Federal Register / Vol. 79, No. 231 / Tuesday, December 2, 2014 / Notices 71477 

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

2 17 CFR 240.19b–4. 

3The Penny Pilot was established in March 2008 

and was last extended in 2014. See Securities 

Exchange Act Release Nos. 57579 (March 28, 2008), 

73 FR 18587 (April 4, 2008) (SR–NASDAQ–2008– 

026) (notice of filing and immediate effectiveness 

establishing Penny Pilot); and 72244 (May 23, 

2014), 79 FR 31151 (May 30, 2014) (SR–NASDAQ– 

2014–056) (notice of filing and immediate 

effectiveness extending the Penny Pilot through 

December 31, 2014). 

appropriate, the institution of 

procedures designed to ensure that 

purchases of securities in Affiliated 

Underwritings are in the best interest of 

shareholders of the Fund. 

8. Each Fund will maintain and 

preserve permanently in an easily 

accessible place a written copy of the 

procedures described in the preceding 

condition, and any modifications to 

such procedures, and will maintain and 

preserve for a period of not less than six 

years from the end of the fiscal year in 

which any purchase in an Affiliated 

Underwriting occurred, the first two 

years in an easily accessible place, a 

written record of each purchase of 

securities in Affiliated Underwritings 

once an investment by a Fund of Funds 

in the securities of the Fund exceeds the 

limit of section 12(d)(1)(A)(i) of the Act, 

setting forth from whom the securities 

were acquired, the identity of the 

underwriting syndicate’s members, the 

terms of the purchase, and the 

information or materials upon which 

the Board’s determinations were made. 

9. Before investing in a Fund in 

excess of the limit in section 

12(d)(1)(A), a Fund of Funds and the 

applicable Trust will execute a FOF 

Participation Agreement stating, 

without limitation, that their respective 

boards of directors or trustees and their 

investment advisers, or trustee and 

Sponsor, as applicable, understand the 

terms and conditions of the order, and 

agree to fulfill their responsibilities 

under the order. At the time of its 

investment in Shares of a Fund in 

excess of the limit in section 

12(d)(1)(A)(i), a Fund of Funds will 

notify the Fund of the investment. At 

such time, the Fund of Funds will also 

transmit to the Fund a list of the names 

of each Fund of Funds Affiliate and 

Underwriting Affiliate. The Fund of 

Funds will notify the Fund of any 

changes to the list of the names as soon 

as reasonably practicable after a change 

occurs. The Fund and the Fund of 

Funds will maintain and preserve a 

copy of the order, the FOF Participation 

Agreement, and the list with any 

updated information for the duration of 

the investment and for a period of not 

less than six years thereafter, the first 

two years in an easily accessible place. 

10. Before approving any advisory 

contract under section 15 of the Act, the 

board of directors or trustees of each 

Investing Management Company 

including a majority of the disinterested 

directors or trustees, will find that the 

advisory fees charged under such 

contract are based on services provided 

that will be in addition to, rather than 

duplicative of, the services provided 

under the advisory contract(s) of any 

Fund in which the Investing 

Management Company may invest. 

These findings and their basis will be 

fully recorded in the minute books of 

the appropriate Investing Management 

Company. 

11. Any sales charges and/or service 

fees charged with respect to shares of a 

Fund of Funds will not exceed the 

limits applicable to a fund of funds as 

set forth in NASD Conduct Rule 2830. 

12. No Fund will acquire securities of 

an investment company or company 

relying on section 3(c)(1) or 3(c)(7) of 

the Act in excess of the limits contained 

in section 12(d)(1)(A) of the Act, except 

to the extent the Fund acquires 

securities of another investment 

company pursuant to exemptive relief 

from the Commission permitting the 

Fund to acquire securities of one or 

more investment companies for shortterm cash management purposes. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–28313 Filed 12–1–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73686; File No. SR– 

NASDAQ–2014–115] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

a Proposed Rule Change Relating to 

Extension of the Exchange’s Penny 

Pilot Program and Replacement of 

Penny Pilot Issues That Have Been 

Delisted 

November 25, 2014. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 1, and Rule 19b–4 2 thereunder, 

notice is hereby given that on November 

21, 2014, The NASDAQ Stock Market 

LLC (‘‘NASDAQ’’ 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 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 

Commission a proposal to amend 

Chapter VI, Section 5 (Minimum 

Increments) of the rules of the NASDAQ 

Options Market (‘‘NOM’’) to extend 

through June 30, 2015, the Penny Pilot 

Program in options classes in certain 

issues (‘‘Penny Pilot’’ or ‘‘Pilot’’), and to 

change the date when delisted classes 

may be replaced in the Penny Pilot.3

The Exchange requests that the 

Commission waive the 30-day operative 

delay period to the extent needed for 

timely industry-wide implementation of 

the proposal. 

The text of the amended Exchange 

rule is set forth immediately below. 

Proposed new language is in italics 

and proposed deleted language is 

[bracketed]. 

NASDAQ Stock Market Rules 

Options Rules 

* * * * * 

Chapter VI Trading Systems 

* * * * * 

Sec. 5 Minimum Increments 

(a) The Board may establish minimum 

quoting increments for options contracts 

traded on NOM. Such minimum 

increments established by the Board 

will be designated as a stated policy, 

practice, or interpretation with respect 

to the administration of this Section 

within the meaning of Section 19 of the 

Exchange Act and will be filed with the 

SEC as a rule change for effectiveness 

upon filing. Until such time as the 

Board makes a change in the 

increments, the following principles 

shall apply: 

(1)–(2) No Change. 

(3) For a pilot period scheduled to 

expire on [December 31, 2014]June 30, 

2015, if the options series is trading 

pursuant to the Penny Pilot program one 

(1) cent if the options series is trading 

at less than $3.00, five (5) cents if the 

options series is trading at $3.00 or 

higher, unless for QQQQs, SPY and 

IWM where the minimum quoting 

increment will be one cent for all series 

regardless of price. A list of such 

options shall be communicated to 


rljohnson on DSK3VPTVN1PROD with NOTICES
71478 Federal Register / Vol. 79, No. 231 / Tuesday, December 2, 2014 / Notices 

4The replacement issues will be announced to 

the Exchange’s membership via an Options Trader 

Alert (OTA) posted on the Exchange’s Web site. The 

Exchange proposes in its Penny Pilot rule that 

replacement issues will be selected based on 

trading activity in the previous six months. The 

replacement issues would be identified based on 

The Option Clearing Corporation’s trading volume 

data from June 1, 2014 through November 30, 2014. 

The month immediately preceding the replacement 

issues’ addition to the Pilot Program (i.e. December) 

would not be used for purposes of the six-month 

analysis. 

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

6 15 U.S.C. 78f(b)(5). 

7 15 U.S.C. 78s(b)(3)(A). 

8 17 CFR 240.19b–4(f)(6). 

membership via an Options Trader Alert 

(‘‘OTA’’) posted on the Exchange’s Web 

site. 

The Exchange may replace any pilot 

issues that have been delisted with the 

next most actively traded multiply 

listed options classes that are not yet 

included in the pilot, based on trading 

activity in the previous six months. The 

replacement issues may be added to the 

pilot on the second trading day 

following [July 1, 2014]January 1, 2015. 

(4) No Change. 

(b) No Change. 

* * * * * 

The text of the proposed rule change 

is available from NASDAQ’s Web site at 

http://nasdaq.cchwallstreet.com, 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 

The purpose of this filing is to amend 

Chapter VI, Section 5 to extend the 

Penny Pilot through June 30, 2015, and 

to change the date when delisted classes 

may be replaced in the Penny Pilot. The 

Exchange believes that extending the 

Penny Pilot will allow for further 

analysis of the Penny Pilot and a 

determination of how the program 

should be structured in the future. 

Under the Penny Pilot, the minimum 

price variation for all participating 

options classes, except for the Nasdaq100 Index Tracking Stock (‘‘QQQQ’’), 

the SPDR S&P 500 Exchange Traded 

Fund (‘‘SPY’’) and the iShares Russell 

2000 Index Fund (‘‘IWM’’), is $0.01 for 

all quotations in options series that are 

quoted at less than $3 per contract and 

$0.05 for all quotations in options series 

that are quoted at $3 per contract or 

greater. QQQQ, SPY and IWM are 

quoted in $0.01 increments for all 

options series. The Penny Pilot is 

currently scheduled to expire on 

December 31, 2014. 

The Exchange proposes to extend the 

time period of the Penny Pilot through 

June 30, 2015, and to provide revised 

dates for adding replacement issues to 

the Penny Pilot. The Exchange proposes 

that any Penny Pilot Program issues that 

have been delisted may be replaced on 

the second trading day following 

January 1, 2015. The replacement issues 

will be selected based on trading 

activity in the previous six months.4

This filing does not propose any 

substantive changes to the Penny Pilot 

Program; all classes currently 

participating in the Penny Pilot will 

remain the same and all minimum 

increments will remain unchanged. The 

Exchange believes the benefits to public 

customers and other market participants 

who will be able to express their true 

prices to buy and sell options have been 

demonstrated to outweigh the potential 

increase in quote traffic. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 5 in general, and furthers the 

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

in particular, in that it 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 facilitating 

transactions in securities, and 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. 

In particular, the proposed rule 

change, which extends the Penny Pilot 

for an additional six months through 

June 30, 2015, and changes the date for 

replacing Penny Pilot issues that were 

delisted to the second trading day 

following January 1, 2015, will enable 

public customers and other market 

participants to express their true prices 

to buy and sell options for the benefit 

of all market participants. This is 

consistent with the Act. 

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. To the 

contrary, this proposal is procompetitive because it allows Penny 

Pilot issues to continue trading on the 

Exchange. Moreover, the Exchange 

believes that the proposed rule change 

will allow for further analysis of the 

Pilot and a determination of how the 

Pilot should be structured in the future; 

and will serve to promote regulatory 

clarity and consistency, thereby 

reducing burdens on the marketplace 

and facilitating investor protection. The 

Pilot is an industry wide initiative 

supported by all other option 

exchanges. The Exchange believes that 

extending the Pilot will allow for 

continued competition between market 

participants on the Exchange trading 

similar products as their counterparts 

on other exchanges, while at the same 

time allowing the Exchange to continue 

to compete for order flow with other 

exchanges in option issues trading as 

part of the Pilot. 

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) 7 of the Act and 

subparagraph (f)(6) of Rule 19b–4 

thereunder.8

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: (i) Necessary or appropriate in 

the public interest; (ii) for the protection 

of investors; or (iii) otherwise in 

furtherance of the purposes of the Act. 

If the Commission takes such action, the 

Commission shall institute proceedings 


rljohnson on DSK3VPTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 231 / Tuesday, December 2, 2014 / Notices 71479 

9 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See OCC Rule 1001(a). 

4OCC also has submitted an advance notice that 

would provide greater detail concerning conditions 

under which OCC would resize the Clearing Fund 

intra-month. The change would permit intra-month 

resizing in the event that the five-day rolling 

average of projected draws are 150% or more of the 

Clearing Fund’s then current size. See Securities 

Exchange Act Release No. 72804 (August 11, 2014), 

79 FR 48276 (August 15, 2014) (SR–OCC–2014– 

804). 

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 email to rule-comments@

sec.gov. Please include File Number SR– 

NASDAQ–2014–115 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, Station 

Place, 100 F Street NE., Washington, DC 

20549–9303. 

All submissions should refer to File 

Number SR–NASDAQ–2014–115. This 

file number should be included on the 

subject line if email 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, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of NASDAQ. 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–2014–115 and 

should be submitted on or before 

December 23, 2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–28318 Filed 12–1–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73685; File No. SR–OCC– 

2014–21] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing of Proposed Rule Change in 

Order To Permit OCC To Adjust the 

Size of Its Clearing Fund on an IntraMonth Basis 

November 25, 2014. 

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 November 

13, 2014, The Options Clearing 

Corporation (‘‘OCC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II and III 

below, which Items have been prepared 

by OCC. The Commission is publishing 

this notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

This proposed rule change by OCC 

would delete the second sentence of 

Rule 1001(a), which OCC has 

temporarily suspended pursuant to 

emergency authority under Article IX, 

Section 14 of its By-Laws, which would 

permit OCC to adjust the size of its 

Clearing Fund on an intra-month basis. 

II. Clearing Agency’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. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

1. Purpose 

OCC is submitting this proposed rule 

change to permit OCC to collect 

additional financial resources from its 

clearing membership by increasing the 

size of its Clearing Fund on an intramonth basis when OCC determines such 

action should be taken so that the 

Clearing Fund is sufficient to protect 

OCC against potential loss under 

simulated default scenarios. OCC 

monitors the sufficiency of the Clearing 

Fund on a daily basis but may only 

readjust the size of the Clearing Fund on 

a monthly basis.3 During the ordinary 

course of daily monitoring activities on 

October 15, 2014, and as a result of 

increased volatility in the financial 

markets in October 2014, OCC 

determined that in the event of a default 

of its largest participant family, OCC’s 

then current financial resources 

potentially could have fallen short of 

the total financial resources needed to 

cover the loss associated with the 

default. 

To permit OCC to increase the size of 

its Clearing Fund prior to the next 

monthly resizing that was scheduled to 

take place on the first business day of 

November 2014, OCC’s Executive 

Chairman, on October 15, 2014, 

exercised certain emergency powers as 

set forth in Article IX, Section 14 of 

OCC’s By-Laws.4 In emergency 

circumstances, and subject to certain 

conditions, Article IX, Section 14 

permits OCC’s Board of Directors, 

Executive Chairman, or President to 

waive or suspend its By-Laws, Rules, 

policies and procedures, or any other 

rules issued by OCC or extend the time 

fixed thereby for the doing of any act or 

acts for up to thirty calendar days. 

Consistent with that authority, and 

following discussions with the Risk 

Committee of OCC’s Board of Directors, 

the Executive Chairman waived the 

provisions in the second sentence of 

Rule 1001(a). OCC then filed an 

emergency notice with the Commission 

pursuant to Section 806(e)(2) of the 

Payment, Clearing, and Settlement 


rljohnson on DSK3VPTVN1PROD with NOTICES