[Federal Register Volume 69, Number 15 (Friday, January 23, 2004)]
[Notices]
[Pages 3421-3422]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-1459]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49090; File No. SR-NQLX-2004-01]


Self-Regulatory Organization; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Changes by NQLX LLC Relating to Time-
Stamping Orders for Block Trades and Exchange for Physical Trades

January 16, 2004.
    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, 2004, NQLX 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. On 
January 5, 2004, NQLX filed the proposed rule changes 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 January 6, 2004.
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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 and 420 to explicitly require 
its members to time-stamp orders when negotiations end (rather than 
begin) for block trades and exchange for physical trades. Because 
NQLX's rules already require members to time-stamp orders immediately 
upon receipt, execution, and any modification or cancellation of the 
order, NQLX believes that these changes will enhance its ability to 
monitor its members for timely submission to NQLX for acceptance of 
proposed block and exchange for physical trades as required by its 
Rules 419 and 420.
    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 changes.
    (g) Information Recording, Submission, and Dissemination.
    (1) For a Block Trade in addition to the requirements of Rules 
408(b) and 408(c), a Member or Person Associated with a Member must 
record on an Order Ticket the identity of the individual arranging the 
Block Trade and time stamp the Order when negotiation [begins] ends.
    (2)-(7) No changes.

Rule 420 Exchange for Physical Trades

    (a) No changes
    (b) Information Recording, Submission, and Dissemination.
    (1) For an Exchange for Physical Trade in addition to the 
requirements of Rules 408(b) and 408(c), a Member or Person Associated 
with a Member must record on an Order Ticket the identity of the 
individual arranging the Exchange for Physical Trade and time stamp the 
Order when negotiation [begins] ends.
    (2)-(7) No changes.
* * * * *

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,

[[Page 3422]]

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
    NQLX proposes revising both its rule regarding block trades (NQLX 
Rule 419(g)(1)) and its rule regarding exchange for physical trades 
(NQLX Rule 420(b)(1)) to require its members to time-stamp orders when 
negotiations end (rather than begin) for proposed block trades and 
exchange for physical trades. Requiring time-stamping when negotiations 
end for block trades and exchange for physical trades is in addition to 
the time-stamping of orders required immediately upon receipt, 
execution, and any modification or cancellation of the order, which is 
already required of all orders submitted to NQLX for execution.\4\ NQLX 
believes that these proposed rule changes will enhance the exchange's 
ability to monitor its members for timely submission of proposed block 
trades and exchange for physical trades to NQLX for acceptance as 
required by NQLX's Rules 419 and 420, respectively.
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    \4\ See NQLX Rules 408(b), 419(g)(1), and 420(b)(1).
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    NQLX also believes that the proposed rule changes are 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.\7\
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    \5\ 15 U.S.C. 78f(h)(3)(J).
    \6\ 7 U.S.C. 2(a)(1)(D)(i)(IX).
    \7\ 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 these proposed rule changes pursuant to section 19(b)(7) 
of the Act.\8\ NQLX believes that these proposed rule changes are 
consistent with the requirements of the Commodity Futures Modernization 
Act of 2000,\9\ including the requirement that NQLX have audit trails 
necessary and appropriate to facilitate coordinated surveillance to 
detect, among other things, manipulation.\10\ NQLX further believes 
that its proposed rule changes comply with the requirements under 
section 6(h)(3) of the Act \11\ and the criteria under section 
2(a)(1)(D)(i) of the CEA,\12\ 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,\13\ in general, and section 6(b)(5) of the Act,\14\ 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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    \8\ 15 U.S.C. 78s(b)(7).
    \9\ Pub. L. 106-554, 114 Stat. 2763 (2000).
    \10\ 15 U.S.C. 78f(h)(3)(J).
    \11\ 15 U.S.C. 78f(h)(3).
    \12\ 7 U.S.C. 2(a)(1)(D)(i).
    \13\ 15 U.S.C. 78f.
    \14\ 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.

C. Self-Regulatory Organization's Statement on Comments on 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 Rule Changes and Timing for 
Commission Action

    The proposed rule changes became effective on January 6, 2004. 
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.\15\
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    \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 
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 may also be submitted electronically at the 
following e-mail address: [email protected]. All comment letters 
should refer to File No. SR-NQLX-2004-01. This file number should be 
included on the subject line if e-mail is used. To help the Commission 
process and review your comments more efficiently, comments should be 
sent in hardcopy or by e-mail but not by both methods. 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-2004-01 and 
should be submitted by February 13, 2004.

    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).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-1459 Filed 1-22-04; 8:45 am]
BILLING CODE 8010-01-P