Federal Register / Vol. 75, No. 13 / Thursday, January 21, 2010 / Notices 3511 

9We note clarifications have been provided in 

other contexts. For example, see PCAOB Staff Q&A 

at http://www.pcaobus.org/Standards/ 

Staff_Questions_and_Answers/2009/09- 

02_FASB_Codification.pdf. 

10See comments of CAQ, Deloitte, EY, Grant, 

KPMG, and PWC. 

11See comments of Deloitte, Grant, and KPMG. 

12See comments of PBTK. 

13 17 CFR 210.2–01(f)(7)(ii). 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(6). 

determine which matters may be 

significant, the engagement quality 

reviewer would need to document every 

issue and therefore would not perform 

any review procedures until the 

engagement team completed all audit 

work and finalized all of its 

conclusions. 

The Commission does not believe that 

there is any inconsistency between the 

example in the adopting release and the 

requirements of Auditing Standard No. 

7. The PCAOB specified in its adopting 

release that the example applies ‘‘if a 

reviewer identified a significant 

engagement deficiency to be addressed 

by the engagement team.’’ We believe 

that documentation suggested in the 

example from the adopting release is 

appropriate after the engagement quality 

reviewer has concluded that he or she 

has identified a significant engagement 

deficiency. However, since several 

comments were related to this point, we 

encourage the PCAOB to provide further 

implementation guidance on the 

documentation requirement.9

Standard of Care 

Commenters generally expressed 

agreement with the revisions that the 

PCAOB made to the description of due 

professional care in the standard in 

response to comments, including 

establishing the expected standard of 

performance by referring to AU Section 

230, Due Professional Care in the 

Performance of Work (‘‘AU 230’’).10

However, many of the same commenters 

expressed concern with language in the 

adopting release about the concept of 

due professional care. Particularly, 

many commenters pointed to language 

in the adopting release that a qualified 

reviewer who has performed the 

required review with due professional 

care ‘‘will, necessarily, have discovered 

any significant engagement deficiencies 

that could reasonably have been 

discovered under the circumstances.’’ 

Certain commenters expressed a view 

that the language in the release could be 

read as requiring absolute assurance or 

a ‘‘flawless’’ review.11

The Commission believes that the 

PCAOB adequately responded to 

comments in this area during its 

reproposal process. We do not find any 

inconsistency between the PCAOB’s 

adopting release and the requirement to 

conduct the EQR with due professional 

care as described in paragraphs 12 and 

17 of Auditing Standard No. 7. 

Paragraph 12 of Auditing Standard No. 

7 references AU 230, which is the 

source of guidance regarding due 

professional care in the PCAOB’s 

interim auditing standards. Moreover, 

the PCAOB specified in its adopting 

release that ‘‘the Board is not redefining 

due professional care in the context of 

the EQR standard.’’ 

Definition of Partner 

One commenter suggested that the 

PCAOB revise the description of the 

qualifications of the engagement quality 

reviewer in Auditing Standard No. 7 to 

specify that equity ownership in the 

firm is not a requirement for a 

reviewer.12 The commenter believed 

Board language in its adopting release 

on the distinction between ‘‘partner’’ 

and ‘‘non-partner’’ could be considered 

‘‘muddying and potentially biasing (and 

perhaps unintended) restrictive 

language.’’ 

The discussion of requiring a partner 

or an individual in an equivalent 

position to perform the EQR is 

consistent with the Commission’s 

independence rules.13 We do not 

believe that equity ownership is 

necessarily inherent in the analysis; 

rather the analysis of whether an 

individual is a partner or in an 

equivalent position is based on the 

organization of the individual firm and 

other related facts and circumstances. 

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposed 

PCAOB Rules on Auditing Standard No. 

7, Engagement Quality Review, and 

Conforming Amendment (File No. 

PCAOB–2009–02) 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 PCAOB Rules on Auditing 

Standard No. 7, Engagement Quality 

Review, and Conforming Amendment 

(File No. PCAOB–2009–02) be and 

hereby are approved. 

By the Commission. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–1028 Filed 1–20–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–61349; File No. SR–CBOE– 

2010–004] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Modify Trading Hours 

for CBSX 

January 14, 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 January 

12, 2010, the Chicago Board Options 

Exchange, Incorporated (‘‘CBOE’’ or 

‘‘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 CBOE. CBOE has submitted the 

proposed rule change under Section 

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

4(f)(6) thereunder,4 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 modify 

trading hours for the CBOE Stock 

Exchange (‘‘CBSX’’). The text of the 

proposed rule change is available on the 

Exchange’s Web site (http:// 

www.cboe.org/Legal), at the Exchange’s 

Office of the Secretary, and at the 

Commission. 

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 

CBOE 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 III below. The Exchange has 

prepared summaries, set forth in 

sections A, B, and C below, of the most 

significant aspects of such statements. 


jlentini on DSKJ8SOYB1PROD with NOTICES
3512 Federal Register / Vol. 75, No. 13 / Thursday, January 21, 2010 / Notices 

5See SR–CBOE–2009–083, 74 FR 57718 

(November 9, 2009). 

6See Nasdaq Stock Market Rules 4617 and 

4120(b)(4), NYSEArca Rule 7.34(a), and BATS Rule 

11.1(a). 

7See CBOE Rule 52.3(c)(1). 

8 15 U.S.C. 78s(b)(1). 

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

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

11 15 U.S.C. 78s(b)(3)(A). 

12 17 CFR 240.19b–4(f)(6). Rule 19b–4(f)(6)(iii) 

also requires an exchange to provide the 

Commission with written notice of its intent to file 

the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

the proposed rule change or such shorter time as 

the Commission may designate. The Exchange 

satisfied this requirement. 

13See note 6, supra. 

14For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposal’s impact on efficiency, competition, and 

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

15See CBOE Rule 31.5P.(2)(a); CBOE Rule 51.2, 

Interpretation and Policy .01 (providing required 

disclosures for CBSX extended trading hours); and 

CBOE Rule 51.8(a) (prohibiting the entry of market 

orders during CBSX extended trading hours). See 

also BATS Rules 3.21 and 11.9(a)(2); Nasdaq Rules 

4631 and 5740(a)(2); and NYSEArca Rule 7.34(e). 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

CBSX proposes to designate the time 

period from 8:30 a.m. CT until 3 p.m. 

CT as ‘‘CBSX Regular Trading Hours’’ for 

stock, IPR and IPS transactions and to 

make certain corresponding changes. 

CBSX also proposes to designate the 

time periods from 8 a.m. CT until 8:30 

a.m. CT and 3 p.m. CT until 3:30 p.m. 

CT as ‘‘CBSX Extended Trading Hours’’ 

and to make certain corresponding 

changes. The proposed change would be 

effective as of February 1, 2010. CBOE 

also proposes to make changes 

corresponding to SR–CBOE–2009–083, 

which changed the time at which CBSX 

opens from 8:15 a.m. CT to 8 a.m. CT.5

All changes have been requested by 

CBSX users. Other US-based exchanges 

permit trading after 3 p.m. CT, 

including the Nasdaq Stock Market.6

These changes do not change the 

effective ‘‘normal trading hours,’’ on 

CBSX, which is and will remain from 

8:30 a.m. CT to 3 p.m. CT. The periods 

from 8 a.m. CT until 8:30 a.m. CT and 

3 p.m. CT until 3:30 p.m. CT will not 

qualify as ‘‘normal trading hours.’’ 

Therefore, trading rules, policies and 

Designated Primary Market-Maker 

(‘‘DPM’’) obligations during these 

periods may differ from those during 

normal trading hours, [sic] Some of 

these differences already exist in CBSX 

rules. 

Specifically, the ‘‘Unusual Market 

Conditions’’ rule pertaining to trading 

halts for trading of IPRs and IPSs 

imposes different procedures during 

normal trading hours than it does 

during the 8 a.m. CT to 8:30 a.m. CT and 

3:15 p.m. to 3:30 p.m. periods.7 This 

difference already existed in CBSX 

rules; the proposed rule change would 

adjust the time periods listed in Rule 

52.3(c)(1). 

CBSX rules also already included 

differences between normal trading 

hours and the non-normal trading 

periods in the numerical guidelines 

used to determine whether or not a 

trade qualifies as ‘‘clearly erroneous.’’ 

The proposed rule change would also 

adjust the time periods listed in Rule 

52.4(c)(1). 

Because the periods from 8 a.m. CT to 

8:30 a.m. CT and 3 p.m. CT to 3:30 p.m. 

CT are not ‘‘normal trading hours,’’ 

CBSX DPMs will not be required to 

provide continuous quotes during these 

periods. The proposed rule change 

would amend Rule 53.56 to reflect this. 

The Exchange represents that the later 

closing time will have no implications 

for CBSX systems. The Exchange 

represents that CBSX traders will have 

been notified of the time change via 

circular prior to the rule change taking 

effect. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the Securities Exchange Act of 1934 

(‘‘Act’’) 8 and the rules and regulations 

thereunder and, in particular, the 

requirements of Section 6(b) of the Act.9

Specifically, the Exchange believes that 

the proposed rule change is consistent 

with the Section 6(b)(5) 10 requirements 

that the rules of an exchange be 

designed to promote just and equitable 

principles of trade, to prevent 

fraudulent and manipulative acts, to 

remove impediments to and perfect the 

mechanism for a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. Permitting trading until 

later in the day will permit investors 

greater opportunity to participate in the 

market, thereby removing an 

impediment to trading. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

CBOE 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 

The Exchange neither solicited nor 

received comments on the proposal. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

CBOE has designated the proposed 

rule change as one that: (1) Does not 

significantly affect the protection of 

investors or the public interest; (2) does 

not impose any significant burden on 

competition; and (3) does not become 

operative for 30 days from the date of 

filing, or such shorter time as the 

Commission may designate if consistent 

with the protection of investors and the 

public interest. Therefore, the proposed 

rule change has become effective 

pursuant to Section 19(b)(3)(A) of the 

Act 11 and Rule 19b–4(f)(6) 

thereunder.12

CBOE has requested that the 

Commission waive a portion of the 30- 

day operative delay to permit the 

proposed rule change to become 

operative on February 1, 2010. CBOE 

believes that such waiver will facilitate 

CBSX providing its members with 

extended trading opportunities that are 

already available on other exchanges.13

The Commission grants CBOE’s 

request.14 The Commission believes that 

such action is consistent with the 

protection of investors and the public 

interest because other U.S. exchanges 

currently provide extended trading 

hours subject to similar rules relating to 

investor protection.15 Accordingly, 

CBOE’s proposal does not appear to 

present any novel regulatory issues. 

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–CBOE–2010–004 on the 

subject line. 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 75, No. 13 / Thursday, January 21, 2010 / Notices 3513 

16 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The $1 Strike Price Program was initially 

approved as a pilot on March 12, 2008. See 

Securities Exchange Act Release No. 57478 (March 

12, 2008), 73 FR 14521 (March 18, 2008) (SR– 

NASDAQ–2007–004 and SR–NASDAQ–2007–080) 

(order approving). The program was subsequently 

made permanent and expanded. See Securities 

Exchange Act Release Nos. 58093 (July 3, 2008), 73 

FR 39756 (July 10, 2008)(SR–NASDAQ–2008–057) 

(notice of filing and immediate effectiveness); and 

59588 (March 17, 2009), 74 FR 12410 (March 24, 

2009)(SR–NASDAQ–2009–025) (notice of filing and 

immediate effectiveness). 

4Long-Term Equity Anticipation Securities 

(LEAPS) are long term options that expire from 

twelve to thirty-nine months from the time they are 

listed. Chapter IV Section 8. Long-term index 

options are considered separately in Chapter XIV 

Section 11. For purposes of the Program, long-term 

options (LEAPS) are considered to be option series 

having greater than nine months until expiration. 

Chapter IV Supplementary Material .02 to Section 

6. 

5 17 CFR 240.19b–4(f)(6)(iii). 

6See Securities Exchange Act Release No. 60978 

(November 10, 2009), 74 FR 59296 (November 17, 

2009) (SR–CBOE–2009–068) (order approving 

proposed rule change to allow listing LEAPS in $1 

Strike Program). 

7Regarding the $0.50 Strike Program, see Chapter 

IV Supplementary Material .05 to Section 6 and 

Securities Exchange Act Release No. 60952 

(November 6, 2009), 74 FR 59277 (November 17, 

2009) (SR–NASDAQ–2009–099) (notice of filing 

and order approving). The $0.50 Strike Program 

establishes strike price intervals of $0.50 for options 

on stocks trading at or below $3.00. 

Paper Comments: 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

Station Place, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–CBOE–2010–004. 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–CBOE–2010–004 and 

should be submitted on or before 

February 11, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–1020 Filed 1–20–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–61347; File No. SR– 

NASDAQ–2010–003] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of a Proposed Rule Change by the 

NASDAQ Stock Market LLC To Amend 

the $1 Strike Program To Allow the 

Listing of $1 LEAPS 

January 13, 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 January 

11, 2010, The NASDAQ Stock Market 

LLC (‘‘Nasdaq’’) 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 Nasdaq. 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 is filing with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) a proposal for the 

NASDAQ Options Market (‘‘NOM’’ or 

‘‘Exchange’’) to amend its Chapter IV 

Supplementary Material .02 to Section 6 

(Series of Options Contracts Open for 

Trading) to expand the Exchange’s $1 

Strike Price Program (‘‘Program’’ or ‘‘$1 

Strike Program’’) 3 to allow listing longterm option series (‘‘LEAPS’’) 4 in $1 

strike price intervals up to $5 in up to 

200 option classes in individual stocks. 

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 from Nasdaq’s Web site at 

http://nasdaq.cchwallstreet.com/ 

Filings/, 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 

This proposed rule change is based on 

a filing previously submitted by Chicago 

Board Options Exchange, Incorporated 

(‘‘CBOE’’) that was recently approved by 

the Commission.6

The purpose of the proposal is to 

expand the $1 Strike Program in a 

limited fashion to allow NASDAQ to list 

new series in $1 strike price intervals up 

to $5 in LEAPS in up to 200 option 

classes on individual stocks. 

Currently, under the $1 Strike 

Program, the Exchange may not list 

option series having greater than nine 

months until expiration (LEAPS) at $1 

strike price intervals for any class 

selected for the Program. The Exchange 

also is restricted from listing any series 

that would result in strike prices being 

$0.50 apart, unless the series are part of 

the $.50 Strike Program.7

NASDAQ believes that its proposal to 

allow limited listing of option series 

having greater than nine months until 

expiration (LEAPS) in the Program is 

appropriate and will allow investors to 


jlentini on DSKJ8SOYB1PROD with NOTICES