Self-Regulatory Organizations; Chicago Board Options Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Consolidate into a Single Rule Certain Requirements for Products Traded on the CBOE Stock Exchange Pursuant to Unlisted Trading Privileges, 70683-70686 [E8-27755]

Download as PDF Federal Register / Vol. 73, No. 226 / Friday, November 21, 2008 / Notices dwashington3 on PRODPC61 with NOTICES The Postal Service contemporaneously filed notice that the Governors have authorized a Type 2 rate adjustment to establish rates for inbound market dominant services as reflected in the Bilateral Agreement.2 More specifically, the Bilateral Agreement, which has been assigned Docket No. R2009–1, governs the exchange of inbound air and surface letters post (LC/AO) and Xpresspost from Canada.3 The Request includes two attachments. Attachment 1 sets forth proposed Mail Classification Schedule language; Attachment 2 provides a Statement of Supporting Justification as required by 39 CFR 3020.32. In addition, the Postal Service indicates that it filed an unredacted copy of the contract and supporting materials under seal. Request at 2, n.2. In the Statement of Supporting Justification, Lea Emerson, Executive Director, International Postal Affairs, reviews the factors of section 3622(c) and concludes, inter alia, that the revenues generated will cover the attributable costs of the services offered under the Bilateral Agreement; that the rates are preferable to default rates set by the Universal Postal Union; and that the rates represent a modest increase over those reflected in the existing bilateral agreement with Canada Post. Request, Attachment 2, at 2–4. In its Request, the Postal Service provides information responsive to part 3010, subpart D of the Commission’s rules. To that end, it addresses the requirements of section 3622(c)(10) as well as certain details of the negotiated service agreement. Request at 2–7. The Postal Service asserts that the Bilateral Agreement satisfies all applicable statutory criteria. Id. at 7–8. The Postal Service filed much of the supporting materials, financial analysis, and specific Bilateral Agreement under seal. Id. at 2, n.2. The Postal Service maintains that the Bilateral Agreement and related financial information should remain under seal, as they contain pricing, cost, and other information that are highly confidential. Id. at 2.4 of Filing Agreement (Under Seal), November 13, 2008 (Request). 2 Type 2 rate adjustments involve negotiated service agreements. See 39 CFR 3010.5. 3 To elaborate, the Bilateral Agreement covers Letter Post, including letters, flats, packets, containers, and International Registered Mail service ancillary thereto, and Canada Post’s Xpresspost, which consists of documents and packages containing merchandise. Request at 3. 4 The Postal Service indicates that the materials filed under seal constitute a subset of the overarching agreement between the parties. Although unstated, presumably the subset represents the parties’ agreement concerning VerDate Aug<31>2005 14:24 Nov 20, 2008 Jkt 217001 The Postal Service has an existing bilateral agreement with Canada Post which is set to expire December 31, 2008. Id. at 8. The Bilateral Agreement represents a one-year extension of the existing agreement, with some modifications. It has a planned effective date of January 1, 2009. Id. at 3. The Postal Service urges the Commission to act promptly to allow the rates to be implemented under 39 CFR 3010.40. Id. at 8. II. Notice of Filings Pursuant to 39 U.S.C. sections 3622 and 3642, the Commission establishes Docket Nos. MC2009–7 and R2009–1 for consideration of the Request pertaining to the proposed Canada Post—United States Postal Service Contractual Bilateral Agreement product and the related Bilateral Agreement, respectively. In keeping with practice, these dockets are addressed on a consolidated basis for purposes of this Order; however, future filings should be made in the specific docket in which issues being addressed pertain. Interested persons may submit comments on whether the Postal Service’s filings in the captioned dockets are consistent with the policies of 39 U.S.C. 3622, 3642, 39 CFR part 3010.40, and 39 CFR 3020 subpart B. Because the Commission is addressing these dockets on a consolidated basis, the due dates for comments are December 3, 2008. The public portions of these filings can be accessed via the Commission’s Web site (https:// www.prc.gov). The Commission appoints Paul L. Harrington to serve as Public Representative in these dockets. 70683 By the Commission. Steven W. Williams, Secretary. [FR Doc. E8–27746 Filed 11–20–08; 8:45 am] BILLING CODE 7710–FW–P SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meeting Federal Register Citation of Previous Announcement 73 FR 67905, November 17, 2008. STATUS: Open Meeting. PLACE: 100 F Street, NW., Washington, DC. DATE AND TIME OF PREVIOUSLY ANNOUNCED MEETING: November 19, 2008. Deletion of an Item. The following item will not be considered during the Open Meeting on Wednesday, November 19, 2008: CHANGE IN THE MEETING: whether to adopt rule amendments that would impose additional requirements on nationally recognized statistical rating organizations in order to address concerns about the integrity of their credit rating procedures and methodologies. At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact the Office of the Secretary at (202) 551–5400. Dated: November 19, 2008. Florence E. Harmon, Acting Secretary. [FR Doc. E8–27832 Filed 11–20–08; 8:45 am] BILLING CODE 8011–01–P It is Ordered 1. The Commission establishes Docket Nos. MC2009–7 and R2009–1 for consideration of the matters raised in each docket. 2. Pursuant to 39 U.S.C. 505, Paul L. Harrington is appointed to serve as officer of the Commission (Public Representative) to represent the interests of the general public in these proceedings. 3. Comments by interested persons in these proceedings are due no later than December 3, 2008. 4. The Secretary shall arrange for publication of this order in the Federal Register. inbound market dominant services. The Postal Service further indicates that the parties anticipate finalizing ‘‘this and related agreements by midDecember, and any lingering details will not affect the rates, classification, or other fundamental basis for this Request and Notice.’’ Request at 3, n.4. PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–58955; File No. SR–CBOE– 2008–109] Self-Regulatory Organizations; Chicago Board Options Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Consolidate into a Single Rule Certain Requirements for Products Traded on the CBOE Stock Exchange Pursuant to Unlisted Trading Privileges November 14, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. E:\FR\FM\21NON1.SGM 21NON1 70684 Federal Register / Vol. 73, No. 226 / Friday, November 21, 2008 / Notices notice is hereby given that on November 4, 2008, the Chicago Board Options Exchange, Inc. (‘‘CBOE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been substantially prepared by the Exchange. CBOE has designated the proposed rule change as constituting a rule change under Section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f)(6) thereunder,4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The CBOE proposes to amend its rules to consolidate into a single rule certain requirements for products traded on the CBOE Stock Exchange (‘‘CBSX’’), the CBOE’s stock trading facility, pursuant to unlisted trading privileges (‘‘UTP’’). Many of these products have been established in various new products proposals previously approved by the Commission. The text of the proposed rule change is available at the Exchange’s Web site at https:// www.cboe.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the CBOE included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The CBOE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. dwashington3 on PRODPC61 with NOTICES A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The CBOE proposes to amend its rules to consolidate into a single rule certain requirements for products traded on CBSX pursuant to UTP. Many of these products have been established in various new products proposals previously approved by the 3 15 4 17 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). VerDate Aug<31>2005 14:24 Nov 20, 2008 Jkt 217001 Commission. The Exchange proposes to amend CBOE Rule 31.5 to set forth a new rule, CBOE Rule 31.5P, regarding the extension of UTP to an NMS Stock 5 that is listed on another national securities exchange. Any such security will be subject to all Exchange trading rules applicable to NMS Stock, unless otherwise noted. The Exchange will file with the Commission a Form 19b–4(e) with respect to any such security that is a ‘‘new derivative securities product’’ (‘‘NDSP’’) as defined in Rule 19b–4(e) under the Act.6 In addition, any NDSP traded on the Exchange pursuant to proposed CBOE Rule 31.5P will be subject to the following criteria. Proposed CBOE Rule 31.5P(2)(a) provides that the Exchange will distribute an information circular prior to the commencement of trading in such NDSP that generally will include the same information as the information circular provided by the listing exchange, including: (1) The special risks of trading the NDSP, including CBOE Rule 53.6; 7 (2) the Exchange’s rules that will apply to the NDSP, including the suitability rule; (3) information about the dissemination of value of the underlying assets or indexes; and (4) the risks of trading during the period from 8:15 a.m. until 8:30 a.m. (Central Time) due to the lack of calculation or dissemination of the underlying index value, the Intraday Indicative Value, the Indicative Optimized Portfolio Value or other comparable estimate of the value of a share of the NDSP. Proposed CBOE Rule 31.5P(2)(b) reminds members and member organizations that they are subject to the prospectus delivery requirements under the Securities Act of 1933, unless the NDSP is the subject of an order by the Commission exempting the product from certain prospectus delivery requirements under Section 24(d) of the Investment Company Act of 1940 and the product is not otherwise subject to prospectus delivery requirements under the Securities Act of 1933. The Exchange shall inform its members and member organizations regarding the application of the provisions of this subparagraph to such NDSPs by means of an information circular. CBOE Rule 52.3(b)–(c) addresses trading halts in NDSPs traded on the Exchange pursuant to UTP. Proposed CBOE Rule 52.3(c)(6)(i) would modify the term ‘‘Derivative Securities Product’’ 5 See CBOE Rule 50.1(j). CFR 240.19b–4(e). 7 CBOE Rule 53.6 requires, in part, that member organizations have a reasonable basis for recommendations that they make to customers. 6 17 PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 to ‘‘New Derivative Securities Product’’ and state that the modified term shall have the same meaning as New Derivative Securities Product in Rule 31.5P. The term ‘‘New Derivative Securities Product’’ is intended to include any products that are included in the current term ‘‘Derivative Securities Product.’’ In addition, throughout CBOE Rule 52.3(b)–(c), the term ‘‘Derivative Securities Product’’ is modified to ‘‘New Derivative Securities Product’’ to reflect the change in proposed CBOE Rule 52.3(c)(6)(i). CBOE Rule 52.3(c)(1) provides that if an NDSP begins trading on CBSX in the period from 8:15 a.m. until 8:30 a.m. (Central Time) and subsequently a temporary interruption occurs in the calculation or wide dissemination of an applicable Required Value,8 CBSX may continue to trade the NDSP for the remainder of the 8:15 a.m. to 8:30 a.m. session. CBOE Rule 52.3(c)(2) provides that during Normal Market Hours,9 if a temporary interruption occurs in the calculation or wide dissemination of an applicable Required Value, and the listing market halts trading in the NDSP, CBSX, upon notification by the listing market of a halt due to such temporary interruption, also shall immediately halt trading in the NDSP on CBSX. CBOE Rule 52.3(c)(3) provides that if an applicable Required Value continues not to be calculated or widely disseminated as of the commencement of trading on CBSX on the next trading day, CBSX shall not commence trading of the NDSP that day. If an interruption in the calculation or wide dissemination of an applicable Required Value continues, CBSX may resume trading in the NDSP only if calculation and wide dissemination of the applicable Required Value resumes or trading in the NDSP resumes in the listing market. Finally, proposed CBOE Rule 52.3(c)(4) provides that for an NDSP where a net asset value (or, in the case of managed fund shares or actively managed exchange-traded funds, a ‘‘disclosed portfolio’’) is disseminated, CBSX will immediately halt trading in such security upon notification by the listing market that the net asset value or, if applicable, such disclosed portfolio is not being disseminated to all market participants at the same time. CBSX 8 Proposed CBOE 52.3(c)(6)(ii) states that ‘‘Required Value’’ shall mean (i) the value of any security or index underlying a New Derivative Securities Product, and (ii) the intraday indicative value, or the indicative optimized portfolio value or other comparable estimate of the value of a share of a New Derivative Securities Product updated regularly during the trading day.’’ 9 CBOE Rule 52.3(c)(2) defines Normal Market Hours as the time period from 8:30 a.m. until 3:15 p.m. (Central Time). E:\FR\FM\21NON1.SGM 21NON1 dwashington3 on PRODPC61 with NOTICES Federal Register / Vol. 73, No. 226 / Friday, November 21, 2008 / Notices may resume trading in the NDSP only when trading in the NDSP resumes on the listing market. Proposed CBOE Rule 31.5P(2)(c) provides for restrictions for members registered as Market Makers (‘‘Restricted Market Maker’’) in an NDSP that derives its value from one or more currencies, commodities, or derivatives based on one or more currencies or commodities, or is based on a basket or index comprised of currencies or commodities (collectively, ‘‘Reference Assets’’). Specifically, proposed CBOE Rule 31.5P(2)(c)(i) provides a Restricted Market Maker in an NDSP is prohibited from acting or registering as a market maker in any Reference Asset of that NDSP or any derivative instrument based on a Reference Asset of that NDSP (collectively, with Reference Assets, ‘‘Related Instruments’’). Proposed CBOE Rule 31.5P(2)(c)(ii) provides a Restricted Market Maker shall, in a manner prescribed by CBOE, file with CBOE and keep current a list identifying any accounts (‘‘Related Instrument Trading Accounts’’) for which Related Instruments are traded: (a) In which the Restricted Market Maker holds an interest; (b) over which it has investment discretion; or (c) in which it shares in the profits and/or losses. In addition, a Restricted Market Maker may not have an interest in, exercise investment discretion over, or share in the profits and/or losses of a Related Instrument Trading Account which has not been reported to CBOE as required by this Rule. Proposed CBOE Rule 31.5P(2)(c)(iii) provides that in addition to the existing obligations under CBOE rules regarding the production of books and records, a Restricted Market Maker shall, upon request by CBOE, make available to CBOE any books, records, or other information pertaining to any Related Instrument Trading Account or to the account of any registered or nonregistered employee affiliated with the Restricted Market Maker for which Related Instruments are traded. Finally, proposed CBOE Rule 31.5P(2)(c)(iv) provides that a Restricted Market Maker shall not use any material nonpublic information in connection with trading a Related Instrument. Lastly, CBOE represents that the Exchange’s surveillance procedures for NDSPs traded on the Exchange pursuant to UTP will be similar to the procedures used for equity securities traded on the Exchange and will incorporate and rely upon existing Exchange surveillance systems. The Exchange will closely monitor activity in NDSPs traded on the Exchange pursuant to UTP and deter any potential improper trading activity. Proposed CBOE Rule 31.5P(2)(d) also VerDate Aug<31>2005 14:24 Nov 20, 2008 Jkt 217001 provides that the Exchange will enter into a comprehensive surveillance sharing agreement (‘‘CSSA’’) with a market trading components of the index or portfolio on which the New Derivative Securities Product is based to the same extent as the listing exchange’s rules require the listing market to enter into a CSSA with such market. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 10 in general, and furthers the objectives of Section 6(b)(5) of the Act 11 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest, by providing for the trading of securities, including NDSPs, on CBSX pursuant to UTP, subject to consistent and reasonable standards. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, it has become effective pursuant to Section 19(b)(3)(A) of the Act 12 and Rule 19b–4(f)(6) thereunder.13 CBOE has asked the Commission to waive the 30-day operative delay. The Commission hereby grants the 10 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 12 15 U.S.C. 78s(b)(3)(A). 13 17 CFR 240.19b–4(f)(6). The Commission notes that CBOE has satisfied the five-day pre-filing notice requirement. 11 15 PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 70685 Exchange’s request and believes that such waiver is consistent with the protection of investors and the public interest. This action should benefit investors by creating, without undue delay, additional competition in the trading of new derivative securities products, subject to consistent and reasonable standards. Proposed CBOE Rules 31.5 and 52–3(b)–(c) are closely modeled after similar rules of other national securities exchanges 14 and do not raise any novel or significant regulatory issues. Therefore, the Commission designates the proposed rule change as operative upon filing.15 At any time within 60 days of the filing of the proposed rule change the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–CBOE–2008–109 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–CBOE–2008–109. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your 14 See BATS Exchange Rule 14.1 and Securities Exchange Act Release No. 58623 (September 23, 2008), 73 FR 57169 (October 1, 2008) (SR–BATS– 2008–004); National Stock Exchange Rule 15.9 and Securities Exchange Act Release No. 57448 (March 6, 2008), 73 FR 13597 (March 13, 2008) (SR–NSX– 2008–05); NASDAQ OMX PHLX Rule 803(o) and Securities Exchange Act Release No. 57806 (May 9, 2008), 73 FR 28541 (May 16, 2008) (SR–Phlx–2008– 34); International Securities Exchange Rule 2101 and Securities Exchange Act Release No. 57387 (February 27, 2008), 73 FR 11965 (March 5, 2008) (SR–ISE–2007–99). 15 For purposes only of waiving the operative date of this proposal, the Commission has considered the rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). E:\FR\FM\21NON1.SGM 21NON1 70686 Federal Register / Vol. 73, No. 226 / Friday, November 21, 2008 / Notices comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site https://www.sec.gov/ rules/sro.shtml. 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 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 on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing will also be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–CBOE– 2008–109 and should be submitted on or before December 12, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Florence E. Harmon, Acting Secretary, [FR Doc. E8–27755 Filed 11–20–08; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–58944; File No. SR–DTC– 2008–09] Self-Regulatory Organizations; The Depository Trust Company; Order Granting Approval of a Proposed Rule Change to Expand DTC’s Debit Cap Look-Ahead Processing dwashington3 on PRODPC61 with NOTICES November 13, 2008. I. Introduction On September 12, 2008, The Depository Trust Company (‘‘DTC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) proposed rule change SR–DTC–2008–09 pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’).1 Notice of the proposal was published in the Federal Register on March 7, 2008.2 No 16 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 Securities Exchange Act Release No. 58730 (October 3, 2008), 73 FR 59694 (October 9, 2008). 115 VerDate Aug<31>2005 14:24 Nov 20, 2008 Jkt 217001 comment letters were received. For the reasons discussed below, the Commission is granting approval of the proposed rule change. II. Description The proposed rule change amends the Look-Ahead Process in DTC’s Settlement Services Guide to allow Money Market Issuance Deliveries pending for a Custodian’s or Dealer’s net debit cap to complete against Maturity Presentments pending for an Issuing/ Paying Agent’s net debit cap. DTC’s processing system will calculate the net effect of the dollar amount of offsetting transactions in the accounts of the two Participants involved. If the net of the transactions result in positive risk management controls in those two accounts, the transactions will be completed. On June 10, 2003, the Commission approved a proposed rule change to establish a transaction Look-Ahead Process which became available for municipal and corporate bonds, including Money Market Instruments (‘‘MMIs’’).3 On August 11, 2004, the Commission approved another proposed rule change which expanded the application and extended the benefit of the Look-Ahead Process to all equity transactions.4 With this proposed rule change, DTC is proposing to expand the Look-Ahead Process to MMIs. The purpose of DTC’s Look-Ahead Process is to reduce the number of recycling transactions in the system caused by the Net Debit Cap Risk Management Control.5 The existing Look-Ahead Process finds delivery transactions that are pending because the Receiving Participant has reached its net debit cap.6 It then looks to see whether the Receiving Participant has a pending delivery for the same security to another Participant.7 In such a situation, DTC’s Account Transaction 3Securities Exchange Act Release No. 48007 (June 10, 2003), 68 FR 35744 (June 16, 2003) (File No. SRDTC–2003–07). 4Securities Exchange Act Release No. 50182 (August 11, 2004), 69 FR 51341 (August 18, 2004) (File No. SR-DTC–2004–05). 5Net debit caps help ensure that DTC can complete settlement, even if a Participant fails to settle. 6Before completing a transaction in which a Participant is the receiver, DTC calculates the resulting effect the transaction would have on the Participant’s account and determines whether the resulting net balance would exceed the Participant’s net debit cap. Any transaction that would cause the Participant’s net settlement debit to exceed its net debit cap is placed in a pending (recycling) queue until another transaction creates credits in the Participant’s account. 7For example, Participant A is delivering shares to Participant B and Participant B has a delivery obligation of shares with the same CUSIP to Participant C. PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 Processor (‘‘ATP’’)8 will calculate the net effect to the collateral 9 and net debit cap controls for all three Participants involved. If the net effect will not result in a deficit in the collateral or net debit cap controls for any of the three Participants, ATP processes the transactions simultaneously. Without the Look-Ahead Process, the transaction would pend in DTC’s system until another transaction created sufficient credit in the Receiving Participant’s account. Most credits are generated when a Participant delivers securities versus payment, pledges securities for value, receives principal, dividend or other interest allocations, or wires funds (a Settlement Progress Payment (‘‘SPP’’)) to DTC’s account at the Federal Reserve Bank of New York in order to reduce its DTC net debit. In order to further reduce the number of recycling transactions in the system and to further improve the timeliness and certainty of transactions completing, DTC is expanding the LookAhead Process beyond same securities for MMIs to allow pairs of money market instrument transactions between two Participants (i.e., an Issuing Paying Agent [‘‘IPA’’] and a custodian or dealer) that are pending for both parties’ net debit caps to complete. This situation occurs when an IPA has a delivery of a new money market instrument to a custodian or a dealer for X dollars and that same custodian or dealer has a maturity of a money market instrument of equal or greater value awaiting acceptance by the same IPA. The proposed rule change will allow ATP to process those transactions simultaneously, as long as neither Participant’s risk management controls were overridden. This enhancement to the Look-Ahead Process will reduce the number of MMI recycling transactions. The Look-Ahead enhancement to DTC’s processing system will not result in any systematic changes for Participants. III. Discussion Section 17A(b)(3)(F) of the Act requires that the rules of a clearing agency be designed to assure the 8ATP is the core processing system for all transaction activity affecting security positions held at DTC. 9DTC tracks collateral in a Participant’s account through its Collateral Monitor (‘‘CM’’). At all times, the CM reflects the amount by which the collateral in the account exceeds the net debit in the account. When processing a transaction, DTC verifies that the deliverer’s and receiver’s CMs will not become negative when the transaction completes. If the transaction would cause either party to have a negative CM, the transaction will recycle until the deficient account has sufficient collateral for the transaction to complete. E:\FR\FM\21NON1.SGM 21NON1

Agencies

[Federal Register Volume 73, Number 226 (Friday, November 21, 2008)]
[Notices]
[Pages 70683-70686]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-27755]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58955; File No. SR-CBOE-2008-109]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Consolidate into a Single Rule Certain Requirements for 
Products Traded on the CBOE Stock Exchange Pursuant to Unlisted Trading 
Privileges

November 14, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\

[[Page 70684]]

notice is hereby given that on November 4, 2008, the Chicago Board 
Options Exchange, Inc. (``CBOE'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been substantially prepared by the Exchange. CBOE has designated 
the proposed rule change as constituting a rule change under Section 
19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which 
renders the proposal effective upon filing with the Commission. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The CBOE proposes to amend its rules to consolidate into a single 
rule certain requirements for products traded on the CBOE Stock 
Exchange (``CBSX''), the CBOE's stock trading facility, pursuant to 
unlisted trading privileges (``UTP''). Many of these products have been 
established in various new products proposals previously approved by 
the Commission. The text of the proposed rule change is available at 
the Exchange's Web site at https://www.cboe.com, at the principal office 
of the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the CBOE included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The CBOE has prepared summaries, set forth in Sections 
A, B, and C below, of the most significant aspects of such statements.

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

1. Purpose
    The CBOE proposes to amend its rules to consolidate into a single 
rule certain requirements for products traded on CBSX pursuant to UTP. 
Many of these products have been established in various new products 
proposals previously approved by the Commission. The Exchange proposes 
to amend CBOE Rule 31.5 to set forth a new rule, CBOE Rule 31.5P, 
regarding the extension of UTP to an NMS Stock \5\ that is listed on 
another national securities exchange. Any such security will be subject 
to all Exchange trading rules applicable to NMS Stock, unless otherwise 
noted. The Exchange will file with the Commission a Form 19b-4(e) with 
respect to any such security that is a ``new derivative securities 
product'' (``NDSP'') as defined in Rule 19b-4(e) under the Act.\6\ In 
addition, any NDSP traded on the Exchange pursuant to proposed CBOE 
Rule 31.5P will be subject to the following criteria.
---------------------------------------------------------------------------

    \5\ See CBOE Rule 50.1(j).
    \6\ 17 CFR 240.19b-4(e).
---------------------------------------------------------------------------

    Proposed CBOE Rule 31.5P(2)(a) provides that the Exchange will 
distribute an information circular prior to the commencement of trading 
in such NDSP that generally will include the same information as the 
information circular provided by the listing exchange, including: (1) 
The special risks of trading the NDSP, including CBOE Rule 53.6; \7\ 
(2) the Exchange's rules that will apply to the NDSP, including the 
suitability rule; (3) information about the dissemination of value of 
the underlying assets or indexes; and (4) the risks of trading during 
the period from 8:15 a.m. until 8:30 a.m. (Central Time) due to the 
lack of calculation or dissemination of the underlying index value, the 
Intraday Indicative Value, the Indicative Optimized Portfolio Value or 
other comparable estimate of the value of a share of the NDSP.
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    \7\ CBOE Rule 53.6 requires, in part, that member organizations 
have a reasonable basis for recommendations that they make to 
customers.
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    Proposed CBOE Rule 31.5P(2)(b) reminds members and member 
organizations that they are subject to the prospectus delivery 
requirements under the Securities Act of 1933, unless the NDSP is the 
subject of an order by the Commission exempting the product from 
certain prospectus delivery requirements under Section 24(d) of the 
Investment Company Act of 1940 and the product is not otherwise subject 
to prospectus delivery requirements under the Securities Act of 1933. 
The Exchange shall inform its members and member organizations 
regarding the application of the provisions of this subparagraph to 
such NDSPs by means of an information circular.
    CBOE Rule 52.3(b)-(c) addresses trading halts in NDSPs traded on 
the Exchange pursuant to UTP. Proposed CBOE Rule 52.3(c)(6)(i) would 
modify the term ``Derivative Securities Product'' to ``New Derivative 
Securities Product'' and state that the modified term shall have the 
same meaning as New Derivative Securities Product in Rule 31.5P. The 
term ``New Derivative Securities Product'' is intended to include any 
products that are included in the current term ``Derivative Securities 
Product.'' In addition, throughout CBOE Rule 52.3(b)-(c), the term 
``Derivative Securities Product'' is modified to ``New Derivative 
Securities Product'' to reflect the change in proposed CBOE Rule 
52.3(c)(6)(i).
    CBOE Rule 52.3(c)(1) provides that if an NDSP begins trading on 
CBSX in the period from 8:15 a.m. until 8:30 a.m. (Central Time) and 
subsequently a temporary interruption occurs in the calculation or wide 
dissemination of an applicable Required Value,\8\ CBSX may continue to 
trade the NDSP for the remainder of the 8:15 a.m. to 8:30 a.m. session. 
CBOE Rule 52.3(c)(2) provides that during Normal Market Hours,\9\ if a 
temporary interruption occurs in the calculation or wide dissemination 
of an applicable Required Value, and the listing market halts trading 
in the NDSP, CBSX, upon notification by the listing market of a halt 
due to such temporary interruption, also shall immediately halt trading 
in the NDSP on CBSX. CBOE Rule 52.3(c)(3) provides that if an 
applicable Required Value continues not to be calculated or widely 
disseminated as of the commencement of trading on CBSX on the next 
trading day, CBSX shall not commence trading of the NDSP that day. If 
an interruption in the calculation or wide dissemination of an 
applicable Required Value continues, CBSX may resume trading in the 
NDSP only if calculation and wide dissemination of the applicable 
Required Value resumes or trading in the NDSP resumes in the listing 
market. Finally, proposed CBOE Rule 52.3(c)(4) provides that for an 
NDSP where a net asset value (or, in the case of managed fund shares or 
actively managed exchange-traded funds, a ``disclosed portfolio'') is 
disseminated, CBSX will immediately halt trading in such security upon 
notification by the listing market that the net asset value or, if 
applicable, such disclosed portfolio is not being disseminated to all 
market participants at the same time. CBSX

[[Page 70685]]

may resume trading in the NDSP only when trading in the NDSP resumes on 
the listing market.
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    \8\ Proposed CBOE 52.3(c)(6)(ii) states that ``Required Value'' 
shall mean (i) the value of any security or index underlying a New 
Derivative Securities Product, and (ii) the intraday indicative 
value, or the indicative optimized portfolio value or other 
comparable estimate of the value of a share of a New Derivative 
Securities Product updated regularly during the trading day.''
    \9\ CBOE Rule 52.3(c)(2) defines Normal Market Hours as the time 
period from 8:30 a.m. until 3:15 p.m. (Central Time).
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    Proposed CBOE Rule 31.5P(2)(c) provides for restrictions for 
members registered as Market Makers (``Restricted Market Maker'') in an 
NDSP that derives its value from one or more currencies, commodities, 
or derivatives based on one or more currencies or commodities, or is 
based on a basket or index comprised of currencies or commodities 
(collectively, ``Reference Assets''). Specifically, proposed CBOE Rule 
31.5P(2)(c)(i) provides a Restricted Market Maker in an NDSP is 
prohibited from acting or registering as a market maker in any 
Reference Asset of that NDSP or any derivative instrument based on a 
Reference Asset of that NDSP (collectively, with Reference Assets, 
``Related Instruments''). Proposed CBOE Rule 31.5P(2)(c)(ii) provides a 
Restricted Market Maker shall, in a manner prescribed by CBOE, file 
with CBOE and keep current a list identifying any accounts (``Related 
Instrument Trading Accounts'') for which Related Instruments are 
traded: (a) In which the Restricted Market Maker holds an interest; (b) 
over which it has investment discretion; or (c) in which it shares in 
the profits and/or losses. In addition, a Restricted Market Maker may 
not have an interest in, exercise investment discretion over, or share 
in the profits and/or losses of a Related Instrument Trading Account 
which has not been reported to CBOE as required by this Rule. Proposed 
CBOE Rule 31.5P(2)(c)(iii) provides that in addition to the existing 
obligations under CBOE rules regarding the production of books and 
records, a Restricted Market Maker shall, upon request by CBOE, make 
available to CBOE any books, records, or other information pertaining 
to any Related Instrument Trading Account or to the account of any 
registered or non-registered employee affiliated with the Restricted 
Market Maker for which Related Instruments are traded. Finally, 
proposed CBOE Rule 31.5P(2)(c)(iv) provides that a Restricted Market 
Maker shall not use any material nonpublic information in connection 
with trading a Related Instrument.
    Lastly, CBOE represents that the Exchange's surveillance procedures 
for NDSPs traded on the Exchange pursuant to UTP will be similar to the 
procedures used for equity securities traded on the Exchange and will 
incorporate and rely upon existing Exchange surveillance systems. The 
Exchange will closely monitor activity in NDSPs traded on the Exchange 
pursuant to UTP and deter any potential improper trading activity. 
Proposed CBOE Rule 31.5P(2)(d) also provides that the Exchange will 
enter into a comprehensive surveillance sharing agreement (``CSSA'') 
with a market trading components of the index or portfolio on which the 
New Derivative Securities Product is based to the same extent as the 
listing exchange's rules require the listing market to enter into a 
CSSA with such market.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \10\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \11\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest, by providing for the trading of securities, including NDSPs, 
on CBSX pursuant to UTP, subject to consistent and reasonable 
standards.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received.

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

    Because the foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) impose any significant burden on competition; and
    (iii) become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest, it 
has become effective pursuant to Section 19(b)(3)(A) of the Act \12\ 
and Rule 19b-4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). The Commission notes that CBOE has 
satisfied the five-day pre-filing notice requirement.
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    CBOE has asked the Commission to waive the 30-day operative delay. 
The Commission hereby grants the Exchange's request and believes that 
such waiver is consistent with the protection of investors and the 
public interest. This action should benefit investors by creating, 
without undue delay, additional competition in the trading of new 
derivative securities products, subject to consistent and reasonable 
standards. Proposed CBOE Rules 31.5 and 52-3(b)-(c) are closely modeled 
after similar rules of other national securities exchanges \14\ and do 
not raise any novel or significant regulatory issues. Therefore, the 
Commission designates the proposed rule change as operative upon 
filing.\15\
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    \14\ See BATS Exchange Rule 14.1 and Securities Exchange Act 
Release No. 58623 (September 23, 2008), 73 FR 57169 (October 1, 
2008) (SR-BATS-2008-004); National Stock Exchange Rule 15.9 and 
Securities Exchange Act Release No. 57448 (March 6, 2008), 73 FR 
13597 (March 13, 2008) (SR-NSX-2008-05); NASDAQ OMX PHLX Rule 803(o) 
and Securities Exchange Act Release No. 57806 (May 9, 2008), 73 FR 
28541 (May 16, 2008) (SR-Phlx-2008-34); International Securities 
Exchange Rule 2101 and Securities Exchange Act Release No. 57387 
(February 27, 2008), 73 FR 11965 (March 5, 2008) (SR-ISE-2007-99).
    \15\ For purposes only of waiving the operative date of this 
proposal, the Commission has considered the rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2008-109 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2008-109. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your

[[Page 70686]]

comments more efficiently, please use only one method. The Commission 
will post all comments on the Commission's Internet Web site https://
www.sec.gov/rules/sro.shtml. 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 
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 on official business days between the hours of 10 a.m. 
and 3 p.m. Copies of such filing will also be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CBOE-2008-109 and should be 
submitted on or before December 12, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary,
[FR Doc. E8-27755 Filed 11-20-08; 8:45 am]
BILLING CODE 8011-01-P
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