[Federal Register Volume 68, Number 9 (Tuesday, January 14, 2003)]
[Notices]
[Pages 1878-1880]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-669]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47130; File No. SR-NQLX-2003-01]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by Nasdaq Liffe Markets, LLC 
Proposing To Adopt Listing Standards for Physically-Settled Security 
Futures Contracts That Have Underlying Securities Constituting Shares 
of an Exchange-Traded Fund, Registered Closed-End Management Investment 
Company, or Trust-Issued Receipts

January 6, 2003.
    Pursuant to section 19(b)(7) of the Securities Exchange Act of 1934 
(``Act''),\1\ and rule 19b-7 under the Act,\2\ notice is hereby given 
that on January 6, 2003, Nasdaq Liffe Markets, LLC (``NQLX'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule changes described in items I, II, and III below, 
which items have been prepared by the NQLX. The Commission is 
publishing this notice to solicit comments on the proposed rule changes 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 17 CFR 240.19b-7.
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    On January 6, 2003, NQLX submitted the proposed rule change to the 
Commodities Futures Trading Commission (``CFTC'') for approval. Under 
section 19(b)(7)(B) of the Act,\3\ the proposed rule change may take 
effect upon approval by the CFTC.
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    \3\ 15 U.S.C. 78s(b)(7)(B).
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I. Self-Regulatory Organization's Description of the Proposed Rule 
Change

    First, NQLX proposes to adopt rule changes to its listing standards 
for physically-settled security futures contracts (NQLX rules 902 and 
903) that have underlying securities constituting shares of an 
exchange-traded fund, shares of a registered closed-end management 
investment company, or trust-issued receipts. Second, NQLX proposes to 
correct typographical errors and to add clarifying language to certain 
other provisions of NQLX rules 902 and 903. NQLX believes that these 
proposed rule changes are consistent with the requirements under 
section 6(h)(3) of the Act \4\ and the criteria under Section 
2(a)(1)(D)(i) of the Commodities Exchange Act (``CEA''),\5\ as modified 
by joint orders of the Commission and the CFTC.\6\
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    \4\ 15 U.S.C. 78f(h)(3).
    \5\ 7 U.S.C. 2(a)(1)(D)(i).
    \6\ See Joint Order Granting the Modification of Listing 
Standards Requirements (American Depository Receipts), Securities 
Exchange Act Release No. 44725 (August 20, 2001), and Joint Order 
Granting the Modification of Listing Standards Requirements 
(Exchange Traded Funds, Trust Issued Receipts and shares of Closed-
End Funds), Securities Exchange Act Release No. 46090 (June 19, 
2002), 67 FR 42760 (June 25, 2002).
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    NQLX has prepared statements concerning the purpose of, and basis 
for, the proposed rule change, burdens on competition, and comments 
received from members, participants, and others. The text of these 
statements may be examined at the places specified in item IV below. 
These statements are set forth in sections A, B, and C below.
    The text of the proposed rule change appears below. New text is in 
italics. Deleted text is in brackets.

Rule 902 Initial Listing Standards: Physically-Settled Security Futures 
Contract

    (a) (1)-(2) No change.
    (b) Initial Listing Standards-Underlying Securities are Single 
Securities: To initially list a physically-settled Security Futures 
Contract with an underlying single security, the single security must:
    (1)-(4) No change.
    (5) Have at least seven million shares or receipts evidencing the 
underlying security outstanding owned by Persons that are not required 
to report their securities holdings pursuant to section 16(a) of the 
Securities Exchange Act;
    (6) Have at least 2,000 holders when the underlying security is not 
shares of an exchange-traded fund, shares of a registered closed-end 
management investment company, or trust-issued receipts;
    (7) (i) Have average daily trading volume (in all markets in which 
the underlying security has traded) of at least 109,000 shares or 
receipts evidencing the underlying security in each of the preceding 12 
months when the underlying security is not shares of an exchange-traded 
fund, shares of a registered closed-end management investment company, 
or trust-issued receipts, or
    (ii) Have total trading volume (in all markets in which the 
underlying security has traded) of at least 2.4 million shares or 
receipts evidencing the underlying security in the preceding 12 months 
when the underlying security is shares of an exchange-traded fund, 
shares of a registered closed-end management investment company, or 
trust-issued receipts;
    (8) Have a market price per [share] security of at least $7.50 
(calculated by the lowest closing price reported in any market on which 
the underlying security traded[,]) for the majority of trading days 
during the three calendar months before listing[)];
    (9) No change.
    (c)-(e) No change.

Rule 903 Maintenance Listing Standards-Physically-Settled Security 
Futures Contracts

    (a) (1)-(5) No change.
    (b) No change.
    (c) Maintenance Standards-Underlying Securities are Single 
Securities Other than Shares of Exchange-Traded Funds, Shares of 
Registered Closed-End Management Investment Companies, or Trust-Issued 
Receipts: When the underlying of a physically-settled Security Futures 
Contract is a single security other than shares of exchange-traded 
funds, shares of registered closed-end management investment companies, 
or trust-issued receipts, to list a new delivery month of the Security 
Futures Contract, the single security must:
    (1) Continue to meet the requirements of rule 902(b)(1), (2), and 
(4)[,];
    (2) Have an issuer that meets requirements of rule 902(b)(3) or 
corrects any applicable reporting failure within 30 days after the 
required filing date[,];
    (3) Have at least 6.3 million shares or receipts evidencing the 
underlying security outstanding owned by Persons other than those 
required to report their security holdings under section 16(a) of the 
Securities Exchange Act[,];
    (4) Have at least 1,600 holders[,];
    (5) Have average daily trading volume (across all markets that 
trade the underlying security) of at least 82,000 shares or receipts 
evidencing the underlying security in each of the preceding 12 months;
    (6) Have a market price per [share] security of at least $5.00 on a 
majority of the trading days during the past six calendar months 
(measured by the

[[Page 1879]]

highest closing price reported for the underlying security in any 
market trading the underlying); provided, however, that NQLX may waive 
this requirement and open for trading a new delivery month of the 
Security Futures Contract, if:
    (i)-(ii) No change.
    (iii) The average daily trading volume in the underlying security 
(in all markets that trade the underlying) has been at least 109,000 
shares or receipts evidencing the underlying security in each of the 
prior 12 months; and
    (iv) The market price per share of or receipts evidencing the 
underlying security[;]:
    (A) No change.
    (B) Is at least $3.00 on the day NQLX lists the new delivery month 
for trading[.];
    (7) No change.
    (d)-(f) No change.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NQLX proposes to adopt revisions to its current listing standards 
to clarify the particular listing standards applicable when the 
underlying securities of a security futures contract are shares of 
exchange-traded funds, trust-issued receipts, or shares of closed-end 
funds. Specifically, the proposed rule change makes two things 
clear.\7\ First, the requirement that the underlying security be held 
by at least 2,000 holders does not apply when the underlying securities 
are shares of exchange-traded funds, trust-issued receipts, or shares 
of closed-end funds. Second, when the underlying securities are shares 
of exchange-traded funds, trust-issued receipts, or shares of closed-
end funds, instead of requiring an average daily trading volume of at 
least 109,000 securities in each of the preceding 12 months, the 
revised rules would require total trading volume of at least 2.4 
million securities in the preceding 12 months. The remaining proposed 
changes correct typographical errors and add clarifying language to 
certain provisions of NQLX rules 902 and 903.
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    \7\ NQLX notes that a similar proposal has been adopted by 
OneChicago, LLC, another designated contract market and national 
securities exchange currently listing security futures products. See 
Securities Exchange Act Release No. 47114 (December 31, 2002).
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    NQLX believes that its proposed rule changes comply with the 
requirements under section 6(h)(3) of the Act \8\ and the criteria 
under section 2(a)(1)(D)(i) of the CEA,\9\ as modified by joint orders 
of the Commission and the CFTC, and that its listing standards are no 
less restrictive than comparable listing standards for options traded 
on a national securities exchange or national securities 
association.\10\
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    \8\ 15 U.S.C. 78f(h)(3).
    \9\ 7 U.S.C. 2(a)(1)(D)(i).
    \10\ 15 U.S.C. 78f(h)(3)(C).
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2. Statutory Basis
    NQLX files these proposed rule changes pursuant to section 19(b)(7) 
of the Act.\11\ NQLX believes that these proposed rule changes are 
consistent with the requirements of the Commodity Futures Modernization 
Act of 2000,\12\ including the requirement that trading in a listed 
security futures is not readily susceptible to manipulation of its 
price nor to causing or being used to manipulate the price of the 
underlying security, options on the security, or options on a group or 
index including the security.\13\ NQLX further believes that its 
proposed rule changes comply with the requirements under section 
6(h)(3) of the Act \14\ and the criteria under section 2(a)(1)(D)(i) of 
the CEA,\15\ as modified by joint orders of the Commission and the 
CFTC. In addition, NQLX believes that its proposed rule changes are 
consistent with the provisions of section 6 of the Act,\16\ in general, 
and section 6(b)(5) of the Act,\17\ in particular, which requires, 
among other things, that the rules of an exchange be designed to 
prevent fraudulent and manipulative acts and practices, and, in 
general, to protect investors and the public interest.
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    \11\ 15 U.S.C. 78s(b)(7).
    \12\ Pub. L. 106-554, 114 Stat. 2763 (2000).
    \13\ 15 U.S.C. 78f(h)(3)(H).
    \14\ 15 U.S.C. 78f(h)(3).
    \15\ 7 U.S.C. 2(a)(1)(D)(i).
    \16\ 15 U.S.C. 78f.
    \17\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NQLX does not believe that the proposed rule changes 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 of Comments on the Proposed 
Rule Change Received from Members, Participants, or Others

    NQLX neither solicited nor received written comment on the proposed 
rule changes.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Concurrent with the filing of the proposed rule change with the 
Commission, NQLX has filed a written certification with the CFTC under 
section 5c(c)\18\ of the CEA and CFTC regulation part 38.4\19\ in which 
NQLX certifies that its proposed changes to NQLX rules 902 and 903 
comply with the CEA. Changes to proposed NQLX rules 902 and 903 are 
effective the day after their filing with the CFTC.
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    \18\ 7 U.S.C. 7a-2(c).
    \19\ 17 CFR 38.4.
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    Within 60 days of the date of effectiveness of the proposed rule 
changes, the Commission, after consultation with the CFTC, may 
summarily abrogate the proposed rule changes and require that the 
proposed rule changes be refiled in accordance with the provisions of 
section 19(b)(1) of the Act.\20\
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    \20\ 15 U.S.C. 78s(b)(1).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change conflicts with the Act. Persons making written submissions 
should file nine copies of the submission with the Secretary, 
Securities and Exchange Commission, 450 Fifth Street, NW., Washington, 
DC 20549-0609. Comments also may be submitted electronically to the 
following e-mail address: [email protected]. 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 inspection and copying in the Commission's 
Public Reference Room. Copies of these filings also will be available 
for inspection and copying at the principal office of NQLX. 
Electronically submitted comments will be posted on the Commission's 
website (http://www.sec.gov). All submissions should refer to File No. 
SR-NQLX-2003-01 and should be submitted by February 4, 2003.


[[Page 1880]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(75).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-669 Filed 1-13-03; 8:45 am]
BILLING CODE 8010-01-P