Federal Register / Vol. 74, No. 42 / Thursday, March 5, 2009 / Notices 9651 

18 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 17 CFR 240.19b–4(f)(6). 

4The New York Stock Exchange LLC (‘‘NYSE’’) 

is proposing conforming amendments to its Rule 

300.10T. Because NYSE Alternext’s perspective of 

its member organizations differs from those of the 

NYSE, the rule text proposed by the NYSE is not 

identical to that proposed by NYSE Alternext, but 

is the same in substance. See SR–NYSE–2009–19 

(formally submitted on February 24, 2009). 

5See Securities Exchange Act Release No. 58673 

(September 29, 2008), 73 FR 57707 (October 3, 

2008) (SR–NYSE–2008–60 and SR–Amex 2008–62) 

(approving the Merger). 

6 15 U.S.C. 78f. 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NYSE–2009–19 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–NYSE–2009–19. 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 publicly available. All 

submissions should refer to File 

Number SR–NYSE–2009–19 and should 

be submitted on or before March 26, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–4677 Filed 3–4–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59468; File No. SR– 

NYSEALTR–2009–16] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by NYSE 

Alternext US LLC Amending Rule 

300.10T—NYSE Alternext Equities To 

Provide a Grace Period Under That 

Rule for Member Organizations That 

Have Applied for a Trading License To 

Comply With Certain Exchange Rules 

February 27, 2009. 

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 

24, 2009, NYSE Alternext US, LLC 

(‘‘NYSE Alternext’’ or the ‘‘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 prepared by the Exchange. NYSE 

Alternext has designated the proposed 

rule change as constituting a noncontroversial 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Rule 300.10T—NYSE Alternext Equities 

to provide a grace period under that rule 

for member organizations that have 

applied for a trading license to comply 

with certain Exchange rules. 

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 

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 

The Exchange proposes to amend 

Rule 300.10T—NYSE Alternext Equities 

(‘‘Rule 300.10T’’) to provide for a sixmonth grace period for member 

organizations that have applied for, but 

not received a trading license, to comply 

with certain Exchange rules. The 

Exchange intended Rule 300.10T to 

provide holders of a valid permit to 

trade on the NYSE Alternext systems 

and facilities located at 86 Trinity Place 

(‘‘86 Trinity Permit’’) seeking to trade 

equities at the Exchange with a grace 

period to comply with the Exchange 

membership requirements under the 

NYSE Alternext Equities rules. The 

proposed amendment seeks to clarify 

the rule to reflect the original purpose 

of the provision.4

Background of Merger 

As described more fully in a related 

rule filing (the ‘‘Merger filing’’),5 NYSE 

Euronext acquired The Amex 

Membership Corporation (‘‘AMC’’) 

pursuant to an Agreement and Plan of 

Merger, dated January 17, 2008 (the 

‘‘Merger’’). In connection with the 

Merger, the Exchange’s predecessor, the 

American Stock Exchange LLC 

(‘‘Amex’’), a subsidiary of AMC, became 

a subsidiary of NYSE Euronext and was 

renamed NYSE Alternext US LLC 

(‘‘NYSE Alternext’’ or the ‘‘Exchange’’), 

and continues to operate as a national 

securities exchange registered under 

Section 6 of the Securities Exchange Act 

of 1934, as amended (the ‘‘Act’’).6 The 

effective date of the Merger was October 

1, 2008. 

As described more fully in the Merger 

filing, in connection with the Mergers, 

Amex demutualized by separating all 

trading rights from equity ownership in 

Amex. As part of the demutualization, 

all trading rights appurtenant to the 

Amex Regular Members’ memberships 

or Options Principal Members’ (‘‘OPM’’) 

memberships were cancelled. 

Immediately following the closing of the 

Mergers, those persons and entities that 


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9652 Federal Register / Vol. 74, No. 42 / Thursday, March 5, 2009 / Notices 

7See Securities Exchange Act Release No. 58705 

(October 1, 2008), 73 FR 58995 (October 8, 2008) 

(SR–Amex 2008–63) (approving the Equities 

Relocation). 

8See Securities Exchange Act Release No. 58705 

(October 1, 2008), 73 FR 58995 (October 8, 2008) 

(SR–Amex 2008–63); Securities Exchange Act 

Release No. 58833 (October 22, 2008), 73 FR 64642 

(October 30, 2008) (SR–NYSE–2008–106); 

Securities Exchange Act Release No. 58839 (October 

23, 2008), 73 FR 64645 (October 30, 2008) (SR– 

NYSEALTR–2008–03); Securities Exchange Act 

Release No. 59022 (November 26, 2008), 73 FR 

73683 (December 3, 2008) (SR–NYSEALTR–2008– 

10); and Securities Exchange Act Release No. 59027 

(November 28, 2008), 73 FR 73681 (December 3, 

2008) (SR–NYSEALTR–2008–11). 

9See Securities Exchange Act Release No. 58673 

(September 29, 2008), 73 FR 57707 (October 3, 

2008) (SR–NYSE–2008–60 and SR–Amex 2008–62) 

(approving the Merger). 

were authorized to trade on the Amex 

before the closing of the Mergers were 

deemed to have satisfied applicable 

qualification requirements necessary to 

trade in NYSE Alternext’s demutualized 

marketplace and were issued 86 Trinity 

Permits at no cost. The 86 Trinity 

Permit authorizes owners, lessees or 

nominees of Amex Regular Members or 

OPMs, Amex limited trading permit 

holders, and Amex associate members 

who were authorized to trade on the 

Amex immediately before the Mergers 

to continue to trade at NYSE Alternext’s 

systems and facilities at 86 Trinity 

Place, New York, New York (the ‘‘86 

Trinity Trading Systems’’). NYSE 

Alternext recognizes the former Amex 

(i) owners, lessees, or nominees of 

Regular Members or OPMs, (ii) limited 

trading permit holders, and (iii) 

associate members as either NYSE 

Alternext member organizations or 

members, as applicable. 

In connection with the Merger, on 

December 1, 2008, NYSE Alternext 

relocated all equities trading conducted 

on its 86 Trinity Trading Systems to 

trading systems and facilities located at 

11 Wall Street, New York, New York 

(the ‘‘Equities Relocation’’). The 

Exchange’s equity trading systems and 

facilities at 11 Wall Street (the ‘‘NYSE 

Alternext Trading Systems’’) are 

operated by the NYSE on behalf of 

NYSE Alternext.7

As part of the Equities Relocation, 

NYSE Alternext adopted NYSE Rules 1– 

1004, subject to such changes as 

necessary to apply the Rules to the 

Exchange, as the NYSE Alternext 

Equities Rules to govern trading on the 

NYSE Alternext Trading Systems (the 

‘‘Equities Rule filing’’).8 The NYSE 

Alternext Equities Rules, which became 

operative on December 1, 2008, are 

substantially identical to the current 

NYSE Rules 1–1004 and the Exchange 

continues to update the NYSE Alternext 

Equities Rules as necessary to conform 

with rule changes to corresponding 

NYSE Rules filed by the NYSE. 

Similarly, NYSE Alternext will 

relocate all options trading conducted 

on the 86 Trinity Trading Systems to 

new facilities of NYSE Alternext to be 

located at 11 Wall Street, which 

facilities will utilize a trading system 

based on the options trading system 

used by NYSE Arca, Inc. (‘‘NYSE Arca’’) 

(‘‘Options Relocation,’’ and, together 

with the Equities Relocation, the 

‘‘Relocations’’). 

NYSE Alternext Equities Trading 

License Requirements 

To trade equities on NYSE Alternext 

Trading Systems, a member 

organization must meet NYSE Alternext 

membership qualifications and obtain a 

trading license pursuant to Rule 300— 

NYSE Alternext Equities. As set forth in 

more detail in the Merger filing, an 86 

Trinity Permit holder is eligible to 

obtain an NYSE Alternext equities 

trading license or options trading permit 

(‘‘ATP’’) pursuant to an expedited 

‘‘waive in’’ process up to the Options 

Relocation date. After the Equities 

Relocation, an 86 Trinity Permit entitles 

holders only to trade products other 

than those that have relocated to NYSE 

Alternext Trading Systems. As a result 

of the Equities Relocation, as well as the 

discontinuation of Exchange Traded 

Fund (‘‘ETF’’) and bond trading at 86 

Trinity Place, 86 Trinity Permits 

currently only entitle holders to trade 

listed options on NYSE Alternext. After 

the Options Relocation, the 86 Trinity 

Permits will be cancelled.9 Stated 

otherwise, an 86 Trinity Permit may not 

be used to trade equities on NYSE 

Alternext Trading Systems and a trading 

license under Rule 300—NYSE 

Alternext Equities must be obtained. 

Upon the Options Relocation, a former 

86 Trinity Permit holder will need an 

ATP to trade options on NYSE Alternext 

Trading Systems and the 86 Trinity 

Permit will no longer entitle the holder 

to trade any products at NYSE 

Alternext. 

In recognition of the fact that NYSE 

Alternext member organizations would 

be subject to different or additional 

requirements than were previously 

required under Amex rules, the 

Exchange adopted Rule 300.10T. As 

described in the Equities Rule filing, 

Rule 300.10T provides NYSE Alternext 

member organizations that exchanged 

the equities portion of a valid 86 Trinity 

Permit for an equities trading license 

under Rule 300—NYSE Alternext 

Equities with a six-month grace period 

within which to comply with NYSE 

Alternext Equities Rules 2 (defining the 

terms members and member 

organizations), 300–308 (governing the 

admission of members and member 

organizations), 311 (the formation and 

approval of member organizations), 312 

(changes within member organizations), 

and 313 (submission of partnership 

articles and corporate documents) 

(collectively, the ‘‘NYSE Alternext 

Equities Member Organization Rules’’). 

Among the differing requirements of 

the NYSE Alternext Equities Member 

Organization Rules as compared to the 

Amex rules that governed trading at 86 

Trinity Trading Systems, a member 

organization must be a member of the 

Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’). In addition, 

unlike the Amex rules, Rule 313.20— 

NYSE Alternext Equities requires 

member organizations to submit to the 

Exchange an opinion of counsel that a 

member corporation’s stock is validly 

issued and outstanding and that the 

restrictions and provisions required by 

the Exchange on the transfer, issuance, 

conversion and redemption of its stock 

have been made legally effective. 

The current six-month grace period 

under Rule 300.10T begins to run from 

the date that the member organization 

receives its NYSE Alternext equities 

trading license in exchange for the 

equities portion of a valid 86 Trinity 

Permit. However, a subset of member 

organizations that have applied for a 

trading license are not FINRA members. 

As a result, the Exchange determined 

that it cannot issue an equities trading 

license to such member organizations at 

this time. Because these member 

organizations have not been issued a 

trading license in exchange for the 

equities portion of an 86 Trinity Permit, 

the grace period within which to 

comply with the NYSE Alternext 

Equities Member Organization Rules has 

not been triggered. 

Proposed Amendment to Rule 300.10T 

To reflect the intent of the original 

adoption of Rule 300.10T, i.e., to 

provide member organizations with a 

grace period to comply with the NYSE 

Alternext Equities Member Organization 

Rules, the Exchange proposes to amend 

Rule 300.10T to provide for a six-month 

grace period for those member 

organizations that have applied for, but 

have not been issued a trading license. 

As proposed, to be eligible for the 

grace period, a member organization 

must be a holder of a valid 86 Trinity 

Permit as of the date that it applied for 

an equities trading license. In other 

words, once the 86 Trinity Permits are 

cancelled, i.e., the Options Relocation 

date, an Exchange member organization 

would not be eligible to apply for an 


jlentini on PROD1PC65 with NOTICES
Federal Register / Vol. 74, No. 42 / Thursday, March 5, 2009 / Notices 9653 

10 15 U.S.C. 78f(b)(5). 

11 15 U.S.C. 78k–1(a)(1). 

12 15 U.S.C. 78s(b)(3)(A). 

13 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. NYSE Alternext has satisfied this 

requirement. 

14 17 CFR 240.19b–4(f)(6). 

15 17 CFR 240.19b–4(f)(6). 

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). 

equities trading license and also benefit 

from the Rule 300.10T grace period. As 

proposed, if a member organization 

meets the amended eligibility threshold, 

it has six months from the earlier of 

either receiving the equity trading 

license (which is the current standard) 

or the cancellation of the 86 Trinity 

Permits (the Options Relocation date) 

within which to comply with the NYSE 

Alternext Equities Membership Rules, 

including the FINRA requirement. By 

adding the cancellation of the 86 Trinity 

Permits as a trigger for the six-month 

grace period, the proposed rule provides 

those member organizations that 

applied for a trading license, but were 

not issued a trading license because 

they are not currently FINRA members, 

time to meet the NYSE Alternext 

Equities Member Organization Rule 

requirements. 

In addition, the Exchange proposes 

deleting subsection (i) of the rule, as 

that language is not applicable for NYSE 

Alternext. The intention of Rule 

300.10T was to provide a grace period 

for 86 Trinity Permit holders. This rule 

was added at the same time that the 

NYSE added its version of Rule 

300.10T, which needed the Rule 2.10 

reference. Rule 2.10 provides that NYSE 

member organizations are deemed 

approved as NYSE Alternext member 

organizations. Because NYSE member 

organizations that were not previously 

Amex member organizations never 

received an 86 Trinity Permit, this 

prerequisite is inapplicable for the 

purpose of Rule 300.10T. 

As is currently part of the rule, if an 

NYSE Alternext member organization 

fails to meet the requirements of the 

NYSE Alternext Equities Member 

Organization Rules by the close of the 

grace period applicable to that member 

organization, the Exchange would either 

revoke the member organization’s 

approval to trade, if a trading license 

has already been issued, or not issue a 

trading license. The Exchange may also 

commence proceedings to revoke the 

membership of such member 

organization. 

2. Statutory Basis 

The statutory basis for the proposed 

rule change is Section 6(b)(5) of the 

Act 10 which requires the rules of an 

exchange 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 also is designed to support the 

principles of Section 11A(a)(1) 11 of the 

Act in that it seeks to assure fair 

competition among brokers and dealers 

and among exchange markets and the 

practicability of brokers executing 

investor’s orders in the best market. 

Specifically, the Exchange already 

permits a holder of a valid 86 Trinity 

Permit to apply for and receive an 

equities trading license under Rule 

300—NYSE Alternext Equities. This 

filing would simply provide those 

eligible NYSE Alternext member 

organizations with a valid 86 Trinity 

Permit additional time to exchange their 

86 Trinity Permit for an NYSE equity 

trading license and to comply with 

Exchange membership requirements 

without first without having to apply as 

a new member organization. 

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 

No written comments were either 

solicited or 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 12 and Rule 19b– 

4(f)(6) thereunder.13

A proposed rule change filed 

pursuant to Rule 19b–4(f)(6) under the 

Act 14 normally does not become 

operative for 30 days after the date of its 

filing. However, Rule 19b–4(f)(6) 15

permits the Commission to designate a 

shorter time if such action is consistent 

with the protection of investors and the 

public interest. NYSE Alternext requests 

that the Commission waive the 30-day 

operative delay. The Exchange requests 

the 30-day operative delay because the 

Options Relocation date is imminent 

and is currently scheduled for March 2, 

2009, and the Exchange needs to 

immediately implement this rule change 

so that NYSE Alternext member 

organizations can meet the new rule 

requirements. For these reasons, the 

Commission believes that waiving the 

30-day operative delay 16 is consistent 

with the protection of investors and the 

public interest and designates the 

proposal operative upon 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. 

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–NYSEALTR–2009–16 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–NYSEALTR–2009–16. 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 


jlentini on PROD1PC65 with NOTICES
9654 Federal Register / Vol. 74, No. 42 / Thursday, March 5, 2009 / Notices 

17 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78s(b)(3)(A)(i). 

3 17 CFR 240.19b–4(f)(1). 

4The Commission has modified the text of the 

summaries prepared by OCC. 

5Securities Exchange Act Release No. 55258 

(February 8, 2007), 72 FR 7701 (February 16, 2007). 

6Securities Exchange Act Release No. 58586 

(September 18, 2008), 73 FR 55582 (September 25, 

2008). 

7The New Methodology took effect beginning 

with dividends announced on and after February 1, 

2009, other than for certain grandfathered options. 

8The proposed rule change, including Exhibit 5, 

can be found on OCC’s Web site at http:// 

www.theocc.com/publications/rules/ 

proposed_changes/sr_occ_09_01.pdf. 

9 15 U.S.C. 78q–1. 

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 publicly available. All 

submissions should refer to File 

Number SR–NYSEALTR–2009–16 and 

should be submitted on or before March 

25, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–4678 Filed 3–4–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59442; File No. SR–OCC– 

2009–01] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change Relating to 

Amended Interpretative Guidance on 

the New Methodology for Adjusting 

Option Contracts for Cash Dividends 

and Distributions 

February 24, 2009. 

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

Securities Exchange Act of 1934 

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

January 6, 2009, The Options Clearing 

Corporation (‘‘OCC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change described in Items I, II, and III 

below, which items have been prepared 

primarily by OCC. OCC filed the 

proposed rule change pursuant to 

Section 19(b)(3)(A)(i) of the Act 2 and 

Rule 19b–4(f)(1) thereunder 3 so that the 

proposal was effective upon filing with 

the Commission. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested parties. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The proposed rule change would 

amend previously adopted 

interpretative guidance regarding the 

administration and application of the 

new adjustment method for cash 

dividends and distributions (‘‘New 

Methodology’’). 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

OCC 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. OCC has prepared 

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

and (C) below, of the most significant 

aspects of these statements.4

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

Background 

In File No. SR–OCC–2008–10, OCC 

adopted interpretative guidance 

developed by the OCC’s Securities 

Committee regarding the New 

Methodology.5 In File No. SR–OCC– 

2008–16, OCC proposed a minor 

modification to the New Methodology, 

which was approved by the Commission 

on September 18, 2008.6 The purpose of 

this rule change is to amend the 

interpretative guidance to address the 

approved modification to the New 

Methodology. 

Amendment to Interpretative Guidance 

Under the New Methodology, cash 

dividends paid by a company other than 

pursuant to a policy or practice of 

paying dividends on a quarterly or other 

regular basis would be deemed 

‘‘special’’ and would ordinarily trigger a 

contract adjustment provided the value 

of the adjustment is at least $12.50 per 

option contract.7 However, certain 

inconsistencies may result when the 

threshold of $12.50 per option contract 

is applied to all options on the affected 

underlying security. For example, if a 

$.10 special cash dividend is declared, 

the standard-size 100 share option 

would not be adjusted (because the 

value is less than $12.50). However, a 

previously adjusted 150 share option 

(reflecting a 3 for 2 split) would be 

adjusted (because the value is $15 per 

contract). Adjusting some but not all 

options of the same class in response to 

the same dividend event, especially if 

the 100 share option is not adjusted, 

could be confusing to investors, OCC’s 

Securities Committee (consisting of 

representatives of each of the options 

exchanges and OCC) determined that 

this potential confusion should be 

avoided. 

OCC’s Securities Committee believed 

that greater consistency across contracts 

of varying sizes could be achieved by 

retaining the $12.50 per contract 

threshold in all cases but subjects the 

threshold amount to a qualification 

providing that if a corresponding 

standard-size contract exists on the 

underlying security, previously adjusted 

contracts will be adjusted only if the 

corresponding standard-size contract is 

also adjusted. This qualification was the 

subject of File No. SR–OCC–2008–16. 

Implementation of the qualification will 

take effect at the same time the New 

Methodology is effective. 

OCC’s previously adopted 

interpretative guidance regarding the 

New Methodology has been amended to 

address the application of the qualified 

$12.50 per contract threshold, including 

examples of how the threshold will 

work in practice. The amended 

interpretative guidance is attached to 

the proposed rule change as Exhibit 5, 

and will be posted on OCC’s public Web 

site, made available in an information 

memorandum accessible to clearing 

members, or otherwise made available 

in hard copy form on request.8

The proposed rule change is 

consistent with the requirements of 

Section 17A of the Act 9 and the rules 

and regulations thereunder applicable to 

OCC because it provides market 

participants with interpretative 

guidance on the application of the New 

Methodology which will be applied to 

adjustments for cash dividends and 


jlentini on PROD1PC65 with NOTICES