Federal Register / Vol. 75, No. 198 / Thursday, October 14, 2010 / Notices 63229 

3The standard method for adjusting futures 

contracts in response to cash distributions is to 

decrease the prior day’s settlement price by the 

amount of the dividend. This adjustment is 

effective at the opening of business on the exdistribution date and parallels the adjustment made 

to the price of the underlying stock by the securities 

exchanges on the ex-distribution date. It is intended 

to ensure that no futures mark-to-the-market 

attributable to the adjustment made to the stock 

price for the dividend will occur. 

4OCC also proposes to add Interpretation and 

Policy .10 to Article XII, Section 3 to provide that 

officially reported settlement prices will not be 

adjusted (other than as provided for in the By-Laws 

and Rules) except in extraordinary circumstances. 

The Interpretation further provides that in no event 

will a completed settlement be adjusted due to 

errors discovered thereafter. This latter provision is 

intended to preserve the finality of money 

settlements should it later be determined that an 

officially reported settlement price was erroneous. 

The new Interpretation is based on existing 

provisions of OCC’s By-Laws. See, e.g., Article XIV, 

Section 6, Interpretation and Policy .01; Article 

XVI, Section 4, Interpretation and Policy .01; and 

Article XVII, Section 4, Interpretation and Policy 

.01. 

5Amendment No. 1 will be executed after the 

effectiveness of this filing. 

6 15 U.S.C. 78q–1(b)(3)(F). 

7 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

distribution and of the appropriate 

adjustment amount. Provided that such 

information (including any corrections 

thereto) is reported to OCC before an 

OCC-designated cut-off time prior to the 

ex-date, OCC will make the appropriate 

adjustment to the settlement price of the 

security futures contract. Such 

adjustments will be effective before the 

opening of business on the ex-date.3 If 

the exchange fails to report dividend or 

distribution information to OCC on a 

timely basis or reports incorrect 

dividend or distribution information to 

OCC, then the exchange will be able to 

report such information or corrected 

information to OCC on the ex-date, and 

OCC will effect the adjustment as soon 

as practicable thereafter.4 In the event 

the exchange already opened trading in 

the security futures contracts affected 

thereby, the exchange will provide OCC 

with direction on whether such trades 

should be cleared or disregarded as 

provided for in Article VI, Section 7 of 

OCC’s By-Laws. Pursuant thereto, 

disregarded transactions will be deemed 

null and void and given no effect. These 

procedures are intended not only to 

preserve OCC’s ability to initiate and 

conduct nightly processing on a timely 

basis but also to provide the exchange 

with the opportunity to report to OCC 

dividend or distribution information 

that was not available to it before OCC’s 

processing cut-offs or to correct 

erroneously reported information so that 

there is an appropriate adjustment to the 

settlement price for the affected 

contracts. 

In connection with OneChicago’s 

proposal, OneChicago and OCC also 

have agreed to amend the Security 

Futures Agreement for Clearing and 

Settlement Services, dated April 1, 

2002, (‘‘Clearing Agreement’’) by 

entering into Amendment No. 1 

thereto.5 Amendment No. 1 would 

amend Section 5 of the Clearing 

Agreement to permit OneChicago to 

designate those security futures 

contracts for which adjustments will be 

made in response to all cash dividends 

or distributions of the underlying 

securities and to set forth OneChicago’s 

obligation to furnish OCC with notice of 

all relevant information regarding such 

dividends or distributions so that OCC 

can adjust the settlement price of the 

affected security future as described 

above. Amended Section 5 further 

extends the current indemnification 

provided by OneChicago to OCC to 

cover losses resulting from OCC’s 

adjustment of the settlement prices of 

security futures in accordance with 

dividend or distribution information 

supplied by OneChicago or OCC’s 

failing to adjust in the event 

OneChicago did not supply OCC with 

information regarding such an 

adjustment. 

III. Discussion 

Section 19(b) of the Act directs the 

Commission to approve a proposed rule 

change of a self-regulatory organization 

if it finds that such proposed rule 

change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

such organization. Section 17A(b)(3)(F) 

of the Act requires that the rules of a 

clearing agency be designed to promote 

the prompt and accurate clearance and 

settlement of security transactions and 

generally to protect investors and the 

public interest.6 The Commission 

believes that OCC’s rule change is 

consistent with this Section because the 

rule change should better enable OCC to 

promptly and accurately clear and settle 

security futures contracts for which an 

exchange has designated that the 

settlement prices will be adjusted to 

reflect the issuance of all cash dividends 

or distributions on the underlying 

security. 

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and in 

particular Section 17A of the Act and 

the rules and regulations thereunder. In 

approving the proposed rule change, the 

Commission considered the proposal’s 

impact on efficiency, competition, and 

capital formation. 

It is therefore ordered, pursuant to 

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

proposed rule change (File No. SR– 

OCC–2010–13) be and hereby is 

approved. 

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–25864 Filed 10–13–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63063; File No. SR– 

NASDAQ–2010–126] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change to Make a 

Conforming Change to NASDAQ Rules 

October 7, 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 October 

1, 2010, The NASDAQ Stock Market 

LLC (‘‘NASDAQ’’ or the ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (the ‘‘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 

NASDAQ proposes to make a 

conforming change to Rule 4758 to 

reflect prior effectiveness of filings 

allowing routing of orders to a facility 

of an exchange that is an affiliate of 

NASDAQ. NASDAQ proposes to 

implement the rule change concurrent 

with the launch of cash equity trading 

on NASDAQ OMX PSX, which is 

currently scheduled to occur on October 

8, 2010. The text of the proposed rule 

change is available at http:// 

nasdaq.cchwallstreet.com/, at 

NASDAQ’s principal office, and at the 

Commission’s Public Reference Room. 


jlentini on DSKJ8SOYB1PROD with NOTICES
63230 Federal Register / Vol. 75, No. 198 / Thursday, October 14, 2010 / Notices 

3Securities Exchange Act Release No. 62877 

(September 9, 2010), 75 FR 56633 (September 16, 

2010) (SR–PHLX–2010–79). 

4 17 CFR 242.600. 

5Securities Exchange Act Release No. 62736 

(August 17, 2010), 75 FR 51861 (August 23, 2010) 

(SR–NASDAQ–2010–100). 

6Supra n.3. 

7 15 U.S.C. 78f. 

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

9 15 U.S.C. 78s(b)(3)(A). 

10 17 CFR 240.19b–4(f)(6). 

11 17 CFR 240.19b–4(f)(6)(iii). 

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). 

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. The text of 

these statements may be examined at 

the places specified in Item III below, 

and is set forth in Sections A, B, and C 

below. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The NASDAQ OMX Group, Inc. 

(‘‘NASDAQ OMX’’) owns three U.S. 

registered securities exchanges— 

NASDAQ, NASDAQ OMX PHLX, Inc. 

(‘‘PHLX’’) and NASDAQ OMX BX, Inc. 

(‘‘BX’’). In addition, NASDAQ OMX 

currently indirectly owns Nasdaq 

Execution Services, LLC (‘‘NES’’), a 

registered broker-dealer and a member 

of PHLX. Thus, NES is an affiliate of 

each of NASDAQ, PHLX and BX. 

PHLX has received approval to launch 

NASDAQ OMX PSX (‘‘PSX’’) 3 as a new 

platform for trading NMS stocks (as 

defined in Rule 600 under Regulation 

NMS).4 Although PSX will not route to 

other market centers, PSX will receive 

orders routed to it by other market 

centers, including NASDAQ. 

In SR–NASDAQ–2010–100,5

NASDAQ submitted a proposed rule 

change that authorized it to route orders 

to PSX through NES without checking 

the NASDAQ book. In addition, in SR– 

PHLX–2010–79, PHLX received 

approval, on a pilot basis, to receive 

orders routed to it by NES that did not 

check the NASDAQ book prior to 

routing.6 The change to NASDAQ rules 

was reflected in an amendment to Rule 

4751, but should have also been 

reflected in an amendment to Rule 4758. 

Accordingly, NASDAQ is submitting 

this rule change to make the conforming 

change. 

2. Statutory Basis 

NASDAQ believes that the proposed 

rule change is consistent with the 

provisions of Section 6 of the Act,7 in 

general, and with Section 6(b)(5) of the 

Act,8 in particular, in that the proposal 

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 

regulating, clearing, settling, processing 

information with respect to, and 

facilitating transactions in securities, 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 would make a conforming 

change to NASDAQ rules to reflect 

previously adopted rule changes. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

NASDAQ does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act, as amended. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor 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 9 and Rule 19b– 

4(f)(6) thereunder.10 NASDAQ requests 

that the Commission waive the 30-day 

pre-operative delay contained in 

Exchange Act Rule 19b–4(f)(6)(iii).11

NASDAQ requests such a waiver 

because the proposed rule change 

merely conforms the text of Rule 4758 

to rule changes made by SR–NASDAQ– 

2010–100 and SR–PHLX–2010–79 that 

have already become effective, and such 

waivers will allow the proposed rule 

change to be in effect on October 8, 

2010, the date on which trading will 

commence on PSX. The Commission 

believes that waiving the 30-day 

operative delay 12 is consistent with the 

protection of investors and the public 

interest. Accordingly, the Commission 

designates the proposal operative upon 

filing. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend 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. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

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–NASDAQ–2010–126 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–NASDAQ–2010–126. 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, on official business 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 75, No. 198 / Thursday, October 14, 2010 / Notices 63231 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Advices are administered as part of the 

Exchange’s minor rule plan; the Exchange proposes 

to remove Advice A–11 from the minor rule plan. 

4 15 U.S.C. 78f(b). 

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

6 15 U.S.C. 78s(b)(3)(A). 

7 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires the self-regulatory organization 

to give the Commission 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 

of the proposed rule change, or such shorter time 

as designated by the Commission. Phlx has satisfied 

this requirement. 

days between the hours of 10 a.m. and 

3 p.m. 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–NASDAQ–2010–126 and 

should be submitted on or before 

November 4, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–25863 Filed 10–13–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63064; File No. SR–Phlx– 

2010–136] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX, Inc.; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Rule 1015 

October 7, 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 

September 30, 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, 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 

The Exchange proposes to delete Rule 

1015, Execution Guarantees (with the 

exception of subparagraph (a)(vi)), 

which is outdated and should have been 

deleted previously. The Exchange also 

proposes to delete Options Floor 

Procedure Advice (‘‘Advice’’) A–11, 

which contains corresponding language. 

The Exchange proposes to move 

subparagraph (a)(vi) of both Rule 1015 

and Advice A–11 to Rule 1063.02, 

which governs floor broker activity. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.nasdaqtrader.com/ 

micro.aspx?id=PHLXfilings, at the 

principal office of the Exchange, at the 

Commission’s Public Reference Room, 

and on the Commission’s Web site at 

http://www.sec.gov. 

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 the proposed rule 

change is to update and correct the rules 

by deleting two outdated rules. 

Generally, the execution of orders is 

now governed by Rules 1080 and 1082, 

among others. Rule 1015 refers to 

execution guarantees, disseminated size 

and ‘‘trade or fade’’ provisions that 

together have become obsolete due to 

the combination of the adoption of firm 

quote obligations in options and 

increased automation; specifically, the 

disseminated size is no longer an 

artificial size that requires this rule to 

apportion responsibility to ‘‘floor 

traders’’ to reach that minimum size. 

With the advent of an actual size in 

options along with automatic execution 

at the displayed size, these provisions 

became outdated. 

With respect to Advice A–11, it tracks 

the language of Rule 1015. Historically, 

Advices replicated the provisions of the 

Exchange’s rules that were most 

pertinent for the trading floor 

community to keep handy, in lieu of the 

large, unwieldy rulebook; the Exchange 

adopted, for many years, both rules and 

advices that contained nearly identical 

language where the advice was the 

subject of a fine schedule under the 

Exchange’s minor rule plan in order for 

the trading floor to have easy access to 

these provisions (which the Exchange 

printed and distributed) and in order for 

those persons who administered fines to 

have easy access to consult the 

applicable fine schedules.3

The Exchange proposes to move Rule 

1015(a)(vi) to Rule 1063.02 because it 

governs floor broker behavior and 

continues to be relevant. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 4 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 5

in particular, in that it is designed 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, by 

deleting obsolete provisions and 

generally providing clarity to the rules. 

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 

Because the foregoing proposed rule 

change does not: (1) Significantly affect 

the protection of investors or the public 

interest; (2) impose any significant 

burden on competition; and (3) become 

operative for 30 days after the date of 

the filing, or such shorter time as the 

Commission may designate, if 

consistent with the protection of 

investors and the public interest, the 

proposed rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 6 and Rule 19b–4(f)(6) 

thereunder.7


jlentini on DSKJ8SOYB1PROD with NOTICES