80 FR 31628 - Self-Regulatory Organizations; The NASDAQ Stock Market, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 4626(b)(3)

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 106 (June 3, 2015)

Page Range		31628-31632
FR Document		2015-13616
Federal Register, Volume 80 Issue 106 (Wednesday, June 3, 2015)
[Federal Register Volume 80, Number 106 (Wednesday, June 3, 2015)]
[Notices]
[Pages 31628-31632]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-13616]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75072; File No. SR-NASDAQ-2015-057]


Self-Regulatory Organizations; The NASDAQ Stock Market, LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Amend Rule 4626(b)(3)

May 29, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on May 19, 2015, The NASDAQ Stock Market LLC (``NASDAQ'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I, II and 
III below, which Items have been prepared by the Exchange. 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.
---------------------------------------------------------------------------

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

    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.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 Exchange 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 Exchange 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
Introduction
    On March 22, 2013, the Commission approved a proposal by Nasdaq to 
establish a one-time voluntary accommodation policy for claims arising 
from system difficulties that Nasdaq experienced during the initial 
public offering (``IPO'') of Facebook, Inc. (``Facebook'' or ``FB'') on 
May 18, 2012.\3\ Rule 4626 limits the liability of Nasdaq and its 
affiliates with respect to any losses, damages, or other claims arising 
out of the Nasdaq Market Center or its use and provides for limited 
accommodations under the conditions specified in the rule.\4\ Rule 
4626(b)(1) provides that for the aggregate of all claims made by market 
participants related to the use of the Nasdaq Market Center during a 
single calendar month, Nasdaq's payments under Rule 4626 shall not 
exceed the larger of $500,000 or the amount of the recovery obtained by 
Nasdaq under any applicable insurance policy. Rule 4626(b)(2) states 
that for the aggregate of all claims made by market participants 
related to systems malfunctions or errors of the Nasdaq Market Center 
concerning locked/crossed compliance, trade through protection, market 
maker quoting, order protection, or firm quote compliance, during a 
single calendar month Nasdaq's payments under Rule 4626 shall not 
exceed the larger of $3,000,000 or the amount of the recovery obtained 
by Nasdaq under any applicable insurance policy. Rule 4626(b)(3) 
established a methodology for submission, evaluation, and payment of 
claims associated with the Facebook IPO. The purpose of this proposed 
rule change is to amend Rule 4626(b)(3) to permit a limited reopening 
of the process for submitting, evaluating, and paying such claims, in 
accordance with the terms and conditions described herein.
---------------------------------------------------------------------------

    \3\ Securities Exchange Act Release No. 69216 (March 22, 2013), 
78 FR 19040 (March 28, 2013) (SR-NASDAQ-2012-090) (``Approval 
Order''). See also Securities Exchange Act Release No. 67507 (July 
26, 2012), 77 FR 45706 (August 1, 2012) (SR-NASDAQ-2012-090) 
(``Proposing Release'').
    \4\ Rule 4626(a) provides that except as set forth in the 
accommodation portion of the rule, ``Nasdaq and its affiliates shall 
not be liable for any losses, damages, or other claims arising out 
of the Nasdaq Market Center or its use. Any losses, damages, or 
other claims, related to a failure of the Nasdaq Market Center to 
deliver, display, transmit, execute, compare, submit for clearance 
and settlement, adjust, retain priority for, or otherwise correctly 
process an order, Quote/Order, message, or other data entered into, 
or created by, the Nasdaq Market Center shall be absorbed by the 
member, or the member sponsoring the customer, that entered the 
order, Quote/Order, message, or other data into the Nasdaq Market 
Center.''
---------------------------------------------------------------------------

    On May 18, 2012, Nasdaq experienced system difficulties during the 
Nasdaq Halt and Imbalance Cross Process (the ``Cross'') for the FB IPO. 
These difficulties delayed the completion of the Cross from 11:05 a.m. 
until 11:30 a.m.\5\ Based on its assessment of the information 
available at the time, Nasdaq concluded that the system issues would 
not have any effects beyond the delay itself. In an exercise of its 
regulatory authority, Nasdaq determined to proceed with the IPO at 
11:30 a.m. rather than postpone it.
---------------------------------------------------------------------------

    \5\ All times in this filing are Eastern Time.
---------------------------------------------------------------------------

    As a result of the system difficulties, however, certain orders for 
FB stock that were entered between 11:11:00 a.m. and 11:30:09 a.m. in 
the expectation of participating in the Cross--and that were not 
cancelled prior to 11:30:09 a.m.--either did not execute or executed 
after 1:50 p.m. at prices other than the $42.00 price established by 
the Cross. (Other orders entered between 11:11:00 a.m. and 11:30:09 
a.m., including cancellations, buy orders below $42.00, and sell orders 
above $42.00, were handled without incident.) System issues also 
delayed the dissemination of Cross transaction reports from 11:30 a.m. 
until 1:50 p.m. At 1:50 p.m., Nasdaq system difficulties were 
completely resolved.
    Rule 4626(b)(3) provides that, as a result of these unique 
circumstances, Nasdaq would accommodate members for losses attributable 
to the system difficulties on May 18, 2012 in an amount not to exceed 
$62 million. Rule 4626(b)(3)(A) provides that all claims for such 
accommodation must arise solely from realized or unrealized direct

[[Page 31629]]

trading losses arising from the following specific Cross orders:
    (i) SELL Cross orders that were submitted between 11:11 a.m. and 
11:30 a.m. on May 18, 2012, that were priced at $42.00 or less, and 
that did not execute;
    (ii) SELL Cross orders that were submitted between 11:11 a.m. and 
11:30 a.m. on May 18, 2012, that were priced at $42.00 or less, and 
that executed at a price below $42.00;
    (iii) BUY Cross orders priced at exactly $42.00 and that were 
executed in the Cross but not immediately confirmed; and
    (iv) BUY Cross orders priced above $42.00 and that were executed in 
the Cross but not immediately confirmed, but only to the extent entered 
with respect to a customer that was permitted by the member to cancel 
its order prior to 1:50 p.m. and for which a request to cancel the 
order was submitted to Nasdaq by the member, also prior to 1:50 p.m.
    As originally approved, Rule 4626(b)(3)(D) provided that all claims 
related to the FB IPO must be submitted in writing not later than 7 
days after formal approval of the FB accommodation proposal by the 
Commission, which occurred on March 22, 2013. In recognition of the 
fact that the Passover and Good Friday holidays occurred during the 
week when claim submissions would otherwise be due, Nasdaq submitted an 
immediately effective proposed rule change to extend the deadline for 
claim submission until 11:59 p.m. on April 8, 2013.\6\ Nasdaq received 
claims with respect to 75 market participant identifiers (``MPIDs'') 
within the deadline (the ``2013 Claims''). Nasdaq did not receive any 
claims after the deadline.
---------------------------------------------------------------------------

    \6\ Securities Exchange Act Release No. 69250 (March 28, 2013), 
78 FR 20160 (April 3, 2013) (SR-NASDAQ-2013-055).
---------------------------------------------------------------------------

    Rule 4626(d)(3)(D) further provides that all claims shall be 
processed and evaluated by the Financial Industry Regulation Authority 
(``FINRA''), applying the standards set forth in Rule 4626. FINRA is 
authorized to request such supplemental information as it deems 
necessary to assist its evaluation of claims.
    Rule 4626(b)(3)(E) required FINRA to provide to the Nasdaq Board of 
Directors and the Board of Directors of NASDAQ OMX an analysis of the 
total value of eligible 2013 Claims, and further provided that Nasdaq 
would file with the Commission a rule proposal setting forth the amount 
of eligible 2013 Claims under the standards set forth in Rule 4626 and 
the amount proposed to be paid to members by Nasdaq. This process was 
completed in 2013,\7\ and all valid 2013 Claims were paid on December 
31, 2013.
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 71098 (December 17, 
2013), 78 FR 77540 (December 23, 2013) (SR-NASDAQ-2013-152) (the 
``Results Filing'').
---------------------------------------------------------------------------

Basis for Reopening the Claim Process Under Rule 4626(b)(3)
    On March 15, 2013, UBS Securities LLC (``UBS''), a member of Nasdaq 
within the meaning of Rule 4626, filed a demand for arbitration against 
NASDAQ with the American Arbitration Association (``AAA''). In its 
demand, UBS sought to recover damages alleged to have been caused by 
Nasdaq in connection with the Facebook IPO. UBS cited provisions of the 
Services Agreement between Nasdaq and UBS as the basis for pursuing a 
claim in arbitration.\8\ UBS did not file a claim under Rule 
4626(b)(3).
---------------------------------------------------------------------------

    \8\ The Services Agreement is a contract that users of certain 
NASDAQ OMX systems (including, but not limited to, the Nasdaq Market 
Center) are required to enter into as a condition of using such 
systems.
---------------------------------------------------------------------------

    On April 4, 2013, Nasdaq filed an action in the Southern District 
of New York against UBS seeking declaratory and injunctive relief with 
respect to UBS's demand for arbitration. On April 16, 2013, NASDAQ 
moved preliminarily to enjoin UBS from proceeding with arbitration, 
arguing, inter alia, that the Services Agreement did not reflect an 
agreement by Nasdaq to arbitrate claims covered by Rule 4626. UBS 
cross-moved to dismiss NASDAQ's complaint and opposed the preliminary 
injunction motion. On June 18, 2013, the district court granted 
NASDAQ's motion for a preliminary injunction and denied UBS's cross-
motion to dismiss.\9\ UBS appealed this decision to the United States 
Court of Appeals for the Second Circuit (the ``Court of Appeals'').
---------------------------------------------------------------------------

    \9\ See NASDAQ OMX Grp., Inc. v. UBS Sec. LLC, 957 F. Supp. 2d 
388 (S.D.N.Y. 2013).
---------------------------------------------------------------------------

    On October 31, 2014, the Court of Appeals issued a decision 
affirming the district court's decision.\10\ In doing so, the Court of 
Appeals found that the district court had not erred in (i) exercising 
federal question jurisdiction over the case; (2) determining that the 
arbitrability of UBS's claims is a question for decision by the court, 
rather than an arbitrator; and (3) concluding that UBS's claims are not 
subject to arbitration given the applicability of Rule 4626.\11\ The 
ruling by the Court of Appeals does not, however, foreclose the 
possibility of further judicial proceedings by UBS against Nasdaq. 
Nevertheless, UBS has agreed to forego further proceedings in 
consideration of Nasdaq's agreement to submit a proposed rule change to 
amend Rule 4626(b)(3) for the purpose of allowing UBS to submit a claim 
thereunder. In the interest of ensuring that the administration of Rule 
4626 continues to be as fair as possible to all members, Nasdaq is 
proposing a limited reopening of the claims process not only for UBS, 
but for all other members that did not file 2013 Claims.\12\
---------------------------------------------------------------------------

    \10\ See NASDAQ OMX Grp., Inc. v. UBS Sec. LLC, Docket No. 13-
2657-cv (2d Cir. 2014).
    \11\ On December 29, 2014, the Second Circuit denied a petition 
for panel rehearing, or in the alternative, rehearing en banc.
    \12\ Members that did file 2013 Claims would not be entitled to 
file again or to seek reconsideration of their claims. Similarly, 
any member affiliated with a member that executed and delivered a 
release of claims under Rule 4626(b)(3)(H) would be barred from 
filing. See Rule 4626(b)(3)(H) (requiring ``the execution and 
delivery to Nasdaq of a release by the member of all claims by it or 
its affiliates against Nasdaq or its affiliates for losses that 
arise out of, are associated with, or relate in any way to the 
Facebook, Inc. IPO Cross or to any actions or omissions related in 
any way to that Cross, including but not limited to the execution or 
confirmation of orders in Facebook, Inc. on May 18, 2012'').
---------------------------------------------------------------------------

Structure of the Proposed Claim Process

    Under the proposed process for submission of new claims, a member 
that did not submit a claim prior to 11:59 p.m. ET on April 8, 2013 and 
that is not subject to a release executed and delivered to Nasdaq under 
Rule 4626(b)(3)(H) may submit a claim under Rule 4626(b)(3) prior to 
11:59 p.m. ET on June 19, 2015 (each, a ``2015 Claim'' and 
collectively, the ``2015 Claims''). All 2015 Claims shall be processed 
and evaluated by FINRA applying the accommodation standards set forth 
in paragraphs (b)(3)(A), (B), and (C) of Rule 4626 and as fully 
described in the Proposing Release, the Approval Order, and the Results 
Filing.\13\ FINRA may request such supplemental information as FINRA 
deems necessary to assist FINRA's evaluation of 2015 Claims.
---------------------------------------------------------------------------

    \13\ Nasdaq notes that the Results Filing describes the 
application of Rule 4626 to several questions that arose during 
FINRA's review of 2013 Claims, particularly with respect to claims 
for orders entered under a sponsored access arrangement and claims 
for BUY Cross Orders priced at exactly $42.00.
---------------------------------------------------------------------------

    As was the case with 2013 Claims, FINRA will establish a working 
group consisting of FINRA Market Regulation Department analysts and 
managers (``FB Claims Team''). During the review process, the FB Claims 
Team will not perform any regulatory services for any Nasdaq market and 
will not own or have owned FB stock during the period since its IPO. A 
Steering Committee, composed of members of senior management of FINRA's 
Market Regulation Department, may provide

[[Page 31630]]

guidance to the FB Claims Team on the resolution of procedural and 
substantive issues arising during the course of the FB claim evaluation 
process, review the form and content of the review summary forms for 
each claim, and monitor the overall progress of the claim review 
effort. However, members of the Steering Committee will not participate 
in the FB Claim Team's assessment of and decisions to recommend the 
approval or disapproval of individual claims.
    Following the completion of its analysis of 2015 Claims, FINRA 
shall provide to the Nasdaq Board of Directors and the Board of 
Directors of The NASDAQ OMX Group, Inc. an analysis of the total value 
of eligible 2015 Claims.\14\ Nasdaq will review FINRA's determinations 
and determine whether it concurs in them or believes that any changes 
are required. Nasdaq will thereafter notify members of the value of 
2015 Claims and pay valid 2015 Claims in accordance with the following 
parameters (which are functionally identical to the conditions 
associated with the payment of 2013 Claims):
---------------------------------------------------------------------------

    \14\ In contrast to the process for 2013 Claims, Nasdaq is not 
proposing to submit a follow-on proposed rule change to report on 
the results of the 2015 Claim process. Nasdaq believes that such a 
proposed rule change is unnecessary because the 2015 Claim process 
will follow the parameters described herein and in the Proposing 
Release, the Approval Order, and the Report Filing.
---------------------------------------------------------------------------

     All payments of 2015 Claims will be contingent upon the 
submission to Nasdaq, not later than 7 days after the member's 
receiving notice of the value its 2015 Claim, of an attestation 
detailing:
    [cir] The amount of compensation, accommodation, or other economic 
benefit provided or to be provided by the member to its customers 
(other than customers that were brokers or dealers trading for their 
own account) in respect of trading in Facebook Inc. on May 18, 2012 
(``Customer Compensation''), and
    [cir] the extent to which the losses reflected in the ``Member's 
Share'' \15\ with respect to the 2015 Claim were incurred by the member 
trading for its own account or for the account of a customer that was a 
broker or dealer trading for its own account (``Covered Proprietary 
Losses'').
---------------------------------------------------------------------------

    \15\ As defined in Rule 4626(b)(3)(B), each member's direct 
trading losses calculated in accordance with Rule 4626(b)(3)(A) and 
(B) is referred to in Rule 4626 and herein as the ``Member's 
Share''.
---------------------------------------------------------------------------

    Failure to provide the required attestation within the specified 
time limit will void the member's eligibility to receive an 
accommodation with respect to a 2015 Claim. Each member shall be 
required to maintain books and records that detail the nature and 
amount Customer Compensation and Covered Proprietary Losses with 
respect to 2015 Claims.
     All payments of 2015 Claims will be contingent upon the 
execution and delivery to Nasdaq of a release by the member of all 
claims by it or its affiliates against Nasdaq or its affiliates for 
losses that arise out of, are associated with, or relate in any way to 
the Facebook, Inc. IPO Cross or to any actions or omissions related in 
any way to that Cross, including but not limited to the execution or 
confirmation of orders in Facebook, Inc. on May 18, 2012. The member's 
failure to provide the required release within 14 days after receiving 
notice of the value its 2015 Claim will void the member's eligibility 
to receive an accommodation with respect to its 2015 Claim.
    Nasdaq is requiring the submission of the attestation with respect 
to Customer Compensation because, as was the case with respect to 2013 
Claims, Nasdaq believes that it is reasonable to make accommodation 
payments with respect to orders submitted on behalf of a member's 
customers only if the member has compensated or will compensate its 
customers in an amount that is at least equal to the amount of the 
accommodation payment. In addition, Nasdaq will prioritize the payment 
of accommodation funds used to compensate a member's customers above 
the payment of funds with respect to proprietary trading losses. 
However, Nasdaq notes that with respect to 2013 Claims, Nasdaq was able 
to pay the full amount the 2013 Claims, including proprietary trading 
losses. Moreover, based on Nasdaq's records with respect to the 
disposition of shares in the Cross, Nasdaq believes that it will likely 
be able to pay the full amount of 2015 Claims, including claims with 
respect to Covered Proprietary Losses. Nevertheless, because Rule 4626 
includes an absolute limit of $62 million on the total value of 
accommodation payments with respect to the FB IPO, and because Nasdaq 
is not proposing to increase this limit, Nasdaq is proposing a 
proration mechanism that would be used in the event that the total 
value of 2015 Claims and 2013 Claims exceeds $62 million.\16\ 
Specifically, accommodation payments for 2015 Claims will be made in 
two tranches of priority:
---------------------------------------------------------------------------

    \16\ As reported in the Results Filing, the total value of 2013 
Claims was $44,029,901.61. Accordingly, the maximum amount available 
for the payment of 2015 Claims would be $17,970,098.39.
---------------------------------------------------------------------------

     First, if the member has provided Customer Compensation, 
the member will receive an amount equal to the lesser of the Member's 
Share or the amount of Customer Compensation (``Tranche A'');
     Second, the member will receive an amount with respect to 
Covered Proprietary Losses; provided, however, that the sum of payments 
to a member with respect to 2015 Claims shall not exceed the Member's 
Share (``Tranche B'').
    In the event that the amounts calculated under Tranche A, together 
with the amounts previously paid with respect to 2013 Claims, exceed 
$62 million, the accommodation will be prorated among members eligible 
to receive accommodation under Tranche A based on the size of the 
amounts payable under Tranche A. In the event that Tranche A is paid in 
full and the amounts calculated under Tranche B, together with the 
amounts paid under Tranche A and the amounts previously paid with 
respect to 2013 Claims, exceed $62 million, the accommodation will be 
prorated among members eligible to receive accommodation under Tranche 
B based on the size of the amounts payable under Tranche B. If a 
member's eligibility to receive funds is voided for any reason under 
this rule, and the funds payable to other members must be prorated 
hereunder, the funds available to pay other members will be increased 
accordingly.
    Thus, if the portion of 2015 Claims with respect to Customer 
Compensation, plus the total amount paid with respect to 2013 Claims, 
exceeds $62 million, the funds remaining under Rule 4626 will be 
prorated among members with 2015 Claims with respect to Customer 
Compensation. Similarly, if the portion of 2015 Claims with respect to 
Customer Compensation, plus the total amount paid with respect to 2013 
Claims does not exceed $62 million, but such amount, together with the 
portion of 2015 Claims with respect to Covered Proprietary Losses 
exceeds $62 million, the funds remaining under Rule 4626 after payments 
with respect to Customer Compensation will be prorated among members 
with 2015 Claims with respect to Covered Proprietary Losses. Nasdaq 
believes that this proration mechanism is reasonable because members 
with 2013 Claims submitted timely claims under the terms of Rule 
4626(b)(3) as originally proposed, while members with 2015 Claims are 
receiving the benefit of a subsequent amendment. Accordingly, to the 
extent that any proration is required to keep the overall cost of the 
program under the $62 million limit originally proposed and approved by 
the Commission, the effects of the proration should be borne solely

[[Page 31631]]

by members with 2015 Claims. As discussed above, however, Nasdaq 
believes that it is unlikely that any such proration will be required.
    All payments of 2015 Claims shall be made in cash. Payments to a 
member shall be made as soon as practicable following the completion of 
all analysis and documents required under the rule.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
Section 6(b) of the Act \17\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act \18\ in particular, because the proposal 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. In the Approval Order, the Commission found that Rule 
4626(b)(3) is consistent with the Act because it ``sets forth objective 
and transparent processes to determine eligible claims and how such 
claims would be paid to Nasdaq members that elect to participate in the 
accommodation plan.'' The Commission further determined that providing 
compensation pursuant to the rule would be in the public interest and 
that the rule would encourage members to compensate their customers. 
Similarly, Nasdaq believes that this proposed rule change is consistent 
with the Act because it will allow additional members to benefit from 
the accommodation plan. As originally adopted, Rule 4626(b)(3) contains 
time limits that bar claims submitted after April 8, 2013. These time 
limits were intended to, and were successful in, encouraging members to 
submit claims promptly after Commission approval of the proposal, 
thereby allowing for the efficient administration of the claim process. 
Although UBS opted to pursue arbitration rather than filing a claim 
under the rule, Nasdaq believes that it is reasonable to allow it to 
file a claim under the rule now to resolve the litigation between 
Nasdaq and UBS. In addition, by reopening the claim process to all 
members that did not file a 2013 Claim (or that are not otherwise 
covered by a release executed in connection with the 2013 Claim 
process), Nasdaq will ensure that the benefits of the proposal are 
available not only to UBS, but to also to other members that decided 
not to participate in the 2013 Claim process but that wish to do so 
now.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f(b).
    \18\ 115 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Nevertheless, although Nasdaq believes it is unlikely that 
proration of 2015 Claims in order to keep the total value of all claims 
within the $62 million limit authorized under the rule will be 
required, it is reasonable that members making claims under the 2015 
Claim process would be required to incur the burden of any such 
proration that would be required, since such members opted not to file 
claims within the period originally contemplated by the rule.

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

    Nasdaq believes that the proposed rule change will not impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. Specifically, the proposed rule 
change does not relate to the provision of goods or services, nor does 
it impose regulatory restrictions on the ability of members to compete. 
Accordingly, the change does not affect competition in any respect.

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

    No written comments were either 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, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \19\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\20\
---------------------------------------------------------------------------

    \19\ 115 U.S.C. 78s(b)(3)(A)(iii).
    \20\ 117 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2015-057 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-NASDAQ-2015-057. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://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 Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will 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-NASDAQ-2015-057, and should 
be submitted on or before June 24, 2015.


[[Page 31632]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
Brent J. Fields,
Secretary.
---------------------------------------------------------------------------

    \21\ 117 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

[FR Doc. 2015-13616 Filed 6-2-15; 8:45 am]
BILLING CODE 8011-01-P
Federal Register / Vol. 80, No. 106 / Wednesday, June 3, 2015 / Notices 31631

by members with 2015 Claims. As in the 2013 Claim process but that wish If the Commission takes such action, the
discussed above, however, Nasdaq to do so now. Commission shall institute proceedings
believes that it is unlikely that any such Nevertheless, although Nasdaq to determine whether the proposed rule
proration will be required. believes it is unlikely that proration of should be approved or disapproved.
2015 Claims in order to keep the total
All payments of 2015 Claims shall be IV. Solicitation of Comments
value of all claims within the $62
made in cash. Payments to a member
million limit authorized under the rule
shall be made as soon as practicable Interested persons are invited to
will be required, it is reasonable that
following the completion of all analysis submit written data, views, and
members making claims under the 2015
and documents required under the rule. arguments concerning the foregoing,
Claim process would be required to
including whether the proposed rule
2. Statutory Basis incur the burden of any such proration
that would be required, since such change is consistent with the Act.
Nasdaq believes that the proposed members opted not to file claims within Comments may be submitted by any of
rule change is consistent with Section the period originally contemplated by the following methods:
6(b) of the Act 17 in general, and furthers the rule. Electronic Comments
the objectives of Section 6(b)(5) of the
B. Self-Regulatory Organization’s • Use the Commission’s Internet
Act 18 in particular, because the
Statement on Burden on Competition comment form (http://www.sec.gov/
proposal is designed to promote just and
equitable principles of trade, to remove Nasdaq believes that the proposed rules/sro.shtml); or
impediments to and perfect the rule change will not impose any burden
• Send an email to rule-comments@
mechanism of a free and open market on competition that is not necessary or
sec.gov. Please include File Number SR–
and a national market system, and, in appropriate in furtherance of the
NASDAQ–2015–057 on the subject line.
general to protect investors and the purposes of the Act. Specifically, the
public interest. In the Approval Order, proposed rule change does not relate to Paper Comments
the Commission found that Rule the provision of goods or services, nor
does it impose regulatory restrictions on • Send paper comments in triplicate
4626(b)(3) is consistent with the Act
the ability of members to compete. to Secretary, Securities and Exchange
because it ‘‘sets forth objective and
Accordingly, the change does not affect Commission, 100 F Street NE.,
transparent processes to determine
competition in any respect. Washington, DC 20549–1090.
eligible claims and how such claims
would be paid to Nasdaq members that C. Self-Regulatory Organization’s All submissions should refer to File
elect to participate in the Statement on Comments on the Number SR–NASDAQ–2015–057. This
accommodation plan.’’ The Commission Proposed Rule Change Received From file number should be included on the
further determined that providing Members, Participants, or Others subject line if email is used. To help the
compensation pursuant to the rule No written comments were either Commission process and review your
would be in the public interest and that solicited or received. comments more efficiently, please use
the rule would encourage members to only one method. The Commission will
compensate their customers. Similarly, III. Date of Effectiveness of the post all comments on the Commission’s
Nasdaq believes that this proposed rule Proposed Rule Change and Timing for Internet Web site (http://www.sec.gov/
change is consistent with the Act Commission Action rules/sro.shtml). Copies of the
because it will allow additional Because the foregoing proposed rule submission, all subsequent
members to benefit from the change does not: (i) Significantly affect amendments, all written statements
accommodation plan. As originally the protection of investors or the public with respect to the proposed rule
adopted, Rule 4626(b)(3) contains time interest; (ii) impose any significant change that are filed with the
limits that bar claims submitted after burden on competition; and (iii) become Commission, and all written
April 8, 2013. These time limits were operative for 30 days from the date on communications relating to the
intended to, and were successful in, which it was filed, or such shorter time proposed rule change between the
encouraging members to submit claims as the Commission may designate, it has Commission and any person, other than
promptly after Commission approval of become effective pursuant to Section those that may be withheld from the
the proposal, thereby allowing for the 19(b)(3)(A)(iii) of the Act 19 and public in accordance with the
efficient administration of the claim subparagraph (f)(6) of Rule 19b–4 provisions of 5 U.S.C. 552, will be
process. Although UBS opted to pursue thereunder.20 available for Web site viewing and
arbitration rather than filing a claim At any time within 60 days of the printing in the Commission’s Public
under the rule, Nasdaq believes that it filing of the proposed rule change, the Reference Room, 100 F Street NE.,
is reasonable to allow it to file a claim Commission summarily may Washington, DC 20549, on official
under the rule now to resolve the temporarily suspend such rule change if business days between the hours of
litigation between Nasdaq and UBS. In it appears to the Commission that such 10:00 a.m. and 3:00 p.m. Copies of such
addition, by reopening the claim action is: (i) Necessary or appropriate in filing also will be available for
process to all members that did not file the public interest; (ii) for the protection inspection and copying at the principal
a 2013 Claim (or that are not otherwise of investors; or (iii) otherwise in office of the Exchange. All comments
covered by a release executed in furtherance of the purposes of the Act. received will be posted without change;
connection with the 2013 Claim the Commission does not edit personal
19 115 U.S.C. 78s(b)(3)(A)(iii). identifying information from
tkelley on DSK3SPTVN1PROD with NOTICES

process), Nasdaq will ensure that the 20 117 CFR 240.19b–4(f)(6). In addition, Rule 19b–
benefits of the proposal are available not 4(f)(6) requires a self-regulatory organization to give
submissions. You should submit only
only to UBS, but to also to other the Commission written notice of its intent to file information that you wish to make
members that decided not to participate the proposed rule change at least five business days available publicly. All submissions
prior to the date of filing of the proposed rule should refer to File Number SR–
change, or such shorter time as designated by the
17 15 U.S.C. 78f(b). Commission. The Exchange has satisfied this
NASDAQ–2015–057, and should be
18 115 U.S.C. 78f(b)(5). requirement. submitted on or before June 24, 2015.

VerDate Sep<11>2014 18:57 Jun 02, 2015 Jkt 235001 PO 00000 Frm 00064 Fmt 4703 Sfmt 4703 E:\FR\FM\03JNN1.SGM 03JNN1
31632 Federal Register / Vol. 80, No. 106 / Wednesday, June 3, 2015 / Notices

For the Commission, by the Division of Procedures to (i) revise the CDS certain cross-references to prior
Trading and Markets, pursuant to delegated Procedures to add a new section paragraph 1.71 will be corrected.
authority.21 containing contract terms applicable to Various clarifications will be made in
Brent J. Fields, the CDX.NA Contracts that ICE Clear Paragraph 9 of the CDS Procedures,
Secretary. Europe proposes to accept for clearing; which sets out the contract terms for
[FR Doc. 2015–13616 Filed 6–2–15; 8:45 am] (ii) make conforming changes iTraxx Contracts. Specifically,
BILLING CODE 8011–01–P throughout the CDS Procedures to paragraph 9.1 will be modified to clarify
reference the CDX.NA Contracts; and that it specifies the additional Contract
(iii) make certain other clarifications, Terms applicable to all iTraxx Contracts
SECURITIES AND EXCHANGE corrections and updates to the CDS cleared by the Clearing House.
COMMISSION Procedures (including for iTraxx Paragraph 9.2(c)(i), which applies to
Contracts and Single Name Contracts), iTraxx Contracts which are governed by
[Release No. 34–75065; File No. SR–ICEEU–
as discussed in more detail herein. ICE the Standard iTraxx 2014 CDS
2015–005]
Clear Europe has also proposed to make Supplement, will be modified to make
Self-Regulatory Organizations; ICE certain modifications to its CDS Risk certain additional clarifications relating
Clear Europe Limited; Order Approving Model Description and CDS End-of-Day to initial payments and spun-out trades.
Proposed Rule Change Relating to Price Discovery Policy (the ‘‘CDS Paragraph 9.2(c)(i)(B) will be added to
CDS Procedures for CDX North Pricing Policy’’) to accommodate reflect current clearing house (and
America Index CDS Contracts clearing of CDX.NA Contracts, as market) practice that initial payments
described herein. under cleared iTraxx Contracts (other
May 28, 2015. ICE Clear Europe has proposed to than those for which a bilateral
amend Paragraphs 1, 4, 6, 9, 10 and 11 transaction is already recorded in Deriv/
I. Introduction
of the CDS Procedures, described below. SERV) are made on the business day
On February 12, 2015, ICE Clear following the trade date (or, if later, the
All capitalized terms not defined herein
Europe Limited (‘‘ICE Clear Europe’’) business day following the date of
are defined in the ICE Clear Europe
filed with the Securities and Exchange acceptance for clearing). New paragraph
Clearing Rules (the ‘‘Rules’’).
Commission (‘‘Commission’’) a 9.2(c)(i)(D), which will address the
proposed rule change pursuant to In paragraph 1 of the CDS Procedures,
reference obligation for a spun-out trade
Section 19(b)(1) of the Securities references will be added to the defined
following a restructuring credit event, is
Exchange Act of 1934 (‘‘Act’’),1 and terms ‘‘iTraxx Contract’’ and ‘‘CDX.NA
substantially the same as the
Rule 19b–4 thereunder,2 a proposed rule Contract,’’ as such terms are set out in
corresponding language in paragraph
change to revise ICE Clear Europe’s CDS revised paragraphs 9 and 10 of the CDS
9.3(c)(i)(D) for contracts subject to the
Procedures, CDS Risk Model Procedures, respectively. The definition
Standard iTraxx Legacy CDS
Description and CDS End-of-Day Price of ‘‘Original Annex Date’’ will be
Supplement and was inadvertently
Discovery Policy to provide the basis for modified to apply to CDX.NA Contracts omitted from prior amendments. A
ICE Clear Europe to clear CDX North in substantially the same manner it cross-reference in paragraph 9.2(c)(i)(E)
America Index CDS Contracts applies to iTraxx Contracts. In addition, will be updated. New paragraph
(‘‘CDX.NA Contracts’’). The proposed the definition of ‘‘Protocol Excluded 9.2(c)(i)(F) will provide that paragraph
rule change also includes revisions to Reference Entity’’ in former paragraph 5.7 of the Standard iTraxx 2014 CDS
the CDS Procedures that relate to iTraxx 10.3 will be changed to ‘‘Protocol Supplement, which contains restrictions
Contracts and single name CDS Excluded Corporate Reference Entity’’ on delivery of Credit Event Notices and
Contracts. The proposed rule change and moved to paragraph 1, to reflect that Successor Notices, does not apply to
was published for comment in the such term is only used in the context of iTraxx Contracts (as the appropriate
Federal Register on March 2, 2015.3 On corporate reference entities. restrictions in the context of a cleared
April 16, 2015, the Commission Accordingly, the definition will be transaction are already addressed in the
extended the time period in which to revised to mean an Eligible Single Name Rules and CDS Procedures, including
either approve, disapprove, or institute Reference Entity that is a Standard Rule 1505).
proceedings to determine whether to European Corporate (as specified in the As set forth in paragraph 9.2(c)(ii),
disapprove the proposed rule change to List of Eligible Single Name Reference changes will also be made to the terms
May 31, 2015.4 The Commission did not Entities) and is an Excluded Reference of the iTraxx 2014 Confirmation with
receive comment letters regarding the Entity (as defined in the 2014 CDD respect to iTraxx Contracts that are
proposed change. For the reasons Protocol). (Conforming changes will be governed by the Standard iTraxx 2014
discussed below, the Commission is made to references to that definition CDS Supplement. These amendments
granting approval of the proposed rule throughout the CDS Procedures.) In will include a clarification that
change. addition, a correction will be made to references to the 2014 Credit Derivatives
the cross-reference in definition of Definitions in the standard supplement
II. Description of the Proposed Rule ‘‘New Trade’’ to properly refer to the and confirmation will be interpreted for
Change definition set out in the applicable cleared contracts as though they have
ICE Clear Europe has submitted Contract Terms for the relevant contract. the meaning ascribed to that term in the
proposed amendments to its CDS In addition, amendments will be Rules and Procedures. In addition, a
made to use the defined terms provision that there are no ‘‘Omitted
21 117 CFR 200.30–3(a)(12). ‘‘Component Transaction’’ and Reference Entities’’ for purposes of the
tkelley on DSK3SPTVN1PROD with NOTICES

1 15 U.S.C. 78s(b)(1). ‘‘Clearing’’ throughout the Procedures in standard confirmation will be removed
2 17 CFR 240.19b–4. lieu of the undefined terms. Finally, as that term is not used in the standard
3 Securities Exchange Act Release No. 34–74362
various conforming references to the supplement and confirmation and is
(Feb. 24, 2015), 80 FR 11246 (Mar. 2, 2015) (File new or revised defined terms will be
No. SR–ICEEU–2015–005).
therefore unnecessary.
4 Securities Exchange Act Release No. 34–74741 made throughout the CDS Procedures, Similar clarifications will be made in
(Apr. 16, 2015), 80 FR 22593 (Apr. 22, 2015) (File various provisions of the CDS paragraph 9.3, which relates to iTraxx
No. SR–ICEEU–2015–005). Procedures will be renumbered, and Contracts which are governed by the

VerDate Sep<11>2014 18:57 Jun 02, 2015 Jkt 235001 PO 00000 Frm 00065 Fmt 4703 Sfmt 4703 E:\FR\FM\03JNN1.SGM 03JNN1
Document Created: 2015-12-15 15:08:51
Document Modified: 2015-12-15 15:08:51
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		80 FR 31628