Federal Register / Vol. 74, No. 111 / Thursday, June 11, 2009 / Notices 27851 

WORKBOOK 2—AGGREGATE INFORMATION—Continued 

Eligible mailer information 

Month (for each month) 

October 2006 through 

October 2009 1

High Density and Saturation Letters ................................................................................................................

High Density and Saturation Flats ....................................................................................................................

Rebate Calculation for each mailer Formula Calculation 

Incremental Volume .................................................................................................................................................

Rebate .....................................................................................................................................................................

1Formulas used in the determination of Volume Threshold, Incremental Volume, October 2009 Adjustment, Average Revenue per Piece, and 

Summer Sale Rebate should be shown on each mailer page. Only mailer input data should be hardcoded. 

[FR Doc. E9–13641 Filed 6–10–09; 8:45 am] 

BILLING CODE 7710–FW–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. IC–28758; 812–13619] 

Nuveen Tax-Advantaged Total Return 

Strategy Fund, et al.; Notice of 

Application 

June 4, 2009. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of application for an 

order under section 6(c) of the 

Investment Company Act of 1940 

(‘‘Act’’) for an exemption from sections 

18(a)(1)(A) and (B) of the Act. 

APPLICANTS: Nuveen Tax-Advantaged 

Total Return Strategy Fund, Nuveen 

Real Estate Income Fund, Nuveen 

Diversified Dividend and Income Fund, 

Nuveen Multi-Strategy Income and 

Growth Fund, Nuveen Multi-Strategy 

Income and Growth Fund 2, Nuveen 

Quality Preferred Income Fund, Nuveen 

Quality Preferred Income Fund 2, 

Nuveen Quality Preferred Income Fund 

3, Nuveen Senior Income Fund, Nuveen 

Floating Rate Income Fund and Nuveen 

Floating Rate Income Opportunity Fund 

(each, a ‘‘Fund’’ and collectively, 

‘‘Funds’’). 

SUMMARY OF APPLICATION: Applicants 

request an order (‘‘Order’’) granting an 

exemption from sections 18(a)(1)(A) and 

(B) of the Act for a period from the date 

of the Order until October 31, 2010. The 

Order would permit each Fund to issue 

or incur debt subject to asset coverage 

of 200% that would be used to refinance 

all of the Fund’s issued and outstanding 

auction rate preferred shares (‘‘ARPS’’) 

issued prior to February 1, 2008 that are 

outstanding at the time such post-order 

debt is issued or incurred. The Order 

also would permit each Fund to declare 

dividends or any other distributions on, 

or purchase, capital stock during the 

term of the Order, provided that such 

post-Order debt has asset coverage of at 

least 200% after deducting the amount 

of such transaction. 

FILING DATES: The application was filed 

on December 29, 2008, and amended on 

March 27, 2009, and June 2, 2009. 

HEARING OR NOTIFICATION OF HEARING: An 

order granting the application will be 

issued unless the Commission orders a 

hearing. Interested persons may request 

a hearing by writing to the 

Commission’s Secretary and serving 

applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on June 29, 2009, and 

should be accompanied by proof of 

service on applicants, in the form of an 

affidavit or, for lawyers, a certificate of 

service. Hearing requests should state 

the nature of the writer’s interest, the 

reason for the request, and the issues 

contested. Persons who wish to be 

notified of a hearing may request 

notification by writing to the 

Commission’s Secretary. 

ADDRESSES: Secretary, Securities and 

Exchange Commission, 100 F Street, 

NE., Washington, DC 20549–1090. 

Applicants: c/o Gifford R. Zimmerman, 

Managing Director, Assistant Secretary 

and Associate General Counsel, Nuveen 

Asset Management, 333 West Wacker 

Drive, Chicago, IL 60606. 

FOR FURTHER INFORMATION CONTACT: 

Bruce R. MacNeil, Senior Counsel, at 

(202) 551–6817, or Julia Kim Gilmer, 

Branch Chief, at (202) 551–6821 

(Division of Investment Management, 

Office of Investment Company 

Regulation). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained via the Commission’s 

Web site by searching for the file 

number, or an applicant using the 

Company name box, at http:// 

www.sec.gov/search/search.htm or by 

calling (202) 551–8090. 

Applicants’ Representations 

1. Each of the Funds is organized as 

a Massachusetts business trust and is a 

closed-end management investment 

company registered under the Act. Each 

Fund is advised by Nuveen Asset 

Management (‘‘Nuveen’’) and has issued 

and outstanding a class of common 

shares and a class of one or more series 

of ARPS. 

2. Applicants state that the Funds 

issued their outstanding ARPS for 

purposes of investment leverage to 

augment the amount of investment 

capital available for use in the pursuit 

of their investment objectives. 

Applicants state that, through the use of 

leverage, the Funds seek to enhance the 

investment return available to the 

holders of their common shares by 

earning a rate of portfolio return (which 

includes the return obtained from 

securities purchased from the proceeds 

of ARPS offerings) that exceeds the 

dividend rate that the Funds pay to 

holders of the ARPS. Applicants 

represent that ARPS shareholders are 

entitled to receive a stated liquidation 

preference amount of $25,000 per share 

(plus any accumulated but unpaid 

dividends) in any liquidation, 

dissolution, or winding up of the 

relevant Fund before any distribution or 

payment to holders of the Fund’s 

common shares. Applicants also state 

that dividends declared and payable on 

ARPS have a similar priority over 

dividends declared and payable on the 

Funds’ common shares. In addition, 

applicants state that ARPS are 

‘‘perpetual’’ securities and are not 

subject to mandatory redemption by a 

Fund (provided certain asset coverage 

tests are met). Further, applicants state 

that ARPS are redeemable at each 

Fund’s option. 

3. Applicants state that prior to 

February 2008, dividend rates on the 

ARPS for each dividend period were set 

at the market clearing rate determined 

through an auction process that brought 

together bidders, who sought to buy 

ARPS, and holders of ARPS, who sought 


jlentini on PROD1PC65 with NOTICES
27852 Federal Register / Vol. 74, No. 111 / Thursday, June 11, 2009 / Notices 

1Each Fund notes that the cost of the replacement 

leverage is expected, over time, to be lower than the 

total cost of ARPS based on the Maximum Rates 

applicable to the ARPS of those Funds. 

2Applicants state that certain closed-end 

municipal bond funds in the same group of 

investment companies as the applicants (but none 

of the applicants) have issued Variable Rate 

Demand Preferred Shares (‘‘VRDP Shares’’), a new 

type of preferred stock that supplements or replaces 

existing ARPS. Applicants further state that it is not 

certain that the Funds will be able to redeem all of 

their ARPS through the issuance of VRDP shares. 

3Section 18(h) of the Act defines asset coverage 

of a senior security representing indebtedness of an 

issuer as the ratio which the value of the total assets 

of the issuer, less all liabilities and indebtedness 

not represented by senior securities, bears to the 

aggregate amount of senior securities representing 

indebtedness of the issuer. The section defines asset 

coverage of the preferred stock of an issuer as the 

ratio which the value of the total assets of the 

issuer, less all liabilities and indebtedness not 

represented by senior securities, bears to the 

aggregate amount of senior securities representing 

indebtedness of the issuer plus the amount the class 

of senior security would be entitled to on 

involuntary liquidation. 

4An exception is made for the declaration of a 

dividend on a class of preferred stock if the senior 

security representing indebtedness has an asset 

coverage of at least 200% at the time of declaration 

after deduction of the amount of such dividend. See 

section 18(a)(1)(B) of the Act. Further, section 18(g) 

of the Act provides, among other things, that 

‘‘senior security,’’ for purposes of section 

18(a)(1)(B), does not include any promissory note 

or other evidence of indebtedness issued in 

consideration of any loan, extension or renewal 

thereof, made by a bank or other person and 

privately arranged, and not intended to be publicly 

distributed. 

to sell their ARPS. Applicants explain 

that if an auction fails to clear (because 

of an imbalance of sell orders over bids), 

the dividend payment rate over the next 

dividend period is set at a specified 

maximum applicable rate (the 

‘‘Maximum Rate’’) determined by 

reference to a short-term market interest 

rate. Applicants state that an 

unsuccessful auction is not a default; 

the relevant Fund continues to pay 

dividends to all holders of ARPS but at 

the specified Maximum Rate rather than 

a market clearing rate. Applicants state 

that they had experienced no 

unsuccessful auctions prior to February 

2008. 

4. Applicants state that the lead 

underwriter of the initial placement of 

a particular series of ARPS (each a 

‘‘Lead Manager’’) would regularly place 

bid orders with its own capital in an 

auction to help ensure that there would 

be a sufficient number of bid orders 

relative to sell orders to permit an 

auction to clear. Applicants represent 

that the auction mechanism generally 

provided readily available liquidity to 

holders of ARPS for almost twenty 

years. Applicants believe that many 

holders of ARPS relied on them as part 

of a cash management vehicle, based in 

part on their expectation of ready 

liquidity. 

5. Applicants state that leading up to 

February 2008, the Lead Managers 

began to experience financial pressures 

that led them to be unwilling to hold 

ARPS on their balance sheets and to 

cease entering supporting bids at ARPS 

auctions. Applicants state that 

beginning on February 12, 2008, all 

closed-end funds advised by Nuveen 

that had outstanding ARPS (including 

the Funds) experienced auction failures 

due to an imbalance between buy and 

sell orders. Applicants also state that 

they believe there is no established 

secondary market that would provide 

holders of ARPS with the liquidation 

preference of $25,000 per share. 

Applicants state that to date the Funds 

have redeemed approximately 81% of 

their outstanding ARPS with, in part, 

borrowings from (a) a commercial paper 

conduit facility, (b) a prime brokerage 

facility, and (c) a bank line of credit, but 

have been prohibited from replacing all 

of their outstanding ARPS because they 

would not have the 300% asset coverage 

required by section 18(a)(1) of the Act 

after a full redemption of the ARPS. As 

a result, applicants state that there is 

currently no reliable mechanism for 

holders of ARPS to obtain liquidity, and 

believe that, industry-wide, the current 

lack of liquidity is causing distress for 

a substantial number of ARPS 

shareholders and creating severe 

hardship for many investors. 

6. Applicants seek relief for a period 

from the date of any Order until October 

31, 2010 (‘‘Exemption Period’’) to 

facilitate temporary borrowings by the 

Funds that would enhance their ability 

to provide a liquidity solution to the 

holders of their ARPS in the near term1

while they either pay down or seek a 

more permanent form of replacement 

leverage, such as a new type of preferred 

stock.2 Because of the limited 

availability of debt financing in the 

current, severely constrained capital 

markets, the applicants believe that the 

negotiation, execution and closing of a 

borrowing transaction to replace the 

leverage currently represented by the 

Funds’ outstanding ARPS, if it can be 

effected, might take several months 

following the issuance of the Order. 

Applicants further state that once the 

debt incurred in replacement of a 

Fund’s outstanding ARPS is in place, it 

is uncertain whether and when the 

applicants will be able to issue VRDP 

Shares to replace the debt, or how 

quickly the securities and capital 

markets will return to conditions that 

would enable the applicants to achieve 

compliance with the asset coverage 

requirements that would apply in the 

absence of the Order. Given the 

continuing unsettled state of the 

securities and capital markets, the 

applicants believe that the Exemption 

Period is reasonable and appropriate. 

Each Fund’s refinancing of ARPS would 

be subject to the Fund obtaining any 

necessary approval of changes to the 

Fund’s fundamental investment policies 

and approval of the refinancing 

arrangements by the Fund’s board of 

trustees (‘‘Board’’). 

Applicants’ Legal Analysis 

1. Section 18(a)(1)(A) of the Act 

provides that it is unlawful for any 

registered closed-end investment 

company to issue any class of senior 

security representing indebtedness, or to 

sell such security of which it is the 

issuer, unless such class of senior 

security will have an asset coverage of 

at least 300% immediately after 

issuance or sale. Section 18(a)(2)(A) of 

the Act provides that it is unlawful for 

any registered closed-end investment 

company to issue any class of senior 

security that is a stock, or to sell any 

such security of which it is the issuer, 

unless such class of senior security will 

have an asset coverage of at least 200% 

immediately after such issuance or 

sale.3

2. Section 18(a)(1)(B) prohibits a 

closed-end fund from declaring a 

dividend or other distribution on, or 

purchasing, its own capital stock unless 

its outstanding indebtedness will have 

an asset coverage of at least 300% 

immediately after deducting the amount 

of such dividend, distribution or 

purchase price.4 Section 18(a)(2)(B) 

prohibits a closed-end fund from 

declaring a dividend or other 

distribution on, or purchasing, its own 

common stock unless its outstanding 

preferred stock will have an asset 

coverage of at least 200% immediately 

after deducting the amount of such 

dividend, distribution or purchase 

price. 

3. Section 6(c) of the Act provides, in 

relevant part, that the Commission, by 

order upon application, may 

conditionally or unconditionally 

exempt any person, security, or 

transaction from any provision of the 

Act if and to the extent necessary or 

appropriate in the public interest and 

consistent with the protection of 

investors and the purposes fairly 

intended by the policy and provisions of 

the Act. 

4. Applicants request that the 

Commission issue an Order under 

section 6(c) of the Act to exempt each 

Fund from the 300% asset coverage 

requirements set forth in sections 


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Federal Register / Vol. 74, No. 111 / Thursday, June 11, 2009 / Notices 27853 

5For purposes of the Order, ARPS refinancings 

refer to such post-Order borrowings and any 

refinancings of such post-Order borrowings until 

the expiration of the Order. 

6See supra note 2. 

7Applicants acknowledge that managing any 

portfolio that relies on borrowing for leverage 

entails the risk that, when the borrowing matures 

and must be repaid or refinanced, an economically 

attractive form of replacement leverage may not be 

available in the capital markets. For that reason, any 

portfolio that relies on borrowing for leverage is 

subject to the risk that it may have to deleverage, 

which could be disadvantageous to the portfolio’s 

common shareholders. Applicants therefore state 

that they regard leveraging through borrowing as 

potentially a temporary, interim step, with the 

issuance of new preferred stock such as VRDP 

Shares as a possible longer-term replacement source 

of portfolio leverage. 

18(a)(1)(A) and (B) of the Act. 

Specifically, the Funds seek relief from 

the section 18 asset coverage 

requirements for senior securities 

representing indebtedness for the 

Exemption Period to permit the Funds 

to refinance any ARPS issued prior to 

February 1, 2008 that are outstanding at 

the time of the Order with debt subject 

to the 200% asset coverage requirement 

for stock, rather than the 300% asset 

coverage that would ordinarily apply 

under section 18 to senior securities 

representing indebtedness, (a) when 

they incur that debt, and (b) when they 

declare dividends or any other 

distributions on, or purchase, their 

capital stock, after deduction of the 

amount of such dividend, distribution 

or purchase price.5 Applicants state 

that, except as permitted under the 

requested Order, if issued, the Funds 

would meet all of the asset coverage 

requirements of section 18(a) of the Act. 

In addition, applicants state that each 

Fund that borrows in reliance on the 

Order will either pay down or refinance 

the debt within the Exemption Period so 

that the Fund would, at the expiration 

of the Exemption Period, comply with 

the applicable asset coverage 

requirements (200% for stock or 300% 

for debt) under section 18 of the Act. 

5. Applicants state that section 18 

reflects congressional concerns 

regarding preferential treatment for 

certain classes of shareholders, complex 

capital structures, and the use of 

excessive leverage. Applicants submit 

that another concern was that senior 

securities gave the misleading 

impression of safety from risk. 

Applicants believe that the request for 

temporary relief is necessary, 

appropriate and in the public interest 

and that such relief is consistent with 

the protection of investors and the 

purposes intended by the policy and 

provisions of the Act. 

6. Applicants note that the illiquidity 

of ARPS is a unique, exigent situation 

that is posing urgent, and in some cases, 

severe hardships on ARPS shareholders. 

Applicants represent that the proposed 

replacement of the ARPS with debt 

would provide liquidity for the Funds’ 

ARPS shareholders while the Funds 

continue their efforts to obtain a more 

permanent form of financing (such as 

through the issuance of VRDP Shares) 

that fully complies with the asset 

coverage requirements of section 18.6

7. Applicants represent that the Order 

would help avoid the potential harm to 

common shareholders that could result 

if the Funds were to deleverage their 

portfolios in the current difficult market 

environment or that could result if a 

reduction in investment return reduced 

the market price of common shares. 

Applicants also state that the requested 

Order would permit the Funds to 

continue to provide their common 

shareholders with the enhanced returns 

that leverage may provide. 

8. Applicants believe that the interests 

of both classes of the Funds’ current 

investors would be well served by the 

requested order—the ARPS 

shareholders because they would 

achieve the liquidity that the market 

currently cannot provide (as well as full 

recovery of the liquidation value of their 

shares) and the common shareholders 

because the cost of the new form of 

leverage would, over time, be lower 

than that of the total cost of the ARPS 

based on their Maximum Rates and the 

adverse consequences of deleveraging 

would be avoided. 

9. Applicants represent that the 

proposed borrowing would be obtained 

from banks, insurance companies or 

qualified institutional buyers (as 

defined in Rule 144(a)(1) under the 

Securities Act of 1933) who would be 

capable of assessing the risk associated 

with the transaction. Applicants also 

state that, to the extent the Act’s asset 

coverage requirements were aimed at 

limiting leverage because of its potential 

to magnify losses as well as gains, they 

believe that the proposal would not 

unduly increase the speculative nature 

of the Funds’ common shares because 

the relief is temporary and the Funds 

would be no more highly leveraged if 

they replace the existing ARPS with 

borrowing.7 Applicants also state that 

the proposed liquidity solution would 

not make the Funds’ capital structure 

more complex, opaque, or hard to 

understand or result in pyramiding or 

inequitable distribution of control. 

10. Applicants state that the current 

state of the credit markets, which has 

affected the ARPS, is an historic event 

of unusual severity, which requires a 

creative and flexible response on the 

part of both the public and private 

sectors. Applicants believe that these 

issues have created an urgent need for 

tailored, rapid, thoughtful and 

responsive solutions. Applicants believe 

that the request meets the standards for 

exemption under section 6(c) of the Act. 

Applicants’ Conditions 

Applicants agree that any order 

granting the requested relief shall be 

subject to the following conditions: 

1. Each Fund that borrows subject to 

200% asset coverage under the Order 

will do so only if such Fund’s Board, 

including a majority of the trustees who 

are not ‘‘interested persons’’ (as defined 

in section 2(a)(19) of the Act) 

(‘‘Independent Trustees’’), shall have 

determined that such borrowing is in 

the best interests of such Fund, its 

common shareholders, and its ARPS 

shareholders. Each Fund shall make and 

preserve for a period of not less than six 

years from the date of such 

determination, the first two years in an 

easily accessible place, minutes 

specifically describing the deliberations 

by the Board and the information and 

documents supporting those 

deliberations, the factors considered by 

the Board in connection with such 

determination, and the basis of such 

determination. 

2. Upon expiration of the Exemption 

Period, each Fund will have asset 

coverage of at least 300% for each class 

of senior security representing 

indebtedness. 

3. The Board of any Fund that has 

borrowed in reliance on the Order shall 

receive and review, no less frequently 

than quarterly during the Exemption 

Period, detailed progress reports 

prepared by management (or other 

parties selected by the Independent 

Trustees) regarding and assessing the 

efforts that the Fund has undertaken, 

and the progress that the Fund has 

made, towards achieving compliance 

with the appropriate asset coverage 

requirements under section 18 by the 

expiration of the Exemption Period. The 

Board, including a majority of the 

Independent Trustees, will make such 

adjustments as it deems necessary or 

appropriate to ensure that the Fund 

comes into compliance with section 18 

of the Act within a reasonable period of 

time, not to exceed the expiration of the 

Exemption Period. Each Fund will make 

and preserve minutes describing these 

reports and the Board’s review, 

including copies of such reports and all 

other information provided to or relied 

upon by the Board, for a period of not 

less than six years, the first two years in 

an easily accessible place. 


jlentini on PROD1PC65 with NOTICES
27854 Federal Register / Vol. 74, No. 111 / Thursday, June 11, 2009 / Notices 

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

2 17 CFR 240.19b–4. 

3The Exchange notes that parallel changes are 

proposed to be made to the rules of NYSE Amex 

LLC. See SR-NYSEAmex-2009-24. 

4The Display Book system is an order 

management and execution facility. The Display 

Book system receives and displays orders to the 

DMMs, contains the Book, and provides a 

mechanism to execute and report transactions and 

publish results to the Consolidated Tape. The 

Display Book system is connected to a number of 

other Exchange systems for the purposes of 

comparison, surveillance, and reporting 

information to customers and other market data and 

national market systems. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–13723 Filed 6–10–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Public Law 94–409, that 

the Securities and Exchange 

Commission will hold a Joint Hearing 

with the Department of Labor to 

examine target date funds and similar 

investment options on Thursday, June 

18, 2009 beginning at 9 a.m. 

The Joint Hearing will take place in 

the Auditorium of the Department of 

Labor’s headquarters at 200 Constitution 

Avenue, NW., Washington, DC. The 

Joint Hearing will be open to the public 

with seating on a first-come, first-served 

basis. Visitors will be subject to security 

checks. 

Discussion topics at the Joint Hearing 

will include issues related to how target 

date fund managers determine asset 

allocations and changes to asset 

allocations (including glide paths) over 

the course of a fund’s operation; how 

they select and monitor underlying 

investments; how the foregoing and 

related risks are disclosed to investors; 

and the approaches or factors for 

comparing and evaluating target date 

funds. Joint Hearing participants will 

include representatives of plan 

participants and beneficiaries, plan 

sponsors, investor organizations, 

academia and the financial services 

industry. 

For further information, please 

contact: The Office of the Secretary at 

(202) 551–5400. 

Dated: June 5, 2009. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. E9–13683 Filed 6–10–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60045; File No. SR–NYSE– 

2009–55] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC, Notice of 

Filing of a Proposed Rule Change 

Amending Rule 70.25 To Permit All 

Available Contra-side Liquidity To 

Trigger the Execution of a d-Quote 

June 4, 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 June 2, 

2009, New York Stock Exchange LLC 

(‘‘NYSE’’ 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 NYSE. 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 70.25 to permit all available 

contra-side liquidity to trigger the 

execution of a d-Quote. The text of the 

proposed rule change is available at the 

Exchange, the Commission’s Public 

Reference Room, and http:// 

www.nyse.com. 

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 

NYSE Rule 70.25(c)(iii) to provide that 

all available contra-side liquidity within 

the possible execution range of a dQuote will be considered when 

determining whether to activate a dQuote.3

Background 

Rule 70.25 governs the entry, 

validation, and execution of bids and 

offers represented by a Floor broker on 

the Floor of the Exchange via agency 

interest files (‘‘e-Quotes’’) that include 

discretionary instructions as to size and/ 

or price (‘‘d-Quotes’’). The discretionary 

instructions that a Floor broker may 

include with an e-Quote can relate to 

the price at which the d-Quote may 

trade and the number of shares to which 

the discretionary price instruction 

applies. 

Rule 70.25(c) provides that a Floor 

broker may designate the amount of his 

or her e-Quote to which discretionary 

pricing instructions apply. Floor brokers 

may also designate a minimum or 

maximum size of contra-side volume 

with which the Floor broker is willing 

to trade using discretionary pricing 

instructions. However, under current 

Rule 70.25(c)(iii), Exchange systems 

currently look only at the contra-side 

displayed interest on the Display 

Book® 4 (‘‘Book’’) to determine whether 

the contra-side volume is within the dQuote’s discretionary size range. 

Therefore, the displayed bid or offer 

must meet the minimum volume of the 

d-Quote before a d-Quote can be 

activated. 

For example, assuming the Exchange 

Best Bid and Offer (‘‘BBO’’) is .05 bid for 

1,000 shares and offering 1,000 shares at 

.08, a d-Quote bidding for .05 with four 

cents of price discretion and a minimum 

share volume subject to such 

discretionary pricing instructions of 

4,000 shares would not be activated 

because the displayed offer of 1,000 

shares is not sufficient to fill the 

discretionary size instructions. 

Accordingly, that d-Quote would not 

trade. 

Similarly, the d-Quote would not be 

activated even if the Book has contraside undisplayed interest that could 

meet both the discretionary pricing and 

volume instructions of the d-Quote. 

Taking the same example as above, if 


jlentini on PROD1PC65 with NOTICES