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Notice

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

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Start Preamble 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.

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.

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 Start Printed Page 61709account 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.”

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]

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.

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]

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: rule-comments@sec.gov. 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 Start Printed Page 61710communications 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.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[17]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

4.  17 CFR 1.35(a-1)(5)(iii)(A).

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5.  17 CFR 1.35(a-1)(5)(iii)(A).

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7.  7 U.S.C. 2(a)(1)(D)(i)(IX).

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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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10.  Pub. L. 106-554, 114 Stat. 2763 (2000).

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13.  7 U.S.C. 2(a)(1)(D)(i).

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[FR Doc. 03-27228 Filed 10-28-03; 8:45 am]

BILLING CODE 8010-01-P