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Notice

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

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Start Preamble 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.

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. Start Printed Page 7835Proposed 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 Part s 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.

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.

Within 60 days of the date of effectiveness of the proposed rule changes, the Commission, after Start Printed Page 7836consultation 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]

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: rule-comments@sec.gov. 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.

Start Signature

For the Commission by the Division of Market Regulation, pursuant to delegated authority.[14]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

[FR Doc. 03-3828 Filed 2-14-03; 8:45 am]

BILLING CODE 8010-01-P