap is 

placed on a pending (recycling) queue until another 

transaction creates credits in such Participant’s 

account. 

8A ‘‘reclaim’’ is an instruction to DTC to undo 

a delivery and is typically invoked in the event of 

an error where a Participant does not recognize the 

delivery. 

9 If OCC does not submit a redelivery to the 

lender, then the borrower’s reclaim to OCC will 

drop at the recycle cutoff (i.e., the borrower will 

retain the securities and the debit for the stock loan 

delivery it received from OCC). This is how DTC 

currently treats reclaims that are over $15 million. 

10 15 U.S.C. 78q–1. 11 15 U.S.C. 78q–1(b)(3)(F). 

other message instructing DTC to 

transfer the same number of shares of 

the same stock with the same dollar 

value from OCC’s account to the 

borrowing Participant’s account. Each 

participant that elects to use the 

proposed Market Loan Program will 

authorize DTC by written agreement to 

accept instructions on its behalf from 

OCC, requesting that DTC debit or credit 

the Participant’s DTC account with 

regard to said stock loan transactions.4

Since OCC’s Market Loan Program is 

intended to be primarily an anonymous 

market, OCC will establish a new 

account at DTC for this activity.5 The 

transfer of securities for value between 

the lender and the borrower will pass 

through the new OCC account in order 

to enable the stock loan transaction to 

be settled in a manner that provides 

anonymity to both the lender and 

borrower. In an effort to ensure that 

OCC’s stock loan transactions complete, 

DTC is proposing to bypass the 

collateral monitor in OCC account.6

This will advance transactions from the 

collateral recycle queue to the net debit 

cap recycle queue and will allow lookahead to capture the transactions. DTC 

will also set the net debit cap 7 on OCC’s 

account to zero so that all receives into 

the account recycle for net debit cap. A 

zero net debit cap will ensure that no 

receives are completed to OCC account 

unless an offsetting delivery is also 

completed. 

In order to reduce the possibility of 

mismatched stock loans, DTC is 

proposing to amend its current lookahead process for OCC stock loan 

transactions so that look-ahead matches 

on number of shares and dollar amount 

in addition to CUSIP. The existing LookAhead process finds delivery 

transactions that are pending because 

the receiving Participant has reached its 

net debit cap. It then looks to see 

whether the receiving Participant has a 

pending delivery for the same security 

to another Participant. In such a 

situation, DTC’s Account Transaction 

Processor (‘‘ATP’’) will calculate the net 

effect to the collateral and net debit cap 

controls for all three Participants 

involved. If the net effect will not result 

in a deficit in the collateral or net debit 

cap controls for any of the three 

Participants, ATP processes the 

transactions simultaneously. 

Additionally, DTC is proposing to 

block matched reclaims into OCC’s 

account. Participants will be permitted 

to reclaim 8 to OCC’s account, but 

reclaims under $15 million will not 

override OCC’s debit cap and will 

recycle until OCC submits a redelivery 

back to the lender or until the reclaim 

drops at the recycle cutoff.9 Under 

DTC’s existing procedures, if the 

borrowing Participant reclaimed to OCC 

and the reclaim was less than $15 

million, the reclaim would override the 

DTC Risk Management controls for 

OCC’s account creating a debit in OCC’s 

account. The debit would be eliminated 

if OCC entered a reclaim to the lending 

Participant. 

DTC believes that the proposed rule 

change is consistent with the 

requirements of Section 17A of the 

Act 10 and the rules and regulations 

thereunder applicable to DTC because it 

should promote the prompt and 

accurate clearance and settlement of 

stock loan transactions which would 

settle through the Look-Ahead process 

and achieve a more efficient level of 

straight-through processing. 

(B) Self-Regulatory Organization’s 

Statement on Burden on Competition 

DTC does not believe that the 

proposed rule change would have any 

impact or impose any burden on 

competition. 

(C) Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

Written comments relating to the 

proposed rule change have not been 

solicited or received. DTC will notify 

the Commission if it receives additional 

comments. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The Commission finds that the 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder and 

particularly with the requirements of 

Section 17A(b)(3)(F).11 Section 

17A(b)(3)(F) requires that the rules of a 

clearing agency be designed to promote 

the prompt and accurate clearance and 

settlement of securities transactions 

and, in general, to protect investors and 

the public interest. The Commission 

finds that the approval of DTC’s rule 

change is consistent with this section 

because it will allow DTC to provide to 

OCC settlement of stock loan 

transactions which will settle through 

the Look-Ahead process and will 

achieve a more efficient level of straightthrough processing. 

DTC has requested that the 

Commission approve the proposed rule 

change prior to the thirtieth day after 

publication of the notice of the filing. 

The Commission finds good cause for 

approving the proposed rule change 

prior to the thirtieth day after the 

publication of notice because such 

approval will allow DTC to implement 

the proposed rule change by the end of 

January 2009 when OCC plans to 

commence its proposed Market Loan 

Program in which OCC will act as a 

central counterparty for stock loan 

transactions. 

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–DTC–2008–15 on the 

subject line. 

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5694 Federal Register / Vol. 74, No. 19 / Friday, January 30, 2009 / Notices 

12 15 U.S.C. 78s(b)(2). 

13 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). 

14 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. 57254 

(February 1, 2008), 73 FR 7345 (February 7, 2008) 

(‘‘Notice’’). 

4See letters from Abe Lampert, dated May 25, 

2006 (‘‘Lampert Letter’’); Charles B. Cox III, dated 

May 26, 2006 (‘‘Cox Letter I’’); B. Thomas Rule, 

dated May 28, 2006 (‘‘Rule Letter’’); Bryan 

Weisberg, dated May 31, 2006 (‘‘Weisberg Letter’’); 

Andrea Schneider, dated June 18, 2006 (‘‘A. 

Schneider Letter’’); Gerald Schneider, dated 

February 6, 2008 (‘‘G. Schneider Letter’’); Andrew 

Carr, dated March 4, 2008 (‘‘Carr Letter’’); Charles 

B. Cox III, dated March 4, 2008 (‘‘Cox Letter II’’); 

Charles B. Cox III, dated April 16, 2008 (‘‘Cox Letter 

III’’); and Securities Industry and Financial Markets 

Association (‘‘SIFMA’’), dated July 23, 2008 

(‘‘SIFMA Letter’’). 

5 In Amendment No. 2, ISE deleted proposed 

changes to ISE Rules 715 and 723 (d)(2). These 

revisions clarify that the proposed rule change 

would not limit a Public Customer’s access to the 

Exchange’s Price Improvement Mechanism (‘‘PIM’’). 

See infra note 75. 

6See letter from Michael J. Simon, Secretary, ISE, 

to Florence Harmon, Acting Secretary, Commission, 

dated January 12, 2009 (‘‘ISE Response Letter’’). 7A ‘‘Public Customer’’ is defined in ISE’s rules 

as ‘‘a person that is not a broker or dealer in 

securities.’’ A ‘‘Public Customer Order’’ is defined 

as ‘‘an order for the account of a Public Customer.’’ 

ISE Rules 100(a)(38) and (39). 8A ‘‘Non-Customer’’ is defined in ISE’s rules as 

‘‘a person or entity that is a broker or dealer in 

securities.’’ A ‘‘Non-Customer Order’’ is defined as 

‘‘any order that is not a Public Customer Order.’’ 

ISE Rules 100(a)(27) and (28). 

9For example, Public Customer Orders currently 

incur fees for certain transactions in ‘‘Premium 

Products’’ (defined in the ISE Schedule of Fees) and 

Complex Orders that take liquidity on the 

Exchange’s complex order book. In addition, 

transaction fees are charged for Public Customer 

Orders entered in response to special order 

broadcasts, such as Facilitation orders, Solicitation 

orders, Block orders, and orders entered in the 

Exchange’s PIM. Public Customer Orders also are 

subject to fees for order cancellations. See ISE 

Schedule of Fees. 

10See Notice, supra note 3, at 73 FR 7346. 

11See Notice, supra note 3, at 73 FR 7346 n.7. 

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–DTC–2008–15. 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 

Section, 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 DTC and on 

DTC’s Web site at http://www.dtcc.com/ 

downloads/legal/rule_filings/2008/dtc/ 

2008–15.pdf. 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–DTC– 

2008–15 and should be submitted on or 

before February 20, 2009. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,12 that the 

proposed rule change (File No. SR– 

DTC–2008–15) be and hereby is 

approved.13

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–1983 Filed 1–29–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59287; File No. SR–ISE– 

2006–26] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing of Amendment 

No. 2 and Order Granting Accelerated 

Approval of the Proposed Rule 

Change, as Modified by Amendment 

Nos. 1 and 2 Thereto, Relating to 

Professional Account Holders 

January 23, 2009. 

I. Introduction 

On May 5, 2006, the International 

Securities Exchange, LLC (‘‘ISE’’ 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 

amend ISE rules to give certain nonbroker-dealer orders, identified as 

‘‘professional orders,’’ the priority given 

broker-dealer orders and market maker 

quotes rather than the priority currently 

given all public customer orders and to 

charge the same transaction fees for 

professional orders as charged for the 

orders of broker-dealers and market 

makers. On January 25, 2008, the 

Exchange filed Amendment No. 1 to the 

proposed rule change. The proposed 

rule change, as modified by Amendment 

No. 1, was published for comment in 

the Federal Register on February 7, 

2008.3 The Commission received ten 

comment letters on the proposal.4 The 

Exchange filed Amendment No. 2 to the 

proposed rule change on June 17, 2008,5

and submitted a response to the SIFMA 

Letter on January 12, 2009.6 This order 

provides notice of Amendment No. 2 

and approves the proposal, as modified 

by Amendment Nos. 1 and 2, on an 

accelerated basis. 

II. Description of ISE’s Proposal 

Currently, ISE grants certain 

advantages to Public Customer Orders 7

over Non-Customer Orders.8 In 

particular, Public Customer Orders 

receive priority over Non-Customer 

Orders and market maker quotes at the 

same price. In addition, subject to 

certain exceptions, Public Customer 

Orders do not incur transaction 

charges.9 The ISE states that the 

purpose, generally, of providing these 

marketplace advantages to Public 

Customer Orders is to attract retail 

investor order flow to the Exchange by 

leveling the playing field for retail 

investors over market professionals and 

providing competitive pricing.10

According to the Exchange, market 

professionals have access to 

sophisticated trading systems that 

contain functionality not available to a 

retail customer, including things such as 

continuously updated pricing models 

based upon real-time streaming data, 

access to multiple markets 

simultaneously, and order and risk 

management tools.11

With respect to the marketplace 

advantages of priority in trading and 

waiver of fees, the Exchange does not 

believe at this time that the definitions 

of Public Customer and Non-Customer 

properly distinguish between the kind 

of non-professional retail investors for 

whom these advantages were intended 

and certain professionals. The Exchange 

believes that distinguishing solely 

between registered broker-dealers and 

non-broker-dealers with respect to these 

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