Federal Register / Vol. 74, No. 120 / Wednesday, June 24, 2009 / Notices 30189 

7 In approving this proposal, 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)(5). 

9 17 CFR 240.15c3–1. 

10 15 U.S.C. 78s(b)(2). 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 59896 

(May 11, 2009), 74 FR 22991 (‘‘Notice’’). 

4See CBSX Rule 53.54. A CBSX DPM is a marketmaker that must, among other things, provide 

opening and continuous quotes in its assigned 

securities. See CBSX Rule 53.56. 

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

6 In approving this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

5. Such other terms and conditions 

prescribed by the Exchange in 

accordance with such form, formats and 

procedures as may be established by the 

Exchange from time to time would also 

apply. In this regard, upon approval of 

the proposed rule change and for a 

period of one year, the Exchange will 

require that, prior to the 

Commencement Date, a legal opinion 

with respect to the account holder’s and 

Issuer’s legal right to enter into the 

Transactions under the terms of the 

Issuer’s employee stock option plan and 

related documents (the ‘‘Legal 

Opinion’’) be obtained in a form 

acceptable to the Exchange. During the 

one-year time period, the Exchange may 

determine that such Legal Opinion is no 

longer necessary and will revise its 

established forms, formats and 

procedures accordingly. 

III. Discussion and Commission’s 

Findings 

After careful review of the proposed 

rule change and ISE’s response, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities association.7

In particular, the Commission finds 

that the proposed rule change is 

consistent with Section 6(b)(5),8 in that 

the proposed rule change is designed to 

prevent fraudulent and manipulative 

acts and practices, promote just and 

equitable principles of trade, remove 

impediments to and perfect the 

mechanisms 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 will offer market participants 

new trading opportunities and will 

enhance the Exchange’s competitive 

position. 

The Commission believes that the 

proposed rule change to amend the 

Exchange’s margin rule should be 

allowed. However, the Commission 

does have significant concerns with the 

amount of control each broker-dealer 

has over the Vested Employee Options. 

One purpose of the margin rules is to 

protect broker-dealers in the event of 

market turmoil. The broker-dealer must 

have enough control over the cash or 

securities it is holding as margin on 

behalf of investors to be able to act 

unilaterally to protect itself. With 

Vested Employee Options, the brokerdealer cannot act unilaterally to use the 

margin deposited by the customer (i.e., 

the Vested Employee Options); instead, 

the broker-dealer must rely on another 

person (i.e., the issuer) to promptly 

deliver the required shares. For 

example, if an issuer notifies the brokerdealer that there is an ineffective 

registration statement, it could prevent 

the broker-dealer from exercising the 

options and receiving publicly tradable 

shares, a prospect that could cause 

financial harm to the broker-dealer. 

The Commission raised these 

concerns in the Notice by noting in a 

footnote that absent relief from the 

Commission, broker-dealers would need 

to take a capital charge for any 

unsecured margin debt and by asking 

questions about how the broker-dealer’s 

legal authority to exercise the Vested 

Employee Options could be enhanced 

and how to limit the liquidity and 

operational risks arising from the 

Transactions. The Commission received 

no comments on this footnote or these 

questions. Thus, for purposes of 

determining whether an account is 

unsecured or partly secured pursuant to 

the net capital rule,9 including an 

account containing a Transaction, a 

broker-dealer may not include the value 

of a Vested Employee Option. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,10 that the 

proposed rule change (SR–ISE–2007– 

121), as modified by Amendment No. 1, 

be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–14798 Filed 6–23–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60129; File No. SR–CBOE– 

2009–030] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Order Approving 

Proposed Rule Change Regarding 

Appointments of CBSX DPMs 

June 17, 2009. 

On May 7, 2009, the Chicago Board 

Options Exchange, Incorporated 

(‘‘CBOE’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change 

regarding appointments of Designated 

Primary Market-Makers (‘‘DPMs’’) on 

the CBOE Stock Exchange (‘‘CBSX’’). 

The proposed rule change was 

published for comment in the Federal 

Register on May 15, 2009.3 The 

Commission received no comments 

regarding the proposal. This order 

approves the proposed rule change. 

CBOE proposed to amend its rules 

regarding appointments of CBSX DPMs. 

Currently, every security traded on 

CBSX must be assigned to a DPM.4 The 

Exchange’s proposal will modify its 

rules to provide the Exchange with the 

flexibility to commence trading in a 

security on the CBSX without an 

assigned DPM. The Exchange 

represented that some securities are not 

traded on CBSX because DPMs have 

opted to not seek assignments in such 

securities. The Exchange’s proposal will 

allow CBSX users the ability to trade 

these securities on CBSX without them 

being quoted by a DPM. The Exchange 

has also represented that this proposed 

modification to CBSX Rule 53.54 is not 

intended to in any way affect existing 

DPM appointments. The Exchange will 

notify its market participants of those 

securities that will trade without a DPM 

via a circular. 

CBOE’s proposal will also modify 

CBSX Rule 53.56 to change the time 

DPMs are required to begin providing 

quotes from 8:15 a.m. to 8:30 a.m. 

(Chicago time). Lastly, CBOE’s proposal 

will eliminate CBSX Rule 53.54 which 

governed the allocation process used by 

CBSX prior to its initial launch. 

The Commission finds that the 

proposal is consistent with Section 

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

the rules of a national securities 

exchange be designed, among other 

things, 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.6 The Act does not 

mandate a particular market structure 

or, specifically, that an exchange have 

30190 Federal Register / Vol. 74, No. 120 / Wednesday, June 24, 2009 / Notices 

7 15 U.S.C. 78s(b)(2). 

8 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

specialists or the equivalent (which are 

known as DPMs on CBSX). Therefore, 

the Commission believes that it is 

reasonable and consistent with the Act 

to make additional securities available 

for trading on CBSX without the 

participation of a DPM. In taking this 

action, the Commission has relied on 

CBOE’s representation that this proposal 

is not intended to affect existing DPM 

appointments. The Commission further 

believes that it is within the discretion 

of the Exchange to require DPMs to 

begin quoting in their required 

securities at 8:30 a.m. rather than, as 

under the Exchange’s current rule, at 

8:15 a.m. (Chicago time). 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,7 that the 

proposed rule change (SR–CBOE–2009– 

030) is approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–14799 Filed 6–23–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60117; File No. SR– 

NYSEAmex–2009–25] 

Self-Regulatory Organizations; NYSE 

Amex, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Amending the Schedule 

of Fees and Charges for Exchange 

Services by Adding a Ratio Threshold 

Fee 

June 16, 2009. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on June 10, 

2009, NYSE Amex LLC. (‘‘NYSE Amex’’ 

or the ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(the ‘‘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 amend its 

Schedule of Fees and Charges for 

Exchange Services (‘‘Fee Schedule’’) by 

adding a Ratio Threshold Fee. While 

changes to the Schedule pursuant to this 

proposal will be effective upon filing, 

the proposed fee will become operative 

on June 10, 2009. The text of the 

proposed rule change is attached as 

Exhibit 5 to the 19b–4 form. A copy of 

this filing is available on the Exchange’s 

Web site at http://www.nyse.com, at the 

Exchange’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, 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 adding a 

Ratio Threshold Fee to its Fee Schedule. 

The proposed Ratio Threshold Fee will 

be charged to ATP Holders based on the 

number of orders entered compared to 

the number of executions received in a 

calendar month. The fee will be 

assessed as follows: 

Monthly order to execution ratio Monthly 

charge 

Between 10,000 and 14,999 to 1 ... $5,000 

Between 15,000 and 19,999 to 1 ... 10,000 

Between 20,000 and 24,999 to 1 ... 20,000 

25,000 to 1 and greater .................. 35,000 

This fee shall not apply to orders that 

improve the Exchange’s prevailing best 

bid-offer (BBO) market at the time the 

orders are received. 

ATP Holders with order to execution 

ratios of 10,000 to 1 or greater have the 

potential residual effect of exhausting 

system resources, bandwidth, and 

capacity. Such order to execution ratios 

may, in turn, create latency and impact 

other ATP Holder’s ability to receive 

timely executions. Recognizing that 

orders and executions often occur in 

large numbers, the purpose of this fee is 

to focus on activity that is truly 

disproportionate while fairly allocating 

costs among members. The proposed fee 

has multiple thresholds and is greater at 

higher order to execution ratios because 

the potential impact on exchange 

systems, bandwidth and capacity 

becomes greater with increased order to 

execution ratios. 

Additionally, the Exchange proposes 

an exception whereby ATP Holders will 

not be charged the Ratio Threshold Fee 

if they incur charges on a monthly basis 

pursuant to the Cancellation Fee. The 

Cancellation Fee is charged only for 

cancelled public customer orders in 

excess of the established thresholds and 

is designed to protect customer priority. 

By virtue of this exception, the Ratio 

Threshold Fee will, in effect, only be 

assessed on non-customer orders. Due to 

the necessity of the Cancellation Fee to 

protect customer priority and the 

Exchange’s need to allocate costs for the 

use of bandwidth and capacity among 

all members, the Exchange believes the 

structure of the Ratio Threshold Fee 

compared to the Cancellation Fee is 

appropriate because firms paying the 

Cancellation Fee will not also be 

charged the Ratio Threshold Fee. 

The new Ratio Threshold Fee will 

become effective on June 10, 2009. 

2. Statutory Basis 

The Exchange believes that the 

proposal is consistent with Section 6(b) 

of the Act, in general, and Section 

6(b)(4), in particular, in that it provides 

for the equitable allocation of dues, fees 

and other charges among its members 

and other market participants that use 

the trading facilities of NYSE Amex 

Options. Under this proposal, all 

similarly situated members of NYSE 

Amex Options will be charged the same 

reasonable dues, fees and other charges. 

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 that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change.