[Federal Register Volume 68, Number 32 (Tuesday, February 18, 2003)]
[Notices]
[Pages 7834-7836]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-3828]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47342; File No. SR-NQLX-2003-02]


Self-Regulatory Organization; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Changes by Nasdaq Liffe Markets, LLC, 
Relating to Revised Listing Standards

February 10, 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 15, 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 NQLX. The Commission is publishing 
this notice to solicit comments on the proposed rule changes from 
interested persons. NQLX also has previously filed the proposed rule 
change with the Commodity Futures Trading Commission (``CFTC''), 
together with written certifications under section 5c(c) of the 
Commodity Exchange Act \3\ (``CEA'') on November 18, 2002 and January 
6, 2003.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 17 CFR 240.19b-7.
    \3\ 7 U.S.C. 7a-2(c).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Description of the Proposed Rule 
Change

    First, NQLX proposes amending Rule 325 to specify the reportable 
position levels for security futures contracts that have 1,000 shares 
of the underlying security, rather than the usual 100 shares of the 
underlying security. Second, NQLX proposes adopting a rule change to 
its Rule 420 as it relates to exchange for physical transactions 
between two members. Pursuant to this change, instead of requiring the 
member selling the futures leg to submit the relevant trade information 
to NQLX, the rule would allow the two members to mutually agree on 
which member would submit the trade information to NQLX. The remaining 
changes to Rule 420 correct the numbering in the rule. Below is the 
text of the proposed rule changes.

[[Page 7835]]

Proposed new language is italicized. Proposed deletions are in 
[brackets].

Rule 325 Reportable Positions

    (a) No change.
    (b) For purposes of filings made or information provided to NQLX 
pursuant to CFTC regulations Parts 15, 17 and 18, each Member must 
report any open contract positions [of 200 contracts or more for] in 
Security Futures Contracts of (i) 200 contracts or more if one contract 
represents 100 shares of common stock, shares of an exchange-traded 
fund, shares of a registered closed-end management investment company 
or 100 trust-issued receipts or American Depository Receipts, or (ii) 
100 contracts or more if one contract represents 1,000 shares of an 
exchange-traded fund or shares of a registered closed-end management 
investment company or 1,000 trust-issued receipts.

Rule 420 Exchange for Physical Trades

    (b) Information Recording, Submission, and Dissemination.
    (1) No change.
    (2) As soon as practicable but no later than 30 minutes after 
arranging an Exchange for Physical Trade, the Member--when the 
transaction is between a Member and a Customer--and the Member selling 
the Futures Leg--when the transaction is between two Members unless 
otherwise mutually agreed to by the two members--must submit through 
the ATS the following information concerning the Exchange for Physical 
Trade:
    (3[c]) NQLX will review the information submitted by the Member 
pursuant to Rule 420(b) for the proposed Exchange for Physical Trade 
and will post both sides of the Futures Leg to the account of, and send 
a confirmation to, the submitting Member if, at the time, the Exchange 
for Physical Trade appears to have satisfied the requirements of Rule 
420.
    (4[d]) After sending the confirmation for the Exchange for Physical 
trade, NQLX will disseminate through the ATS the following information:
    (i[1]) the Futures Leg designated with a ``B'' to denote that the 
transaction was the Exchange for Physical Trade,
    (ii[2]) delivery or expiration month,
    (iii[3]) price of the Futures Leg,
    (iv[4]) quantity of the Futures Leg,
    (v[5]) put or call and exercise price of the Futures Leg (if 
applicable), and
    (vi[6]) open or close position indicator (if applicable).
    (5[e]) Prices reported for Exchange for Physical Trades will not 
trigger unexecuted Orders in the Central Order Book.
    (6[f]) As soon as practicable, but no longer than 10 minutes, after 
receipt of confirmation for the Exchange for Physical Trade from NQLX, 
the submitting Member (or its Clearing Member, if applicable) must 
transfer through the Trade Registration System the applicable Futures 
Contract to the Member for the buyer of the Futures Leg (or its 
Clearing Member, if applicable).
    (7[g]) As soon as practicable, but no longer than 10 minutes, after 
the Futures Leg appears on the Trade Registration System pursuant to 
Rule 420(b)(6)[f], the Member for the buyer of the Futures Leg (or its 
Clearing Member, if applicable) must accept the Futures Leg, and 
designate the buyer's Customer account number or identifier in, the 
Trade Registration System.

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

    NQLX has prepared statements concerning the purpose of, and 
statutory basis for, the proposed rule changes, 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.

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

1. Purpose
    First, NQLX proposes adopting a rule addition to its Rule 325 to 
specify the reportable position levels for security futures contracts 
that have 1,000 shares of the underlying security, rather than the 
usual 100 shares of the underlying security. Second, NQLX proposes 
adopting a rule change to its Rule 420 related to the party that must 
submit trade information on exchange for physical transactions when the 
transactions are between two members. Under such circumstances, instead 
of requiring the member selling the futures leg to submit the relevant 
trade information to NQLX, the rule change would allow the two members 
to mutually agree on which member would submit information on the 
transaction to NQLX. If the two members could not agree on which one 
would submit the trade information to NQLX, then the member selling the 
futures leg would have the reporting responsibility. The remaining 
changes to Rule 420 correct the numbering in the rule.
2. Statutory Basis
    NQLX files these proposed rule changes pursuant to section 19(b)(7) 
of the Act.\4\ NQLX believes that these proposed rule changes are 
consistent with the requirements of the Commodity Futures Modernization 
Act of 2000,\5\ including the requirement that trading in a listed 
security futures contract 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.\6\ NQLX further believes that its 
proposed rule changes comply with the requirements under section 
6(h)(3) of the Act \7\ and the criteria under section 2(a)(1)(D)(i) of 
the CEA.\8\ In addition, NQLX believes that its proposed rule changes 
are consistent with the provisions of section 6 of the Act,\9\ in 
general, and section 6(b)(5) of the Act,\10\ in particular, which 
requires, among other things, that the rules of an exchange are 
designed to prevent fraudulent and manipulative acts and practices; 
and, in general, protect investors and the public interest.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78s(b)(7).
    \5\ Pub. L. 106-554, 114 Stat. 2763 (2000).
    \6\ See section 6(h)(3)(H) of the Act, 15 U.S.C. 78f(h)(3)(H).
    \7\ 15 U.S.C. 78f(h)(3).
    \8\ 7 U.S.C. 2(a)(1)(D)(i).
    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    NQLX does not believe that the proposed rule change will result in 
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 Changes 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 Rules and Timing for 
Commission Action

    Prior to the filing of the proposed rule change with the SEC, NQLX 
filed written certifications with the CFTC under section 5c(c) \11\ of 
the CEA and CFTC Regulation Part 40.6 \12\ in which NQLX certified that 
its proposed changes to Rules 325 and 420 comply with the CEA. Proposed 
changes to Rules 325 and 420 were effective the day after their filing 
with the CFTC.
---------------------------------------------------------------------------

    \11\ 7 U.S.C. 7a-2(c).
    \12\ 17 CFR 40.6.
---------------------------------------------------------------------------

    Within 60 days of the date of effectiveness of the proposed rule 
changes, the Commission, after

[[Page 7836]]

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.\13\
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
changes conflict 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 changes that are filed with the 
Commission, and all written communications relating to the proposed 
rule changes 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 will also 
be available for inspection and copying at the principal office of 
NQLX. All submissions should refer to File No. SR-NQLX-2003-02 and 
should be submitted by March 11, 2003.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\14\
Margaret H. McFarland,
Deputy Secretary.
---------------------------------------------------------------------------

    \14\ 17 C.F.R. 200.30-3(a)(75).
---------------------------------------------------------------------------

[FR Doc. 03-3828 Filed 2-14-03; 8:45 am]
BILLING CODE 8010-01-P