[Federal Register Volume 68, Number 187 (Friday, September 26, 2003)]
[Notices]
[Pages 55695-55696]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-24379]



[[Page 55695]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48498; File No. SR-NQLX-2003-07]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by NQLX LLC To Remove 
Requirement That Members Record the Clearing Account Indicator on Order 
Tickets

September 17, 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 August 28, 2003, NQLX LLC (``NQLX'') filed with the Securities 
and Exchange Commission (``SEC'' or ``Commission'') the proposed rule 
change 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 change from interested persons. NQLX also 
filed the proposed rule change with the Commodity Futures Trading 
Commission (``CFTC''), together with a written certification under 
section 5c(c) of the Commodity Exchange Act (``CEA'') \3\ on August 27, 
2003.
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    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 17 CFR 240.19b-7.
    \3\ 7 U.S.C. 7a-2(c).
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I. Self-Regulatory Organization's Description of the Proposed Rule 
Change

    NQLX is proposing changes to NQLX Rule 408 because it has 
determined that NQLX Rule 408(c)(6)'s requirement that its Members 
record on order tickets the alpha-code for the relevant ``Clearing 
Account Indicator'' \4\ is redundant and unnecessary so long as at the 
time of order entry its Members submit the appropriate Clearing Account 
Indicator to NQLX's automated trading system along with other required 
order information. The text of the proposed rule change follows; 
additions are italicized; deletions are [bracketed].
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    \4\ NQLX Rule 101(a)(15) defines ``Clearing Account Indicator'' 
as ``the type of account designated by the Clearing Organization.'' 
In this context, the type of account means the clearing account type 
at The Options Clearing Corporation (i.e., market maker, firm/
proprietary, or customer).
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* * * * *

Rule 408 Submitting Orders

    (a)-(b) No Change
    (c)(1)-(5) No Change
    [(6) Clearing Account Indicator,]
    ([7]6) Exchange Contract,
    ([8]7) delivery or expiration month,
    ([9]8) quantity,
    ([10]9) buy or sell,
    ([11]10) price or price limit or range,
    ([12]11) put or call and exercise price (if applicable),
    ([13]12) open or close position indicator (if applicable),
    ([14]13) Order instructions from Rule 410 (if applicable),
    ([15]14) Strategy type indicator (if applicable), and
    ([16]15) code indicator for a Cross Transaction, Block Trade, or 
Exchange for Physical Trade (if applicable).
    (d) A Member or Person Associated with a Member must ensure that 
the information from items (4) through (1[6]5) in Rule 408(c) as well 
as the appropriate Clearing Account Indicator [is] are [also] submitted 
to the ATS for all Orders at the time of Order entry.
    (e) If at the time of Order entry the Member or Person Associated 
with the Member fails to provide the appropriate Clearing Account 
Indicator as required by Rule[s] 408[(c)(6) and ](d), then the Member 
or Person Associated with the Member must timely provide the 
appropriate Clearing Account Indicator for the trade through the Trade 
Registration System.
* * * * *

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 
statutory 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.

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

1. Purpose
    NQLX proposes revising specified provisions of NQLX Rule 408 to 
remove the unnecessary redundancy of requiring its Members to record 
exchange-designated Clearing Account Indicators on order tickets as 
well as submitting those same Clearing Account Indicators at the time 
of order entry to NQLX's automated trading system. NQLX requires 
Clearing Account Indicators from its Members to facilitate providing 
its clearing house, The Options Clearing Corporation, with information 
regarding the appropriate clearing account type (i.e., market maker, 
firm/proprietary, or customer) for all orders at the time of order 
entry. Therefore, so long as NQLX Members submit the appropriate 
Clearing Account Indicator for orders submitted to NQLX's automated 
trading system at the time of order entry, the purpose of this rule 
provision is met. As such, NQLX Rule 408(c)(6)'s current requirement 
that Members also record Clearing Account Indicators on order tickets 
is redundant and burdensome because it requires each preparer of an 
order ticket submitted to NQLX to know NQLX's exchange-designated 
Clearing Account Indicators, but serves no additional regulatory 
purpose.
    No other substantive changes are proposed to NQLX Rule 408 and 
Members are still required to record customer account numbers or 
identifiers and customer type indicators along with other required 
information on each order ticket. Therefore, with the adoption of these 
proposed changes, NQLX believes that it will continue to maintain audit 
trails necessary and appropriate to surveil trading in security futures 
products in its market and to coordinate the surveillance with other 
markets as required.
    NQLX believes that the proposed rule change is consistent with the 
requirements, where applicable, under section 6(h)(3)(J) of the Act \5\ 
and the criteria, where applicable, under section 2(a)(1)(D)(i)(IX) of 
the CEA,\6\ as modified by joint orders of the Commission and the CFTC.
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    \5\ 15 U.S.C. 78f(h)(3)(J).
    \6\ 7 U.S.C. 2(a)(1)(D)(i)(IX).
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2. Statutory Basis
    NQLX files this proposed rule change pursuant to section 19(b)(7) 
of the Act.\7\ NQLX believes that the proposed rule change is 
consistent with the requirements of the Commodity Futures Modernization 
Act of 2000,\8\ including the requirement that NQLX have audit trails 
necessary and appropriate to facilitate coordinated surveillance to 
detect, among other things, manipulation.\9\ NQLX further believes that 
its proposed rule change complies with the requirements under section 
6(h)(3) of the Act \10\ and the criteria under section 2(a)(1)(D)(i) of 
the CEA,\11\ as modified by joint orders of the Commission and the 
CFTC. In addition, NQLX believes that its proposed rule change is 
consistent with the provisions of section 6 of the Act,\12\ in general, 
and

[[Page 55696]]

section 6(b)(5) of the Act,\13\ in particular, in that they will 
prevent fraudulent and manipulative acts and practices, will foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities and will protect investors and 
the public interest.
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    \7\ 15 U.S.C. 78s(b)(7).
    \8\ Pub. L. 106-554, 114 Stat. 2763 (2000).
    \9\ See section 6(h)(3)(J) of the Act, 15 U.S.C. 78f(h)(3)(J).
    \10\ 15 U.S.C. 78f(h)(3).
    \11\ 7 U.S.C. 2(a)(1)(D)(i).
    \12\ 15 U.S.C. 78f.
    \13\ 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 change 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 on Comments on the Proposed 
Rule Change Received from Members, Participants, or Others

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

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

    Pursuant to section 19(b)(7)(B) of the Act,\14\ the proposed rule 
change became effective on August 27, 2003. Within 60 days of the date 
of effectiveness of the proposed rule change, the Commission, after 
consultation with the CFTC, may summarily abrogate the proposed rule 
change and require that the proposed rule change be refiled in 
accordance with the provisions of section 19(b)(1) of the Act.\15\
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    \14\ 15 U.S.C. 78s(b)(7)(B).
    \15\ 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 changes 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 will also 
be available for inspection and copying at the principal office of 
NQLX. Electronically submitted comments will be posted on the 
Commission's Internet Web site (http://www.sec.gov). All submissions 
should refer to File No. SR-NQLX-2003-07 and should be submitted by 
October 17, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(75).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-24379 Filed 9-25-03; 8:45 am]
BILLING CODE 8010-01-P