67796 Federal Register / Vol. 75, No. 212 / Wednesday, November 3, 2010 / Notices 

7 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 8 15 U.S.C. 78f(b). 

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

10See CBOE Regulatory Circulars RG09–97 

(August 31, 2009), RG09–132 (November 20, 2009). 

See also FINRA Regulatory Notices 09–53 (August 

2009), 09–65 (November 2009). 

11 15 U.S.C. 78s(b)(2). 

12 17 CFR 200.30–3(a)(12). 

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

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

3 17 CFR 240.19b–4(f)(4). 

4The Commission has modified the text of the 

summaries prepared by NSCC. 

Securities, supranational debt and debt 

of a foreign country or a subdivision 

thereof, or options or other derivatives 

on any of the foregoing; or (b) interest 

rate futures or options or derivatives on 

the foregoing in this subparagraph (b); 

or (c) CBOE Volatility Index (VIX) 

futures. The Exchange is proposing to 

revise the definition of ‘‘Futures-Linked 

Securities’’ to provide that they are 

securities that pay at maturity a cash 

amount based on the performance or the 

leveraged (multiple or inverse) 

performance of an index or indexes of 

futures contracts or options or 

derivatives on futures contracts 

(‘‘Futures Reference Asset’’). All ETNs 

eligible for options trading must still be 

principally traded on a national 

securities exchange and an ‘‘NMS 

Stock.’’ 

III. Commission Findings 

After careful consideration, the 

Commission finds that the proposed 

rule changes are consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange,7 and in 

particular, the requirements of Section 

6(b) of the Act.8 Specifically, the 

Commission finds that the proposed 

rule changes are consistent with Section 

6(b)(5) of the Act,9 which requires, 

among other things, that the rules of a 

national securities exchange be 

designed to prevent fraudulent and 

manipulative acts and practices, 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. 

Leveraged ETN Options 

The Commission notes that the 

Exchange has represented that, similar 

to its imposition of higher margin 

requirements for options on leveraged 

ETFs,10 the Exchange will impose 

higher margin requirements for 

leveraged ETNs, as allowed under CBOE 

Rules 12.3(h) and 12.10. The Exchange 

will also issue a Regulatory Circular 

announcing the new margin 

requirements prior to listing and trading 

options on leveraged ETNs. 

In addition, pursuant to the proposed 

rule change, the Exchange represented 

that the current listing standards for 

ETN options will continue to apply. The 

Exchange has also represented that its 

existing surveillance procedures 

applicable to trading options are 

adequate to properly monitor trading of 

options on leveraged ETNs. 

The Commission believes that these 

representations are adequate to protect 

investors. Furthermore, the Commission 

believes that the ability to trade options 

on leveraged ETNs will provide 

investors with additional risk 

management tools. Therefore, the 

Commission believes that this proposed 

rule change is appropriate. 

Broaden the Definition of ‘‘FuturesLinked Securities’’ 

The Commission believes that this 

proposal will provide a more efficient 

process for the Exchange to list and 

trade options on ETNs. The Exchange 

will be able to list and trade options 

overlying newly introduced ETNs that 

do not fall within the current definition 

of ‘‘Futures-Linked Securities,’’ without 

first filing a rule change proposal with 

the Commission to change the definition 

of ‘‘Futures-Linked Securities’’ to 

include each specific new product. The 

Commission notes that all ETNs that 

underlie options traded on the Exchange 

must still be principally traded on a 

national securities exchange and must 

be an ‘‘NMS stock.’’ In addition, 

pursuant to the proposed rule change, 

the Exchange represented that the 

current listing standards for options on 

ETNs will continue to apply to options 

on ETNs that fall within the proposed 

definition of ‘‘Futures-Linked 

Securities.’’ The Exchange has also 

represented that its existing surveillance 

procedures applicable to trading options 

are adequate to properly monitor trading 

of options on ETNs. Therefore, the 

Commission believes that this proposed 

rule change is appropriate. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,11 that the 

propose rule change (SR–CBOE–2010– 

080), as modified by Amendment No. 1, 

be, and is hereby, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–27768 Filed 11–2–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63194; File No. SR–NSCC– 

2010–12] 

Self-Regulatory Organizations; The 

National Securities Clearing 

Corporation; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Modify Procedures 

Related to the Automated Customer 

Account Transfer Service 

October 27, 2010. 

Pursuant to Section 19(b)(4) of the 

Securities Exchange Act of 1934 

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

October 15, 2010, The National 

Securities Clearing Corporation 

(‘‘NSCC’’) 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 NSCC. 

NSCC filed the proposal pursuant to 

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

Rule 19b–4(f)(4) 3 thereunder 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 persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The purpose of the proposed rule 

change is to modify NSCC’s Rules so 

that in certain circumstances shares 

delivered to a Member through NSCC’s 

Continuous Net Settlement System 

(‘‘CNS’’) would be allocated to a 

Member’s buy-in delivery obligation in 

a security before being allocated to 

satisfy an Automated Customer Account 

Transfer Service (‘‘ACATS’’) delivery 

obligation in the same security. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

NSCC 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. NSCC has prepared 

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

and (C) below, of the most significant 

aspects of such statements.4


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Federal Register / Vol. 75, No. 212 / Wednesday, November 3, 2010 / Notices 67797 

5ACATS complements a Financial Industry 

Regulatory Authority (‘‘FINRA’’) rule requiring 

FINRA members to use automated clearing agency 

customer account transfer services and to effect 

customer account transfers within specified time 

frames. 

6CNS is an ongoing accounting system which 

nets today’s settling trades with yesterday’s closing 

positions to produce a net short or long position for 

a particular security for a particular Member. NSCC 

is the counter party in all transactions. The 

positions are then passed against the Member’s 

designated depository positions and available 

securities are allocated by book-entry movement. 

This allocation of securities is accomplished 

through an evening cycle followed by a day cycle. 

Positions which remain open after the evening 

cycle may be changed as a result of trades accepted 

for settlement that day. CNS allocates deliveries in 

both the night and day cycles using an algorithm 

based on such things as priority groups, age of 

position within a priority group, and random 

numbers within age groups. 

7Securities Exchange Act Release No. 34–62726 

(August 16, 2010), 75 FR 162 (August 23, 2010) 

(SR–NSCC–2010–05). 

8The proposed changes to NSCC’s Rules can be 

found in Exhibit 5 to proposed rule change SR– 

NSCC–2010–12 at http://www.dtcc.com/ 

downloads/legal/rule_filings/2010/nscc/2010- 

12.pdf. 

9Supra note 7. 

10 15 U.S.C. 78q–1. 

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

12 17 CFR 240.19b–4(f)(4). 

(A) Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change. 

NSCC’s ACATS enables Members to 

effect automated transfers of customers’ 

accounts among themselves.5 For 

ACATS transfers processed through 

CNS,6 long and short positions are 

passed against Members’ positions at 

The Depository Trust Company (‘‘DTC’’) 

and available securities are delivered by 

book-entry movements from short 

Members’ accounts at DTC and to long 

Members’ accounts at DTC. On August 

16, 2010, the Commission approved 

enhancements to ACATS.7 Pursuant to 

Procedure VII of NSCC’s Rules, except 

with respect to securities that are 

subject to certain corporate action 

events, Members with failing long 

positions in a particular security may 

issue a Notice of Intention to Buy-In 

(‘‘Buy-In Notice’’) that specifies a 

quantity of securities not exceeding 

such long positions that it intends to 

buy-in. Generally, deliveries of 

securities to fulfill CNS long positions, 

which represent securities NSCC owes 

Members, are processed in an order 

determined by an algorithm and are 

allocated to Members’ long positions as 

they are received by NSCC. A Buy-In 

Notice affects the priority in which 

securities are allocated, and Members 

with long CNS positions that have 

issued Buy-In Notices have high priority 

to receive shares of the security. 

Members with short CNS positions, 

which represent securities those 

Members owe NSCC, are passed the 

liability for the shares subject to the 

Buy-In Notice and have the opportunity 

to deliver the shares to CNS to avoid 

being subject to a buy-in execution. 

Upon implementation of the 

enhancements to ACATS, deliveries or 

receives in a particular security 

processed through CNS will be deemed 

by NSCC to satisfy a Member’s ACATS 

receive or deliver obligation before 

satisfying other CNS-related obligations 

for that Member in the same security. 

However, in the limited situation where 

a Member is receiving securities being 

delivered pursuant to a Buy-In Notice it 

has issued and that Member also has an 

ACATS receive obligation in that same 

security on that same day, deliveries of 

the security to the Member will first 

satisfy its ACATS receive obligation. 

Any remaining shares in the security 

being delivered to the Member will then 

be applied to satisfy the delivery 

obligation under the Buy-In Notice. If 

the number of remaining shares 

delivered in the security are insufficient 

to cover the obligation under the BuyIn Notice but do satisfy the delivering 

Member’s CNS short position, then the 

delivering Member will be deemed to 

have satisfied its buy-in obligation. 

Consequently, if the receiving Member 

elects to execute the buy-in for the 

security as permitted in the Rules, 

NSCC as the central counterparty will 

have a market exposure in that security 

equal to the amount of shares that were 

first allocated to satisfy the ACATS 

delivery obligation. 

To address this scenario, NSCC is 

amending Procedure VII to make clear 

that for either (a) long positions against 

which a Buy-In Notice is due to expire 

that day but for which positions were 

not satisfied the previous day and (b) 

long positions against which a buy-in 

notice is due to expire the following 

day, deliveries of securities through 

CNS will be applied first to satisfy the 

buy-in delivery obligation for the 

security. Only after the buy-in delivery 

obligation is satisfied will shares in the 

security be deemed to satisfy any 

ACATS delivery obligation. Any 

additional shares delivered in the 

security will then be applied to 

remaining delivery obligations.8

NSCC intends to implement 

enhancement to ACATS as approved in 

Exchange Act Release 34–62726 9 and as 

modified by this proposed rule change 

on or about October 29, 2010. The date 

of implementation would be announced 

by Important Notice. 

NSCC 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 NSCC because 

the proposed rule change would 

promote the prompt and accurate 

clearance and settlement of securities 

transactions, assure the safeguarding of 

securities and funds which are in its 

possession or control or for which it is 

responsible and, in general, protect 

investors and the public interest by 

modifying NSCC’s Rules so that in 

certain circumstances shares delivered 

to a Member through CNS would be 

allocated to a Member’s buy-in delivery 

obligation in a security before being 

allocated to satisfy an ACATS delivery 

obligation in the same security. 

(B) Self-Regulatory Organization’s 

Statement on Burden on Competition 

NSCC does not believe that the 

proposed rule change will 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 yet been 

solicited or received. NSCC will notify 

the Commission of any written 

comments received by NSCC. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(iii) of the Act 11 and Rule 

19b–4(f)(4) 12 thereunder because the 

proposed rule change effects a change in 

an existing service of a registered 

clearing agency that: (i) Does not 

adversely affect the safeguarding of 

securities or funds in the custody or 

control of the clearing agency or for 

which it is responsible and (ii) does not 

significantly affect the respective rights 

or obligations of the clearing agency or 

persons using the service. At any time 

within sixty days of the filing of such 

rule change, the Commission summarily 

may 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. 


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67798 Federal Register / Vol. 75, No. 212 / Wednesday, November 3, 2010 / Notices 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3For a complete description of Phlx XL II, see 

Securities Exchange Act Release No. 59995 (May 

28, 2009), 74 FR 26750 (June 3, 2009) (SR–Phlx– 

2009–32). The instant proposed fees will apply only 

to option orders entered into, and routed by, the 

Phlx XL II system. 

4See Securities Exchange Act Release No. 59995 

(May 28, 2009), 74 FR 26750 (June 3, 2009) (SR– 

Phlx–2009–32). 

5See C2 Fees Schedule. 

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 

• Electronic comments may be 

submitted by using 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 

No. SR–NSCC–2010–12 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–NSCC–2010–12. 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 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 filings 

also will be available for inspection and 

copying at the principal office of NSCC 

and on NSCC’s Web site at http:// 

www.dtcc.com/downloads/legal/ 

rule_filings/2010/nscc/2010-12.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–NSCC–2010–12 and should be 

submitted on or before November 24, 

2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–27687 Filed 11–2–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63198; File No. SR–Phlx2010–151] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Routing Fees 

October 27, 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 October 

25, 2010, NASDAQ OMX PHLX LLC 

(‘‘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 is proposing to amend 

its fees governing pricing for Exchange 

members using the Phlx XL II system,3

for routing standardized equity and 

index option Customer and Professional 

orders to away markets for execution. 

While fee changes pursuant to this 

proposal are effective upon filing, the 

Exchange has designated these changes 

to be operative upon the effectiveness of 

SR–C2–2010–006. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://nasdaqtrader.com/ 

micro.aspx?id=PHLXfilings, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

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

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to recoup costs that the 

Exchange incurs for routing and 

executing Customer and Professional 

orders in equity and index options to 

away markets. 

In May 2009, the Exchange adopted 

Rule 1080(m)(iii)(A) to establish Nasdaq 

Options Services LLC (‘‘NOS’’), a 

member of the Exchange, as the 

Exchange’s exclusive order router.4 NOS 

is utilized by the Phlx XL II system 

solely to route orders in options listed 

and open for trading on the Phlx XL II 

system to destination markets. 

Currently, the Exchange’s Fee 

Schedule includes Routing Fees for both 

Customer and Professional orders. The 

Exchange proposes to assess a Routing 

Fee of $.21 per contract in Customer 

option orders and $.46 per contract in 

Professional option orders that are 

routed to C2 Options Exchange, Inc. 

(‘‘C2’’). The Exchange is proposing to 

caption these proposed fees ‘‘C2.’’ 

The Exchange is proposing these fees 

in order to recoup most clearing charges 

which are incurred by the Exchange 

when orders are routed to these away 

markets as well as a transaction charge 

which is assessed by C2.5

The Exchange is proposing these fees 

to recoup the majority of transaction 

and clearing costs associated with 

routing Customer and Professional 

orders to each destination market. The 

Exchange believes that the routing fees 

proposed will enable the Exchange to 

recover the transaction fees assessed by 

away markets, where applicable, plus 

clearing fees for the execution of 


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