[Federal Register Volume 68, Number 209 (Wednesday, October 29, 2003)]
[Notices]
[Pages 61708-61710]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-27228]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48670; File No. SR-NQLX-2003-06]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by Nasdaq Liffe Markets, LLC To 
Amend Rules 412(g) and 420(b) To Make Its Allocation and Claim 
Requirements for Block Trades and Exchange for Physical Trades 
Consistent With the Commodity Futures Trading Commission's Rule 
Relating to Allocation of Bunched Orders

October 21, 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 July 16, 2003, Nasdaq Liffe Markets, LLC (``NQLX'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change 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 change from interested persons. 
On July 15, 2003, NQLX 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 
\3\ (``CEA'') in which NQLX indicated that the effective date of the 
proposed rule change would be July 16, 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 proposes to amend NQLX Rules 419(g) and 420(b) to make NQLX's 
allocation and claim requirements for block trades and exchange for 
physical trades consistent with the CFTC's new Rule 1.35(a-
1)(5)(iii)(A) \4\ requirement that allocations of bunched orders must 
occur as soon as practicable but ``no later than a time sufficiently 
before the end of the day the order is executed to ensure that clearing 
records identify the ultimate customer for each trade.'' Also, in NQLX 
Rule 419(g)(2)(x), NQLX proposes to remove the term ``and'' as 
redundant.
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    \4\ 17 CFR 1.35(a-1)(5)(iii)(A).
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    The text of the proposed rule change appears below. New text is in 
italics. Deleted text is in [brackets].
* * * * *

Rule 419 Block Trades

    (a)-(f) No change.
    (g) Information Recording, Submission, and Dissemination
    (1) No change.
    (2) (i)-(ix) No change.
    (x) price or prices of each leg of a Strategy trade (if 
applicable), [and]
    (xi)-(xiv) No change.
    (3) NQLX will review the information submitted for the proposed 
Block Trade by the Member for the Initiator and will post both sides of 
the Block Trade in NQLX's Trade Registration System to the account of[, 
and send a confirmation to,] the Member for the Initiator if, at the 
time, the Block Trade appears to have satisfied the requirements of 
Rule 419.
    (4) After [sending the Block Trade confirmation to the Member for 
the Initiator]posting both sides of the Block Trade in the Trade 
Registration System to the account of the Member for the Initiator, 
NQLX will immediately disseminate through the ATS the following 
information concerning the Block Trade:
    (i)-(iv) No change.
    (5) No change.
    (6) As soon as practicable [, but no longer than 10 minutes, after 
receipt of the Block Trade confirmation from NQLX,] but no later than 
sufficiently before the close of the Trade Registration System to allow 
for the orderly allocation and claim of the Block Trade, the Member for 
the Initiator (or its Clearing Member, if applicable) must transfer 
through the Trade Registration System the applicable portion of the 
Block Trade to the Member for the Responder (or its Clearing Member, if 
applicable) and the designated Market Maker, if applicable.
    (7) As soon as practicable [,but no longer than 10 minutes,] after 
the applicable portion of the Block Trade appears on the Trade 
Registration System pursuant to Rule 419(g)(6) and before the close of 
the Trade Registration System, the Member for the Responder (or its 
Clearing Member, if applicable) and the designated Market Maker, if 
applicable, must accept its applicable portion through, and designate 
the Responder's Customer

[[Page 61709]]

account number or identifier in, the Trade Registration System.

Rule 420 Exchange for Physical Trades

    (a) No change.
(b) Information Recording, Submission, and Dissemination
    (1)-(2) No change.
    (3) 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 in NQLX's Trade 
Registration System 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) After [sending the confirmation for the Exchange for Physical 
Trade] posting both sides of the Futures Leg in the Trade Registration 
System to the account of the submitting Member, NQLX will disseminate 
through the ATS the following information:
    (i)-(vi) No change.
    (5) No change.
    (6) As soon as practicable[, but no longer than 10 minutes, after 
receipt of confirmation for the Exchange for Physical Trade from NQLX,] 
but no later than sufficiently before the close of the Trade 
Registration System to allow for the orderly allocation and claim of 
the Futures Leg, 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) 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) and before the close of the Trade Registration System, 
the Member for the buyer of the Futures Leg (or its Clearing Member, if 
applicable) must accept the Futures Leg through, 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 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.

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

1. Purpose
    NQLX proposes revising NQLX Rules 419(g) and 420(b) to make NQLX's 
allocation and claim requirements for block trades and exchange for 
physical trades consistent with the CFTC's new Rule 1.35(a-
1)(5)(iii)(A) \5\ requirement that allocations of bunched orders must 
occur as soon as practicable but ``no later than a time sufficiently 
before the end of the day the order is executed to ensure that clearing 
records identify the ultimate customer for each trade.''
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    \5\ 17 CFR 1.35(a-1)(5)(iii)(A).
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    NQLX believes that amended NQLX Rules 419(g) and 420(b) are 
consistent with the CFTC's new rule relating to allocation of bunched 
orders while providing the necessary and appropriate trade audit trail 
for block and exchange for physical trades, specifically in the areas 
of trade processing and clearing. NQLX also believes that the proposed 
rule change is consistent with the requirements, where applicable, 
under Section 6(h)(3)(J) of the Act \6\ and the criteria, where 
applicable, under Section 2(a)(1)(D)(i)(IX) of the CEA,\7\ as modified 
by joint orders of the Commission and the CFTC.\8\
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    \6\ 15 U.S.C. 78f(h)(3)(J).
    \7\ 7 U.S.C. 2(a)(1)(D)(i)(IX).
    \8\ See 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) and Joint Order 
Granting the Modification of Listing Standards Requirements 
(American Depository Receipts), Securities Exchange Act Release No. 
44725 (August 20, 2001), 67 FR 42760 (June 25, 2002).
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2. Statutory Basis
    NQLX files the proposed rule change pursuant to Section 19(b)(7) of 
the Act.\9\ NQLX believes that the proposed rule change is consistent 
with the requirements of the Commodity Futures Modernization Act of 
2000,\10\ including the requirement that NQLX have audit trails 
necessary and appropriate to facilitate coordinated surveillance to 
detect, among other things, manipulation.\11\ NQLX further believes 
that its proposed rule change complies with the requirements under 
Section 6(h)(3) of the Act \12\ and the criteria under Section 
2(a)(1)(D)(i) of the CEA,\13\ 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,\14\ in general, and Section 6(b)(5) of the Act,\15\ in particular, 
in that it is designed to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities and, in general, to protect investors and the public 
interest.
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    \9\ 15 U.S.C. 78s(b)(7).
    \10\ Pub. L. 106-554, 114 Stat. 2763 (2000).
    \11\ 15 U.S.C. 78f(h)(3)(J).
    \12\ 15 U.S.C. 78f(h)(3).
    \13\ 7 U.S.C. 2(a)(1)(D)(i).
    \14\ 15 U.S.C. 78f.
    \15\ 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.

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 change.

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

    The proposed rule change has become effective on July 16, 2003. 
Within 60 days of the date of effectiveness of the proposed rule 
change, the Commission, after consultation with the CFTC, had the 
authority to 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.\16\
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    \16\ 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

[[Page 61710]]

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. All submissions 
should refer to File No. SR-NQLX-2003-06 and should be submitted by 
November 19, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
Margaret H. McFarland,
Deputy Secretary.
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    \17\ 17 CFR 200.30-3(a)(75).
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[FR Doc. 03-27228 Filed 10-28-03; 8:45 am]
BILLING CODE 8010-01-P